UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark (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, 2022February 28, 2023

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)

716-694-0800716-694-0800

(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,March 30, 2023, there were outstanding 3,502,5463,509,152 shares of the registrant’s common stock, par value $.025$0.025 per share.


-2- 2


Table of Contents

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, 2022February 28, 2023 and May 31, 2022

4

Condensed Consolidated Statements of Income for the three and sixnine months ended November 30,February 28, 2023 and 2022 and 2021

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and sixnine months ended November 30,February 28, 2023 and 2022 and 2021

6

Condensed Consolidated Statements of Cash Flows for the sixnine months ended November 30,February 28, 2023 and 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)

 

 

February 28,

 

May 31,

 

2023

 

2022

 

 

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$3,383,847  

 

$22,517,038  

Short-term investments

19,276,643  

 

1,097,450  

Accounts and other receivables, net

8,563,365  

 

4,466,686  

Inventory

5,680,215  

 

5,854,935  

Costs and estimated earnings in excess of billings

3,773,987  

 

3,336,474  

Other current assets

817,814  

 

704,436  

Total current assets

41,495,871  

 

37,977,019  

 

 

 

 

Maintenance and other inventory, net

867,889  

 

1,107,309  

Property and equipment, net

11,233,349  

 

9,854,759  

Other assets

208,983  

 

205,359  

Deferred income taxes

74,615  

 

74,615  

$53,880,707  

 

$49,219,061  

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$1,467,153  

 

$1,426,830  

Billings in excess of costs and estimated earnings

1,437,996  

 

1,122,763  

Other current liabilities

3,279,709  

 

3,414,314  

Total current liabilities

6,184,858  

 

5,963,907  

 

 

 

 

Stockholders' Equity:

 

 

 

Common stock and additional paid-in capital

10,603,892  

 

10,329,258  

Retained earnings

40,061,664  

 

35,840,898  

 

50,665,556  

 

46,170,156  

Treasury stock - at cost

(2,969,707) 

 

(2,915,002) 

Total stockholders’ equity

47,695,849  

 

43,255,154  

$53,880,707  

 

$49,219,061  

 

 

 

 

Table of Contents

See notes to condensed consolidated financial statements.


4


 

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 
Total assets $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 
Stockholders’ equity before treasury stock  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 
Total liabilities and stockholders’ equity $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 February 28,

 

For the nine months ended

February 28,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales, net

$9,891,272 

 

$6,143,329  

 

$29,479,337 

 

$21,209,052 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

5,870,523 

 

4,768,479  

 

17,980,006 

 

15,371,500 

 

 

 

 

 

 

 

 

 

 

    Gross profit

4,020,749 

 

1,374,850  

 

11,499,331 

 

5,837,552 

 

 

 

 

 

 

 

 

 

 

Research and development costs

190,688 

 

201,277  

 

881,335 

 

684,494 

 

Selling, general and administrative expenses

2,025,115 

 

1,364,664  

 

5,878,214 

 

4,445,623 

 

 

 

 

 

 

 

 

 

 

    Operating income

1,804,946 

 

(191,091) 

 

4,739,782 

 

707,435 

 

 

 

 

 

 

 

 

 

 

Other income, net

239,941 

 

4,798  

 

432,984 

 

75,953 

 

 

 

 

 

 

 

 

 

 

    Income before provision for income taxes

2,044,887 

 

(186,293) 

 

5,172,766 

 

783,388 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

386,000 

 

(69,000) 

 

952,000 

 

59,000 

 

 

 

 

 

 

 

 

 

 

    Net income

$1,658,887 

 

$(117,293) 

 

$4,220,766 

 

$724,388 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per common share

$0.47 

 

$(0.03) 

 

$1.20 

 

$0.21 

 

 

 

 

 

 

 

 

 

 

Table of Contents


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.

 

                
                 

 

 

See notes to condensed consolidated financial statements.


5


-5- 

Table of Contents

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- 

Table of Contents

 

 

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.        

TAYLOR DEVICES, INC. AND SUBSIDIARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

 

 

 

 

 

 

(Unaudited)

(Unaudited)

 

For the three months ended February 28,

For the nine months ended February 28,

                                                                                                                                                                                                              

2023

 

2022

 

2023

 

2022

 

                           

 

                           

 

                           

 

                           

Common Stock

 

 

 

 

 

 

 

 Beginning of period

$101,457  

 

$101,323  

 

$101,342  

 

$101,305  

 Issuance of shares for employee stock purchase plan

 

 

 

 

20  

 

27  

 Issuance of shares for employee stock option plan

244  

 

 

 

344  

 

 

 End of period

101,706  

 

101,332  

 

101,706  

 

101,332  

Paid-in Capital

 

 

 

 

 

 

 

 Beginning of period

10,394,127  

 

10,144,275  

 

10,227,916  

 

10,010,430  

 Issuance of shares for employee stock purchase plan

2,429  

 

4,227  

 

8,083  

 

12,308  

 Issuance of shares for employee stock option plan

105,630  

 

 

 

137,750  

 

 

 Stock options issued for services

 

 

 

 

128,437  

 

125,764  

 End of period

10,502,186  

 

10,148,502  

 

10,502,186  

 

10,148,502  

Retained Earnings

 

 

 

 

 

 

 

 Beginning of period

38,402,777  

 

34,443,156  

 

35,840,898  

 

33,601,475  

 Net income

1,658,887  

 

(117,293) 

 

4,220,766  

 

724,388  

 End of period

40,061,664  

 

34,325,863  

 

40,061,664  

 

34,325,863  

Treasury Stock

 

 

 

 

 

 

 

 Beginning of period

(2,915,002) 

 

(2,915,002) 

 

(2,915,002) 

 

(2,915,002) 

 Issuance of shares for employee stock option plan

(54,705) 

 

 

 

(54,705) 

 

 

 End of period

(2,969,707) 

 

(2,915,002) 

 

(2,969,707) 

 

(2,915,002) 

 

 

Total stockholders' equity

$47,695,849  

 

$41,660,695  

 

$47,695,849  

 

$41,660,695  

 

 

 

 

 

 

 

 

-7-

See notes to condensed consolidated financial statements.


6


 

TAYLOR DEVICES, INC. AND SUBSIDIARY

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

 

 

 

(Unaudited)

 

February 28,

For the nine months ended

2023

 

2022

 

 

 

 

Operating activities:

 

 

 

Net income

$4,220,766  

 

$724,388  

Adjustments to reconcile net income to net cash flows from operating activities:

 

 

 

  Depreciation

1,003,924  

 

980,525  

  Stock options issued for services

128,437  

 

125,764  

  Changes in other assets and liabilities:

 

 

 

     Accounts and other receivables, net

(4,096,679) 

 

(1,147,600) 

     Inventory

414,140  

 

38,591  

     Costs and estimated earnings in excess of billings

(437,513) 

 

178,192  

     Other current assets

(113,378) 

 

109,225  

     Accounts payable

40,323  

 

(617,153) 

     Billings in excess of costs and estimated earnings

315,233  

 

(653,856) 

     Other current liabilities

(134,605) 

 

649,968  

         Net operating activities

1,340,648  

 

388,044  

 

 

 

 

Investing activities:

 

 

 

  Acquisition of property and equipment

(2,382,514) 

 

(721,969) 

  Purchase of short-term investments

(18,179,193) 

 

(4,692) 

  Other investing activities

(3,624) 

 

(3,679) 

         Net investing activities

(20,565,331) 

 

(730,340) 

 

 

 

 

Financing activities:

 

 

 

  Proceeds from issuance of common stock, net

91,492  

 

12,335  

 

        Net change in cash and cash equivalents

(19,133,191) 

 

(329,961) 

 

 

 

 

Cash and cash equivalents - beginning

22,517,038  

 

20,581,604  

 

 

 

 

         Cash and cash equivalents - ending

$3,383,847  

 

$20,251,643  

 

 

 

 

Table of Contents 

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 February 28, 2023 and May 31, 2022, the results of operations for the three and nine months ended February 28, 2023 and 2022, and cash flows for the nine months ended February 28, 2023 and 2022. 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 nine-month periods ended February 28, 2023 and 2022, the net income was divided by 3,502,982 and 3,496,968 respectively, which is net of the Treasury shares, to calculate the net income per share. For the three-month periods ended February 28, 2023 and 2022, the net income was divided by 3,505,849 and 3,496,833 respectively, which is net of the Treasury shares, to calculate the net income per share. 

5.The results of operations for the three and nine-month periods ended February 28, 2023 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.Short-term Investments: 

At times, the Company invests excess funds in liquid interest earning instruments. Short-term investments at February 28, 2023 and May 31, 2022 include “available for sale” US treasury securities and corporate bonds stated at fair value, which approximates cost.  The short-term investments (23) mature on various dates during the period March 2023 to November 2026. Unrealized holding gains and losses would be presented as a separate component of accumulated other comprehensive income, net of deferred income taxes. Realized gains and losses on the sale of investments are determined using the specific identification method.

The short-term investments are valued using pricing models maximizing the use of observable inputs for similar securities. This includes basing value on yields currently available on comparable securities of issuers with similar credit ratings.

8.Inventory: 

 

1.

February 28, 2023

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

Raw materials

$684,006

$488,393

Work-in-process

4,807,814

5,166,271

Finished goods

288,395

300,271

5,780,215

5,954,935

Less allowance 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.obsolescence

100,000

100,000

$5,680,215

$5,854,935

 

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.

8


 

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.

9.Revenue Recognition: 

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 
Gross inventory  5,696,046   5,954,935 
Less allowance for obsolescence  100,000   100,000 
Net inventory $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- 

Table of Contents

 

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 sixnine months ended November 30, 2022, 61%February 28, 2023, 62% of revenue was recorded for contracts in which revenue was recognized over time while 39%38% was recognized at a point in time.  In the sixnine months ended November 30, 2021, 67%February 28, 2022, 63% of revenue was recorded for contracts in which revenue was recognized over time while 33%37% 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, 2022February 28, 2023 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.The February 28, 2022 statement of income has been reclassified to conform with the presentation adopted for February 28, 2023. 

11.Other current liabilities:  

 

10.

February 28, 2023

May 31, 2022

Customer deposits

$332,227

$1,347,709

Personnel costs

2,397,755

1,587,271

Other current liabilities:

549,727

479,334

$3,279,709

$3,414,314

     
  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

-9- 

Table of Contents


 

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 

Summary comparison of the nine months ended February 28, 2023 and 2022

Increase /

(Decrease)

Sales, net

$ 8,270,000

Cost of goods sold

$ 2,608,000

Research and development costs

     $    197,000

Selling, general and administrative expenses

$ 1,432,000

Income before provision for income taxes

$ 4,389,000

Provision for income taxes

$    893,000

Net income

$ 3,496,000

 

 

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


-10- 

Table of Contents

 

For the sixnine months ended November 30, 2022February 28, 2023 (All figures discussed are for the sixnine months ended November 30, 2022February 28, 2023 as compared to the sixnine months ended November 30, 2021)February 28, 2022).

 

 Six months ended November 30 Change

Nine months ended February 28

Change

 2022 2021 Amount Percent

2023

2022

Amount

 

Percent

Net Revenue $19,588,000  $15,066,000  $4,522,000   30%

$ 29,479,000

$ 21,209,000

$ 8,270,000

 

39%

Cost of sales  12,109,000   10,603,000   1,506,000   14%

17,980,000

15,372,000

2,608,000

 

17%

Gross profit $7,479,000  $4,463,000  $3,016,000   68%

$ 11,499,000

$   5,837,000

$ 5,662,000

 

97%

… as a percentage of net revenues  38%  30%        

39%

28%

 

 

 

 

The Company's consolidated results of operations showed a 30%39% increase in net revenues and an increase in net income of 204%483%. 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%36% more than the level recorded in the prior year.  The Company had 3545 Projects in process during the current period as compared to 2834 during the same period last year.  Revenues recorded in the current period for other-than long-term construction projects (non-projects) were 55%45% more than the level recorded in the prior year.  Total sales within the U.S. increased 43%58% from the same period last year.  Total sales to Asia decreased 4%10% 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%(29%) as well as to customers in aerospace / defense (47%(44%) and to industrial customers (93%). The increase in aerospace /defenseaerospace/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%93% 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%39% in the current period is eighteleven percentage points greater than the same period of the prior year (30%(28%). 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 benefits from the increase inCompany’s continuous improvement initiatives and increased 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

Nine months ended February 28

 2022 2021

2023

2022

Industrial  11%  8%

10%

 8%

Structural  54%  62%

54%

58%

Aerospace / Defense  35%  30%

36%

34%

        

 

 

At November 30, 2021,February 28, 2022, the Company had 139140 open sales orders in our backlog with a total sales value of $17.0$17.4 million.  At November 30, 2022,February 28, 2023, the Company has 139125 open sales orders in our backlog, and the total sales value is $18.1$27.8 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- 11


Table of Contents

 

 

Net revenue by geographic region, as a percentage of total net revenue for the six-monthnine-month periods ended November 30,February 28, 2023 and February 28, 2022 and November 30, 2021 is as follows:

 

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

 

Nine months ended February 28

 

2023

2022

USA

81%

72%

Asia

12%

18%

Other

 7%

10%

 

 

Research and Development Costs

 

 Six months ended November 30 Change

Nine months ended February 28

Change

 2022 2021 Amount Percent

2023

2022

Amount

 

Percent

R & D $690,000  $483,000  $207,000   43%

$ 881,000

$ 684,000

$ 197,000

 

29%

… as a percentage of net revenues  3.5%  3.2%        

3.0%

3.2%

 

 

 

 

Research and development costs stayed consistent as a percent of net revenues while increasing by 43%29% over the prior year.

 

Selling, General and Administrative Expenses

 

 Six months ended November 30 Change

Nine months ended February 28

Change

 2022 2021 Amount Percent

2023

2022

Amount

 

Percent

SG&A $3,853,000  $3,081,000  $772,000   25%

S G & A

$ 5,878,000

$ 4,446,000

$1,432,000

 

32%

… as a percentage of net revenues  20%  20%        

20%

21%

 

 

 

 

Selling, general and administrative expenses increased by 25%32% 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$4,740,000 for the sixnine months ended November 30, 2022, 227%February 28, 2023, 570% more than the $899,000$707,000 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 

Summary comparison of the three months ended February 28, 2023 and 2022

Increase /

(Decrease)

Sales, net

$ 3,748,000

Cost of goods sold

$ 1,102,000

Research and development costs

$     (10,000

)

Selling, general and administrative expenses

$    660,000

Income before provision for income taxes

$ 2,231,000

Provision for income taxes

$    455,000

Net income

$ 1,776,000

 

 

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- 12


Table of Contents

 

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, 2022February 28, 2023 (All figures discussed are for the three months ended November 30, 2022February 28, 2023 as compared to the three months ended November 30, 2021)February 28, 2022).

 

 Three months ended November 30 Change

Three months ended February 28

Change

 2022 2021 Amount Percent

2023

2022

Amount

 

Percent

Net Revenue $10,497,000  $7,758,000  $2,739,000   35%

$9,891,000 

$6,143,000 

$3,748,000 

 

 61%

Cost of sales  6,403,000   5,167,000   1,236,000   24%

5,871,000 

4,769,000 

1,102,000 

 

 23%

Gross profit $4,094,000  $2,591,000  $1,503,000   58%

$4,020,000 

$1,374,000 

$2,646,000 

 

 192%

… as a percentage of net revenues  39%  33%        

41%

22%

 

 

 

 

The Company's consolidated results of operations showed a 35%61% increase in net revenues and an$1.8 million increase in net income of 136%.income.  Revenues recorded in the current period for Projects were 22%91% more than the level recorded in the prior year.  The Company had 2829 Projects in process during the current period as compared to 2627 during the same period last year.  Revenues recorded in the current period for other-than long-term construction projects (non-projects) were 64%28% more than the level recorded in the prior year. Total sales within the U.S. increased 41%98% from the same period last year.  Total sales to Asia increased 36%decreased 25% 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%(76%) as well as to customers in aerospace / defense (59%(42%) and to industrial customers (152%(69%).  The increasecircumstances affecting the fluctuations in aerospace /defense sales is due,revenue levels are as identified 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.year-to-date comparisons, above.

 

The gross profit as a percentage of net revenue of 39%41% in the current period is sixnineteen percentage points higher than the same period of the prior year (33%(22%).  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 benefits from the increase inCompany’s continuous improvement initiatives and increased 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

Three months ended February 28

 2022 2021

2023

2022

Industrial  15%  8%

 8%

8%

Structural  52%  64%

54%

49%

Aerospace / Defense  33%  28%

38%

43%

        

 

 

Net revenue by geographic region, as a percentage of total net revenue for the three-month periods ended November 30,February 28, 2023 and February 28, 2022, and November 30, 2021, is as follows:

 

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

 

Three months ended February 28

 

2023

2022

USA

85%

69%

Asia

9%

19%

Other

6%

12%


-13- 13


Table of Contents

 

Research and Development Costs

 

 Three months ended November 30 Change

Three months ended February 28

Change

 2022 2021 Amount Percent

2023

2022

Amount

 

Percent

R & D $315,000  $201,000  $114,000   57%

$ 191,000

$ 201,000

$ (10,000)

 

-5%

… as a percentage of net revenues  3.0%  2.6%        

1.9%

3.3%

 

 

 

 

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

 

Selling, General and Administrative Expenses

 

 Three months ended November 30 Change

Three months ended February 28

Change

 2022 2021 Amount Percent

2023

2022

Amount

 

Percent

S G & A $2,022,000  $1,609,000  $413,000   26%

$ 2,025,000

$ 1,365,000

$ 660,000

 

48%

… as a percentage of net revenues  19%  21%        

20%

22%

 

 

 

 

Selling, general and administrative expenses increased 26%48% 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$1,805,000 for the three months ended November 30, 2022, 125% moreFebruary 28, 2023, better than the $780,000$191,000 loss 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-monthnine-month periods ended November 30, 2022February 28, 2023 and 2021.2022.

 

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

February
2023

 

February
2022

Risk-free interest rate:  1.625%  2.875%

1.625%

 

2.875%

Expected life of the options:  4.1 years   4 years 

4.1 years

 

4 years

Expected share price volatility:  30%  32%

30%

 

32%

Expected dividends:  zero   zero 

zero

 

zero

        

 

 

 

These assumptions resulted in estimated fair-market value per stock option: $3.06  $3.42 

$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- 14


Table of Contents

 

A summary of changes in the stock options outstanding during the six-monthnine-month period ended November 30, 2022February 28, 2023 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 

 

 

 

 

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:

 

13,750

 

$ 10.04

Less: Options expired:

 

3,750

 

-

Options outstanding and exercisable at February 28, 2023:

 

307,500

 

$ 11.51

Closing value per share on NASDAQ at February 28, 2023:

 

 

 

$ 16.80

 

Capital Resources and Long-Term Debt

 

The Company's primary liquidity is dependent upon the working capital needs. These are mainly short-term investments, 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 sixnine months ended November 30, 2022February 28, 2023 were $1,391,000$2,383,000 compared to $560,000$722,000 in the same period of the prior year.  As of November 30, 2022,February 28, 2023, the Company has commitments for capital expenditures totaling $1,800,000$900,000 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             

                                                                    

February 28, 2023

May 31, 2022

Increase /(Decrease)

Raw materials

$    684,000

 

$    489,000

 

$     195,000

 

    40%

Work-in-process

4,808,000

 

5,166,000

 

(358,000

)

    - 7%

Finished goods

188,000

 

200,000

 

(12,000

)

    - 6%

Inventory

5,680,000

 87%

5,855,000

 84%

(175,000

)

     - 3%

 Maintenance and other inventory

868,000

 13%

1,107,000

 16%

(239,000

)

  - 22%

Total

$ 6,548,000

100%

$ 6,962,000

100%

$    (414,000

)

    - 6%

 

                        

 

                        

 

                        

 

 

Inventory turnover

3.5

 

3.1

 

 

 

 

 

NOTE: Inventory turnover is annualized for the six-monthnine-month period ended November 30, 2022.February 28, 2023.

 

Inventory, at $5,596,000$5,680,000 as of November 30, 2022,February 28, 2023, is $259,000$175,000 less than the prior year-end level of $5,855,000. Approximately 88%85% of the current inventory is work in process, 2%3% is finished goods, and 10%12% 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$68,000 and $90,000zero for the six-monthnine-month periods ended November 30, 2022February 28, 2023 and 2021.2022.  The Company continues to rework slow-moving inventory, where applicable, to convert it to product to be used on customer orders.


-15- 15


Table of Contents

 

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)

February 28, 2023

May 31, 2022

Increase /(Decrease)

Accounts receivable $5,941,000  $4,467,000  $1,474,000   33%

$   8,563,000

 

$ 4,467,000

 

$ 4,096,000

 

92%

CIEB  5,295,000   3,336,000   1,959,000   59%

3,774,000

 

3,336,000

 

438,000

 

13%

Less: BIEC  1,090,000   1,123,000   (33,000)  -3%

1,438,000

 

1,123,000

 

315,000

 

28%

Net $10,146,000  $6,680,000  $3,466,000   52%

$ 10,899,000

 

$ 6,680,000

 

$ 4,219,000

 

63%

                

 

 

 

 

 

 

 

Number of an average day’s sales outstanding in accounts receivable  51   42         

78

 

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$8,563,000 as of November 30, 2022February 28, 2023 includes $6,000$29,000 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 5178 at November 30, 2022. February 28, 2023.  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$0.6 million increase in the level of sales for the month of November 2022February 2023 over the month of May 2022 and the $1.5 million reduction to CIEB from quarter ending November 30, 2022. The Company expects to collect the net accounts receivable balance during the next twelve months.

 

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$3,774,000 balance in this account at November 30, 2022February 28, 2023 is 59%13% 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%56% of the CIEB balance as of the end of the last fiscal quarter, August 31,November 30, 2022, was billed to those customers in the current fiscal quarter ended November 30, 2022.February 28, 2023.  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

February 28, 2023

May 31, 2022

Costs $3,380,000  $3,250,000 

$ 3,430,000

 

$ 3,250,000

Estimated Earnings  3,221,000   2,642,000 

4,045,000

 

2,642,000

Less: Billings to customers  1,306,000   2,556,000 

3,701,000

 

2,556,000

CIEB $5,295,000  $3,336,000 

$ 3,774,000

 

$ 3,336,000

Number of Projects in progress  16   11 

15

 

11

 

As noted above, BIEC represents billings to customers in excess of revenues recognized.  The $1,090,000$1,438,000 balance in this account at November 30, 2022February 28, 2023 is down 3%up 28% 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- 16


Table of Contents

 

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

 

 November 30, 2022 May 31, 2022

February 28, 2023

May 31, 2022

Billings to customers $2,037,000  $2,711,000 

$ 3,772,000

 

$ 2,711,000

Less: Costs  676,000   1,019,000 

1,349,000

 

1,019,000

Less: Estimated Earnings  271,000   569,000 

985,000

 

569,000

BIEC $1,090,000  $1,123,000 

$ 1,438,000

 

$ 1,123,000

Number of Projects in progress  4   8 

7

 

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%

 

February 28, 2023

May 31, 2022

Number of Projects in progress

22

 

19

Aggregate percent complete

49%

 

47%

Average total sales value of Projects in progress

$844,000

 

$795,000

Percentage of total value invoiced to customer

41%

 

35%

 

The Company's backlog of sales orders at November 30, 2022February 28, 2023 is $18.1$27.8 million, downup from the $23.7 million at the end of the prior year.  $5.6$10.3 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$1,467,000 as of November 30, 2022,February 28, 2023, is 8%3% more than the prior year-end.  Other current liabilities decreased 10%increased 9% from the prior year-end, to $3,088,000.$3,733,000.  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, 2022February 28, 2023 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, 2022February 28, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's control over financial reporting.


-17- 17


Table of Contents

 

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, 2022February 28, 2023 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, 2022February 28, 2023

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

December 1, 2022 -

September 30,

December 31, 2022

-

-

-

 -

October

January 1, 20222023 -

October

January 31, 20222023

-

-

-

November

February 1, 20222023 -

November 30, 2022

February 28, 2023

-

-

-

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- 18


Table of Contents

 

ITEM 6

Exhibits

3(v)

By-laws – filed on January 6, 2023 with Form 10-Q for the period ending November 30, 2022, and incorporated herein by reference.

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


-19- 

Table of Contents

 

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,February 28, 2023, and the related condensed consolidated statements of income and stockholders’ equity for the three and sixnine months ended November 30,February 28, 2023 and 2022, and 2021, and cash flows for the sixnine months ended November 30,February 28, 2023 and 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, 2022March 30, 2023


20


-20- 

Table of Contents

 

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

March 30, 2023

/s/Timothy J. Sopko

 

 

 

 

 

Timothy J. Sopko

Chief Executive Officer

(Principal Executive Officer)

Date:

March 30, 2023

/s/Paul Heary

 

 

 

 

 

 

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

Mark V. McDonoughPaul Heary

Chief Financial Officer


21