Taylor Devices(TAYD) - 2025 Q4 - Annual Report

FORM 10-K PART I Item 1. Business Taylor Devices, Inc. designs, manufactures, and markets shock absorption, rate control, and energy storage devices for aerospace, defense, industrial, and structural applications - Taylor Devices, Inc. specializes in shock absorption, rate control, and energy storage devices for diverse applications, including aerospace, defense, industrial, and structural sectors[15] - The company's product lines include Seismic Dampers, Fluidicshoks®, Crane and Industrial Buffers, Self-Adjusting Shock Absorbers, Liquid Die Springs, Vibration Dampers, Machined Springs, Custom Shock and Vibration Isolators, and Custom Actuators[16][17] - Sales to three major customers constituted approximately 42% of net sales in 2025 (21%, 15%, and 6% respectively), indicating significant customer concentration[23] Principal Products The company manufactures nine main categories of shock absorption and energy control products, with seismic dampers being a substantial portion of sales - The company's product portfolio includes Seismic Dampers, Fluidicshoks®, Crane and Industrial Buffers, Self-Adjusting Shock Absorbers, Liquid Die Springs, Vibration Dampers, Machined Springs, Custom Shock and Vibration Isolators, and Custom Actuators[16] - Seismic Dampers are a significant product line, designed to mitigate earthquake effects on structures[17] - Custom derivations of all products are designed and manufactured for aerospace and defense applications[16][17] Sales and Distribution U.S. sales are handled by an in-house technical sales force, while international sales use non-employee representatives earning 5% to 10% commissions - U.S. sales are handled by an in-house technical sales force[18] - International sales are managed by non-employee sales representatives, typically under non-exclusive agreements with commissions ranging from 5% to 10% of the product's net aggregate selling price[18] Non-Employee Commission Expense (2024-2025) | Year Ended May 31 | Commission Expense (USD) | | :------------------ | :----------------------- | | 2025 | 0 | | 2024 | 77,000 | Competition The company faces competition in hydraulic energy absorbers for aerospace and defense, industrial products, and structural damping devices from various domestic and international firms - Competition exists in aerospace and defense programs for hydraulic energy absorbers, including competing technologies[19] - Industrial products face competition from several foreign companies and two U.S. companies in crane buffers and industrial shock absorbers[19] - For structural damping devices, the company competes with three U.S. firms and several international firms (especially in Japan and Taiwan), along with other alternative seismic protection technologies[20] Raw Materials and Supplies The company sources raw materials from diverse U.S. and foreign suppliers, mitigating the risk of losing any single supplier - Raw materials and supplies are sourced from a diverse base of U.S. and foreign suppliers[22] - The loss of any single supplier is not expected to have a material adverse effect on the company[22] Dependence Upon Major Customers The company has significant customer concentration, with sales to three customers accounting for 42% of net sales in 2025, posing a material risk if lost Sales Concentration by Major Customers (2024-2025) | Year | Number of Customers | Percentage of Net Sales | | :--- | :------------------ | :---------------------- | | 2025 | 3 | 42% (21%, 15%, 6%) | | 2024 | 4 | 40% (21%, 7%, 7%, 5%) | - The loss of any or all of these major customers, if not replaced, would have a material adverse effect on the Company[23] Patents, Trademarks and Licenses The company holds 24 patents, with expiration dates extending until 2042, protecting its intellectual property - The company holds 24 patents, expiring at various times until 2042[24] Terms of Sale The company does not offer extended payment terms or consignment sales, with standard industrial product delivery times averaging 8 to 10 weeks in 2025 - No extended payment terms are offered, and no consignment sales occurred in 2024 or 2025[25] - Average delivery time for standard industrial products was 8 to 10 weeks in 2025[25] - Progress payments are typically required for larger custom aerospace and defense projects[25] Need for Government Approval of Principal Products or Services Federal government contracts are subject to termination at the government's discretion, and reduced defense spending could materially impact the company - Federal government contracts are subject to termination at the government's election and are typically fixed-price[26] - Reduced defense spending leading to contract reductions or terminations could materially adversely affect the company[26] Research and Development The company conducts product research and development to support growth, with some R&D for aerospace and defense funded by customers or the federal government - The company engages in product research and development to accommodate growth and maintain market presence[27] - R&D for aerospace and defense sectors is occasionally funded by customers or the federal government[27] Research and Development Expenditures (2024-2025) | Category | 2025 (USD) | 2024 (USD) | | :-------------------------------- | :--------- | :--------- | | Company-funded product research | 444,000 | 388,000 | | Government-funded R&D | 1,141,000 | 818,000 | | Customer-funded R&D | 228,000 | 477,000 | Government Regulation The company believes it is in substantial compliance with environmental laws, OSHA standards, and federal government product production regulations - The company believes it is in substantial compliance with environmental laws and regulations, with no material effect on the company[28] - The company is subject to OSHA and believes it is in substantial compliance with its standards for employee protection[29] - Regulations for federal government products involve frequent governmental audits and extensive product testing, with which the company believes it is in substantial compliance[30] Employees As of May 31, 2025, the company had 137 employees and maintains good employee relations, with no collective bargaining agreements Employee Count (May 31, 2025) | Category | Count | | :---------- | :---- | | Total | 137 | | Full-time | 135 | | Part-time | 2 | - The company reports good relations with its employees, and none are covered by a collective bargaining agreement[32] Item 1A. Risk Factors As a smaller reporting company, Taylor Devices, Inc. is exempt from providing the information typically required by this item - Smaller reporting companies are exempt from providing risk factor information[33] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments - There are no unresolved staff comments[34] Item 1C. Cybersecurity Taylor Devices, Inc. has a comprehensive cybersecurity program aligned with NIST and DoD guidelines, overseen by the Board, with no material incidents reported - The company's cybersecurity plan aligns with NIST (SP) 800-171 and Department of Defense CMMC Level 2 guidelines[35] - Cybersecurity measures include company-wide security policies, standards, controls, specialized training, phishing simulations, and regular third-party reviews (24/7/365 security incident management, vulnerability services, penetration testing)[35][36] - The Board of Directors oversees cybersecurity risks, with the Director of Information Technology, Mitch Reszczenski (29+ years IT experience), primarily responsible for assessment and management[38][39] - As of the Form 10-K filing date, the company is unaware of any cybersecurity threats or incidents that have materially affected or are likely to materially affect its business strategy, results of operations, or financial condition[37] Risk Management and Strategy The company manages cybersecurity risks through a system security plan aligned with NIST and DoD guidelines, including policies, training, and third-party reviews - Cybersecurity risk management is guided by a system security plan aligned with NIST (SP) 800-171 and DoD CMMC Level 2 guidelines[35] - Measures include company-wide security policies, standards, controls, specialized training, phishing simulations, and general cybersecurity training for all employees[35] - Third parties perform regular reviews of security controls, including 24/7/365 security incident and event management, vulnerability services, and penetration testing[36] Governance The Board of Directors oversees cybersecurity risk management, with the Director of Information Technology responsible for assessment and regular updates - The Board of Directors oversees management's identification, assessment, and management of cybersecurity risks[38] - Mitch Reszczenski, Director of Information Technology with 29+ years of experience, is primarily responsible for cybersecurity risk management[39] - Senior management provides annual (or more frequent) updates to the Board on cybersecurity matters, and the Board reviews and approves cybersecurity budgets[39] Item 2. Properties Taylor Devices, Inc. owns and operates over 100,000 square feet of production and testing facilities across two locations in North Tonawanda, New York - The company's primary production facilities are located on Tonawanda Island, North Tonawanda, New York, totaling over 54,000 square feet[41] - These facilities include a small parts plant (4,400 sq ft), a large parts plant (13,500 sq ft), a general office/test facility (7,000 sq ft), and a 27,000 sq ft seismic assembly and test facility capable of testing dampers up to 45 feet in length[41] - The company also owns two additional industrial buildings (46,000 sq ft) on nine acres in North Tonawanda, used for machining, painting, and packaging, plus a 1,200 sq ft remote shock test facility[41] Item 3. Legal Proceedings The company refers to Note 17, 'Legal Proceedings,' for additional information regarding its legal proceedings - Legal proceedings information is incorporated by reference from Note 17 to the Consolidated Financial Statements[42] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[43] PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Taylor Devices, Inc.'s common stock trades on Nasdaq under 'TAYD', with 340 record holders and 3,400 beneficial owners, and the company retains cash for working capital instead of paying dividends - The company's common stock (TAYD) trades on the Nasdaq Stock Market[46] - The company does not pay cash dividends and intends to retain cash for future working capital needs[47] Market Information The company's common stock is traded on the Nasdaq Stock Market under the symbol 'TAYD' - Common stock trades on the Nasdaq Stock Market under the symbol 'TAYD'[46] Holders As of August 1, 2025, there were 340 record holders and an estimated 3,400 beneficial owners of the company's common stock Common Stock Holders (August 1, 2025) | Category | Count | | :--------------- | :---- | | Record Holders | 340 | | Beneficial Owners| ~3,400| Dividends The company does not currently pay cash dividends and plans to retain cash to fund future working capital requirements - The company does not pay cash dividends and plans to retain cash for working capital needs in the foreseeable future[47] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Taylor Devices, Inc.'s financial performance and position for 2025 and 2024, covering critical accounting policies, operating results, liquidity, and capital resources - Net revenues increased by 4% and net income increased by 5% for the year ended May 31, 2025, compared to the prior year[63] - The company increased its allowance for estimated credit losses to $564,000 at May 31, 2025, from $29,000 at May 31, 2024, due to uncertainty in collecting a $751,000 overdue balance on a structural project[50][83] - Capital expenditures for 2025 were $2,602,000, a significant increase from $1,149,000 in 2024, primarily for new manufacturing machinery, testing equipment, and facility improvements[76] Cautionary Statement This section includes a cautionary statement regarding forward-looking statements, emphasizing that actual results may differ materially due to various factors - Forward-looking statements are subject to factors, risks, and uncertainties that can cause actual results to differ materially from expectations[48] - Risks include fluctuations in business cycles, changing economic conditions, variations in customer orders, product demand, competition, pricing pressures, and technological advances[48] Application of Critical Accounting Policies and Estimates The company's financial statements rely on management's estimates and judgments, particularly for accounts receivable, inventory, revenue recognition, and income taxes - Financial statements require management to make estimates, assumptions, and judgments affecting reported amounts[49] - Critical accounting policies include Accounts Receivable, Inventory, Revenue Recognition, and Income Taxes[49] - Adjustments are made in subsequent periods to reflect more current information if estimates or assumptions prove different from actual amounts[49] Accounts Receivable Accounts receivable are stated at expected collectible amounts, with an allowance for estimated credit losses based on individual account assessment - Accounts receivable are stated at expected collectible amounts, with an allowance for estimated credit losses based on individual account assessment[50] - The valuation allowance for credit losses increased significantly to $564,000 at May 31, 2025, from $29,000 at May 31, 2024, due to uncertainty over a $751,000 overdue balance on a structural project[50] - Actual accounts written off over the five years ended May 31, 2025, equaled 0.2% of sales for that period[50] Inventory Inventory is valued at the lower of average cost or net realizable value, with an allowance for potential obsolescence due to rapid technological advances - Inventory is valued at the lower of average cost or net realizable value, with average cost approximating first-in, first-out[51] - An allowance for potential inventory obsolescence is recorded due to sensitivity to technical obsolescence in industries with rapid technological advances[52] Inventory Disposal and Obsolescence Provision (2024-2025) | Year Ended May 31 | Inventory Disposed (USD) | Provision for Obsolescence (USD) | | :------------------ | :----------------------- | :------------------------------- | | 2025 | 107,000 | 0 | | 2024 | 791,000 | 386,000 | Revenue Recognition Revenue is recognized when control of promised products or services is transferred to a customer, reflecting the expected consideration - Revenue is recognized when control of promised products or services is transferred to a customer, reflecting the expected consideration[53] - For long-term contracts with no alternative use and enforceable payment rights, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion[55] Revenue Recognition Method Split (2024-2025) | Year Ended May 31 | Over Time | At a Point in Time | | :------------------ | :-------- | :----------------- | | 2025 | 68% | 32% | | 2024 | 59% | 41% | Income Taxes Deferred tax assets and liabilities are recognized for future tax consequences of temporary differences, with management believing they are recoverable - Deferred tax assets and liabilities are recognized for future tax consequences of temporary differences between tax and financial statement bases[58] - A valuation allowance is not recorded against deferred tax assets as management believes they are recoverable, requiring approximately $13.6 million of future taxable income to realize $2,848,000 in deferred tax assets as of May 31, 2025[59] - The deferred tax asset balance increased by 31% ($671,000) from the prior year[59] Results of Operations Operating results for 2025 show a 4% net revenue increase and 5% net income growth, with stable gross profit - Revenues from long-term projects increased by 19% in 2025, while non-project revenues decreased by 18%[63] - Sales to industrial customers increased by 24%, structural customers by 3%, and aerospace/defense customers by 2%[64] - Total sales within the U.S. decreased by 5%, while sales to Asia increased significantly from $2.0 million to $7.0 million[66] Summary Comparison of Key Financial Items (YoY Change 2025 vs 2024) | Item | Increase / (Decrease) (USD) | | :-------------------------------------- | :-------------------------- | | Sales, net | 1,710,000 | | Cost of goods sold | 1,071,000 | | Research and development costs | 56,000 | | Selling, general and administrative expenses | 436,000 | | Other income | (35,000) | | Income before provision for income taxes | 112,000 | | Provision for income taxes | (302,000) | | Net income | 414,000 | Net Revenue Net revenue increased by 4% to $46.3 million in 2025, driven by a 19% rise in long-term project revenues, while non-project revenues decreased by 18% Net Revenue (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | Change (%) | | :---------- | :----------- | :----------- | :----------- | :--------- | | Net Revenue | 46,293,000 | 44,583,000 | 1,710,000 | 4% | - Revenues from long-term projects increased by 19% in 2025, while non-project revenues decreased by 18%[63] Sales by Customer Group Industrial sales increased by 24%, structural by 3%, and aerospace/defense by 2% in 2025, with aerospace/defense remaining the largest segment at 59% of total net revenue Sales by Customer Group (YoY Change 2025 vs 2024) | Customer Group | Change (%) | | :---------------- | :--------- | | Industrial | 24% | | Structural | 3% | | Aerospace / Defense | 2% | Sales by Customer Group as % of Total Net Revenue (2024-2025) | Customer Group | 2025 (%) | 2024 (%) | | :---------------- | :------- | :------- | | Industrial | 9% | 8% | | Structural | 32% | 32% | | Aerospace / Defense | 59% | 60% | Net Revenue by Geographic Region U.S. sales decreased by 5%, while sales to Asia significantly increased from $2.0 million to $7.0 million in 2025, shifting the geographic revenue mix Net Revenue by Geographic Region as % of Total Net Revenue (2024-2025) | Region | 2025 (%) | 2024 (%) | | :----- | :------- | :------- | | U.S. | 79% | 86% | | Asia | 15% | 4% | | Other | 6% | 10% | - Total sales within the U.S. decreased by 5% from the prior year[66] - Total sales to Asia increased significantly from $2.0 million in 2024 to $7.0 million in 2025[66] Gross Profit Gross profit increased by 3% to $21.5 million in 2025, maintaining a stable gross profit margin of 46% of revenue Gross Profit (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | Change (%) | | :---------- | :----------- | :----------- | :----------- | :--------- | | Gross profit| 21,478,000 | 20,839,000 | 639,000 | 3% | | % of revenue| 46% | 47% | -1% | | Backlog Total sales order backlog decreased to $27.1 million in 2025 from $33.1 million in 2024, with aerospace/defense comprising 75% of the current backlog, mostly expected to be recognized in fiscal year 2026 Sales Order Backlog (May 31, 2024-2025) | Metric | May 31, 2025 (USD) | May 31, 2024 (USD) | | :---------------------- | :----------------- | :----------------- | | Total sales value | 27.1 million | 33.1 million | | Open sales orders | 142 | 134 | | Backlog in progress | 13.1 million | 18.6 million | Backlog by Customer Group as % of Total Backlog (May 31, 2024-2025) | Customer Group | May 31, 2025 (%) | May 31, 2024 (%) | | :---------------- | :--------------- | :--------------- | | Aerospace / Defense | 75% | 72% | | Structural | 19% | 22% | - The majority of the current backlog is expected to be recognized as revenue during the fiscal year ending May 31, 2026, with the remainder in fiscal year 2027[68] Research and Development Costs Research and development costs increased by 14% to $444,000 in 2025, representing 1.0% of revenue Research and Development Costs (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | Change (%) | | :---------- | :--------- | :--------- | :----------- | :--------- | | R&D Costs | 444,000 | 388,000 | 56,000 | 14% | | % of revenue| 1.0% | 0.9% | | | Selling, General and Administrative Expenses Selling, general and administrative expenses increased by 4% to $11.4 million in 2025, primarily due to higher credit loss expense Selling, General and Administrative Expenses (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | Change (%) | | :---------- | :------------ | :------------ | :----------- | :--------- | | SG&A Costs | 11,407,000 | 10,971,000 | 436,000 | 4% | | % of revenue| 25% | 25% | | | - The increase in SG&A expenses was primarily due to increased credit loss expense[71] Operating Income Operating income increased by 2% to $9.6 million in 2025, primarily driven by increased revenue Operating Income (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | Change (%) | | :-------------- | :---------- | :---------- | :----------- | :--------- | | Operating Income| 9,627,000 | 9,479,000 | 148,000 | 2% | - The increase in operating income was primarily driven by increased revenue[72] Other Income Other income decreased by 2% to $1.4 million in 2025, mainly due to lower short-term investment interest income Other Income (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | Change (%) | | :---------- | :---------- | :---------- | :----------- | :--------- | | Other Income| 1,405,809 | 1,441,343 | (35,534) | -2% | - The decrease in other income was primarily due to lower short-term investment interest income[73] Provision for Income Taxes The provision for income taxes decreased by 16% to $1.62 million in 2025, resulting in a lower effective tax rate of 15%, influenced by research tax credits and foreign-derived intangible income deductions Provision for Income Taxes and Effective Tax Rate (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | | :---------------------- | :---------- | :---------- | :----------- | | Provision for Income Taxes | 1,620,000 | 1,922,000 | (302,000) | | Effective Tax Rate (ETR)| 15% | 18% | -3% | - The decrease in ETR was influenced by research tax credits and foreign-derived intangible income deductions[74] Liquidity and Capital Resources, Line of Credit and Long-Term Debt Liquidity is driven by cash flow and a $10 million line of credit, with increased capital expenditures and working capital changes - Primary liquidity sources are cash on hand, cash flows from operations, and a $10,000,000 demand line of credit[75][78] - As of May 31, 2025, the company has commitments for approximately $1,853,000 in future capital expenditures[76] - Accounts payable decreased by 22% to $1,119,000, and accrued expenses decreased by 13% to $4,072,000, primarily due to decreases in accrued incentive compensation[88][89] Capital Expenditures (2024-2025) | Year Ended May 31 | Capital Expenditures (USD) | | :------------------ | :------------------------- | | 2025 | 2,602,000 | | 2024 | 1,149,000 | Capital Expenditures Capital expenditures significantly increased to $2.6 million in 2025, primarily for new manufacturing machinery, testing equipment, and facility improvements, with future commitments of $1.85 million - Current year capital expenditures included new manufacturing machinery, testing equipment, technology upgrades, and assembly/test facility improvements[76] - As of May 31, 2025, the company has commitments for approximately $1,853,000 in future capital expenditures, mainly for new manufacturing and testing equipment[76] Line of Credit The company maintains a $10 million demand line of credit with M&T Bank, with no outstanding balance as of May 31, 2025, secured by a negative pledge of property - The company has a $10,000,000 demand line of credit with M&T Bank, with interest at 30, 60, or 90-day SOFR rate plus 2.365%[77] - There was no outstanding balance on the line of credit as of May 31, 2025[77] - The line is secured by a negative pledge of the company's real and personal property and is subject to annual renewal[77] Inventory and Maintenance Inventory Total inventory increased by 1% to $9.2 million in 2025, with work-in-process as the largest component, while maintenance and other inventory decreased by 30% Inventory and Maintenance Inventory (May 31, 2024-2025) | Category | May 31, 2025 (USD) | May 31, 2024 (USD) | Change (USD) | Change (%) | | :------------------------ | :----------------- | :----------------- | :----------- | :--------- | | Raw materials | 627,000 | 887,000 | (260,000) | -29% | | Work-in-process | 7,223,000 | 6,412,000 | 811,000 | 13% | | Finished goods | 263,000 | 213,000 | 50,000 | 23% | | Inventory (subtotal) | 8,113,000 | 7,512,000 | 601,000 | 8% | | Maintenance and other inventory | 1,108,000 | 1,580,000 | (472,000) | -30% | | Total Inventory | 9,221,000 | 9,092,000 | 129,000 | 1% | | Inventory turnover | 2.7 | 3.0 | | | - Approximately 89% of current inventory is work-in-process, 3% finished goods, and 8% raw materials, all expected to be consumed or sold within twelve months[79] Obsolete Inventory Disposal (2024-2025) | Year Ended May 31 | Disposed Inventory (USD) | | :------------------ | :----------------------- | | 2025 | 107,000 | | 2024 | 791,000 | Accounts Receivable, Costs and Estimated Earnings in Excess of Billings ("CIEB") and Billings in Excess of Costs and Estimated Earnings ("BIEC") Net accounts receivable, CIEB, and BIEC increased by 66% to $6.58 million in 2025, driven by a significant rise in CIEB and an increased allowance for credit losses due to an overdue structural project Accounts Receivable, CIEB, and BIEC (May 31, 2024-2025) | Metric | May 31, 2025 (USD) | May 31, 2024 (USD) | Change (USD) | Change (%) | | :------------------------------------ | :----------------- | :----------------- | :----------- | :--------- | | Accounts receivable | 5,600,000 | 5,212,000 | 388,000 | 7% | | Costs and estimated earnings in excess of billings (CIEB) | 5,360,000 | 4,357,000 | 1,003,000 | 23% | | Billings in excess of costs and estimated earnings (BIEC) | 4,382,000 | 5,601,000 | (1,219,000) | -22% | | Net (AR + CIEB - BIEC) | 6,578,000 | 3,968,000 | 2,610,000 | 66% | | Days Sales Outstanding (DSO) | 32 | 39 | | | - The allowance for estimated credit losses increased to $564,000 at May 31, 2025, from $29,000 at May 31, 2024, due to uncertainty over a $751,000 overdue balance on a structural project[83] - The increase in CIEB reflects a higher aggregate percentage of completion for projects, with 38% of the balance billed in the quarter ended May 31, 2025, and the remainder expected to be billed as projects progress[85] Accounts Payable Accounts payable decreased by 22% to $1.12 million in 2025, reflecting normal fluctuations and expected payment within twelve months Accounts Payable (May 31, 2024-2025) | Metric | May 31, 2025 (USD) | May 31, 2024 (USD) | Change (USD) | Change (%) | | :-------------- | :----------------- | :----------------- | :----------- | :--------- | | Accounts payable| 1,119,000 | 1,439,000 | (320,000) | -22% | - The decrease in accounts payable is considered normal fluctuation, with the current amount expected to be paid within the next twelve months[88] Accrued Expenses Accrued expenses decreased by 13% to $4.07 million in 2025, primarily due to a reduction in accrued incentive compensation Accrued Expenses (May 31, 2024-2025) | Metric | May 31, 2025 (USD) | May 31, 2024 (USD) | Change (USD) | Change (%) | | :-------------- | :----------------- | :----------------- | :----------- | :--------- | | Accrued expenses| 4,072,000 | 4,664,000 | (592,000) | -13% | - The decrease in accrued expenses is primarily due to decreases in accrued incentive compensation[89] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Taylor Devices, Inc. is exempt from providing the information typically required by this item - Smaller reporting companies are exempt from providing quantitative and qualitative disclosures about market risk[90] Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data are included in this Form 10-K starting on page F-1 and are incorporated by reference - Financial statements and supplementary data are incorporated by reference, commencing on page F-1[91] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[92] Item 9A. Controls and Procedures The company's management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of May 31, 2025, with no material changes - The CEO and CFO evaluated and concluded that disclosure controls and procedures were effective as of May 31, 2025[93] - Management assessed and concluded that the company's internal control over financial reporting was effective as of May 31, 2025, based on the COSO Internal Control—Integrated Framework[94] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended May 31, 2025[95] Evaluation of disclosure controls and procedures The CEO and CFO evaluated and concluded that disclosure controls and procedures were effective as of May 31, 2025, ensuring timely and accurate reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of May 31, 2025[93] - These controls ensure information required for Exchange Act reports is recorded, processed, summarized, and reported timely[93] Management's report on internal control over financial reporting Management, with CEO and CFO participation, assessed and concluded that internal control over financial reporting was effective as of May 31, 2025, based on the COSO framework - Management, with CEO and CFO, assessed and concluded that internal control over financial reporting was effective as of May 31, 2025[94] - The assessment was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Integrated Framework[94] Changes in internal control over financial reporting No material changes in the company's internal controls over financial reporting occurred during the fiscal quarter ended May 31, 2025 - No material changes in internal controls over financial reporting occurred during the fiscal quarter ended May 31, 2025[95] Item 9B. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended May 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended May 31, 2025[96] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[97] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2025 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2025 Annual Meeting of Shareholders[99] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2025 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2025 Annual Meeting of Shareholders[99] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's 2025 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2025 Annual Meeting of Shareholders[99] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2025 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2025 Annual Meeting of Shareholders[99] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2025 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2025 Annual Meeting of Shareholders[99] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements and various exhibits, including corporate governance documents, material contracts, and officer certifications - The report includes audited consolidated financial statements: Balance Sheets, Statements of Income, Stockholders' Equity, and Cash Flows, along with related notes[102] - Exhibits cover corporate governance documents (articles of incorporation, by-laws), security holder rights (Rights Agreement), material contracts (stock option plans, employee stock purchase plan, employment agreements, line of credit agreements), and officer certifications[102][104][108] - The section also lists Inline XBRL interactive data files for financial statements and notes[108] Item 16. Form 10-K Summary The company reported no Form 10-K Summary - No Form 10-K Summary is provided[106] SIGNATURES CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Lumsden & McCormick, LLP issued an unqualified opinion on Taylor Devices, Inc.'s consolidated financial statements for 2025 and 2024, identifying cost estimates for long-term contracts and inventory valuation as critical audit matters - Lumsden & McCormick, LLP issued an unqualified opinion on the consolidated financial statements for May 31, 2025 and 2024[118] - The audit was conducted in accordance with PCAOB standards, focusing on assessing risks of material misstatement[120][121] - Critical audit matters included cost estimates for long-term contracts and the valuation of inventory, both involving significant auditor judgment due to inherent uncertainties in management's estimates[122][124][125][126][127] Opinion on the Financial Statements The independent registered public accounting firm, Lumsden & McCormick, LLP, expressed an unqualified opinion on the consolidated financial statements for May 31, 2025 and 2024 - Lumsden & McCormick, LLP provided an unqualified opinion on the consolidated financial statements[118] - The financial statements fairly present the company's financial condition, results of operations, and cash flows for the years ended May 31, 2025 and 2024, in accordance with U.S. GAAP[118] Basis for Opinion The audit was conducted in accordance with PCAOB standards, requiring reasonable assurance about material misstatement, with the firm being independent and registered with the PCAOB - Audits were conducted in accordance with PCAOB standards to obtain reasonable assurance about material misstatement[120] - The firm is registered with the PCAOB and independent[119] - An understanding of internal control over financial reporting was obtained, but no opinion on its effectiveness was expressed[120] Critical Audit Matters Critical audit matters included cost estimates for long-term contracts and inventory valuation, both requiring significant auditor judgment due to inherent uncertainties - Critical audit matters relate to accounts or disclosures material to the financial statements and involved especially challenging, subjective, or complex judgments[122] - Key critical audit matters were cost estimates for long-term contracts and the valuation of inventory[124][126] - Auditing these estimates involved evaluating management's methods, reasonableness of judgments and assumptions, and testing data accuracy and completeness[128][129] Consolidated Balance Sheets Total assets increased by 13.5% to $71.6 million in 2025, driven by short-term investments and current assets, while total liabilities decreased by 19.1% to $9.6 million, and stockholders' equity rose by 21.1% to $62.0 million - Short-term investments increased by 23.7% to $34.8 million in 2025, becoming a major component of current assets[130] - Billings in excess of costs and estimated earnings decreased by 21.8% to $4.4 million, contributing to the overall reduction in current liabilities[130] Consolidated Balance Sheet Highlights (May 31, 2024-2025) | Metric | May 31, 2025 (USD) | May 31, 2024 (USD) | Change (USD) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :----------- | :--------- | | Total Current Assets | 56,282,839 | 48,769,281 | 7,513,558 | 15.4% | | Total Assets | 71,618,120 | 63,077,418 | 8,540,702 | 13.5% | | Total Current Liabilities | 9,573,743 | 11,830,732 | (2,256,989) | -19.1% | | Total Stockholders' Equity | 62,044,377 | 51,246,686 | 10,797,691 | 21.1% | Consolidated Statements of Income Net sales increased by 3.8% to $46.3 million in 2025, leading to a 4.6% rise in net income to $9.4 million, with basic EPS at $3.01 and diluted EPS at $2.87, and a lower effective tax rate - Research and development costs increased by 14.3% to $444,000 in 2025[132] - Selling, general and administrative expenses increased by 4.0% to $11.4 million in 2025[132] Consolidated Statements of Income Highlights (2024-2025) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :--------- | | Sales, net | 46,292,725 | 44,582,807 | 1,709,918 | 3.8% | | Gross profit | 21,478,144 | 20,839,253 | 638,891 | 3.1% | | Operating income | 9,627,327 | 9,479,419 | 147,908 | 1.6% | | Income before provision for income taxes | 11,033,136 | 10,920,762 | 112,374 | 1.0% | | Provision for income taxes | 1,620,000 | 1,922,000 | (302,000) | -15.7% | | Net income | 9,413,136 | 8,998,762 | 414,374 | 4.6% | | Basic earnings per common share | 3.01 | 2.68 | 0.33 | 12.3% | | Diluted earnings per common share | 2.87 | 2.58 | 0.29 | 11.2% | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased by 21.1% to $62.0 million in 2025, driven by net income and increased paid-in capital from stock options, with significantly lower treasury stock acquisitions - Net income of $9,413,136 contributed to the increase in retained earnings in 2025[134] - Stock options issued for services added $1,222,509 to paid-in capital in 2025[134] - Repurchase of shares for treasury stock was zero in 2025, compared to $9,143,578 in 2024[134] Consolidated Statements of Stockholders' Equity Highlights (2024-2025) | Metric | May 31, 2025 (USD) | May 31, 2024 (USD) | Change (USD) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :----------- | :--------- | | Common Stock | 104,835 | 104,056 | 779 | 0.7% | | Paid-in Capital | 14,544,580 | 12,959,531 | 1,585,049 | 12.2% | | Retained Earnings | 60,540,154 | 51,127,018 | 9,413,136 | 18.4% | | Treasury Stock | (13,145,192) | (12,943,919) | (201,273) | 1.6% | | Total Stockholders' Equity | 62,044,377 | 51,246,686 | 10,797,691 | 21.1% | Consolidated Statements of Cash Flows Net cash decreased by $1.64 million in 2025, driven by lower operating cash flow and increased investing outflows, partially offset by a shift to net financing inflows due to reduced treasury stock acquisitions - The decrease in net operating cash flow was significantly impacted by changes in accounts and other receivables, inventory, and billings in excess of costs and estimated earnings[135] - Acquisition of property and equipment increased to $2,602,088 in 2025 from $1,149,388 in 2024, contributing to higher investing outflows[135] - The shift in financing activities from a net outflow to a net inflow was largely due to a substantial reduction in the acquisition of treasury stock (from $9,859,177 in 2024 to $201,273 in 2025)[135] Consolidated Statements of Cash Flows Highlights (2024-2025) | Activity | 2025 (USD) | 2024 (USD) | Change (USD) | | :------------------------ | :------------ | :------------ | :------------ | | Net operating activities | 7,471,935 | 13,218,924 | (5,746,989) | | Net investing activities | (9,274,796) | (5,070,614) | (4,204,182) | | Net financing activities | 162,046 | (8,892,058) | 9,054,104 | | Net change in cash | (1,640,815) | (743,748) | (897,067) | | Cash & cash equivalents - ending | 1,190,656 | 2,831,471 | (1,640,815) | Notes to Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, financial statement line items, and significant events, including an increased allowance for credit losses and ongoing legal proceedings - The company manufactures and sells a single group of similar products across nine categories, primarily to customers in the U.S. (79% of 2025 revenue) and Asia (15% of 2025 revenue)[137][139] - The allowance for estimated credit losses increased to $564,466 in 2025 due to uncertainty in collecting a $751,000 overdue balance on a structural project[163] - Revenue recognition for long-term contracts is over time (68% in 2025), while other sales are recognized at a point in time (32% in 2025)[152] - The company is a third-party defendant in a legal action related to viscous damping devices supplied for a high-rise condominium, with discovery ongoing until December 2025[192][196][197] Note 1. Summary of Significant Accounting Policies This note outlines the company's fundamental accounting policies, including its single segment operations, consolidation principles, use of estimates, and specific policies for revenue recognition and stock-based compensation - The company operates as a single segment, manufacturing shock absorption, rate control, and energy storage devices[137][138] - Revenue recognition for contracts with no alternative use and enforceable payment rights is over time (68% in 2025, 59% in 2024), while other sales are recognized at a point in time (32% in 2025, 41% in 2024)[152] Revenue by Geographic Region (2024-2025) | Region | 2025 (%) | 2024 (%) | | :----- | :------- | :------- | | U.S. | 79% | 86% | | Asia | 15% | 4% | | Other | 6% | 10% | Stock-Based Compensation Expense (2024-2025) | Year Ended May 31 | Expense (USD) | | :------------------ | :------------ | | 2025 | 1,222,509 | | 2024 | 1,047,252 | Note 2. Accounts and Other Receivables Accounts and other receivables, net of allowance for estimated credit losses, totaled $5.6 million in 2025, with the allowance significantly increasing due to a $751,000 overdue structural project balance - The allowance for estimated credit losses increased due to uncertainty in collecting a $751,000 overdue balance on a structural project[163] - All other amounts are expected to be collected within the next fiscal year[164] Accounts and Other Receivables, Net (May 31, 2024-2025) | Metric | 2025 (USD) | 2024 (USD) | | :------------------------------------ | :---------- | :---------- | | Customers | 6,164,251 | 5,241,874 | | Less allowance for estimated credit losses | 564,466 | 29,466 | | Net Accounts and Other Receivables | 5,599,785 | 5,212,408 | Note 3. Inventory Inventory, net of obsolescence allowance, totaled $8.1 million in 2025, up from $7.5 million in 2024, with work-in-process as the largest component and a decreased obsolescence allowance Inventory Composition (May 31, 2024-2025) | Category | 2025 (USD) | 2024 (USD) | | :------------------------ | :---------- | :---------- | | Raw materials | 627,616 | 886,947 | | Work-in-process | 7,222,613 | 6,412,497 | | Finished goods | 286,092 | 271,608 | | Total before allowance | 8,136,321 | 7,571,052 | | Less allowance for obsolescence | 23,000 | 59,000 | | Net Inventory | 8,113,321 | 7,512,052 | Note 4. Costs and Estimated Earnings on Uncompleted Contracts The net balance of costs and estimated earnings on uncompleted contracts shifted to an asset of $0.98 million in 2025, reflecting increased CIEB and a higher aggregate completion percentage for projects - The majority of remaining revenue on open projects is expected to be recognized during the fiscal year ending May 31, 2026[167] Costs and Estimated Earnings on Uncompleted Contracts (May 31, 2024-2025) | Metric | 2025 (USD) | 2024 (USD) | | :------------------------------------ | :---------- | :---------- | | Costs incurred on uncompleted contracts | 12,499,313 | 10,576,401 | | Estimated earnings | 13,175,240 | 10,459,240 | | Less billings to date | 24,696,121 | 22,280,350 | | Net Balance | 978,432 | (1,244,709) | Project Status (May 31, 2024-2025) | Metric | 2025 | 2024 | | :-------------------------- | :---- | :---- | | Number of Projects in progress | 21 | 19 | | Aggregate percent complete | 65% | 53% | | Aggregate amount remaining | $13,100,204 | $18,650,312 | Note 5. Maintenance and Other Inventory Maintenance and other inventory, net of obsolescence allowance, decreased to $1.11 million in 2025, with the provision for obsolescence at zero due to lower disposals - This inventory is particularly sensitive to technical obsolescence due to its use in industries with continuous new product introductions and rapid technological advances[169] Maintenance and Other Inventory (May 31, 2024-2025) | Metric | 2025 (USD) | 2024 (USD) | | :------------------------------ | :---------- | :---------- | | Maintenance and other inventory | 1,872,931 | 2,416,748 | | Less allowance for obsolescence | 765,056 | 836,919 | | Net Maintenance and Other Inventory | 1,107,875 | 1,579,829 | Inventory Disposal and Obsolescence Provision (2024-2025) | Year Ended May 31 | Inventory Disposed (USD) | Provision for Obsolescence (USD) | | :------------------ | :----------------------- | :------------------------------- | | 2025 | 107,000 | 0 | | 2024 | 791,000 | 386,000 | Note 6. Property and Equipment Property and equipment, net of accumulated depreciation, increased to $12.07 million in 2025, primarily due to additions in machinery and equipment, with future capital expenditure commitments of $1.85 million - The company has commitments to make capital expenditures of approximately $1,853,000 as of May 31, 2025[171] Property and Equipment, Net (May 31, 2024-2025) | Category | 2025 (USD) | 2024 (USD) | | :------------------------ | :----------- | :----------- | | Land | 195,220 | 195,220 | | Buildings and improvements | 10,160,842 | 10,054,459 | | Machinery and equipment | 17,950,644 | 15,956,076 | | Office furniture and equipment | 3,193,150 | 3,113,921 | | Autos and trucks | 91,717 | 24,818 | | Land improvements | 662,168 | 662,168 | | Total | 32,253,741 | 30,006,662 | | Less accumulated depreciation | 20,179,569 | 18,825,729 | | Net Property and Equipment | 12,074,172 | 11,180,933 | Depreciation Expense (2024-2025) | Year Ended May 31 | Expense (USD) | | :------------------ | :------------ | | 2025 | 1,708,849 | | 2024 | 1,690,239 | Note 7. Short-Term Borrowings The company has a $10 million demand line of credit with M&T Bank, with no outstanding balance as of May 31, 2025, and uses a cash management facility for outstanding checks - The company has a $10,000,000 demand line of credit with M&T Bank, with interest at 30, 60, or 90-day SOFR rate plus 2.365%[172] - No amount was outstanding under the line of credit at May 31, 2025, or 2024[173] Outstanding Checks under Cash Management Facility (May 31, 2024-2025) | Year Ended May 31 | Amount (USD) | | :------------------ | :----------- | | 2025 | 97,673 | | 2024 | 372,347 | Note 8. Accrued Expenses Accrued expenses decreased by 12.7% to $4.07 million in 2025, primarily due to a reduction in personnel costs, including accrued incentive compensation - The decrease in accrued expenses was primarily due to decreases in accrued incentive compensation[89] Accrued Expenses Composition (May 31, 2024-2025) | Category | 2025 (USD) | 2024 (USD) | | :-------------- | :---------- | :---------- | | Customer deposits | 104,825 | 285,689 | | Personnel costs | 3,214,157 | 3,763,777 | | Other | 753,454 | 614,997 | | Total | 4,072,436 | 4,664,463 | Note 9. Sales Net sales increased to $46.29 million in 2025, with aerospace/defense remaining the largest segment, and sales to two customers accounting for 36% of net sales - Sales to two customers approximated 36% (21% and 15% respectively) of net sales for 2025[175] - Sales to a single customer approximated 21% of net sales for 2024[175] Net Sales by Customer Group (2024-2025) | Customer Group | 2025 (USD) | 2024 (USD) | | :---------------- | :----------- | :----------- | | Structural | 14,827,044 | 14,406,863 | | Aerospace / Defense | 27,134,038 | 26,675,321 | | Industrial | 4,331,643 | 3,500,623 | | Total Net Sales | 46,292,725 | 44,582,807 | Note 10. Income Taxes The total provision for income taxes decreased to $1.62 million in 2025, resulting in a lower effective tax rate of 14.7%, influenced by research tax credits and foreign-derived intangible income deductions - The lower effective tax rate was influenced by research tax credits and foreign-derived intangible income deductions[177] - Realization of deferred tax assets ($2,847,600 in 2025) is dependent on generating approximately $13.6 million in future taxable income[177] Provision for Income Taxes (2024-2025) | Category | 2025 (USD) | 2024 (USD) | | :------------------------ | :----------