TSR Inc. withdrew its slate of board candidates after failing to arrange financing to buy out dissident shareholders, the company announced in a filing on the eve of Tuesday's annual shareholder meeting.
The Hauppauge-based technology staffing and consulting company, abiding by an agreement announced in September, threw its support to two directors backed by Manhattan-based Zeff Capital LP, one of the dissident shareholders.
Following Tuesday's annual meeting, chairman and chief executive Christopher Hughes said "all financing options" continue to be pursued ahead of the next deadline at 5 p.m. Dec. 30.
If financing is not secured by then, Hughes and all other current members of the board of directors -- except for the two new directors backed by Zeff -- would resign.
That would effectively give the Zeff directors control of the company, allowing them to appoint additional directors and executives.
If the $5.96 million in financing is in place by Dec. 30, however, the deal calls for the Zeff directors to resign, giving incumbent management full control.
The plan announced in September would let TSR and Hughes buy out the 48.6 percent of shares held by Zeff, Fintech Consulting LLC of Iselin, New Jersey, and QAR Industries of Mineral Wells, Texas, at a price of $6.25 per share.
The agreement also calls for TSR to pay $1.5 million to the three investors to settle legal disputes.
Daniel Zeff, president of Zeff Capital, an investment firm, did not immediately respond to requests for comment.
In October 2018, when his company announced plans to mount a proxy fight against TSR, Zeff said that "action is needed...to reverse" the company's management decisions, including the adoption of a "poison pill."
Poison pills are adopted by potential corporate takeover targets to raise the costs and often forces the acquirer to negotiate with the board of directors instead of appealing directly to shareholders.
In November, QAR's bid to acquire TSR for $6.25 a share was rejected by TSR.
Shares of TSR fell about 7 percent to $3.33 on Monday and were trading unchanged on Tuesday.
In June 2018, Joseph Hughes, the founder of TSR, and his wife, Winifred, the parents of Christopher Hughes, requested that TSR be sold in a letter sent on their behalf by another son, James Hughes.
The following month, Joseph and Winifred Hughes sold their 41.8 percent stake in the company to Zeff, QAR and Fintech.
TSR, Long Island's 33rd-largest public company based on 2018 revenue of $65 million, provides computer staffing services to the utility, insurance, publishing, pharmaceutical and financial services industries.