UNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-Q (Mark One) [ X ]
    
    QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
 For the quarterly period ended February
28, 2010 OR [    ]
    
    TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
 For the transition period from

to  Commission File Number
0-3498 TAYLOR DEVICES,
INC.
 (Exact name of registrant as specified in its
charter) NEW YORK
    
    16-0797789(State or Other
      Jurisdiction ofIncorporation or Organization)
    
    (I.R.S.
      EmployerIdentification No.)90 Taylor Drive, North
      Tonawanda, New York
    
    14120-0748(Address of Principal
      Executive Offices)
    
    (Zip
    Code)
 716-694-0800
 (Registrant's telephone
number, including area code)  Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past
90 days.                               
Yes [ X ]      No [    ] Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Exchange Act. (Check one): Large accelerated filer
      [    ]
    
    Accelerated filer [    ]
    
    Non-accelerated
      filer [    ]
    
    Smaller reporting
      company [ X ](Do not check if a
      smaller reporting company)
 Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).             
Yes [    ]    No [ X ] As of April 12, 2010, there were
outstanding 3,230,273 shares of the registrant's common stock, par value $.025
per share.   1    TAYLOR DEVICES, INC.  Index to Form
10-Q    PART I
    FINANCIAL
      INFORMATION                                                                                                                                        
         PAGE
      NO.Item 1.
    Financial
      StatementsCondensed Consolidated
      Balance Sheets as of February 28, 2010 and May 31,
      2009
    3Condensed Consolidated
      Statements of Income for the three and nine months ended February 28, 2010
      and February 28, 2009
    4Condensed Consolidated
      Statements of Cash Flows for the nine months ended February 28, 2010 and
      February 28, 2009
    5Notes to Condensed
      Consolidated Financial Statements
    6Item 2.
    Management's Discussion
      and Analysis of Financial Condition and Results of
      Operations
    7Item 3.
    Quantitative and
      Qualitative Disclosures About Market Risk
    
    14Item 4T.
    Controls and
      Procedures
    
    14PART II
    OTHER
      INFORMATIONItem 1.
    Legal
      Proceedings
    15Item 1A.
    Risk
      Factors
    15Item 2.
    Unregistered Sales of
      Equity Securities and Use of Proceeds
    15Item 3.
    Defaults Upon Senior
      Securities
    16Item 4.
    (Removed and
      Reserved)
    16Item 5.
    Other
      Information
    16Item 6.
    Exhibits
    16REPORT OF INDEPENDENT
      REGISTERED PUBLIC ACCOUNTING
      FIRM
    17SIGNATURES
    
    18
   2      TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Balance Sheets
    (Unaudited)February
      28,      2010
    May
      31,2009AssetsCurrent
      assets:Cash and cash
    equivalents
    $      216,140
    $        
    45,297Accounts receivable,
    net
    2,934,849
    2,691,032Inventory
    6,822,601
    6,721,821Costs and estimated earnings in
      excess of billings
    2,453,764
    1,957,149Other current assets
    1,275,694
    1,382,907Total current assets
    13,703,048
    12,798,206Maintenance and other inventory,
      net
    711,540
    808,537Property and equipment,
      net
    3,528,122
    3,687,637Other assets
    141,024
    136,747$ 
      18,083,734
    $  17,431,127Liabilities and
      Stockholders' EquityCurrent
      liabilities:Short-term borrowings and current
      portion of long-term debt
    $       293,485
    $  
    1,094,151Accounts payable
    1,179,218
    886,963Accrued commissions
    461,448
    598,287Billings in excess of costs and
      estimated earnings
    99,315
    126,017Other current
    liabilities
    1,370,838
    1,146,631Total current liabilities
    3,404,304
    3,852,049Long-term liabilities
    317,798
    395,245Stockholders'
      Equity:Common stock and additional paid-in
      capital
    6,524,898
    6,494,497Retained earnings
    10,068,018
    8,920,55716,592,916
    15,415,054Treasury stock - at
    cost
    (2,231,284)
    (2,231,221)Total stockholders' equity
    14,361,632
    13,183,833$ 
      18,083,734
    $  17,431,127  See notes to condensed consolidated
financial statements.  3    TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Statements of Income
    (Unaudited)
    (Unaudited)For the three months
      ended February 28,
    For the nine months
      ended February 28,2010
    2009
    2010
    2009Sales, net
    $
      4,783,353
    $  3,718,629
    $
      13,285,823
    $ 12,279,862Cost of goods sold
    3,283,576
    2,840,825
    8,639,332
    9,168,104Gross
      profit
    1,499,777
    877,804
    4,646,491
    3,111,758Selling, general and administrative
      expenses
    956,089
    821,581
    3,268,512
    2,709,750Operating
      income
    543,688
    56,223
    1,377,979
    402,008Other income (expense),
      net
    2,786
    (9,077)
    5,182
    (32,445)Income before provision for income
      taxes
    546,474
    47,146
    1,383,161
    369,563Provision for income taxes
      (benefit)
    221,700
    15,800
    235,700
    134,200Net
      income
    $     324,774
    $   
      31,346
    $  
      1,147,461
    $  
  235,363Basic and diluted
      earnings per common share
    $      0.10
    $   
      0.01
    $     
      0.36
    $    
      0.07   See notes to condensed consolidated
financial statements.  4    TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Statements of Cash Flows(Unaudited)February
      28,
    February
    28,For the nine months
    ended
    2010
    2009Cash flows from
      operating activities:Net income
    $ 
      1,147,461
    $    
      235,363Adjustments to reconcile net income
      to net cash flows fromoperating
      activities:Depreciation and
      amortization
    340,170
    302,177Gain on sale of
    equipment
    -
    (350)Stock options issued for
      services
    19,851
    28,114Deferred income taxes
    -
    300Changes in other assets and
      liabilities:Accounts receivable
    (243,817)
    860,557Inventory
    (3,783)
    (107,738)Costs and estimated earnings in
      excess of billings
    (496,615)
    (216,240)Other current assets
    69,282
    118,190Accounts payable
    292,255
    (244,977)Accrued commissions
    (136,839)
    135,221Billings in excess of costs and
      estimated earnings
    (26,702)
    318,999Other current
    liabilities
    224,207
    171,360Net cash flows from
      operating activities
    1,185,470
    1,600,976Cash flows from
      investing activities:Acquisition of property and
      equipment
    (180,655)
    (588,517)Other investing
      activities
    33,654
    1,031Net cash flows for
      investing activities
    (147,001)
    (587,486)Cash flows from
      financing activities:Net short-term borrowings and
      repayments on long-term debt
    (878,113)
    (975,954)Proceeds from long-term
      debt
    -
    21,482Proceeds from issuance of common
      stock, net
    10,487
    11,043Net cash flows for
      financing activities
    (867,626)
    (943,429)Net increase in cash and cash
      equivalents
    170,843
    70,061Cash and cash equivalents -
      beginning
    45,297
    110,720Cash and cash equivalents -
      ending
    $     216,140
    $  
  180,781   See notes to condensed consolidated
financial statements.  5     TAYLOR DEVICES, INC.  Notes to Condensed
Consolidated Financial Statements  1.
    The accompanying
      unaudited condensed consolidated financial statements have been prepared
      in accordance with accounting principles generally accepted in the United
      States of America for interim financial information and with the
      instructions to Form 10-Q.  Accordingly, they do not include all of
      the information and footnotes required by accounting principles generally
      accepted in the United States of America for complete financial
      statements. In the opinion of the Company, the accompanying unaudited
      condensed consolidated financial statements contain all adjustments
      (consisting of only normal recurring accruals) necessary to present fairly
      the financial position as of February 28, 2010 and May 31, 2009, the
      results of operations for the three and nine months ended February 28,
      2010 and February 28, 2009, and cash flows for the nine months ended
      February 28, 2010 and February 28, 2009. These financial statements should
      be read in conjunction with the audited financial statements and notes
      thereto contained in the Company's Annual Report to Shareholders for the
      year ended May 31, 2009.  There have been no updates or changes to
      our audited financial statements for the year ended May 31,
      2009.2.
    The Company has evaluated events and transactions for
      potential recognition or disclosure in the financial statements through
      April 12, 2010 (the date the financial statements were
      issued).3.
    There is no provision
      nor shall there be any provisions for profit sharing, dividends, or any
      other benefits of any nature at any time for this fiscal
      year.4.
    For the three and nine
      month periods ended February 28, 2010 and February 28, 2009, the net
      income was divided by 3,223,317 and 3,221,155, respectively, which is net
      of the Treasury shares, to calculate the net income per
      share.5.
    The results of
      operations for the nine month period ended February 28, 2010 are not
      necessarily indicative of the results to be expected for the full
      year.6.
    Effective September 1,
      2009, the Company adopted the Financial Accounting Standards Board
      ("FASB") Accounting Standards Codification ("ASC") regarding Generally
      Accepted Accounting Principles ("GAAP").  The guidance establishes
      the FASB ASC as the source of authoritative accounting principles
      recognized by the FASB to be applied by nongovernmental entities in the
      preparation of financial statements in conformity with GAAP for SEC
      registrants.  All guidance contained in the FASB ASC carries an equal
      level of authority.  The FASB ASC supersedes all existing non-SEC
      accounting and reporting standards.  The FASB now issues new
      standards in the form of Accounting Standards Updates ("ASUs").  The
      FASB will not consider ASUs as authoritative in their own right. 
      ASUs will serve only to update the FASB ASC, provide background
      information about the guidance and provide the basis for conclusions on
      the changes in the FASB ASC.  References made to FASB guidance have
      been updated for the FASB ASC throughout this document.
      Effective June 1, 2009,
      the Company adopted guidance issued by the FASB that requires disclosure
      about the fair value of financial instruments for interim financial
      statements of publicly traded companies.  The adoption did not have
      an impact on our consolidated results of operations or financial
      condition.
      Effective June 1, 2008,
      the Company adopted the FASB ASC "Fair Value Measurements and Disclosures"
      guidance with respect to recurring financial assets and liabilities. 
      Effective June 1, 2009, the Company adopted the FASB ASC "Fair Value
      Measurements and Disclosures" guidance as it relates to nonrecurring fair
      value measurement requirements for nonfinancial assets and
      liabilities.  The ASC guidance defines fair value, establishes a
      framework for measuring fair value in GAAP, and expands disclosure about
      fair value measurements.  The adoption of the standard had no impact
      on our consolidated financial results.
      Other recently
      issued ASC guidance has either been implemented or are not significant to
      the Company.
  6  Item 2.  Management's
Discussion and Analysis of Financial Condition and Results of
Operations Cautionary
Statement The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking
statements.  Information in this Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere in
this 10-Q that does not consist of historical facts, are "forward-looking
statements."  Statements accompanied or qualified by, or containing, words
such as "may," "will," "should," "believes," "expects," "intends," "plans,"
"projects," "estimates," "predicts," "potential," "outlook," "forecast,"
"anticipates," "presume," and "assume" constitute forward-looking statements
and, as such, are not a guarantee of future performance.  The statements
involve factors, risks and uncertainties, the impact or occurrence of which can
cause actual results to differ materially from the expected results described in
such statements.  Risks and uncertainties can include, among others,
uncertainty regarding how long the worldwide economic recession will continue
and whether the recession will deepen; reductions in capital budgets by our
customers and potential customers; changing product demand and industry
capacity; increased competition and pricing pressures; advances in technology
that can reduce the demand for the Company's products; and other factors, many
or all of which are beyond the Company's control.  Consequently, investors
should not place undue reliance on forward-looking statements as predictive of
future results.  The Company disclaims any obligation to release publicly
any updates or revisions to the forward-looking statements herein to reflect any
change in the Company's expectations with regard thereto, or any changes in
events, conditions or circumstances on which any such statement is
based. Results of
Operations A summary of the period to
period changes in the principal items included in the condensed consolidated
statements of income is shown below: Summary comparison of the nine
      months ended February 28, 2010 and February 28, 2009Increase
    /(Decrease)Sales,
net
    
    $ 
      1,006,000Cost of goods
      sold
    
    $  (529,000)Selling, general and
      administrative expenses
    
    $    
      559,000Income before provision
      for income taxes
    
    $  1,014,000Provision for income
      taxes
    
    $     102,000Net
income
    
    $    
      912,000
 Sales under certain
fixed-price contracts, requiring substantial performance over several periods
prior to commencement of deliveries, are accounted for under the
percentage-of-completion method of accounting whereby revenues are recognized
based on estimates of completion prepared on a ratio of cost to total estimated
cost basis.  Costs include all material and direct and indirect charges
related to specific contracts. Adjustments to cost estimates
are made periodically and any losses expected to be incurred on contracts in
progress are charged to operations in the period such losses are
determined.  However, any profits expected on contracts in progress are
recognized over the life of the contract. For financial statement
presentation purposes, the Company nets progress billings against the total
costs incurred 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.  7   For the nine months ended
February 28, 2010(All figures
discussed are for the nine months ended February 28, 2010 as compared to the
nine months ended February 28, 2009.) Nine months ended
    ChangeFebruary 28, 2010
    February 28, 2009
    Increase / (Decrease)
    Percent
      ChangeNet
      Revenue
    $13,286,000
    $12,280,000
    $
      1,006,000
    8%Cost of
      sales
    8,639,000
    9,168,000
    (529,000)
    -6%Gross
      profit
    $  4,647,000
    $
      3,112,000
    $
      1,535,000
    49%...as a percentage of net revenues
    35%
    25% The Company's consolidated
results of operations showed an 8% increase in net revenues and an increase in
net income of 388%.  Revenues recorded in the current period for long-term
construction projects were 71% higher than the level recorded in the prior
year.  Revenues recorded in the current period for other-than long-term
construction projects (non-projects) were down 28% from the level recorded in
the prior year.  The gross profit as a percentage of net revenues for the
current and prior year periods was 35% and 25%.  This fluctuation is
attributable primarily to a.) three large export projects in the current year
have higher than average margins, and b.) three large projects in the current
year with aerospace / defense customers that have higher margins than average
projects for construction customers. While the overall sales
figures showed only a slight increase from the prior year, the mix of customers
buying our products changed.  Sales of the Company's products are made to
three general groups of customers: industrial, construction and aerospace /
defense.  The negative effect of the continued slow global construction
market has been offset by an increase in our global sales to customers in the
aerospace and defense markets.  A breakdown of sales to the three general
groups of customers is as follows: First Nine
      Months - Fiscal 2010
    
    First Nine
      Months - Fiscal 2009Industrial
    9%
    
    Industrial
    14%Construction
    38%
    
    Construction
    46%Aerospace / Defense
    53%
    
    Aerospace / Defense
    40%  At February 28, 2009, we
had 104 open sales orders in our backlog with a total sales value of $12.4
million.  At February 28, 2010, we have 20% more open sales orders in our
backlog (124 orders) and the total sales value is $13 million or approximately
5% higher than the prior year. The Company's revenues and
net income fluctuate from period to period.  The fluctuations in comparing
the current period to the prior period are not necessarily representative of
future results.  8   Selling, General and
      Administrative Expenses Nine months ended
    ChangeFebruary 28, 2010
    February 28, 2009
    Increase / (Decrease)
    Percent
      ChangeOutside
      Commissions
    $615,000
    $     527,000
    $     88,000
    17%Other
      SG&A
    2,654,000
    2,183,000
    471,000
    22%Total
      SG&A
    $ 
      3,269,000
    $
      2,710,000
    $  
      559,000
    21%...as a percentage of net revenues
    25%
    22% Selling, general and
administrative expenses increased by 21% from the prior year.  Outside
commission expense increased by 17% from last year's level.  This
fluctuation was primarily due to a single, high value, non-project,
commissionable sales order recorded this year as well as three Projects in Asia
that included higher than average commissions in the current year.  Other
selling, general and administrative expenses increased 22% from last year to
this.  This increase is primarily due to a.) increased professional fees
related to the completion of a tax credit study that resulted in the recording
of $325,000 in tax credits in the current period, b.) increased incentive
compensation expense related to the improved operating results and increased
aerospace sales, and, c.) the collection, last year, of receivables that had
previously been reserved for as potentially uncollectible.  The tax credits
are included in the current year consolidated statements of income as a benefit
within the provision for income taxes. The above factors resulted in
operating income of $1,378,000 for the nine months ended February 28, 2010, up
243% from the $402,000 in the same period of the prior year. Summary comparison of the three
      months ended February 28, 2010 and February 28, 2009Increase
    /(Decrease)Sales,
net
    
    $ 
      1,065,000Cost of goods
      sold
    
    $    
      443,000Selling, general and
      administrative expenses
    
    $    
      135,000Income before provision
      for income taxes
    
    $    
      499,000Provision for income
      taxes
    
    $     206,000Net
income
    
    $    
      293,000
 For the three months ended
February 28, 2010(All figures
discussed are for the three months ended February 28, 2010 as compared to the
three months ended February 28, 2009.) Three months ended
    ChangeFebruary 28, 2010
    February 28, 2009
    Increase / (Decrease)
    Percent
      ChangeNet
      Revenue
    $  4,783,000
    $ 
      3,718,000
    $
      1,065,000
    29%Cost of
      sales
    3,283,000
    2,840,000
    443,000
    16%Gross
      profit
    $ 
      1,500,000
    $    878,000
    $    622,000
    71%...as a percentage of net revenues
    31%
    24% The Company's consolidated
results of operations showed a 29% increase in net revenues and an increase in
net income of 936%.  Revenues recorded in the current period for long-term
construction projects were 170% higher than the level recorded in the prior
year.  Revenues recorded in the current period for other-than long-term
construction projects (non-projects) were down 16% from the level recorded in
the prior year.  The gross profit as a percentage of net revenues for the
current and prior year periods was 31% and 24%.  This fluctuation is
attributable primarily to three large projects in the current year with
aerospace / defense customers that have higher margins than average projects for
construction customers.  9   A breakdown of sales to the
three general groups of customers is as follows: Third Quarter -
      Fiscal 2010
    
    Third
      Quarter  - Fiscal 2009Industrial
    11%
    
    Industrial
    15%Construction
    33%
    
    Construction
    36%Aerospace / Defense
    56%
    
    Aerospace / Defense
    49% The Company's revenues and
net income fluctuate from period to period.  The fluctuations in comparing
the current period to the prior period are not necessarily representative of
future results. Selling, General and
      Administrative Expenses Three months ended
    ChangeFebruary 28, 2010
    February 28, 2009
    Increase / (Decrease)
    Percent
      ChangeOutside
      Commissions
    $141,000
    $   
      163,000
    $      (22,000)
    -13%Other
      SG&A
    815,000
    658,000
    157,000
    24%Total
      SG&A
    $     956,000
    $   821,000
    $     135,000
    16%...as a percentage of net revenues
    20%
    22% Selling, general and
administrative expenses increased by 16% from the prior year.  Outside
commission expense decreased by 13% from last year's level.  This
fluctuation was primarily due to more Project sales in the current year that are
to customers in aerospace / defense without the assistance of outside sales
representatives and therefore incur no commission expense on these sales. 
Other selling, general and administrative expenses increased 24% from last year
to this due to the collection, last year, of receivables that had previously
been reserved for as potentially uncollectible. The above factors resulted in
operating income of $544,000 for the three months ended February 28, 2010, up
867% from the $56,000 in the same period of the prior year. Stock
Options The Company has a stock
option plan which provides for the granting of nonqualified or incentive stock
options to officers, key employees and non-employee directors.  Options
granted under the plan are exercisable over a ten year term.  Options not
exercised at the end of the term expire.  10  The Company expenses
stock options using the fair value recognition provisions of the ASC.  The
Company recognized $20,000 and $28,000 of compensation cost for the nine month
periods ended February 28, 2010 and February 28, 2009. The fair value of each stock
option grant has been determined using the Black-Scholes model.  The model
considers assumptions related to exercise price, expected volatility, risk-free
interest rate, and the weighted average expected term of the stock option
grants.  Expected volatility assumptions used in the model were based on
volatility of the Company's stock price for the thirty month period ending on
the date of grant.  The risk-free interest rate is derived from the U.S.
treasury yield.  The Company used a weighted average expected term. 
The following assumptions were used in the Black-Scholes model in estimating the
fair market value of the Company's stock option grants: 2010                           
2009                                                           
Risk-free interest
rate:             
4.875%                      
5.000%                                              
Expected life of the
options:            2.5
years                   
2.5
years                                         
Expected share price
volatility:             
57.57%                      
44.62%                                                           
Expected
dividends:               
zero                            
zero These assumptions resulted
in:               
Estimated fair-market value per stock option:
               
$1.37                          
$1.94 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 nine month period ended February 28, 2010
is presented below: Weighted-                                                                                                                              
Number
of              
Average                                                                                                                                
Options            
Exercise PriceOptions outstanding and exercisable at May 31,
2009:          
160,000                     
$ 4.98Options
granted:            
14,500                     
$
3.51                                                           
                
Options outstanding and exercisable at February 28,
2010:           
174,500                    
$ 4.86 Closing value per share on NASDAQ at
February 28,
2010:                                             
$ 5.43 Capital Resources, Line of
Credit and Long-Term Debt The Company's primary
liquidity is dependent upon the working capital needs.  These are mainly
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
nine months ended February 28, 2010 were $181,000 compared to $589,000 in the
same period of the prior year.  As of February 28, 2010, the Company has no
commitments for capital expenditures during the next twelve months. Effective August 7, 2009, the
Company replaced its bank credit facility with a $6,000,000 bank demand line of
credit, with interest payable at the Company's option of 30, 60, 90 or 180 day
LIBOR rate plus 2.5%, or the bank's prime rate less .25%.  There is an
interest rate floor of 3.5%.  The line is secured by accounts receivable,
equipment, inventory, and general intangibles, and a negative pledge of the
Company's real property.  This line of credit is subject to the usual terms
and conditions applied by the bank, is subject to renewal annually, and is not
subject to an express requirement on the bank's part to lend.  There is a
$288,000 principal balance outstanding as of February 28, 2010, compared to the
$1,017,000 balance outstanding on the line of credit in place as of May 31,
2009.  The outstanding balance on the line of credit fluctuates as the
Company's various long-term projects progress.  The Company is in
compliance with restrictive covenants under the line of credit.  In these
covenants, the Company agrees to maintain the following minimum levels of the
stated item:  11   Covenant                                  
Minimum per
Covenant          Current
Actual   When
Measured           
Minimum level working
capital                        
$3,000,000                        
$10,299,000             
Quarterly           
Minimum debt service coverage
ratio                 
1.5:1                                    
n/a              
Fiscal Year-end All of the $5,712,000 unused
portion of our line of credit is available without violating any of our debt
covenants. Principal maturities of
long-term debt for the remainder of the current fiscal year and the subsequent
five years are as follows: 2010 - $1,000; 2011 - $6,000; 2012 - $5,000; and 2013
- $4,000. Inventory and
      Maintenance Inventory February 28, 2010
    May 31, 2009
    Increase / (Decrease) Raw
      Materials
    $  
      504,000
    
    $   524,000
    
    $  
        (20,000)
    -4%Work in
      process
    5,976,000
    
    5,688,000
    
    288,000
    5%Finished
      goods
    343,000
    
    510,000
    
    (167,000)
    -33%Inventory
    6,823,000
    91%
    6,722,000
    89%
    101,000
    2%Maintenance
      and other inventory
    712,000
    9%
    809,000
    11%
    (97,000)
    -12%Total
    $7,535,000
    100%
    $7,531,000
    100%
    $       
      4,000
    0%Inventory turnover
    1.5
    
    1.6
 NOTE: Inventory
      turnover is annualized for the nine month period ended February 28,
      2010. Inventory, at $6,823,000 as
of February 28, 2010, is $101,000 or two percent higher than the prior year-end
level of $6,722,000.  Of this, approximately 88% is work in process, 5% is
finished goods, and 7% is raw materials. Maintenance and other
inventory represent stock that is estimated to have a product life cycle in
excess of twelve months. This stock represents certain items the Company is
required to maintain for service of products sold and items that are generally
subject to spontaneous ordering.  This inventory is particularly sensitive
to technological obsolescence in the near term due to its use in industries
characterized by the continuous introduction of new product lines, rapid
technological advances and product obsolescence.  The maintenance inventory
decreased slightly since May 31, 2009.  Management of the Company has
recorded an allowance for potential inventory obsolescence. The provision for
potential inventory obsolescence was $135,000 for each of the nine month periods
ended February 28, 2010 and February 28, 2009.  The Company continues to
rework slow-moving inventory, where applicable, to convert it to product to be
used on customer orders. Accounts Receivable,
      Costs and Estimated Earnings in Excess of Billings
    ("CIEB"),and Billings in
      Excess of Costs and Estimated Earnings ("BIEC") February 28, 2010
    May 31,
      2009
    Increase /(Decrease)Accounts
      receivable
    $ 
      2,935,000
    
    $ 
      2,691,000
    
    $     244,000
    
    9%CIEB
    2,454,000
    
    1,957,000
    
    497,000
    
    25%Less:
      BIEC
    99,000
    
    126,000
    
    (27,000
    )
    -21%Net
    $ 
      5,290,000
    
    $ 
      4,522,000
    
    $     768,000
    
    17%  Number of
      an average day's sales outstanding in accounts
      receivable
    55
    54 The Company combines the
totals of accounts receivable, the current asset CIEB, and the current
liability, BIEC, to determine how much cash the Company will eventually realize
from revenue recorded to date.  As the accounts receivable figure rises in
relation to the other two figures, the Company can anticipate increased cash
receipts within the ensuing 30-60 days. Accounts receivable of
$2,935,000 as of February 28, 2010 includes approximately $418,000 of amounts
retained by customers on long-term construction projects ("Project(s)"). 
It also includes $42,000 of an allowance for doubtful accounts
("Allowance").   The accounts receivable balance as of May 31, 2009 of
$2,691,000 included an Allowance of $42,000.  The Company expects to
collect the net accounts receivable balance, including the retainage, during the
next twelve months.  12   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 $2,454,000 balance in this account at February 28, 2010 is
25% more than the prior year-end.  This increase is primarily due to two
projects in progress that have an aggregate sales value of $2.3 million and, in
accordance with the terms of each of the contracts, have billings to the
customers of only 22% of the contracts' aggregate sales value as of February 28,
2010.  In the aggregate, these two projects are slightly more than 85%
completed. Generally, if progress billings are permitted under the terms of a
Project sales agreement, 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.  65% of the CIEB balance as of the end of
the last fiscal quarter, November 30, 2009, was billed to those customers in the
current fiscal quarter ended February 28, 2010.  The remainder will be
billed as the projects progress, in accordance with the terms specified in the
various contracts. The balances in this account
are comprised of the following components: February 28, 2010
    
    May
      31, 2009Costs
    $
      5,128,000
    
    $
      3,303,000Estimated
      earnings
    1,716,000
    
    1,048,000Less:
      Billings to customers
    4,390,000
    
    2,394,000CIEB
    $
      2,454,000
    
    $
      1,957,000Number of
      Projects in progress
    17
    
    10 As noted above, BIEC
represents billings to customers in excess of revenues recognized.  The
$99,000 balance in this account at February 28, 2010 is down slightly from the
$126,000 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: February 28, 2010
    
    May
      31, 2009Billings to
      customers
    $   146,000
    
    $   956,000Less: 
      Costs
    45,000
    
    548,000Less:
      Estimated earnings
    2,000
    
    282,000BIEC
    $    99,000
    
    $   126,000Number of
      projects in progress
    1
    
    4 Summary of factors affecting
the balances in CIEB and BIEC: February 28, 2010
    
    May
      31, 2009Number of
      Projects in progress
    18
    
    14Aggregate
      percent complete
    66%
    
    58%Average
      total sales value of Projects in progress
    $546,000
    
    $661,000Percentage
      of total value invoiced to customer
    44%
    
    36% The Company's backlog of
sales orders at February 28, 2010 is $13.0 million, down slightly from the $13.1
million backlog value at the end of the prior year.  $4.1 million of the
current backlog is on long-term construction projects already in
progress. Other Balance Sheet
Items Accounts payable, at
$1,179,000 as of February 28, 2010, is approximately $292,000 more than the
prior year-end.  There is no specific reason for this fluctuation other
than the normal payment cycle of vendor invoices.  13   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 February 28, 2010 are $461,000, down 23% from the
$598,000 accrued at the prior year-end.  This decrease is primarily due to
more Projects in process at February 28, 2010 are to customers in aerospace /
defense without the assistance of outside sales representatives and therefore
incur no commission expense on these sales.  The Company expects the
current accrued amount to be paid during the next twelve months.  Other
current liabilities increased 20% from the prior year-end, to $1,371,000
primarily due to customer advance deposits.  Payments on these liabilities
will take place as scheduled within the next twelve months. Management believes the
Company's cash flows from operations and borrowing capacity under the bank line
of credit is sufficient to fund ongoing operations, capital improvements and
share repurchases for the next twelve months. Item 3.  Quantitative
and Qualitative Disclosures About Market Risk Smaller reporting companies
are not required to provide the information called for by this item. Item 4T.  Controls
and Procedures (a)
          Evaluation of
disclosure controls and procedures. The Company's principal
executive officer and principal financial officer have evaluated the Company's
disclosure controls and procedures as of February 28, 2010 and have concluded
that as of the evaluation date, the disclosure controls and procedures were
effective to ensure that information required to be disclosed in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission's rules and
forms and that information required to be disclosed in the reports we file or
submit under the Exchange Act is accumulated and communicated to our management,
including our chief executive officer and chief financial officer to allow
timely decisions regarding required disclosure. (b)           Changes in
internal
controls. There have been no changes in
the Company's internal controls over financial reporting that occurred during
the fiscal quarter ended February 28, 2010 that have materially affected, or are
reasonably likely to materially affect, the Company's control over financial
reporting.  14   Part II - Other
Information ITEM 1
    Legal
      Proceedings
      The State of New York Workers'
      Compensation Board ("Board") commenced a lawsuit against the Company and
      264 other entities in May 2008, seeking to recover funds allegedly owed in
      connection with the Company's participation in the Manufacturing
      Self-Insurance Trust ("Trust").  Among the Board's claims are that
      (i) the Trust provided workers' compensation self-insurance to its
      participating members, including the Company, from April 22, 1997 to
      August 31, 2006; (ii) the Board has assumed control of the Trust; (iii)
      the Trust's liabilities exceed its assets by approximately $29,000,000;
      and (iv) the Company and the other participating members are jointly and
      severally liable for the alleged deficit.  The lawsuit proceeds
      slowly.
      The Board has performed forensic
      audits of the Trust to determine the amounts allegedly owed by the
      participating members, and has calculated an estimate of each
      participating member's share of the deficit, which, for the Company, is
      alleged to be in excess of $118,626.  The Board also claims that the
      Company and the other 264 participating members could be jointly and
      severally responsible for sums substantially in excess of the Board's
      estimates.  The Company denies the Board's claims that the Company
      owes the amounts sought, and continues its investigation into the factual
      allegations of the lawsuit.
      Management is vigorously defending
      the claim and has joined with other participating members in a joint
      defense against the lawsuit.  The Board has initiated settlement
      discussions, dependent upon participation of defendants holding a minimum
      aggregate amount of claims against them.  Settlement of the Board's
      claim is possible, although cross-claims may be asserted by non-settling
      defendants.
      There are no other legal
      proceedings except for routine litigation incidental to the
      business.ITEM 1A
    Risk
      FactorsSmaller reporting
      companies are not required to provide the information called for by this
      item.ITEM 2
    Unregistered Sales of
      Equity Securities and Use of Proceeds(a)
    The Company sold no
      equity securities during the fiscal quarter ended February 28, 2010 that
      were not registered under the Securities Act.(b)
    Use of proceeds
      following effectiveness of initial registration
      statement:Not
      Applicable(c)
    Repurchases of Equity
      Securities
      None(d)
    Under the terms of the Company's credit arrangements
      with its primary lender, the Company is required to maintain net working
      capital of at least $3,000,000, as such term is defined in the credit
      documents.  On February 28, 2010, under such definition the Company's
      net working capital was significantly in excess of such limit. 
      Additional information regarding the Company's line of credit and
      restrictive covenants appears under the caption "Capital Resources, Lines
      of Credit and Long-Term Debt" in the Management's Discussion and Analysis
      of Financial Condition and Results of
Operations.
 15   ITEM
      3
    Defaults Upon Senior
      SecuritiesNoneITEM
      4
    Submission of Matters
      to a Vote of Securities Holders
      NoneITEM
      5
    Other
      Information(a)
    Information required to
      be disclosed in a Report on Form 8-K, but not reported
      None(b)
    Material changes to the
      procedures by which Security Holders may recommend nominees to the
      Registrant's Board of Directors
      NoneITEM 6
    Exhibits20
    News from Taylor
      Devices, Inc. Shareholder Letter, Spring
  2009-2010.31(i)
    Rule 13a-14(a)
      Certification of Chief Executive Officer.31(ii)
    Rule 13a-14(a)
      Certification of Chief Financial Officer.32(i)
    Section 1350
      Certification of Chief Executive Officer.32(ii)
    Section 1350
      Certification of Chief Financial
  Officer.
  16   Report of Independent
Registered Public Accounting Firm The Board of Directors and
StockholdersTaylor Devices, Inc. We have reviewed the
accompanying condensed consolidated balance sheet of Taylor Devices, Inc. and
Subsidiary as of February 28, 2010, the related condensed consolidated
statements of income for the three and nine months ended February 28, 2010 and
February 28, 2009 and cash flows for the nine months ended February 28, 2010 and
February 28, 2009.  These interim financial statements are the
responsibility of the Company's management. We conducted our reviews in
accordance with standards of the Public Company Accounting Oversight Board
(United States).  A review of interim financial information consists
principally of applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters.  It is substantially less
in scope than an audit conducted in accordance with standards of the Public
Company Accounting Oversight Board, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole. 
Accordingly, we do not express such an opinion. Based on our reviews, we are
not aware of any material modifications that should be made to the accompanying
interim condensed consolidated financial statements referred to above for them
to be in conformity with accounting principles generally accepted in the United
States of America. We have previously audited,
in accordance with standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheet as of May 31, 2009, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated August 7, 2009, we expressed an unqualified opinion on those financial
statements.  In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of May 31, 2009 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived. Lumsden & McCormick,
LLPBuffalo, New YorkApril 13, 2010  17    TAYLOR DEVICES,
  INC.   Signatures  In accordance with the
requirements of the Exchange Act, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.  TAYLOR DEVICES,
      INC.(Registrant)  Date:
    April 13,
      2010
    
    
    /s/Douglas P.
      TaylorDouglas P.
      TaylorPresidentChairman of the Board of Directors(Principal
      Executive Officer)
   Date:
    April 13,
      2010
    
    
    /s/Mark V.
      McDonoughMark V.
      McDonoughChief Financial Officer
   18