UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended February 28, 2021


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

For the transition period from to

Commission File Number 0-3498

TAYLOR DEVICES INC

(Exact name of registrant as specified in its charter)


New York		16-0797789

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

90 Taylor Drive, North Tonawanda, New York		14120

(Address of principal executive offices)		(Zip Code)

716-694-0800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

None

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

Yes ☒ No ☐

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

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

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

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

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 March 26, 2021, there were outstanding 3,488,510 shares of the registrant’s common stock, par value $.025 per share.

TAYLOR DEVICES, INC.

Index to Form 10-Q

PART I	FINANCIAL INFORMATION		PAGE NO.

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets as of February 28, 2021 and May 31, 2020	4

		Condensed Consolidated Statements of Income for the three and nine months ended February 28/29, 2021 and 2020	5

		Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended February 28/29, 2021 and 2020	6

		Condensed Consolidated Statements of Cash Flows for the nine months ended February 28/29, 2021 and 2020	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)
	February 28,			May 31,
	2021			2020

Assets
Current assets:
Cash and cash equivalents	$	16,084,718		$	15,159,827
Short-term investments		1,090,582			1,071,950
Accounts and other receivables, net		5,024,657			5,819,471
Inventory		8,550,215			10,107,437
Costs and estimated earnings in excess of billings		1,011,367			1,754,573
Other current assets		931,241			510,360
Total current assets		32,692,780			34,423,618

Maintenance and other inventory, net		1,242,968			879,050
Property and equipment, net		9,558,066			9,407,490
Other assets		199,380			195,621
Deferred income taxes		170,115			170,115
Total assets	$	43,863,309		$	45,075,894
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings	$	—		$	1,461,500
Accounts payable		1,205,800			1,370,175
Accrued commissions		402,120			305,885
Other current liabilities		1,019,872			1,663,914
Billings in excess of costs and estimated earnings		633,216			736,866
Total current liabilities		3,261,008			5,538,340

Stockholders' Equity:
Common stock and additional paid-in capital		9,946,679			9,860,006
Retained earnings		33,542,199			32,538,580
		43,488,878			42,398,586
Treasury stock - at cost		(2,886,577	)		(2,861,032	)
Total stockholders’ equity		40,602,301			39,537,554
	$	43,863,309		$	45,075,894


See notes to condensed consolidated financial statements.

-4-

TAYLOR DEVICES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Shareholders’ Equity
	(Unaudited)						(Unaudited)
	For the three months ended February 28/29,						For the nine months ended February 28/29,
	2021			2020			2021			2020

Common Stock
Beginning of period	$	101,037		$	100,751		$	100,943		$	100,735
Issuance of shares for employee stock purchase plan		10			8			29			24
Issuance of shares for employee stock option plan		—			—			75			—
End of period		101,047			100,759			101,047			100,759
Paid-in Capital
Beginning of period		9,841,612			9,601,166			9,759,063			9,538,892
Issuance of shares for employee stock purchase plan		4,020			3,372			11,382			10,209
Issuance of shares for employee stock option plan		—			—			25,470			—
Stock options issued for services		—			—			49,717			55,437
End of period		9,845,632			9,604,538			9,845,632			9,604,538
Retained Earnings
Beginning of period		33,359,881			30,780,187			32,538,580			29,508,604
Net income		182,318			782,752			1,003,619			2,054,335
End of period		33,542,199			31,562,939			33,542,199			31,562,939
Treasury Stock
Beginning of period		(2,886,577	)		(2,829,359	)		(2,861,032	)		(2,829,359	)
Acquisition of treasury stock at cost		—			—			(25,545	)		—
End of period		(2,886,577	)		(2,829,359	)		(2,886,577	)		(2,829,359	)
Total stockholders' equity	$	40,602,301		$	38,438,877		$	40,602,301		$	38,438,877


See notes to condensed consolidated financial statements.


	February 28, 2021		May 31, 2020
Raw materials	$	584,191	$	658,024
Work-in-process		7,583,386		8,586,404
Finished goods		482,638		963,009
Gross inventory		8,650,215		10,207,437
Less allowance for obsolescence		100,000		100,000
Net inventory	$	8,550,215	$	10,107,437

Summary comparison of the nine months ended February 28/29, 2021 and 2020
	Increase /
	(Decrease)
Sales, net	$	(5,396,000	)
Cost of goods sold	$	(1,233,000	)
Selling, general, and administrative expenses	$	(422,000	)
Income (loss) before provision for income taxes	$	(1,719,000	)
Provision for income taxes (benefit)	$	(668,000	)
Net income	$	(1,051,000	)

	Nine months ended February 28/29						Change
	2021			2020			Amount			Percent
Net Revenue	$	15,249,000		$	20,645,000		$	(5,396,000	)		-26	%
Cost of sales		12,715,000			13,948,000			(1,233,000	)		-9	%
Gross profit	$	2,534,000		$	6,697,000		$	(4,163,000	)		-62	%
… as a percentage of net revenues		17	%		32	%

Summary comparison of the three months ended February 28/29, 2021 and 2020
	Increase /
	(Decrease)
Sales, net	$	(2,462,000	)
Cost of goods sold	$	(492,000	)
Selling, general, and administrative expenses	$	(215,000	)
Income (loss) before provision for income taxes	$	(1,148,000	)
Provision for income taxes (benefit)	$	(548,000	)
Net income	$	(600,000	)

	Three months ended February 28/29						Change
	2021			2020			Amount			Percent
Net Revenue	$	4,772,000		$	7,234,000		$	(2,462,000	)		-34	%
Cost of sales		4,369,000			4,861,000			(492,000	)		-10	%
Gross profit	$	403,000		$	2,373,000		$	(1,970,000	)		-83	%
… as a percentage of net revenues		8	%		33	%

	February 2021			February 2020
Risk-free interest rate:		1.750	%		1.750	%
Expected life of the options:		3.9 years			3.8 years
Expected share price volatility:		34	%		30	%
Expected dividends:		zero			zero

These assumptions resulted in estimated fair-market value per stock option:	$	2.88		$	2.84

			Weighted-
	Number of		Average
	Options		Exercise Price
Options outstanding and exercisable at May 31, 2020:		252,250	$	11.52
Options granted:		17,250	$	10.05
Less: Options exercised:		3,000	$	8.52
Less: Options expired:		18,750	$	11.18
Options outstanding and exercisable at February 28, 2021:		247,750	$	11.32
Closing value per share on NASDAQ at February 28, 2021:			$	11.07

	February 28, 2021				May 31, 2020				Increase /(Decrease)
Raw materials	$	584,000			$	658,000			$	(74,000	)	-11	%
Work-in-process		7,583,000				8,586,000				(1,003,000	)	-12	%
Finished goods		383,000				863,000				(480,000	)	-56	%
Inventory		8,550,000	87	%		10,107,000	92	%		(1,557,000	)	-15	%
Maintenance and other inventory		1,243,000	13	%		879,000	8	%		364,000		41	%
Total	$	9,793,000	100	%	$	10,986,000	100	%	$	(1,193,000	)	-11	%

Inventory turnover		1.6				1.7

	February 28, 2021		May 31, 2020
Costs	$	2,102,000	$	2,615,000
Estimated Earnings		340,000		540,000
Less: Billings to customers		1,431,000		1,400,000
CIEB	$	1,011,000	$	1,755,000
Number of Projects in progress		13		10

	February 28, 2021		May 31, 2020		Increase /(Decrease)
Accounts receivable	$	4,431,000	$	5,819,000	$	(1,388,000	)	-24	%
Other receivable		594,000		—		594,000
CIEB		1,011,000		1,755,000		(744,000	)	-42	%
Less: BIEC		633,000		737,000		(104,000	)	-14	%
Net	$	5,403,000	$	6,837,000	$	(1,434,000	)	-21	%

Number of an average day’s sales outstanding in accounts receivable		84		68

	February 28, 2021		May 31, 2020
Billings to customers	$	1,960,000	$	7,794,000
Less: Costs		1,144,000		3,781,000
Less: Estimated Earnings		183,000		3,276,000
BIEC	$	633,000	$	737,000
Number of Projects in progress		7		5

ITEM 1	Legal Proceedings

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

ITEM 1A	Risk Factors

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

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds

	(a)	The Company sold no equity securities during the fiscal quarter ended February 28, 2021 that were not registered under the Securities Act.
	(b)	Use of proceeds following effectiveness of initial registration statement:
		Not Applicable
	(c)	Repurchases of Equity Securities – Quarter Ended February 28, 2021

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

		December 1, 2020 -
		December 31, 2020		-	-	-	-

		January 1, 2021 -
		January 31, 2021		-	-	-	-

		February 1, 2020 -
		February 28, 2021		-	-	-	-

		Total		-	-	-	-


ITEM 3	Defaults Upon Senior Securities

	None

ITEM 4	Mine Safety Disclosures

	Not applicable

ITEM 5	Other Information

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

			None

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

			None


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

SEC Form 10-Q filed by Taylor Devices, Inc.