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, 2009 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 1, 2009, there were
outstanding 3,222,095 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 February 28, 2009 and May 31, 2008
    3Condensed Consolidated
      Statements of Income for the three and nine months ended February 28, 2009
      and February 29, 2008
    4Condensed Consolidated
      Statements of Cash Flows for the nine months ended February 28, 2009 and
      February 29, 2008
    5Notes to Condensed
      Consolidated Financial Statements
    6Item 2.
    Management's Discussion
      and Analysis of Financial Condition and Results of
      Operation
    7Item 3.
    Quantitative and
      Qualitative Disclosures About Market Risk
    
    13Item 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.
    Submission of Matters
      to a Vote of Security Holders
    16Item 5.
    Other
      Information
    16Item 6.
    Exhibits
    17REPORT OF INDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRM
    18SIGNATURES
    
    19
   2       TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Balance Sheets
    (Unaudited)February
      28,     2009
    May
      31,2008AssetsCurrent
      assets:Cash and cash
    equivalents
    $         
      180,781
    $       110,720Accounts receivable,
    net
    1,248,600
    2,109,157Inventory
    6,786,962
    6,625,168Costs and estimated earnings in
      excess of billings
    1,972,404
    1,756,164Other current assets
    1,238,917
    1,360,736Total current assets
    11,427,664
    11,961,945Maintenance and other inventory,
      net
    833,532
    887,588Property and equipment,
      net
    3,718,550
    3,425,910Intangible and other
      assets
    135,857
    139,207$ 
      16,115,603
    $  16,414,650Liabilities and
      Stockholders' EquityCurrent
      liabilities:Short-term borrowings and current
      portion of long-term debt
    $   
      111,151
    $  
    1,016,621Payables - trade
    941,272
    1,186,249Accrued commissions
    527,914
    392,693Billings in excess of costs and
      estimated earnings
    318,999
    -Other current
    liabilities
    1,105,874
    934,514Total current liabilities
    3,005,210
    3,530,077Long-term liabilities
    286,783
    335,485Stockholders'
      Equity:Common stock and additional paid-in
      capital
    6,464,647
    6,425,490Retained earnings
    8,584,028
    8,348,66315,048,675
    14,774,153Treasury stock - at
    cost
    (2,225,065)
    (2,225,065)Total stockholders' equity
    12,823,610
    12,549,088$ 
      16,115,603
    $  16,414,650  See notes to condensed consolidated
financial statements.  3     TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Statements of Income
    (Unaudited)
    (Unaudited)For the three months
      ended
    For the nine months
      endedFebruary
      28,
    February
    29,
    February
      28,
    February
    292009
    2008
    2009
    2008Sales, net
    $
      3,718,629
    $  4,926,252
    $
      12,279,862
    $ 13,610,843Cost of goods sold
    2,840,825
    3,169,589
    9,168,104
    8,900,234Gross
      profit
    877,804
    1,756,663
    3,111,758
    4,710,609Selling, general and administrative
      expenses
    821,581
    1,132,753
    2,709,750
    3,257,349Operating
      income
    56,223
    623,910
    402,008
    1,453,260Other expense, net
    (9,077)
    (20,804)
    (32,445)
    (76,761)Income before provision for income
      taxes, equity in netincome (loss) of
      affiliate and minority stockholder's interest
    47,146
    603,106
    369,563
    1,376,499Provision for income
      taxes
    15,800
    232,000
    134,200
    527,700Income before equity in net income
      (loss) of affiliateand minority
      stockholder's interest
    31,346
    371,106
    235,363
    848,799Equity in net income (loss) of
      affiliate
    -
    (1,156)
    -
    4,963Income before minority
      stockholder's interest
    31,346
    372,262
    235,363
    853,762Minority stockholder's
      interest
    -
    (7,253)
    -
    (27,214)Net
      income
    $ 
          31,346
    $   
      365,009
    $   
      235,363
    $  
  826,548Basic and diluted
      earnings per common share
    $      0.01
    $     0.12
    $      0.07
    $     0.26  See notes to condensed consolidated
financial statements.  4    TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Statements of Cash Flows(Unaudited)February
      28,
    February
    29,For the nine months
    ended
    2009
    2008Cash flows from
      operating activities:Net income
    $     235,363
    $    
      826,548Adjustments to reconcile net income
      to net cash flows fromoperating
      activities:Depreciation and
      amortization
    302,177
    270,169Gain of sale of
    equipment
    (350)
    (890)Stock options issued for
      services
    28,114
    37,741Equity in net (income) loss of
      affiliate
    -
    (4,963)Deferred income taxes
    300
    -Minority stockholder's
      interest
    -
    27,214Changes in other assets and
      liabilities:Accounts receivable
    860,557
    1,275,406Inventory
    (107,738)
    (1,852,381)Costs and estimated earnings in
      excess of billings
    (216,240)
    384,669Other current assets
    118,190
    (247,589)Payables - trade
    (244,977)
    281,793Accrued commissions
    135,221
    (18,668)Billings in excess of costs and
      estimated earnings
    318,999
    62,832Other current
    liabilities
    171,360
    (276,066)Net cash flows from
      operating activities
    1,600,976
    765,815Cash flows from
      investing activities:Acquisition of property and
      equipment
    (588,517)
    (432,455)Other investing
      activities
    1,031
    5,164Net cash flows for
      investing activities
    (587,486)
    (427,291)Cash flows from
      financing activities:Net short-term borrowings and
      repayments on long-term debt
    (975,954)
    (188,686)Payables - affiliate
    -
    (130,933)Proceeds from long-term
      debt
    21,482
    -Proceeds from issuance of common
      stock
    11,043
    20,467Net cash flows for
      financing activities
    (943,429)
    (299,152)Net increase  in cash and cash
      equivalents
    70,061
    39,372Cash and cash equivalents -
      beginning
    110,720
    22,748Cash and cash equivalents
      - ending
    $     180,781
    $  
  62,120   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, 2009 and May 31, 2008, the
      results of operations for the three and nine months ended February 28,
      2009 and February 29, 2008, and cash flows for the nine months ended
      February 28, 2009 and February 29, 2008. 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, 2008.  There have been no updates or changes to
      our audited financial statements for the year ended May 31,
      2008.2.
    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.3.
    For the three and nine
      month periods ended February 28, 2009 and February 29, 2008 the net income
      was divided by 3,221,155 and 3,146,622, respectively, which is net of the
      Treasury shares, to calculate the net income per
      share.4.
    The results of
      operations for the nine month period ended February 28, 2009 are not
      necessarily indicative of the results to be expected for the full
      year.5.
    Effective April 1, 2008, the Company merged with Tayco
      Developments, Inc. (Developments) following approval from shareholders of
      both companies. The Company is the surviving corporation.  
      Under the terms of the Plan of Merger, each share of Developments' common
      stock was converted into one share of the Company's common stock. 
      The Company had approximately a 23% equity investment in Developments
      prior to the merger.6.
    In September
      2006, the FASB issued SFAS No. 157 "Fair Value Measurements," to define
      fair value, establish a framework for measuring fair value in accordance
      with generally accepted accounting principles, and expand disclosures
      about fair value measurements.  SFAS No. 157 is effective for fiscal
      years beginning after November 15, 2007 and for interim periods within
      those years.  The FASB issued FASB Staff Positions (FSP) 157-1 and
      157-2 and 157-3.  FSP 157-1 amends SFAS 157 to exclude SFAS No. 13,
      "Accounting for Leases," and its related interpretive accounting
      pronouncements that address leasing transactions, while FSP 157-2 delays
      the effective date of the application for SFAS No. 157 to fiscal years
      beginning after November 15, 2008 for all nonfinancial assets that are
      recognized or disclosed at fair value in the consolidated financial
      statements on a nonrecurring basis.  FSP 157-3 addresses
      considerations in determining fair value of a financial asset when the
      market for that asset is not active.  The Company adopted SFAS No.
      157 as of June 1, 2008 with the exception of the application of the
      statement to nonfinancial assets and liabilities.  The Company does
      not believe that the adoption of SFAS No. 157 for its nonfinancial assets
      and liabilities, effective June 1, 2009, will have a material impact on
      its consolidated financial statements.  The impact of adopting SFAS
      No. 157 on our consolidated financial statements was not
      significant. In February 2007, the FASB issued SFAS No. 159
      "The Fair Value Option for Financial Assets and Financial Liabilities --
      an Amendment of SFAS No. 115."  This statement permits entities to
      choose to measure many financial instruments and certain other items at
      fair value.  The objective is to improve financial reporting by
      mitigating volatility in reporting earnings caused by measuring related
      assets and liabilities differently without having to apply complex hedge
      accounting provisions.  SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007 and interim periods within those
      years.  The Company adopted SFAS No. 159 as of June 1, 2008 and
      elected not to measure any additional financial instruments and other
      items at fair value, therefore, the adoption of SFAS No. 159 had no effect
      on our consolidated financial statements. Other recently
      issued FASB Statements or Interpretations, SEC Staff Accounting Bulletins,
      and AICPA Emerging Issue Task Force Consensuses have 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, 2009 and February 29, 2008Increase
    /(Decrease)Sales,
net
    
    $ 
    (1,331,000)Cost of goods
      sold
    
    $     
      268,000Selling, general and
      administrative expenses
    
    $   
      (548,000)Other expense,
      net
    
    $     
      (44,000)Income before provision
      for income taxes, equity in net income of affiliate and minority
      stockholder's interest
    
    $ (1,007,000)Provision for income
      taxes
    
    $   
      (394,000)Net
income
    
    $   
      (591,000)
 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.   7  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. For the nine months ended
February 28, 2009(All figures
discussed are for the nine months ended February 28, 2009 as compared to the
nine months ended February 29, 2008.) Nine months ended
    ChangeFebruary 28, 2009
    February 29, 2008
    Increase / (Decrease)
    Percent
      ChangeNet
      Revenue
    $12,280,000
    $13,611,000
    $(1,331,000)
    -10%Cost of
      sales
    9,168,000
    8,900,000
    268,000
    3%Gross
      profit
    $  3,112,000
    $
      4,711,000
    $(1,599,000)
    -34%...as a percentage of net revenues
    25%
    35% The Company's consolidated
results of operations showed a 10% decrease in net revenues and a decrease in
net income of 72%.  Revenues recorded in the current period for long-term
construction projects were 34% less than the level recorded in the prior
year.  Revenues recorded in the current period for other-than long-term
construction projects (non-projects) were up 15% over the level recorded in the
prior year.  The gross profit as a percentage of net revenues for the
current and prior year periods was 25% and 35%.  This fluctuation is
attributable to a.) two large, domestic current year projects that have a very
low margin and b.) a few of the bigger non-project shipments in the current
period had low margins. Management attributes a large
portion of the decrease in revenue to the current economic recession and its
effect on the construction markets throughout the world.  Several
construction projects in the United States and in Asia that had been in the
planning stages during the past year or more have been placed "on-hold" by their
owners, citing the decline in demand for their buildings or an inability to
secure the necessary financing to complete their projects.  We maintain
contact with these owners / contractors so that we will be in a position to work
with them should their project resume activity.  It is not possible to
determine the amount of contracts which we may have been awarded had the
construction projects not been placed "on-hold".  A small number of
customers have cancelled outstanding purchase orders with the Company.  We
include provisions in our contracts for the building projects that allow us to
collect from the customer a pro-rata amount for work completed on a contract at
the time of cancellation.  These cancelled purchase orders are not expected
to have a material impact on our operating results or cash flow.  At
February 29, 2008, we had 121 open sales orders in our backlog with a total
sales value of $11.6 million.  At February 28, 2009, we have 14% fewer open
sales orders in our backlog (104 orders) but the total sales value is $12.4
million or approximately 7% higher than the prior year.   In order to
remain profitable during this down-turn in the economy, we are carefully
watching our expenses to reduce them wherever possible. 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 Nine months ended
    ChangeFebruary 28, 2009
    February 29, 2008
    Increase / (Decrease)
    Percent
      ChangeOutside
      Commissions
    $  
      527,000
    $  
      904,000
    $ 
      (377,000)
    -42%Other
      SG&A
    2,183,000
    2,354,000
    (171,000)
    -7%Total
      SG&A
    $2,710,000
    $3,258,000
    $  (548,000)
    -17%...as a percentage of net
      revenues
    22%
    24%  8   Selling, general and
administrative expenses decreased by 17% from the prior year.  Outside
commission expense decreased by 42% from last year's level.  As a
percentage of sales, outside commissions were 4.3% compared with 6.6% last
year.  This fluctuation was primarily due to higher than normal commissions
on some export orders last year.  This year's commissions are slightly
lower than historical averages.  Other selling, general and administrative
expenses remained relatively constant from last year to this. The above factors resulted in
operating income of $402,000 for the nine months ended February 28, 2009, down
72% from the $1,453,000 in the same period of the prior year. Other expense, net, of
$32,000 is primarily interest expense and is $44,000 less than in the prior
year.  The average level of use of the Company's operating line of credit
during the period decreased by about $225,000 from the prior year period. 
The line of credit is used primarily to fund the production of larger projects
that do not allow for advance payments or progress payments.  Long-term
debt is just under half of what it was as of February 29, 2008.  Interest
rates on the line of credit and most of the long-term debt is 2.75 percentage
points lower than the rates in effect at February 29, 2008.  These factors
combined to lower our interest expense for the quarter. Summary comparison of the three
      months ended February 28, 2009 and February 29, 2008Increase
    /(Decrease)Sales,
net
    
    $ (1,208,000)Cost of goods
      sold
    
    $   
      (329,000)Selling, general and
      administrative expenses
    
    $   
      (311,000)Other expense,
      net
    
    $     
      (12,000)Income before provision
      for income taxes, equity in net income of affiliate and minority
      stockholder's interest
    
    $   
      (556,000)Provision for income
      taxes
    
    $   
      (216,000)Net
income
    
    $   
      (334,000)
 For the three months ended
February 28, 2009(All figures
discussed are for the three months ended February 28, 2009 as compared to the
three months ended February 29, 2008.) Three months ended
    ChangeFebruary 28, 2009
    February 29, 2008
    Increase / (Decrease)
    Percent
      ChangeNet
      Revenue
    $  3,719,000
    $
      4,927,000
    $(1,208,000)
    -25%Cost of
      sales
    2,841,000
    3,170,000
    (329,000)
    -10%Gross
      profit
    $     878,000
    $
      1,757,000
    $   (879,000)
    -50%...as a percentage of net revenues
    24%
    36% The Company's consolidated
results of operations showed a 25% decrease in net revenues and a decrease in
net income of 91%.  Revenues recorded in the current period for long-term
construction projects were 22% less than the level recorded in the prior
year.  Revenues recorded in the current period for other-than long-term
construction projects (non-projects) were lower by 3% over the level recorded in
the prior year.  Gross profit decreased by 25%.  The gross profit as a
percentage of net revenues for the current and prior year periods was 24% and
36%.  This fluctuation is attributable to a.) two large, domestic projects
that have a very low margin in the current period, b.) a few of the bigger
projects in the same period last year had higher than normal margins and c.) a
few of the bigger non-project shipments in the quarter had low
margins. Discussions, above, related
to the impact from the recent economic conditions, apply to the quarter ended
February 28, 2009 as well.  9   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, 2009
    February 29, 2008
    Increase / (Decrease)
    Percent
      ChangeOutside
      Commissions
    $  
      163,000
    $  
      311,000
    $ 
      (148,000)
    -48%Other
      SG&A
    659,000
    822,000
    (163,000)
    -20%Total
      SG&A
    $   822,000
    $1,133,000
    $  (311,000)
    -27%...as a percentage of net
      revenues
    22%
    23% Selling, general and
administrative expenses decreased by 27% from the prior year.  Outside
commission expense decreased by 48% from last year's level primarily due to a
decreased sales volume.  Other selling, general and administrative expenses
are 20% lower from last year to this mainly due to the collection of receivables
previously reserved for as potentially uncollectible. The above factors resulted in
operating income of $56,000 for the three months ended February 28, 2009, down
91% from the $624,000 in the same period of the prior year. Other expense, net, of $9,000
is primarily interest expense and is $12,000 less than in 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. The Company applies the stock
option expensing rules of Statement of Financial Accounting Standards (SFAS) No.
123R, "Share Based Payment," using the fair value recognition provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation."  The Company recognized
$28,000 and $38,000 of compensation cost for the nine month periods ended
February 28, 2009 and February 29, 2008. 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 utilized 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: 2008                           
2007                                                           
Risk-free interest
rate:             
5.000%                      
3.625%                                              
Expected life of the
options:            2.5
years                   
2.5
years                                         
Expected share price
volatility:             
44.62%                      
61.47%                                                           
Expected
dividends:               
zero                            
zeroThese
assumptions resulted
in:               
Estimated fair-market value per stock option:
               
$1.94                          
$2.47 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.   10  A summary of changes in the
stock options outstanding during the nine month period ended February 28, 2009
is presented below: Weighted-                                                                                                                              
Number
of              
Average                                                                                                                                
Options            
Exercise PriceOptions outstanding and exercisable at May 31,
2008:          
120,500                     
$ 5.30Options
granted:            
14,500                     
$
6.04                                                                                      
Options
exercised:              
none                              
-                                                                                          
Options
expired:              
none                              
-                       Options
outstanding and exercisable at February 28,
2009:          
135,000                   
  $
5.38 Closing value per share on NASDAQ at February 28,
2009:                                              
$2.40 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, 2009 were $589,000 compared to $432,000 in the
same period of the prior year.  As of February 28, 2009, the Company has
commitments for capital expenditures totaling $50,000 during the next twelve
months. The Company has a $5,000,000
line of credit with a bank.  There is a $34,000 principal balance
outstanding as of February 28, 2009, compared to the $879,000 balance
outstanding as of May 31, 2008.  The outstanding balance on the line of
credit will fluctuate as the Company's various long-term projects
progress.  The Company is in compliance with restrictive covenants under
the line of credit and other financing arrangements, including Niagara County Industrial Development Agency Bond financing.   In these covenants, the Company agrees to
maintain the following minimum or maximum levels of the stated item: Covenant
    Minimum / Maximum
    Current ActualMinimum level working capital
    $2,000,000
    $8,422,000Minimum tangible net worth
    $6,000,000
    $12,822,000Maximum annual capital
    expenditures
    $800,000
    $589,000Minimum debt service ratio
    1:1
    3.8:1 The covenants also require the Company to advise the bank of any
litigation where the claim amount is $100,000 or greater.  Please refer to
Part II, Item 1 of this report - Legal Proceedings, for more discussion
regarding litigation. All of the $4,966,000 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: 2009 - $8,000; 2010 - $77,000; 2011 - $32,000; 2012 -
$32,000; and 2013 - $24,000. Inventory and Maintenance
Inventory  February 28, 2009
    May 31, 2008
    Increase / (Decrease) Raw
      Materials
    $  
      576,000
    
    $   436,000
    
    $    140,000
    32%Work in
      process
    5,655,000
    
    5,811,000
    
    (156,000)
    -3%Finished
      goods
    556,000
    
    378,000
    
    178,000
    47%Inventory
    6,787,000
    89%
    6,625,000
    88%
    162,000
    2%Maintenance
      and other inventory
    834,000
    11%
    888,000
    12%
    (54,000)
    -6%Total
    $7,621,000
    100%
    $7,513,000
    100%
    $    108,000
    1%Inventory turnover
    1.6
    
    1.9
  11   NOTE: Inventory
      turnover is annualized for the nine month period ended February 28,
      2009. Inventory, at $6,787,000 as
of February 28, 2009, is 2% higher than the prior year-end.  Of this,
approximately 83% is work in process, 8% is finished goods, and 9% is raw
materials.  Current inventory increased by $162,000 or two percent over the
May 31, 2008 level of $6,625,000.  While this increase is not significant,
it is one factor in the decrease in the inventory turnover rate.  The
inventory turnover is calculated by dividing the annualized cost of sales by the
average inventory level.  The average level of inventory for the nine
months ended February 28, 2009 was $7,567,000.  This is $887,000 higher
than the average level for the fiscal year ended May 31, 2008.  This
increase is primarily due to the following: a.)We have increased the amount of
machined components sourced from foreign vendors.  There is a longer lead
time to receive these products from the vendors so we maintain a higher level of
inventory to meet our requirements.  The cost of maintaining this higher
level of inventory is offset by the lower landed cost to purchase the components
with the same high level of quality demanded from domestic suppliers. b.) In an
attempt to reduce the lead time to our customers, we have increased the level of
inventory of certain seismic components in standard sizes. While the level of
inventory will fluctuate from time to time due to the stage of completion of the
non-project sales orders in progress at the time, we do not expect that the
inventory level will increase significantly from current levels for a sustained
period of time. 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, 2008.  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, 2009 and February 29, 2008.  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, 2009
    May 31, 2008
    Increase /(Decrease) Accounts
      receivable
    $ 
      1,249,000
    
    $  2,109,000
    
    $    
(860,000)
    -41%CIEB
    1,972,000
    
    1,756,000
    
    216,000
    12%Less:
      BIEC
    319,000
    
    -
    
    319,000 Net
    $  2,902,000
    
    $  3,865,000
    
    $     
      (963,000)
    -25% Number
      of an average day's sales outstanding in accounts
      receivable
    30
    38 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
$1,249,000 as of February 28, 2009 includes approximately $137,000 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, 2008 of
$2,109,000 included an Allowance of $72,000.  The Allowance increased by
$180,000 from May 31, 2008 to November 30, 2008 due to increasing uncertainty
regarding the collectibility of amounts past due from a foreign customer. 
Subsequent to November 30, 2008, the Company has received full payment for these
past due amounts from this customer and, as a consequence, has reduced the
amount of the Allowance by $210,000 to reflect management's assessment of the
current risk of uncollectible accounts receivable.  'The Company expects to
collect the net accounts receivable balance of $1,249,000, including the
retainage, during the next twelve months.  The number of an average day's
sales outstanding in accounts receivable decreased from 38 days at May 31, 2008
to 30 at February 28, 2009.  This is primarily due to the collection during
the current period of one old, large receivable that was outstanding at May 31,
2008.  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 $1,972,000 balance in this account at February 28, 2009 is
12% more than the prior year-end.  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.  41% of
the CIEB balance as of the end of the last fiscal quarter, November 30, 2008,
was billed to those customers in the current fiscal quarter ended February 28,
2009.  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, 2009
    November 30, 2008
    May
      31, 2008Costs
    $
      3,274,000
    $
      3,076,000
    $
      1,711,000Estimated
      earnings
    490,000
    494,000
    372,000Less:
      Billings to customers
    1,792,000
    1,419,000
    327,000CIEB
    $
      1,972,000
    $
      2,151,000
    $
      1,756,000Number of
      Projects in progress
    9
    9
    7 Summary of factors affecting
the balances in CIEB and BIEC: February 28, 2009
    November 30, 2008
    May
      31, 2008Number of
      Projects in progress
    10
    9
    7Aggregate
      percent complete
    69%
    77%
    45%Average
      total sales value of Projects in progress
    $589,000
    $538,000
    $667,000Percentage
      of total value invoiced to customer
    38%
    29%
    7% Other Balance Sheet
Items The Company's backlog of
sales orders at February 28, 2009 is $12.4 million, up from the $11.4 million
backlog value at the end of the prior year.  $2.0 million of the current
backlog is on long-term construction projects already in
progress. Other current assets, which
is primarily comprised of deferred taxes and prepaid expenses, decreased by 9%
to $1,239,000.  This change is mostly due to a reduction in the prepaid
expenses as they are expensed in the normal course of business.  Accounts
payable, at $941,000 as of February 28, 2009, is 21% lower than the prior
year-end.  This reduction is primarily due to a lower level of purchases
(by approximately one-third) from the two month period ended May 31, 2008 to the
two month period ended February 28, 2009.  Fewer purchases are required to
support the lower level of sales. 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, 2009 are $528,000, up 34% from the
$393,000 accrued at the prior year-end.  This increase is primarily due to
more Projects in process at February 28, 2009, at a later stage of
completion.  The Company expects the current accrued amount to be paid
during the next twelve months.  Other current liabilities increased
slightly from the prior year-end, to $1,106,000.  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.




13

---

TAYLOR DEVICES,
      INC.  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, 2009 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, 2009 that have materially affected, or are
reasonably likely to materially affect, the Company's control over financial
reporting.  14    TAYLOR DEVICES,
      INC. Part II - Other
      InformationITEM 1
    Legal
      ProceedingsThe 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
      November 30, 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 Board claims that it
      has calculated a rough estimate of each participating member's current
      share of the deficit, which, for the Company, is alleged to be in excess
      of $79,555.  The Board also claims, however, that the Company and the
      other 264 participating members could be jointly and severally responsible
      for sums substantially in excess of the Board's rough
estimates.
      The Company denies the Board's
      claims that the Company owes the amounts sought.  The lawsuit is
      proceeding slowly, and the Company's investigation into the factual
      allegations of the lawsuit continues.  It appears that the Board is
      performing additional forensic audits regarding the Trust, in order to
      more accurately determine the amounts allegedly owed by the participating
      members.
      Management intends to vigorously
      defend the claim and has joined with other participating members in a
      joint defense against the lawsuit.  It is anticipated that the
      Company, together with other defendants, will conduct an independent
      forensic audit of the Trust's liabilities and assets.  It is also
      anticipated that the Company will challenge the legal and contractual
      basis for the Board's claims.
      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, 2009 that
      were not registered under the Securities Act.(b)
    Use of proceeds
      following effectiveness of initial registration
      statement:Not
  Applicable
                  15   (c)Repurchases of
      Equity SecuritiesPeriod
    (a) Total  Number
      ofSharesPurchased
    (b)AveragePrice PaidPer
      Share
    (c) Total Numberof Shares Purchasedas Part
      ofPubliclyAnnounced Plansor Programs
    (d)
      MaximumNumber (orApproximate DollarValue) of Shares 
      that May YetBe Purchased Underthe Plans
      orProgramsDecember 1, 2008
      - December 31, 2008
    -
    -
    -
    .January 1, 2009 - January
      31, 2009
    -
    -
    -
    .February 1, 2009 -February
      28, 2009
    -
    -
    -
    .Total
    -
    -
    -
    $160,802
      (1)(1)
    In 1998, the Company
      initiated a plan to purchase shares of its outstanding common stock
      through open market purchases, with an initial deposit to the program of
      $225,000.  Additional deposits totaling $435,000 have been made to
      the plan, with expenditures of $499,198.  To date, a total of 164,696
      shares have been purchased at an average price per share of
      $3.03. (d)
    Under the terms of the
      Company's credit arrangements with its primary lender, the Company is
      prohibited from issuing cash dividends.  In addition, the credit
      arrangements require the Company to maintain net working capital of at
      least $2,000,000 and tangible net worth of at least $6,000,000, as such
      terms are defined in the credit documents.  On February 28, 2009,
      under such definitions the Company's net working capital and tangible net
      worth were significantly in excess of such limits.  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. ITEM 3
    Defaults Upon
      Senior SecuritiesNoneITEM 4
    Submission of Matters
      to Vote of Securities HoldersNoneITEM 5
    Other
      Information(a)
    Information required to be
      disclosed in a Report on Form 8-K, but not
  reportedNone(b)
    Material changes to the procedures
      by which Security Holders may recommend nominees to the Registrant"s Board
      of DirectorsNone16ITEM 6
    Exhibits20
    News from Taylor
      Devices, Inc. Shareholder Letter, Spring 200931(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.
  17  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, 2009, the related condensed consolidated
statements of income for the three and nine months ended February 28, 2009 and
February 29, 2008 and cash flows for the nine months ended February 28, 2009 and
February 29, 2008.  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, 2008, 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 1, 2008, 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, 2008 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, 2009   18   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 14, 2009
    
    
    s/Douglas P.
      TaylorDouglas P.
      TaylorPresidentChairman of the Board of Directors(Principal
      Executive Officer)
  
  Date:
    April 14, 2009
    
    
    s/Mark V.
      McDonoughMark V.
      McDonoughChief Financial Officer
  19