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 August 31, 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
      October 11, 2007Common Stock(2‐1/2
      cents par value)
    
    3,145,905
 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 August 31, 2007 and May 31, 2007
    3Condensed Consolidated
      Statements of Income for the three months ended August 31, 2007 and August
      31, 2006
    4Condensed Consolidated
      Statements of Cash Flows for the three months ended August 31, 2007 and
      August 31, 2006
    5Notes to Condensed
      Consolidated Financial Statements
    6Item 2.
    Management's Discussion
      and Analysis or Plan of Operation
    7Item 3.
    Controls and
      Procedures
    
    13PART II
    OTHER
      INFORMATIONItem 1.
    Legal
      Proceedings
    14Item 2.
    Unregistered Sales of
      Equity Securities and Use of Proceeds
    14Item 3.
    Defaults upon Senior
      Securities
    14Item 4.
    Submission of Matters
      to a Vote of Security Holders
    15Item 5.
    Other
      Information
    15Item 6.
    Exhibits
    15REPORT OF INDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRM
    16SIGNATURES
    
    17
  TAYLOR DEVICES, INC.
      AND SUBSIDIARYCondensed
      Consolidated Balance Sheets
    (Unaudited)August
      31, 2007
    May
      31,2007AssetsCurrent
      assets:Cash and cash
    equivalents
    $        
      246,705
    $        
    22,748Accounts receivable,
    net
    4,187,337
    3,893,793Inventory
    5,792,404
    5,093,146Costs and estimated earnings in
      excess of billings
    1,855,390
    1,991,183Other current assets
    933,025
    954,358Total current assets
    13,014,861
    11,955,228Maintenance and other inventory,
      net
    970,123
    753,825Property and equipment,
      net
    3,471,316
    3,349,810Investment in affiliate, at
      equity
    456,109
    451,520Intangible and other
      assets
    141,219
    142,007$ 
      18,053,628
    $  16,652,390Liabilities and
      Stockholders' EquityCurrent
      liabilities:Short-term borrowings and current
      portion of long-term debt
    $   
      2,539,558
    $  
    1,866,066Payables - trade
    1,261,244
    994,057Accrued commissions
    657,527
    666,323Billings in excess of costs and
      estimated earnings
    477,805
    18,002Other current
    liabilities
    1,007,257
    1,258,783Total current liabilities
    5,943,391
    4,803,231Long-term liabilities
    478,140
    564,207Payables - affiliate
    121,605
    174,609Minority stockholder's
      interest
    530,202
    520,504Stockholders'
      Equity:Common stock and additional paid-in
      capital
    4,872,764
    4,830,543Retained earnings
    7,163,608
    6,815,37812,036,372
    11,645,921Treasury stock - at
    cost
    (1,056,082)
    (1,056,082)Total stockholders' equity
    10,980,290
    10,589,839$ 
      18,053,628
    $  16,652,390 See notes to condensed consolidated
financial statements.    TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Statements of Income
    (Unaudited)For the three months
      ended August 31,2007
    2006Sales, net
    $
      4,408,185
    $ 3,997,502Cost of goods sold
    2,719,114
    2,409,807Gross
      profit
    1,689,071
    1,587,695Selling, general and administrative
      expenses
    1,068,503
    1,245,525Operating
      income
    620,568
    342,170Other expense, net
    (45,529)
    (83,513)Income before provision for income
      taxes, equity in netincome of affiliate
      and minority stockholder's interest
    575,039
    258,657Provision for income
      taxes
    221,700
    95,000Income before equity in net income
      of affiliateand minority
      stockholder's interest
    353,339
    163,657Equity in net income of
      affiliate
    4,589
    2,532Income before minority
      stockholder's interest
    357,928
    166,189Minority stockholder's
      interest
    (9,698)
    (10,676)Net
      income
    $   
      348,230
    $     
      155,513Basic and diluted
      earnings per common share
    $      0.11
    $       0.05 See notes to condensed consolidated
financial statements.   TAYLOR DEVICES, INC. AND
      SUBSIDIARYCondensed
      Consolidated Statements of Cash Flows(Unaudited)August 31,For the three months
      ended
    2007
    2006Cash flows from
      operating activities:Net income
    $     348,230
    $    
      155,513Adjustments to reconcile net income
      to net cash flows fromoperating
      activities:Depreciation and
      amortization
    88,477
    88,532Gain of sale of
    equipment
    (890)
    -Stock based compensation expense
      related to employee stock options
    37,741
    76,368Bad debts expense
    -
    45,000Equity in net (income) loss of
      affiliate
    (4,589)
    (2,532)Minority stockholder's
      interest
    9,698
    10,676Changes in other assets and
      liabilities:Accounts receivable
    (293,544)
    (22,704)Inventory
    (915,556)
    (509,621)Costs and estimated earnings in
      excess of billings
    135,793
    (348,492)Other current assets
    (4,876)
    (71,455)Payables - trade
    267,187
    (123,424)Accrued commissions
    (8,796)
    88,563Billings in excess of costs and
      estimated earnings
    459,803
    116,605Other current
    liabilities
    (251,526)
    88,123Net cash flows for
      operating activities
    (132,848)
    (408,848)Cash flows from
      investing activities:Acquisition of property and
      equipment
    (207,883)
    (32,352)Other investing
      activities
    25,787
    21,146Net cash flows for
      investing activities
    (182,096)
    (11,206)Cash flows from
      financing activities:Net short-term borrowings and
      repayments on long-term debt
    587,425
    672,628Payables - affiliate
    (53,004)
    (24,210)Proceeds from issuance of common
      stock
    4,480
    3,664Net cash flows from
      financing activities
    538,901
    652,082Net increase in cash and cash
      equivalents
    223,957
    232,028Cash and cash equivalents -
      beginning
    22,748
    60,011Cash and cash equivalents
      - ending
    $     246,705
    $   
      292,039 See 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 August 31, 2007 and May 31,
      2007, the results of operations for the three months ended August 31, 2007
      and August 31, 2006, and cash flows for the three months ended August 31,
      2007 and August 31, 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, 2007.  There have been no updates or changes to our
      audited financial statements for the year ended May 31,
      2007.2.
    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 month
      periods ended August 31, 2007 and 2006 the net income was divided by
      3,145,323 and 3,142,457, respectively, which is net of the Treasury
      shares, to calculate the net income per
    share.4.
    The results of
      operations for the three month period ended August 31, 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 three months ended August
      31, 2007, Developments had revenues of $74,000 and net income of
      $96,000.  The carrying amount of the investment in Developments as of
      August 31, 2007 and May 31, 2007 was $456,000 and
      $452,000.6.
    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 three month period ended
      August 31, 2007 includes compensation cost for all stock options granted
      subsequent to May 31, 2007, 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 three month periods ended August 31, 2007 and 2006 was approximately
      $38,000 and $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 three
      months ended August 31, 2007 and 2006Increase
    /(Decrease)Sales,
net
    
    $   
      411,000Cost of goods
      sold
    
    $   
      309,000Selling, general and
      administrative expenses
    
    $  
    (177,000)Other expense,
      net
    
    $    
      (38,000)Income before provision
      for income taxes, equity in net income of affiliate and minority
      stockholder's interest
    
    $   
      316,000Provision for income
      taxes
    
    $   
      127,000Income before equity in
      net income of affiliate and minority stockholder's
      interest
    
    $   
      190,000Equity in net income of
      affiliate
    
    $        2,000Net
income
    
    $   
      193,000
 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 three months ended
August 31, 2007(All figures being
discussed are for the three months ended August 31, 2007 as compared to the
three months ended August 31, 2006.) Three months ended
    ChangeAugust 31, 2007
    August 31, 2006
    Increase / (Decrease)
    Percent
      ChangeNet
      Revenue
    $  4,408,000
    $
      3,998,000
    $ 
      410,000
    10%Cost of
      sales
    2,719,000
    2,410,000
    309,000
    13%Gross
      profit
    $ 
      1,689,000
    $
      1,588,000
    $  101,000
    6%...as a percentage of net
      revenues
    38%
    40% The Company's consolidated
results of operations showed a 10% increase in net revenues and an increase in
net income of 124%. Revenues recorded in the current period for long-term
construction projects were slightly less (16%) than the level recorded in the
prior year.  Revenues recorded in the current period for other-than
long-term construction projects (non-projects) were up approximately $850,000 or
72% 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 6%.  The gross profit as a percentage of net
revenues for the current and prior year periods was 38% and
40%. 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 Expenses Three
      months ended
    ChangeAugust 31, 2007
    August
      31, 2006
    Increase / (Decrease)
    Percent
      ChangeOutside
      Commissions
    $   250,000
    $   441,000
    $(191,000)
    -43%Other
      SG&A
    819,000
    805,000
    14,000
    2%Total
      SG&A
    $1,069,000
    $1,246,000
    $(177,000)
    -14%...as a percentage of net revenues
    24%
    31% Selling, general and
administrative expenses decreased by 14% from the prior year.  Outside
commission expense decreased by 43% over last year's level.  Outside
commission expense was lower in this period due to higher commission rates on
two large, long-term construction projects in production last year, offset
slightly by a higher volume of sales subject to commission in the current
year.  Other selling, general and administrative expenses increased by only
2% from last year to this. The above factors resulted in
operating income of $621,000 for the three months ended August 31, 2007, up 81%
from the $342,000 in the same period of the prior year. Other expense, net, of
$46,000 is primarily interest expense and is $38,000 less than in the prior
year.  The average level of use of the Company's operating line of credit
during the period decreased significantly from $3.7 million last year to $2.1
million this year.    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 $38,000 and
$76,000 of compensation cost for the three month periods ended August 31, 2007
and 2006. The fair value of each stock
option grant has been determined using the Black-Scholes model.  The model
considers assumptions related to exercise price, expected volatility, risk-free
interest rate, and the weighted average expected term of the stock option
grants.  Expected volatility assumptions utilized in the model were based
on volatility of the Company's stock price for the thirty month period ending on
the date of grant.  The risk-free interest rate is derived from the U.S.
treasury yield.  The Company used a weighted average expected term. 
The following assumptions were used in the Black-Scholes model in estimating the
fair market value of the Company's stock option grants: August 31, 2007       August 31,
2006                                                                 
Risk-free interest
rate:             
3.625%                          
3%                                              
Expected life of the
options:            2.5
years                   
2.5
Years                                         
Expected share price
volatility:             
61.47%                     
152.96%                                                           
Expected
dividends:               
zero                            
zero These assumptions resulted
in:              
Estimated fair-market value per stock option:
               
$2.47                          
$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 three month period ended August 31, 2007 is
presented below: Number of Options
    Weighted-Average Exercise PriceOptions
      outstanding and exercisable at May 31, 2007:
    
    87,500
    $
      5.200Options granted:
    
    15,250
    $ 6.170Options exercised:
    
    -
    -Options expired:
    
    -
    -Options outstanding and exercisable at August 31, 2007:
    
    102,750
    $ 5.342 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
three months ended August 31, 2007 were $208,000 compared to $32,000 in the same
period of the prior year.  There are no material commitments for capital
expenditures as of August 31, 2007. The Company has a $5,000,000
line of credit with a bank.  There is a $2,299,000 principal balance
outstanding as of August 31, 2007, which is up from the $1,628,000 balance
outstanding as of May 31, 2007.  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: 2008 - $155,000; 2009 - $138,000; 2010 - $72,000;
2011 - $27,000; 2012 - $27,000; and 2013 - $20,000. Inventory and
      Maintenance Inventory August 31, 2007
    May 31, 2007
    Increase / (Decrease Raw
      Materials
    $  
      440,000
    
    $   425,000
    
    $    15,000
    4%Work in
      process
    5,018,000
    
    4,221,000
    
    797,000
    19%Finished
      goods
    334,000
    
    447,000
    
    (113,000)
    -25%Inventory
    5,792,000
    86%
    5,093,000
    87%
    699,000
    14%Maintenance
      and other inventory
    970,000
    14%
    754,000
    13%
    216,000
    29%Total
    $6,762,000
    100%
    $5,847,000
    100%
    $  915,000
    16%Inventory turnover
    1.7
    
    2.0
 NOTE: Inventory
      turnover is annualized for the three month period ended August 31,
      2007. Inventory, at $5,792,000 as
of August 31, 2007, is 14% higher than the prior year-end.  Of this,
approximately 86% is work in process, 6% is finished goods, and 8% is raw
materials.  The work in process component of inventory increased by
19%.  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 represents 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.  The maintenance inventory
increased by 29% since May 31, 2007.  This significant increase is
primarily due to the reclassification, from current inventory, of a group of
components used in the manufacture of a certain unit used in the aerospace
field.  There are no orders in the sales backlog for these products at
August 31, 2007.  These components will be used when units in the field are
sent to the Company for repair or replacement.  Management of the Company
has recorded an allowance for potential inventory obsolescence. The provision
for potential inventory obsolescence was $45,000 for each of the three month
periods ended August 31, 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 Earnings August
      31, 2007
    May 31, 2007
    Increase /(Decrease) Accounts
      receivable
    $ 
      4,187,000
    
    $  3,894,000
    
    $       
      293,000
    8% Costs and
      estimated earnings in excess of billings
    1,855,000
    
    1,991,000
    
    (136,000)
    -7% Less:
      Billings in excess of costs and estimated earnings
    478,000
    
    18,000
    
    460,000
    2556% Net
    $  5,564,000
    
    $
      5,867,000
    
    $    
      (303,000)
    -5% 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
$4,187,000 as of August 31, 2007 includes approximately $348,000 of amounts
retained by customers on long-term construction projects
("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
$1,855,000 balance in this account at August 31, 2007 is only slightly less than
the prior year-end.  Generally, if progress billings are permitted under
the terms of a project sales agreement, the more complete the project is, the
more progress billings will be permitted.  The Company expects to bill the
entire amount during the next twelve months. The balances in this account
are comprised of the following components: August 31, 2007
    
    May
      31, 2007Costs
    $
      1,627,000
    
    $
      3,218,000Estimated
      earnings
    864,000
    
    1,787,000Less:
      Billings to customers
    636,000
    
    3,014,000Costs and
      estimated earnings in excess of billings
    $
      1,855,000
    
    $
      1,991,000Number of
      projects in progress
    13
    
    17 As noted above, the current
liability, "billings in excess of costs and estimated earnings", represents
billings to customers in excess of revenues recognized.  The $478,000
balance in this account at August 31, 2007 is a $460,000 increase from the
balance at the end of the prior year.  Included in this balance at August
31, 2007 is $364,000 in advance billings on two long-term construction projects
that are not yet in progress.  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 balances in this account
are comprised of the following components: August 31, 2007
    
    May
      31, 2007Billings to
      customers
    $
      1,623,000
    
    $    72,000Less: 
      Costs
    723,000
    
    39,000Less:
      Estimated earnings
    422,000
    
    15,000Billings in
      excess of costs and estimated earnings
    $    478,000
    
    $    18,000Number of
      projects in progress
    3
    
    1Number of
      projects not in progress, with billings
    2
    
    - Summary 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": August 31, 2007
    May
      31, 2007Number of
      projects in progress
    16
    18Aggregate
      percent complete
    63%
    70%Average
      total sales value of projects in progress
    $346,000
    $408,000Percentage
      of total value invoiced to customer
    34%
    42% Other Balance Sheet
Items The Company's backlog of
sales orders at August 31, 2007 is $12.2 million, down slightly from the backlog
value at the end of the prior year.  $1.1 million of the current backlog is
on long-term construction projects already in progress. Accounts payable, at
$1,261,000 as of August 31, 2007, is approximately 27% more than the prior
year-end.  This balance will fluctuate as the requirement to purchase goods
and services fluctuates which is driven in part by the level of long-term
construction project activity.  Most of the projects in process at August
31, 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.  Requirements to purchase
goods and services to support sales orders that are not long-term construction
projects has increased as well. 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 August 31, 2007 are $658,000.  This is very close
to the $666,000 accrued at the prior year-end.  The Company expects the
current accrued amount to be paid during the next twelve months.  Other
current liabilities decreased by $252,000 from the prior year-end, to
$1,007,000.  Most of this decrease is due payments made in the current
period against income tax liabilities and the application, in the current
period, of advance payments received from customers in prior periods. 
Payments on these liabilities will take place as scheduled prior to the end of
this fiscal year. The Company paid $38,000 to
Developments during the three months ended August 31, 2007, reducing the
principal balance on the note payable to $106,000. 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 August 31, 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 August 31, 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 August
      31, 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 orProgramsJune 1, 2007 -June 30, 2007
    -
    -
    -July 1, 2007 - 
      July 31, 2007
    -
    -
    -August 1, 2007 -  August
      31, 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 August 31, 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
    Exhibits20
    
    Taylor Devices, Inc.
      Annual Report 200731(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 August 31, 2007, the related condensed consolidated statements
of income for the three months ended August 31, 2007 and August 31, 2006 and
cash flows for the three months ended August 31, 2007 and August 31, 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, 2007, 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 19, 2007, 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, 2007 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived. Lumsden & McCormick,
LLPBuffalo, New YorkOctober 1, 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:
    October 11, 2007
    
    
    s/Douglas P.
      TaylorDouglas P.
      TaylorPresidentChairman of the Board of Directors(Principal
      Executive Officer)
   Date:
    October 11,
      2007
    
    
    s/Mark V.
      McDonoughMark V.
      McDonoughChief Financial
Officer