The following discussion and analysis should be read in conjunction with the Company's consolidated financial statements and notes thereto presented elsewhere in this report.

Results of Operations

The following table sets forth for the periods indicated certain financial information derived from the Company's consolidated statements of operations. There can be no assurance that historical trends in operating results will continue in the future:

                               Year Ended May 31,
                         (Dollar Amounts in Thousands)

                                                2012                      2011
                                                       % of                      % of
                                        Amount       Revenue       Amount      Revenue
      Revenue, Net                     $ 45,215         100.0 %   $ 39,342        100.0 %
      Cost of Sales                      37,751          83.5       32,152         81.7

      Gross Profit                        7,464          16.5        7,190         18.3
      Selling, General and
      Administrative Expenses             7,466          16.5        6,708         17.1

      Income (Loss) from Operations          (2 )         0.0          482          1.2
      Other Income, Net                      15           0.0           21          0.1

      Income Before Income Taxes             13           0.0          503          1.3
      Provision for Income Taxes             25           0.0          242          0.6

      Consolidated Net Income (Loss)   $    (12 )         0.0 %   $    261          0.7 %

Revenue

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the fiscal year ended May 31, 2012 increased $5,873,000 or 14.9% from fiscal 2011. The average number of consultants on billing with customers increased from approximately 236 for the fiscal year ended May 31, 2011 to 264 for the fiscal year ended May 31, 2012.

Beginning with the broad based economic downturn in 2008 and continuing for several years through fiscal 2010, the Company experienced a decrease in the number of consultants on billing with customers and reduced opportunities to place new consultants on billing with customers. Since fiscal 2011, there have been indications that there are improvements in the economy and that levels of business activity are increasing, resulting in an increase in opportunities to place consultants on billing with customers. Although customers' IT spending may be increasing and consultants on billing with customers has increased, the Company is still experiencing the impact of the economic downturn, specifically in the gross profit generated from the placements of consultants on billing with customers, particularly with customers in the financial services industry. The Company believes that the economic outlook remains uncertain.

Cost of Sales

Cost of sales increased by $5,599,000 or 17.4%, in fiscal 2012 from fiscal 2011. Cost of sales as a percentage of revenue increased to 83.5% in fiscal 2012 from 81.7% in fiscal 2011. The increase in cost of sales resulted primarily from an increased number of consultants on billing with customers. The increase in cost of sales as a percentage of revenue was primarily attributable to discount programs and rate reductions at a few of the Company's major financial services customers.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of expenses relating to account executives, technical recruiters, facilities costs, management and corporate overhead. These expenses increased $758,000, or 11.3%, to $7,466,000 in fiscal 2012 from $6,708,000 in fiscal 2011. This increase was primarily attributable to an increase in the number of recruiting personnel and the initial costs of hiring and training such personnel. The Company has hired additional technical recruiters to address increased requests by clients for submission of technical personnel for potential positions, although such submissions have not yet resulted in a proportional increase in placements. During the past eighteen months, the Company established a program to hire and train recent college graduates to become technical recruiters. The initial costs associated with the hiring and training of such personnel have increased the costs of recruitment, although, over time, the Company believes this program will provide the Company with a larger pool of skilled technical recruiters at a lower cost than hiring experienced technical recruiters. The Company also hired additional account representatives in an effort to increase growth. Additionally, these expenses decreased, as a percentage of revenue, from 17.1% in the fiscal year ended May 31, 2011 to 16.5% in the fiscal year ended May 31, 2012.

Other Income

Fiscal 2012 other income resulted primarily from interest and dividend income of $12,000, which decreased by $8,000 from the level realized in 2011 due to lower rates of interest earned on the Company's US Treasury securities, certificates of deposit and money market accounts.

Income Taxes

The effective income tax rate was 48.1% in fiscal 2011. The effective income tax rate for 2012 is not meaningful due to state minimum or alternative taxes exceeding taxable income.

Consolidated Net Income (Loss)

Consolidated net income decreased from $261,000 in fiscal 2011 to a loss of $12,000 in fiscal 2012. Consolidated net income decreased primarily due to higher cost of sales as a percentage of revenue. Also, recruiting expenses continue to increase due to increased client specifications, pricing and other competitive pressures. Selling expenses also increased as additional account executives were hired for the first time since the economic downturn.

Liquidity, Capital Resources and Changes in Financial Condition
The Company expects that cash flow generated from operations together with its available cash and marketable securities will be sufficient to provide the Company with adequate resources to meet its liquidity requirements for the next 12 months.

At May 31, 2012, the Company had working capital (total current assets in excess of total current liabilities) of $12,402,000 including cash and cash equivalents and certificates of deposit and marketable securities of $8,035,000 as compared to working capital of $12,388,000 including cash and cash equivalents and certificates of deposit and marketable securities of $7,662,000 at May 31, 2011.

Net cash flow of $359,000 was provided by operations during fiscal 2012 as compared to $826,000 of net cash flow used in operations in fiscal 2011. The cash provided by operations for fiscal 2012 primarily resulted from a decrease in accounts receivable of $193,000 in addition to an increase in accounts and other payables and accrued expenses and other liabilities of $284,000. The cash used in operations for fiscal 2011 primarily resulted from an increase in accounts receivable of $2,414,000 which was mitigated to some extent by an increase in accounts and other payables and accrued expenses and other current liabilities of $1,186,000.

Net cash provided by investing activities amounted to $2,734,000 for fiscal 2012, compared to $265,000 in net cash used in investing activities in fiscal 2011. The change in net cash from investing activities between fiscal 2012 and 2011 primarily resulted from maturities of US Treasury securities and certificates of deposit.

Net cash used in financing activities of $224,000 during the fiscal year ended May 31, 2012 resulted from purchases of treasury stock of $153,000 and distributions of $71,000 to the holder of the noncontrolling interest in the Company's subsidiary, Logixtech Solutions LLC. Net cash used in financing activities of $75,000 during the fiscal year ended May 31, 2011 resulted from purchases of treasury stock of $26,000 and distributions of $49,000 to the noncontrolling interest.

The Company's capital resource commitments at May 31, 2012 consisted of lease obligations on its branch and corporate facilities. The Company intends to finance these lease commitments from cash flow provided by operations, available cash and short-term marketable securities.

The Company's cash and marketable securities were sufficient to enable it to meet its liquidity requirements during fiscal 2012.

Impact of New Accounting Standards

The Company is not aware of any new accounting pronouncements that would have a material impact on its consolidated financial statements.

Critical Accounting Policies

The SEC defines "critical accounting policies" as those that require the application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The Company's significant accounting policies are described in Note 1 to its consolidated financial statements, contained elsewhere in this report. The Company believes that the following accounting policies require the application of management's most difficult, subjective or complex judgments:

Estimating Allowances for Doubtful Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based on our historical experience, customer types, credit worthiness, economic trends and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers, or in their willingness to pay, could have a material adverse effect on the collectibility of our accounts receivable and our future operating results.

Valuation of Marketable Securities
The Company classifies its marketable securities at acquisition as either (i) held-to-maturity, (ii) trading or (iii) available-for-sale. Based upon the Company's intent and ability to hold its US Treasury securities to maturity (which maturities range up to 24 months), such securities have been classified as held-to-maturity and are carried at amortized cost, which approximates fair value. The Company's equity securities are classified as trading securities, which are carried at fair value, as determined by quoted market price, which is Level 1 input, as established by the fair value hierarchy. The related unrealized gains and losses are included in earnings.

Valuation of Deferred Tax Assets
We regularly evaluate our ability to recover the reported amount of our deferred income tax assets considering several factors, including our estimate of the likelihood of the Company generating sufficient taxable income in future years during the period over which temporary differences reverse. Presently, the Company believes that it is more likely than not that it will realize the benefits of its deferred tax assets based primarily on the Company's history of and projections for taxable income in the future. In the event that actual results differ from our estimates or we adjust these estimates in future periods, we may need to establish a valuation allowance against a portion or all of our deferred tax assets, which could materially impact our financial position or results of operations.