Taylor Devices, Inc. Annual Report 2021

FY2021 Annual Report · Taylor Devices, Inc.

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2021 ANNUAL REPORT

CEO’S LETTER

To our Shareholders,

Firstly, and most importantly, despite the negative impacts of the COVID-19 pandemic
I am happy to report that Taylor Devices was able to protect the health and safety
of our employees and their families this past year while still delivering our critically
needed components to customers around the world largely on time. Our team endured
wearing masks, social distancing, the frequent disinfecting of work areas, working
remotely when viable, working staggered shifts to ensure safe distancing between
employees, and quarantining when necessary. Their dedication and resiliency
throughout this challenging time has been extraordinary and I am both thankful and
proud to be their leader and colleague!

Looking back to the start of our FY21 last June, the cautious optimism we had that the negative impacts of COVID-19
would subside by late summer or early fall turned out to be a bit too optimistic, as it wasn’t until mid to late winter, our
Q3, that our customers began returning to normal business activity levels. This can be seen most directly in our FY21 full
year bookings which finished at $35.0 million, setting a new high record for our company and eclipsing the prior record of
$32.0 million in FY16. All three of our customer products groups; Aero/Defense, Structural, and Industrial, finished at or
slightly above their historic high levels, thus contributing to the overall record respectively.

That said, the negative impacts of COVID-19 to our FY21 were significant as our full year sales finished at $22.5 million,
down $5.87 million vs. the prior year. Most of this difference, $5.5 million or 93% of it, was driven by sales to our Structural
products customers which finished at $10.1 million vs. $15.6 million the prior year. Full year sales to our Aero/Defense
products customers were $10.2 million which is only down $579 thousand or 5% as compared to the prior year. This is
not surprising as most of our customers in this product group serve the essential needs of the US Aero/Defense market
which continued to be both well-funded and maintained last year. Industrial, the smallest of our customer product
groups, saw its full year sales finish at $2.2 million which is slightly up vs. the prior year’s $2.0 million. Our customers in
this product group tend to provide essential services which helped minimize the negative impact of COVID-19 for them
as well. Lower sales volume, combined with the fact that a high percentage of our Structural products sales were to Asia,
where high tariffs reduce margins, significantly impacted our full year net profit which finished at $1.1 million or 4.7% of
sales vs. $3.0 million the prior year. This would have been significantly lower if not for the COVID-19 economic aid received
from the US Government. Most importantly, this aid enabled us to keep our Taylor Devices workforce at full capacity
despite the lower demand from our customers, and provided us with the added benefit of utilizing the excess capacity
to accelerate progress on our Continuous Improvement initiatives which are critical to supporting our targeted growth.
An On Time Delivery improvement of 8% in FY21 vs. the prior year was realized thanks to the hard work of our entire team.
Additionally, upgrades to our production facilities to improve production flow and reduce costs have progressed such
that they will be substantially completed by the time this report is printed.

We enter FY22 in a much-improved condition vs. this time last year as our firm order backlog is $22.0 million as compared
to $9.8 million the prior year. The markets and customers we serve are operating at more typical levels as the economic
recovery from COVID-19 continues. Accordingly, as long as this recovery trend continues, the investments we have
continued making throughout this past year in our people, technology, processes, and facilities position us well to achieve
our goals for FY22.

Sincerely,

Timothy J. Sopko
Chief Executive Officer
TAYLOR DEVICES, INC.

PRESIDENT’S LETTER

Dear Shareholders,

After a busy year in which we managed to navigate the challenges of the pandemic
while also implementing further changes and improvements, we have emerged in a
position that we believe will allow us to maintain our long-term goals for profitable
growth. Despite the fact that we finished the fiscal year with a net income of only
$1.6 million, we have established positive momentum and are looking forward to a
strong year and a bright future ahead.

One year ago, when we were several months into the pandemic, I reported that many
projects that were previously pending had been delayed but not cancelled amid the
uncertainty. Fortunately, many of these projects did indeed continue to move forward and materialize in terms of firm
orders throughout the fiscal year, particularly for structural products. What I refer to as “the COVID gap” in bookings has
effectively closed and incoming orders have been consistent.

Throughout fiscal year 2021, we have made some key additions to our Sales & Business Development staff. These
additions, among other initiatives and strategies, have already had a significant impact on our ability to increase bookings
and sales, key metrics for sustainable profitable growth. This is evident in a FY21 bookings level of $35.0 million and a
firm backlog of $22.0 million at the beginning of this fiscal year. The breakdown of bookings includes $13.6 million for
Aerospace/Defense Products, $19.4 million for Structural Products, and just shy of $2 million for Industrial Products,
thereby maintaining a healthy mix within the 3 major value streams.

A featured project within our FY2021 Annual Report is the Silicon Valley SV1 Data Center located in Santa Clara, California
and owned by NTT (Nippon Telegraph and Telephone). This four-story building sits on a base isolation system consisting
of friction pendulum bearings and 25 large Taylor Devices’ seismic dampers that allow up to 32 inches of motion in any
horizontal direction to isolate the building against major earthquakes.

Also featured in this Annual Report is a new product that Taylor Devices is currently testing for shock and vibration
isolation called “Pumpkin™ Mounts”. A press release covering this was previously published in April. These unique
products are designed to protect equipment onboard naval vessels against extreme shock and vibration and offer
significant advantages over other competing devices. Initial explosive testing on a floating barge was recently conducted
in Scotland and results have demonstrated excellent performance. The testing phase of this project will continue
throughout the current fiscal year, and we are hopeful that this product will add yet another unique device to our
already large arsenal of products, all of which bring substantial value to our customers.

Overall, our ability to “weather the storm” throughout the pandemic demonstrates the resilience of our employees and
our products. Our customers maintain a high level of confidence in us. Interest in our products remains quite high and we
are looking forward to sustaining our long-term plans.

Sincerely,

Alan R. Klembczyk
President
TAYLOR DEVICES, INC.

VICE PRESIDENT OF OPERATIONS STATUS

Fiscal Year 2021 proved to be an exciting year as Taylor Devices continued our journey
towards Operational Excellence, enabled by Continuous Improvement. Fueled by
a second Continuous Improvement hire, over 150 discrete improvements, and the
relentless use of Strategy Deployment to tell us the vital few breakthrough initiatives
we would focus on, we achieved the following strong results:

› 8% improvement in Customer On-Time Delivery over Fiscal Year 2020
› 30% reduction in Inventory Dollar Value from Fiscal Year 2020
• 14% from Inventory Reserve
• 9% from scrapping Obsolete Inventory
• 7% from improved Buying Practices as well as improved Sales,

Inventory & Operations Planning (SIOP)

TODD J. AVERY
Vice President, Operations

The entire Taylor Team pulled together to achieve these results, enabled by
improved systems, processes, and training as we constantly challenged ourselves
to progressively become better on a day-to-day basis. Some of the more significant accomplishments include:
› Deployed an Advanced Planning System to improve execution of customer orders as we grow
› Invested $1.5m on Future State Improvements to the Factory including cleaned and painted ceilings, walls and

epoxy floors which will result in a safer, cleaner, brighter work environment

› Implemented a new layout to enable product flow including three enclosed paint booths to improve paint quality
while reducing the need to transport material between our facilities that are located approximately 2 miles apart

› Deployed a kitting system for Structural Products that reduces part kitting time by 50%
› Trained our Structural Team on 1-piece flow and commenced deployment in Assembly

Fiscal Year 2022 will see Taylor Devices’ improvement journey progress even further as we focus on the following
Breakthrough Improvement Initiatives:

› Deployment of Make versus Buy Process to include Supply Chain Development
› Productivity Improvements – Just Do It’s, Kaizen Events, Capital Expenditures
› Focus on our People through Strategic Workforce Development, Continuous Improvement Training/Events,

and Job Safety Analysis

Our Taylor Team has changed and must continue to change if we are to satisfy our customers through the coming
years of growth. We have and will continue to embrace our role as Leaders, as good Team members, and as
Continuous Improvement engines. I am proud of how our Team has embraced change and I look forward to seeing
them and Taylor Devices grow in Fiscal Year 2022 and beyond.

Pictured here, the floors in warehouse
and test areas have been painted
and resurfaced, while assembly
cells have been moved to their new
locations. This new layout puts
assembly cells beneficially closer
to drill and test areas, and shipping
and receiving areas.

FROM THE CFO

This past fiscal year turned out to be more challenging than we expected, despite
having had a preview of what we were likely to face due to the adverse impacts
of the COVID-19 pandemic at the end of the prior year. We complied with the
ever-evolving guidelines from Federal and State health authorities, not only
preserving the health and safety of our employees and their families, but also
making us a more resilient company in many ways.

Fiscal year 2021 revenue finished at $22.5 million which is a 21% decrease in
revenue from the prior year. The majority of this reduction was the result of lower
sales to our customers who utilize our products for seismic/wind protection, as they
were essentially shut down for much of the fiscal year due to COVID-19. Fiscal year
2021 sales to these customers were $10.1 million vs. $15.6 million the prior year and a
$15.5 million average over the past four fiscal years. Meanwhile, sales to our Aerospace/Defense customers for fiscal
year 2021 were $10.2 million vs. $10.8 million the prior year and a $10.6 million average over the past four fiscal years.

MARK V. MCDONOUGH
Chief Financial Officer

Our gross profit of $3.2 million, or 14% of sales, is significantly lower than last year’s 33% of sales. Included were
research and development expenditures of $772 thousand this fiscal year in support of our growth strategies which
more than doubled the prior year R&D expenditures. The lower gross profit was also affected by our commitment to
maintaining a full workforce in the face of lower sales volume. We were able to make the most of this slower period
by increasing training and improving processes. Operating expenses, including selling, general and administrative
expenses were carefully controlled as we focused on emerging from the pandemic stronger and better prepared for
the challenges we were sure to encounter. In exchange for maintaining our full workforce, we were able to participate
in the U.S. federal government’s various COVID-19 relief programs totaling $2.9 million which helped to mitigate a
$2.4 million operating loss for the year. Because of all this, net income for fiscal year 2021 finished at $1.1 million,
or 5% of sales, vs. $3.0 million, or 11% of sales the prior year. Earnings per share was 30 cents for fiscal year 2021
compared to 87 cents the prior year.

Our sales order backlog of $22 million on May 31, 2021 is up significantly from the prior year-end of $9.8 million and
better than our average level over the past four years of $17 million. This sales order backlog is slightly weighted
towards our commercial customers at 57% vs. 43% for our Aerospace/Defense customers, which is a return to our
more typical backlog customer mix. With continued investments in R&D, technology, personnel, capital equipment,
and improved processes, we are better prepared than ever before to take advantage of the great market positions
we have and profitably grow the value of your company.

Among other exciting warehouse
developments was the installation of
new paint booths. These will support
our Future State Painting at 90 Taylor.

In Shipping and Receiving, new
organizational and storage solutions
have been implemented which are
improving material and product flow.

CORPORATE DATA

OFFICERS AND DIRECTORS
F. ERIC ARMENAT | Board Member
JOHN BURGESS | Chairman of the Board of Directors
ROBERT M. CAREY | Board Member
ALAN R. KLEMBCZYK | President and Board Member
MARK V. MCDONOUGH | Chief Financial Officer and Corporate Secretary
TIMOTHY J. SOPKO | Chief Executive Officer and Board Member

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Lumsden & McCormick, LLP
Cyclorama Building
369 Franklin Street
Buffalo, NY 14202-1702

GENERAL COUNSEL
Barclay Damon, LLP
Barclay Damon Tower
125 East Jefferson Street
Syracuse, NY 13202

MANAGERS
TODD AVERY | Vice President, Operations
MEGAN BRANT | Accounting Supervisor
STUART BUCKLEY | Vice President of Business Development and Strategy
NATHAN CANNEY | Senior Project Manager
ROBERT CONRAD | Director of Continuous Improvement
PAUL CRVELIN | Vice President, Engineering
KONRAD ERIKSEN | Structural Products Integrated Product Team Lead
SUSAN EWING | Human Resources Manager
ANDREA GREEN | EHS Manager
STEVEN HARDING | Maintenance Manager
DONALD HORNE | Chief Engineer
CHARLES KETCHUM III | Quality Assurance Manager
NICHOLAS MARSOLAIS | Production Control Manager
MICHAEL ROGOWSKI | Supply Chain Manager
ERIC ROTH | Scholl Operations Manager Test Supervision
ROBERT SCHNEIDER | Director of Strategic Sales and Marketing
BILL STREAMS | Machine Shop Manager
MATT STRYCHALSKI | Paint Shop Manager
KEVIN SUPLICKI | Information Systems Manager
COURTNEY TAYLOR | Contracts Administrator
DAVID TAYLOR | Manager of Aerospace and Defense Sales
DENNIS WARMUS | Manufacturing Engineering Manager
CRAIG WINTERS | Director of Program Management, Structural & Industrial Products
MICHAEL YAX | Vice President, Quality and Continuous Improvement

TRANSFER AGENT AND REGISTRAR
Computershare Investor Services
150 Royall Street
Canton, MA 02021
800-522-6645
www.computershare.com

FINANCIAL REPORT – BY WRITTEN REQUEST
A copy of the financial report on form 10-K can be obtained by written request to the attention of
Mark McDonough, CFO at Taylor Devices, Inc., 90 Taylor Drive, North Tonawanda, NY 14120.

TAYLOR DEVICES, INC. AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

AND

CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2021

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 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and elsewhere in this 10-K 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," "assume" and
"optimistic" 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,
fluctuations in general business cycles and changing economic conditions; variations in timing and amount of
customer orders; changing product demand and industry capacity; increased competition and pricing pressures;
advances in technology that can reduce the demand for the Company's products, as well as other factors, many or all
of which may be 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.

Application of Critical Accounting Policies and Estimates

The Company's consolidated financial statements and accompanying notes are prepared in accordance with U.S.
generally accepted accounting principles. The preparation of the Company's financial statements requires
management to make estimates, assumptions and judgments that affect the amounts reported. These estimates,
assumptions and judgments are affected by management's application of accounting policies, which are discussed in
Note 1, "Summary of Significant Accounting Policies", and elsewhere in the accompanying consolidated financial
statements. As discussed below, our financial position or results of operations may be materially affected when
reported under different conditions or when using different assumptions in the application of such policies. In the
event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods
to reflect more current information. Management believes the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of the Company's financial statements.

Accounts Receivable

Our ability to collect outstanding receivables from our customers is critical to our operating performance and cash
flows. Accounts receivable are stated at an amount management expects to collect from outstanding balances.
Management provides for probable uncollectible accounts through a charge to earnings and a credit to a valuation
allowance based on its assessment of the current status of individual accounts after considering the age of each
receivable and communications with the customers involved. Balances that are collected, for which a credit to a
valuation allowance had previously been recorded, result in a current-period reversal of the earlier transaction charging
earnings and crediting a valuation allowance. Balances that are still outstanding after management has used
reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts
receivable in the current period. The actual amount of accounts written off over the five year period ended May 31,
2021 equaled less than 0.3% of sales for that period. The balance of the valuation allowance has decreased to $7,000
at May 31, 2021 from $211,000 at May 31, 2020. Management does not expect the valuation allowance to materially
change in the next twelve months for the current accounts receivable balance.

Inventory

Inventory is stated at the lower of average cost or net realizable value. Average cost approximates first-in, first-out
cost.

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 technical 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. Therefore, management of the Company has recorded an allowance for potential inventory
obsolescence. Based on certain assumptions and judgments made from the information available at that time, we
determine the amount in the inventory allowance. If these estimates and related assumptions or the market changes,
we may be required to record additional reserves. Historically, actual results have not varied materially from the
Company's estimates.

During fiscal 2021, the Company began a thorough review of the facilities including the flow of inventory through
the factory and warehouse areas to determine the most efficient utilization of available space. Inventory purchasing
practices and stocking levels were also evaluated and it was determined that a significant portion of the older items
would be disposed of while the allowance for potential inventory obsolescence would be increased as more items are
identified for disposal. $1,101,000 of inventory was disposed of during the year. The provision for potential inventory
obsolescence was $1,500,000 and $180,000 for the years ended May 31, 2021 and 2020.

Revenue Recognition

Revenue is recognized 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 cost represents work performed, which corresponds with, and
thereby best depicts, the transfer of control to the customer. Contract costs include labor, material and overhead. Total
estimated costs for each of the contracts are estimated based on a combination of historical costs of manufacturing
similar products and estimates or quotes from vendors for supplying parts or services towards the completion of the
manufacturing process. Adjustments to cost and profit estimates are made periodically due to changes in job
performance, job conditions and estimated profitability, including those arising from final contract settlements. These
changes may result in revisions to costs and income and are recognized in the period in which the revisions are
determined. Any losses expected to be incurred on contracts in progress are charged to operations in the period such
losses are determined. If total costs calculated upon completion of the manufacturing process in the current period
for a contract are more than the estimated total costs at completion used to calculate revenue in a prior period, then
the profits in the current period will be lower than if the estimated costs used in the prior period calculation were equal
to the actual total costs upon completion. Historically, actual results have not varied materially from the Company's
estimates. Other sales to customers are recognized upon shipment to the customer based on contract prices and terms.
In the year ended May 31, 2021, 43% of revenue was recorded for contracts in which revenue was recognized over
time while 57% was recognized at a point in time. In the year ended May 31, 2020, 57% of revenue was recorded for
contracts in which revenue was recognized over time while 43% was recognized at a point in time.

For financial statement presentation purposes, the Company nets progress billings against the total costs incurred 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.

Income Taxes

The provision for income taxes provides for the tax effects of transactions reported in the financial statements
regardless of when such taxes are payable. Deferred tax assets and liabilities are recognized for the expected future
tax consequences of temporary differences between the tax and financial statement basis of assets and liabilities. The
deferred tax assets relate principally to asset valuation allowances such as inventory obsolescence reserves and bad
debt reserves and also to liabilities including warranty reserves, accrued vacation, accrued commissions and others.
The deferred tax liabilities relate primarily to differences between financial statement and tax depreciation. Deferred
taxes are based on tax laws currently enacted with tax rates expected to be in effect when the taxes are actually paid
or recovered.

Realization of the deferred tax assets is dependent on generating sufficient taxable income at the time temporary
differences become deductible. The Company provides a valuation allowance to the extent that deferred tax assets
may not be realized. A valuation allowance has not been recorded against the deferred tax assets since management
believes it is more likely than not that the deferred tax assets are recoverable. The Company considers future taxable
income and potential tax planning strategies in assessing the need for a potential valuation allowance. In future years
the Company will need to generate approximately $3.9 million of taxable income in order to realize our deferred tax
assets recorded as of May 31, 2021 of $815,000. This deferred tax asset balance is 2% ($15,000) less than at the end
of the prior year. The amount of the deferred tax assets considered realizable however, could be reduced in the near
term if estimates of future taxable income are reduced. If actual results differ from estimated results or if the Company
adjusts these assumptions, the Company may need to adjust its deferred tax assets or liabilities, which could impact
its effective tax rate.

The Company's practice is to recognize interest related to income tax matters in interest income / expense and to
recognize penalties in selling, general and administrative expenses.

The Company and its subsidiary file consolidated Federal and State income tax returns. As of May 31, 2021, the
Company had State investment tax credit carryforwards of approximately $368,000 expiring through May 2026.

Results of Operations

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

Summary comparison of the years ended May 31, 2021 and 2020

Sales, net
Cost of goods sold
Selling, general and administrative expenses
Income before provision for income taxes
Provision for income taxes
Net income

Increase /
(Decrease)
$ (5,872,000)
$ 190,000
$ (407,000)
$ (2,734,000)
$ (767,000)
$ (1,967,000)

For the year ended May 31, 2021 (All figures being discussed are for the year ended May 31, 2021 as compared to
the year ended May 31, 2020.)

Year ended May 31
2020
2021

Change

Amount

Percent

Net Revenue

$ 22,510,000

$ 28,382,000

$ (5,872,000 )

-21%

Cost of sales

19,335,000

19,145,000

190,000

Gross profit

$ 3,175,000

$ 9,237,000

$ (6,062,000 )

-66%

… as a percentage of net revenues

14%

33%

The Company's consolidated results of operations showed a 21% decrease in net revenues and a decrease in net income
of 65%. Revenues recorded in the current period for long-term construction projects (“Project(s)”) were 41% lower
than the level recorded in the prior year. We had 41 Projects in process during the current period compared with 41
during the same period last year. Revenues recorded in the current period for other-than long-term construction
projects (non-projects) were 7% more than the level recorded in the prior year. The number of Projects in-process
fluctuates from period to period. The changes from the prior period to the current period are not necessarily
representative of future results.

Sales of the Company's products are made to three general groups of customers: industrial, structural and aerospace /
defense. The Company saw a 35% decrease from last year’s level in sales to structural customers who were seeking
seismic / wind protection for either construction of new buildings and bridges or retrofitting existing buildings and
bridges along with a 5% decrease in sales to customers in aerospace / defense offset by a 10% increase in sales to
customers using our products in industrial applications. The significant decrease in sales to structural customers is
primarily from domestic customers. Many prospective customers in the construction field had been delaying orders
for several months as they considered the potential effects of the current COVID pandemic on the economy. Slightly
more than half of the sales order bookings to structural customers were recorded in the final four months of the fiscal
year, including $6.4 million in the fourth quarter. All of these will be deliverable in fiscal 2022.

A breakdown of sales to these three general groups of customers, as a percentage of total net revenue for fiscal years
ended May 31, 2021 and 2020 is as follows:

Year ended May 31

Industrial
Structural
Aerospace / Defense

2021
10%
45%
45%

2020
7%
55%
38%

Total sales within North America decreased 34% from last year. Total sales to Asia increased 52% from the prior
year. Net revenue by geographic region, as a percentage of total net revenue for fiscal years ended May 31, 2021 and
2020 is as follows:

Year ended May 31

North America
Asia
Other

2021
70%
20%
10%

2020
85%
11%
4%

The gross profit as a percentage of net revenue of 14% in the current period is less than the 33% recorded in the same
period of the prior year. The significant decrease in gross profit as a percentage of revenue is primarily due to the
significant reduction in domestic sales to structural customers along with the 58% increase in research and
development costs incurred as discussed above.

At May 31, 2020, we had 102 open sales orders in our backlog with a total sales value of $9.8 million. At May 31,
2021, we had 132 open sales orders in our backlog with a total sales value of $22.0 million. $9.3 million of the current
backlog is on Projects already in progress. $2.2 million of the $9.8 million sales order backlog at May 31, 2020 was
in progress at that date. 43% of the sales value in the backlog is for aerospace / defense customers compared to 63%
at the end of fiscal 2020. As a percentage of the total sales order backlog, orders from structural customers accounted
for 55% at May 31, 2021 and 32% at May 31, 2020.

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

Selling, General and Administrative Expenses

Outside Commissions $ 719,000
4,808,000
$ 5,527,000

Other SG&A
Total SG&A

Year ended May 31
2020
2021
$ 1,081,000
4,853,000
$ 5,934,000

Change

Amount
$ (362,000 )
(45,000 )
$ (407,000 )

Percent
-33%
-1%
-7%

… as a percentage of net revenues

25%

21%

Selling, general and administrative expenses decreased slightly from the prior year. Outside commission expense
decreased 33% from last year's level due to the significant decrease in the level of commissionable sales recorded in
the current period as compared to the prior period. Other selling, general and administrative expenses decreased only
slightly from last year.

The above factors resulted in operating loss of $2,352,000 for the year ended May 31, 2021, down significantly from
the $3,303,000 operating income in the prior year.

Other income during the period includes $2,972,000 of financial assistance provided by the U.S. federal government
as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Consolidated Appropriations Act
of 2021 (CAA), discussed below: a.) $1,462,000 of income due to the forgiveness of the loan by the Small Business
Administration (SBA) under the Paycheck Protection Program (PPP), and b.) $1,510,000 of Employee Retention
Credit income.

The Company's effective tax rate (ETR) is calculated based upon current assumptions relating to the year's operating
results and various tax related items. The ETR for the fiscal year ended May 31, 2021 is -56%, compared to the ETR
for the prior year of 11%.

A reconciliation of provision for income taxes at the statutory rate to income tax provision at the Company's effective
rate is as follows:

Computed tax provision at the expected statutory rate
Tax effect of permanent differences:

Research tax credits
Foreign-derived intangible income deduction
U.S. Government PPP loan forgiven
Other permanent differences

Other

2021

2020

$ 143,000 $ 718,000

(218,000 )
-
(307,000 )
42,000
(41,000 )

(272,000 )
(100,000 )
-
40,000
-
$ (381,000 ) $ 386,000

The foreign-derived intangible income deduction is a tax deduction provided to corporations that sell goods or services
to foreign customers. It became available through Public Law 115-97, known as the Tax Cuts and Jobs Act. The
legislation that created the PPP and permitted the SBA to forgive loans made through the PPP also directed that the
forgiven loan would not be taxable income to the recipient.

Stock Options

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

The Company measures compensation cost arising from the grant of share-based payments to employees at fair value
and recognizes such cost in income over the period during which the employee is required to provide service in
exchange for the award. The Company recognized $154,000 and $143,000 of compensation cost for the years ended
May 31, 2021 and 2020.

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. The Company used a weighted average expected term. Expected volatility
assumptions used in the model were based on volatility of the Company's stock price for the thirty-month period
immediately preceding the granting of the options. The Company issued stock options in August 2020 and April
2021. The risk-free interest rate is derived from the U.S. treasury yield.

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

Risk-free interest rate:
Expected life of the options:
Expected share price volatility:
Expected dividends:
These assumptions resulted in estimated fair-market value per stock option:

1.750%
3.9 years
34%
zero
$2.88

August 2020

April 2021
2.625%
4.0 years
32%
zero
$3.49

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. A summary of changes in the stock options outstanding during the year ended May
31, 2021 is presented below.

Options outstanding and exercisable at May 31, 2020:
Options granted:
Less: Options exercised:
Less: Options expired:
Options outstanding and exercisable at May 31, 2021:
Closing value per share on NASDAQ at May 31, 2021:

Number of
Options

252,250
47,250
13,000
18,750
267,750

Weighted-
Average
Exercise Price
$ 11.52
$ 11.26
$ 6.34
$ 13.31
$ 11.60
$ 11.85

Capital Resources, Line of Credit and Long-Term Debt

The Company's primary liquidity is dependent upon its working capital needs. These are primarily inventory, accounts
receivable, costs and estimated earnings in excess of billings, accounts payable, accrued commissions, billings in
excess of costs and estimated earnings, and debt service. The Company's primary sources of liquidity have been
operations and bank financing.

Capital expenditures for the year ended May 31, 2021 were $1,622,000 compared to $1,231,000 in the prior year.
Current year capital expenditures included new manufacturing machinery, testing equipment, paint booths system,
upgrades to technology equipment and assembly / test facility improvements. The Company has commitments to
make capital expenditures of approximately $400,000 as of May 31, 2021.

During fiscal 2020, the Company received a loan totaling $1,462,000 from the SBA under the Paycheck Protection
Program of the CARES Act, in response to the Coronavirus pandemic described below. The total amount of the loan
was forgiven during fiscal 2021 under provisions of the CARES Act.

The Company has a $10,000,000 demand line of credit from a bank, with interest payable at the Company's option of
30, 60 or 90 day LIBOR rate plus 2.25%. There is no outstanding balance at May 31, 2021 or May 31, 2020. The
outstanding balance on the line of credit fluctuates as the Company's various long-term projects progress. The line is
secured by a negative pledge of the Company's real and personal property. This line of credit is subject to the usual
terms and conditions applied by the bank and is subject to renewal annually.

The bank is not committed to make loans under this line of credit and no commitment fee is charged.

Inventory and Maintenance Inventory

May 31, 2021

May 31, 2020

Work in process
Finished goods
Inventory
Maintenance and other inventory

Raw materials $ 503,000
5,076,000
256,000
5,835,000 78%
1,613,000 22%
Total $ 7,448,000 100%

$ 658,000
8,586,000
863,000
10,107,000 92%
879,000 8%
$10,986,000 100%

Increase /(Decrease)
$ (155,000 )
(3,510,000 )
(607,000 )
(4,272,000 )
734,000
$ (3,538,000 )

-24%
-41%
-70%
-42%
84%
-32%

Inventory turnover

2.1

1.7

Inventory, at $5,835,000 as of May 31, 2021, is 42% less than the prior year-end. Of this, approximately 87% is work
in process, 4% is finished goods, and 9% is raw materials. All of the current inventory is expected to be consumed or
sold within twelve months. The level of inventory will fluctuate from time to time due to the stage of completion of
the non-project sales orders in progress at the time.

The Company continues to rework slow-moving inventory, where applicable, to convert it to product to be used on
customer orders. During fiscal 2021, the Company began a thorough review of the inventory to identify and dispose
of items that had not been used for several years and were unlikely to be used in the foreseeable future. The Company
disposed of approximately $1,101,000 and $46,000 of obsolete inventory during the years ended May 31, 2021 and
2020, respectively.

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

Accounts and other receivables
Less: Other receivable
Accounts receivable
CIEB
Less: BIEC
Net

May 31, 2021
$ 4,121,000
741,000
3,380,000
1,500,000
1,362,000
$ 3,518,000

May 31, 2020
$ 5,819,000
-
5,819,000
1,755,000
737,000
$ 6,837,000

-29%

Increase /(Decrease)
$ (1,698,000 )
741,000
(2,439,000 )
(255,000 )
625,000
$ (3,319,000 )

-42%
-15%
85%
-49%

Number of an average day’s sales outstanding in
accounts receivable (DSO)

The Company combines the totals of accounts receivable, the asset CIEB, and the 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 $3,380,000 as of May 31, 2021 includes approximately $201,000 of amounts retained by
customers on long-term construction projects. The Company expects to collect all of these amounts, including the
retained amounts, during the next twelve months. The number of an average day's sales outstanding in accounts
receivable (DSO) decreased to 42 days at May 31, 2021 from 68 days as of May 31, 2020. 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 fourth quarter
of the current fiscal year is only 6% less than in the fourth quarter of the prior year. The level of accounts receivable
at the end of the current fiscal year is 42% less than the level at the end of the prior year. The level of accounts
receivable at the end of the current year is significantly less that last year due to 1.) the collection in the current year
of amounts owed on some larger Projects that had been completed in the prior year and 2.) the lower level of sales in
the current year. The combination of the decrease in the level of an average day’s sales along with the decrease in the
level of accounts receivable caused the DSO to decrease by 26 days from last year-end to this year-end. The Company
expects to collect the net accounts receivable balance, including the retainage, during the next twelve months.

Other receivable is an amount of Employee Retention Credit claimed by the Company for the second calendar quarter
of 2021 and is expected to be received in the third calendar quarter of 2021.

The status of the projects in-progress at the end of the current and prior fiscal years have changed in the factors
affecting the year-end balances in the asset CIEB, and the liability BIEC:

Number of projects in progress at year-end
Aggregate percent complete at year-end
Average total value of projects in progress at year-end
Percentage of total value invoiced to customer

2021
14
32%
$963,000
30%

2020
15
80%
$830,000
74%

There is one fewer project in-process at the end of the current fiscal year as compared with the prior year end and the
average value of those projects has increased by 16% between those two dates.

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, provisions such as this are often not possible. The $1,500,000 balance in this
account at May 31, 2021 is a 15% decrease from the prior year-end. This decrease reflects the lower aggregate level
of the percentage of completion of these Projects as of the current year end as compared with the Projects in process
at the prior year end. Generally, if progress billings are permitted under the terms of a project sales agreement, then
the more complete the project is, the more progress billings will be permitted. The Company expects to bill the entire
amount during the next twelve months. 42% of the CIEB balance as of the end of the last fiscal quarter, February 28,
2021, was billed to those customers in the current fiscal quarter ended May 31, 2021. The remainder will be billed as
the projects progress, in accordance with the terms specified in the various contracts.

The year-end balances in the CIEB account are comprised of the following components:

May 31, 2021

May 31, 2020

Costs
Estimated earnings
Less: Billings to customers
CIEB
Number of projects in progress

$ 2,362,000
410,000
1,272,000
$ 1,500,000

$ 2,615,000
540,000
1,400,000
$ 1,755,000

As noted above, BIEC represents billings to customers in excess of revenues recognized. The $1,362,000 balance in
this account at May 31, 2021 is in comparison to a $737,000 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 account "costs and estimated earnings in excess
of billings," discussed above. Final delivery of product under these contracts is expected to occur during the next
twelve months.

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

May 31, 2021

May 31, 2020

Billings to customers
Less: Costs
Less: Estimated earnings
BIEC
Number of projects in progress

$ 2,741,000
1,011,000
368,000
$ 1,362,000

$ 7,794,000
3,781,000
3,276,000
$ 737,000

Accounts payable, at $1,787,000 as of May 31, 2021, is 30% more than the prior year-end. This significant increase
is due to the increase in customer orders received during the final months of the current fiscal year that will be
manufactured and shipped to the customers in the coming months. The Company expects the current accounts payable
amount to be paid during the next twelve months.

Commission expense on applicable sales orders is recognized at the time revenue is recognized. The commission is
paid following receipt of payment from the customers. Accrued commissions as of May 31, 2021 are $269,000. This
is 12% less than the $306,000 accrued at the prior year-end. This decrease is generally due to the decrease in the level
of sales, discussed above. The Company expects the current accrued amount to be paid during the next twelve months.

Other accrued expenses of $1,715,000 increased slightly from the prior year level of $1,664,000.

Management believes that the Company's cash on hand, cash flows from operations, and borrowing capacity under
the bank line of credit will be sufficient to fund ongoing operations, capital improvements and share repurchases (if
any) for the next twelve months.

Coronavirus Pandemic

On January 31, 2020, the United States Secretary of Health and Human Services (HHS) declared a public health
emergency related to the global spread of coronavirus COVID-19, and a pandemic was declared by the World Health
Organization in February 2020. Efforts to fight the widespread disease included limiting or closing many businesses
and resulted in a severe disruption of operations for many organizations. Financial markets also fluctuated
significantly during this time. The extent of the impact of COVID-19 on the Company’s operational and financial
performance was significant in fiscal 2021. While the use of vaccinations world-wide have apparently slowed spread
of the disease, the extent of the impact of COVID-19 on the Company’s operational and financial performance in
fiscal 2022 will depend on further developments, including the duration and spread of the outbreak, impact on
customers, employees, and vendors, all of which cannot be predicted.

Company management currently does not have reason to believe that the COVID-19 pandemic will adversely affect
our ability to meet our obligations to our customers. Our top priorities continue to be the health and safety of our
employees and their families along with supporting our customers. Thanks to the careful adherence to our COVID-
19 safety measures by our workforce as well as our customers and suppliers, we remain in a strong position with
respect to being able to process existing orders and we are quite prepared to process new orders as they are
secured. Our high-spirited, healthy workforce continues to adjust their work schedules as the needs arise.

The majority of our customers remain open to continue to receive shipments from us and issue new purchase orders
to us. Many of our domestic structural customers froze operations while they attempted to determine the extent and
impact of the pandemic on their projects. We noticed a thawing in this domestic market during the final four months
of the fiscal year as customers appeared to gain confidence in the future of our economy. This has resulted in an
increase in the volume of domestic sales orders. While these new orders had very little impact on the 2021 fiscal year,
they have provided a strong base for the next fiscal year.

The liquidity of the Company remains strong at this time. However, the pandemic is not over and the economy has
not fully recovered yet. Management remains concerned about variants of the virus as well as the uncertainty of the
when or how the virus may affect some of our customers’ purchasing plans. The economic downturn did have a
negative impact on our operations and for this reason, we have applied for and have received assistance from the
federal government under various provisions of the CARES Act and CAA, as discussed above.

Our Supply Chain Management team is in communication with our partners around the globe so that we can be updated
on any delays that may occur. Increases in global demand for materials such as steel have caused sharp cost increases
as the various economies improve around the world. We have faced longer lead times to procure some materials.
Management is monitoring this situation and adjusting our sourcing as necessary.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Taylor Devices, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Taylor Devices, Inc. and Subsidiary (the
Company) as of May 31, 2021 and 2020, and the related consolidated statements of income, stockholders' equity,
and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively
referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial condition of the Company as of May 31, 2021 and 2020, and the results
of its operations and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.

Cost Estimates for Long-Term Contracts and Related Revenue Recognition

Description of the Matter

As more fully described in Note 1 to the consolidated financial statements, the Company recognizes revenue over
time for long-term contracts as goods are produced. The Company uses costs incurred as the method for
determining progress, and revenue is recognized based on costs incurred to date plus an estimate of margin at
completion. The process of estimating margin at completion involves estimating the costs to complete production of
goods and comparing those costs to the estimated final revenue amount. Long-term contracts are inherently
uncertain in that revenue is fixed while the estimates of costs required to complete these contracts are subject to
significant variability. Due to the technical performance requirements in many of these contracts, changes to cost
estimates could occur, resulting in higher or lower margins when the contracts are completed.

Given the inherent uncertainty and significant judgments necessary to estimate future costs at completion, auditing
these estimates involved a focused audit effort and a high degree of auditor judgment.

How We Addressed the Matter in Our Audit

Our auditing procedures related to the cost estimates for long-term contracts and related revenue recognition
included the following, among others:

 We evaluated the appropriateness and consistency of management’s methods used to develop its estimates.
 We evaluated the reasonableness of judgments made and significant assumptions used by management

relating to key estimates.

 We selected a sample of executed contracts to understand the contract, perform an independent assessment
of the appropriate timing of revenue recognition, and test the mathematical accuracy of revenue recognized
based on costs incurred to date relative to total estimated costs at completion.

 We performed inquiries of the Company’s project managers and others directly involved with the contracts
to evaluate project status and project challenges which may affect total estimated costs to complete. We
also observed the project work site when key estimates related to tangible or physical progress of the
project.

 We tested the accuracy and completeness of the data used in developing key estimates, including material,

labor, overhead, and sub-contractor costs.

 We performed retrospective reviews of prior year long-term contracts, comparing actual performance to
estimated performance and the related financial statement impact, when evaluating the thoroughness and
precision of management’s estimation process in previous years.

Valuation of Inventory

Description of the Matter

As of May 31, 2021, the Company’s inventory balance was $5.8 million, net of a $100,000 allowance for
obsolescence, its maintenance and other inventory balance was $1.6 million, net of a $2.0 million allowance for
obsolescence, and its provision for obsolescence for the year ended was $1.5 million. As discussed in Note 5,
maintenance and other inventory represents certain items that are estimated to have a product life-cycle in excess of
twelve months the Company is required to maintain for service of products sold and items that are generally subject
to spontaneous ordering. The Company evaluates its inventory for obsolescence on an ongoing basis by considering
historical usage as well as requirements for future orders.

Given the inherent uncertainty and significant judgments necessary to estimate potential inventory obsolescence,
auditing management’s estimates involved a high degree of auditor judgment.

How We Addressed the Matter in Our Audit

Our auditing procedures related to valuation of inventory included the following, among others:

relating to key estimates.

 We inquired of management relative to write-offs of inventory during the year.
 We tested the completeness and accuracy of management’s schedule of inventory.
 We developed an independent expectation of the obsolescence reserve based on our knowledge of the
Company’s inventory, including analysis of slow-moving items and historical usage and compared it to
actual.

 We examined management’s lower of cost or net realizable value analysis and performed procedures to test

its completeness and accuracy.

 We selected a sample of material purchases made during the year to ensure they were included in inventory

at the proper value.

 During our physical inventory observation, we toured the Company’s warehouses and examined inventory

on hand for any indications of obsolescence.

We have served as the Company’s auditor since 1998.

Buffalo, New York
August 27, 2021

TAYLOR DEVICES, INC. AND SUBSIDIARY

Consolidated Balance Sheets

May 31,

Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts and other receivables, net (Note 2)

Inventory (Note 3)

Prepaid expenses
Prepaid income taxes
Costs and estimated earnings in excess of billings (Note 4)

Total current assets

Maintenance and other inventory, net (Note 5)
Property and equipment, net (Note 6)
Cash value of life insurance, net
Deferred income taxes (Note 10)

Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings (Note 7)
Accounts payable
Accrued commissions
Other accrued expenses
Billings in excess of costs and estimated earnings (Note 4)

Total current liabilities

Stockholders' Equity:

Common stock, $.025 par value, authorized 8,000,000 shares,

issued 4,055,275 and 4,040,805 shares

Paid-in capital
Retained earnings

Treasury stock – 558,834 and 553,934 shares at cost
Total stockholders' equity

See notes to consolidated financial statements.

2021

2020

$ 20,581,604
1,097,012
4,120,564
5,835,596
522,747
454,778
1,499,604
34,111,905

$ 15,159,827
1,071,950
5,819,471
10,107,437
460,212
50,148
1,754,573
34,423,618

1,612,839
9,816,594
200,538
190,115
$ 45,931,991

879,050
9,407,490
195,621
170,115
$ 45,075,894

$ -
1,787,325
269,064
1,715,409
1,361,985
5,133,783

$ 1,461,500
1,370,175
305,885
1,663,914
736,866
5,538,340

101,305
10,010,430
33,601,475
43,713,210
(2,915,002)
40,798,208
$ 45,931,991

100,943
9,759,063
32,538,580
42,398,586
(2,861,032)
39,537,554
$ 45,075,894

TAYLOR DEVICES, INC. AND SUBSIDIARY

Consolidated Statements of Income

For the years ended May 31,

2021

2020

Sales, net (Note 9)

Cost of goods sold

Gross profit

Selling, general and administrative expenses

$ 22,509,641

$ 28,381,541

19,334,950

19,144,451

3,174,691

5,526,774

9,237,090

5,934,410

Operating income (loss)

(2,352,083 )

3,302,680

Other income

Interest, net

Paycheck Protection Program loan forgiveness (Note 7)

Employee Retention Credit (Note 20)

Miscellaneous

Total other income

Income before provision for income taxes

53,654
1,461,500
1,510,131
8,693

3,033,978

111,054

2,242

113,296

681,895

3,415,976

Provision for income taxes (benefit) (Note 10)

(381,000 )

386,000

Net income

$ 1,062,895

$ 3,029,976

Basic and diluted earnings per common share (Note 11)

$ 0.30

$ 0.87

See notes to consolidated financial statements.

TAYLOR DEVICES, INC. AND SUBSIDIARY

Consolidated Statements of Shareholders’ Equity

For the years ended May 31,

2021

2020

Common Stock
Beginning of period
Issuance of shares for employee stock purchase plan
Issuance of shares for employee stock option plan
End of period

Paid-in Capital
Beginning of period
Issuance of shares for employee stock purchase plan
Issuance of shares for employee stock option plan
Stock options issued for services
End of period

Retained Earnings
Beginning of period
Net income
End of period

Treasury Stock
Beginning of period
Issuance of shares for employee stock option plan
End of period

$ 100,943
37
325
101,305

$ 100,735
34
174
100,943

9,759,063
14,954
82,070
154,343
10,010,430

9,538,892
13,824
63,250
143,097
9,759,063

32,538,580
1,062,895
33,601,475

29,508,604
3,029,976
32,538,580

(2,861,032)
(53,970)
(2,915,002)

(2,829,359)
(31,673)
(2,861,032)

Total stockholders' equity

$ 40,798,208

$ 39,537,554

See notes to consolidated financial statements.

TAYLOR DEVICES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

For the years ended May 31,

2021

2020

$ 1,062,895

Operating activities:
Net income
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation
Stock options issued for services
Bad debt expense
Provision for inventory obsolescence
Deferred income taxes
Paycheck Protection Program debt forgiveness
Changes in other current assets and liabilities:
Accounts and other receivables
Inventory
Prepaid expenses
Prepaid income taxes
Costs and estimated earnings in excess of billings
Accounts payable
Accrued commissions
Other accrued expenses
Billings in excess of costs and estimated earnings
Net operating activities

1,564,907
2,038,052
(62,535)
(404,630)
254,969
417,150
(36,821)
51,495
625,119
7,030,157

1,212,713
154,343
134,000
1,500,000
(20,000)
(1,461,500)

$ 3,029,976

1,141,110
143,097
-
180,000
19,000
-

(540,169)
804,721
(148,052)
186,869
5,817,917
(32,517)
(1,003,473)
131,644
103,163
9,833,286

Investing activities:
Acquisition of property and equipment
Increase in short-term investments
Increase in cash value of life insurance
Net investing activities

Financing activities:
Short-term borrowings
Proceeds from issuance of common stock
Net financing activities

Net change in cash and cash equivalents

(1,621,817)
(25,062)
(4,917)
(1,651,796)

(1,231,158)
(16,359)
(4,872)
(1,252,389)

-
43,416
43,416

1,461,500
45,608
1,507,108

5,421,777

10,088,005

Cash and cash equivalents - beginning

15,159,827

5,071,822

Cash and cash equivalents - ending

$ 20,581,604

$ 15,159,827

See notes to consolidated financial statements.

TAYLOR DEVICES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies:

Nature of Operations:

Taylor Devices, Inc. (the Company) manufactures and sells a single group of very similar products that have many
different applications for customers. These similar products are included in one of eight categories; namely, Seismic
Dampers, Fluidicshoks®, Crane and Industrial Buffers, Self-Adjusting Shock Absorbers, Liquid Die Springs,
Vibration Dampers, Machined Springs and Custom Actuators for use in various types of machinery, equipment and
structures, primarily to customers which are located throughout the United States and several foreign countries. The
products are manufactured at the Company's sole operating facility in the United States where all of the Company's
long-lived assets reside. Management does not track or otherwise account for sales broken down by these categories.

68% of the Company's 2021 revenue was generated from sales to customers in the United States and 20% was from
sales to customers in Asia. Remaining sales were to customers in other countries in North America, Europe, Australia
and South America.

83% of the Company's 2020 revenue was generated from sales to customers in the United States and 11% was from
sales to customers in Asia. Remaining sales were to customers in other countries in North America, Europe and South
America.

Principles of Consolidation:

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned
subsidiary, Tayco Realty Corporation (Realty). All inter-company transactions and balances have been eliminated in
consolidation.

Subsequent Events:

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

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents:

The Company includes all highly liquid investments in money market funds in cash and cash equivalents on the
accompanying balance sheets.

Cash and cash equivalents in financial institutions may exceed insured limits at various times during the year and
subject the Company to concentrations of credit risk.

Short-term Investments:

At times, the Company invests excess funds in liquid interest earning instruments. Short-term investments at May 31,
2021 and May 31, 2020 include “available for sale” corporate bonds stated at fair value, which approximates cost. The
bonds (16) mature on various dates during the period August 2021 to September 2025. 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 bonds 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.

Accounts and Other Receivables:

Accounts and other receivables are stated at an amount management expects to collect from outstanding balances.
Management provides for probable uncollectible accounts through a charge to earnings and a credit to a valuation
allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after
management has used reasonable collection efforts are written off through a charge to the valuation allowance and a
credit to the receivable.

Inventory:

Inventory is stated at the lower of average cost or net realizable value. Average cost approximates first-in, first-out
cost.

Property and Equipment:

Property and equipment is stated at cost net of accumulated depreciation. Depreciation is provided primarily using
the straight-line method for financial reporting purposes and accelerated methods for income tax reporting purposes.
Maintenance and repairs are charged to operations as incurred; significant improvements are capitalized.

Cash Value of Life Insurance:

Cash value of life insurance is stated at the surrender value of the contracts.

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 in which revenue was recognized over time while 57% was recognized at a point in time. In the year
ended May 31, 2020, 57% of revenue was recorded for contracts in which revenue was recognized over time while
43% 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 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 May 31, 2021 and 2020, 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.

Shipping and Handling Costs:

Shipping and handling costs on incoming inventory items are classified as a component of cost of goods sold, while
shipping and handling costs on outgoing shipments to customers are classified as a component of selling, general and
administrative expenses. The amounts of these costs classified as a component of selling, general and administrative
expenses were $146,878 and $420,786 for the years ended May 31, 2021 and 2020. Shipping and handling activities
that occur after the customer has obtained control of the product are considered fulfillment activities, not performance
obligations.

Research and Development Costs:

Research and development costs are classified as a component of cost of sales. The amounts of these costs were
$924,000 and $585,000 for the years ended May 31, 2021 and 2020.

Income Taxes:

The Company's practice is to recognize interest related to income tax matters in interest income / expense and to recognize
penalties in selling, general and administrative expenses. The Company did not have any accrued interest or penalties
included in its consolidated balance sheets at May 31, 2021 or 2020. The Company recorded no interest expense or
penalties in its consolidated statements of income during the years ended May 31, 2021 and 2020.

The Company believes it is no longer subject to examination by federal and state taxing authorities for years prior to May
31, 2018.

Sales Taxes:

Certain jurisdictions impose a sales tax on Company sales to nonexempt customers. The Company collects these
taxes from customers and remits the entire amount as required by the applicable law. The Company excludes from
revenues and expenses the tax collected and remitted.

Stock-Based Compensation:

The Company measures compensation cost arising from the grant of share-based payments to employees at fair value
and recognizes such cost in income over the period during which the employee is required to provide service in
exchange for the award. The stock-based compensation expense for the years ended May 31, 2021 and 2020 was $154,343
and $143,097.

New Accounting Standards:

Any recently issued Accounting Standards Codification (ASC) guidance has either been implemented or are not
significant to the Company.

2. Accounts and Other Receivables:

Customers
Customers – retention

Less Allowance for doubtful accounts
Add Other receivables

2021
$ 3,184,970
200,956
3,385,926
6,781
741,419
$ 4,120,564

2020

$ 5,399,915
630,823
6,030,738
211,267
-
$ 5,819,471

Retention receivable from customers represents amounts invoiced to customers where payments have been partially
withheld pending completion of the project. All amounts are expected to be collected within the next fiscal year.

Other receivable is an amount of Employee Retention Credit claimed by the Company for the second calendar quarter
of 2021 and is expected to be received in the third calendar quarter of 2021.

3. Inventory:

Raw materials
Work-in-process
Finished goods

Less allowance for obsolescence

4. Costs and Estimated Earnings on Uncompleted Contracts:

Costs incurred on uncompleted contracts
Estimated earnings

Less billings to date

2021
$ 503,344
5,076,377
355,875
5,935,596
100,000
$ 5,835,596

2020

$ 658,024
8,586,404
963,009
10,207,437
100,000
$10,107,437

2021
$ 3,372,276
778,011
4,150,287
4,012,668
$ 137,619

2020
$ 6,395,550
3,816,527
10,212,077
9,194,370
$ 1,017,707

Amounts are included in the accompanying balance sheets under the following captions:

Costs and estimated earnings in excess of billings
Billings in excess of costs and estimated earnings

2021
$ 1,499,604
1,361,985
$ 137,619

2020
$ 1,754,573
736,866
$ 1,017,707

The following summarizes the status of Projects in progress as of May 31, 2021 and 2020:

Number of Projects in progress
Aggregate percent complete
Aggregate amount remaining
Percentage of total value invoiced to customer

2021
14
32%
$9,333,701
30%

2020
15
80%
$2,234,962
74%

The Company expects to recognize the entire remaining revenue on all open projects during the May 31, 2022 fiscal
year.

Revenue recognized during the years ended May 31, 2021 and 2020 for amounts included in billings in excess of costs
and estimated earnings as of the beginning of the year amounted to $736,866 and $633,703.

5. Maintenance and Other Inventory:

Maintenance and other inventory
Less allowance for obsolescence

2021
$ 3,612,000
1,999,161
$ 1,612,839

2020
$ 2,479,497
1,600,447
$ 879,050

6. Property and Equipment:

Land
Buildings and improvements
Machinery and equipment
Office furniture and equipment
Autos and trucks
Land improvements

Less accumulated depreciation

2021
$ 195,220
9,584,087
12,366,569
2,536,688
24,818
476,429
25,183,811
15,367,217
$ 9,816,594

2020
$ 195,220
9,457,142
11,242,667
2,209,382
24,818
455,429
23,584,658
14,177,168
$ 9,407,490

Depreciation expense was $1,212,713 and $1,141,110 for the years ended May 31, 2021 and 2020.

The Company has commitments to make capital expenditures of approximately $400,000 as of May 31, 2021.

7. Short-Term Borrowings:

During 2020, the Company received a loan totaling $1,461,500 from the Small Business Administration (SBA) under
the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief and Economic Security (CARES) Act, in
response to the pandemic described in Note 20. The total amount of the loan was forgiven during fiscal 2021 under
provisions of the CARES Act. The amount of the loan forgiveness is included in Other income on the Consolidated
Statements of Income.

The Company has available a $10,000,000 demand line of credit from a bank, with interest payable at the Company's
option of 30, 60 or 90 day LIBOR rate plus 2.25%. The line is secured by a negative pledge of the Company's real
and personal property. This line of credit is subject to the usual terms and conditions applied by the bank and subject
to renewal annually.

There is no amount outstanding under the line of credit at May 31, 2021 or May 31, 2020.

The Company uses a cash management facility under which the bank draws against the available line of credit to cover
checks presented for payment on a daily basis. Outstanding checks under this arrangement totaled $366,209 and
$523,344 as of May 31, 2021 and 2020. These amounts are included in accounts payable.

8. Legal Proceedings:

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

9. Sales:

The Company manufactures and sells a single group of very similar products that have many different applications
for customers. These similar products are included in one of eight categories; namely, Seismic Dampers,
Fluidicshoks®, Crane and Industrial Buffers, Self-Adjusting Shock Absorbers, Liquid Die Springs, Vibration
Dampers, Machined Springs and Custom Actuators. Management does not track or otherwise account for sales broken
down by these categories. Sales of the Company's products are made to three general groups of customers: industrial,
structural and aerospace / defense. A breakdown of sales to these three general groups of customers is as follows:

Structural
Aerospace / Defense
Industrial

2021
$ 10,137,468
10,183,399
2,188,774
$ 22,509,641

2020
$ 15,621,784
10,771,129
1,988,628
$ 28,381,541

Sales to two customers approximated 21% (11% and 10%, respectively) of net sales for 2021. Sales to a single
customer approximated 10% of net sales for 2020.

10. Income Taxes:

Current tax provision (benefit):

Federal
State

Deferred tax provision (benefit):

Federal
State

2021

2020

$ (361,000)
-
(361,000)

(20,000)
-
(20,000)
$ (381,000)

$ 375,000
-
375,000

11,000
-
11,000
$ 386,000

A reconciliation of provision for income taxes at the statutory rate to income tax provision at the Company's effective
rate is as follows:

Computed tax provision at the expected statutory rate
State income tax - net of Federal tax benefit
Tax effect of permanent differences:

Research tax credits
Foreign-derived intangible income deduction
PPP loan forgiveness
Other permanent differences

Other

Effective income tax rate

2021
$ 143,200
-

(218,000 )
-
(306,900 )
41,500
(40,800 )
$ (381,000 )
(55.9%)

2020
$ 717,400
500

(272,000 )
(99,739 )
-
40,200
(361 )
$ 386,000

11.3%

Significant components of the Company's deferred tax assets and liabilities consist of the following:

Deferred tax assets:
Allowance for doubtful receivables
Tax inventory adjustment
Allowance for obsolete inventory
Accrued vacation
Accrued commissions
Warranty reserve
Stock options issued for services

Deferred tax liabilities:
Excess tax depreciation

Net deferred tax assets

2021

2020

$ 1,400
22,900
440,800
81,400
5,900
23,900
238,500
814,800

$ 44,400
94,000
357,100
60,500
3,900
39,400
230,200
829,500

(624,685 )
$ 190,115

(659,385 )
$ 170,115

Realization of the deferred tax assets is dependent on generating sufficient taxable income at the time temporary
differences become deductible. The Company provides a valuation allowance to the extent that deferred tax assets
may not be realized. A valuation allowance has not been recorded against the deferred tax assets since management
believes it is more likely than not that the deferred tax assets are recoverable. The Company considers future taxable
income and potential tax planning strategies in assessing the need for a potential valuation allowance. The amount of
the deferred tax assets considered realizable however, could be reduced in the near term if estimates of future taxable
income are reduced. The Company will need to generate approximately $3.9 million in taxable income in future years
in order to realize the deferred tax assets recorded as of May 31, 2021 of $814,800.

11. Earnings Per Common Share:

Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-
average common shares outstanding for the period. Diluted earnings per common share reflects the weighted-average
common shares outstanding and dilutive potential common shares, such as stock options.

A reconciliation of weighted-average common shares outstanding to weighted-average common shares outstanding
assuming dilution is as follows:

Average common shares outstanding
Common shares issuable under stock option plans
Average common shares outstanding assuming dilution

2021
3,490,213
1,674
3,491,887

2020
3,481,128
8,663
3,489,791

12. Related Party Transactions:

The Company had no related party transactions for the years ended May 31, 2021 and 2020.

13. Employee Stock Purchase Plan:

In March 2004, the Company reserved 295,000 shares of common stock for issuance pursuant to a non-qualified
employee stock purchase plan. Participation in the employee stock purchase plan is voluntary for all eligible
employees of the Company. Purchase of common shares can be made by employee contributions through payroll
deductions. At the end of each calendar quarter, the employee contributions will be applied to the purchase of common
shares using a share value equal to the mean between the closing bid and ask prices of the stock on that date. These
shares are distributed to the employees at the end of each calendar quarter or upon withdrawal from the plan. During
the years ended May 31, 2021 and 2020, 1,470 ($9.20 to $11.40 price per share) and 1,374 ($8.63 to $11.00 price per
share) common shares, respectively, were issued to employees. As of May 31, 2021, 218,783 shares were reserved for
further issue.

14. Stock Option Plans:

In 2018, the Company adopted a stock option plan which permits the Company to grant both incentive stock options
and non-qualified stock options. The incentive stock options qualify for preferential treatment under the Internal
Revenue Code. Under this plan, 160,000 shares of common stock have been reserved for grant to key employees and
directors of the Company and 76,000 shares have been granted as of May 31, 2021. Under the plan, the option price
may not be less than the fair market value of the stock at the time the options are granted. Options vest immediately
and expire ten years from the date of grant.

Using the Black-Scholes option pricing model, the weighted average estimated fair value of each option granted under
the plan was $3.27 during 2021 and $2.85 during 2020. The pricing model uses the assumptions noted in the following
table. Expected volatility is based on the historical volatility of the Company's stock. The risk-free interest rate for
periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the
grant. The expected life of options granted is derived from previous history of stock exercises from the grant date and
represents the period of time that options granted are expected to be outstanding. The Company uses historical data
to estimate option exercise and employee termination assumptions under the valuation model. The Company has
never paid dividends on its common stock and does not anticipate doing so in the foreseeable future.

Risk-free interest rate
Expected life in years
Expected volatility
Expected dividend yield

2021
2.31%
4.0
33%
0%

2020
1.98%
3.9
32%
0%

The following is a summary of stock option activity:

Outstanding - May 31, 2019
Options granted
Less: options exercised
Less: options expired
Outstanding - May 31, 2020
Options granted
Less: options exercised
Less: options expired
Outstanding - May 31, 2021

Weighted
Average
Exercise Price

224,000
50,250
10,000
12,000
252,250
47,250
13,000
18,750
267,750

$ 11.71
$ 10.30
$ 6.35
$ 14.34
$ 11.52
$ 11.26
$ 6.34
$ 13.31
$ 11.60

Intrinsic
Value

$ 228,132

$ 209,835

$ 271,426

We calculated intrinsic value for those options that had an exercise price lower than the market price of our common
shares as of the balance sheet dates. The aggregate intrinsic value of outstanding options as of the end of each fiscal
year is calculated as the difference between the exercise price of the underlying options and the market price of our
common shares for the options that were in-the-money at that date (137,750 at May 31, 2021 and 98,000 at May 31,
2020.) The Company's closing stock price was $11.85 and $10.99 as of May 31, 2021 and 2020. As of May 31, 2021,
there are 84,000 options available for future grants under the 2018 stock option plan. $28,425 and $31,750 was
received from the exercise of share options during the fiscal years ended May 31, 2021 and 2020.

The following table summarizes information about stock options outstanding at May 31, 2021:

Outstanding and Exercisable

Range of Exercise Prices

Number of
Options

$ 7.01-$ 8.00
$ 8.01-$ 9.00
$ 9.01-$10.00
$10.01-$11.00
$11.01-$12.00
$12.01-$13.00
$13.01-$14.00
$16.01-$17.00
$19.01-$20.00
$ 7.01-$20.00

15,000
24,250
30,000
32,250
91,250
33,750
15,000
15,000
11,250
267,750

Weighted Average
Remaining Years of
Contractual Life
1.6
2.1
7.6
7.2
7.4
4.3
4.2
3.6
5.2
5.7

Weighted Average
Exercise Price

$ 7.74
$ 8.71
$ 9.85
$10.17
$11.71
$12.36
$13.80
$16.40
$19.26
$11.60

The following table summarizes information about stock options outstanding at May 31, 2020:

Outstanding and Exercisable

Range of Exercise Prices

Number of
Options

$ 5.01-$ 6.00
$ 7.01-$ 8.00
$ 8.01-$ 9.00
$ 9.01-$10.00
$10.01-$11.00
$11.01-$12.00
$12.01-$13.00
$13.01-$14.00
$16.01-$17.00
$19.01-$20.00
$ 5.01-$20.00

10,000
15,000
27,250
30,750
15,000
68,750
40,500
15,000
15,000
15,000
252,250

Weighted Average
Remaining Years of
Contractual Life
0.9
2.9
3.6
9.9
7.9
7.8
5.8
6.9
5.9
6.2
6.5

Weighted Average
Exercise Price

$ 5.69
$ 7.74
$ 8.69
$ 9.85
$10.30
$11.57
$12.38
$13.80
$16.40
$19.26
$11.52

15. Preferred Stock:

The Company has 2,000,000 authorized but unissued shares of preferred stock which may be issued in series. The
shares of each series shall have such rights, preferences, and limitations as shall be fixed by the Board of Directors.

16. Treasury Stock:

Treasury shares are 558,834 and 553,934 at May 31, 2021 and 2020.

17. Retirement Plan:

The Company maintains a retirement plan for essentially all employees pursuant to Section 401(k) of the Internal
Revenue Code. The Company matches a percentage of employee voluntary salary deferrals subject to limitations.
The Company may also make discretionary contributions as determined annually by the Company's Board of
Directors. The amount expensed under the plan was $288,470 and $158,191 for the years ended May 31, 2021 and
2020.

18. Fair Value of Financial Instruments:

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities
approximate fair value because of the short maturity of these instruments.

The fair values of short-term investments were determined as described in Note 1.

19. Cash Flows Information:

Interest paid

Income taxes paid

20. Risks and Uncertainties:

2021

none

2020

none

$ 43,630

$ 180,131

As a result of the pandemic described above, the Company applied for, and received, financial assistance from the
U.S. federal government as part of the CARES Act and the Consolidated Appropriations Act of 2021 (CAA) including:
a.) $1,461,500 of income due to the forgiveness of the PPP loan by the SBA (discussed previously in Note 7), and b.)
$1,510,131 of Employee Retention Credit income. These amounts are included in Other income on the Consolidated
Statements of Income.

MARKET INFORMATION

The Company’s Common Stock trades on the NASDAQ Capital Market of the National Association of Securities
Dealers Automated Quotation (“NASDAQ”) stock market under the symbol TAYD. The high and low sales
information noted below for the quarters of fiscal year 2021 and fiscal year 2020 were obtained from NASDAQ.

HOLDERS

As of May 31, 2021, the number of issued and outstanding shares of Common Stock was 3,496,441 and the
approximate number of record holders of the Company’s Common Stock was 456. Due to a substantial number
of shares of the Company’s Common Stock held in street name, the Company believes that the total number of
beneficial owners of its Common Stock is less than 1,300.

No cash or stock dividends have been declared during the last two fiscal years. The Company plans to retain cash
in the foreseeable future to fund working capital needs.

NOTICE OF 2021 VIRTUAL ANNUAL SHAREHOLDERS MEETING

Taylor Devices’ Annual Shareholders Meeting will be held virtually on Friday, October 22, 2021, at 11:00 a.m.
All shareholders who wish to attend the 2021 Virtual Annual Shareholders Meeting MUST PRE-REGISTER for this
event. The online shareholder pre-registration will close promptly on Thursday, October 21, 2021 at 12:00 p.m.

Go to the link provided below for the mandatory, online pre-registration form and the virtual meeting information:
www.taylordevices.com/annual-shareholders-meeting/

FISCAL 2021

F IS CAL 2020

HIGH
$11.46

LOW
$8.68

HIGH
$10.54

LOW
$8.58

HIGH
$11.45

LOW
$10.54

HIGH
$11.10

LOW
$10.11

FIRST

S ECO N D

FIRST

SECON D

HIGH
$11.93

LOW
$9.76

HIGH
$12.43

LOW
$10.58

HIGH
$13.39

LOW
$10.10

HIGH
$11.57

LOW
$6.61

THIRD

FOURT H

THIRD

FOURTH

FEATURED PROJECTS

NTT

OWNER
NTT

STRUCTURAL ENGINEER
Paradigm Structural Engineers

GENERAL CONTRACTOR
Holder Construction

STEEL SUBCONTRACTOR
DPR Construction

Data centers have become a vital part of our modern lives with the rise of cloud computing and the IoT (Internet of
Things), creating a global infrastructure of always connected devices.

Located in Santa Clara, NTT’s SV1 Data Center is a new four-story, 160,000 square foot facility designed with the
highest security measures, renewable energy options, and most importantly, is Silicon Valley’s first base-isolated data
center. While its location is ideal due to its proximity to many of the top technology companies, the area is in a high
seismic hazard zone. A sudden break or loss of connection caused by an earthquake could prove to be catastrophic in
not only the United States, but throughout the world.

A total of 25 Taylor Devices Fluid Viscous Dampers are used in this building, each with a force capacity of 500,000 lbs.
and a total stroke of 64 inches, or +/- 32 inches in any horizontal direction. These dampers are used in conjunction
with base isolation bearings to absorb any vibrations or seismic tremors, thereby protecting all critical IT equipment so
the data center operations can continue without interruption.

Pictured here is one of the twenty-five
Taylor Devices Fluid Viscous Dampers
that was installed in the basement of
NTT”s SV1 Data Center.

Its function is to absorb earthquake
energy and protect the building and
all of its contents.

PUMPKIN TM
MOUNTS

Taylor Devices has partnered with
Thornton Tomasetti to manufacture and
distribute the Pumpkin™ Mounts absorber.

Pumpkin Mounts are the next generation
of shock and vibration isolation technology
for critical systems and structures.
Originally developed by Thornton Tomasetti,
Pumpkin Mounts feature a symmetry that
resists multi-directional lateral and vertical
loads. It can support a payload in tension,
compression, or under shear for isolation
of wall or bulkhead-mounted fixtures on all
structures, including naval and commercial
vessels subjected to extreme shock and vibration.

Offering significantly improved performance over standard
devices, Pumpkin Mounts provide enhanced load capacity that
can withstand repeated shock, along with reduced high-frequency
noise and efficient use of space. Unlike rubber mounts, which require secondary devices to avoid tearing and failure,
Pumpkin Mounts are resistant to high-tension forces.

Pumpkin Mounts reduce input accelerations of several hundred g’s down to as low as 15 g or less when tested in naval
environments where explosive shock standards are extremely rigorous. The mounts have demonstrated exceptional
shock performance during repetitive and multiple events without compromising equipment.

“We are excited to be bringing this technology to users across multiple markets,” said Alan Klembczyk, Taylor Devices
president. “The many differentiators of Pumpkin Mounts compared to conventional devices will provide significant
improvements for our clients’ equipment during transient shock and vibration events.”

“Explosive testing of the mounts has shown significant improvements in the capability to protect critical equipment,”
said Phill Thompson, Thornton Tomasetti principal and European region leader. “We look forward to this collaboration with
Taylor Devices and to a successful launch of Pumpkin Mounts worldwide.”

Pumpkin Mounts installed just
prior to shock testing. Each of
these devices has a deflection
capability of 76 mm (3.0 inches)
in compression, 127 mm (5.0 inches)
in tension, and 178 mm (7.0 inches)
in shear (roll).

BOARD OF DIRECTORS AND EXECUTIVES

Since graduating from the University of Buffalo in 1987 with a degree in Mechanical
Engineering, Mr. Klembczyk has held key positions in Sales, Engineering, and Executive
Management at Taylor Devices. Over the last 32 years, he has held titles such as Design
Engineer, Assistant Chief Engineer, Chief Engineer, Vice President of Sales & Engineering.
He later went on to be appointed President of the Company and Member of the Board of
Directors in June 2018.

Mr. Klembczyk has been responsible for establishing new Sales & Marketing policies and
has been directly involved with defining internal Company policy and strategic direction in
cooperation with all levels of Taylor Devices’ Management. He was an integral part of the
team that managed upgrades to the Quality System and obtained 3rd party certification to
International Standards ISO 9001, ISO 14000 and Aerospace Standard AS9100.

ALAN R. KLEMBCZYK
President and Board Member

Mr. Klembczyk has served for many years on the Technical Advisory Group for the US

Shock and Vibration Information & Analysis Center (SAVIAC) and the Shock and Vibration Exchange (SAVE). In 2019, he
received the Distinguished Service Award from SAVE. Additionally, he has been a tutorial and course instructor for various
organizations internationally and has participated in many technical conferences and symposia. He is a founding member
and first co-chair of the Industry Partner Committee of the US Resiliency Council.

Mr. Klembczyk has participated in many research projects for military & aerospace, industrial, and structural applications.
He has served as Program Manager for many of these projects and has worked with academia including the University at
Buffalo’s MCEER: Earthquake Engineering to Extreme Events, among others.

He has published several papers describing unique applications for structural dampers, tuned mass dampers, vibration
isolators, shock absorbers, and shock isolators, and holds US Patents for some of these components. These papers have
been published by SAVE, SAVIAC, the Society for Experimental Mechanics (SEM) and the Applied Technology Council (ATC).

Mr. Sopko’s business experience spans more than thirty years in Aerospace (Military and
Civil), Industrial, as well as Commercial markets with a primary focus on Engineering,
Product Development, Program Management, Operations, and Business Management.

Prior to joining Taylor Devices as CEO in April 2019, Mr. Sopko was Vice President and
General Manager of Carleton Technologies Inc. (d.b.a. Cobham Mission Systems) in Orchard
Park, New York, a Department of Defense Contractor. While there, he also held the positions
of General Manager, Director of Engineering and Programs, Director of Engineering, and
Director of Business Development. Under Mr. Sopko’s leadership as VP and GM, Carleton
successfully grew its annual sales from $110m to over $200m.

TIMOTHY J. SOPKO
Chief Executive Officer
and Board Member

After nine years of Design Engineering and Program Management in industry (1988-
1997), Mr. Sopko co-founded Comprehensive Technical Solutions Inc., a New York State
S-corporation that provides product design engineering services to companies across the
United States, as well as produces and supports a portfolio of internally funded products.

Mr. Sopko is a Mechanical Engineering graduate of The State University of New York at Buffalo and has been a member
of The University’s Mechanical and Aerospace Dean’s Advisory Board since 2012. Mr. Sopko is also an author and/or
co-author of several US Patents.

Mr. McDonough, who joined Taylor Devices in June 2003, is a Certified Public Accountant in
New York State and holds a BBA degree from Niagara University, awarded in 1982. He has
been involved in the financial management of various Western New York manufacturing
organizations for over twenty-five years. He has extensive experience in international
operations coupled with a long history of implementing internal controls systems. From
1986 to 1989 he was an auditor with the Buffalo office of Ernst & Young, LLP.

Mr. McDonough is a member of the New York State Society of Certified Public Accountants
and the American Institute of Certified Public Accountants.

MARK V. McDONOUGH
Chief Financial Officer and
Corporate Secretary

Mr. Armenat’s career has spanned more than 40 years in a variety of middle market
organizations both public and privately owned. Mr. Armenat most recently served as President
and Chief Executive offi cer of Multisorb Filtration Group which he successfully spearheaded
the sale of in early 2018 from a private equity owner. Multisorb is the world leader in the active
packaging industry, solving complex technical challenges in the pharmaceutical, food, and
industrial markets.

From 2012 to 2016, Mr. Armenat served as President and Chief Executive Offi cer for several
companies owned by private equity. These companies included healthcare delivery, medical
waste collection and disposal, as well as active packaging. He was responsible for the
successful business improvement and eventual divestiture of the companies.

From 2009 to 2012, Mr. Armenat served as Chief Operating Offi cer of Avox Systems (Zodiac
Aerospace), a leading supplier of aircraft oxygen systems. From 1994 to 2009, he served as
Vice President of Operations and then President and General Manager of Carleton Technologies

F. ERIC ARMENAT
Board Member

(Cobham Mission Systems), a global leader of technology for the military and commercial aviation markets. Mr. Armenat also
worked as an Operations Management Consultant with Ernst and Young beginning in 1984.

Mr. Armenat earned his Bachelor of Science Degree in Industrial Engineering from Southern Illinois University and his MBA in
Finance and Accounting from St. Bonaventure University. He also proudly served in the United States Airforce.

Mr. Carey brings over 45 years of experience ranging from general management to consultative
work to the Company. He was the General Manager of the Reichert Analytical Instruments group
from 2001 to 2009. The company manufactures and internationally sells a variety of analytical
measurement instruments for use in medicine, food processing, and biotechnology research.

Mr. Carey was the Principal at CMA, Ltd from 1990 to 2001. CMA, Ltd provides consulting services
to the manufacturing sector in the areas of organization, operational change and strategic
planning. Mr. Carey was also a Partner in Decision Processes International (DPI) from 1999 to 2001.
DPI is an international strategic planning consultancy working with companies of all sizes.

ROBERT M. CAREY
Board Member

In 1979, Mr. Carey joined Wilson Greatbatch Ltd. (now Integer Holdings) as North American Sales
Manager. Mr. Greatbatch held the patents for the implantable pacemaker. The eponymously
named company is the world’s leader in implantable power sources. In 1981 Mr. Carey was named
Vice President of Wilson Greatbatch and General Manager of the Electrochem Div. Electrochem
which manufactures and internationally sells high energy batteries used in rugged or remote environments such as space, oil
and gas drilling, the military, and the ocean.

He earned a Bachelor of Science in Microbiology from the State University of California, Long Beach and a Master of Business
Administration from the State University of New York at Buff alo. Mr. Carey served in the U.S. Army, achieving the rank of Captain.

Mr. Burgess gained his international strategy, manufacturing operations, and organizational
development expertise from his more than 40 years of experience with middle market public
and privately-owned companies. Mr. Burgess served as President and CEO of Reichert, Inc., a
leading provider of ophthalmic instruments, and spearheaded the acquisition of the company
from Leica Microsystems in 2002, leading the company until its sale in January 2007. Prior to
the acquisition, Mr. Burgess served as President of Leica’s Ophthalmic and Educational Division
before leading the buyout of the Ophthalmic Division and formation of Reichert, Inc.

From 1996 to 1999, Mr. Burgess was COO of International Motion Controls (IMC), a $200 million
diversifi ed manufacturing fi rm. During his tenure there, he led a signifi cant acquisition strategy
which resulted in seven completed acquisitions and sixteen worldwide businesses in the motion
control market. Previously, Mr. Burgess operated a number of companies for Moog, Inc. and
Carleton Technologies, including six years spent as President of Moog’s Japanese subsidiary,
Nihon Moog K.K. located in Hiratsuka, Japan. Moog, Inc. is the global leader in electro-hydraulic
servo control technology with a focus on the aerospace and defense sectors. It was recognized
as one of The 100 Best Companies to Work For in America by Fortune Magazine.

JOHN BURGESS
Chairman of the
Board of Directors

Mr. Burgess earned a BS in Engineering from Bath University in England, and an MBA from Canisius College. Currently,
Mr. Burgess is a Director of Bird Technologies Corporation of Solon, Ohio.

90 Taylor Drive
North Tonawanda
New York 14120

P 716 694 0800
F 716 695 6015