For quarter ended February 29, 2004

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 of incorporation or organization) |  | (I.R.S. Employer Identification Number)

|90 TAYLOR DRIVE, NORTH TONAWANDA, NEW YORK |  | 14120-0748
|------------------------------------------ |  | ----------
|Address of principal executive offices     |  | Zip Code  

|Registrant's Telephone Number, Including Area Code --
      716-694-0800
|------------------------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all annual,
quarterly, and other reports required to be filed with all the Commission and
(2) has been subject to the filing requirements for at least the past 90
days.

|Yes | X |  | No |  | 
|--- | - |  | -- |  | 



Indicate the number of shares outstanding, of each of the Issuer's classes of
common stock as of the close of the period covered by this report.

|CLASS                                |  | Outstanding at February 29, 2004
|------------------------------------ |  | --------------------------------
|Common Stock (2-1/2 cents par value) |  | 2,973,603                       



|TAYLOR
      DEVICES, INC.    
|------------------------------
|                              
|**Index to Form
      10-QSB**
|                              

|PART I                     | FINANCIAL INFORMATION | PAGE NO.                                                                                                                     
|-------------------------- | --------------------- | -----------------------------------------------------------------------------------------------------------------------------
|                           |                       |                                                                                                                              
|                           | Item 1.               | Financial Statements                                                                                                         
|                           |                       |                                                                                                                              
|                           |                       | Condensed Consolidated Balance Sheets February 29, 2004 and
      May 31, 2003                                               
|                           |                       |                                                                                                                              
|                           |                       | Condensed Consolidated Statements of Income for the three
      and nine months ended February 29, 2004 and February 28, 2003
|                           |                       |                                                                                                                              
|                           |                       | Condensed Consolidated Statements of Cash Flows for the nine
      months ended February 29, 2004 and February 28, 2003      
|                           |                       |                                                                                                                              
|                           |                       | Notes to Condensed Consolidated Financial Statements                                                                         
|                           |                       |                                                                                                                              
|                           | Item 2.               | Management's Discussion and Analysis or Plan of Operation                                                                    
|                           | Item 3.               | Controls and Procedures                                                                                                      
|                           |                       |                                                                                                                              
|PART II                    | OTHER INFORMATION     |                                                                                                                              
|                           | Item 1.               | Legal Proceedings                                                                                                            
|                           | Item 2.               | Changes in Securities                                                                                                        
|                           | Item 3.               | Defaults upon Senior Securities                                                                                              
|                           | Item 4.               | Submission of Matters to Vote of Security Holders                                                                            
|                           | Item 5.               | Other Information                                                                                                            
|                           | Item 6.               | Exhibits and Reports on Form 8-K                                                                                             
|                           |                       |                                                                                                                              
|ACCOUNTANTS' REVIEW REPORT | 16                   
|SIGNATURES                 |                       | 17                                                                                                                           



|TAYLOR
      DEVICES, INC. AND SUBSIDIARY      
|-----------------------------------------------
|                                               
|                                               
|**Part I -
      Item 1. Financial Statements**
|                                               
|                                               
|                                               
|**Condensed Consolidated Balance Sheets**      
|                                               
|**Assets**                                     
|******Current assets:**                        
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|****Maintenance and other inventory, net       
|                                               
|****Property and equipment, net                
|                                               
|****Investment in affiliate, at equity         
|                                               
|****Intangibles and other assets               
|                                               
|                                               
|                                               
|**Liabilities and Stockholders'
      Equity** 
|**Current liabilities:**                       
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Long-term
      liabilities                    
|Payables - affiliate, net                      
|
|Minority stockholder's interest                
|                                               
|******Stockholders' Equity:**                  
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               



*See notes to condensed
consolidated financial statements**.*







|TAYLOR
      DEVICES, INC. AND SUBSIDIARY                |                                                                                                                                                |                                                         |                       
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------
|                                                         |                                                                                                                                                |                                                         |                       
|Condensed Consolidated
      Statementsof Income         | **(Unaudited)**                                                                                                                                | **(Unaudited)**                                        
|                                                         | For the three months
      endedFebruary 29 February 28                                                                                        | For the nine months ended February 29 February
      28
|****                                                     | **2004**                                                                                                                                       | 2003****                                                | **2004**              
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         |                                                                                                                                                |                                                         |                       
|Sales,
      net                                         | **$3,372,094******                                                                                                                             | $4,049,385                                              | ******$9,715,617******
|                                                         |                                                                                                                                                |                                                         |                       
|************Cost of
      goods sold                     | **2,297,773**                                                                                                                                  | 2,510,652                                               | **7,178,943**         
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         | **************Gross profit**                                                                                                                   | **1,074,321**                                           | 1,538,733             
|                                                         |                                                                                                                                                |                                                         |                       
|************Selling, general and administrative expenses | **926,928**                                                                                                                                    | 1,261,403                                               | **2,938,929**         
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         | **Operating income
      (loss)**                                                                                                              | **147,393******                                         | 277,330               
|                                                         |                                                                                                                                                |                                                         |                       
|************Other
      income (expense), net            | **(21,275)**                                                                                                                                   | (74,944)                                                | **(36,936)**          
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         | ************Income (loss) before provision for income
      taxes, equity in net income of affiliate and minority stockholder's
      interest | ****
      **126,118******                              | 202,386               
|
|                                                         |                                                                                                                                                |                                                         |                       
|********Provision for income taxes
      (benefit)       | **71,000**                                                                                                                                     | 69,000                                                  | **(156,500)**         
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         | ************Income (loss) before equity in net income of
      affiliate and minority stockholder's
      interest                             | ****                                                    |                       
|                                                         | **********55,118******                                                                                                                         | 133,386                                                 | ******(282,691)****** 
|                                                         |                                                                                                                                                |                                                         |                       
|************Equity
      in net income of affiliate      | **5,738**                                                                                                                                      | 6,330                                                   | **33,212**            
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         | ************Income (loss) before minority stockholder's
      interest                                                                         | **60,856******                                          | 139,716               
|                                                         |                                                                                                                                                |                                                         |                       
|************Minority stockholder's interest              | **(4,994)**                                                                                                                                    | (4,305)                                                 | **(13,233)**          
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         | **************Net income (loss)**                                                                                                              | **$ 55,862**                                            | $
      135,411       
|                                                         |                                                                                                                                                |                                                         |                       
|                                                         | ************Basic and diluted earnings (loss) per common
      share                                                                           | **$ 0.02**                                              | $
      0.05          





*See notes to condensed consolidated financial
statements.*





|TAYLOR DEVICES, INC. AND SUBSIDIARY                      
|---------------------------------------------------------
|                                                         
|**Condensed Consolidated Statements of Cash
      Flows**
|                                                         
|                                                         
|For
      the nine months ended                          
|                                                         
|**Cash flows from operating
      activities:**          
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|******Cash flows from investing activities:**            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|******Cash flows from financing activities:**            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|****Cash
      and cash equivalents - beginning          
|                                                         
|                                                         



*See notes to condensed consolidated financial
statements.*





|TAYLOR DEVICES, INC. AND
    SUBSIDIARY                       
|--------------------------------------------------------------
|                                                              
|**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 29, 2004 and May 31,
      2003, the results of operations for the three and nine months ended
      February 29, 2004 and February 28, 2003, and cash flows for the nine
      months ended February 29, 2004 and February 28, 2003. 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, 2003.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | The May 31, 2003 condensed
      consolidated balance sheet has been reclassified to conform with the
      condensed consolidated balance sheet presentation of the Payable -
      affiliate, net adopted for 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | There is no provision nor
      shall there be any provisions for profit sharing, dividends, or any other
      benefits of any nature at any time for this fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4. | For the three and nine month
      period ended February 29, 2004, the loss was divided by 2,973,603, which
      is net of the Treasury shares, to calculate the loss per share. For the
      three and nine month period ended February 28, 2003, the profit was
      divided by 2,900,876,which is net of the Treasury shares, to calculate the
      earnings per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | The results of operations
      for the nine month period ended February 29, 2004 are not necessarily
      indicative of the results to be expected for the full
  year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



|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 Operations," 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 update the forward-looking statements in this report.

A summary of the period to period changes in the principal
items included in the consolidated statements of income is shown below:

|                                                                  | Comparison of the nine months ended
      February 29, 2004 and February 28, 2003
|----------------------------------------------------------------- | ---------------------------------------------------------------------------------
|                                                                  | Increase (Decrease)                                                              
|Sales, net                                                        |                                                                                  
|Cost of goods
      sold                                          |                                                                                  
|Selling,
      general and administrative expenses                |                                                                                  
|Other expense,
      net                                          |                                                                                  
|Income (loss)
      before provision for income taxes, equity in  |                                                                                  
|net income of affiliate and minority stockholder's
      interest | ($1,564,000)                                                                     
|Provision for
      income taxes (benefit)                        |                                                                                  
|Income (loss)
      before equity in net income of affiliate      |                                                                                  
|and minority stockholder's interest                               | ($1,002,000)                                                                     
|Equity in net
      income of affiliate                           |                                                                                  
|Net income
      (loss)                                           |                                                                                  

|TAYLOR DEVICES, INC.                                                           
|-------------------------------------------------------------------------------
|                                                                               
|**Management's Discussion and Analysis or Plan of
      Operation (Continued)**
|                                                                               

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 29, 2004**
(All figures being discussed are for the nine months ended February 29, 2004 as
compared to the nine months ended February 28, 2003.)

| | **Nine Months Ended** | **Change**
| | --------------------- | ----------

|                                         | February 29, 2004 | February 28, 2003 | Increase /(Decrease) | PercentChange
|---------------------------------------- | ----------------- | ----------------- | -------------------- | -------------
|Net
      Revenue                        | $9,716,000        | $11,112,000       | $(1,396,000)         | *-13%*       
|Cost of
      sales                      | 7,179,000         | 6,364,000         | 815,000              | *13%*        
|Gross
      profit                       | $2,537,000        | $ 4,748,000       | $(2,211,000)         | *-47%*       
|...as a percentage of net
      revenues | 26%               | 43%               |                      |              

The Company's consolidated results of operations
showed a 13% decrease in net revenues with a decrease in net income from
$723,000 to a net loss of $263,000. Gross profit decreased by 47%. The gross
profit as a percentage of net revenues for the quarter was 26% as compared to
43% for the same period in the prior year. Gross margin for the prior year
period benefitted from the final shipment or near closeout of several large
orders that had been taken into revenue on a progress bill and estimated cost
basis. The final closeout costs or revised estimates for these orders were more
favorable than had been anticipated at the beginning of that period. The product
mix in the current period includes a reduced percentage of highly engineered
aerospace products and increased percentage of very competitively bid
construction projects that, when combined, results in a reduced gross margin.
This trend has started to reverse, however, as the Company has shown
improvements in the gross margins of long-term contracts during the past nine
months. As a percentage of sales, the gross margin on long-term contracts has
increased from 8% in the first quarter to 21% in the second quarter to 34% in
the third quarter. Certain long-term construction projects in Asia, which were
very competitively bid, are now completed. The weaker U.S. dollar is expected to
help make our products more competitive in foreign markets. Management is
optimistic that these improved gross margins will continue based on the make-up
of the current backlog which indicates future aerospace sales increasing and
improved profit margin on design / build bridge and building construction
projects. The Company continues to reduce spending on overhead, as the level of
sales has decreased, in its effort to improve profitability.

|**Selling, General and Administrative
      Expenses** | **** |  | 
|------------------------------------------------------ | ---- |  | 

| | **Nine Months Ended** | **Change**
| | --------------------- | ----------

|                                           | **February 29,2004** | **February 28,2003** | **Increase /(Decrease)** | **PercentChange**
|------------------------------------------ | -------------------- | -------------------- | ------------------------ | -----------------
|Outside
      Commissions                  | $ 695,000            | $1,145,000           | $(450,000)               | *-39%*           
|Royalties                                  | 205,000              | 81,000               | 124,000                  | *153%*           
|Other
      SG&A                           | 2,039,000            | 2,178,000            | (139,000)                | *-6%*            
|Total
      SG&A                           | $2,939,000           | $3,404,000           | $(465,000)               | *-14%*           
|*...as a
      percentage of net revenues* | *30%*                | *31%*                |                          |                  

Selling,
general and administrative expenses decreased by approximately 14% from the
prior year primarily due to lower levels of commission expense, which is
directly related to the level of sales for the period. There was $92,000 of bad
debt expense last year that did not repeat this year. This reduction, combined
with a 33% decrease in advertising and promotion expenses contributed to the
savings over the prior year. Included in the overall 14% decrease in expense is
an increase in royalty expense of $124,000. The royalty expense increase is
directly related to the increase in the sales of products manufactured by the
Company under agreement with affiliate Tayco Development, Inc., which owns the
patents on the technology utilized in the products.

Depreciation expense increased by $17,000 over the same period
of the prior year.

The above factors resulted in an operating loss of $402,000 for
the nine months ended February 29, 2004 as compared to operating income of
$1,344,000 in the same period of the prior year.

Interest expense decreased by approximately 57% from the same
period of the prior year due to a combination of lower interest rates on the
Company's variable long-term and short-term debt along with a lower level of use
of the Company's operating line of credit. The line of credit is used primarily
to fund the production of larger projects that do not allow for advance payments
or progress payments.

Other income of $60,000 in the nine months ended February 29,
2004 is primarily the excess of proceeds from the life insurance policies on the
Company's founder, Paul H. Taylor, over the net of the cash surrender value of
the policies and loans against the policies.

**For the three months ended February 29, 2004**
(All figures being discussed are for the three months ended February 29, 2004 as
compared to the three months ended February 28, 2003.)

| | **Three Months Ended** | **Change**
| | ---------------------- | ----------

|                                           | **February 29, 2004** | **February 28, 2003** | **Increase /(Decrease)** | **PercentChange**
|------------------------------------------ | --------------------- | --------------------- | ------------------------ | -----------------
|Net
      Revenue                          | $3,372,000            | $4,049,000            | $(677,000)               | *-17%*           
|Cost of
      sales                        | 2,298,000             | 2,511,000             | (213,000)                | *-8%*            
|Gross
      profit                         | $1,074,000            | $1,538,000            | $(464,000)               | *-30%*           
|*...as a
      percentage of net revenues* | *32%*                 | *38%*                 |                          |                  

The
Company's consolidated results of operations showed a 17% decrease in net
revenues with a 59% decrease in net income from $135,000 to $56,000. Gross
profit decreased by 30%. The gross profit as a percentage of net revenues for
the quarter was 32% as compared to 38% for the same period in the prior year. In
the third quarter of the prior year, the Company encountered intense foreign
competition and unfavorable currency exchange rates that led to the booking of
certain long-term project orders at very tight margins. Those projects continued
through the second quarter of the current year. As noted above, the margins
earned on the long-term projects have been improving each quarter this year.
Based on the revenue remaining to be recorded on long-term projects already in
progress as of February 29, 2004, the favorable product mix in the remainder of
the backlog and the continued efforts to reduce overhead spending, the gross
margin in the fourth quarter, as a percentage of sales, is expected to be higher
than the third quarter and significantly better than the 20% margin earned in
the fourth quarter of last year.

|**Selling, General and Administrative
      Expenses** | **** |  | 
|------------------------------------------------------ | ---- |  | 

| | **Three Months Ended** | **Change**
| | ---------------------- | ----------

|                                            | **February 29, 2004** | **February 28,2003** | **Increase /(Decrease)** | **PercentChange**
|------------------------------------------- | --------------------- | -------------------- | ------------------------ | -----------------
|Outside Commissions                         | $227,000              | $ 472,000            | $(245,000)               | *-52%*           
|Royalties                                   | 44,000                | 25,000               | 19,000                   | *76%*            
|Other
      SG&A                            | 656,000               | 764,000              | (108,000)                | *-14%*           
|Total
      SG&A                            | $927,000              | $1,261,000           | $(334,000)               | *-26%*           
|*... as a
      percentage of net revenues* | *27%*                 | *31%*                |                          |                  

Selling, general and administrative expenses
decreased by approximately 27% from the prior year. Commission expense dropped
by 40% during this same period reflecting the current year absence of large
sales contracts with higher than normal commission rates. There was $60,000 of
bad debt expense last year that did not repeat this year. This reduction,
combined with a 33% decrease in advertising and promotion expenses contributed
to the savings over the prior year.

Depreciation expense increased by $5,000 over the same period
of the prior year.

The above factors resulted in an operating income of $147,000
as compared to $277,000 in the same period of the prior year.

Interest expense decreased by approximately 70% from the same
period of the prior year due to a combination of lower interest rates on the
Company's variable long-term and short-term debt along with a lower level of use
of the Company's operating line of credit.

**Capital Resources, Line of
Credit and Long-Term Debt**

The Company's primary liquidity relates to 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 from operations and from bank financing.

Capital expenditures for the nine months ended February 29,
2004 were $59,000 compared to $89,000 in the same period of the prior year.
There are no material commitments for capital expenditures as of February 29,
2004.

The Company has a $7,500,000 line of credit on which there is a
$720,000 balance outstanding as of February 29, 2004. This is down from the
$4,300,000 balance outstanding as of May 31, 2003. This significant reduction in
the outstanding balance of the line of credit is the result of collection of
receivables on large, long-term projects that completed earlier in the year. The
outstanding balance on the line of credit will fluctuate as the Company's
various long-term projects progress.

Principal maturities of long-term debt for the remainder of the
current fiscal year and the subsequent five years are as follows: 2004 -
$44,000; 2005 - $220,000; 2006 - $231,000; 2007 - $243,000; 2008 - $232,000; and
2009 - $138,000.

| | **Inventory and Maintenance
      Inventory** |  |  |  |  |  | 
| | --------------------------------------------- |  |  |  |  |  | 

| |  | February 29, 2004 | **May 31, 2003** | **Decrease**
| |  | ----------------- | ---------------- | ------------

| | Raw
Materials         | $ 276,000  |        | $
      315,000 |        | $
      (39,000) | *-12%*
| | --------------------- | ---------- | ------ | --------------- | ------ | ---------------- | ------
| | Work
      in process | 3,709,000  |        | 3,970,000       |        | (261,000)        | *-7%* 
| | Finished goods        | 312,000    |        | 509,000         |        | (197,000)        | *-39%*
| | Inventory             | 4,297,000  | *91%*  | 4,794,000       | *89%*  | (497,000)        | *-10%*
| | Maintenance inventory | 437,000    | *9%*   | 571,000         | *11%*  | (134,000)        | *-23%*
| | Total                 | $4,734,000 | *100%* | $5,365,000      | *100%* | $(631,000)       | *-12%*
| |                       |            |        |                 |        |                  |       
| | Inventory turnover    | 1.9        |        | 1.6             |        |                  |       

|*NOTE: Inventory turnover is annualized for the nine-month
      period ending February 29, 2**004.*
|----------------------------------------------------------------------------------------------------

Inventory, at $4,297,000 as of February 29, 2004, is lower by
approximately 10% over the prior year-end. Of this, approximately 86% is work in
process, 7% is finished goods, and 7% is raw materials.

Maintenance and other inventory represent stock that is
estimated to have a product life cycle in excess of twelve months. This stock
represents certain items 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 technical
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 $135,000 for the nine-month period ended February 29, 2004 as
it was for the same period last year. However, management intends 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 Earnings** |  |  | 
| | ---------------------------------------------------------------- |  |  | 

| |  | **February 29, 2004** | **May 31, 2003** | **Decrease**
| |  | --------------------- | ---------------- | ------------

| | Accounts receivable | $2,311,000 |  | $4,220,000 |  | $(1,909,000) | *-45%*
| | ------------------- | ---------- |  | ---------- |  | ------------ | ------

|Costs and estimated
      earnings in excess of billings | 1,164,000 |  | 3,866,000 |  | (2,702,000) | **-70%
|-------------------------------------------------------- | --------- |  | --------- |  | ----------- | ------

|Less: |  |  |  |  |  |  | 
|----- |  |  |  |  |  |  | 

|Billings in excess of
      costs and estimated earnings | 33,000 |  | 160,000 |  | (127,000) | **-79%
|-------------------------------------------------------- | ------ |  | ------- |  | --------- | ------

| | Net | $3,442,000 |  | $7,926,000 |  | $(4,484,000) | *-57%*
| | --- | ---------- |  | ---------- |  | ------------ | ------



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 $2,311,000 as of February 29, 2004
includes approximately $352,000 of amounts retained by customers on long-term
construction projects. The decrease in accounts receivable over the prior
year-end by approximately $1,909,000 is due to the final collection of
receivables on certain long-term 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 in certain governmental contracts
and contracts with foreign customers. The $1,164,000 balance in this account at
February 29, 2004 is a 70% decrease from the prior year-end. This decrease
results from increased billings to the customers as many of the long-term
projects have completed or are at an advanced stage of completion at February
29, 2004. The Company expects to bill the entire amount during the next twelve
months.

As noted above, the current
liability, "billings in excess of costs and estimated earnings", represents
billings to customers in excess of revenues recognized. The $33,000 balance in
this account at February 29, 2004 is a decrease from the $127,000 balance at the
end of the prior year. Final delivery of product under these contracts is
expected to occur during the next twelve months.

The Company's backlog of sales
orders at February 29, 2004 is $6.2 million, down from the backlog at the end of
the prior year of $9.2 million. $2.2 million of the current backlog is on
projects already in progress. Management does not feel that the decrease in the
level of the backlog of sales orders is a cause for concern. The Company has
submitted several bids, that are still pending, to work on long-term
construction projects around the world. If the Company is successful in its
efforts to win the bids, it will have a positive impact on the sales order
backlog.

Accounts payable, at $851,000 as
of February 29, 2004, is approximately $518,000 less than the prior year-end.
This reduction is primarily due to three factors: 1) less purchasing volume -
due to lower sales volume; 2) increased efforts to cut costs; and 3) increased
emphasis on taking advantage of early payment discounts negotiated with
suppliers.

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 29, 2004 are $567,000. This is approximately $1,067,000 lower than the
prior year-end. As our accounts receivable has decreased, so too has the accrued
commission. The Company expects the current accrued amount to be paid during the
next twelve months.

Other accrued expenses dropped by
54% from the prior year-end to $399,000. This was primarily due to our annual
California sales tax remittance in the quarter.

Goodwill represents the excess of
purchase price paid over fair value of net assets acquired. In accordance with
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets", the Company stopped amortizing goodwill effective June 1,
2002. The Company assesses for the potential impairment of goodwill at least
annually by determining whether its carrying amount exceeds its implied fair
value. The Company completed its assessment of goodwill for the year ended May
31, 2003 and determined that an impairment charge was not warranted.

During the nine months ended
February 29, 2004, the Company purchased 4,600 shares of its common stock via
the Share Repurchase Program authorized by the Board of Directors. From time to
time, subject to market price, the Company expects to continue reacquiring
shares.

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 a date within 90 days of the filing date of this
quarterly report and have concluded that as of the evaluation date, the
disclosure controls and procedures were adequate 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 significant
changes in the Company's internal controls or in other factors that could
significantly affect such controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.





|TAYLOR DEVICES, INC.           
|-------------------------------
|                               
|**Part II - Other Information**
|                               

| | ITEM 1 | Legal
      Proceedings                                                             
| | ------ | ------------------------------------------------------------------------------------
| |        | None except for routine litigation incidental to
      the Company's business.      
| | ITEM
2 | Changes in Securities
      and Small Business Issuer Purchases of Equity Securities
| |        |                                                                                     
| |        |                                                                                     

| |  | Period                              | (a) Total*Number of**Shares**Purchased*   | (b)*Average* *Price Paid* *Per Share* | (c) Total Number*of Shares* *Purchased* *as Part of* *Publicly* *Announced Plans* *or Programs* | *(d) Maximum* *Number (or**Approximate Dollar* *Value) of Shares**that May Yet*
      *Be Purchased
      Under* *the Plans
      or**Programs*
| |  | ----------------------------------- | ----------------------------------------- | ------------------------------------- | ----------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | December 1, 2003 -December 31, 2003 | - 0 -                                     | - 0 -                                 | - 0 -                                                                                           |                                                                                                                                                
| |  | January 1, 2004 -January 31, 2004   | - 0 -                                     | - 0 -                                 | - 0 -                                                                                           |                                                                                                                                                
| |  |                                     | February 1, 2004 -February 29,
      2004 | - 0 -                                 | -0-                                                                                             | -0-                                                                                                                                            
| |  |                                     | Total                                     | - 0 -                                 | - 0 -                                                                                           | - 0 -                                                                                                                                          



| |            | (1) In 1998, the Registrant 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 of $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.
| | ---------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ITEM
    3 | Defaults Upon Senior
      Securities                                                                                                                                                                                                                                                                                                                                                                     
| |            | None                                                                                                                                                                                                                                                                                                                                                                                                      
| | ITEM 4     | Submission of Matters
      to Vote of Securities Holders                                                                                                                                                                                                                                                                                                                                                 
| |            | None                                                                                                                                                                                                                                                                                                                                                                                                      
| | ITEM 5     | Other
      Information                                                                                                                                                                                                                                                                                                                                                                                   
| |            |                                                                                                                                                                                                                                                                                                                                                                                                           
| |            |                                                                                                                                                                                                                                                                                                                                                                                                           
| |            |                                                                                                                                                                                                                                                                                                                                                                                                           
| |            |                                                                                                                                                                                                                                                                                                                                                                                                           
| |            |                                                                                                                                                                                                                                                                                                                                                                                                           

| | ITEM 6 | Exhibits and Reports
      on Form 8-K
| | ------ | --------------------------------------
| |        |                                       
| |        | (a)                                   
| |        |                                       
| |        |                                       
| |        |                                       
| |        |                                       
| |        |                                       
| |        |                                       
| |        |                                       
| |        | (b)                                   







|                              
|------------------------------
|                              
|**Accountants' Review Report**
|                              

The
Board of Directors and Stockholders Taylor Devices, Inc.

We have reviewed the condensed
consolidated balance sheet of Taylor Devices, Inc. and Subsidiary as of February
29, 2004, and the related condensed consolidated statements of income and cash
flows for the three and nine months ended February 29, 2004 and February 28,
2003. These financial statements are the responsibility of the Company's
management.

We conducted our review in
accordance with standards established by the American Institute of Certified
Public Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with auditing
standards generally accepted in the United States of America, 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 review, we are not
aware of any material modifications that should be made to the condensed
consolidated financial statements referred to above for them to be in conformity
with accounting principles generally accepted in the United States of
America.

We have previously audited, in
accordance with auditing standards generally accepted in the United States of
America, the consolidated balance sheet as of May 31, 2003, 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 8, 2003, 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, 2003 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.



Lumsden & McCormick, LLP Buffalo, New York March 26, 2004





|TAYLOR DEVICES, INC.
|--------------------
|                    
|**Signatures**      
|                    

Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

|TAYLOR DEVICES, INC.
|--------------------
|(Registrant)        

|By: | s/Douglas P. Taylor                                                                                |  | Date: | April 13, 2004
|--- | -------------------------------------------------------------------------------------------------- |  | ----- | --------------
|    | Douglas P. Taylor
      President Chairman of the Board of Directors (Principal Executive Officer) |  |       |               

| | AND |  |  | 
| | --- |  |  | 
| |     |  |  | 

|By: | s/Mark V. McDonough                             |  | Date: | April 13, 2004
|--- | ----------------------------------------------- |  | ----- | --------------
|    | Mark V. McDonough
      Chief Financial Officer |  |       |