UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-3498

TAYLOR DEVICES INC

(Exact name of registrant as specified in its charter)


New York		16-0797789

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

90 Taylor Drive, North Tonawanda, New York		14120

(Address of principal executive offices)		(Zip Code)

716-694-0800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated Filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

PART I	FINANCIAL INFORMATION		PAGE NO.

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets as of February 28, 2022 and May 31, 2021	4

		Condensed Consolidated Statements of Income for the three and nine months ended February 28, 2022 and 2021	5

		Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended February 28, 2022 and 2021	6

		Condensed Consolidated Statements of Cash Flows for the nine months ended February 28, 2022 and 2021	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		17

	Item 4.	Controls and Procedures		17

PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	18
	Item 1A.	Risk Factors	18
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
	Item 3.	Defaults Upon Senior Securities	18
	Item 4.	Mine Safety Disclosures	18
	Item 5.	Other Information	18
	Item 6.	Exhibits	19

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			20
SIGNATURES			21

TAYLOR DEVICES, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets	(Unaudited)
	February 28,			May 31,
	2022			2021

Assets
Current assets:
Cash and cash equivalents	$	20,251,643		$	20,581,604
Short-term investments		1,101,705			1,097,012
Accounts and other receivables, net		5,268,164			4,120,564
Inventory		5,932,166			5,835,596
Costs and estimated earnings in excess of billings		1,321,412			1,499,604
Other current assets		868,300			977,525
Total current assets		34,743,390			34,111,905

Maintenance and other inventory, net		1,477,678			1,612,839
Property and equipment, net		9,558,038			9,816,594
Other assets		204,216			200,538
Deferred income taxes		190,115			190,115
Total assets	$	46,173,437		$	45,931,991
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,170,172		$	1,787,325
Accrued commissions		353,245			269,064
Billings in excess of costs and estimated earnings		708,129			1,361,985
Other current liabilities		2,281,196			1,715,409
Total current liabilities		4,512,742			5,133,783

Stockholders' Equity:
Common stock and additional paid-in capital		10,249,834			10,111,735
Retained earnings		34,325,863			33,601,475
		44,575,697			43,713,210
Treasury stock - at cost		(2,915,002	)		(2,915,002	)
Total stockholders’ equity		41,660,695			40,798,208
	$	46,173,437		$	45,931,991


See notes to condensed consolidated financial statements.


	February 28, 2022		May 31, 2021
Raw materials	$	497,309	$	503,344
Work-in-process		5,200,533		5,076,377
Finished goods		334,324		355,875
Gross inventory		6,032,166		5,935,596
Less allowance for obsolescence		100,000		100,000
Net inventory	$	5,932,166	$	5,835,596

Summary comparison of the nine months ended February 28, 2022 and 2021
	Increase /
	(Decrease)
Sales, net	$	5,960,000
Cost of goods sold	$	3,341,000
Selling, general and administrative expenses	$	613,000
Income before provision for income taxes	$	(41,000	)
Provision for income taxes (benefit)	$	238,000
Net income	$	(279,000	)

	Nine months ended February 28						Change
	2022			2021			Amount		Percent
Net Revenue	$	21,209,000		$	15,249,000		$	5,960,000		39	%
Cost of sales		16,056,000			12,715,000			3,341,000		26	%
Gross profit	$	5,153,000		$	2,534,000		$	2,619,000		103	%
… as a percentage of net revenues		24	%		17	%

Summary comparison of the three months ended February 28, 2022 and 2021
	Increase /
	(Decrease)
Sales, net	$	1,371,000
Cost of goods sold	$	601,000
Selling, general and administrative expenses	$	141,000
Loss before provision for income taxes	$	(10,000	)
Provision for income taxes (benefit)	$	290,000
Net income (loss)	$	(300,000	)

	Three months ended February 28						Change
	2022			2021			Amount		Percent
Net Revenue	$	6,143,000		$	4,772,000		$	1,371,000		29	%
Cost of sales		4,970,000			4,369,000			601,000		14	%
Gross profit	$	1,173,000		$	403,000		$	770,000		191	%
… as a percentage of net revenues		19	%		8	%

	February 2022			February 2021
Risk-free interest rate:		2.875	%		1.750	%
Expected life of the options:		4 years			3.9 years
Expected share price volatility:		32	%		34	%
Expected dividends:		zero			zero

These assumptions resulted in estimated fair-market value per stock option:	$	3.42		$	2.88

			Weighted-
	Number of		Average
	Options		Exercise Price
Options outstanding and exercisable at May 31, 2021:		267,750	$	11.60
Options granted:		36,750	$	11.64
Less: Options expired:		1,500		—
Options outstanding and exercisable at February 28, 2022:		303,000	$	11.61
Closing value per share on NASDAQ at February 28, 2022:			$	10.00

	February 28, 2022				May 31, 2021				Increase /(Decrease)
Raw materials	$	497,000			$	503,000			$	(6,000	)	-1	%
Work-in-process		5,201,000				5,076,000				125,000		2	%
Finished goods		234,000				256,000				(22,000	)	-9	%
Inventory		5,932,000	80	%		5,835,000	78	%		97,000		2	%
Maintenance and other inventory		1,478,000	20	%		1,613,000	22	%		(135,000	)	-8	%
Total	$	7,410,000	100	%	$	7,448,000	100	%	$	(38,000	)	-1	%

Inventory turnover		2.9				2.1

TAYLOR DEVICES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity
	(Unaudited)						(Unaudited)
	For the three months ended February 28,						For the nine months ended February 28,
	2022			2021			2022			2021

Common Stock
Beginning of period	$	101,323		$	101,037		$	101,305		$	100,943
Issuance of shares for employee stock purchase plan		9			10			27			29
Issuance of shares for employee stock option plan		—			—			—			75
End of period		101,332			101,047			101,332			101,047
Paid-in Capital
Beginning of period		10,144,275			9,841,612			10,010,430			9,759,063
Issuance of shares for employee stock purchase plan		4,227			4,020			12,308			11,382
Issuance of shares for employee stock option plan		—			—			—			25,470
Stock options issued for services		—			—			125,764			49,717
End of period		10,148,502			9,845,632			10,148,502			9,845,632
Retained Earnings
Beginning of period		34,443,156			33,359,881			33,601,475			32,538,580
Net income (loss)		(117,293	)		182,318			724,388			1,003,619
End of period		34,325,863			33,542,199			34,325,863			33,542,199
Treasury Stock
Beginning of period		(2,915,002	)		(2,886,577	)		(2,915,002	)		(2,861,032	)
Issuance of shares for employee stock option plan		—			—			—			(25,545	)
End of period		(2,915,002	)		(2,886,577	)		(2,915,002	)		(2,886,577	)
Total stockholders' equity	$	41,660,695		$	40,602,301		$	41,660,695		$	40,602,301


See notes to condensed consolidated financial statements.

	February 28, 2022		May 31, 2021		Increase /(Decrease)
Accounts and other receivables	$	5,268,000	$	4,121,000	$	1,147,000		28	%
Less: Other receivable		—		741,000		(741,000	)	-100	%
Accounts receivable		5,268,000		3,380,000		1,888,000		56	%
CIEB		1,321,000		1,500,000		(179,000	)	-12	%
Less: BIEC		708,000		1,362,000		(654,000	)	-48	%
Net	$	5,881,000	$	3,518,000	$	2,363,000		67	%

Number of an average day’s sales outstanding in accounts receivable		77		42

	February 28, 2022		May 31, 2021
Costs	$	2,865,000	$	2,362,000
Estimated Earnings		134,000		410,000
Less: Billings to customers		1,678,000		1,272,000
CIEB	$	1,321,000	$	1,500,000
Number of Projects in progress		10		9

	February 28, 2022		May 31, 2021
Billings to customers	$	2,246,000	$	2,741,000
Less: Costs		762,000		1,011,000
Less: Estimated Earnings		776,000		368,000
BIEC	$	708,000	$	1,362,000
Number of Projects in progress		5		5

ITEM 1	Legal Proceedings

	There are no other legal proceedings except for routine litigation incidental to the business.

ITEM 1A	Risk Factors

	Smaller reporting companies are not required to provide the information called for by this item.

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds

	(a)	The Company sold no equity securities during the fiscal quarter ended February 28, 2022 that were not registered under the Securities Act.
	(b)	Use of proceeds following effectiveness of initial registration statement:
		Not Applicable
	(c)	Repurchases of Equity Securities – Quarter Ended February 28, 2022

		Period		(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs

		December 1, 2021 -
		December 31, 2021		-	-	-	-

		January 1, 2022 -
		January 31, 2022		-	-	-	-

		February 1, 2022 -
		February 28, 2022		-	-	-	-

		Total		-	-	-	-



ITEM 3	Defaults Upon Senior Securities

	None

ITEM 4	Mine Safety Disclosures

	Not applicable

ITEM 5	Other Information

	(a)		Information required to be disclosed in a Report on Form 8-K, but not reported

			None

	(b)		Material changes to the procedures by which Security Holders may recommend nominees to the Registrant's Board of Directors

			None


ITEM 6	Exhibits
	31(i)	Rule 13a-14(a) Certification of Chief Executive Officer.
	31(ii)	Rule 13a-14(a) Certification of Chief Financial Officer.
	32(i)	Section 1350 Certification of Chief Executive Officer.
	32(ii)	Section 1350 Certification of Chief Financial Officer.
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SEC Form 10-Q filed by Taylor Devices Inc.