Item 15. Exhibits and Financial Statement
Schedules.
DOCUMENTS FILED AS PART OF THIS REPORT:
|
|
Index to
Financial Statements:
|
|
|
(i)
|
Report of
Independent Registered Public Accounting Firm
|
|
|
(ii)
|
Consolidated
Balance Sheets as of May 31, 2019 and 2018
|
|
|
(iii)
|
Consolidated Statements of Income for the years ended May 31, 2019 and 2018
|
|
|
(iv)
|
Consolidated
Statements of Stockholders' Equity for the years ended May 31, 2019 and 2018
|
|
|
(v)
|
Consolidated
Statements of Cash Flows for the years ended May 31, 2019 and 2018
|
|
|
(vi)
|
Notes to Consolidated Financial Statements - May 31, 2019 and 2018
|
EXHIBITS:
|
|
3
|
Articles
of incorporation and by-laws
|
|
|
(i)
|
Restated
Certificate of Incorporation incorporated by reference to Exhibit (3)(i) of Annual Report on Form 10-K, dated August 24, 1983.
|
|
|
(ii)
|
Amendment
to Certificate of Incorporation incorporated by reference to Exhibit (3)(iv) to Form 8 [Amendment to Application or Report], dated
September 24, 1993.
|
|
|
(iii)
|
Amendment
to Certificate of Incorporation eliminating and re-designating the Series A Junior Preferred Stock and creating 5,000 Series 2008
Junior Participating Preferred Stock, at $.05 par value, as filed by the Secretary of State of the State of New York on September
16, 2008, and incorporated by reference to Exhibit (3)(i) of Form 8-K, dated as of September 15, 2008 and filed September 18, 2008.
|
|
|
(iv)
|
Certificate
of Change incorporated by reference to Exhibit (3)(i) to Quarterly Report on Form 10-QSB for the period ending November 30, 2002.
|
|
|
(v)
|
By-laws and
Proxy Review Guidelines incorporated by reference to Exhibit (3) to Quarterly Report on Form 10-Q for the period ending February
28, 2015, filed April 14, 2015.
|
|
4
|
Instruments
defining rights of security holders, including indentures
|
|
|
(i)
|
Rights Agreement
by and between registrant and Computershare Trust Company, N.A., dated as of September 25, 2018 and letter
to shareholders (including Summary of Rights), dated October 5, 2018, attached as Exhibits 4 and 20, respectively, to Registration
Statement on Form 8-A 12G, filed with the Securities and Exchange Commission on October 5, 2018.
|
|
|
(vi)
|
Description of registrant’s securities
|
|
|
|
|
|
|
|
10
|
Material
Contracts
|
|
|
(i)
|
2005 Taylor
Devices, Inc. Stock Option Plan attached as Appendix B to Definitive Proxy Statement, filed with the Securities and Exchange Commission
on September 27, 2005.
|
|
|
(ii)
|
2008 Taylor
Devices, Inc. Stock Option Plan attached as Appendix C to Definitive Proxy Statement, filed with the Securities and Exchange Commission
on September 26, 2008.
|
|
|
(iii)
|
2012 Taylor
Devices, Inc. Stock Option Plan attached as Appendix C to Definitive Proxy Statement, filed with the Securities and Exchange Commission
on September 21, 2012.
|
|
|
(iv)
|
2015 Taylor
Devices, Inc. Stock Option Plan attached as Appendix B to Definitive Proxy Statement, filed with the Securities and Exchange Commission
on April 8, 2016.
|
|
|
(v)
|
2018 Taylor
Devices, Inc. Stock Option Plan attached as Appendix B to Definitive Proxy Statement, filed with the Securities and Exchange Commission
on September 27, 2018.
|
|
|
(vi)
|
The 2004
Taylor Devices, Inc. Employee Stock Purchase Plan, incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8,
File No. 333-114085, filed with the Securities and Exchange Commission on March 31, 2004.
|
|
|
(vii)
|
Post-Effective
Amendment No. 1 to Registration Statement on Form S-8, File No. 333-114085, for the 2004 Taylor Devices, Inc. Employee Stock Purchase
Plan, filed with the Securities and Exchange Commission on August 24, 2006.
|
|
|
(viii)
|
Form of Indemnification
Agreement between registrant and directors and executive officers, attached as Appendix A to Definitive Proxy Statement, filed
with the Securities and Exchange Commission on September 27, 2007.
|
|
|
(ix)
|
Management
Bonus Policy dated as of March 4, 2011 between the Registrant and executive officers, incorporated by reference to Exhibit 10(i)
to Quarterly Report on Form 10-Q for the period ending February 28, 2011.
|
|
|
(x)
|
Negative
Pledge Agreement dated August 30, 2018 by the Registrant in favor of M&T Bank, filed with this report.
|
|
|
(xi)
|
Employment
Agreement dated as of June 14, 2019 between the Registrant and Alan R. Klembczyk, incorporated by reference to Exhibit 10(i) to
Current Report on Form 8-K filed June 19, 2019.
|
|
|
(xii)
|
Employment
Agreement dated as of June 14, 2019 between the Registrant and Mark V. McDonough, incorporated by reference to Exhibit 10(ii) to
Current Report on Form 8-K filed June 19, 2019.
|
|
11
|
Statement regarding computation of per share earnings
|
|
|
|
|
|
REG. 228.601(A)(11) Statement regarding computation of per share earnings
|
|
|
|
|
|
Weighted average of common stock/equivalents outstanding - fiscal year ended May 31, 2019
|
|
|
|
|
|
|
|
Weighted average common stock outstanding
|
3,470,595
|
|
|
|
Common shares issuable under stock option plans using treasury stock method
|
17,043
|
|
|
|
Weighted average common stock outstanding assuming dilution
|
3,487,638
|
|
|
|
|
|
|
|
Net income fiscal year ended May 31, 2019
|
(1)
|
$ 2,544,525
|
|
|
|
Weighted average common stock
|
(2)
|
3,470,595
|
|
|
|
Basic income per common share (1) divided by (2)
|
$ 0.73
|
|
|
|
|
|
|
|
Net income fiscal year ended May 31, 2019
|
(3)
|
$ 2,544,525
|
|
|
|
Weighted average common stock outstanding assuming dilution
|
(4)
|
3,487,638
|
|
|
|
Diluted income per common share (3) divided by (4)
|
$ 0.73
|
|
|
|
|
|
Weighted average of common stock/equivalents outstanding - fiscal year ended May 31, 2018
|
|
|
|
|
|
|
|
Weighted average common stock outstanding
|
3,458,049
|
|
|
|
Common shares issuable under stock option plans using treasury stock method
|
30,876
|
|
|
|
Weighted average common stock outstanding assuming dilution
|
3,488,925
|
|
|
|
|
|
|
|
Net income fiscal year ended May 31, 2018
|
(1)
|
$ 443,370
|
|
|
|
Weighted average common stock
|
(2)
|
3,458,049
|
|
|
|
Basic income per common share (1) divided by (2)
|
$ 0.13
|
|
|
|
|
|
|
|
Net income fiscal year ended May 31, 2018
|
(3)
|
$ 443,370
|
|
|
|
Weighted average common stock outstanding assuming dilution
|
(4)
|
3,488,925
|
|
|
|
Diluted income per common share (3) divided by (4)
|
$ 0.13
|
|
|
|
|
|
13
|
The Annual Report to Security Holders for the fiscal year ended May 31, 2019, attached to this Annual Report on Form 10-K
.
|
|
|
|
|
|
14
|
Code of Ethics, incorporated by reference to Exhibit 14 to Annual Report on Form 10-KSB for the period ending May 31, 2005.
|
|
21
|
Subsidiaries of the registrant
|
|
|
Tayco Realty Corporation is a New York corporation organized on September 8, 1977, owned by the Company.
|
|
23
|
The Consent of Independent Registered Public Accounting Firm precedes the Consolidated Financial Statements.
|
|
31
|
Officer Certifications
|
|
|
(i)
|
Rule 13a-14(a) Certification of Chief Executive Officer
.
|
|
|
(ii)
|
Rule 13a-14(a) Certification of Chief Financial Officer
.
|
|
|
|
|
|
|
|
|
|
|
|
32
|
Officer Certifications
|
|
|
(i)
|
Section 1350 Certification of Chief Executive Officer
.
|
|
|
(ii)
|
Section 1350 Certification of Chief Financial Officer
.
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
SIGNATURES
Pursuant to the requirements of
Section 13 or 15(d) 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/Timothy
J. Sopko
|
Date:
|
August 2, 2019
|
|
Timothy J. Sopko
|
|
|
|
Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
and
By:
|
/s/Mark V. McDonough
|
Date:
|
August 2, 2019
|
|
Mark V. McDonough
|
|
|
|
Chief Financial Officer and Director
|
|
|
Pursuant to the requirements of
the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By:
|
/s/John Burgess
|
By:
|
/s/Randall L. Clark
|
|
John Burgess, Director
|
|
Randall L. Clark, Director
|
|
August 2, 2019
|
|
August 2, 2019
|
By:
|
/s/F. Eric Armenat
|
By:
|
/s/Alan
R. Klembczyk
|
|
F. Eric Armenat, Director
|
|
Alan R. Klembczyk,
President and Director
|
|
August 2, 2019
|
|
August 2, 2019
|
[Lumsden & McCormick,
LLP Letterhead]
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors of
Taylor Devices, Inc.
Gentlemen:
We hereby
consent to the incorporation by reference in this Annual Report on Form 10-K (Commission File Number 0-3498) of Taylor Devices,
Inc. of our report dated August 2, 2019 and any reference thereto in the Annual Report to Shareholders for the fiscal year ended
May 31, 2019.
We also consent
to such incorporation by reference in Registration Statement Nos. 333-114085, 333-133340, 333-155284, 333-184809, 333-210660
and 333-232121 of Taylor Devices, Inc. on Form S-8 of our report dated August 2, 2019.
/s/Lumsden & McCormick, LLP
Lumsden & McCormick, LLP
Buffalo, New York
August 2, 2019
TAYLOR DEVICES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2019
[Lumsden & McCormick,
LLP Letterhead]
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors and Stockholders
Taylor Devices, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Taylor Devices, Inc. and Subsidiary (the Company) as of May 31, 2019 and 2018, and the related consolidated
statements of income, stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated
financial statements (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial condition of the Company as of May 31, 2019 and 2018, and the
results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted
in the United States of America.
Adoption of ASU No. 2014-09
As discussed in Note 1 to the consolidated
financial statements, the Company changed its method for recognizing revenue as a result of the adoption of Accounting Standards
Update (ASU) No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, and the amendments in ASUs 2015-14, 2016-08,
2016-10, and 2016-12, effective June 1, 2018.
Basis for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted
our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As
part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our
opinion.
/s/Lumsden & McCormick, LLP
Lumsden & McCormick, LLP
We have served as the Company’s auditor since 1998.
Buffalo, New York
August 2, 2019
TAYLOR DEVICES, INC. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31,
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,071,822
|
|
|
$
|
2,858,323
|
|
Short-term investments
|
|
|
1,055,591
|
|
|
|
1,039,082
|
|
Accounts receivable, net
|
|
|
5,279,302
|
|
|
|
6,265,864
|
|
Inventory
|
|
|
11,239,331
|
|
|
|
11,317,775
|
|
Prepaid expenses
|
|
|
312,160
|
|
|
|
244,643
|
|
Prepaid income taxes
|
|
|
237,017
|
|
|
|
202,519
|
|
Costs and estimated earnings in excess of billings
|
|
|
7,572,490
|
|
|
|
6,356,963
|
|
Total current assets
|
|
|
30,767,713
|
|
|
|
28,285,169
|
|
|
|
|
|
|
|
|
|
|
Maintenance and other inventory, net
|
|
|
731,877
|
|
|
|
885,651
|
|
Property and equipment, net
|
|
|
9,317,442
|
|
|
|
9,935,625
|
|
Cash value of life insurance, net
|
|
|
190,749
|
|
|
|
185,730
|
|
Deferred income taxes
|
|
|
189,115
|
|
|
|
219,115
|
|
Assets
|
|
$
|
41,196,896
|
|
|
$
|
39,511,290
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,402,692
|
|
|
$
|
1,460,175
|
|
Accrued commissions
|
|
|
1,309,358
|
|
|
|
983,260
|
|
Other accrued expenses
|
|
|
1,532,271
|
|
|
|
1,412,502
|
|
Billings in excess of costs and estimated earnings
|
|
|
633,703
|
|
|
|
2,043,002
|
|
Total current liabilities
|
|
|
4,878,024
|
|
|
|
5,898,939
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Common stock, $
.025
par value, authorized
8,000,000
shares, issued
4,029,431
and
4,017,139
shares
|
|
|
100,735
|
|
|
|
100,428
|
|
Paid-in capital
|
|
|
9,538,892
|
|
|
|
9,382,202
|
|
Retained earnings
|
|
|
29,508,604
|
|
|
|
26,959,080
|
|
Stockholders’ equity before treasury stock
|
|
|
39,148,231
|
|
|
|
36,441,710
|
|
Treasury stock - 550,872 shares at cost
|
|
|
(2,829,359
|
)
|
|
|
(2,829,359
|
)
|
Total stockholders' equity
|
|
|
36,318,872
|
|
|
|
33,612,351
|
|
Total liabilities and stockholders’ equity
|
|
$
|
41,196,896
|
|
|
$
|
39,511,290
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAYLOR DEVICES, INC. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
For the years ended May 31,
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Sales, net
|
|
$
|
33,619,031
|
|
|
$
|
24,363,967
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
24,571,255
|
|
|
|
18,439,760
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
9,047,776
|
|
|
|
5,924,207
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
6,045,984
|
|
|
|
5,276,574
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
3,001,792
|
|
|
|
647,633
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
69,006
|
|
|
|
26,861
|
|
Miscellaneous
|
|
|
(11,273
|
)
|
|
|
1,876
|
|
Total other income
|
|
|
57,733
|
|
|
|
28,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
515,000
|
|
|
|
233,000
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,544,525
|
|
|
$
|
443,370
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share
|
|
$
|
0.73
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAYLOR DEVICES, INC. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended May 31, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Paid-In
|
|
Retained
|
|
Treasury
|
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
Stock
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2017
|
|
$
|
99,763
|
|
|
$
|
9,070,278
|
|
|
$
|
26,515,710
|
|
|
$
|
(2,829,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year ended May 31, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
443,370
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for employee stock option plan
|
|
|
619
|
|
|
|
164,364
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for employee stock purchase plan
|
|
|
46
|
|
|
|
22,629
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options issued for services
|
|
|
—
|
|
|
|
124,931
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2018
|
|
|
100,428
|
|
|
|
9,382,202
|
|
|
|
26,959,080
|
|
|
|
(2,829,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year ended May 31, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
2,544,525
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for employee stock option plan
|
|
|
269
|
|
|
|
32,561
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for employee stock purchase plan
|
|
|
38
|
|
|
|
17,473
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments Due to ASU 2014-09
|
|
|
—
|
|
|
|
—
|
|
|
|
4,999
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options issued for services
|
|
|
—
|
|
|
|
106,656
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2019
|
|
$
|
100,735
|
|
|
$
|
9,538,892
|
|
|
$
|
29,508,604
|
|
|
$
|
(2,829,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAYLOR DEVICES, INC. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
For the years ended May 31,
|
|
2019
|
|
2018
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,544,525
|
|
|
$
|
443,370
|
|
Adjustments to reconcile net income to net cash flows from
|
|
|
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,072,959
|
|
|
|
995,924
|
|
Stock options issued for services
|
|
|
106,656
|
|
|
|
124,931
|
|
Loss on disposal of property and equipment
|
|
|
18,061
|
|
|
|
—
|
|
Provision for inventory obsolescence
|
|
|
175,000
|
|
|
|
60,000
|
|
Deferred income taxes
|
|
|
30,000
|
|
|
|
210,000
|
|
Changes in other current assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
986,562
|
|
|
|
(3,720,091
|
)
|
Inventory
|
|
|
1,158,334
|
|
|
|
103,963
|
|
Prepaid expenses
|
|
|
(67,517
|
)
|
|
|
18,931
|
|
Prepaid income taxes
|
|
|
(34,498
|
)
|
|
|
(38,615
|
)
|
Costs and estimated earnings in excess of billings
|
|
|
(1,542,036
|
)
|
|
|
511,430
|
|
Accounts payable
|
|
|
(57,483
|
)
|
|
|
130,854
|
|
Accrued commissions
|
|
|
326,098
|
|
|
|
136,319
|
|
Other accrued expenses
|
|
|
(674,944
|
)
|
|
|
580,442
|
|
Billings in excess of costs and estimated earnings
|
|
|
(1,384,194
|
)
|
|
|
747,013
|
|
Net operating activities
|
|
|
2,657,523
|
|
|
|
304,471
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(472,837
|
)
|
|
|
(936,833
|
)
|
Increase in short-term investments
|
|
|
(16,509
|
)
|
|
|
(16,756
|
)
|
Increase in cash value of life insurance
|
|
|
(5,019
|
)
|
|
|
(5,151
|
)
|
Net investing activities
|
|
|
(494,365
|
)
|
|
|
(958,740
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
50,341
|
|
|
|
187,658
|
|
Net financing activities
|
|
|
50,341
|
|
|
|
187,658
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
2,213,499
|
|
|
|
(466,611
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning
|
|
|
2,858,323
|
|
|
|
3,324,934
|
|
Cash and cash equivalents - ending
|
|
$
|
5,071,822
|
|
|
$
|
2,858,323
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAYLOR DEVICES, INC. AND SUBSIDIARY
|
|
Notes to Consolidated Financial Statements
|
|
1. Summary of Significant Accounting
Policies:
Nature of Operations:
Taylor Devices, Inc. (the Company) manufactures
and sells a single group of very similar products that have many different applications for customers. These similar products are
included in one of eight categories; namely, Seismic Dampers, Fluidicshoks®, Crane and Industrial Buffers, Self-Adjusting Shock
Absorbers, Liquid Die Springs,Vibration Dampers, Machined Springs and Custom Actuators for use in various types of machinery, equipment
and structures, primarily to customers which are located throughout the United States and several foreign countries. The products
are manufactured at the Company's sole operating facility in the United States where all of the Company's long-lived assets reside.
Management does not track or otherwise account for sales broken down by these categories.
78%
of the Company's 2019 revenue was generated from sales to customers in the United States and
17%
was from sales to customers
in Asia. Remaining sales were to customers in other countries in North America, Europe and South America.
74%
of the Company's 2018 revenue was generated
from sales to customers in the United States and
21%
was from sales to customers in Asia. Remaining sales were to customers in
other countries in North America, Europe, Australia and South America.
Principles of Consolidation:
The accompanying
consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Tayco Realty Corporation
(Realty). All inter-company transactions and balances have been eliminated in consolidation.
Subsequent Events:
The Company has evaluated events and transactions
for potential recognition or disclosure in the financial statements through the date the financial statements were issued.
Use of Estimates:
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.
Cash and Cash Equivalents:
The Company includes all highly liquid investments
in money market funds in cash and cash equivalents on the accompanying balance sheets.
Cash and cash equivalents in financial institutions
may exceed insured limits at various times during the year and subject the Company to concentrations of credit risk.
Short-term Investments:
At times, the Company invests excess
funds in liquid interest earning instruments. Short-term investments at May 31, 2019 include “available for sale”
corporate bonds stated at fair value, which approximates cost. The bonds (7) mature on various dates during the period
May 2020 to December 2021. Unrealized holding gains and losses would be presented as a separate component of accumulated
other comprehensive income, net of deferred income taxes. Realized gains and losses on the sale of investments are
determined using the specific identification method.
The bonds are valued using pricing models maximizing
the use of observable inputs for similar securities. This includes basing value on yields currently available on comparable securities
of issuers with similar credit ratings.
Accounts Receivable:
Accounts receivable are stated at an amount
management expects to collect from outstanding balances. Management provides for probable uncollectible accounts through a charge
to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances
that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation
allowance and a credit to accounts receivable.
Inventory:
Inventory is stated at the lower of average
cost or net realizable value. Average cost approximates first-in, first-out cost.
Property and Equipment:
Property and equipment is stated at cost net
of accumulated depreciation. Deprecation is provided primarily using the straight-line method for financial reporting purposes,
and accelerated methods for income tax reporting purposes. Maintenance and repairs are charged to operations as incurred; significant
improvements are capitalized.
Cash Value of Life Insurance:
Cash value of life insurance is stated at the
surrender value of the contracts.
Revenue Recognition:
As noted below, ASU 2014-09 was adopted
on June 1, 2018 using the modified retrospective method, which required the recognition of the cumulative effect of the transition
as an adjustment to retained earnings.
Revenue is recognized (generally at
fixed prices) when, or as, the Company transfers control of promised products or services to a customer in an amount that reflects
the consideration to which the Company expects to be entitled in exchange for transferring those products or services.
A performance obligation is a promise in
a contract to transfer a distinct good or service to the customer, and is the unit of account. A contract’s transaction
price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation
is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual
goods or services is not separately identifiable from other promises in the contracts which are, therefore, not distinct.
Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance
obligations. In the year ended May 31, 2019,
45%
of revenue was recorded for contracts with a single performance obligation
that was satisfied within the period. In the year ended May 31, 2018,
40%
of revenue was recorded for contracts with a single
performance obligation that was satisfied within the period.
For contracts with customers in which
the Company satisfies a promise to the customer to provide a product that has no alternative use to the Company and the Company
has enforceable rights to payment for progress completed to date inclusive of profit, the Company satisfies the performance obligation
and recognizes revenue over time (generally less than one year), using costs incurred to date relative to total estimated costs
at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which
corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material and
overhead. Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are
charged to operations in the period such losses are determined. In the year ended May 31, 2019,
55%
of revenue was recorded for
contracts in which revenue was recognized over time. In the year ended May 31, 2018,
60%
of revenue was recorded for contracts
in which revenue was recognized over time.
Progress payments are typically negotiated
for longer term projects. Payments are otherwise due once performance obligations are complete (generally at shipment and transfer
of title). 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.
If applicable, the Company recognizes
an asset for the incremental, material costs of obtaining a contract with a customer if the Company expects the benefit of those
costs to be longer than one year and the costs are expected to be recovered. As of May 31, 2019, the Company does not have material
incremental costs on any open contracts with an original expected duration of greater than one year, and therefore such costs are
expensed as incurred. These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract
with a customer.
We recognized the cumulative effect
of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings primarily because certain
longer term contracts accounted for on the percentage of completion method did not contain “enforceable right to payment”
terms, as defined. The comparative information has not been restated and continues to be reported under the accounting standards
in effect for those periods.
The cumulative effect of the changes
made to our consolidated June 1, 2018 balance sheet for the adoption of ASU 2014-09, were as follows:
|
|
|
|
|
|
|
Balance Sheet
|
|
Balance at May 31, 2018
|
|
Adjustments Due to ASU 2014-09
|
|
Balance at June 1, 2018
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
11,317,775
|
|
|
$
|
1,101,116
|
|
|
$
|
12,418,891
|
|
Costs and estimated earnings in excess of billings
|
|
$
|
6,356,963
|
|
|
$
|
(326,509
|
)
|
|
$
|
6,030,454
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Billings in excess of costs and estimated earnings
|
|
$
|
2,043,002
|
|
|
$
|
(25,105
|
)
|
|
$
|
2,017,897
|
|
Other accrued expenses
|
|
$
|
1,412,502
|
|
|
$
|
794,713
|
|
|
$
|
2,207,215
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
$
|
26,959,080
|
|
|
$
|
4,999
|
|
|
$
|
26,964,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In accordance with the new revenue
standard requirements, the disclosure of the impact of adoption of ASU 2014-09 on our consolidated balance sheet and income statement
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2019
|
Balance Sheet
|
|
As Reported
|
|
Effect of Change Higher/(Lower)
|
|
Balances Without Adoption of ASU 2014-09
|
Assets
|
|
|
|
|
|
|
Inventory
|
|
$
|
11,239,331
|
|
|
$
|
—
|
|
|
$
|
11,239,331
|
|
Costs and estimated earnings in excess of billings
|
|
$
|
7,572,490
|
|
|
$
|
—
|
|
|
$
|
7,572,490
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Other accrued expenses
|
|
$
|
1,532,271
|
|
|
$
|
—
|
|
|
$
|
1,532,271
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
$
|
29,508,604
|
|
|
$
|
—
|
|
|
$
|
29,508,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended May 31, 2019
|
Income Statement
|
|
As Reported
|
|
Effect of Change Higher/(Lower)
|
|
Balances Without Adoption of ASU 2014-09
|
Revenues
|
|
|
|
|
|
|
Sales, net
|
|
$
|
33,619,031
|
|
|
$
|
1,096,117
|
|
|
$
|
32,522,914
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
$
|
24,571,255
|
|
|
$
|
1,101,116
|
|
|
$
|
23,470,139
|
|
Provision for income taxes
|
|
$
|
515,000
|
|
|
$
|
—
|
|
|
$
|
515,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,544,525
|
|
|
$
|
(4,999
|
)
|
|
$
|
2,549,524
|
|
Shipping and Handling Costs:
Shipping and handling costs on incoming inventory
items are classified as a component of cost of goods sold, while shipping and handling costs on outgoing shipments to customers
are classified as a component of selling, general and administrative expenses. The amounts of these costs classified as a component
of selling, general and administrative expenses were
$268,847
and
$264,696
for the years ended May 31, 2019 and 2018.
Research and Development Costs:
Research and development costs are classified
as a component of cost of sales. The amounts of these costs were
$319,000
and
$263,000
for the years ended May 31, 2019 and 2018.
Income Taxes:
The provision for income taxes provides for
the tax effects of transactions reported in the financial statements regardless of when such taxes are payable. Deferred tax assets
and liabilities are recognized for the expected future tax consequences of temporary differences between the tax and financial
statement basis of assets and liabilities. Deferred taxes are based on tax laws currently enacted with tax rates expected to be
in effect when the taxes are actually paid or recovered.
The Company's
practice is to recognize interest related to income tax matters in interest income / expense and to recognize penalties in selling,
general and administrative expenses. The Company did not have any accrued interest or penalties included in its consolidated balance
sheets at May 31, 2019 or 2018. The Company recorded no interest expense or penalties in its consolidated statements of income
during the years ended May 31, 2019 and 2018.
The Company
believes it is no longer subject to examination by federal and state taxing authorities for years prior to May 31, 2016.
Sales Taxes:
Certain jurisdictions impose a sales tax on
Company sales to nonexempt customers. The Company collects these taxes from customers and remits the entire amount as required
by the applicable law. The Company excludes from revenues and expenses the tax collected and remitted.
Stock-Based
Compensation:
The Company measures compensation cost arising
from the grant of share-based payments to employees at fair value and recognizes such cost in income over the period during which
the employee is required to provide service in exchange for the award.
The stock-based compensation
expense for the years ended May 31, 2019 and 2018 was
$106,656
and
$124,931
.
New
Accounting Standards:
In May 2014, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive
new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer
at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires
additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts,
including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.
ASU 2014-09, as amended, is effective for annual reporting periods, and interim periods within that period, beginning after December
15, 2018 (fiscal year 2019 for the Company). Companies may use either a full retrospective or a modified retrospective approach
to adopt ASU 2014-09. The Company adopted ASU 2014-09 on June 1, 2018 using the modified retrospective method, which required
the recognition of the cumulative effect of the transition as an adjustment to retained earnings. The effect of the adoption is
detailed above.
Other recently issued Accounting Standards
Codification (ASC) guidance has either been implemented or are not significant to the Company.
2. Accounts Receivable:
|
|
2019
|
|
2018
|
Customers
|
|
$
|
4,438,373
|
|
|
$
|
5,515,848
|
|
Customers - retention
|
|
|
950,684
|
|
|
|
859,771
|
|
Gross accounts receivable
|
|
|
5,389,057
|
|
|
|
6,375,619
|
|
Less allowance for doubtful accounts
|
|
|
109,755
|
|
|
|
109,755
|
|
Net accounts receivable
|
|
$
|
5,279,302
|
|
|
$
|
6,265,864
|
|
3. Inventory:
|
|
2019
|
|
2018
|
Raw materials
|
|
$
|
679,018
|
|
|
$
|
726,852
|
|
Work-in-process
|
|
|
9,905,495
|
|
|
|
9,990,225
|
|
Finished goods
|
|
|
754,818
|
|
|
|
700,698
|
|
Gross inventory
|
|
|
11,339,331
|
|
|
|
11,417,775
|
|
Less allowance for obsolescence
|
|
|
100,000
|
|
|
|
100,000
|
|
Net inventory
|
|
$
|
11,239,331
|
|
|
$
|
11,317,775
|
|
4. Costs and Estimated Earnings on Uncompleted
Contracts:
|
|
2019
|
|
2018
|
Costs incurred on uncompleted contracts
|
|
$
|
16,599,307
|
|
|
$
|
12,512,350
|
|
Estimated earnings
|
|
|
6,526,707
|
|
|
|
5,157,890
|
|
Total costs and estimated earnings
|
|
|
23,126,014
|
|
|
|
17,670,240
|
|
Less billings to date
|
|
|
16,187,227
|
|
|
|
13,356,279
|
|
Costs and estimated earnings not billed
|
|
$
|
6,938,787
|
|
|
$
|
4,313,961
|
|
Amounts are included in the accompanying balance
sheets under the following captions:
|
|
2019
|
|
2018
|
Costs and estimated earnings in excess of billings
|
|
$
|
7,572,490
|
|
|
$
|
6,356,963
|
|
Billings in excess of costs and estimated earnings
|
|
|
633,703
|
|
|
|
2,043,002
|
|
Costs and estimated earnings not billed
|
|
$
|
6,938,787
|
|
|
$
|
4,313,961
|
|
The following summarizes the status of Projects
in progress as of May 31, 2019 and 2018:
|
|
2019
|
|
2018
|
Number of Projects in progress
|
|
|
22
|
|
|
|
26
|
|
Aggregate percent complete
|
|
|
77
|
%
|
|
|
72
|
%
|
Aggregate amount remaining
|
|
$
|
6,748,520
|
|
|
$
|
6,816,089
|
|
Percentage of total value invoiced to customer
|
|
|
54
|
%
|
|
|
55
|
%
|
Additionally, as of May 31, 2019, there are
sales orders for
four
Projects that are not yet in progress. These projects total
$990,971
in value upon completion. This compares
to
four
such Projects as of May 31, 2018 with a total value of
$8,793,737
. The Company expects to recognize the entire remaining
revenue on all open projects during the May 31, 2020 fiscal year.
Revenue recognized during the years ended May
31, 2019 and 2018 for amounts included in billings in excess of costs and estimated earnings as of the beginning of the year amounted
to
$4,187,015
and
$2,005,000
.
5. Maintenance and Other Inventory:
|
|
2019
|
|
2018
|
Maintenance and other inventory
|
|
$
|
2,197,958
|
|
|
$
|
2,287,897
|
|
Less allowance for obsolescence
|
|
|
1,466,081
|
|
|
|
1,402,246
|
|
Maintenance and other inventory, net
|
|
$
|
731,877
|
|
|
$
|
885,651
|
|
Maintenance and other inventory represent stock
that is estimated to have a product life-cycle in excess of twelve-months. This stock represents certain items the Company is required
to maintain for service of products sold, and items that are generally subject to spontaneous ordering.
This inventory is particularly sensitive to
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. Therefore, management of the Company has recorded an allowance for
potential inventory obsolescence.
The provision for potential inventory obsolescence
was
$175,000
and
$60,000
for the years ended May 31, 2019 and 2018.
6. Property and Equipment:
|
|
2019
|
|
2018
|
Land
|
|
$
|
195,220
|
|
|
$
|
195,220
|
|
Buildings and improvements
|
|
|
9,342,431
|
|
|
|
9,342,431
|
|
Machinery and equipment
|
|
|
10,390,610
|
|
|
|
10,302,681
|
|
Office furniture and equipment
|
|
|
1,975,392
|
|
|
|
1,652,711
|
|
Autos and trucks
|
|
|
24,818
|
|
|
|
84,256
|
|
Land improvements
|
|
|
455,429
|
|
|
|
455,429
|
|
Gross property and equipment
|
|
|
22,383,900
|
|
|
|
22,032,728
|
|
Less accumulated depreciation
|
|
|
13,066,458
|
|
|
|
12,097,103
|
|
Property and equipment, net
|
|
$
|
9,317,442
|
|
|
$
|
9,935,625
|
|
Depreciation expense was
$1,072,959
and
$995,924
for the years ended May 31, 2019 and 2018.
The Company has commitments to make capital
expenditures of approximately
$50,000
as of May 31, 2019.
7. Short-Term Borrowings:
The Company has available a
$10,000,000
demand line of credit from a bank, with interest payable at the Company's option of 30, 60 or 90 day LIBOR rate plus
2.25%. The line is secured by a negative pledge of the Company's real and personal property. This line of credit is subject to
the usual terms and conditions applied by the bank and subject to renewal annually.
There is
no
amount outstanding under the line
of credit at May 31, 2019 or May 31, 2018.
The Company uses a cash management facility
under which the bank draws against the available line of credit to cover checks presented for payment on a daily basis. Outstanding
checks under this arrangement totaled
$292,000
and
$57,042
as of May 31, 2019 and 2018. These amounts are included in accounts
payable.
8. Legal Proceedings:
There are no legal proceedings except for routine
litigation incidental to the business.
9. Sales:
The Company manufactures and sells a single
group of very similar products that have many different applications for customers. These similar products are included in one
of eight categories; namely, Seismic Dampers, Fluidicshoks®, Crane and Industrial Buffers, Self-Adjusting Shock Absorbers,
Liquid Die Springs,Vibration Dampers, Machined Springs and Custom Actuators. Management does not track or otherwise account for
sales broken down by these categories. Sales of the Company's products are made to three general groups of customers: industrial,
construction and aerospace / defense. A breakdown of sales to these three general groups of customers is as follows:
|
|
2019
|
|
2018
|
Construction
|
|
$
|
20,168,587
|
|
|
$
|
12,192,836
|
|
Aerospace / Defense
|
|
|
11,383,374
|
|
|
|
10,205,945
|
|
Industrial
|
|
|
2,067,070
|
|
|
|
1,965,186
|
|
Sales, net
|
|
$
|
33,619,031
|
|
|
$
|
24,363,967
|
|
Sales to four customers approximated
36%
(
17%
,
8%
,
6%
and
5%
respectively)
of net sales for 2019. Sales to five customers approximated
49%
(
14%
,
13%
,
9%
,
7%
and
6%
respectively) of net sales for 2018.
10. Income Taxes:
|
|
2019
|
|
2018
|
Current tax provision:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
521,000
|
|
|
$
|
23,000
|
|
State
|
|
|
—
|
|
|
|
—
|
|
Total current tax provision
|
|
|
521,000
|
|
|
|
23,000
|
|
Deferred tax provision:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(6,000
|
)
|
|
|
210,000
|
|
State
|
|
|
—
|
|
|
|
—
|
|
Total deferred tax provision
|
|
|
(6,000
|
)
|
|
|
210,000
|
|
Total tax provision
|
|
$
|
515,000
|
|
|
$
|
233,000
|
|
A reconciliation of provision for income taxes
at the statutory rate to income tax provision at the Company's effective rate is as follows:
|
|
2019
|
|
2018
|
Computed tax provision at the expected statutory rate
|
|
$
|
642,500
|
|
|
$
|
193,500
|
|
State income tax - net of Federal tax benefit
|
|
|
500
|
|
|
|
(1,200
|
)
|
Tax effect of permanent differences:
|
|
|
|
|
|
|
|
|
Research tax credits
|
|
|
(166,000
|
)
|
|
|
(110,000
|
)
|
Tax rate change on deferred taxes
|
|
|
—
|
|
|
|
164,000
|
|
Other permanent differences
|
|
|
28,700
|
|
|
|
(3,700
|
)
|
Other
|
|
|
9,300
|
|
|
|
(9,600
|
)
|
Total tax provision
|
|
$
|
515,000
|
|
|
$
|
233,000
|
|
Effective income tax rate
|
|
|
16.8
|
%
|
|
|
34.4
|
%
|
Significant components of the Company's deferred
tax assets and liabilities consist of the following:
|
|
2019
|
|
2018
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful receivables
|
|
$
|
23,000
|
|
|
$
|
23,000
|
|
Tax inventory adjustment
|
|
|
99,700
|
|
|
|
18,800
|
|
Allowance for obsolete inventory
|
|
|
328,900
|
|
|
|
315,500
|
|
Accrued vacation
|
|
|
50,200
|
|
|
|
40,900
|
|
Accrued commissions
|
|
|
19,800
|
|
|
|
14,000
|
|
Warranty reserve
|
|
|
30,300
|
|
|
|
27,600
|
|
Stock options issued for services
|
|
|
208,600
|
|
|
|
223,100
|
|
Total deferred tax assets
|
|
|
760,500
|
|
|
|
662,900
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Excess tax depreciation
|
|
|
571,385
|
|
|
|
443,785
|
|
Net deferred tax assets
|
|
$
|
189,115
|
|
|
$
|
219,115
|
|
In December 2017, the Tax Cuts and Jobs Act
(the 2017 Act) became law. It includes a broad range of tax reform proposals affecting businesses, including corporate tax rates,
business deductions, and international tax provisions. Among the changes, the 2017 Act reduces the corporate rate from
34%
to
21%
for periods beginning after December 31, 2017. Because of the rate change, the Company recorded a non-cash write down of deferred
tax assets and recognized incremental deferred tax expense of
$164,000
during the year ended May 31, 2018.
Realization of the deferred tax assets is dependent
on generating sufficient taxable income at the time temporary differences become deductible. The Company provides a valuation allowance
to the extent that deferred tax assets may not be realized. A valuation allowance has not been recorded against the deferred tax
assets since management believes it is more likely than not that the deferred tax assets are recoverable. The Company considers
future taxable income and potential tax planning strategies in assessing the need for a potential valuation allowance. The amount
of the deferred tax assets considered realizable however, could be reduced in the near term if estimates of future taxable income
are reduced. The Company will need to generate approximately $3.6 million in taxable income in future years in order to realize
the deferred tax assets recorded as of May 31, 2019 of
$760,500
.
The Company and its subsidiary file
consolidated Federal and State income tax returns. As of May 31, 2019, the Company had State investment tax credit
carryforwards of approximately
$370,000
expiring through
May
31, 2025
.
11. Earnings
Per Common Share:
Basic earnings per common share is computed
by dividing income available to common stockholders by the weighted-average common shares outstanding for the period. Diluted earnings
per common share reflects the weighted-average common shares outstanding and dilutive potential common shares, such as stock options.
A reconciliation of weighted-average common
shares outstanding to weighted-average common shares outstanding assuming dilution is as follows:
|
|
2019
|
|
2018
|
Average common shares outstanding
|
|
|
3,470,595
|
|
|
|
3,458,049
|
|
Common shares issuable under stock option plans
|
|
|
17,043
|
|
|
|
30,876
|
|
Average common shares outstanding assuming dilution
|
|
|
3,487,638
|
|
|
|
3,488,925
|
|
12. Related Party Transactions:
The Company had no related party transactions
for the years ended May 31, 2019 and 2018.
13. Employee Stock Purchase
Plan:
In March 2004, the Company reserved 295,000
shares of common stock for issuance pursuant to a non-qualified employee stock purchase plan. Participation in the employee stock
purchase plan is voluntary for all eligible employees of the Company. Purchase of common shares can be made by employee contributions
through payroll deductions. At the end of each calendar quarter, the employee contributions will be applied to the purchase of
common shares using a share value equal to the mean between the closing bid and ask prices of the stock on that date. These shares
are distributed to the employees at the end of each calendar quarter or upon withdrawal from the plan. During the years ended May
31, 2019 and 2018,
1,542
($10.235 to $12.28 price per share) and
1,835
($11.025 to $13.415 price per share) common shares, respectively,
were issued to employees. As of May 31, 2019, 221,627 shares were reserved for further issue.
14. Stock Option Plans:
In 2015, the Company adopted a stock option
plan which permits the Company to grant both incentive stock options and non-qualified stock options. The incentive stock options
qualify for preferential treatment under the Internal Revenue Code. Under this plan,
160,000
shares of common stock have been reserved
for grant to key employees and directors of the Company and 138,500 shares have been granted as of May 31, 2019. Under the plan,
the option price may not be less than the fair market value of the stock at the time the options are granted. Options vest immediately
and expire ten years from the date of grant.
Using the Black-Scholes option pricing model,
the weighted average estimated fair value of each option granted under the plan was
$3.20
during 2019 and
$2.86
during 2018. The pricing model uses the assumptions noted in the following table. Expected volatility is based on the historical
volatility of the Company's stock. The risk-free interest rate for periods within the contractual life of the option is based
on the U.S. Treasury yield curve in effect at the time of the grant. The expected life of options granted is derived from previous
history of stock exercises from the grant date and represents the period of time that options granted are expected to be outstanding.
The Company uses historical data to estimate option exercise and employee termination assumptions under the valuation model. The
Company has never paid dividends on its common stock and does not anticipate doing so in the foreseeable future.
|
|
2019
|
|
2018
|
Risk-free interest rate
|
|
|
2.179
|
%
|
|
|
2.179
|
%
|
Expected life in years
|
|
|
3.7
|
|
|
|
3.7
|
|
Expected volatility
|
|
|
30
|
%
|
|
|
30
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
The following is a summary of stock option activity:
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Intrinsic Value
|
Outstanding - May 31, 2017
|
|
|
253,500
|
|
|
$
|
10.93
|
|
|
$
|
817,629
|
|
Options granted
|
|
|
43,750
|
|
|
$
|
11.15
|
|
|
|
|
|
Less: options exercised
|
|
|
24,750
|
|
|
$
|
6.67
|
|
|
|
|
|
Less: options expired
|
|
|
750
|
|
|
$
|
19.26
|
|
|
|
|
|
Outstanding - May 31, 2018
|
|
|
271,750
|
|
|
$
|
11.33
|
|
|
$
|
304,252
|
|
Options granted
|
|
|
43,000
|
|
|
$
|
11.90
|
|
|
|
|
|
Less: options exercised
|
|
|
10,750
|
|
|
$
|
3.05
|
|
|
|
|
|
Less: options expired
|
|
|
80,000
|
|
|
$
|
11.68
|
|
|
|
|
|
Outstanding - May 31, 2019
|
|
|
224,000
|
|
|
$
|
11.71
|
|
|
$
|
228,132
|
|
We calculated intrinsic value for those options
that had an exercise price lower than the market price of our common shares as of the balance sheet dates. The aggregate intrinsic
value of outstanding options as of the end of each fiscal year is calculated as the difference between the exercise price of the
underlying options and the market price of our common shares for the options that were in-the-money at that date (77,250 at May
31, 2019 and 93,000 at May 31, 2018.) The Company's closing stock price was
$11.08
and
$10.26
as of May 31, 2019 and 2018. As
of May 31, 2019, there are
21,500
options available for future grants under the 2015 stock option plan.
$32,830
and
$164,983
was
received from the exercise of share options during the fiscal years ended May 31, 2019 and 2018.
In 2018, the Company adopted a stock option
plan which permits the Company to grant both incentive stock options and non-qualified stock options. The incentive stock options
qualify for preferential treatment under the Internal Revenue Code. Under this plan, 160,000 shares of common stock have been reserved
for grant to key employees and directors of the Company and no shares have been granted as of May 31, 2019. Under the plan, the
option price may not be less than the fair market value of the stock at the time the options are granted. Options vest immediately
and expire ten years from the date of grant.
The following table summarizes information
about stock options outstanding at May 31, 2019:
Outstanding and Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
|
|
Number of Options
|
|
|
|
Weighted Average Remaining Years of Contractual Life
|
|
|
|
Weighted Average Exercise Price
|
|
$
5.01
-$
6.00
|
|
|
10,000
|
|
|
|
1.9
|
|
|
$
|
5.69
|
|
$
6.01
-$
7.00
|
|
|
10,000
|
|
|
|
0.9
|
|
|
$
|
6.35
|
|
$
7.01
-$
8.00
|
|
|
15,000
|
|
|
|
3.9
|
|
|
$
|
7.74
|
|
$
8.01
-$
9.00
|
|
|
27,250
|
|
|
|
4.6
|
|
|
$
|
8.69
|
|
$
10.01
-$
11.00
|
|
|
15,000
|
|
|
|
8.9
|
|
|
$
|
10.30
|
|
$
11.01
-$
12.00
|
|
|
53,000
|
|
|
|
8.4
|
|
|
$
|
11.79
|
|
$
12.01
-$
13.00
|
|
|
45,000
|
|
|
|
6.9
|
|
|
$
|
12.38
|
|
$
13.01
-$
14.00
|
|
|
15,000
|
|
|
|
7.9
|
|
|
$
|
13.80
|
|
$
16.01
-$
17.00
|
|
|
15,000
|
|
|
|
6.9
|
|
|
$
|
16.40
|
|
$
19.01
-$
20.00
|
|
|
18,750
|
|
|
|
7.2
|
|
|
$
|
19.26
|
|
$
5.00
-$
20.00
|
|
|
224,000
|
|
|
|
6.5
|
|
|
$
|
11.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information
about stock options outstanding at May 31, 2018:
Outstanding and Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
|
|
Number of Options
|
|
|
|
Weighted Average Remaining years of Contractual Life
|
|
|
|
Weighted Average Exercise Price
|
|
$
2.00
-$
3.00
|
|
|
10,000
|
|
|
|
0.9
|
|
|
$
|
2.83
|
|
$
5.01
-$
6.00
|
|
|
15,000
|
|
|
|
2.9
|
|
|
$
|
5.69
|
|
$
6.01
-$
7.00
|
|
|
15,750
|
|
|
|
1.8
|
|
|
$
|
6.34
|
|
$
7.01
-$
8.00
|
|
|
20,000
|
|
|
|
4.9
|
|
|
$
|
7.74
|
|
$
8.01
-$
9.00
|
|
|
32,250
|
|
|
|
5.7
|
|
|
$
|
8.74
|
|
$
10.01
-$
11.00
|
|
|
25,000
|
|
|
|
9.9
|
|
|
$
|
10.30
|
|
$
11.01
-$
12.00
|
|
|
20,000
|
|
|
|
3.9
|
|
|
$
|
11.29
|
|
$
12.01
-$
13.00
|
|
|
55,000
|
|
|
|
7.7
|
|
|
$
|
12.35
|
|
$
13.01
-$
14.00
|
|
|
30,000
|
|
|
|
8.9
|
|
|
$
|
13.80
|
|
$
16.01
-$
17.00
|
|
|
30,000
|
|
|
|
7.9
|
|
|
$
|
16.40
|
|
$
19.01
-$
20.00
|
|
|
18,750
|
|
|
|
8.2
|
|
|
$
|
19.26
|
|
$
2.00
-$
20.00
|
|
|
271,750
|
|
|
|
6.5
|
|
|
$
|
11.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Preferred Stock:
The Company has
2,000,000
authorized but unissued
shares of preferred stock which may be issued in series. The shares of each series shall have such rights, preferences, and limitations
as shall be fixed by the Board of Directors.
16. Treasury Stock:
Treasury shares are
550,872
at May 31, 2019
and 2018.
17. Retirement Plan:
The Company maintains a retirement plan for
essentially all employees pursuant to Section 401(k) of the Internal Revenue Code. The Company matches a percentage of employee
voluntary salary deferrals subject to limitations. The Company may also make discretionary contributions as determined annually
by the Company's Board of Directors. The amount expensed under the plan was
$71,222
and
$74,279
for the years ended May 31, 2019
and 2018.
18. Fair Value of Financial
Instruments:
The carrying amounts of cash and cash equivalents,
accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments.
The fair values of short-term investments were
determined as described in Note 1.
19. Cash Flows Information:
|
|
2019
|
|
2018
|
|
|
|
|
|
Interest paid
|
|
|
none
|
|
|
|
none
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
550,498
|
|
|
$
|
61,615
|
|
Taylor Devices (NASDAQ:TAYD)
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부터 6월(6) 2024 으로 7월(7) 2024
Taylor Devices (NASDAQ:TAYD)
과거 데이터 주식 차트
부터 7월(7) 2023 으로 7월(7) 2024