Taylor Devices, Inc. Annual Report 2022

FY2022 Annual Report · Taylor Devices, Inc.

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ANNUAL REPORTCEO’S LETTER

To our Shareholders,

While the worst of the COVID-19 pandemic was arguably in our rearview mirror by last June when FY22 began, state and
federal mask and vaccination mandates exacerbated by more contagious (but fortunately less symptomatically severe)
variants of the virus continued to stress our team for most of the year. That said, I am very happy to report that we were
able to help our employees and their families stay substantially healthy and safe in FY22 while growing our TDI Team from
115 to 123 employees amid unprecedented competition for talent in the U.S.

FY22 was a very good year for our team and business with full year bookings of $32.5 million (the 2nd highest in the
company’s history), sales of $30.9 million, and backlog at the end of the year of $23.7 million (each our 3rd
highest respectively).

The post pandemic market recovery that we started to see at the end of FY21 continued in FY22, particularly in the
markets that our Structural Products serve where $6.1 million (73%) of the $8.4 million increase in sales over last
year was realized.

All three of our customer product groups; Aerospace/Defense, Structural, and Industrial, finished at levels greater than
their respective averages over the prior five years for bookings, sales, and backlog. This is indicative of the overall relative
improvement across the business.

Our full year net profit finished at $2.2 million (7.3%) of sales vs. last year’s $1.1 million (4.7%) of sales. As FY21 net profit
included almost $3 million of U.S. federal government financial assistance due to the COVID-19 pandemic vs the $54
thousand received this year, the improvement in FY22 over FY21 is significant as can be seen at the operating profit level.
The net profit of 7.3% of sales achieved in FY22 also compares favorably with the average net profits as a percentage of
sales over the prior five years, which is 6.8%.

The unprecedented escalation of material costs, particularly steel, also challenged our profitability in FY22 with the
negative impact being more significant for orders that were in our backlog at the start of the year as they were priced prior
to these unprecedented increases. Concurrently, lead times for the majority of the materials and products we procure
also increased in FY22 at greater rates than usual, which our team was able to effectively manage with minimal negative
impact to our customers.

Our strategy of directly engaging the key stakeholders in our chosen markets to ensure that the positive differentiators of
our products are understood, concurrent with added members to our team, is clearly helping us achieve our goal of
profitable growth. This is clear based on the bookings levels achieved the past two years; 2nd highest this year and highest
in the year prior.

We enter FY23 with a very strong firm order backlog of $23.7 million as compared to $22.0 million the prior year. This also
compares favorably with the average firm order backlog at the start of the prior five years of $18 million. This, supported by
our continued investments in our people, technology, processes, and facilities, positions us well to continue successfully
on our profitable growth journey in FY23.

Sincerely,

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

PRESIDENT’S LETTER

Dear Shareholders,

I am pleased to report that FY22 brought us another strong year in bookings, continuing to build the momentum
that we gained last year after the initial negative effects of the pandemic. Looking at the total for the last 2 years,
we have booked $67.5 million after recording $32.5 million this year. Looking forward, we are optimistic that we will
continue to experience strong bookings, leading to a consistently higher revenue level. Indeed, our backlog at the
end of FY22 was a very healthy $23.7 million, allowing us to get off to a great start for the current year.

This year, the breakdown in bookings includes $12.6 million for Aerospace/Defense Products, $16.2 million for
Structural Products, and a relatively strong $3.7 million for Industrial Products, partially due to the increase in
investments made in the US steel industry.

One year ago, I reported that we made some key additions to our Sales & Business Development Staff. This year,
we made even more progress building that team. Significant progress has been made in various ongoing Sales
& Marketing campaigns. I look forward to speaking in more detail about those at our Annual General Meeting in
October. Additionally, we are continuing to invest substantially in R&D and capital expenditures. These efforts will
help us realize our long-range goals for profitable growth across all 3 of our customer product groups.

A featured structural project in this Annual Report that we completed this fiscal year is a building at 300 Lakeside
Avenue located in Oakland, CA (featured on our cover). This building recently underwent a voluntary seismic
upgrade that included the addition of 272 Taylor Fluid Viscous Dampers. This 28-story building with over 1,000,000
square feet of space was originally built in 1960 and will become the headquarters for Pacific Gas & Electric.

Back in FY19, the cover of our Annual Report featured an artist’s rendering of the Space Launch System rocket for
a program that has since been named the Artemis Program. It is with great pride that we have watched the recent
news reports on the roll-out of the actual Launch Vehicle at the Kennedy Space Center. We will soon see this
program return humans to the Moon. Decades ago, Taylor Devices provided products to NASA during the Apollo
Program, and we are still providing similar products to support our return to the Moon. This time, we will have
hardware on the rocket itself (on our cover) that comprises an isolation system that will help protect the Orion
Crew Capsule from the harsh vibrations that occur during launch. We will be providing these isolation systems for
each Artemis launch. The Program, featured in this Report, is slated to continue for many years and will eventually
land humans on the surface of Mars.

Another featured project is the Boeing Starliner (as seen on our cover) which has recently flown its first successful
mission to the International Space Station. Our products, initially delivered a few years ago, accommodate opening
the astronaut hatch and enable proper deployment of the Service Module away from the Crew Module during
re-entry to Earth. We have received on-orbit data from our customer that verified excellent performance of these
products in space.

Taylor Devices remains poised to enjoy further long-term growth. The combination of current sales forecasts
coupled with a strong backlog will propel us toward the new fiscal year and beyond.
We look forward to a bright future. Please join us virtually at the AGM in October!

Sincerely,

Alan R. Klembczyk
President
TAYLOR DEVICES, INC.

VICE PRESIDENT OF OPERATIONS STATUS

FY22 saw the continuation of Taylor Devices’ Operational Excellence Journey, improving year over year in the following areas:

• Achieved a FY22 On Time Delivery Q4 run rate of 85%, a 3% improvement from FY21
• Achieved FY22 Past Due Customer order lines of 8, a value seen only twice in the previous 3 FY’s
• Achieved Inventory Turns of 3.8, beating our Turns target by 9%
• Concluded FY22 with only 1 Customer Escape, defined as a Customer ‘out of box’ non-conformance
• Achieved both of the Company’s Environmental waste reduction objectives
• Reduced Employee turnover by 6%

The entire Taylor Team pulled together to achieve these results, enabled by better systems, processes, and training. Our
Continuous Improvement Program underpins our journey and the FY22 projects found below represent just some of the
team’s accomplishments:

• Planned and Purchased Machining Equipment to support Company’s Make/Buy Plan and Takt Time of One cylinder per

hour via creation of a Cylinder Turning Cell

• Planned and Purchased Material Handling Equipment for Assembly to support safety and Takt Time of One Damper per

hour via creation of a Damper Assembly Cell

• Implemented and Improved a Protective Coating Process utilizing newly designed material handling carts and Coating

Booths to support Takt Time of One Damper per hour

• Implemented one stationary and one mobile area CMM tool, drastically reducing inspection time
• Implemented a Certified Operator System in the Machine Shop, enabling ownership of inspection at the team level
• Eliminated wasteful Quality Control check steps
• Supported Ground Up Costing tool, enabling PO Targets for Buyers resulting in margin target achievement
• Implemented 100+ machining set up/run time/cleaning/packaging improvements to reduce labor time
• Improved Inventory Organization via 5S program, Bar Coding, and Kitting
• Conducted 12 Job Safety Analysis (JSA) events and implemented Ergonomic Lift Devices as a result
• Improved method of loading International Shipping Containers
• Implemented a Customer Shipping Crate recycling program and implemented numerous packaging Improvements
• Improved our Repair Process resulting in an improvement of On Time Delivery from 50% to 100% on some products

For the last three Fiscal Years, The Operations Team at Taylor Devices has been finding, training, and developing people who
want to improve their jobs every day. We have been investing in machines and equipment to make the workplace safer and
more efficient for our team members. We have commenced using our Advanced Planning System to properly schedule job-
shop work. We have implemented hundreds and hundreds of discrete improvements to increase our throughput through the
factory. We have determined what we want to make here and what we want to buy from suppliers, better understanding the
capacity of both. We have reduced and improved how we perform quality inspections. We have done all of this to enable our
supply chain, our factory, and our people to support Taylor Devices’ Long Range Strategic Growth Plan. We are ready.

“ We have done all of this to enable our supply chain,
our factory, and our people to support Taylor Devices’
Long Range Strategic Growth Plan. We are ready.”

TODD J. AVERY
VICE PRESIDENT, OPERATIONS

FROM THE CFO

While fiscal 2022 will not enter the record books as one of our best, it will be remembered as a profitable rebound from
the pandemic period. We certainly cannot foretell what other global events we may face in this decade, but we are
confident in the resilience of our talented workforce, the leadership of our management team, and the strength of our
balance sheet to work through whatever comes our way.

After we worked through the remnants of the pandemic early on in fiscal year 2022, we made a strong finish in the
fourth quarter, completing the year with a revenue of $30.9 million. Revenue from domestic sales accounted for
almost all of the 37% increase in our total sales over the prior year. As structural projects heated up again, almost three
quarters of the increase were from sales to our customers that utilize our products for seismic/wind protection. Sales
to aerospace/defense customers increased over 25% from the prior year.

Our gross profit of $8.6 million, or 28% of sales, includes research and development expenditures of over $1.2 million
in support of our growth strategies. Investments in capital equipment of almost $1.4 million will help us to work more
efficiently to improve the gross margin and accommodate the increased volume that our business development and
sales team is targeting for fiscal 2023 and beyond. Operating expenses remained under control as we focused on
strengthening the team we need to achieve our strategic goals.

As a result of all this, net income for fiscal year 2022 finished at $2.2 million, or 7% of sales, vs. $1.1 million in the prior
year. Earnings per share was 64 cents for fiscal year 2022 compared to 30 cents in fiscal 2021.

Our sales order backlog of $23.7 million on May 31, 2022 provides good momentum heading into fiscal 2023. This
sales order backlog is slightly weighted towards our commercial customers at 59% vs. 41% for our aerospace/defense
customers. We will continue to invest in the growth of your company by making sound investments in research and
development, as well as in the individuals who provide the brainpower to fuel it. We are laser-focused to profitably grow
Taylor Devices Inc in fiscal 2023 and beyond.

“ We will continue to invest in the growth of your
company by making sound investments in research and
development, as well as in the individuals who provide
the brainpower to fuel it.”

MARK V. MCDONOUGH
CHIEF FINANCIAL OFFICER

CORPORATE DATA

OFFICERS AND DIRECTORS

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, Business Development and Strategy
NATHAN CANNEY | Director of Structural Engineering
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 | Product Control and Receiving Manager
STEVEN HARDING | Maintenance Manager
DONALD HORNE | Chief Engineer
CHARLES KETCHUM III | Quality Assurance Manager
MARK LEMKE | Protective Coatings Manager
NICHOLAS MARSOLAIS | Supply Chain Director
ERIC ROTH | Scholl Operations Manager Test Supervision
ROBERT SCHNEIDER | Director of Strategic Sales and Marketing
KEVIN SUPLICKI | Information Systems Manager
COURTNEY TAYLOR | Business Development and Marketing Manager
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, 2022

Item 7. 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, 2022
equaled less than 0.3% of sales for that period. The balance of the valuation allowance has increased to $16,000 at May 31, 2022
from $7,000 at May 31, 2021. 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. This review continued through fiscal 2022. 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. There was $772,000 and $1,101,000 of inventory disposed of during the years ended May 31, 2022 and 2021. The
provision for potential inventory obsolescence was zero and $1,500,000 for the years ended May 31, 2022 and 2021.

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, 2022, 60% of revenue was recorded for contracts in which revenue was recognized
over time while 40% was recognized at a point in time. 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.

For financial statement presentation purposes, the Company nets progress billings against the total costs incurred and estimated
earnings 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 $4.2 million of taxable income
in order to realize our deferred tax assets recorded as of May 31, 2022 of $876,000. This deferred tax asset balance is 7% ($61,000)
more 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, 2022, the Company had
State investment tax credit carryforwards of approximately $389,000 expiring through May 2027.

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, 2022 and 2021

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)
$ 8,357,000
$ 2,904,000
$ 628,000
$ 1,875,000
$ 698,000
$ 1,177,000

For the year ended May 31, 2022 (All figures being discussed are for the year ended May 31, 2022 as compared to the year ended
May 31, 2021.)

Year ended May 31
2021
2022

Change

Amount

Percent

Net Revenue

$ 30,867,000

$ 22,510,000

$ 8,357,000

37%

Cost of sales

22,239,000

19,335,000

2,904,000

15%

Gross profit

$ 8,628,000

$ 3,175,000

$ 5,453,000

172%

… as a percentage of net revenues

28%

14%

The Company's consolidated results of operations showed a 37% increase in net revenues and an increase in net income of 110%.
Revenues recorded in the current period for long-term construction projects (“Project(s)”) were 92% more than the level recorded
in the prior year. We had 45 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 4% less 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 60% increase 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 22% increase in sales to
customers in aerospace / defense and a 1% decrease in sales to customers using our products in industrial applications. The
significant increase in sales to structural customers is primarily from domestic customers.

A breakdown of sales to these three general groups of customers, as a percentage of total net revenue for fiscal years ended May
31, 2022 and 2021 is as follows:

Year ended May 31

Industrial
Structural
Aerospace / Defense

2022
7%
53%
40%

2021
10%
45%
45%

Total sales within North America increased 52% from last year. Total sales to Asia decreased 5% from the prior year. Net revenue
by geographic region, as a percentage of total net revenue for fiscal years ended May 31, 2022 and 2021 is as follows:

Year ended May 31

North America
Asia
Other

2022
78%
14%
8%

2021
70%
20%
10%

The gross profit as a percentage of net revenue of 28% in the current period is double the 14% recorded in the same period of the
prior year. The significant increase in gross profit as a percentage of revenue is primarily due to the increase in domestic sales to
structural customers. The prior year results were adversely affected by the pandemic.

At May 31, 2021, we had 132 open sales orders in our backlog with a total sales value of $22.0 million. At May 31, 2022, we had
135 open sales orders in our backlog with a total sales value of $23.7 million. $7.6 million of the current backlog is on Projects
already in progress. $9.3 million of the $22.0 million sales order backlog at May 31, 2021 was in progress at that date. 41% of the
sales value in the backlog is for aerospace / defense customers compared to 43% at the end of fiscal 2021. As a percentage of the
total sales order backlog, orders from structural customers accounted for 50% at May 31, 2022 and 55% at May 31, 2021.

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 $ 495,000
5,660,000
$ 6,155,000

Other SG&A
Total SG&A

Year ended May 31
2021
2022
$ 719,000
4,808,000
$ 5,527,000

Change

Amount
$ (224,000 )
852,000
$ 628,000

Percent
-31%
18%
11%

… as a percentage of net revenues

20%

25%

Selling, general and administrative expenses increased 11% from the prior year. Outside commission expense decreased 31% 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 increased 18% from last year. The Company reduced its
reliance on outside manufacturers’ representatives in FY22 and increased its internal sales force in an effort to increase profitable
sales. This is the primary reason that the level of commissionable sales has decreased while the other SG&A expenses have
increased.

The above factors resulted in operating income of $2,473,000 for the year ended May 31, 2022, showing significant improvement
from the $2,352,000 operating loss in the prior year.

Other income during the prior 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): 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 (ERC) income. Other income during the current period includes
ERC income of $54,000.

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, 2022 is 12%, compared to the ETR for the prior year of -56%.

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

2022

2021

$ 538,000 $ 143,000

(275,000 )
(12,000 )
-
3,000
63,000

(218,000 )
-
(307,000 )
42,000
(41,000 )
$ 317,000 $ (381,000 )

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 $201,000 and $154,000 of compensation cost for the years ended May 31, 2022 and 2021.

The fair value of each stock option grant has been determined using the Black-Scholes model. The model considers assumptions
related to exercise price, expected volatility, risk-free interest rate, and the weighted average expected term of the stock option
grants. 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 2021 and April 2022. 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:

2.875%
4 years
32%
zero
$3.42

August 2021

April 2022
2.25%
4 years
29%
zero
$2.52

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, 2022 is presented
below.

Options outstanding and exercisable at May 31, 2021:
Options granted:
Less: Options expired:
Options outstanding and exercisable at May 31, 2022:
Closing value per share on NASDAQ at May 31, 2022:

Number of
Options

267,750
66,750
51,500
283,000

Weighted-
Average
Exercise Price
$ 11.60
$ 10.69
-
$ 11.43
$ 9.30

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, 2022 were $1,392,000 compared to $1,622,000 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 $1,600,000 as of May 31, 2022. These capital expenditures will be primarily for new manufacturing and testing
equipment.

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, 2022 or May 31, 2021. 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, 2022

May 31, 2021

Increase /(Decrease)

Raw materials $ 488,000
5,166,000
200,000

Work-in-process
Finished goods
Inventory
Maintenance and other inventory

5,854,000 84%
1,107,000 16%
Total $ 6,961,000 100%

$ 503,000
5,076,000
256,000

5,835,000 78%
1,613,000 22%
$ 7,448,000 100%

$ (15,000 )
90,000
(56,000 )
19,000
(506,000 )
$ (487,000 )

-3%
2%
-22%
0%
-31%
-7%

Inventory turnover

3.1

2.1

Inventory, at $5,854,000 as of May 31, 2022, is only slightly higher than at the prior year-end. Of this, approximately 88% is work
in process, 4% is finished goods, and 8% 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 $772,000 and
$1,101,000 of obsolete inventory during the years ended May 31, 2022 and 2021, 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, 2022
$ 4,467,000
-
4,467,000
3,336,000
1,123,000
$ 6,680,000

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

Increase /(Decrease)
$ 346,000
(741,000 )
1,087,000
1,836,000
(239,000 )
$ 3,162,000

8%
-100%
32%
122%
-18%
90%

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 $4,467,000 as of May 31, 2022 includes approximately $190,000 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) was 42 days at May 31, 2022 and
May 31, 2021. The Company expects to collect the net accounts receivable balance, including the retainage, during the next twelve
months.

Other receivable is an amount of ERC claimed by the Company for the second calendar quarter of 2021 and was 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

2022
19
47%
$795,000
35%

2021
14
32%
$963,000
30%

There are 5 more projects 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 decreased by 17% 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 $3,336,000 balance in this account at May 31, 2022 is a 122%
increase from the prior year-end. This increase reflects the higher 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. 58% of the CIEB balance as of the end of the last
fiscal quarter, February 28, 2022, was billed to those customers in the current fiscal quarter ended May 31, 2022. 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, 2022

May 31, 2021

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

$ 3,250,000
2,642,000
2,556,000
$ 3,336,000

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

As noted above, BIEC represents billings to customers in excess of revenues recognized. The $1,123,000 balance in this account
at May 31, 2022 is in comparison to a $1,362,000 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, 2022

May 31, 2021

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

$ 2,711,000
1,019,000
569,000
$ 1,123,000

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

Accounts payable, at $1,427,000 as of May 31, 2022, is 20% less than the prior year-end. This decrease is normal fluctuation of
this account and is not considered to be unusual. 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, 2022 are $85,000. This is 68% less than the $269,000
accrued at the prior year-end. This decrease is generally due to the decrease in the level of commissionable sales, discussed above.
The Company expects the current accrued amount to be paid during the next twelve months.

Other accrued expenses of $3,329,000 increased 94% from the prior year level of $1,715,000. This increase is due to increases in
customer prepayments on projects not yet started along with an increase in accrued incentive compensation resulting from increased
earnings and sales order bookings.

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 and capital improvements for the next twelve months.

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, 2022 and 2021, 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, 2022 and 2021, 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:

(cid:120) We evaluated the appropriateness and consistency of management’s methods used to develop its estimates.
(cid:120) We evaluated the reasonableness of judgments made and significant assumptions used by management

relating to key estimates.

(cid:120) 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.

(cid:120) 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.

(cid:120) We tested the accuracy and completeness of the data used in developing key estimates, including material,

labor, overhead, and sub-contractor costs.

(cid:120) 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, 2022, the Company’s inventory balance was $5.9 million, net of a $100,000 allowance for
obsolescence, its maintenance and other inventory balance was $1.1 million, net of an approximate $1.2 million
allowance for obsolescence. 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.

(cid:120) We inquired of management relative to write-offs of inventory during the year.
(cid:120) We tested the completeness and accuracy of management’s schedule of inventory.
(cid:120) 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.

(cid:120) We examined management’s lower of cost or net realizable value analysis and performed procedures to test

its completeness and accuracy.

(cid:120) We selected a sample of material purchases made during the year to ensure they were included in inventory

at the proper value.

(cid:120) 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 19, 2022

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:
Accounts payable
Accrued commissions
Other accrued expenses
Billings in excess of costs and estimated earnings (Note 4)

Total current liabilities

2022

2021

$ 22,517,038
1,097,450
4,466,686
5,854,935
468,489
235,947
3,336,474
37,977,019

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

1,107,309
9,854,759
205,359
74,615
$ 49,219,061

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

1,426,830
84,907
3,329,407
1,122,763
5,963,907

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

Stockholders' Equity:

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

issued 4,056,771 and 4,055,275 shares

Paid-in capital
Retained earnings

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

101,342
10,227,916
35,840,898
46,170,156
(2,915,002)
43,255,154
$ 49,219,061

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

See notes to consolidated financial statements.

TAYLOR DEVICES, INC. AND SUBSIDIARY

Consolidated Statements of Income

For the years ended May 31,

2022

2021

Sales, net (Note 9)

Cost of goods sold

Gross profit

$ 30,866,582

$ 22,509,641

22,239,070

19,334,950

8,627,512

3,174,691

Selling, general and administrative expenses

6,154,735

5,526,774

Operating income (loss)

2,472,777

(2,352,083 )

Other income

Interest, net

Paycheck Protection Program loan forgiveness (Note 20)

Employee Retention Credit (Note 20)

Miscellaneous

Total other income

4,543

53,508

25,595

83,646

53,654

1,461,500

1,510,131

8,693

3,033,978

Income before provision for income taxes

2,556,423

681,895

Provision for income taxes (benefit) (Note 10)

317,000

(381,000 )

Net income

$ 2,239,423

$ 1,062,895

Basic and diluted earnings per common share (Note 11)

$ 0.64

$ 0.30

See notes to consolidated financial statements.

TAYLOR DEVICES, INC. AND SUBSIDIARY

Consolidated Statements of Shareholders’ Equity

For the years ended May 31,

2022

2021

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

$ 101,305
37
-
101,342

$ 100,943
37
325
101,305

10,010,430
16,208
-
201,278
10,227,916

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

33,601,475
2,239,423
35,840,898

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

(2,915,002)
-
(2,915,002)

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

Total stockholders' equity

$ 43,255,154

$ 40,798,208

See notes to consolidated financial statements.

TAYLOR DEVICES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

For the years ended May 31,

2022

2021

$ 2,239,423

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
Gain on disposal of property and equipment
Provision for inventory obsolescence
Deferred income taxes
Paycheck Protection Program loan 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

(346,122)
486,191
54,258
218,831
(1,836,870)
(360,495)
(184,157)
1,613,998
(239,222)
3,308,525

1,347,442
201,278
-
(1,530)
-
115,500
-

$ 1,062,895

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

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

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

Financing activities:
Proceeds from issuance of common stock

(1,391,577)
7,500
(438)
(4,821)
(1,389,336)

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

16,245

43,416

Net change in cash and cash equivalents

1,935,434

5,421,777

Cash and cash equivalents - beginning

20,581,604

15,159,827

Cash and cash equivalents - ending

$ 22,517,038

$ 20,581,604

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.

76% of the Company's 2022 revenue was generated from sales to customers in the United States and 14% was from sales to
customers in Asia. Remaining sales were to customers in other countries in North America, Europe, Australia, and South America.

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 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, 2022 and
May 31, 2021 include “available for sale” corporate bonds stated at fair value, which approximates cost. The bonds (16) mature on
various dates during the period December 2022 to November 2026. Unrealized holding gains and losses would be presented as a
separate component of accumulated other comprehensive income, net of deferred income taxes. Realized gains and losses on the
sale of investments are determined using the specific identification method.

The 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.

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,
2022 and 2021, 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 $238,536 and $146,878
for the years ended May 31, 2022 and 2021. 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 $1,213,000 and
$924,000 for the years ended May 31, 2022 and 2021.

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, 2022 and 2021. The Company recorded no interest expense or penalties in its consolidated statements of
income during the years ended May 31, 2022 and 2021.

The Company believes it is no longer subject to examination by federal and state taxing authorities for years prior to May 31, 2019.

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, 2022 and 2021 was $201,278 and $154,343.

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

2022
$ 4,292,300
190,492
4,482,792
16,106
-
$ 4,466,686

2021

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

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 was an amount of Employee Retention Credit claimed by the Company for the second calendar quarter of 2021
and 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

2022
$ 488,393
5,166,271
300,271
5,954,935
100,000
$ 5,854,935

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

2022
$ 4,268,608
3,211,392
7,480,000
5,266,289
$ 2,213,711

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

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

2022
$ 3,336,474
1,122,763
$ 2,213,711

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

The following summarizes the status of Projects in progress as of May 31, 2022 and 2021:

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

2022
19
47%
$7,627,234
35%

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

The Company expects to recognize the entire remaining revenue on all open projects during the May 31, 2023 fiscal year.

Revenue recognized during the years ended May 31, 2022 and 2021 for amounts included in billings in excess of costs and estimated
earnings as of the beginning of the year amounted to $1,420,000, and $736,866.

5. Maintenance and Other Inventory:

Maintenance and other inventory
Less allowance for obsolescence

2022
$ 2,334,889
1,227,580
$ 1,107,309

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

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. This review continued through fiscal 2022. 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. $772,000 and $1,101,000 of inventory was disposed of during the years ended May 31, 2022 and 2021. The provision
for potential inventory obsolescence was zero and $1,500,000 for the years ended May 31, 2022 and 2021.

6. Property and Equipment:

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

Less accumulated depreciation

2022
$ 195,220
9,821,812
12,824,696
2,744,400
24,818
483,929
26,094,875
16,240,116
$ 9,854,759

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

Depreciation expense was $1,347,442 and $1,212,713 for the years ended May 31, 2022 and 2021.

The Company has commitments to make capital expenditures of approximately $1,600,000 as of May 31, 2022.

7. Short-Term Borrowings:

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, 2022 or May 31, 2021.

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 $193,478 and $366,209 as of May 31,
2022 and 2021. These amounts are included in accounts payable.

8. Other Accrued Expenses:

Customer deposits
Personnel costs
Other

2022
$ 1,347,709
1,587,271
394,427
$ 3,329,407

2021
$ 867,652
659,623
188,134
$ 1,715,409

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

2022
$ 16,267,162
12,440,687
2,158,733
$ 30,866,582

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

Sales to a single customer approximated 15% of net sales for 2022. Sales two customers approximated 21% (11% and 10%,
respectively) of net sales for 2021.

10. Income Taxes:

Current tax provision (benefit):

Federal
State

Deferred tax provision (benefit):

Federal
State

2022

2021

$ 200,100
1,400
201,500

115,500
-
115,500
$ 317,000

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

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

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

12.4%

2022
$ 536,800
1,100

2021
$ 143,200
-

(275,400 )
(12,200 )
-
3,100
63,600
$ 317,000

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

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
R&D tax credit
Stock options issued for services

Deferred tax liabilities:
Excess tax depreciation

Net deferred tax assets

2022

2021

$ 3,400
92,200
278,800
84,300
7,000
48,800
84,000
277,600
876,100

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

(801,485 )
$ 74,615

(624,685 )
$ 190,115

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 $4.2 million in
taxable income in future years in order to realize the deferred tax assets recorded as of May 31, 2022 of $876,100.

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

2022
3,497,345
2,208
3,499,553

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

12. Related Party Transactions:

The Company had no related party transactions for the years ended May 31, 2022 and 2021.

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, 2022 and 2021, 1,496 ($9.90 to $11.83 price per share) and 1,470
($9.20 to $11.40 price per share) common shares, respectively, were issued to employees. As of May 31, 2022, 217,287 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 136,250
shares have been granted as of May 31, 2022. 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
$3.02 during 2022 and $3.27 during 2021. 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

The following is a summary of stock option activity:

2022
2.59%
4.0
31%
0%

Weighted
Average
Exercise Price

Outstanding - May 31, 2020
Options granted
Less: options exercised
Less: options expired
Outstanding - May 31, 2021
Options granted
Less: options expired
Outstanding - May 31, 2022

252,250
47,250
13,000
18,750
267,750
66,750
51,500
283,000

$ 11.52
$ 11.26
$ 6.34
$ 13.31
$ 11.60
$ 10.69

$ 11.43

$ 28,248

2021
2.31%
4.0
33%
0%

Intrinsic
Value

$ 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 (29,250 at May 31, 2022 and 137,750 at May 31, 2021.) The Company's closing stock price was $9.30
and $11.85 as of May 31, 2022 and 2021. As of May 31, 2022, there are 23,750 options available for future grants under the 2018
stock option plan. No options were exercised in the fiscal year ended May 31, 2022. $28,425 was received from the exercise of
share options during the fiscal year ended May 31, 2021.

The following table summarizes information about stock options outstanding at May 31, 2022:

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

10,000
19,250
55,000
26,500
112,250
28,750
10,000
10,000
11,250
283,000

Weighted Average
Remaining Years of
Contractual Life
0.9
1.5
9.0
7.3
7.8
3.9
4.9
3.9
4.2
6.5

Weighted Average
Exercise Price

$ 7.74
$ 8.64
$ 9.67
$10.14
$11.72
$12.39
$13.80
$16.40
$19.26
$11.43

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

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 at both May 31, 2022 and 2021.

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
$313,269 and $288,470 for the years ended May 31, 2022 and 2021.

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:

2022

none

2021

none

$ 43,630

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. 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 was minimal. The effect on the Company’s operational and financial performance in fiscal 2023 is not
expected to be significant however it 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.

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 (all in fiscal 2021), and b.) $1,563,639 of Employee Retention Credit income
($53,508 in fiscal 2022 and $1,510,131 in fiscal 2021). These amounts are included in Other income on the Consolidated Statements
of Income.

21. Legal Proceedings:

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

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 2022 and fiscal year 2021 were obtained from NASDAQ.

HOLDERS

As of May 31, 2022, the number of issued and outstanding shares of Common Stock was 3,497,937 and the number
of record holders of the Company’s Common Stock was 461. A substantial number of shares of the Company’s
Common Stock are 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 2022 ANNUAL SHAREHOLDERS MEETING

Taylor Devices’ Annual Shareholders Meeting will be held virtually on Friday, October 21, 2022, at 11:00 a.m.

All shareholders who wish to attend the 2022 Virtual Annual Shareholders Meeting MUST PRE-REGISTER
for this event. The online shareholder pre-registration will close promptly on Thursday, October 20, 2022 at
12:00 p.m.

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

FISCAL 2022

F IS CAL 202 1

HIGH
$12.25

LOW
$11.21

HIGH
$12.00

LOW
$10.93

HIGH
$11.46

LOW
$8.68

HIGH
$10.54

LOW
$8.58

FIRST

S ECO N D

FIRST

SECON D

HIGH
$11.00

LOW
$9.88

HIGH
$10.24

LOW
$8.75

HIGH
$11.93

LOW
$9.76

HIGH
$12.43

LOW
$10.58

THIRD

FOURT H

THIRD

FOURTH

FEATURED PROJECTS

300 LAKESIDE

OWNER
TMG Partners

STRUCTURAL ENGINEER
Magnusson Klemencic Associates

GENERAL CONTRACTOR
Plant Construction Company, L.P

STEEL SUBCONTRACTOR
Olson Steel

Taylor damper finished and on full display with
building space ready for full occupancy.

300 Lakeside, also known as the Kaiser Center, is a commercial office and retail building in Oakland, CA. Purchased by
San Francisco developer TMG Properties in 2020, the space is the future home of PG&E’s new headquarters.

Originally developed in 1960 for Kaiser Industries, this Pre-Northridge Steel Moment Frame structure required major
renovations before new tenants could move in, including facade upgrades, safety improvements, and a significant
seismic upgrade using Fluid Viscous Dampers.

Flexibility in damper placement floor-to-floor allowed for dampers to be staggered, preventing the disturbance of costly
architectural finishes and reducing demands on existing columns. Drift and force reductions were made without placing
dampers on the upper stories, saving time and money on the project. Additionally, flexible installation time allowed for
completion and occupancy of floors as needed.

A total of 272 Taylor Dampers ranging in size from 330 to 550 kips (1500 kN to 2500 kN) are being used for this building.

US NAVY

Taylor Devices’ Nathan Canney, PhD, PE, Director of
Structural Engineering oversees the installation of the
damper at 300 Lakeside. (Far Left)

Taylor Devices’ 550 kip damper is shown here in its
completed state within one of 300 Lakeside building’s
open spaces. (Left)

ARTEMIS

NASA’s Apollo Program flew astronauts to the
Moon between 1968 and 1972. Taylor Devices
was chosen during the development phase of
the Program to create specialized Umbilical
Swing Arm Energy Absorbers for the Apollo
launch pad. Now, more than 50 years after that
first Moon landing, we are excited to be a part
of humanity’s return to the Moon through the
Artemis program. This time, our products will be
flying on the Space Launch System (SLS) Rocket.

Taylor Devices supplies a series of 6 highly
specialized isolators for each launch which
are installed between the launch abort motor
ogive (fairing) and the Orion Crew Capsule,
right near the top of the SLS Rocket. This
isolation system protects the Crew Capsule
from the harsh shock and vibration that occurs
during launch. Additionally, several different
energy absorbers similar to those used during
the Space Shuttle Program will be used for
various systems on the launch pad.

STARLINER

In addition to the Artemis Program, Taylor Devices is proud
to supply flight hardware for the Boeing Starliner Program.
Our products, installed on the CST-100 Crew Capsule, will
accommodate opening of the hatch for the astronauts and
enable proper deployment of the Service Module during
re-entry to Earth.

The Starliner Program transports crews to the International
Space Station, successfully flying its first crewed mission in
May, 2022. The Crew Capsule is reusable and can carry up to
7 astronauts, or a combination of cargo and crew to
low-Earth orbit. It is able to land on its airbags on land, or
in water in case of an emergency.

After Starliner’s CST-100 Crew Capsule landed at White
Sands Space Harbor in May 2022, Boeing’s team is shown
here opening the Side Hatch. Note the long black strut,
designed and manufactured by Taylor Devices. (Top Right)

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 34 years, he has held titles such as Design
Engineer, Assistant Chief Engineer, Chief Engineer, and 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 is 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.

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

ALAN R. KLEMBCZYK
President and Board Member

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 Resilience Council.

Mr. Klembczyk has participated in many research projects for products 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 where he was also a
member of The University’s Mechanical and Aerospace Dean’s Advisory Board for over 10 years. 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 thirty 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. 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 diversified manufacturing firm. During his tenure there, he led a significant 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. 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.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 officer 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 Officer 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 Officer 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 (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 Air Force.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.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 Division. Electrochem 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 Buffalo. Mr. Carey served in the U.S. Army, achieving the rank of Captain.F. ERIC ARMENATBoard MemberROBERT M. CAREYBoard MemberJOHN BURGESSChairman of the Board of DirectorsANNUAL REPORT

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