10-Q

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 November 30, 2022

OR

☐ 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	None	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of December 29, 2022, there were outstanding 3,502,546 shares of the registrant’s common stock, par value $.025 per share.

-2- 

TAYLOR DEVICES, INC.

Index to Form 10-Q

PART I	FINANCIAL INFORMATION		PAGE NO.
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of November 30, 2022 and May 31, 2022	4
		Condensed Consolidated Statements of Income for the three and six months ended November 30, 2022 and 2021	5
		Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended November 30, 2022 and 2021	6
		Condensed Consolidated Statements of Cash Flows for the six months ended November 30, 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

-3- 

TAYLOR DEVICES, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets	(Unaudited)
	November 30,			May 31,
	2022			2022
Assets
Current assets:
Cash and cash equivalents	$	21,013,144		$	22,517,038
Short-term investments		1,097,450			1,097,450
Accounts and other receivables, net		5,940,731			4,466,686
Inventory		5,596,046			5,854,935
Costs and estimated earnings in excess of billings		5,295,376			3,336,474
Other current assets		890,506			704,436
Total current assets		39,833,253			37,977,019
Maintenance and other inventory, net		972,282			1,107,309
Property and equipment, net		10,610,010			9,854,759
Other assets		207,879			205,359
Deferred income taxes		74,615			74,615
	$	51,698,039		$	49,219,061
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,537,181		$	1,426,830
Billings in excess of costs and estimated earnings		1,089,884			1,122,763
Other current liabilities		3,087,615			3,414,314
Total current liabilities		5,714,680			5,963,907
Stockholders' Equity:
Common stock and additional paid-in capital		10,495,584			10,329,258
Retained earnings		38,402,777			35,840,898
		48,898,361			46,170,156
Treasury stock - at cost		(2,915,002	)		(2,915,002	)
Total stockholders’ equity		45,983,359			43,255,154
	$	51,698,039		$	49,219,061
See notes to condensed consolidated financial statements.

-4- 

TAYLOR DEVICES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income	(Unaudited)				(Unaudited)
	For the three months ended November 30,				For the six months ended November 30,
	2022		2021		2022		2021
Sales, net	$	10,497,366	$	7,757,986	$	19,588,065	$	15,065,723
Cost of goods sold		6,403,541		5,167,463		12,109,483		10,603,021
Gross profit		4,093,825		2,590,523		7,478,582		4,462,702
Research and development costs		315,301		201,277		690,647		483,217
Selling, general and administrative expenses		2,022,061		1,608,860		3,853,099		3,080,959
Operating income		1,756,463		780,386		2,934,836		898,526
Other income, net		153,045		7,418		193,043		71,155
Income before provision for income taxes		1,909,508		787,804		3,127,879		969,681
Provision for income taxes		350,000		128,000		566,000		128,000
Net income	$	1,559,508	$	659,804	$	2,561,879	$	841,681
Basic and diluted earnings per common share	$	0.45	$	0.19	$	0.73	$	0.24
See notes to condensed consolidated financial statements.

-5- 

TAYLOR DEVICES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders’ Equity
	(Unaudited)						(Unaudited)
	For the three months ended November 30,						For the six months ended November 30,
	2022			2021			2022			2021
Common Stock
Beginning of period	$	101,451		$	101,313		$	101,342		$	101,305
Issuance of shares for employee stock purchase plan		6			10			15			18
Issuance of shares for employee stock option plan		—			—			100			—
End of period		101,457			101,323			101,457			101,323
Paid-in Capital
Beginning of period		10,263,098			10,014,255			10,227,916			10,010,430
Issuance of shares for employee stock purchase plan		2,592			4,256			5,654			8,081
Issuance of shares for employee stock option plan		—			—			32,120			—
Stock options issued for services		128,437			125,764			128,437			125,764
End of period		10,394,127			10,144,275			10,394,127			10,144,275
Retained Earnings
Beginning of period		36,843,269			33,783,352			35,840,898			33,601,475
Net income		1,559,508			659,804			2,561,879			841,681
End of period		38,402,777			34,443,156			38,402,777			34,443,156
Treasury Stock
Beginning and end of period		(2,915,002	)		(2,915,002	)		(2,915,002	)		(2,915,002	)
Total stockholders' equity	$	45,983,359		$	41,773,752		$	45,983,359		$	41,773,752
See notes to condensed consolidated financial statements.

-6- 

TAYLOR DEVICES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
	(Unaudited)
	November 30,
For the six months ended	2022			2021
Operating activities:
Net income	$	2,561,879		$	841,681
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation		635,580			637,363
Stock options issued for services		128,437			125,764
Changes in other assets and liabilities:
Accounts and other receivables, net		(1,474,045	)		(189,316	)
Inventory		393,916			88,563
Costs and estimated earnings in excess of billings		(1,958,902	)		(2,385,172	)
Other current assets		(186,070	)		354,898
Accounts payable		110,351			(284,608	)
Billings in excess of costs and estimated earnings		(32,879	)		(645,498	)
Other current liabilities		(326,699	)		82,114
Net operating activities		(148,432	)		(1,374,211	)
Investing activities:
Acquisition of property and equipment		(1,390,831	)		(560,159	)
Other investing activities		(2,520	)		(7,249	)
Net investing activities		(1,393,351	)		(567,408	)
Financing activities:
Proceeds from issuance of common stock, net		37,889			8,099
Net change in cash and cash equivalents		(1,503,894	)		(1,933,520	)
Cash and cash equivalents - beginning		22,517,038			20,581,604
Cash and cash equivalents - ending	$	21,013,144		$	18,648,084
See notes to condensed consolidated financial statements.

-7- 

TAYLOR DEVICES, INC.

Notes to Condensed Consolidated Financial Statements

1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of November 30, 2022 and May 31, 2022, the results of operations for the three and six months ended November 30, 2022 and 2021, and cash flows for the six months ended November 30, 2022 and 2021. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report to Shareholders for the year ended May 31, 2022.

2. The Company has evaluated events and transactions for potential recognition or disclosure in the financial statements through the date the financial statements were issued.

3. There is no provision nor shall there be any provisions for profit sharing, dividends, or any other benefits of any nature at any time for this fiscal year.

4. For the six-month periods ended November 30, 2022 and 2021, the net income was divided by 3,500,172 and 3,496,697 respectively, which is net of the Treasury shares, to calculate the net income per share. For the three-month periods ended November 30, 2022 and 2021, the net income was divided by 3,499,598 and 3,496,610 respectively, which is net of the Treasury shares, to calculate the net income per share.

5. The results of operations for the three and six-month periods ended November 30, 2022 are not necessarily indicative of the results to be expected for the full year.

6. Recently issued Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) guidance has either been implemented or is not significant to the Company.

7. Inventory:

	November 30, 2022		May 31, 2022
Raw materials	$	575,415	$	488,393
Work-in-process		4,900,432		5,166,271
Finished goods		220,199		300,271
		5,696,046		5,954,935
Less allowance for obsolescence		100,000		100,000
	$	5,596,046	$	5,854,935

8. Revenue Recognition:

Revenue is recognized (generally at fixed prices) when, or as, the Company transfers control of promised products or services to a customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products or services.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts which are, therefore, not distinct. Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations.

-8- 

For contracts with customers in which the Company satisfies a promise to the customer to provide a product that has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date inclusive of profit, the Company satisfies the performance obligation and recognizes revenue over time (generally less than one year) using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material and overhead. Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. Other sales to customers are recognized upon shipment to the customer based on contract prices and terms. In the six months ended November 30, 2022, 61% of revenue was recorded for contracts in which revenue was recognized over time while 39% was recognized at a point in time. In the six months ended November 30, 2021, 67% of revenue was recorded for contracts in which revenue was recognized over time while 33% was recognized at a point in time.

Progress payments are typically negotiated for longer term projects. Payments are otherwise due once performance obligations are complete (generally at shipment and transfer of title). For financial statement presentation purposes, the Company nets progress billings against the total costs incurred and estimated earnings recognized on uncompleted contracts. The asset, “costs and estimated earnings in excess of billings,” represents revenues recognized in excess of amounts billed. The liability, “billings in excess of costs and estimated earnings,” represents billings in excess of revenues recognized.

If applicable, the Company recognizes an asset for the incremental, material costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year and the costs are expected to be recovered. As of November 30, 2022 and May 31, 2022, the Company does not have material incremental costs on any open contracts with an original expected duration of greater than one year, and therefore such costs are expensed as incurred. These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract with a customer.

9. The November 30, 2021 statement of income has been reclassified to conform with the presentation adopted for November 30, 2022.

10. Other current liabilities:

	November 30, 2022		May 31, 2022
Customer deposits	$	954,262	$	1,347,709
Personnel costs		1,579,679		1,587,271
Other		553,674		479,334
Other current liabilities	$	3,087,615	$	3,414,314

-9- 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Information in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this 10-Q and its Exhibits that does not consist of historical facts, are "forward-looking statements." Statements accompanied or qualified by, or containing, words such as "may," "will," "should," "believes," "expects," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume" constitute forward-looking statements and, as such, are not a guarantee of future performance. The statements involve factors, risks and uncertainties, the impact or occurrence of which can cause actual results to differ materially from the expected results described in such statements. Risks and uncertainties can include, among others, reductions in capital budgets by our customers and potential customers; changing product demand and industry capacity; increased competition and pricing pressures; advances in technology that can reduce the demand for the Company's products; the kind, frequency and intensity of natural disasters that affect demand for the Company’s products; and other factors, many or all of which are beyond the Company's control. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results. The Company disclaims any obligation to release publicly any updates or revisions to the forward-looking statements herein to reflect any change in the Company's expectations with regard thereto, or any changes in events, conditions or circumstances on which any such statement is based.

Results of Operations

A summary of the period-to-period changes in the principal items included in the condensed consolidated statements of income is shown below:

Summary comparison of the six months ended November 30, 2022 and 2021
	Increase /
	(Decrease)
Sales, net	$	4,522,000
Cost of goods sold	$	1,506,000
Research and development costs	$	207,000
Selling, general and administrative expenses	$	772,000
Income before provision for income taxes	$	2,158,000
Provision for income taxes	$	438,000
Net income	$	1,720,000

Sales under certain fixed-price contracts, in which the product has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date, inclusive of profit, are accounted for under the percentage-of-completion method of accounting whereby revenues are recognized based on estimates of completion prepared on a ratio of cost to total estimated cost basis. Costs include all material and direct and indirect charges related to specific contracts.

Adjustments to cost estimates are made periodically and any losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. However, any profits expected on contracts in progress are recognized over the life of the contract.

For financial statement presentation purposes, the Company nets progress billings against the total costs incurred and estimated earnings recognized on uncompleted contracts. The asset, "costs and estimated earnings in excess of billings," represents revenues recognized in excess of amounts billed. The liability, "billings in excess of costs and estimated earnings," represents billings in excess of revenues recognized.

-10- 

For the six months ended November 30, 2022 (All figures discussed are for the six months ended November 30, 2022 as compared to the six months ended November 30, 2021).

	Six months ended November 30						Change
	2022			2021			Amount		Percent
Net Revenue	$	19,588,000		$	15,066,000		$	4,522,000		30	%
Cost of sales		12,109,000			10,603,000			1,506,000		14	%
Gross profit	$	7,479,000		$	4,463,000		$	3,016,000		68	%
… as a percentage of net revenues		38	%		30	%

The Company's consolidated results of operations showed a 30% increase in net revenues and an increase in net income of 204%. Revenue for the first half of fiscal 2023 is higher than any half fiscal year period in the history of the Company. Revenues recorded in the current period for long-term construction projects (“Project(s)”) were 18% more than the level recorded in the prior year. The Company had 35 Projects in process during the current period as compared to 28 during the same period last year. Revenues recorded in the current period for other-than long-term construction projects (non-projects) were 55% more than the level recorded in the prior year. Total sales within the U.S. increased 43% from the same period last year. Total sales to Asia decreased 4% from the same period of the prior year. Sales increases were recorded over the same period last year to customers involved in construction of buildings and bridges (13%) as well as to customers in aerospace / defense (47%) and to industrial customers (93%). The increase in aerospace /defense sales is due, in part, to a healthy combination of providing production hardware on several legacy programs and new development programs, along with receiving substantial contracts for the refurbishment of hardware on existing naval platforms. The 108% increase in sales to industrial customers is primarily due to some new domestic manufacturing facilities beginning operations which utilized the Company’s products.

In prior years, the Company reported research and development costs as part of cost of sales and therefore included in the gross profit. Management intends to continue to make significant investments in research and development in order to promote profitable growth of the Company. In order to more clearly distinguish these investments from the profitability of a period’s sales, effective with the first quarter of fiscal 2023, the Company is disclosing research and development costs separately on the Condensed Consolidated Statements of Income below the gross profit line. Prior period statements of income as well as disclosures in this document have been reclassified to conform with the presentation adopted for the current period.

The gross profit as a percentage of net revenue of 38% in the current period is eight percentage points greater than the same period of the prior year (30%). The Company has been able to increase sales prices to recover more of the increased costs for materials and labor that were incurred over the past year. Management continues to work with suppliers to obtain more visibility of conditions affecting their respective markets. These actions combined with the increase in volume have helped to improve the gross margin as a percentage of revenue over the prior year.

Sales of the Company’s products are made to three general groups of customers: industrial, structural and aerospace / defense. A breakdown of sales to the three general groups of customers is as follows:

	Six months ended November 30
	2022			2021
Industrial		11	%		8	%
Structural		54	%		62	%
Aerospace / Defense		35	%		30	%

At November 30, 2021, the Company had 139 open sales orders in our backlog with a total sales value of $17.0 million. At November 30, 2022, the Company has 139 open sales orders in our backlog, and the total sales value is $18.1 million.

The Company's backlog, revenues, commission expense, gross profits, and net income fluctuate from period to period. The changes in the current period, compared to the prior period, are not necessarily representative of future results.

-11- 

Net revenue by geographic region, as a percentage of total net revenue for the six-month periods ended November 30, 2022 and November 30, 2021 is as follows:

	Six months ended November 30
	2022			2021
USA		80	%		73	%
Asia		13	%		18	%
Other		7	%		9	%

Research and Development Costs

	Six months ended November 30						Change
	2022			2021			Amount		Percent
R & D	$	690,000		$	483,000		$	207,000		43	%
… as a percentage of net revenues		3.5	%		3.2	%

Research and development costs stayed consistent as a percent of net revenues while increasing by 43% over the prior year.

Selling, General and Administrative Expenses

	Six months ended November 30						Change
	2022			2021			Amount		Percent
SG&A	$	3,853,000		$	3,081,000		$	772,000		25	%
… as a percentage of net revenues		20	%		20	%

Selling, general and administrative expenses increased by 25% from the prior year. This increase is primarily due to increased employee compensation costs including incentive compensation.

The above factors resulted in an operating income of $2,935,000 for the six months ended November 30, 2022, 227% more than the $899,000 in the same period of the prior year.

A summary of the period-to-period changes in the principal items included in the condensed consolidated statements of income is shown below:

Summary comparison of the three months ended November 30, 2022 and 2021
	Increase /
	(Decrease)
Sales, net	$	2,739,000
Cost of goods sold	$	1,236,000
Research and development costs	$	114,000
Selling, general and administrative expenses	$	413,000
Income before provision for income taxes	$	1,122,000
Provision for income taxes	$	222,000
Net income	$	900,000

Sales under certain fixed-price contracts, in which the product has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date, inclusive of profit, are accounted for under the percentage-of-completion method of accounting whereby revenues are recognized based on estimates of completion prepared on a ratio of cost to total estimated cost basis. Costs include all material and direct and indirect charges related to specific contracts.

Adjustments to cost estimates are made periodically and any losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. However, any profits expected on contracts in progress are recognized over the life of the contract.

-12- 

For financial statement presentation purposes, the Company nets progress billings against the total costs incurred and estimated earnings recognized on uncompleted contracts. The asset, "costs and estimated earnings in excess of billings," represents revenues recognized in excess of amounts billed. The liability, "billings in excess of costs and estimated earnings," represents billings in excess of revenues recognized.

For the three months ended November 30, 2022 (All figures discussed are for the three months ended November 30, 2022 as compared to the three months ended November 30, 2021).

	Three months ended November 30						Change
	2022			2021			Amount		Percent
Net Revenue	$	10,497,000		$	7,758,000		$	2,739,000		35	%
Cost of sales		6,403,000			5,167,000			1,236,000		24	%
Gross profit	$	4,094,000		$	2,591,000		$	1,503,000		58	%
… as a percentage of net revenues		39	%		33	%

The Company's consolidated results of operations showed a 35% increase in net revenues and an increase in net income of 136%. Revenues recorded in the current period for Projects were 22% more than the level recorded in the prior year. The Company had 28 Projects in process during the current period as compared to 26 during the same period last year. Revenues recorded in the current period for other-than long-term construction projects (non-projects) were 64% more than the level recorded in the prior year. Total sales within the U.S. increased 41% from the same period last year. Total sales to Asia increased 36% from the same period of the prior year. Sales increases were recorded over the same period last year to customers involved in construction of buildings and bridges (10%) as well as to customers in aerospace / defense (59%) and to industrial customers (152%). The increase in aerospace /defense sales is due, in part, to a healthy combination of providing production hardware on several legacy programs and new development programs, along with receiving substantial contracts for the refurbishment of hardware on existing naval platforms. The increase in sales to industrial customers is primarily due to some new domestic manufacturing facilities beginning operations which utilized the Company’s products.

The gross profit as a percentage of net revenue of 39% in the current period is six percentage points higher than the same period of the prior year (33%). The Company has been able to increase sales prices to recover more of the increased costs for materials and labor that were incurred over the past year. Management continues to work with suppliers to obtain more visibility of conditions affecting their respective markets. These actions combined with the increase in volume have helped to improve the gross margin as a percentage of revenue over the prior year.

Sales of the Company’s products are made to three general groups of customers: industrial, structural and aerospace / defense. A breakdown of sales to the three general groups of customers is as follows:

	Three months ended November 30
	2022			2021
Industrial		15	%		8	%
Structural		52	%		64	%
Aerospace / Defense		33	%		28	%

Net revenue by geographic region, as a percentage of total net revenue for the three-month periods ended November 30, 2022 and November 30, 2021, is as follows:

	Three months ended November 30
	2022			2021
USA		77	%		75	%
Asia		17	%		16	%
Other		6	%		9	%

-13- 

Research and Development Costs

	Three months ended November 30						Change
	2022			2021			Amount		Percent
R & D	$	315,000		$	201,000		$	114,000		57	%
… as a percentage of net revenues		3.0	%		2.6	%

Research and development costs stayed consistent as a percentage of net revenues while increasing by 57% over the prior year.

Selling, General and Administrative Expenses

	Three months ended November 30						Change
	2022			2021			Amount		Percent
S G & A	$	2,022,000		$	1,609,000		$	413,000		26	%
… as a percentage of net revenues		19	%		21	%

Selling, general and administrative expenses increased 26% from the prior year. This increase is primarily due to increased employee compensation costs including incentive compensation.

The above factors resulted in an operating income of $1,756,000 for the three months ended November 30, 2022, 125% more than the $780,000 in the same period of the prior year.

Stock Options

The Company has a stock option plan which provides for the granting of nonqualified or incentive stock options to officers, key employees and non-employee directors. Options granted under the plan are exercisable over a ten-year term. Options not exercised at the end of the term expire.

The Company expenses stock options using the fair value recognition provisions of the FASB ASC. The Company recognized $128,000 and $126,000 of compensation cost for the six-month periods ended November 30, 2022 and 2021.

The fair value of each stock option grant has been determined using the Black-Scholes model. The model considers assumptions related to exercise price, expected volatility, risk-free interest rate, and the weighted average expected term of the stock option grants. Expected volatility assumptions used in the model were based on volatility of the Company's stock price for the thirty-month period ending on the date of grant. The risk-free interest rate is derived from the U.S. treasury yield. The Company used a weighted average expected term.

The following assumptions were used in the Black-Scholes model to estimate the fair market value of the Company's stock option grants:

	November 2022			November 2021
Risk-free interest rate:		1.625	%		2.875	%
Expected life of the options:		4.1 years			4 years
Expected share price volatility:		30	%		32	%
Expected dividends:		zero			zero
These assumptions resulted in estimated fair-market value per stock option:	$	3.06		$	3.42

The ultimate value of the options will depend on the future price of the Company's common stock, which cannot be forecast with reasonable accuracy.

-14- 

A summary of changes in the stock options outstanding during the six-month period ended November 30, 2022 is presented below:

			Weighted-
	Number of		Average
	Options		Exercise Price
Options outstanding and exercisable at May 31, 2022:		283,000	$	11.43
Options granted:		42,000	$	11.45
Less: Options exercised:		4,000	$	8.06
Less: Options expired:		3,750		—
Options outstanding and exercisable at November 30, 2022:		317,250	$	11.49
Closing value per share on NASDAQ at November 30, 2022:			$	13.40

Capital Resources and Long-Term Debt

The Company's primary liquidity is dependent upon the working capital needs. These are mainly inventory, accounts receivable, costs and estimated earnings in excess of billings, accounts payable, other current liabilities, and billings in excess of costs and estimated earnings. The Company's primary source of liquidity has been operations.

Capital expenditures for the six months ended November 30, 2022 were $1,391,000 compared to $560,000 in the same period of the prior year. As of November 30, 2022, the Company has commitments for capital expenditures totaling $1,800,000 during the next twelve months.

The Company believes it is carrying adequate insurance coverage on its facilities and their contents.

Inventory and Maintenance Inventory

	November 30, 2022				May 31, 2022				Increase /(Decrease)
Raw materials	$	575,000			$	489,000			$	86,000		18	%
Work-in-process		4,901,000				5,166,000				(265,000	)	-5	%
Finished goods		120,000				200,000				(80,000	)	-40	%
Inventory		5,596,000	85	%		5,855,000	84	%		(259,000	)	-4	%
Maintenance and other inventory		972,000	15	%		1,107,000	16	%		(135,000	)	-12	%
Total	$	6,568,000	100	%	$	6,962,000	100	%	$	(394,000	)	-6	%
Inventory turnover		3.6				3.1

NOTE: Inventory turnover is annualized for the six-month period ended November 30, 2022.

Inventory, at $5,596,000 as of November 30, 2022, is $259,000 less than the prior year-end level of $5,855,000. Approximately 88% of the current inventory is work in process, 2% is finished goods, and 10% is raw materials.

Maintenance and other inventory represent stock that is estimated to have a product life cycle in excess of twelve months. This stock represents certain items the Company is required to maintain for service of products sold and items that are generally subject to spontaneous ordering. This inventory is particularly sensitive to technological obsolescence in the near term due to its use in industries characterized by the continuous introduction of new product lines, rapid technological advances and product obsolescence. Management of the Company has recorded an allowance for potential inventory obsolescence. The provision for potential inventory obsolescence was zero and $90,000 for the six-month periods ended November 30, 2022 and 2021. The Company continues to rework slow-moving inventory, where applicable, to convert it to product to be used on customer orders.

-15- 

Accounts Receivable, Costs and Estimated Earnings in Excess of Billings (“CIEB"), and Billings in Excess of Costs and Estimated Earnings ("BIEC")

	November 30, 2022		May 31, 2022		Increase /(Decrease)
Accounts receivable	$	5,941,000	$	4,467,000	$	1,474,000		33	%
CIEB		5,295,000		3,336,000		1,959,000		59	%
Less: BIEC		1,090,000		1,123,000		(33,000	)	-3	%
Net	$	10,146,000	$	6,680,000	$	3,466,000		52	%
Number of an average day’s sales outstanding in accounts receivable		51		42

The Company combines the totals of accounts receivable, the current asset, CIEB, and the current liability, BIEC, to determine how much cash the Company will eventually realize from revenue recorded to date. As the accounts receivable figure rises in relation to the other two figures, the Company can anticipate increased cash receipts within the ensuing 30-60 days.

Accounts receivable of $5,941,000 as of November 30, 2022 includes $6,000 of an allowance for doubtful accounts (“Allowance”). The accounts receivable balance as of May 31, 2022 of $4,467,000 included an Allowance of $16,000. The number of an average day's sales outstanding in accounts receivable (“DSO”) increased from 42 days at May 31, 2022 to 51 at November 30, 2022. The DSO is a function of 1.) the level of sales for an average day (for example, total sales for the past three months divided by 90 days) and 2.) the level of accounts receivable at the balance sheet date. The level of sales for an average day in the second quarter of the current fiscal year is 9% more than in the fourth quarter of the prior year. The level of accounts receivable at the end of the current fiscal quarter is 33% more than the level at the end of the prior year. The increase in the level of accounts receivable off-set by the increase in the level of an average day’s sales caused the DSO to increase from last year end to this quarter-end. The Company expects to collect the net accounts receivable balance during the next twelve months. The level of accounts receivable is greater than at the end of the prior year primarily because of the $1.2 million increase in the level of sales for the month of November 2022 over the month of May 2022.

As noted above, CIEB represents revenues recognized in excess of amounts billed. Whenever possible, the Company negotiates a provision in sales contracts to allow the Company to bill, and collect from the customer, payments in advance of shipments. Unfortunately, such provisions are often not possible. The $5,295,000 balance in this account at November 30, 2022 is 59% more than the prior year-end balance. This increase is the result of normal flow of the Projects through production with billings to the customers as permitted in the related contracts. The Company expects to bill the entire amount during the next twelve months. 17% of the CIEB balance as of the end of the last fiscal quarter, August 31, 2022, was billed to those customers in the current fiscal quarter ended November 30, 2022. The remainder will be billed as the Projects progress, in accordance with the terms specified in the various contracts.

The balances in this account are comprised of the following components:

	November 30, 2022		May 31, 2022
Costs	$	3,380,000	$	3,250,000
Estimated Earnings		3,221,000		2,642,000
Less: Billings to customers		1,306,000		2,556,000
CIEB	$	5,295,000	$	3,336,000
Number of Projects in progress		16		11

As noted above, BIEC represents billings to customers in excess of revenues recognized. The $1,090,000 balance in this account at November 30, 2022 is down 3% from the $1,123,000 balance at the end of the prior year. The balance in this account fluctuates in the same manner and for the same reasons as the CIEB, discussed above. Final delivery of product under these contracts is expected to occur during the next twelve months.

-16- 

The balances in this account are comprised of the following components:

	November 30, 2022		May 31, 2022
Billings to customers	$	2,037,000	$	2,711,000
Less: Costs		676,000		1,019,000
Less: Estimated Earnings		271,000		569,000
BIEC	$	1,090,000	$	1,123,000
Number of Projects in progress		4		8

Summary of factors affecting the balances in CIEB and BIEC:

	November 30, 2022			May 31, 2022
Number of Projects in progress		20			19
Aggregate percent complete		54	%		47	%
Average total sales value of Projects in progress	$	657,000		$	795,000
Percentage of total value invoiced to customer		25	%		35	%

The Company's backlog of sales orders at November 30, 2022 is $18.1 million, down from the $23.7 million at the end of the prior year. $5.6 million of the current backlog is on Projects already in progress. While too late to be included in the backlog as of November 30, 2022, the Company recorded an additional $8.2 million of sales order bookings in the first half of December.

Other Balance Sheet Items

Accounts payable, at $1,537,000 as of November 30, 2022, is 8% more than the prior year-end. Other current liabilities decreased 10% from the prior year-end, to $3,088,000. The Company expects the current accrued amounts to be paid or applied during the next twelve months.

Management believes the Company's cash flows from operations are sufficient to fund ongoing operations and capital improvements for the next twelve months.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

(a)        Evaluation of disclosure controls and procedures.

The Company's principal executive officer and principal financial officer have evaluated the Company's disclosure controls and procedures as of November 30, 2022 and have concluded that as of the evaluation date, the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer to allow timely decisions regarding required disclosure.

(b)        Changes in internal control over financial reporting.

There have been no changes in the Company's internal controls over financial reporting that occurred during the fiscal quarter ended November 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's control over financial reporting.

-17- 

Part II - Other Information

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 November 30, 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 November 30, 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
		September 1, 2022 -
		September 30, 2022		-	-	-	-
		October 1, 2022 -
		October 31, 2022		-	-	-	-
		November 1, 2022 -
		November 30, 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

-18- 

ITEM 6	Exhibits
	3(v)	By-laws
	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
	104	Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101

-19- 

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Taylor Devices, Inc.

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Taylor Devices, Inc. and Subsidiary (the Company) as of November 30, 2022, and the related condensed consolidated statements of income and stockholders’ equity for the three and six months ended November 30, 2022 and 2021, and cash flows for the six months ended November 30, 2022 and 2021, and the related notes (collectively referred to as the interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of May 31, 2022, and the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated August 19, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Lumsden & McCormick, LLP

Buffalo, New York

December 29, 2022

-20- 

TAYLOR DEVICES, INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TAYLOR DEVICES, INC.

(Registrant)

Date:	December 29, 2022	/s/Timothy J. Sopko
		Timothy J. Sopko Chief Executive Officer (Principal Executive Officer)

Date:	December 29, 2022	/s/Mark V. McDonough
		Mark V. McDonough Chief Financial Officer

EX-31

Exhibit 31(i)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a - 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy J. Sopko, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Taylor Devices, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 29, 2022	/s/ Timothy J. Sopko
	Timothy J. Sopko Chief Executive Officer

EX-32

Exhibit 32(i)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connect with the quarterly report of Taylor Devices, Inc. ("the Company") on Form 10-Q for the quarter ended November 30, 2022 to be filed with Securities and Exchange Commission on or about the date hereof (the
"Report"), I, Timothy J. Sopko Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

Date: December 29, 2022	By:	/s/ Timothy J. Sopko
		Timothy J. Sopko Chief Executive Officer

EX-31

Exhibit 31(ii)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a - 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark V. McDonough, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Taylor Devices, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: December 29, 2022	/s/ Mark V. McDonough
	Mark V. McDonough Chief Financial Officer

EX-32

Exhibit 32(ii)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connect with the quarterly report of Taylor Devices, Inc. (the "Company") on Form 10-Q for the quarter ended November 30, 2022 to be filed with Securities and Exchange Commission on or about the date hereof (the "Report"), I, Mark V. McDonough, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

Date: December 29, 2022	By:	/s/ Mark V. McDonough
		Mark V. McDonough, Chief Financial Officer

EX-3

BY-LAWS

Of

TAYLOR DEVICES, INC.

(Revision of 08/2022)

TABLE OF CONTENTS

Page

ARTICLE I   MEETINGS OF SHAREHOLDERS	1
Section 1.   Annual Meeting	1
Section 2.   Special Meetings	1
Section 3.   Notice of Meetings	1
Section 4.   Waiver of Notice	1
Section 5.   Qualification of Voters	1
Section 6.   Quorum	1
Section 7.   Inspectors of Election	2
Section 8.   Proxies	2
Section 9.   Voting	2
Section 10.   Consents	2
Section 11.   Notice of Business	2
Section 12.   Shareholder Nominations	3
Section 13.   Conduct of Shareholder Meetings	3
Section 14   Undisclosed Beneficial Ownership	3
ARTICLE II   BOARD OF DIRECTORS	4
Section 1.   Power of Board and Qualification of Directors	4
Section 2.   Number of Directors	4
Section 3.   Election and Term of Directors	4
Section 4.   Resignations	4
Section 5.   Removal of Directors	4
Section 6.   Newly Created Directorships and Vacancies	4
Section 7.   Executive and Other Committees of Directors	4
Section 8.   Compensation of Directors	5
ARTICLE III   MEETINGS OF THE BOARD	5
Section 1.   Regular Meetings	5
Section 2.   Special Meetings; Notice and Waiver of Notice	5
Section 3.   Quorum; Action by the Board and Adjournment	5
Section 4.   Action without a Meeting	5
ARTICLE IV   OFFICERS	6
Section 1.   Officers	6
Section 2.   Term of Office and Removal	6
Section 3.   Powers and Duties	6
Section 4.   Compensation	6
ARTICLE V   INDEMNITY	6
Section 1.   Indemnification	6
Section 2.   Agreement to Indemnify	6
ARTICLE VI   SHARE CERTIFICATES	7
Section 1.   Form of Share Certificates	7
Section 2.   Registration of Transfers	7
Section 3.   Dividends	7
Section 4.   Fixing Record Date	7
ARTICLE VII   MISCELLANEOUS PROVISIONS	7
Section 1.   Corporate Seal	7
Section 2.   Fiscal Year	7
Section 3.   Checks and Notes	7
Section 4   Exclusive Forum	8
ARTICLE VIII   AMENDMENTS	8
Section 1.   Power to Amend	8

ARTICLE I

MEETINGS OF SHAREHOLDERS

Section 1. ANNUAL MEETING. A meeting of the shareholders shall be held annually for the election of directors and the transaction of such other business as may properly come before the meeting which may be held within or without the State of New York, at any time within six (6) months after the end of the fiscal year as shall be fixed by the Board of Directors.

Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the Board of Directors at the written request of the holders of record of a majority of the outstanding shares of the Corporation entitled to vote at such meetings. Special meetings shall be held at such time as may be fixed in the call and stated in the notice of meeting or waiver thereof. At any such special meeting only such business may be transacted as is related to the purposes set forth in the notice of the meeting.

Section 3. NOTICE OF MEETINGS. Written notice of each meeting of shareholders shall be given, personally or by mail, not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each shareholder entitled to vote at such meeting.

Notice of any meeting of shareholders shall state the place, date, and hour of such meeting and in the case of special meetings (i) the purpose or purposes for which the meeting is called and (ii) at whose direction the notice is being issued. If mailed, such notice is given when deposited in the United States mail directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, then directed to him at such other address.

Section 4. WAIVER OF NOTICE. Notice of any meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him.

Section 5. QUALIFICATION OF VOTERS. Except as may be otherwise provided in the Certificate of Incorporation, every shareholder of record shall be entitled at every meeting of shareholders to one vote for every share standing in his name on the record of shareholders.

Shares of the Corporation standing in the name of another domestic or foreign corporation of any type or kind may be voted by such officer, agent or proxy as the By-Laws of the Corporation may provide, or in the absence of such provision, as the Board of Directors of the Corporation may determine.

The Corporation shall be protected in treating the persons in whose names shares stand on the record of shareholders as the owners thereof for all purposes.

Section 6. QUORUM. The presence of a majority of the holders of shares entitled to vote, whether such presence is in person or by proxy, shall constitute a quorum at a meeting of shareholders for the transaction of any business unless the New York Business Corporation Law provides otherwise.

When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.

The shareholders present may adjourn the meeting despite the absence of a quorum.

Section 7. INSPECTORS OF ELECTION. In advance of any shareholders’ meeting, the Board of Directors may appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at the shareholders’ meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint such inspectors.

In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat.

Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.

Section 8. PROXIES. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy.

Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided therein and as permitted by law.

Section 9. VOTING. Directors shall be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election.

Whenever any corporate action, other than the election of Directors, is to be taken by vote of the shareholders, it shall, except as otherwise provided by law, be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon.

Section 10. CONSENTS. Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken signed by the holders of all outstanding shares entitled to vote thereon.

Section 11. NOTICE OF BUSINESS. At any meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors, or (ii) by any shareholder of the Corporation who is a shareholder of record at the time of the giving of notice provided in this Section, and entitled to vote at such meeting, and who complies with all notice procedures set forth in this Section. For business to be properly brought before a meeting of shareholders by a shareholder, the shareholder shall have given timely notice thereof in writing to the Secretary. “Timely,” for purposes of this Section, shall mean that the notice shall be delivered to, or mailed by first class United States mail, postage prepaid and received at, the principal executive office of the Corporation not less than 30 days prior to the meeting; provided, however, that should less than 40 days’ notice or prior public disclosure of the date of the meeting be given or made to shareholders, such written notice from the shareholder must be delivered or mailed, and presented, not later than the close of business on the tenth day following the day on which the Notice of Meeting was mailed, or such public disclosure was made, whichever first occurs.

Each notice referred to in the preceding paragraph shall set forth, as to each matter the shareholder proposes to bring before the meeting, (1) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and, in the event that such business includes a proposal to amend either the Certificate of Incorporation or the By-Laws, the specific text of the proposed amendment; (2) the name and the business and residence address of the shareholder or shareholders proposing such business; (3) the class and number of shares of capital stock of the Corporation which are beneficially owned by such shareholder or shareholders; and (4) a brief description of the material interest, if any, of such shareholder in such business.

Notwithstanding anything in these By-Laws to the contrary, any reference in any Notice of Meeting of the Shareholders, referring to the transaction of “other business,” shall be limited to procedural matters only, and no item of business shall be conducted at a shareholders’ meeting, except in accordance with this Section. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the item of business was not properly brought before the meeting or in accordance with this Section, and, if the Chairman should so determine, shall declare that such item of business shall not be transacted.

Section 12. SHAREHOLDER NOMINATIONS. Nominations for the election of directors may be made by a shareholder entitled to vote for the election of directors only in accordance with these By-Laws. Such nominations must be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary at the principal executive office of the Corporation not less than 30 days prior to any meeting of the shareholders called for the election of directors; provided, however, that should less than 40 day’ notice or prior public disclosure of the date of the meeting be given or made to shareholders, such written nomination by a shareholder must be delivered or mailed, and presented, not later than the close of business on the tenth day following the day on which the Notice of Meeting was mailed or such public disclosure was made, whichever first occurs.

Each notice referred to in the preceding paragraph shall set forth, (1) as to each nominee proposed in such notice, such person’s name, age, business address and, if known, residence address, together with all information regarding such person as would be required to be disclosed in a proxy statement soliciting proxies for election of directors filed pursuant to Regulation 14A of the Securities and Exchange Commission under the Securities Exchange Act of 1934, (2) the name, business and residence addresses and number of shares of the Corporation’s capital stock beneficially owned by each person making the nomination or nominations, and (3) a description of all arrangements or understandings between each such shareholder and any nominee or any other person or persons (naming such person or persons) in connection with or relating to the making of the nomination or nominations to serve on the Board of Directors, if elected.

The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures set forth in this Section and, if the Chairman should so determine, shall declare the nomination defective and to be disregarded.

Section 13. CONDUCT OF SHAREHOLDER MEETINGS. The Board of Directors may, from time to time, adopt rules of conduct and proxy review guidelines for shareholder meetings. If any provision of such rules of conduct and proxy review guidelines shall conflict with the Certificate of Incorporation of the Corporation or with these By-Laws, the Certificate of Incorporation or these By-Laws, as the case may be, shall control.

Section 14. UNDISCLOSED BENEFICIAL OWNERSHIP. If a person is required to report beneficial ownership of shares of the Corporation under Section 13(d) or 13(g) of the Securities Exchange Act of 1934 and the Rules of the U.S. Securities and Exchange Commission thereunder, as such Act and Rules are in effect from time to time, but such person has not done so, then such shares shall not be voted until 10 calendar days after such person shall have reported such beneficial ownership in accordance with such Act and Rules.

ARTICLE II

BOARD OF DIRECTORS

Section 1. POWER OF BOARD AND QUALIFICATION OF DIRECTORS. The business of the Corporation shall be managed by the Board of Directors, each of whom shall be at least eighteen (18) years of age.

Section 2. NUMBER OF DIRECTORS. The number of Directors constituting the entire Board of Directors shall be not less than three (3) nor more than ten (10).

Section 3. ELECTION AND TERM OF DIRECTORS. The Board of Directors shall be comprised of three Classes, each such Class to be as nearly equal in number as possible. At each annual meeting of shareholders, each Director shall be elected to hold office until expiration of the term of that Director’s Class, which shall in each instance be three years, or until such Director’s successor is elected and qualified; provided however, that the terms of office of Directors initially classified and elected shall be as follows: the term of the first Class shall expire at the next annual meeting of shareholders following approval of classification; the term of the second Class at the second succeeding annual meeting following approval of classification; and the term of the Third Class at the third succeeding annual meeting following approval of classification.

Section 4. RESIGNATIONS. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the Secretary of the Corporation. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein the acceptance of such resignation shall not be necessary to make it effective.

Section 5. REMOVAL OF DIRECTORS. Any or all of the Directors may be removed with cause by vote of the shareholders.

Section 6. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created Directorships resulting from an increase in the number of Directors and vacancies occurring in the Board of Directors for any reason whatsoever shall be filled by a vote of a majority of the Directors then in office, although less than quorum exists. A Director elected to fill a vacancy or a newly created Directorship shall not be classified, but shall be elected and hold office until the next annual meeting of shareholders, or until such time as may be otherwise provided for in Sections 4 and 5 herein. Any newly created Directorships, or any decrease in Directorships, shall be so apportioned among the Classes as to make all Classes as nearly equal as possible.

Section 7. EXECUTIVE AND OTHER COMMITTEES OF DIRECTORS. The Board of Directors, by resolution adopted by a majority of the entire Board, may designate from among its members an executive committee and other committees, each consisting of three or more Directors, and each of which, to the extent provided in the resolution and permitted by law, shall have all the authority of the Board.

The Board of Directors may designate one or more Directors as alternate members of any such committee, who may replace any absent member or members at any meeting of such committee.

Each such committee shall serve at the pleasure of the Board of Directors.

Section 8. COMPENSATION OF DIRECTORS. The Board of Directors shall have authority to fix the compensation of Directors for services in any capacity, or to allow a fixed amount plus expenses, if any, for attendance at meetings of the Board or of committees of Directors.

ARTICLE III

MEETINGS OF THE BOARD

Section 1. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held, without notice, immediately following the annual meetings of shareholders.

Section 2. SPECIAL MEETINGS; NOTICE AND WAIVER OF NOTICE. Special meetings of the Board of Directors may be held upon the call of the Chairman of the Board by oral, telegraphic or written notice, duly given to or sent or mailed to each Director not less than one day prior to said meeting. Special meetings shall be called by the Chairman of the Board on the written request of any two (2) Directors.

Notice of a special meeting need not be given to any Director who submits a signed waiver of notice whether before or after a meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him.

A notice, or waiver of notice, need not specify the purpose of any special meeting of the Board of Directors.

Section 3. QUORUM; ACTION BY THE BOARD AND ADJOURNMENT. A majority of the entire Board shall constitute a quorum for the transaction of business unless otherwise provided herein and except that when the number of Directors constituting the whole Board shall be an even number, one-half of that number shall constitute a quorum.

The vote of a majority of the Directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board, except as may be otherwise provided herein.

A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting to another time and place.

Any one or more members of the Board or any committee thereof may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

Section 4. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action, and such resolution and the written consent thereto by the members of the Board or the committee shall be filed with the minutes of the proceedings of the Board or committee.

ARTICLE IV

OFFICERS

Section 1. OFFICERS. At the regular meeting of the Board of Directors, the Board shall elect a Chief Executive Officer, President, Secretary and Treasurer of the Corporation and from time to time may elect or appoint an Assistant-Secretary, Assistant-Treasurer, General Manager and such other officers as the Board shall determine. Any two or more offices may be held by the same person, except the office of Chief Executive Officer and Secretary.

Section 2. TERM OF OFFICE AND REMOVAL. Each officer shall hold office for one year and until his successor has been elected or appointed and qualified, or until the next annual election of Directors or until such earlier removal, with or without cause.

Any officer may be removed by the Board with or without cause. The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights.

Section 3. POWERS AND DUTIES. The officers of the Corporation shall each have such powers and authority and perform such duties in the management of the property and affairs of the Corporation as from time to time may be prescribed by the Board of Directors and, to the extent not so prescribed, they shall each have such powers and authority and perform such duties in the management of the affairs and property of the Corporation, subject to the control of the Board, as generally pertain to their respective offices.

Securities of other corporations held by the Corporation may be voted by any officer designated by the Board and, in the absence of any such designation, by the Chief Executive Officer, President, Secretary or Treasurer of the Corporation.

The Board may require any officer to give security for the faithful performance of his duties.

Section 4. COMPENSATION. The compensation of all officers of the Corporation shall be fixed by the Board of Directors.

ARTICLE V

INDEMNITY

Section 1. INDEMNIFICATION. To the full extent authorized by law, the Corporation shall indemnify any person made or threatened to be made, a party to an action or proceeding, whether criminal or civil, by reason of the fact that he, his testator or intestate is or was a Director or officer of the Corporation or serves or served any other corporation in any capacity at the request of the Corporation.

Section 2. AGREEMENT TO INDEMNIFY. The Corporation shall have authority to enter into agreements, from time to time and as amended, with any Director or officer (each such person hereinafter referred to as an “Indemnitee”) to indemnify and advance the expenses of any Indemnitee to the full extent permitted by the New York Business Corporation Law, as the same now exists or as may hereafter be amended (“Indemnity Agreement”).

The indemnification and advancement of expenses granted to an Indemnitee pursuant to this Article shall not be exclusive of or limiting as to any other rights to which such Indemnitee may be entitled, when authorized by (a) a resolution of shareholders or (b) a resolution of directors, or (c) an Indemnity Agreement. No amendment, modification, or rescission of these By-Laws shall be effective to limit any person’s right to indemnification with respect to any cause of action that accrues, or other incident or matter that occurs, prior to the date on which such modification, amendment or rescission is adopted.

ARTICLE VI

SHARE CERTIFICATES

Section 1. FORM OF SHARE CERTIFICATES. The shares of the Corporation shall be represented by certificates, in such form as the Board of Directors may from time to time prescribe, signed by the Chief Executive Officer and the Secretary or an Assistant-Secretary or the Treasurer or an Assistant-Treasurer, and shall be sealed with the seal of the Corporation or facsimile thereof.

Section 2. REGISTRATION OF TRANSFERS. Shares of the Corporation shall be transferable only upon the books of the Corporation, by the persons specified by the certificate representing such shares or by special endorsement to be entitled to such shares, or by the duly authorized attorney or legal representative of such person.

Section 3. DIVIDENDS. The Board of Directors may declare and pay dividends on its outstanding shares except when currently the Corporation is insolvent or would thereby be made insolvent, or when the declaration, payment or distribution would be contrary to any restriction contained in the Certificate of Incorporation. Such dividends shall be made out of surplus only.

Section 4. FIXING RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 1. CORPORATE SEAL. The corporate seal shall have inscribed thereon the name of the Corporation and shall be in such form as the Board of Directors may from time to time determine.

Section 2. FISCAL YEAR. The fiscal year of the Corporation shall be the twelve months ending May 31 or such other period as may be prescribed by the Board of Directors.

Section 3. CHECKS AND NOTES. All checks or demands for money and notes or other instruments evidencing indebtedness or obligations of the Corporation shall be signed by such officer or officers or other person or persons as shall be thereunto authorized from time to time by the Board of Directors.

Section 4. EXCLUSIVE FORUM. Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Corporation to the Corporation or the Corporation’s shareholders, (iii) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the New York Business Corporation Law or the Corporation’s Certificate of Incorporation or By-laws (as either may be amended from time to time), or (iv) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine, shall be a federal or state court located within the State of New York.

ARTICLE VIII

AMENDMENTS

Section 1.POWER TO AMEND. By-Laws of the Corporation may be adopted, amended or repealed by the shareholders. By-Laws may also be adopted, amended or repealed by the Board of Directors subject to being amended or repealed by the shareholders entitled to vote thereon.

APPENDIX A

Adopted: January 28, 1998

TAYLOR DEVICES, INC.

____________________

PROXY REVIEW GUIDELINES

TABLE OF CONTENTS

ARTICLE	TITLE	PAGE
I	General Rules	A-1
II	Guardians and Minors	A-2
III	Joint Owners	A-3
IV	Fiduciaries	A-3
V	Banks and Trust Companies	A-4
VI	Conservators or Committees	A-4
VII	Receivers	A-4
VIII	Pledgees and Pledgors	A-4
IX	Corporations, Associations, Etc.	A-4
X	Partnerships	A-5
XI	Nominee Proxies	A-5
XII	Broker’s Proxies	A-6
XIII	Dates and Postmarks	A-6
XIV	Conflict of Law	A-7

PROXY REVIEW GUIDELINES

These guidelines are adopted to favor an interpretation giving validity to proxies and avoiding disenfranchisement of shareholders. The intent of a shareholder, when discernible, shall prevail. In applying these guidelines, the inspectors of election shall act accordingly. Any matter not covered herein shall be so determined as to further, where possible, the validity of shareholders’ proxies. “Proxy’’ shall be deemed to include “Power of Attorney’’ as well as “Proxy’’.

I. GENERAL RULES

1.01 Any proxy bearing a handwritten or hand printed signature or signed by stamped, typewritten, or facsimile signature is presumptively valid.

1.02 Any copy, facsimile, telecommunication or other reliable reproduction of the writing or transmission in lieu of the original writing or transmission shall be presumptively valid provided that such copy, facsimile, telecommunication or other reliable reproduction (1) is a complete reproduction of the entire original writing or transmission; and (2) either sets forth or is submitted with information from which it can be reasonably determined by the inspectors of election that it was authorized by the shareholders.

1.03 Proxies may be signed in pencil.

1.04 Changes or variations in spelling as between the registered name of the shareholder and his indicated signature will not void the proxy, if the name as signed is phonetically similar to the name as registered.

1.05 The addition of an address different from that appearing in the stock register will not void the proxy.

1.06 Titles such as Mr., Mrs., Miss, or Doctor or equivalent may be added or omitted and, even if included in the registered name, need not be included in the indicated signature.

1.07 Initials may be used for first and/or middle names, and an initial may be added or omitted and names may be used for the first and/or middle initial. The proxy will not be voided merely because a middle initial differs from a middle initial appearing on the stock records.

1.08 The addition or omission of Jr. or Sr. or Roman or Arabic numerals after the signature will not render the proxy void.

1.09 Where the shareholder’s name is signed by someone other than the shareholder, the proxy is presumptively valid if the signer has designated his capacity as attorney, power of attorney, attorney in fact, relative (such as parents, brother, or uncle), agent, per, by, or any abbreviation of any of the foregoing.

1.10 All shareholders shall be presumed to have voted all the shares registered in their respective names (although appearing in more than one account and different addresses in the same community on the record of shareholders) which they are entitled to vote, in the absence of any indication to the contrary. A broker or nominee proxy which does not specify or otherwise limit the proxy to a designated number of shares shall be valid for the total number of shares registered in the name of such broker or nominee and held for its account by any depositary which has submitted an omnibus proxy.

1.11 A power of attorney or proxy will be sufficient to confer authority to execute another power of attorney or proxy even though it contains no power of substitution.

1.12 Where shares are registered in the name of a fiduciary, even absent a fiduciary designation as part of the signature, the proxy will be valid.

1.13 The designation of the capacity of any signatory is acceptable in any language.

1.14 Where shares are held in the name of a shareholder, both in his individual capacity and in some fiduciary or other representative capacity, any single proxy shall be deemed as voting the shares in all capacities, unless otherwise indicated.

1.15 Unless otherwise indicated in the proxy, any proxy shall be deemed to vote all shares of stock which the person executing the proxy is entitled to vote as record holder or otherwise.

1.16 Where a woman signs her married name to a proxy, and the stock is registered in her maiden name, or vice versa, the proxy will be valid. If the registered surname and the surname in the signature differ, the inspectors of election may assume the variation is the result of change in marital status.

II. GUARDIANS AND MINORS

2.01 Shares registered in the name of a guardian or custodian may be voted by such guardian or custodian, or by the beneficial owner.

2.02 Shares registered in the name of a shareholder under the guardianship or custodianship of a designated person may be voted either by such guardian or custodian, or by such shareholder.

III. JOINT OWNERS

3.01 Shares held by two or more persons, whether as joint tenants, tenants in common, tenants by the entirety, members of a partnership, owners of community property, or otherwise, may be voted in person or by proxy by any of such persons. If more than one of such persons shall vote such shares, the vote of the majority shall be binding, or if evenly divided, then the vote shall be divided among them in proportion to the number of such persons voting in person or by proxy, even though the name of one of the signers does not appear as a record holder.

3.02 Where the surnames are identical, they need not be repeated in the signature -- for example, a proxy in the names of ``John Jones and Mary Jones’’ will be valid if signed ``John and Mary Jones’’ or ``Mr. and Mrs. John Jones’’.

IV. FIDUCIARIES

4.01 Shares held by an administrator, executor, guardian, committee, curator, trustee, agent, attorney, personal representative, or other fiduciary, or by two or more persons having the same fiduciary relationship respecting the same shares, may be voted by him or them, either in person or by proxy as provided in this Section IV without transfer of such shares into his or their name, provided that evidence of such representative capacity is produced.

4.02 Assuming compliance with 4.01 above, a proxy signed by any such person which does not indicate the name of the person for whom he is acting, even though the name of the signer does not appear on the shareholder list on the record date, will be valid.

4.03 Where shares are held by more than one of the persons referred to in this Section IV, the shares shall be voted as determined by a majority of such persons, except that (1) if they be equally divided as to a vote, the vote of the shares shall be divided equally, and (2) if only one such person shall vote, either in person or by proxy, such vote shall be sufficient to vote all the shares.

V. BANKS AND TRUST COMPANIES

5.01 Where a proxy is executed by a bank or trust company, it need only be signed in such name as registered, and when so executed, shall be deemed properly executed without supporting evidence of corporate authority or identity of the person signing. No corporate seal, attestation, copy of by-laws, resolution conferring authority or proof of identity is necessary. Where the name of the bank or trust company appears on the face of the proxy, failure to repeat such name as part of the signature or to indicate the capacity of the signatory will not invalidate the proxy.

VI. CONSERVATORS OR COMMITTEES

6.01 Shares standing in the name of a conservator or committee may be voted by such conservator or committee or by the beneficial owner, either in person or by proxy.

6.02 Shares registered in the name of a shareholder under the conservatorship of a designated person may be voted by such conservator or by such shareholder.

6.03 Shares registered in the name of a shareholder, in care of a person designated as conservator, may be voted by such conservator or by such shareholder.

VII. RECEIVERS

7.01 Shares registered in the name of a receiver may be voted by such receiver whether or not he designates himself as such.

VIII. PLEDGEES AND PLEDGORS

8.01 The vote of any person whose stock is pledged shall be valid unless in the transfer by the pledgor on the books of the Corporation such person has expressly empowered the pledgee to vote thereon, in which case only the vote of the pledgee or his proxy shall be valid.

IX. CORPORATIONS, ASSOCIATIONS, ETC.

9.01 A proxy representing shares registered in the name of a corporation, association, church, religious, education, charitable, fraternal or social organization, foundation, society, pension, retirement, profit sharing or other similar plan, or group, or governmental unit, or political group is valid if it bears the handwritten, hand printed, typed, facsimile or stamped signature of the registered holder even though the name of the person signing on behalf of the registered holder does not appear. Proxies apparently executed in the name of any of the foregoing entities shall be valid. If the name of the shareholder is not handwritten, hand printed, typed, in facsimile or stamped, but such proxy is so signed by an officer or other person purporting to act in behalf of such shareholder, the proxy shall be valid. No corporate seal, attestation, or copy of by-laws or resolution conferring authority is necessary. Where the shareholder’s name appears on the face of the proxy, failure to repeat such name as part of the signature will not invalidate the proxy.

X. PARTNERSHIPS

10.01 Where shares are registered in the name of a partnership, proxies bearing handwritten, hand printed, typed, facsimile, or stamped signatures in the partnership name only, or signed in the partnership name will be valid. Where the shareholder’s name appears on the face of the proxy, failure to repeat such name as part of the signature will not invalidate the proxy.

10.02 A proxy representing shares in the name of an investment club and signed either by an individual, in his own name (without designation or any title or authority), or signed with solely the name of the investment club, is valid.

XI. NOMINEE PROXIES

11.01 A nominee proxy may be signed in the name of the nominee as registered, whether an individual, partnership, or corporation, without requiring the signature of an individual as a partner or as an officer. A nominee proxy may also be signed by an individual without repeating the nominee’s name or without indicating his capacity or source of authority.

11.02 A proxy signed by a nominee bearing one account number or other identifying number or symbol will not revoke any other proxy signed by the same nominee bearing a different account number or other identifying number or symbol.

11.03 Where (1) the total number of shares represented by proxy submitted by a single nominee exceeds the total of shares registered in the name of that nominee, or (2) where in the opinion of the inspectors of election any other inconsistency or ambiguity exists with respect to the number of, or manner in which, shares are voted by a nominee, the inspectors may, if they deem it advisable, procure such information from such nominee or otherwise as the inspectors may deem sufficient to determine the manner in which it was intended that the shares be voted by such nominee.

XII. BROKER’S PROXIES

12.01 All proxies received from a broker, which specify a designated number of shares, will be counted regardless of date, provided the total number of shares represented by such proxies do not exceed the total number of shares registered in the name of such broker or its nominees. No proxy or proxies received from a broker shall be deemed to revoke any prior proxy or proxies unless there is specific language to that effect in addition to the printed language of the proxy form. Any such proxy which shall, by such specific language in addition to the printed language of the proxy form, revoke any prior proxy or proxies, shall be deemed effective only with respect to the shares voted by such proxy.

12.02 Where (1) the total number of shares represented by proxies submitted by a single broker exceeds the total number of shares registered in the name of such broker or its nominees, or (2) where in the opinion of the inspectors of election any other inconsistency or ambiguity exists with respect to the number of, or manner in which, shares are voted by a broker, the inspectors may, if they deem it advisable, procure such information from such broker or otherwise, as the inspectors may deem sufficient to determine the manner in which it was intended that the shares be voted by such broker.

XIII. DATES AND POSTMARKS

13.01 No printed proxy shall be deemed valid unless the printed form requests (by format or direction) that the shareholder to sign and date the proxy, and a space is specifically left for the date.

13.02 An undated proxy accompanied by an envelope bearing a postmark shall be deemed to be dated as of the date of the postmark.

13.03 An undated proxy, not accompanied by an envelope bearing a postmark, shall not be valid, unless a majority of the inspectors of election agree otherwise.

13.04 A dated proxy, or an undated proxy accompanied by an envelope bearing a postmark, shall be deemed later than an undated proxy not accompanied by an envelope bearing a postmark, (if, in the latter case, such proxy is validated).

13.05 Where the vote of any shareholder is in doubt because a dated proxy with an envelope has been submitted as well as an undated proxy with an envelope, both proxies shall be deemed to be dated as of the date of the respective envelope postmark.

13.06 Where proxies from the same shareholder bear the same date or are construed under this Section XIII to bear the same date, and the vote of such shareholder is in doubt, the proxy bearing the latest postmark date and hour on the accompanying envelope shall be deemed the later; if in such case the postmark hours are also identical they shall be acceptable only for purposes of a quorum.

13.07 If the signature on the proxy and the date on the proxy are in different colors of ink or in ink and pencil, the proxy shall be valid only if accompanied by its postmarked envelope and the date of the postmark shall be the date of the proxy.

13.08 Assuming validity, an undated proxy received by telecommunication, facsimile, or other reliable transmissions shall be dated the date of facsimile or transmission.

XIV. CONFLICT OF LAW

14.01 In case of any conflict of law with respect to the validity of proxies, as between the law of the state in which the proxy is executed and the law of the State of New York, the law of the State of New York shall govern, irrespective of conflict of laws.

XML

Cover - shares	3 Months Ended
	Nov. 30, 2022	Dec. 29, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Nov. 30, 2022
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--05-31
Entity File Number	0-3498
Entity Registrant Name	TAYLOR DEVICES INC
Entity Central Index Key	0000096536
Entity Tax Identification Number	16-0797789
Entity Incorporation, State or Country Code	NY
Entity Address, Address Line One	90 Taylor Drive
Entity Address, City or Town	North Tonawanda
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	14120
City Area Code	716
Local Phone Number	694-0800
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		3,502,546

XML

Condensed Consolidated Balance Sheets - USD ($)	Nov. 30, 2022	May 31, 2022	Nov. 30, 2021
Current assets:
Cash and cash equivalents	$ 21,013,144	$ 22,517,038	$ 18,648,084
Short-term investments	1,097,450	1,097,450
Accounts and other receivables, net	5,940,731	4,466,686
Inventory	5,596,046	5,854,935
Costs and estimated earnings in excess of billings	5,295,376	3,336,474
Other current assets	890,506	704,436
Total current assets	39,833,253	37,977,019
Maintenance and other inventory, net	972,282	1,107,309
Property and equipment, net	10,610,010	9,854,759
Other assets	207,879	205,359
Deferred income taxes	74,615	74,615
Total assets	51,698,039	49,219,061
Current liabilities:
Accounts payable	1,537,181	1,426,830
Billings in excess of costs and estimated earnings	1,089,884	1,122,763
Other current liabilities	3,087,615	3,414,314
Total current liabilities	5,714,680	5,963,907
Stockholders' Equity:
Common stock and additional paid-in capital	10,495,584	10,329,258
Retained earnings	38,402,777	35,840,898
Stockholders’ equity before treasury stock	48,898,361	46,170,156
Treasury stock - at cost	(2,915,002)	(2,915,002)	(2,915,002)
Total stockholders’ equity	45,983,359	43,255,154	$ 41,773,752
Total liabilities and stockholders’ equity	$ 51,698,039	$ 49,219,061

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Condensed Consolidated Statements of Income - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021	Nov. 30, 2022	Nov. 30, 2021
Income Statement [Abstract]
Sales, net	$ 10,497,366	$ 7,757,986	$ 19,588,065	$ 15,065,723
Cost of goods sold	6,403,541	5,167,463	12,109,483	10,603,021
Gross profit	4,093,825	2,590,523	7,478,582	4,462,702
Research and development costs	315,301	201,277	690,647	483,217
Selling, general and administrative expenses	2,022,061	1,608,860	3,853,099	3,080,959
Operating income	1,756,463	780,386	2,934,836	898,526
Other income, net	153,045	7,418	193,043	71,155
Income before provision for income taxes	1,909,508	787,804	3,127,879	969,681
Provision for income taxes	350,000	128,000	566,000	128,000
Net income	$ 1,559,508	$ 659,804	$ 2,561,879	$ 841,681
Basic and diluted earnings per common share	$ 0.45	$ 0.19	$ 0.73	$ 0.24

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Condensed Consolidated Statements of Stockholders Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]
Stockholders' Equity Attributable to Parent	$ 101,305	$ 10,010,430	$ 33,601,475
Stockholders' Equity Attributable to Parent, Beginning Balance at May. 31, 2021	101,305	10,010,430	33,601,475
Stock Issued During Period, Value, Employee Stock Purchase Plan	18	8,081
Stock Issued During Period, Value, Employee Benefit Plan	0	0
APIC, Share-Based Payment Arrangement, Option, Increase for Cost Recognition		125,764
Net Income (Loss) Attributable to Parent			841,681
Stockholders' Equity Attributable to Parent, Ending Balance at Nov. 30, 2021	101,323	10,144,275	34,443,156
Stockholders' Equity Attributable to Parent	101,313	10,014,255	33,783,352
Stockholders' Equity Attributable to Parent, Beginning Balance at Aug. 31, 2021	101,313	10,014,255	33,783,352
Stock Issued During Period, Value, Employee Stock Purchase Plan	10	4,256
Stock Issued During Period, Value, Employee Benefit Plan	0	0
APIC, Share-Based Payment Arrangement, Option, Increase for Cost Recognition		125,764
Net Income (Loss) Attributable to Parent			659,804
Stockholders' Equity Attributable to Parent, Ending Balance at Nov. 30, 2021	101,323	10,144,275	34,443,156
Stockholders' Equity Attributable to Parent	101,323	10,144,275	34,443,156
Stockholders' Equity Attributable to Parent	101,342	10,227,916	35,840,898
Stockholders' Equity Attributable to Parent, Beginning Balance at May. 31, 2022	101,342	10,227,916	35,840,898
Stock Issued During Period, Value, Employee Stock Purchase Plan	15	5,654
Stock Issued During Period, Value, Employee Benefit Plan	100	32,120
APIC, Share-Based Payment Arrangement, Option, Increase for Cost Recognition		128,437
Net Income (Loss) Attributable to Parent			2,561,879
Stockholders' Equity Attributable to Parent, Ending Balance at Nov. 30, 2022	101,457	10,394,127	38,402,777
Stockholders' Equity Attributable to Parent	101,451	10,263,098	36,843,269
Stockholders' Equity Attributable to Parent, Beginning Balance at Aug. 31, 2022	101,451	10,263,098	36,843,269
Stock Issued During Period, Value, Employee Stock Purchase Plan	6	2,592
Stock Issued During Period, Value, Employee Benefit Plan	0	0
APIC, Share-Based Payment Arrangement, Option, Increase for Cost Recognition		128,437
Net Income (Loss) Attributable to Parent			1,559,508
Stockholders' Equity Attributable to Parent, Ending Balance at Nov. 30, 2022	101,457	10,394,127	38,402,777
Stockholders' Equity Attributable to Parent	$ 101,457	$ 10,394,127	$ 38,402,777

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Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021
Operating activities:
Net income	$ 2,561,879	$ 841,681
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation	635,580	637,363
Stock options issued for services	128,437	125,764
Changes in other assets and liabilities:
Accounts and other receivables, net	(1,474,045)	(189,316)
Inventory	393,916	88,563
Costs and estimated earnings in excess of billings	(1,958,902)	(2,385,172)
Other current assets	(186,070)	354,898
Accounts payable	110,351	(284,608)
Billings in excess of costs and estimated earnings	(32,879)	(645,498)
Other current liabilities	(326,699)	82,114
Net operating activities	(148,432)	(1,374,211)
Investing activities:
Acquisition of property and equipment	(1,390,831)	(560,159)
Other investing activities	(2,520)	(7,249)
Net investing activities	(1,393,351)	(567,408)
Financing activities:
Proceeds from issuance of common stock, net	37,889	8,099
Net change in cash and cash equivalents	(1,503,894)	(1,933,520)
Cash and cash equivalents - beginning	22,517,038	20,581,604
Cash and cash equivalents - ending	$ 21,013,144	$ 18,648,084

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Notes to Condensed Consolidated Financial Statements

3 Months Ended

Nov. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Notes to Condensed Consolidated Financial Statements

Notes to Condensed Consolidated Financial Statements

1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of November 30, 2022 and May 31, 2022, the results of operations for the three and six months ended November 30, 2022 and 2021, and cash flows for the six months ended November 30, 2022 and 2021. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report to Shareholders for the year ended May 31, 2022.

2. The Company has evaluated events and transactions for potential recognition or disclosure in the financial statements through the date the financial statements were issued.

3. There is no provision nor shall there be any provisions for profit sharing, dividends, or any other benefits of any nature at any time for this fiscal year.

4. For the six-month periods ended November 30, 2022 and 2021, the net income was divided by 3,500,172 and 3,496,697 respectively, which is net of the Treasury shares, to calculate the net income per share. For the three-month periods ended November 30, 2022 and 2021, the net income was divided by 3,499,598 and 3,496,610 respectively, which is net of the Treasury shares, to calculate the net income per share.

5. The results of operations for the three and six-month periods ended November 30, 2022 are not necessarily indicative of the results to be expected for the full year.

6. Recently issued Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) guidance has either been implemented or is not significant to the Company.

7. Inventory:

	November 30, 2022		May 31, 2022
Raw materials	$	575,415	$	488,393
Work-in-process		4,900,432		5,166,271
Finished goods		220,199		300,271
		5,696,046		5,954,935
Less allowance for obsolescence		100,000		100,000
	$	5,596,046	$	5,854,935

8. Revenue Recognition:

Revenue is recognized (generally at fixed prices) when, or as, the Company transfers control of promised products or services to a customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products or services.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts which are, therefore, not distinct. Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations.

For contracts with customers in which the Company satisfies a promise to the customer to provide a product that has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date inclusive of profit, the Company satisfies the performance obligation and recognizes revenue over time (generally less than one year) using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material and overhead. Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. Other sales to customers are recognized upon shipment to the customer based on contract prices and terms. In the six months ended November 30, 2022, 61% of revenue was recorded for contracts in which revenue was recognized over time while 39% was recognized at a point in time. In the six months ended November 30, 2021, 67% of revenue was recorded for contracts in which revenue was recognized over time while 33% was recognized at a point in time.

Progress payments are typically negotiated for longer term projects. Payments are otherwise due once performance obligations are complete (generally at shipment and transfer of title). For financial statement presentation purposes, the Company nets progress billings against the total costs incurred and estimated earnings recognized on uncompleted contracts. The asset, “costs and estimated earnings in excess of billings,” represents revenues recognized in excess of amounts billed. The liability, “billings in excess of costs and estimated earnings,” represents billings in excess of revenues recognized.

If applicable, the Company recognizes an asset for the incremental, material costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year and the costs are expected to be recovered. As of November 30, 2022 and May 31, 2022, the Company does not have material incremental costs on any open contracts with an original expected duration of greater than one year, and therefore such costs are expensed as incurred. These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract with a customer.

9. The November 30, 2021 statement of income has been reclassified to conform with the presentation adopted for November 30, 2022.

10. Other current liabilities:

	November 30, 2022		May 31, 2022
Customer deposits	$	954,262	$	1,347,709
Personnel costs		1,579,679		1,587,271
Other		553,674		479,334
Other current liabilities	$	3,087,615	$	3,414,314

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Notes to Condensed Consolidated Financial Statements (Tables)

3 Months Ended

Nov. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Inventory

	November 30, 2022		May 31, 2022
Raw materials	$	575,415	$	488,393
Work-in-process		4,900,432		5,166,271
Finished goods		220,199		300,271
		5,696,046		5,954,935
Less allowance for obsolescence		100,000		100,000
	$	5,596,046	$	5,854,935

Other accrued expenses table

	November 30, 2022		May 31, 2022
Customer deposits	$	954,262	$	1,347,709
Personnel costs		1,579,679		1,587,271
Other		553,674		479,334
Other current liabilities	$	3,087,615	$	3,414,314

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Inventory (Details) - USD ($)	Nov. 30, 2022	May 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Raw materials	$ 575,415	$ 488,393
Work-in-process	4,900,432	5,166,271
Finished goods	220,199	300,271
Gross inventory	5,696,046	5,954,935
Less allowance for obsolescence	100,000	100,000
Net inventory	$ 5,596,046	$ 5,854,935

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Other accrued expenses table (Details) - USD ($)	Nov. 30, 2022	May 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Customer deposits	$ 954,262	$ 1,347,709
Personnel costs	1,579,679	1,587,271
Other	553,674	479,334
Other current liabilities	$ 3,087,615	$ 3,414,314

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Notes to Condensed Consolidated Financial Statements (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Nov. 30, 2022	Nov. 30, 2021	Nov. 30, 2022	Nov. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Weighted Average Number of Shares Outstanding, Basic	3,499,598	3,496,610	3,500,172	3,496,697