TSR INC. AND SUBSIDIARIES

                                  EXHIBIT 10.1

                             FORM 10-K MAY 31, 2004


                              EMPLOYMENT AGREEMENT

           AGREEMENT effective this 1st day of June, 2004 by and between TSR,
Inc., a Delaware corporation, with offices at 400 Oser Avenue, Hauppauge, New
York 11788 (hereinafter called the "Corporation") and Ernest G. Bago,
(hereinafter called "Executive").

                              W I T N E S S E T H :

           WHEREAS, the Corporation desires to employ Executive and Executive is
willing to undertake such employment on the terms and subject to the conditions
hereinafter set forth.

           NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto agree as follows:

1.    The Corporation hereby employs Executive as President of TSR Consulting
      Services, Inc. or such other position as he may be appointed to by the
      Chairman of the Board of Directors, to perform such duties on behalf of
      the Corporation and TSR Consulting Services, Inc. as the Chairman may from
      time to time determine.

2.    Executive hereby accepts such employment and agrees that throughout the
      period of his employment hereunder, he will devote his full time,
      attention, knowledge and skills, faithfully, diligently and to the best of
      his ability, in furtherance of the business of the Corporation and to
      promote the interest of the Corporation, will perform the duties assigned
      to him pursuant to Paragraph 1 hereof, subject, at all times, to the
      direction and control of the Chairman of the Board of Directors of the
      Corporation and the Corporation's Board of Directors. Executive shall at
      all times be subject to, observe and carry out such rules, and regulations
      as the Corporation from time to time shall establish. During the period of
      Executive's employment hereunder, Executive shall not be entitled to
      additional compensation for serving in any office of the Corporation or
      any of its subsidiaries to which he is elected, including without
      limitation as a director of the Corporation.

3.    Executive shall be employed for a term of three (3) years commencing as of
      the 1st day of June, 2004 and ending on the 31st day of May, 2007 (the
      "Term"), unless his employment is terminated prior to the expiration of
      the Term pursuant to the provisions hereof.

4.    As full compensation for his services hereunder, the Corporation will pay
      to Executive a salary (the "Base Salary") at the rate of Two Hundred
      Thousand ($200,000) Dollars per annum, payable in equal installments in
      arrears no less frequently than semi-monthly. In addition, the
      Corporation's Compensation Committee of the Board of Directors, shall in
      good faith, prior to the end of each contract year consider and cause the
      Corporation to grant to Executive a discretionary bonus, based upon
      standards which the Chairman of the Corporation, subject to the approval
      of the Corporation's Compensation Committee of the Board of Directors,
      shall establish with Executive at the beginning of the contract year and
      may be modified thereafter. The bonus provided for hereunder shall be
      payable by the Corporation to Executive within 120 days of the end of the
      fiscal year, for the period to which such bonus relates. In addition,
      Executive shall be entitled to participate, to the extent he is eligible
      under the terms and conditions thereof, in any pension, profit-sharing,
      retirement, hospitalization, insurance, medical services, or other
      employee benefit plan generally available to executives of the Corporation
      which may be in effect from time to time during the period of his
      employment hereunder. The Corporation shall be under no obligation to
      institute or continue the existence of any such employee benefit plan.
      Executive is entitled to executive medical benefits and also shall be
      entitled to a car (leased or owned at sole discretion of the Corporation)
      and payment or reimbursement of a country club membership in such amounts
      for the car and the country club membership as shall be determined by the
      Board of Directors of the Corporation. Any or all of such entitlements in
      the preceding sentence may be discontinued at the end of any contract year
      at the discretion of the Chairman.

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5.    The Corporation shall reimburse Executive for all expenses reasonably
      incurred by him in connection with the performance of his duties hereunder
      and in connection with the business of the Corporation, upon the
      submission to the Corporation of appropriate vouchers therefor and
      approval thereof by the Treasurer of the Corporation. Such reimbursements
      shall be subject to the expense reimbursement policies of the Corporation,
      which are in effect from time to time. Executive shall be entitled to
      three (3) weeks vacation time per annum in accordance with the regular
      procedures of the Corporation governing executive officers as determined
      from time to time by the Corporation's Board of Directors.

6.    (a)   Notwithstanding any provision contained herein to the contrary, if
            on or after the date hereof and prior to the end of the Term,
            Executive is terminated for "Cause" (as defined below) then the
            Corporation shall have the right to give notice of termination of
            Executive's services hereunder as of a date to be specified in such
            notice and this Agreement shall terminate as of the date so
            specified. Termination for "Cause" shall mean Executive shall (i) be
            indicted of a felony, (ii) commit any act or omit to take any action
            in bad faith and to the detriment of the Corporation, (iii) commit
            an act of fraud against the Corporation or (iv) materially breach
            any term of this Agreement and fail to correct such breach within
            ten days after written notice of commission thereof.

      (b)   If, during the Term, Executive is unable to perform his duties
            hereunder on account of illness, accident or other physical or
            mental incapacity and such illness or other incapacity shall
            continue for a period of six (6) consecutive months or an aggregate
            of one hundred and eighty (180) days in any consecutive twelve (12)
            month period, the Corporation shall have the right, on fifteen (15)
            days written notice (given after such period) to Executive, to
            terminate this Agreement. In such event, the Corporation shall be
            obligated to pay to Executive his Base Salary for the calendar month
            in which such termination occurs. However, if prior to the date
            specified in such notice, Executive's illness or incapacity shall
            have terminated and he shall have taken up the performance of his
            duties hereunder, Executive shall be entitled to resume his
            employment hereunder, as though such notice had not been given.

      (c)   In the event of Executive's death during the Term, this Agreement
            shall terminate immediately, and Executive's legal representatives
            shall be entitled to receive his Base Salary for the calendar month
            during which his death shall have occurred together with any
            approved expenses as contemplated under Section 5 and as may
            otherwise be provided under any insurance policy or similar
            instrument.

      (d)   In the event that this Agreement is terminated for "Cause" pursuant
            to Section 6(a), then Executive shall be entitled to receive only
            his Base Salary for the month in which such termination shall take
            effect.

      (e)   In the event the Corporation terminates Executive for any reason
            other than as provided under Section 6(a), (b), or (c), then this
            Agreement shall terminate upon thirty (30) days' written notice to
            Executive and the Corporation shall be obligated to pay to Executive
            an amount equal to any unpaid, approved expenses as contemplated
            under Section 5 and a severance payment equal to twelve (12) month's
            salary at the Base Salary, payable in twelve (12) equal monthly
            installments. Notwithstanding the foregoing, if Executive obtains
            employment within the one (1) year period following termination, the
            severance payment payable by the Corporation hereunder shall be
            reduced to the extent of the compensation received by Executive from
            such employment. Executive shall use best efforts to obtain
            substitute employment in a timely manner following termination.

            In the event the Corporation terminates Executive for any reason
            other than as provided under Section 6(a), (b), or (c) Executive
            will remain eligible for a period of one year after termination to
            participate in the health benefit program provided to all employees
            of the Corporation which may then be in effect. The health benefit
            program will be paid by the Corporation.

7.    In the event of a "Change in Control of the Corporation" which is defined
      as:

      (a)   the shareholders of the Corporation approve a merger or
            consolidation involving the Corporation resulting in a change of
            ownership of a majority of the outstanding shares of capital stock
            of the Corporation, or

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      (b)   the shareholders of the Corporation approve a plan of liquidation or
            dissolution of the Corporation or the sale or disposition by the
            Corporation of all or substantially all the Corporation's assets or

      (c)   there has been a public announcement of a Change in Control of the
            Corporation (provided, however, that consummation of the Change in
            Control of the Corporation shall be a condition precedent to the
            effectiveness of this provision) and the acquiring or surviving
            corporation does not assume all of the Corporation's rights and
            obligations under this Agreement, then:

            (i)   the Corporation shall pay to Executive his full salary through
                  the date of termination at the Base Salary in effect at the
                  time notice of termination is given plus his bonus prorated
                  through the date of termination; and

            (ii)  in lieu of any further salary or bonus payments to Executive
                  for periods subsequent to the date of termination, the
                  Corporation shall pay within 60 days of the date of
                  termination as severance pay to Executive:

                  (A)   $750,000, if the termination occurs in fiscal 2005
                        provided that the year-to-date pre-tax profit of the
                        Corporation exceeds $300,000 for the month of June,
                        $600,000 for the month of July, $900,000 for the month
                        of August, $1,200,000 for the month September,
                        $1,500,000 for the month of October, $1,800,000 for the
                        month of November, $2,100,000 for the month of December,
                        $2,350,000 for the month of January, $2,600,000 for the
                        month of February, $2,900,000 for the month of March,
                        $3,200,000 for the month of April, and $3,500,000 for
                        the month of May.

                  (B)   $500,000 if the termination occurs in fiscal 2006,
                        provided that a similar year-to-date monthly schedule
                        developed by the Chairman with $3,500,000 as the minimum
                        pre-tax profit for the fiscal year is met.

                  (C)   $250,000 if the termination occurs in fiscal 2007,
                        provided that a similar year-to-date monthly schedule
                        developed by the Chairman with $3,500,000 as the minimum
                        pre-tax profit for the fiscal year is met.

8.    The Corporation and Executive are on this day entering into a Maintenance
      of Confidence and Non-Compete Agreement, the terms of which are hereby
      expressly incorporated into this Agreement, provided, however, that the
      Maintenance of Confidence and Non-Compete Agreement shall continue to be
      effective notwithstanding any termination of Executive's employment
      hereunder and shall continue in effect upon expiration of this Agreement
      pursuant to the terms of the Maintenance of Confidence and Non-Compete
      Agreement.

9.    (a)   The Corporation shall have the right from time to time to purchase,
            increase, modify or terminate insurance policies on the life of
            Executive for the benefit of the Corporation, in such amounts as the
            Corporation shall determine in its sole discretion.

      (b)   In connection with paragraph 9(a) above, Executive shall, at such
            time or times and at such place or places as the Corporation may
            reasonably direct, submit himself to such physical examinations and
            Executive shall deliver such documents as the Corporation may deem
            necessary or desirable.

10.   Executive shall hold in a fiduciary capacity for the benefit of the
      Corporation all information, knowledge and data relating to or concerned
      with its operations, sales, business and affairs, and he shall not, at any
      time hereafter, use, disclose or divulge any such information, knowledge
      or data to any person, firm or corporation other than the Corporation or
      its designees or except as may otherwise be required in connection with
      the business and affairs of the Corporation.

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11.        The parties hereto acknowledge that Executive's services are unique
           and that, in the event of a breach by Executive of any of his
           obligations under this Agreement, the Corporation will not have an
           adequate remedy at law. Accordingly, in the event of any such breach
           or threatened breach by Executive, the Corporation shall be entitled
           to such equitable and injunctive relief as may be available to
           restrain Executive from the violation of the provisions thereof.
           Nothing herein shall be construed as prohibiting the Corporation from
           pursuing any other remedies at law or in equity for such breach or
           threatened breach, including the recovery of damages and the
           immediate termination of the employment of Executive hereunder.

12.        This Agreement together with the Maintenance of Confidence and
           Non-Compete Agreement executed on the same date hereof, constitute
           the entire agreement of the parties hereto with respect to the
           subject matter hereof and no amendment or modification hereof shall
           be valid or binding unless made in writing and signed by the party
           against whom enforcement thereof is sought.


13.        Any notice required, permitted or desired to be given pursuant to any
           of the provisions of this Agreement shall be deemed to have been
           sufficiently given or served for all purposes if delivered in person
           or sent by certified mail, return receipt requested, postage and fees
           prepaid as follows:

                     If to the Corporation at:

                               Chairman of the Board
                               TSR, Inc.
                               400 Oser Avenue
                               Hauppauge, New York 11788

                     With a copy to:

                               Mr. John Sharkey
                               Vice President of Finance
                               TSR, Inc.
                               400 Oser Avenue
                               Hauppauge, New York 11788

                     If to the Executive at:

                               Mr. Ernest G. Bago



      Either of the parties hereto may at any time and from time to time change
      the address to which notice shall be sent hereunder by notice to the other
      party given under this paragraph 13. The date of the giving of any notice
      sent by mail shall be the date of the posting of the mail.

14.   Neither this Agreement nor the right to receive any payments hereunder may
      be assigned by Executive. This Agreement shall be binding upon Executive,
      his heirs, executors and administrators and upon the Corporation, its
      successors and assigns.

15.   No course of dealing nor any delay on the part of the Corporation in
      exercising any rights hereunder shall operate as a waiver of any such
      rights. No waiver of any default or breach of this Agreement shall be
      deemed a continuing waiver or a waiver of any other breach or default.

16.   This Agreement shall be governed, interpreted and construed in accordance
      with the laws of the State of New York applicable to agreements entered
      into and to be performed entirely therein.

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17.   If any clause, paragraph, section or part of this Agreement shall be held
      or declared to be void, invalid or illegal, for any reason, by any court
      of competent jurisdiction, such provisions shall be ineffective but shall
      not in any way invalidate or affect any other clause, paragraph, section
      or part of this Agreement.

18.   Executive acknowledges that he is not subject to any agreement, which
      would in any way restrict him from carrying out his employment as
      contemplated hereunder.

19.   This Agreement supersedes any prior employment agreement.



      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day in year first above written.



/s/ Ernest G. Bago
-------------------------------
Ernest G. Bago
Executive

TSR, Inc.


By:   /s/ J.F. Hughes
     -------------------------------
Name: J.F. Hughes
Title: Chairman














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