UNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM
10‐QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 2007 [  ]  TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from __________ to __________ Commission File Number 0‐3498  TAYLOR DEVICES,
      INC.(Exact name of small
      business issuer as specified in its
  charter)
 NEW
      YORK
    
    16‐0797789(State or other jurisdiction of
      incorporation or organization)
    
    (IRS Employer
      Identification Number)
 90 TAYLOR
      DRIVE, NORTH TONAWANDA, NEW YORK 14120-0748Address of principal
      executive offices
 716‐694‐0800 Issuer's Telephone Number
 Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 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 shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
    
    No
    X State the number of shares outstanding of
each of the issuer's classes of common equity, as of the latest practicable
date: Class
    
    Outstanding at
      March 29, 2007Common Stock(2‐1/2
      cents par value)
    
    3,144,221
  Transitional Small Business
      Disclosure Format (Check one):
    Yes
    
    No
    X    TAYLOR DEVICES, INC. Index to Form
10-QSB PART I
    FINANCIAL
      INFORMATION                                                                                                                   
      PAGE NO.Item 1.
    Financial
      StatementsCondensed Consolidated
      Balance Sheets February 28, 2007 and May 31, 2006
    3Condensed Consolidated
      Statements of Income for the three and nine months ended February 28, 2007
      and February 28, 2006
    4Condensed Consolidated
      Statements of Cash Flows for the nine months ended February 28, 2007 and
      February 28, 2006
    5Notes to Condensed
      Consolidated Financial Statements
    6Item 2.
    Management's Discussion
      and Analysis or Plan of Operation
    7Item 3.
    Controls and
      Procedures
    
    14PART II
    OTHER
      INFORMATIONItem 1.
    Legal
      Proceedings
    15Item 2.
    Unregistered Sales of
      Equity Securities and Use of Proceeds
    15Item 3.
    Defaults upon Senior
      Securities
    15Item 4.
    Submission of Matters
      to a Vote of Security Holders
    16Item 5.
    Other
      Information
    16Item 6.
    Exhibits
    16REPORT OF INDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRM
    17SIGNATURES
    
    18
    TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Balance Sheets
    (Unaudited)February
      28,      2007
    May
      31,2006AssetsCurrent
      assets:Cash and cash
    equivalents
    $        
      45,819
    $        
    60,011Accounts receivable,
    net
    2,942,988
    2,423,428Inventory
    4,878,439
    4,216,633Costs and estimated earnings in
      excess of billings
    3,216,800
    5,062,294Other current assets
    857,887
    1,053,929Total current assets
    11,941,933
    12,816,295Maintenance and other inventory,
      net
    575,525
    543,057Property and equipment,
      net
    3,383,490
    3,419,404Investment in affiliate, at
      equity
    446,868
    440,378Intangible and other
      assets
    147,899
    165,571$ 
      16,495,715
    $  17,384,705Liabilities and
      Stockholders' EquityCurrent
      liabilities:Short-term borrowings and current
      portion of long-term debt
    $   
      1,965,270
    $  
    3,258,924Payables - trade
    996,063
    1,315,089Accrued commissions
    810,804
    982,741Billings in excess of costs and
      estimated earnings
    135,245
    95,421Other current
    liabilities
    863,317
    397,872Total current liabilities
    4,770,699
    6,050,047Long-term liabilities
    579,202
    760,988Payables - affiliate
    178,829
    253,307Minority stockholder's
      interest
    510,863
    483,895Stockholders'
      Equity:Common stock and additional paid-in
      capital
    4,783,641
    4,696,445Retained earnings
    6,728,563
    6,196,10511,512,204
    10,892,550Treasury stock - at
    cost
    (1,056,082)
    (1,056,082)Total stockholders' equity
    10,456,122
    9,836,468$ 
      16,495,715
    $  17,384,705 See notes to condensed consolidated
financial statements.   TAYLOR DEVICES, INC. AND
            SUBSIDIARYCondensed
            Consolidated Statements of Income
          (Unaudited)
          (Unaudited)For the three
            months ended February 28,
          For the nine
            months ended February 28,2007
          2006
          2007
          2006Sales, net
          $
            4,604,636
          $ 4,114,446
          $
            12,429,113
          $ 10,594,573Cost of goods
          sold
          3,048,809
          2,997,885
          7,955,954
          7,425,852Gross
            profit
          1,555,827
          1,116,561
          4,473,159
          3,168,721Selling, general and
            administrative expenses
          1,092,565
          950,872
          3,346,138
          2,547,335Operating
            income
          463,262
          165,689
          1,127,021
          621,386Other expense,
          net
          (66,207)
          (26,837)
          (239,885)
          (77,413)Income before provision for
            income taxes, equity in netincome of
            affiliate and minority stockholder's interest
          397,055
          138,852
          887,136
          543,973Provision for income
            taxes
          151,000
          50,000
          334,200
          204,000Income before equity in net
            income of affiliateand minority
            stockholder's interest
          246,055
          88,852
          552,936
          339,973Equity in net income (loss)
            of affiliate
          1,987
          (1,337)
          6,490
          (7,789)Income before minority
            stockholder's interest
          248,042
          87,515
          559,426
          332,184Minority stockholder's
            interest
          (9,871)
          (8,974)
          (26,968)
          (23,576)Net
            income
          $     238,171
          $    
            78,541
          $    532,458
          $      308,608Basic and diluted earnings
            per common share
          $     
            0.08
          $         0.03
          $     
            0.17
          $       
      0.10 See notes to condensed
      consolidated financial statements.    TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Statements of Cash Flows(Unaudited)February 28,For the nine months
    ended
    2007
    2006Cash flows from
      operating activities:Net income
    $     532,458
    $    
      308,608Adjustments to reconcile net income
      to net cash flows fromoperating
      activities:Depreciation and
      amortization
    273,094
    242,603Stock based compensation expense
      related to employee stock options
    76,368
    -Bad debts expense
    78,000
    9,157Equity in net (income) loss of
      affiliate
    (6,490)
    7,789Minority stockholder's
      interest
    26,968
    23,576Changes in other assets and
      liabilities:Accounts receivable
    (597,560)
    1,589,425Inventory
    (694,274)
    401,145Costs and estimated earnings in
      excess of billings
    1,845,494
    (2,715,144)Other current assets
    191,294
    (110,163)Payables - trade
    (319,026)
    346,589Accrued commissions
    (171,937)
    304,857Billings in excess of costs and
      estimated earnings
    39,824
    (234,003)Other current
    liabilities
    465,445
    68,791Net cash flows from
      operating activities
    1,739,658
    243,230Cash flows from
      investing activities:Acquisition of property and
      equipment
    (215,265)
    (118,845)Other investing
      activities
    505
    3,094Net cash flows for
      investing activities
    (214,760)
    (115,751)Cash flows from
      financing activities:Net short-term borrowings and
      repayments on long-term debt
    (1,475,440)
    176,928Payables - affiliate
    (74,478)
    (291,425)Proceeds from issuance of common
      stock
    10,828
    6,166Net cash flows for
      financing activities
    (1,539,090)
    (108,331)Net increase (decrease) in cash and
      cash equivalents
    (14,192)
    19,148Cash and cash equivalents -
      beginning
    60,011
    63,397Cash and cash equivalents -
      ending
    $     45,819
    $   
      82,545See notes to condensed consolidated
financial statements.


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-QSB and Regulation S-B.  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, 2007 and May 31,
      2006, the results of operations for the three and nine months ended
      February 28, 2007 and February 28, 2006, and cash flows for the nine
      months ended February 28, 2007 and February 28, 2006. 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, 2006.  There have been no
      updates or changes to our audited financial statements for the year ended
      May 31, 2006.2.
    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, 2007 and 2006 the net income was divided
      by 3,143,251 and 3,102,603, 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, 2007 are not
      necessarily indicative of the results to be expected for the full
      year.5.
    Significant Equity
      Investee: The Company owns approximately a 23% equity investment in Tayco
      Developments, Inc. (Developments).  For the nine months ended
      February 28, 2007, Developments had revenues of $181,000 and net income of
      $145,000.  The carrying amount of the investment in Developments as
      of February 28, 2007 and May 31, 2006 was $447,000 and
      $440,000.6.
    Prior to June 1, 2006,
      the Company applied APB Opinion 25 Accounting for Stock Issued to
      Employees and related interpretations in accounting for its stock
      option plans.  Since the option price was the fair market value per
      share on the date the option was granted, no compensation cost had been
      recognized for its stock option plans in reporting periods prior to the
      nine month period ended February 28, 2007.
      Effective June 1, 2006,
      the Company adopted 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 utilized
      the modified prospective approach of adoption under SFAS No. 123R. 
      Accordingly, compensation cost recognized in the nine month period ended
      February 28, 2007 includes compensation cost for all stock options granted
      subsequent to May 31, 2006, based on the grant-date fair value estimated
      in accordance with the provisions of SFAS 123R.
      As a result of adopting
      SFAS 123R on June 1, 2006, the Company's earnings before income taxes for
      the nine month period ended February 28, 2007 was approximately $76,000
      lower than if it had continued to be accounted for as share-based
      compensation under APB Opinion
25.


TAYLOR DEVICES, INC.Item 2.  Management's
Discussion and Analysis or Plan of Operation
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 or Plan of Operation," and elsewhere in this 10-QSB 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, fluctuations in general
business cycles and changing economic conditions; changing product demand and
industry capacity; increased competition and pricing pressures; advances in
technology that can reduce the demand for the Company's products, as well as
other factors, many or all of which may be beyond the Company's control. 
Consequently, investors should not place undue reliance on forward-looking
statements as predictive of future results.  The Company disclaims any
obligation to release publicly any updates or revisions to the forward-looking
statements herein to reflect any change in the Company's expectations with
regard thereto, or any changes in events, conditions or circumstances on which
any such statement is based.
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, 2007 and 2006Increase
    /(Decrease)Sales,
net
    
    $ 1,835,000Cost of goods
      sold
    
    $   
      530,000Selling, general and
      administrative expenses
    
    $   
      799,000Other expense,
      net
    
    $   
      162,000Income before provision
      for income taxes, equity in net income of affiliate and minority
      stockholder's interest
    
    $   
      343,000Provision for income
      taxes
    
    $   
      130,000Income before equity in
      net income of affiliate and minority stockholder's
      interest
    
    $   
      213,000Equity in net income
      (loss) of affiliate
    
    $     
      14,000Net
income
    
    $   
      224,000
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.
For the nine months ended
February 28, 2007(All figures being
discussed are for the nine months ended February 28, 2007 as compared to the
nine months ended February 28, 2006.)
Nine months ended
    ChangeFebruary 28, 2007
    February 28, 2006
    Increase / (Decrease)
    Percent ChangeNet
      Revenue
    $12,429,000
    $10,595,000
    $
      1,834,000
    17%Cost of
      sales
    7,956,000
    7,426,000
    530,000
    7%Gross
      profit
    $ 
      4,473,000
    $3,169,000
    $
      1,304,000
    41%...as a percentage of net revenues
    36%
    30%The Company's consolidated
results of operations showed a 17% increase in net revenues and an increase in
net income of 73%. Revenues recorded in the current period for long-term
construction projects were consistent with the level recorded in the prior
year.  Revenues recorded in the current period for other-than long-term
construction projects (non-projects) were up $1.6 million or 46% over the level
recorded in the prior year.  This increase is primarily in sales of
products to customers in aerospace and defense related fields.  Gross
profit increased by 41%.  The gross profit as a percentage of net revenues
for the current and prior year periods was 36% and 30%.  Gross profit
improved for both projects and non-project sales.  This improvement
resulted from a combination of increased volume, changes in product mix and
improved manufacturing processes.  Based on this and our current sales
order backlog of $12.4 million, management expects that the results achieved
year-to-date will continue through the end of the current fiscal
year.
The Company's revenues and
net income fluctuate from period to period.  The increases in the current
period, compared to the prior period, are not necessarily representative of
future results.
Selling, General and
      Administrative ExpensesNine months ended
    ChangeFebruary 28, 2007
    February 28, 2006
    Increase / (Decrease)
    Percent ChangeOutside
      Commissions
    $1,091,000
    $   706,000
    $  385,000
    55%Other
      SG&A
    2,255,000
    1,841,000
    414,000
    22%Total
      SG&A
    $3,346,000
    $2,547,000
    $  799,000
    31%...as a percentage of net revenues
    27%
    24%Selling, general and
administrative expenses increased by 31% from the prior year.  Outside
commission expense increased by 55% over last year's level.  Outside
commission expense was higher in this period due to higher commission rates on a
few large, long-term construction projects in production, in addition to a
higher volume of sales subject to commission.  Other selling, general and
administrative expenses increased by 22% from last year to this primarily due to
increases in personnel related costs including the calculated value of stock
options granted during the period, inside sales commissions and salary and wage
adjustments.
The above factors resulted in
operating income of $1,127,000 for the nine months ended February 28, 2007, up
81% from the $621,000 in the same period of the prior year.
Other expense, net, of
$240,000 is primarily interest expense and is $162,000 more than in the prior
year.  The average level of use of the Company's operating line of credit
during the period increased significantly from $0.7 million last year to $3.2
million this year.  The interest rate on the operating line of credit
increased 0.75 percentage points since February 28, 2006.  The line of
credit is used primarily to fund the production of larger projects that do not
allow for advance payments or progress payments.
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.
On June 1, 2006, the Company
adopted 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 utilized the modified prospective approach of
adoption under SFAS No. 123R which resulted in the recognition of $76,000 of
compensation cost for the nine month period ended February 28, 2007. 
Results for prior periods have not been restated.
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 from February 1, 2004 through August
1, 2006.  The Company last issued stock options in August 2006.  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:
Risk-free
interest rate:   
3%                                                            
xpected life of the options:    2.5
years                                                     
Expected share price volatility:   
152.96%                                                                      
Expected dividends:    zero
These assumptions resulted in
an estimated fair-market value per stock option of $4.82.  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, 2007
is presented below:
Number
      ofOptions
    Weighted-AverageExercise PriceOptions outstanding and exercisable at May 31, 2006:
    85,250
    $
      4.054Options granted:
    13,250
    $ 6.170Options exercised:
    -
    -Options expired:
    35,000
    $
      3.038Options outstanding and exercisable at February 28,
      2007:
    63,500
    $
      5.056The Company previously
applied APB Opinion 25 "Accounting for Stock Issued to Employees" and related
interpretations in accounting for its stock option plans.   Since the
option price was the fair market value per share on the date the option was
granted, no compensation cost had been recognized for its stock option plans in
reporting periods prior to the nine month period ending February 28,
2007.
For the three months ended
February 28, 2007(All figures being
discussed are for the three months ended February 28, 2007 as compared to the
three months ended February 28, 2006.)
Summary comparison of the three
      months ended February 28, 2007 and 2006Increase
    /(Decrease)Sales,
net
    
    $  490,000Cost of goods
      sold
    
    $   
      51,000Selling, general and
      administrative expenses
    
    $  142,000Other expense,
      net
    
    $   
      39,000Income before provision
      for income taxes, equity in net income of affiliate and minority
      stockholder's interest
    
    $  258,000Provision for income
      taxes
    
    $  101,000Income before equity in
      net income of affiliate and minority stockholder's
      interest
    
    $  157,000Equity in net income
      (loss) of affiliate
    
    $     
      3,000Net
income
    
    $ 
  160,000

Three months ended
    ChangeFebruary 28, 2007
    February 28,2006
    Increase / (Decrease)
    Percent ChangeNet
      Revenue
    $  4,605,000
    $4,115,000
    $    490,000
    12%Cost of
      sales
    3,049,000
    2,998,000
    51,000
    2%Gross
      profit
    $  1,556,000
    $1,117,000
    $    439,000
    39%...as a percentage of net
      revenues
    34%
    27%The Company's consolidated
results of operations showed a 12% increase in net revenues and an increase in
net income of 203%. Revenues recorded in the current period for long-term
construction projects were down 28% from the level recorded in the prior
year.  Revenues recorded in the current period for other-than long-term
construction projects (non-projects) were up $1.4 million or 148% over the level
recorded in the prior year.  This increase is primarily in sales of
products to customers in aerospace and defense related fields.   Gross
profit increased by 39%.   The gross profit as a percentage of net
revenues for the current and prior year periods was 34% and 27%.  
Gross profit improved for both projects and non-project sales.  This
improvement resulted from a combination of increased volume, changes in product
mix and improved manufacturing processes.
The Company's revenues and
net income fluctuate from period to period.  The increases in the current
period, compared to the prior period, are not necessarily representative of
future results.
Selling, General and
      Administrative ExpensesThree months ended
    ChangeFebruary 28, 2007
    February 28, 2006
    Increase / (Decrease)
    Percent ChangeOutside
      Commissions
    $   311,000
    $   341,000
    ( $ 
      30,000)
    -9%Other
      SG&A
    782,000
    610,000
    172,000
    28%Total
      SG&A
    $1,093,000
    $   951,000
    $ 142,000
    15%...as a percentage of net revenues
    24%
    23%Selling, general and
administrative expenses increased by 15% from the prior year.  Outside
commission expense decreased by 9% over last year's level.  This decrease
is the result of the combination of lower project revenues subject to
commissions during the period and higher defense related revenues that are
generally not subject to outside commissions.  Other selling, general and
administrative expenses increased by 28% from last year to this primarily due to
increases in personnel related costs.
The above factors resulted in
operating income of $463,000 for the three months ended February 28, 2007, up
180% from the $166,000 in the same period of the prior year.
Other expense, net, of
$66,000 is primarily interest expense and is $39,000 more than in the prior
year.  The average level of use of the Company's operating line of credit
during the period increased significantly from $0.9 million last year to $2.4
million this year.
Capital
Resources, Line of Credit and Long-Term Debt
The Company's primary
liquidity is dependent upon the working capital needs.  These are primarily
inventory, accounts receivable, costs and estimated earnings in excess of
billings, accounts payable, accrued commissions, billings in excess of costs and
estimated earnings, and debt service.  The Company's primary sources of
liquidity have been operations and bank financing.
Capital expenditures for the
nine months ended February 28, 2007 were $215,000 compared to $119,000 in the
same period of the prior year.  There are no material commitments for
capital expenditures as of February 28, 2007.
The Company has a $5,000,000
line of credit with a bank.  There is a $1,725,000 principal balance
outstanding as of February 28, 2007, which is down from the $3,011,000 balance
outstanding as of May 31, 2006.  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.
Principal maturities of
long-term debt for the remainder of the current fiscal year and the subsequent
five years are as follows: 2007 - $58,000; 2008 - $232,000; 2009 - $138,000;
2010 - $72,000; 2011 - $27,000; and 2012 - $27,000.
Inventory and
      Maintenance InventoryFebruary 28, 2007
    May 31, 2006
    Increase / (DecreaseRaw
      Materials
    $  
      405,000
    
    $   413,000
    
    $  
      (8,000)
    -2%Work in
      process
    4,132,000
    
    3,404,000
    
    728,000
    21%Finished
      goods
    341,000
    
    400,000
    
    (59,000)
    -15%Inventory
    4,878,000
    89%
    4,217,000
    89%
    661,000
    16%Maintenance
      and other inventory
    576,000
    11%
    543,000
    11%
    33,000
    6%Total
    $5,454,000
    100%
    $4,760,000
    100%
    $ 694,000
    15%Inventory turnover
    2.1
    
    2.0

NOTE: Inventory
      turnover is annualized for the nine month period ended February 28,
      2007.
Inventory, at $4,878,000 as
of February 28, 2007, is 16% higher than the prior year-end.  Of this,
approximately 85% is work in process, 7% is finished goods, and 8% is raw
materials.  The work in process component of inventory increased by
21%.  This change is the result of increased production activity on sales
orders not accounted for using the percentage of completion method of
accounting.
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 that 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.  Management of the Company
has recorded an allowance for potential inventory obsolescence. The provision
for potential inventory obsolescence was $120,000 and $95,000 for the nine month
periods ended February 28, 2007 and 2006.  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,and Billings in
      Excess of Costs and Estimated EarningsFebruary 28, 2007
    May 31, 2006
    Increase /(Decrease)Accounts
      receivable
    $ 
      2,943,000
    
    $  2,423,000
    
    $       
      520,000
    21%Costs and
      estimated earnings in excess of billings
    3,217,000
    
    5,062,000
    
    (1,845,000)
    -36%Less:
      Billings in excess of costs and estimated earnings
    135,000
    
    95,000
    
    40,000
    42%Net
    $  6,025,000
    
    $  7,390,000
    
    $   
    (1,365,000)
    -18%The Company combines the
totals of accounts receivable, the asset "costs and estimated earnings in excess
of billings", and the liability, "billings in excess of costs and estimated
earnings", 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
$2,943,000 as of February 28, 2007 includes approximately $489,000 of amounts
retained by customers on long-term construction projects.    The
Company expects to collect all of these amounts, including the retainage, during
the next twelve months.
As noted above, the current
asset, "costs and estimated earnings in excess of billings," represents revenues
recognized in excess of amounts billed.  Whenever possible, the Company
negotiates a provision in sales contracts to allow the Company to bill, and
collect from the customer, payments in advance of shipments. 
Unfortunately, provisions such as this are often not possible.  The
$3,217,000 balance in this account at February 28, 2007 is a 36% decrease from
the prior year-end.  Thirteen of the smaller projects (average size of
$156,000) along with four larger projects that were in process at the prior
year-end have since been completed, shipped and billed to the customers. 
There are 20 open projects in process at February 28, 2007 as compared to 25 at
the prior year-end.  47% of the aggregate order value of these open orders
has been invoiced to the customers as of February 28, 2007 compared to 19% at
the prior year-end.  In the aggregate, the projects in progress at February
28, 2007 are 70% complete at that date while the projects in progress at May 31,
2006 were 53% complete at that date.  The average total sales value of
long-term construction projects in process at the end of this period is 8%
higher than at May 31, 2006.  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.
The balances in this account
are comprised of the following components:
February 28, 2007
    
    May
      31, 2006Costs
    $
      3,846,000
    
    $
      4,792,000Estimated
      earnings
    1,684,000
    
    2,760,000Less:
      Billings to customers
    2,313,000
    
    2,490,000Costs and
      estimated earnings in excess of billings
    $
      3,217,000
    
    $
      5,062,000Number of
      projects in progress
    20
    
    23As noted above, the current
liability, "billings in excess of costs and estimated earnings", represents
billings to customers in excess of revenues recognized.  The $135,000
balance in this account at February 28, 2007 is a $40,000 increase from the
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, 2007
    
    May
      31, 2006Billings to
      customers
    $
      3,659,000
    
    $ 
      254,000Less: 
      Costs
    1,853,000
    
    110,000Less:
      Estimated earnings
    1,671,000
    
    49,000Billings in
      excess of costs and estimated earnings
    $    135,000
    
    $    95,000Number of
      projects in progress
    3
    
    2Summary of factors affecting
the year-end balances in the asset "costs and estimated earnings in excess of
billings", and the liability, "billings in excess of costs and estimated
earnings":
February 28, 2007
    May
      31, 2006Number of
      projects in progress
    20
    25Aggregate
      percent complete
    70%
    53%Average
      total value of projects in progress
    $624,000
    $578,000Percentage
      of total value invoiced to customer
    47%
    19%The Company's backlog of
sales orders at February 28, 2007 is $12.4 million, equal to the backlog value
at the end of the prior year.  $3.6 million of the current backlog is on
projects already in progress.
Accounts payable, at $996,000
as of February 28, 2007, is approximately 24% less than the prior
year-end.  This balance will fluctuate as the requirement to purchase goods
and services fluctuates which is driven primarily by the level of long-term
construction project activity.  Most of the projects in process at February
28, 2007 have much of their material requirements filled at that date.  As
work progresses on projects in our sales order backlog, more purchases will
occur and the accounts payable balance will rise.
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, 2007 are $811,000.  This is 17%
lower than the $983,000 accrued at the prior year-end.  Commission expense
related to the long-term construction projects is recorded at the same time as
revenue on the projects is recorded. This liability will continue to decrease as
the progress billings on the projects have been issued by the Company and are
paid by our customers.  The Company expects the current accrued amount to
be paid during the next twelve months.  Other current liabilities increased
by $465,000 from the prior year-end, to $863,000.  Most of this increase is
due to an increase in income tax liabilities.  Payments on these
liabilities will take place as scheduled prior to the end of this fiscal
year.
The Company paid $78,000 to
Developments during the nine months ended February 28, 2007, reducing the
principal balance on the note payable to $164,000.
Management believes that the
Company's cash flows from operations and borrowing capacity under the bank line
of credit will be sufficient to fund ongoing operations, capital improvements
and share repurchases for the next twelve months.


TAYLOR DEVICES, INC.
Item 3.  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,
2007 and have concluded that as of the evaluation date, the disclosure controls
and procedures were effective to ensure that material information relating to
the Company was made known to the officers by others within the
Company.

(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, 2007 that
have materially affected, or are reasonably likely to materially affect, the
Company's control over financial reporting.



TAYLOR DEVICES, INC.Part II - Other
Information
ITEM 1
    Legal
      ProceedingsNone.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,
      2007 that were not registered under the Securities Act.(b)  Use of
      proceeds following effectiveness of initial registration
      statement:Not
Applicable(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, 2006December 31, 2006
    -
    -
    -January 1, 2007
      -      January 31, 2007
    -
    -
    -February 1, 2007 -  February 28,
      2007
    -
    -
    -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 last $6,000,000, as such
      terms are defined in the credit documents.  On February 28, 2007,
      under such definitions the Company's net working capital and tangible net
      worth were significantly in excess of such limits.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 DirectorsNoneITEM 6 
      Exhibits10(i)
    Form of Indemnity
      Agreement between the Company and John Burgess, Director, signed and dated
      March 7, 2007.10(ii)
    First Amendment to
      Employment Agreement dated as of December 22, 2006 between the Registrant
      and Douglas P. Taylor.10(iii)
    
    First Amendment to
      Employment Agreement dated as of December 22, 2006 between the Registrant
      and Richard G. Hill.20
    
    News from Taylor
      Devices, Inc. Shareholder Letter, Spring 2007.31(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.



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, 2007, the related condensed consolidated
statements of income for the three and nine months ended February 28, 2007 and
February 28, 2006 and cash flows for the nine months ended February 28, 2007 and
February 28, 2006.  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, 2006, 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 July 12, 2006, 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, 2006 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
Lumsden & McCormick,
LLPBuffalo, New YorkMarch 21, 2007



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:
    March 29, 2007
    
    
    s/Douglas P.
      TaylorDouglas P.
      TaylorPresidentChairman of the Board of Directors(Principal
      Executive Officer)

Date:
    March 29,
      2007
    
    
    s/Mark V.
      McDonoughMark V.
      McDonoughChief Financial
Officer