Taylor Devices(TAYD) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Unaudited Q3 2022 financial statements show significant profitability growth, with changes in assets, equity, and negative operating cash flow Condensed Consolidated Balance Sheets The balance sheet as of August 31, 2022, shows a slight increase in total assets and stockholders' equity, alongside a decrease in total liabilities Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | August 31, 2022 | May 31, 2022 | | :--- | :--- | :--- | | Total Assets | $49,423,600 | $49,219,061 | | Total Current Assets | $37,770,997 | $37,977,019 | | Total Liabilities | $5,130,784 | $5,963,907 | | Total Current Liabilities | $5,130,784 | $5,963,907 | | Total Stockholders' Equity | $44,292,816 | $43,255,154 | Condensed Consolidated Statements of Income For the three months ended August 31, 2022, the company reported increased net sales and a substantial surge in net income and earnings per share Condensed Consolidated Statements of Income (Unaudited) | Metric | Three months ended Aug 31, 2022 | Three months ended Aug 31, 2021 | | :--- | :--- | :--- | | Sales, net | $9,090,699 | $7,307,737 | | Gross profit | $3,384,757 | $1,872,179 | | Operating income | $1,178,373 | $118,140 | | Net income | $1,002,371 | $181,877 | | Basic and diluted EPS | $0.29 | $0.05 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased for the three months ended August 31, 2022, primarily driven by net income - Total stockholders' equity grew from $40,983,918 as of August 31, 2021, to $44,292,816 as of August 31, 2022[9] - The increase in retained earnings was due to a net income of $1,002,371 for the three-month period ended August 31, 2022[9] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities and investing activities led to a net decrease in cash and cash equivalents for the three months ended August 31, 2022 Net Change in Cash and Cash Equivalents (Unaudited) | Activity | Three months ended Aug 31, 2022 | Three months ended Aug 31, 2021 | | :--- | :--- | :--- | | Net operating activities | $(30,886) | $29,200 | | Net investing activities | $(834,604) | $(467,801) | | Net financing activities | $35,291 | $3,833 | | Net change in cash | $(830,199) | $(434,768) | Notes to Condensed Consolidated Financial Statements The notes clarify interim financial statement preparation, revenue recognition policies, and inventory composition - In the three months ended August 31, 2022, 61% of revenue was recognized over time, while 39% was recognized at a point in time, compared to 66% and 34%, respectively, for the same period in 2021[18] - The company's inventory is primarily composed of work-in-process, which stood at $5,137,526 as of August 31, 2022[14] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 FY2023 performance to increased net revenues, improved gross margin, and growth in key market sectors Results of Operations Net revenues and gross profit significantly increased for the quarter ended August 31, 2022, driven by U.S. sales and specific sector growth, despite a decline in Asia sales Q1 FY2023 vs Q1 FY2022 Performance | Metric | Q1 2022 | Q1 2021 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $9,091,000 | $7,308,000 | $1,783,000 | 24% | | Gross Profit | $3,385,000 | $1,872,000 | $1,513,000 | 81% | | Gross Margin | 37% | 26% | - | - | - The sales order backlog increased by 19% to $23.0 million at August 31, 2022, from $19.4 million at August 31, 2021[30] Sales by Geographic Region (% of Total Net Revenue) | Region | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | USA | 82% | 70% | | Asia | 10% | 20% | | Other | 8% | 10% | Capital Resources and Financial Condition The company's liquidity relies on operations, with increased capital expenditures and a rise in Days Sales Outstanding, though management expects sufficient cash flow - Capital expenditures for the quarter were $833,000, compared to $462,000 in the prior-year period, with commitments for an additional $1,700,000 over the next twelve months[38] - Days Sales Outstanding (DSO) increased from 42 days at May 31, 2022, to 58 days at August 31, 2022, due to a 31% increase in the accounts receivable balance[42][43] - Management believes cash flows from operations are sufficient to fund ongoing operations and capital improvements for the next twelve months[49] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Taylor Devices, Inc. is exempt from providing market risk disclosures - Smaller reporting companies are not required to provide the information called for by this item[50] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of August 31, 2022, with no material changes to internal controls - Management concluded that as of August 31, 2022, the company's disclosure controls and procedures were effective[51] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's control over financial reporting[52] PART II - OTHER INFORMATION Legal Proceedings The company reports no legal proceedings beyond routine litigation incidental to its business - There are no legal proceedings except for routine litigation incidental to the business[53] Risk Factors As a smaller reporting company, Taylor Devices, Inc. is exempt from providing risk factor disclosures - Smaller reporting companies are not required to provide the information called for by this item[53] Unregistered Sales of Equity Securities and Use of Proceeds The company did not engage in unregistered equity security sales or share repurchases during the fiscal quarter - The Company sold no equity securities during the fiscal quarter ended August 31, 2022 that were not registered under the Securities Act[54] - No shares were repurchased during the quarter ended August 31, 2022[54] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[55] Mine Safety Disclosures This item is not applicable to the company - Not applicable[55] Other Information The company reports no undisclosed Form 8-K information or material changes to board nomination procedures - None[55] Exhibits The report lists various exhibits, including CEO and CFO certifications and XBRL taxonomy documents - Exhibits filed include CEO and CFO certifications and XBRL data files[55][56] Report of Independent Registered Public Accounting Firm Review of Interim Financial Information The independent registered public accounting firm reviewed the interim financial information and found no material modifications needed for GAAP conformity - The accounting firm stated: "Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America"[58] - The review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and is substantially less in scope than an audit[60] Signatures Authorization The report was duly signed and authorized on September 30, 2022, by the Chief Executive Officer and Chief Financial Officer - The report was signed on September 30, 2022, by the Chief Executive Officer and Chief Financial Officer[64]