UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended February 28, 2022
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ____________
| Commission file number | 000-26331 |
| GREYSTONE LOGISTICS, INC. | ||||
| (Exact name of registrant as specified in its charter) | ||||
FOR THE TRANSITION PERIOD FROM ______ TO ________
Commission file number000-26331
GREYSTONE LOGISTICS, INC.
(Exact name of registrant as specified in its charter)
| Oklahoma | 75-2954680 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 1613 East | 74120 | |
| (Address of principal executive offices) | (Zip Code) |
| (918)583-7441 |
| (Registrant’s telephone number, including area code) |
| (Former name, former address and former fiscal year, if changed since last report) |
(918) 583-7441Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| NONE | GLGI | NONE |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to post and submit such files). Yes [X] ☒ No [ ] ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company | |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes [ ] ☐ No [X] ☒
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:January 10, 2018April 8, 2022 - 28,361,201
GREYSTONE LOGISTICS, INC.
FORM 10-Q
For the Period Ended November 30, 2017February 28, 2022
| 2 |
Greystone Logistics, Inc. and Subsidiaries
(Unaudited)
| November 30, 2017 | May 31, 2017 | February 28, 2022 | May 31, 2021 | |||||||||||||
| Assets | ||||||||||||||||
| Current Assets: | ||||||||||||||||
| Cash | $ | 528,450 | $ | 579,021 | $ | 7,982,172 | $ | 4,387,533 | ||||||||
| Accounts receivable - | ||||||||||||||||
| Trade, net of allowance for doubtful accounts of $31,660 at November 30, 2017 and May 31, 2017 | 1,940,167 | 6,160,145 | ||||||||||||||
| Related party receivables | 73,027 | 73,578 | ||||||||||||||
| Trade | 5,585,604 | 4,586,134 | ||||||||||||||
| Related parties | 112,174 | 153,550 | ||||||||||||||
| Inventory | 3,039,936 | 1,587,552 | 4,288,015 | 3,441,974 | ||||||||||||
| Prepaid expenses | 113,158 | 136,395 | 629,612 | 52,315 | ||||||||||||
| Total Current Assets | 5,694,738 | 8,536,691 | 18,597,577 | 12,621,506 | ||||||||||||
| Property and Equipment, net | 21,053,357 | 19,706,782 | ||||||||||||||
| Deferred Tax Asset | 38,915 | 281,415 | ||||||||||||||
| Property, Plant and Equipment, net | 32,099,676 | 30,998,988 | ||||||||||||||
| Right-of-Use Operating Lease Assets | 62,242 | 109,013 | ||||||||||||||
| Total Assets | $ | 26,787,010 | $ | 28,524,888 | $ | 50,759,495 | $ | 43,729,507 | ||||||||
| Liabilities and Equity | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Current portion of long-term debt | $ | 2,794,286 | $ | 2,493,236 | $ | 2,818,321 | $ | 3,236,113 | ||||||||
| Current portion of capital lease | 2,194,217 | 2,261,560 | ||||||||||||||
| Accounts payable and accrued expenses | 3,921,631 | 5,727,903 | ||||||||||||||
| Accrued expenses - related parties | - | 29,076 | ||||||||||||||
| Current portion of financing leases | 1,592,166 | 1,745,535 | ||||||||||||||
| Current portion of operating leases | 33,881 | 56,443 | ||||||||||||||
| Accounts payable and accrued liabilities | 7,759,480 | 3,754,556 | ||||||||||||||
| Deferred revenue | 10,218,357 | 6,430,607 | ||||||||||||||
| Preferred dividends payable | 30,822 | 29,726 | 80,137 | - | ||||||||||||
| Total Current Liabilities | 8,940,956 | 10,541,501 | 22,502,342 | 15,223,254 | ||||||||||||
| Long-Term Debt, net of current portion | 15,803,513 | 15,310,754 | ||||||||||||||
| Capital Lease, net of current portion | 518,072 | 1,532,503 | ||||||||||||||
| Long-Term Debt, net of current portion and debt issue costs | 11,396,240 | 12,971,529 | ||||||||||||||
| Financing Leases, net of current portion | 777,911 | 1,848,472 | ||||||||||||||
| Operating Leases, net of current portion | 28,361 | 52,570 | ||||||||||||||
| Deferred Tax Liability | 1,938,166 | 2,380,642 | ||||||||||||||
| Equity: | ||||||||||||||||
| Preferred stock, $0.0001 par value, cumulative, 20,750,000 shares authorized, 50,000 shares issued and outstanding, liquidation preference of $5,000,000 | 5 | 5 | ||||||||||||||
| Common stock, $0.0001 par value, 5,000,000,000 shares authorized, 28,361,201 shares issued and outstanding | 2,836 | 2,836 | ||||||||||||||
| Preferred stock, $ par value, cumulative, shares authorized, shares issued and outstanding, liquidation preference of $5,000,000 | 5 | 5 | ||||||||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively | 2,828 | 2,836 | ||||||||||||||
| Additional paid-in capital | 53,790,764 | 53,790,764 | 53,533,272 | 53,790,764 | ||||||||||||
| Accumulated deficit | (53,361,620 | ) | (53,724,991 | ) | (40,732,392 | ) | (43,776,927 | ) | ||||||||
| Total Greystone Stockholders’ Equity | 431,985 | 68,614 | 12,803,713 | 10,016,678 | ||||||||||||
| Non-controlling interest | 1,092,484 | 1,071,516 | 1,312,762 | 1,236,362 | ||||||||||||
| Total Equity | 1,524,469 | 1,140,130 | 14,116,475 | 11,253,040 | ||||||||||||
| Total Liabilities and Equity | $ | 26,787,010 | $ | 28,524,888 | $ | 50,759,495 | $ | 43,729,507 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of OperationsIncome
(Unaudited)For the Nine Months Ended February 28,
| For the Six Months Ended November 30, | ||||||||
| 2017 | 2016 | |||||||
| Sales | $ | 20,009,177 | $ | 17,065,972 | ||||
| Cost of Sales | 16,976,241 | 14,868,884 | ||||||
| Gross Profit | 3,032,936 | 2,197,088 | ||||||
| General, Selling and Administrative Expenses | 1,452,416 | 1,387,304 | ||||||
| Operating Income | 1,580,520 | 809,784 | ||||||
| Other Income (Expense): | ||||||||
| Other income | 12,069 | - | ||||||
| Interest expense | (658,736 | ) | (542,800 | ) | ||||
| Income before Income Taxes | 933,853 | 266,984 | ||||||
| Provision for Income Taxes | 259,500 | 54,550 | ||||||
| Net Income | 674,353 | 212,434 | ||||||
| Income Attributable to Variable Interest Entity | (122,968 | ) | (119,552 | ) | ||||
| Preferred Dividends | (188,014 | ) | (169,212 | ) | ||||
| Net Income (Loss) Attributable to Common Stockholders | $ | 363,371 | $ | (76,330 | ) | |||
| Income (Loss) Per Share of Common Stock - | ||||||||
| Basic and Diluted | $ | 0.01 | $ | (0.00 | ) | |||
| Weighted Average Shares of Common Stock Outstanding - | ||||||||
| Basic | 28,361,201 | 28,283,332 | ||||||
| Diluted | 28,988,701 | 28,283,332 | ||||||
(Unaudited)
| 2022 | 2021 | |||||||
| Sales | $ | 53,069,648 | $ | 47,602,690 | ||||
| Cost of Sales | 47,914,061 | 38,986,912 | ||||||
| Gross Profit | 5,155,587 | 8,615,778 | ||||||
| Selling, General and Administrative Expenses | 4,033,483 | 3,639,883 | ||||||
| Operating Income | 1,122,104 | 4,975,895 | ||||||
| Other Income (Expense): | ||||||||
| Other income | 35,731 | 19,122 | ||||||
| Gain from forgiveness of debt | 3,068,497 | - | ||||||
| Interest expense | (631,115 | ) | (923,289 | ) | ||||
| Income before Income Taxes | 3,595,217 | 4,071,728 | ||||||
| Provision for Income Taxes | (99,000 | ) | (1,257,000 | ) | ||||
| Net Income | 3,496,217 | 2,814,728 | ||||||
| Income Attributable to Non-controlling Interest | (208,600 | ) | (203,918 | ) | ||||
| Preferred Dividends | (243,082 | ) | (243,973 | ) | ||||
| Net Income Attributable to Common Stockholders | $ | 3,044,535 | $ | 2,366,837 | ||||
| Income Per Share of Common Stock - | ||||||||
| Basic | $ | 0.11 | $ | 0.08 | ||||
| Diluted | $ | 0.10 | $ | 0.08 | ||||
| Basic and Diluted | ||||||||
| Weighted Average Shares of Common Stock Outstanding - | ||||||||
| Basic | 28,472,256 | 28,361,201 | ||||||
| Diluted | 32,301,084 | 32,363,012 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of OperationsIncome
For the Three Months Ended February 28,
(Unaudited)
| For the Three Months Ended November 30, | ||||||||||||||||
| 2017 | 2016 | 2022 | 2021 | |||||||||||||
| Sales | $ | 9,722,102 | $ | 9,221,711 | $ | 22,450,682 | $ | 14,511,196 | ||||||||
| Cost of Sales | 8,588,065 | 7,992,441 | 19,734,155 | 11,954,222 | ||||||||||||
| Gross Profit | 1,134,037 | 1,229,270 | 2,716,527 | 2,556,974 | ||||||||||||
| General, Selling and Administrative Expenses | 621,013 | 664,275 | ||||||||||||||
| Selling, General and Administrative Expenses | 1,680,979 | 1,168,426 | ||||||||||||||
| Operating Income | 513,024 | 564,995 | 1,035,548 | 1,388,548 | ||||||||||||
| Other Income (Expense): | ||||||||||||||||
| Other income | 3,806 | - | 3,688 | 10,178 | ||||||||||||
| Interest expense | (334,059 | ) | (306,169 | ) | (201,992 | ) | (270,229 | ) | ||||||||
| Income before Income Taxes | 182,771 | 258,826 | 837,244 | 1,128,497 | ||||||||||||
| Provision for Income Taxes | 38,700 | 73,400 | (234,000 | ) | (346,000 | ) | ||||||||||
| Net Income | 144,071 | 185,426 | 603,244 | 782,497 | ||||||||||||
| Income Attributable to Variable Interest Entity | (61,915 | ) | (60,173 | ) | ||||||||||||
| Income Attributable to Non-controlling Interest | (70,649 | ) | (68,904 | ) | ||||||||||||
| Preferred Dividends | (93,493 | ) | (84,144 | ) | (80,137 | ) | (80,137 | ) | ||||||||
| Net Income (Loss) Attributable to Common Stockholders | $ | (11,337 | ) | $ | 41,109 | |||||||||||
| Net Income Attributable to Common Stockholders | $ | 452,458 | $ | 633,456 | ||||||||||||
| Income (Loss) Per Share of Common Stock - | ||||||||||||||||
| Income Per Share of Common Stock - | ||||||||||||||||
| Basic and Diluted | $ | (0.00 | ) | $ | 0.00 | $ | 0.02 | $ | 0.02 | |||||||
| Weighted Average Shares of Common Stock Outstanding - | ||||||||||||||||
| Basic | 28,361,201 | 28,361,201 | 28,472,639 | 28,361,201 | ||||||||||||
| Diluted | 28,361,201 | 28,940,368 | 28,967,144 | 29,029,157 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Cash FlowsChanges in Equity
(Unaudited)For the Nine Months Ended February 28, 2022 and 2021
| For the Six Months Ended November 30, | ||||||||
| 2017 | 2016 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 674,353 | $ | 212,434 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities - | ||||||||
| Depreciation and amortization | 1,612,143 | 1,222,574 | ||||||
| Decrease in deferred tax asset | 242,500 | 54,550 | ||||||
| Decrease in trade accounts receivable | 4,219,978 | 2,486,129 | ||||||
| (Increase) Decrease in related party receivables | 551 | (22,142 | ) | |||||
| (Increase) Decrease in inventory | (1,452,384 | ) | 8,953 | |||||
| (Increase) Decrease in prepaid expenses | 23,237 | (157,932 | ) | |||||
| Increase (Decrease) in accounts payable and accrued expenses | (1,733,329 | ) | 239,547 | |||||
| Net cash provided by operating activities | 3,587,049 | 4,044,113 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | (2,996,530 | ) | (2,095,073 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from long-term debt | 1,795,000 | - | ||||||
| Payments on long-term debt and capitalized lease | (2,387,172 | ) | (1,619,936 | ) | ||||
| Proceeds from revolving loan | 240,000 | - | ||||||
| Payments on revolving loan | - | (275,000 | ) | |||||
| Debt issue costs | - | (64,000 | ) | |||||
| Proceeds from exercised stock options | - | 57,000 | ||||||
| Dividends paid on preferred stock | (186,918 | ) | (172,813 | ) | ||||
| Distributions paid by variable interest entity | (102,000 | ) | (102,000 | ) | ||||
| Net cash used in financing activities | (641,090 | ) | (2,176,749 | ) | ||||
| Net Decrease in Cash | (50,571 | ) | (227,709 | ) | ||||
| Cash, beginning of period | 579,021 | 897,377 | ||||||
| Cash, end of period | $ | 528,450 | $ | 669,668 | ||||
| Non-cash Activities: | ||||||||
| Acquisition of equipment by capital lease | $ | - | $ | 5,450,474 | ||||
| Conversion of related party accrued interest to long-term debt | $ | - | $ | 2,475,690 | ||||
| Warrants to purchase common stock issued | $ | - | $ | 120,000 | ||||
| Preferred dividend accrual | $ | 30,822 | $ | 56,404 | ||||
| Supplemental information: | ||||||||
| Interest paid | $ | 658,736 | $ | 527,800 | ||||
| Taxes paid | $ | 10,000 | $ | - | ||||
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Greystone Stockholders’ | Non-controlling | Total | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Balances, May 31, 2020 | 50,000 | $ | 5 | 28,361,201 | $ | 2,836 | $ | 53,790,764 | $ | (46,807,092 | ) | $ | 6,986,513 | $ | 1,173,020 | $ | 8,159,533 | |||||||||||||||||||
| Cash distributions | - | - | - | - | - | - | - | (52,200 | ) | (52,200 | ) | |||||||||||||||||||||||||
| Preferred dividends, $/share | - | - | - | - | - | (81,918 | ) | (81,918 | ) | - | (81,918 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 942,119 | 942,119 | 67,039 | 1,009,158 | |||||||||||||||||||||||||||
| Balances, August 31, 2020 | 50,000 | 5 | 28,361,201 | 2,836 | 53,790,764 | (45,946,891 | ) | 7,846,714 | 1,187,859 | 9,034,573 | ||||||||||||||||||||||||||
| Cash distributions | - | - | - | - | - | - | - | (52,200 | ) | (52,200 | ) | |||||||||||||||||||||||||
| Preferred dividends, $/share | - | - | - | - | - | (81,918 | ) | (81,918 | ) | - | (81,918 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 955,098 | 955,098 | 67,975 | 1,023,073 | |||||||||||||||||||||||||||
| Balances, November 30, 2020 | 50,000 | 5 | 28,361,201 | 2,836 | 53,790,764 | (45,073,711 | ) | 8,719,894 | 1,203,634 | 9,923,528 | ||||||||||||||||||||||||||
| Cash distributions | - | - | - | - | - | - | - | (52,200 | ) | (52,200 | ) | |||||||||||||||||||||||||
| Preferred dividends, $/share | - | - | - | - | - | (80,137 | ) | (80,137 | ) | - | (80,137 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 713,593 | 713,593 | 68,904 | 782,497 | |||||||||||||||||||||||||||
| Balances, February 28, 2021 | 50,000 | $ | 5 | 28,361,201 | $ | 2,836 | $ | 53,790,764 | $ | (44,440,255 | ) | $ | 9,353,350 | $ | 1,220,338 | $ | 10,573,688 | |||||||||||||||||||
| Balances, May 31, 2021 | 50,000 | $ | 5 | 28,361,201 | $ | 2,836 | $ | 53,790,764 | $ | (43,776,927 | ) | $ | 10,016,678 | $ | 1,236,362 | $ | 11,253,040 | |||||||||||||||||||
| Stock options exercised | - | - | 200,000 | 20 | 23,980 | - | 24,000 | - | 24,000 | |||||||||||||||||||||||||||
| Cash distributions | - | - | - | - | - | - | - | (52,200 | ) | (52,200 | ) | |||||||||||||||||||||||||
| Preferred dividends, $/share | - | - | - | - | - | (81,918 | ) | (81,918 | ) | - | (81,918 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 3,052,839 | 3,052,839 | 69,619 | 3,122,458 | |||||||||||||||||||||||||||
| Balances, August 31, 2021 | 50,000 | 5 | 28,561,201 | 2,856 | 53,814,744 | (40,806,006 | ) | 13,011,599 | 1,253,781 | 14,265,380 | ||||||||||||||||||||||||||
| Preferred dividends, $/share | - | - | - | - | - | (81,027 | ) | (81,027 | ) | - | (81,027 | ) | ||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | (297,817 | ) | (297,817 | ) | 68,332 | (229,485 | ) | ||||||||||||||||||||||||
| Balances, November 30, 2021 | 50,000 | 5 | 28,561,201 | 2,856 | 53,814,744 | (41,184,850 | ) | 12,632,755 | 1,322,113 | 13,954,868 | ||||||||||||||||||||||||||
| Common stock purchase | (281,500 | ) | (28 | ) | (281,472 | ) | - | (281,500 | ) | - | (281,500 | ) | ||||||||||||||||||||||||
| Cash distributions | - | - | - | - | - | - | - | (80,000 | ) | (80,000 | ) | |||||||||||||||||||||||||
| Preferred dividends, $/share | - | - | - | - | - | (80,137 | ) | (80,137 | ) | - | (80,137 | ) | ||||||||||||||||||||||||
| Preferred dividends | - | - | - | - | - | (80,137 | ) | (80,137 | ) | - | (80,137 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 532,595 | 532,595 | 70,649 | 603,244 | |||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | 532,595 | 532,595 | 70,649 | 603,244 | |||||||||||||||||||||||||||
| Balances, February 28, 2022 | 50,000 | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (40,732,392 | ) | $ | 12,803,713 | $ | 1,312,762 | $ | 14,116,475 | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended February 28,
(Unaudited)
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 3,496,217 | $ | 2,814,728 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities - | ||||||||
| Depreciation and amortization | 4,015,292 | 4,400,422 | ||||||
| Forgiveness of debt | (3,068,497 | ) | - | |||||
| Gain on sale of assets | (22,336 | ) | - | |||||
| Deferred tax expense | 99,000 | 1,257,000 | ||||||
| Decrease (increase) in trade accounts receivable | (999,470 | ) | 2,290,113 | |||||
| Decrease (increase) in related party receivables | 41,376 | (23,889 | ) | |||||
| Decrease (increase) in inventory | (846,041 | ) | 752,526 | |||||
| Increase in prepaid expenses | (577,297 | ) | (53,564 | ) | ||||
| Increase in accounts payable and accrued liabilities | 3,258,539 | 39,602 | ||||||
| Increase (decrease) in deferred revenue | 3,787,750 | (2,911,800 | ) | |||||
| Net cash provided by operating activities | 9,184,533 | 8,565,138 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | (4,875,530 | ) | (2,252,271 | ) | ||||
| Proceeds from sale of assets | 50,000 | - | ||||||
| Net cash used in investing activities | (4,825,530 | ) | (2,252,271 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from long-term debt | 837,000 | - | ||||||
| Payments on long-term debt and financing leases | (4,390,444 | ) | (3,631,852 | ) | ||||
| Payments on related party note payable and financing lease | (353,523 | ) | (885,206 | ) | ||||
| Proceeds from revolving loan | 3,700,000 | 1,250,000 | ||||||
| Payments on revolving loan | - | (3,190,003 | ) | |||||
| Proceeds from stock options exercised | 24,000 | - | ||||||
| Purchase of treasury stock | (281,500 | ) | - | |||||
| Payments for debt issuance costs | (4,752 | ) | - | |||||
| Dividends paid on preferred stock | (162,945 | ) | (247,946 | ) | ||||
| Distributions paid by non-controlling interest | (132,200 | ) | (156,600 | ) | ||||
| Net cash used in financing activities | (764,364 | ) | (6,861,607 | ) | ||||
| Net Increase (Decrease) in Cash | 3,594,639 | (548,740 | ) | |||||
| Cash, beginning of period | 4,387,533 | 1,131,850 | ||||||
| Cash, end of period | $ | 7,982,172 | $ | 583,110 | ||||
| Non-cash Activities: | ||||||||
| Acquisition of equipment through financing lease | $ | 24,441 | $ | - | ||||
| Capital expenditures in accounts payable | $ | 255,062 | $ | 48,379 | ||||
| Equipment transferred from inventory | $ | - | $ | 26,750 | ||||
| Preferred dividend accrual | $ | 80,137 | $ | 80,137 | ||||
| Supplemental information: | ||||||||
| Interest paid | $ | 627,555 | $ | 897,045 | ||||
| Income taxes paid | $ | 1,015,000 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
GREYSTONE LOGISTICS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Financial Statements
In the opinion of Greystone Logistics, Inc. (“Greystone”), the accompanying unaudited consolidated financial statements contain all adjustments and reclassifications, which are of a normal recurring nature, necessary to present fairly its financial position as of November 30, 2017,February 28, 2022, the results of its operations for the six-monthnine months and three-month periodsthree months ended November 30, 2017February 28, 2022 and 2016,2021 and its cash flows for the six-month periodsnine months ended November 30, 2017February 28, 2022 and 2016.2021. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended May 31, 20172021 and the notes thereto included in Greystone’sthe Form 10-K for such period. The results of operations for the six-monthnine months and three-month periodsthree months ended November 30, 2017February 28, 2022 and 20162021 are not necessarily indicative of the results to be expected for the full fiscal year.
The consolidated financial statements of Greystone include its wholly-owned subsidiaries, Greystone Manufacturing, L.L.C. (“GSM”) and Plastic Pallet Production, Inc. (“PPP”), and the variable interest entity, Greystone Real Estate, L.L.C. (“GRE”). GRE owns two buildings located in Bettendorf, Iowa which are leased to GSM. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements.
Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income (loss) availableattributable to common stockholders by the weighted-average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income (loss) availableattributable to common stockholders by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.
| 2017 | 2016 | |||||||
| Six-month periods ended November 30: | ||||||||
| Options to purchase common stock | - | 200,000 | ||||||
| Warrants to purchase common stock | - | 500,000 | ||||||
| Preferred stock convertible into common stock | 3,333,333 | 3,333,333 | ||||||
| Total | 3,333,333 | 4,033,333 | ||||||
| Three-month periods ended November 30: | ||||||||
| Options to purchase common stock | 200,000 | - | ||||||
| Warrants to purchase common stock | 500,000 | - | ||||||
| Preferred stock convertible into common stock | 3,333,333 | 3,333,333 | ||||||
| Total | 4,033,333 | 3,333,333 | ||||||
Schedule of Anti-dilutive Shares
| 2022 | 2021 | |||||||
| Preferred stock convertible into common stock | 3,333,333 | 3,333,333 | ||||||
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For the following periods:nine months ended February 28, 2022 and 2021:
Schedule of Basic and Diluted Earnings Per Share
| 2022 | 2021 | |||||||
| Basic earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 3,044,535 | $ | 2,366,837 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,472,256 | 28,361,201 | ||||||
| Income per share of common stock - basic | $ | 0.11 | $ | 0.08 | ||||
| Diluted earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 3,044,535 | $ | 2,366,837 | ||||
| Add: Preferred stock dividends for assumed conversion | 243,082 | 243,973 | ||||||
| Net income allocated to common stockholders | $ | 3,287,617 | $ | 2,610,810 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding – basic | 28,472,256 | 28,361,201 | ||||||
| Incremental shares from assumed conversion of options, warrants and preferred stock, as appropriate | 3,828,828 | 4,001,811 | ||||||
| Weighted average common stock outstanding – diluted | 32,301,084 | 32,363,012 | ||||||
| Income per share of common stock – diluted | $ | 0.10 | $ | 0.08 | ||||
For the three months ended February 28, 2022 and 2021:
| 2022 | 2021 | |||||||
| Basic earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 452,458 | $ | 633,456 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding – basic | 28,472,639 | 28,361,201 | ||||||
| Income per share of common stock – basic | $ | 0.02 | $ | 0.02 | ||||
| Diluted earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 452,458 | $ | 633,456 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,472,639 | 28,361,201 | ||||||
| Incremental shares from assumed conversion of warrants or options, as appropriate | 494,505 | 667,956 | ||||||
| Weighted average common stock outstanding - diluted | 28,967,144 | 29,029,157 | ||||||
| Income (loss) per share of common stock – diluted | $ | 0.02 | $ | 0.02 | ||||
| 2017 | 2016 | |||||||
| Six-month periods ended November 30: | ||||||||
| Numerator - | ||||||||
| Net income (loss) attributable to common stockholders | $ | 363,371 | $ | (76,330 | ) | |||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,361,201 | 28,283,332 | ||||||
| Incremental shares from assumed conversion of options and warrants | 627,500 | - | ||||||
| Diluted shares | 28,988,701 | 28,283,332 | ||||||
| Loss per share - | ||||||||
| Basic and Diluted | $ | 0.01 | $ | (0.00 | ) | |||
| Three-month periods ended November 30: | ||||||||
| Numerator - | ||||||||
| Net income (loss) attributable to common stockholders | $ | (11,337 | ) | $ | 41,109 | |||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,361,201 | 28,361,201 | ||||||
| Incremental shares from assumed conversion of options and warrants | - | 579,167 | ||||||
| Diluted shares | 28,361,201 | 28,940,368 | ||||||
| Loss per share - | ||||||||
| Basic and Diluted | $ | (0.00 | ) | $ | 0.00 | |||
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Note 3. Inventory
Inventory consists of the following:
Schedule of Inventory
| November 30, 2017 | May 31, 2017 | |||||||
| Raw materials | $ | 774,037 | $ | 669,083 | ||||
| Finished goods | 2,265,899 | 918,469 | ||||||
| Total inventory | $ | 3,039,936 | $ | 1,587,552 | ||||
| February 28, | May 31, | |||||||
| 2022 | 2021 | |||||||
| Raw materials | $ | 2,054,525 | $ | 2,520,654 | ||||
| Finished goods | 2,233,490 | 921,320 | ||||||
| Total inventory | $ | 4,288,015 | $ | 3,441,974 | ||||
Note 4. Property, Plant and Equipment
A summary of the property, plant and equipment for Greystone is as follows:
Schedule of Property, Plant and Equipment
November 30, 2017 | May 31, 2017 | February 28, 2022 | May 31, 2021 | |||||||||||||
| Production machinery and equipment | $ | 30,314,497 | $ | 27,493,614 | $ | 56,215,850 | $ | 52,292,733 | ||||||||
| Plant buildings and land | 5,296,784 | 5,296,784 | 7,020,542 | 6,970,949 | ||||||||||||
| Leasehold improvements | 337,339 | 263,710 | 1,487,398 | 1,487,398 | ||||||||||||
| Furniture and fixtures | 392,370 | 392,371 | 542,057 | 550,337 | ||||||||||||
| 36,340,990 | 33,446,479 | |||||||||||||||
| Property plant and equipment gross | 65,265,847 | 61,301,417 | ||||||||||||||
| Less: Accumulated depreciation and amortization | (15,287,633 | ) | (13,739,697 | ) | (33,166,171 | ) | (30,302,429 | ) | ||||||||
| Net Property, Plant and Equipment | $ | 21,053,357 | $ | 19,706,782 | $ | 32,099,676 | $ | 30,998,988 | ||||||||
Production machinery and equipment includes equipment capitalized pursuant to a capital lease in the amount of $5,323,864. The equipment is being amortized using the straight-line method over 10 years.
Production machinery includes deposits on equipment in the amount of $149,220 that had$2,977,230 at February 28, 2022, which has not been placed into service as of November 30, 2017. Two plantservice. Plant buildings and land include two properties which are owned by GRE, a VIE, having avariable interest entity (“VIE”) and have an aggregate net book value of $3,070,357 at November 30, 2017.$2,577,901 as of February 28, 2022.
Depreciation expense, including amortization expense related to assets under capital leasefinancing leases, for the sixnine months ended November 30, 2017February 28, 2022 and 20162021 was approximately $1,547,936$4,011,025 and $1,187,544,$4,397,890, respectively.
Note 5. Related Party Transactions/Activity
Yorktown Management & Financial Services, LLC
Yorktown Management & Financial Services, LLC (“Yorktown”), an entity wholly ownedwholly-owned by Greystone’s CEOPresident and President,CEO, owns and rents to Greystone (1) grinding equipment used to grind raw materials for Greystone’s pallet production and (2) extruders for pelletizing recycled plastic into pellets for resale and for use as raw material in the manufacture of pallets. GSM pays weekly rental fees to Yorktown of $22,500$27,500 for use of Yorktown’s grinding equipment and $5,000pelletizing equipment. Rental fees were $1,072,500 for the useeach of Yorktown’s pelletizing equipment for which GSMthe nine months ended February 28, 2022 and 2021.
Greystone paid Yorktown rental fees of $742,500 office rents totaling $38,400 and $715,000 for$36,000 during the sixnine months ended November 30, 2017February 28, 2022 and 2016,2021, respectively.
In addition, Greystone prepaid $99,710 to Yorktown providesas a prepayment for lease rentals and rents on office space in consideration for Greystone in Tulsa, Oklahoma at a monthly rental of $4,000.50% reduction on office rent on the last scheduled payment under the office lease.
TriEnda Holdings, L.L.C.
TriEnda Holdings, L.L.C. (“TriEnda”) is a manufacturer of plastic pallets, protective packing and dunnage utilizing thermoform processing for which Warren F. Kruger, Greystone’s presidentPresident and CEO, serves TriEnda as the non-executive Chairman of the Board and is a partner in a partnership which has a majority ownership interest.interest in TriEnda. Greystone provided tolling services, blendingmay purchase pallets from TriEnda for resale or sell Greystone pallets to TriEnda. During the nine months ended February 28, 2022 and pelletizing plastic resin, for TriEnda through March 2017. Revenue2021, Greystone purchases from TriEnda totaled $-0-$4,222 and $368,690 for the six months ended November 30, 2017$52,356, respectively, and 2016,sales to TriEnda totaled $62,089 and $54,871, respectively. As of February 28, 2022, TriEnda owed $88,204 to Greystone.
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Green Plastic Pallets
Greystone periodically purchases material and pallets from TriEnda. Purchases for the six months ended November 30, 2017 and 2016 totaled $45,467 and $24,265, respectively.
Green Plastic Pallets
Greystone sells plastic pallets to Green Plastic Pallets (“Green”), an entity that is owned by James Kruger, brother to Warren Kruger, Greystone’s presidentPresident and CEO. Greystone had sales to Green of $256,819$348,330 and $146,885$343,350 for the sixnine months ended November 30, 2017February 28, 2022 and 2016,2021, respectively. The account receivable due from Green at November 30, 2017as of February 28, 2022 was $73,027.$23,970.
Note 6. Long-term Debt
Debt as of November 30, 2017February 28, 2022 and May 31, 20172021 is as follows:
Schedule of Long-Term Debt
| February 28, | May 31, | |||||||
| 2022 | 2021 | |||||||
| Other | 120,648 | 147,914 | ||||||
| Term loan A payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing April 30, 2023 | $ | 973,767 | $ | 1,623,572 | ||||
| Term loan C payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing August 4, 2024 | 703,855 | 905,822 | ||||||
| Term loan D payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.75%, maturing January 10, 2022 | - | 487,390 | ||||||
| Term loan E payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.75%, maturing February 28, 2023 | 253,181 | 447,551 | ||||||
| Term loan F payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing February 29, 2024 | 1,476,551 | 2,035,670 | ||||||
| Term loan G payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing April 30, 2024 | - | 789,926 | ||||||
| Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.5%, due January 31, 2024 | 3,700,000 | - | ||||||
| Paycheck Protection Program note, interest rate of 1.0%, debt forgiven June 2021 | - | 3,034,000 | ||||||
| Term loan payable by GRE to International Bank of Commerce, interest rate of 5.5%, monthly principal and interest payment of $27,688, due April 30, 2023 | 1,883,218 | 2,049,941 | ||||||
| Term note payable to Great Western Bank, interest rate of 3.7%, monthly principal and interest payments of $27,593, due March 19, 2025, secured by certain equipment | 962,651 | 1,180,470 | ||||||
| Term loan payable to Great Western Bank, interest rate of 3.5%, monthly principal and interest payments of $5,997, due August 10, 2028, secured by certain real estate | 814,758 | - | ||||||
| Note payable to Robert Rosene, 7.5% interest, due January 15, 2024 | 3,357,143 | 3,536,112 | ||||||
| Other | 120,648 | 147,914 | ||||||
| Total long-term debt | 14,245,772 | 16,238,368 | ||||||
| Debt issuance costs, net of amortization | (31,211 | ) | (30,726 | ) | ||||
| Total debt, net of debt issuance costs | 14,214,561 | 16,207,642 | ||||||
| Less: Current portion of long-term debt | (2,818,321 | ) | (3,236,113 | ) | ||||
| Long-term debt, net of current portion | $ | 11,396,240 | $ | 12,971,529 | ||||
| November 30, 2017 | May 31, 2017 | |||||||
| Term loan A payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing January 7, 2019 | $ | 4,287,282 | $ | 4,626,191 | ||||
| Term loan B payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing January 7, 2019 | 1,215,061 | 1,715,132 | ||||||
| Term loan C payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing August 4, 2020 | 1,721,667 | - | ||||||
| Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, due January 31, 2019 | 2,500,000 | 2,260,000 | ||||||
| Note payable to First Bank, prime rate of interest plus 1.45% but not less than 4.95%, monthly principal and interest payment of $30,628, due August 21, 2021, secured by production equipment | 1,248,240 | 1,396,448 | ||||||
| Term loan payable by GRE to International Bank of Commerce, interest rate of 4.5%, monthly principal and interest payment of $26,215, due January 31, 2019 | 2,748,105 | 2,841,285 | ||||||
| Note payable to Robert Rosene, 7.5% interest, due January 15, 2019 | 4,469,355 | 4,469,355 | ||||||
| Note payable to Yorktown Management & Financial Services, LLC, 5% interest, due February 28, 2019, monthly principal and interest payments of $20,629 | 299,358 | 413,969 | ||||||
| Other | 272,950 | 310,036 | ||||||
| Total Debt | 18,762,018 | 18,032,416 | ||||||
| Debt issue costs, net of amortization | (164,219 | ) | (228,426 | ) | ||||
| Less: Current portion | (2,794,286 | ) | (2,493,236 | ) | ||||
| Long-term debt | $ | 15,803,513 | $ | 15,310,754 | ||||
The prime rate of interest as of November 30, 2017February 28, 2022, was 4.25%3.25%. Effective December 14, 2017,Subsequent to February 28, 2022, the prime rate of interest was increased to 4.50%.3.50% on March 17, 2022.
Debt issuance costs consists of the amounts paid to third parties in connection with the issuance and modification of debt instruments. These costs are shown on the consolidated balance sheet as a direct reduction to the related debt instrument. Amortization of these costs is included in interest expense. Greystone recorded amortization of debt issuance costs of $4,267 and $2,532for the nine months ended February 28, 2022 and 2021, respectively.
Loan Agreement between Greystone and IBC
OnThe Loan Agreement (“IBC Loan Agreement”), dated January 31, 2014 and as amended from time to time, among Greystone and GSM (the “Borrowers”) and International Bank of Commerce (“IBC”) entered intoprovides for certain term loans and a Loan Agreement (the “IBC Loan Agreement”). revolver loan.
The IBC Loan Agreement provided for a revolving loan in an aggregate principal amount of up to $2,500,000 (the “Revolving Loan”) and a term loan in the aggregate principal amount of $9,200,000 (the “Term Loan”). The exact amount which can be borrowed under the Revolving Loan from time to time is dependent upon the amount of the borrowing base, but can in no event exceed $2,500,000. On January 7, 2016, the Borrowers and IBC entered into the First Amendment to the IBC Loan Agreement (the “First Amendment”) whereby IBC made an additional term loan to Borrowers in the original principal amount of $2,530,072 (“New Equipment Loan”). The New Equipment Loan and $2,917,422 of the principal amount outstanding on the Term Loan were consolidated into a new loan in the combined principal amount of $5,447,504 (“Term Loan A”). The Term Loan’s remaining principal balance of $3,000,000 was deemed to be a separate term loan (“Term Loan B”). Effective August 4, 2017, the Borrowers and IBC entered into the Fourth Amendment to the IBC Loan Agreement whereby IBC made an additional loan (“Term Loan C”) to the Borrowers in the amount of $1,795,000. The proceeds from Term Loan C were used to purchase production equipment.
The Term Loans A, B and C bear interest at the New York Prime Rate plus 0.5% but not less than 4.0%. Term Loans A and B mature January 7, 2019; Term Loan C matures August 4, 2020. The Borrowers are required toloans make equal monthly payments of principal and interest in such amounts sufficient to amortize the principal balance of (i) Term Loan A over a seven-year period beginning January 31, 2016 (currently $74,455 per month), (ii) Term Loan Bthe loans over the three-year liferemaining lives. The monthly payments of principal and interest on the IBC term loans may vary due to changes in the prime rate of interest. Currently, the aggregate payments for the IBC term loans are approximately $194,000 per month.
The IBC Loan Agreement, as amended, provides a revolving loan in an aggregate principal amount of up to $4,000,000 (the “Revolving Loan”). The amount which can be borrowed from time to time is dependent upon the amount of the note (currently $89,424 per month) and (iii) Termborrowing base, as defined in the IBC Loan C over a seven-year period beginning August 31, 2017 (currently $25,205 per month)Agreement, not to exceed $4,000,000.
The Revolving Loan bears interest at the New York Prime Rate plus 0.5% but not less than 4.0%. Effective December 12, 2016, the Revolving Loan was amended and restated to extend the maturitygreater of the loan to prime rate of interest plus 0.5%, or 5.50% and matures January 31, 2019.2024. The Borrowers are required to pay all interest accrued on the outstanding principal balance of the Revolving Loan on a monthly basis. Any principal on the Revolving Loan that is prepaid by the Borrowers does not reduce the original amount available to the Borrowers.
The IBC Loan Agreement includes customary representations and warranties and affirmative and negative covenants which include (i) requiring the Borrowers to maintain a debt service coverage ratio Greystone’s available revolving loan borrowing capacity was $300,000 as of 1:25 to 1:00 and a funded debt to EBIDA ratio not exceeding 3:00 to 1:00 measured quarterly, (ii) subject to certain exceptions, limiting the Borrowers’ combined capital expenditures on fixed assets to $1,000,000 per year, (iii) prohibiting Greystone, without IBC’s prior written consent, from declaring or paying any dividends, redemptions of stock or membership interests, distributions and withdrawals (as applicable) in respect of its capital stock or any other equity interest, other than additional payments to holders of its preferred stock in an amount not to exceed $500,000 in any fiscal year, (iv) subject to certain exceptions, prohibiting the incurrence of additional indebtedness by the Borrowers, and (v) requiring the Borrowers to prevent (A) any change in capital ownership such that there is a material change in the direct or indirect ownership of (1) Greystone’s outstanding preferred stock, and (2) any equity interest in GSM, or (B) Warren Kruger from ceasing to be actively involved in the management of Greystone as President and/or Chief Executive Officer. The foregoing list of covenants is not exhaustive and there are several other covenants contained in the IBC Loan Agreement.February 28, 2022.
Greystone’s debt service coverage ratio as of November 30, 2017 was 1:27 to 1:00 which meets the minimum requirement as discussed above.
The IBC Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the IBC Loan Agreement from time to time, inaccuracy of representations, violation of covenants, defaults under other agreements, bankruptcy and similar events, the death of a guarantor, certain material adverse changes relating to a Borrower or guarantor, certain judgments or awards against a Borrower, or government action affecting a Borrower’s or guarantor’s ability to perform under the IBC Loan Agreement or the related loan documents. Among other things, a default under the IBC Loan Agreement would permit IBC to cease lending funds under the IBC Loan Agreement and require immediate repayment of any outstanding notes with interest and any unpaid accrued fees.
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The IBC Loan Agreement is secured by a lien on substantially all of the assets of the Borrowers. In addition, the IBC Loan Agreement is secured by a mortgage granted by GRE on the real property owned by GRE in Bettendorf, Iowa (the “Mortgage”). GRE is owned by Warren F. Kruger, Greystone’s President and CEO, and Robert B. Rosene, Jr., a director of Greystone. Messrs. Kruger and Rosene have provided a combined limited guaranty of the Borrowers’ obligations under the IBC Loan Agreement, with such guaranty being limited to a combined amount of $6,500,000 (the$6,500,000 (the “Guaranty”). subsequently amended and restated as of January 7, 2016, reducing the maximum aggregate guaranty limit to $3,500,000 if Greystone maintained a Debt Coverage Ratio of at least 1.35:1.00 for a period of six consecutive quarters. Greystone has maintained a ratio of at least 1.35:1.00 for the specified time and has notified IBC accordingly. The Mortgage and the Guaranty also secure or guaranty, as applicable, the obligations of GRE under the Loan Agreement between GRE and IBC dated January 31, 2014, as discussed in the following paragraph.herein.
Loan Agreement between GRE and IBC
On January 31, 2014,August 10, 2018, GRE and IBC entered into a Loan Agreement which provided for a mortgagean amended agreement to extend the maturity of the note to GRE of $3,412,500.April 30, 2023 and increase the interest rate to 5.5%. The note provides for a 4.5% interest rate and a maturity of January 31, 2019 and is secured by a mortgage on the two buildings in Bettendorf, Iowa, which are leased to Greystone.
Loan Agreement with Great Western Bank
On August 23, 2021, Greystone entered into a loan agreement with Great Western Bank (“Western Loan Agreement”) to include prior commercial loans and subsequent loans. GSM is a named guarantor under the Western Loan Agreement.
The Western Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the Western Loan Agreement from time to time, inaccuracy of representations, violation of covenants, defaults under other agreements, bankruptcy and similar events, certain material adverse changes relating to a Borrower, certain judgments or awards against a Borrower, or guarantor’s ability to perform under the Western Loan Agreement. Among other things, a default under the Western Loan Agreement would permit Western to cease lending funds under the Western Loan Agreement and require immediate repayment of any outstanding notes with interest and any unpaid accrued fees.
The Western Loan Agreement is secured by a mortgage on two of Greystone’s warehouses.
Note Payable between Greystone and Robert B. Rosene, Jr.
Effective December 15, 2005, Greystone entered into an agreement with Robert B. Rosene, Jr., a member of Greystone’s board of directors, to convert $2,066,000$2,066,000 of advances into an unsecured note payable at 7.5%7.5% interest.
Effective June 1, 2016, the note was restated (the “Restated Note”) to combine the outstanding principal, $2,066,000,$2,066,000, and accrued interest, $2,475,690,$2,475,690, into an unsecured note payable of $4,541,690$4,541,690 with an extended maturity date of January 15, 2019.2024. The Restated Note provides that accrued interest is payable monthly and allows Greystone to use commercially reasonable efforts to pay such amounts as allowed by the IBC Loan Agreement against the interest accrued prior to the restatement. The balance of the note as of February 28, 2022 was $3,357,143.
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Maturities
Note Payable between Greystone and Yorktown Management Financial Services, LLC (“Yorktown”)
On February 29, 2016, Greystone entered into an unsecured note payable to Yorktown in the amount of $688,296 in connection with the acquisition of equipment from Yorktown. The note payable bears interest at the rate of 5% and is payable over three years with monthly principal and interest payments of $20,629.
Maturities
Maturities of Greystone’s long-term debt for the five years subsequent to November 30, 2017February 28, 2022, are $2,794,286, $13,895,875, $1,638,153, $433,704$2,818,321, $10,172,715, $545,176, $79,502 and $-0-.$50,430 with $579,628 thereafter.
Note 7. Capital LeaseLeases
Capital leaseFinancing Leases
Financing leases as of November 30, 2017February 28, 2022 and May 31, 2017:2021:
Schedule of Financing Lease
| February 28, 2022 | May 31, 2021 | |||||||
| Non-cancellable financing leases | $ | 2,370,077 | $ | 3,594,007 | ||||
| Less: Current portion | (1,592,166 | ) | (1,745,535 | ) | ||||
| Non-cancellable financing leases, net of current portion | $ | 777,911 | $ | 1,848,472 | ||||
| November 30, 2017 | May 31, 2017 | |||||||
| Non-cancellable capital lease with private company, interest rate of 5%, due August 7, 2019 | $ | 2,712,289 | $ | 3,794,063 | ||||
| Less: Current portion | (2,194,217 | ) | (2,261,560 | ) | ||||
| Non-cancellable capital lease, net of current portion | $ | 518,072 | $ | 1,532,503 | ||||
In August, 2016, Greystone entered into a three-year lease agreement withand an unrelated private company to provideentered into three lease agreements for certain production equipment with a total cost of approximately $5.4 million. The$6.9 million which were effective February 24, 2018, August 2, 2018 and December 21, 2018, respectively, with five-year terms and an effective interest rate of 7.4%. Each of the lease agreement includesagreements include a bargain purchase option to acquire the production equipment at the end of the lease term. Monthly leaseThe leased equipment is principally used to produce pallets for the private company. Lease payments estimated at approximately $200,000 per month, are payablemade as a credit on a perthe sales invoice basis at the rate of $6.25$3.32 for each pallet produced by the leased production equipment and shipped tofrom the private company.respective leased equipment. The estimated aggregate monthly rental payments are approximately $130,000. The rent payments can vary each month depending on the quantity of pallets produced from each machine. The lease bears an interest rate of 5%, has a three-year maturity and providesagreements provide for minimum monthly lease rental paymentpayments based upon the total pallets sold in excess of a specified amount not to exceed the monthly productive capacity of the leased machines.
Effective December 28, 2018, Yorktown purchased certain production equipment from Greystone at net book value of $968,168 and entered into a lease agreement with Greystone for the equipment with a monthly rent of $27,915 for the initial thirty-six months and $7,695 for the following twelve months and maturing December 27, 2022. The lease agreement has a $10,000 purchase option at the end of the lease.
The production equipment under the non-cancelable capital leasefinancing leases has a gross carrying amount of $5,323,864 at November 30, 2017.$8,473,357 as of February 28, 2022. Amortization of the carrying amount of approximately $266,000$721,923 and $111,000$758,902 was included in depreciation expense for the sixnine months ended November 30, 2017February 28, 2022 and 2016,2021, respectively.
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Operating Leases
Greystone recognized a lease liability for each lease based on the present value of remaining minimum fixed rental payments, using a discount rate that approximates the rate of interest for a collateralized loan over a similar term. A right-of-use asset is recognized for each lease, valued at the lease liability. Minimum fixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expenses on the consolidated statements of income. Variable and short-term rental payments are recognized as costs and expenses as they are incurred.
Greystone has two non-cancellable operating leases for equipment with a fifty-two month term and a forty-eight month term and a discount rate of 5.40%. The leases are single-term with constant monthly rental rates.
Lease Summary Information
For the periods ending February 28, 2022 and 2021:
Summary of Lease Activity
| 2022 | 2021 | |||||||
| Lease Expense | ||||||||
| Financing lease expense - | ||||||||
| Amortization of right-of-use assets | $ | 721,923 | $ | 758,902 | ||||
| Interest on lease liabilities | 119,000 | 218,088 | ||||||
| Operating lease expense | 53,411 | 61,411 | ||||||
| Short-term lease expense | 1,101,133 | 1,117,628 | ||||||
| Total | $ | 1,995,467 | $ | 2,156,029 | ||||
| Other Information | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities for finance leases - | ||||||||
| Operating cash flows | $ | 119,000 | $ | 218,088 | ||||
| Financing cash flows | $ | 1,248,371 | $ | 1,407,081 | ||||
| Cash paid for amounts included in the measurement of lease liabilities for operating leases - | ||||||||
| Operating cash flows | $ | 53,411 | $ | 61,411 | ||||
| Weighted-average remaining lease term (in years) - | ||||||||
| Financing leases | 1.5 | 2.8 | ||||||
| Operating leases | 1.9 | 2.2 | ||||||
| Weighted-average discount rate - | ||||||||
| Financing leases | 7.3 | % | 7.4 | % | ||||
| Operating leases | 5.4 | % | 5.2 | % | ||||
Future minimum lease payments under the non-cancelable capital leaseleases as of November 30, 2017,February 28, 2022, are approximately:
Schedule of Future Minimum Lease Payments
| Financing Leases | Operating Leases | |||||||
| Twelve months ended February 28, 2023 | $ | 1,709,132 | $ | 33,881 | ||||
| Twelve months ended February 29, 2024 | 771,741 | 24,550 | ||||||
| Twelve months ended February 28, 2025 | 22,479 | 7,468 | ||||||
| Twelve months ended February 28, 2026 | 7,807 | - | ||||||
| Twelve months ended February 28, 2027 | 502 | - | ||||||
| Total future minimum lease payments | 2,511,661 | 65,899 | ||||||
| Present value discount | 141,584 | 3,657 | ||||||
| Present value of minimum lease payments | $ | 2,370,077 | $ | 62,242 | ||||
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| Twelve months ended November 30, 2018 | $ | 2,280,000 | ||
| Twelve months ended November 30, 2019 | 521,607 | |||
| Total lease payments | 2,801,607 | |||
| Imputed interest | 89,318 | |||
| Present value of minimum lease payments | $ | 2,712,289 |
Note 8. Deferred Revenue
Advances from a customer pursuant to a contract for the sale of plastic pallets is recognized as deferred revenue. Revenue related to these advancesis recognized by Greystone as pallets are shipped to the customer which totaled $9,772,750 and $4,291,800 during the nine months ended February 28, 2022 and 2021, respectively. Customer advances received during the nine months ended February 28, 2022 and 2021 were $13,560,500 and $1,380,000, respectively. The unrecognized balance of deferred revenue as of February 28, 2022 and May 31, 2021, was $10,218,357 and $6,430,607, respectively.
Note 9. Revenue and Revenue Recognition
Revenue is recognized at the time a good or service is transferred to a customer and the customer obtains control of that good or receives the service performed. Sales arrangements with customers are short-term in nature involving single performance obligations related to the delivery of goods and generally provide for transfer of control at the time of shipment. In limited circumstances, where acceptance of the goods is subject to approval by the customer, revenue is recognized upon approval by the customer unless, historically, there have been insignificant rejections of goods by the customer. Contract liabilities associated with sales arrangements primarily relate to deferred revenue on prepaid sales of goods. Greystone generally permits returns of product due to defects; however, product returns are historically insignificant. The amount of revenue recognized reflects the consideration to which Greystone expects to be entitled to receive in exchange for its products.
Greystone’s principal product is plastic pallets produced from recycled plastic resin. Sales are primarily to customers in the continental United States of America. International sales are made to customers in Canada and Mexico which totaled approximately 1.6% and 0.8% of sales during the nine months ended February 28, 2022 and 2021, respectively.
Greystone’s customers include stocking and non-stocking distributors and direct sales to end-user customers. Sales to the following categories of customers for the nine months ended February 28, 2022 and 2021, respectively, were as follows:
Schedule of Sale of Revenues for Customer Categories
| Category | 2022 | 2021 | ||||||
| End User Customers | 74 | % | 85 | % | ||||
| Distributors | 26 | % | 15 | % | ||||
Note 8. 10. Fair Value of Financial Instruments
The following methods and assumptions are used in estimating the fair-value disclosures for financial instruments:
Debt: The carrying amount of notes with floating rates of interest approximate fair value. Fixed rate notes are valued based on cash flows using estimated rates of comparable notes. The carrying amounts reported inon the balance sheetsheets approximate fair value.
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Note 9. 11. Concentrations, Risks and Uncertainties
Greystone derived approximately 73%75% and 67%85% of its total sales from twothree customers (four customers in fiscal years 2018the prior period) during the nine months ended February 28, 2022 and 2017,2021, respectively. The loss of a material amount of business from one or bothmore of these customers could have a material adverse effect on Greystone.
Greystone purchases damaged pallets from its customers at a price based on the value of the raw material content in the pallet. A majority of these purchases, totaling $890,562$313,050 and $864,874$524,321 in fiscal years 20182022 and 2017,2021, respectively, iswere from one of its major customers.
Robert B. Rosene, Jr., a Greystone director, has provided financing and guarantees on Greystone’s bank debt. As of November 30, 2017,February 28, 2022, Greystone is indebted to Mr. Rosene in the amount of $4,469,355$3,357,143 for a note payable due January 15, 2019.2024. There is no assurance that Mr. Rosene will renew the note as of the maturity date.
COVID-19 Risks. The impact of COVID-19 and the related variants has created much uncertainty in the marketplace. To date, the demand for Greystone’s products has not been affected as Greystone’s pallets are generally used logistically by essential entities. The major issue that Greystone has incurred is maintaining adequate work force to meet demand for pallets. The virus has impacted the overall workforce in our operating area as well as Greystone’s workforce due to employees electing to stay at home for protection from COVID-19 and reductions of recruitment of new employees. Management is unable to predict the stability of its workforce due to the uncertainty created as long as the virus or variants thereof continue to stay active.
Note 10. Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 14-09”) which creates a comprehensive set of guidelines for the recognition of revenue under the principle: “Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The requirements of ASU 14-09 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and will require either retrospective application to each prior period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. Greystone is subject to litigation, claims and other commitments and contingencies arising in the ordinary course of business. Although the asserted value of these matters may be significant, the company currently evaluatingdoes not expect that the impact this ASUultimate resolution of any open matters will have a material adverse effect on ourits consolidated financial position andor results of operations.
In February 2016, the FASB issued Accounting Standards 2016-02,Leases (Topic 842), which is intended to improve financial reporting about leasing transactions. The ASU will require organizations (“lessees”) that lease assets with lease termsNote 12. Commitments
As of more than twelve months to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In addition, the ASU will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The effective date of this ASU is for fiscal years beginning after December 31, 2018 and interim periods within that year. Greystone is currently reviewing the ASU to assess the potential impact on the consolidated financial statements.
Note 11. Income Taxes
On December 22, 2017, the President signed into legislation The Tax Cuts and Jobs Act (the Act). The Act changes existing U.S. tax law and includes numerous provisions that will affect our business, including our income tax accounting, disclosure and tax compliance. We believe the most impactful changes within the Act are those that will reduce the U.S. corporate tax rates, business-related exclusions and deductions and credits. ASC 740, “Income Taxes” (Topic 740), requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended February 28, 2018,2022, Greystone will value all deferred tax assets and liabilities athad commitments totaling $5,308,262 toward the newly enacted Corporate U.S. income tax rate. Greystone is currently evaluating the impact of the Act, which will include revaluing the deferred tax assets and liabilities and will disclose the estimated impact upon recognition in the third quarter of fiscal 2018.
Note 12. Subsequent Event
On January 10, 2018, Greystone and International Bank of Commerce (“IBC”) entered into the Fifth Amendment to the IBC Loan Agreement dated January 31, 2014 (the “Fifth Amendment”) whereby (i) the existing Revolver Note with a current balance of $2,500,000 was converted into a term loan (Term Loan D) with principal and interest amortized over four years and a maturity date of January 10, 2022, (ii) an additional term loan from IBC to Borrowers in the original principal amount of $1,000,000 (Term Loan E) to provide funding for procurementpurchase of production equipment with interest only for one year and amortization of principal and interest over four years beginning at the end of the first year and a maturity date of January 10, 2022, and (iii) a new $3,000,000 revolving loan to provide working capital with the same lending conditions as the existing Revolver Note and a maturity date of January 10, 2020. The three new notes will bear interest at the greater of the prime rate of interest plus 0.5% or 4.75%.equipment.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
General to All Periods
The unaudited consolidated statements include Greystone Logistics, Inc., and its two wholly-owned subsidiaries, Greystone Manufacturing, L.L.C. (“GSM”) and Plastic Pallet Production, Inc. (“PPP”). Greystone also consolidates itsthe variable interest entity, Greystone Real Estate, L.L.C. (“GRE”). All material intercompany accounts and transactions have been eliminated.
References to fiscal year 20182022 refer to the sixnine months and three month periodsmonths ended November 30, 2017.February 28, 2022. References to fiscal year 20172021 refer to the sixnine months and three month periodsmonths ended November 30, 2016.February 28, 2021.
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Sales
Sales
Greystone’s primary focus is to provide quality plastic pallets to its existing customers while continuing its marketing efforts to broaden its customer base. Greystone’s existing customers are primarily located in the United States and engaged in the beverage, pharmaceutical and other industries. Greystone has generated, and plans to continue to generate, interest in its pallets by attending trade shows sponsored by industry segments that would benefit from Greystone’s products. Greystone hopes to gain wider product acceptance by marketing the concept that the widespread use of plastic pallets could greatly reduce the destruction of trees on a worldwide basis. Greystone’s marketing is conducted through contract distributors, its President and other employees.
Personnel
Greystone had full-time-equivalents of approximately 167239 and 200260 full-time employees and 80 and 61 temporary employees as of November 30, 2017February 28, 2022 and 2016,2021, respectively. Full-time equivalent is a measure based on time worked.
Six-Month PeriodNine Months Ended November 30, 2017February 28, 2022 Compared to Six-Month PeriodNine Months Ended November 30, 2016February 28, 2021
Sales
Sales for fiscal year 20182022 were $20,009,177$53,069,648 compared to $17,065,972$47,602,690 in fiscal year 20172021 for an increase of $2,943,205. The$5,466,958, or 11.5%. Average pallet pricing from fiscal year 2021 to fiscal year 2022 is the principal contributing factor to the increase sales in fiscal year 2022. As noted herein, the number of major customers decreased from four to three as one customer’s demand for pallets was completed in fiscal year 2021. However, this deficiency was offset by a substantial increase in pallet sales to distributors in fiscal year 2018 over 2017 was primarily due to sales growth to a pallet leasing company, one of Greystone’s major customers.2022.
Greystone has two majorhad three customers who(four in fiscal year 2021) which accounted for approximately 73%75% and 67%86% of sales in fiscal years 20182022 and 2017,2021, respectively. Pallet sales to Greystone’s major customers are generally based on the customers’ need which may vary by period. Greystone is not able to predict the future needs of these major customers and will continue its efforts to grow sales through the addition of new customers developed through Greystone’s marketing efforts.
Cost of Sales
Cost of sales in fiscal year 20182022 was $16,976,241,$47,914,061, or 85%90% of sales, compared to $14,868,884,$38,986,912, or 87%82% of sales, in fiscal year 2017.2021. The decreaseincrease in cost of sales as a percentage ofto sales in fiscal year 2018 compared2022 was the result of several factors, including cost of raw materials resulting from inflationary increases in prices that were occurring faster that Greystone’s ability to compensate, a shortage of personnel and machine downtime during the first two quarters of fiscal year 2017 was principally2022 resulting in increased production costs per pallet due to setup costs incurredGreystone’s relatively inflexible cost structure, and increased wages. To achieve a reduction in fiscal year 2017the cost of raw material, Greystone has ordered a new shredder and pelletizing system to fulfillincrease the production requirements for the pallet leasing company.in-house capability to process unrefined recycled plastic which are expected to be operational about December 2022.
Selling, General Selling and Administrative Expenses
General, sellingSelling, general and administrative expenses were $1,452,416$4,033,483 in fiscal year 20182022 compared to $1,387,304$3,639,883 in fiscal year 20172021 for an increase of $65,112, or$393,600. Legal expenses of approximately 5%. The increase$475,000 resulting from arbitration proceedings initiated by iGPS Logistics, LLC, were the primary factor for the increased costs during fiscal year 2022. In January 2022, Greystone and iGPS entered into an agreement to terminate the arbitration proceedings without any monetary settlement.
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Other Income (Expenses)
A gain was recognized in fiscal year 2018 over2022 from the forgiveness of the PPP loan and accrued interest in the amount of $3,068,497. Other income in fiscal year 20172022 was attributable to general business growth.
Other Income (Expenses)
Other income was $12,069 and $-0- in fiscal years 2018 and 2017, respectively. The source$35,731 which included a gain of other income is$22,336 from the sale of equipment and $13,395 from sales of scrap material.material while fiscal year 2021was from sales of scrap material in the amount of $19,122.
Interest expense was $658,736 and $542,800 in fiscal years 2018 and 2017 for an increase of $115,936. The increase in interest expense$631,115 in fiscal year 2018 over2022 compared to $923,289 in fiscal year 2017 is principally due to an increase2021 for a decrease of $292,174. Principal reductions in debt a 0.75% increase inand financing lease obligations were the prime rate of interest and an increase in amortization expense associated with debt service costs.primary reason for the decline.
Provision for Income Taxes
The provision for income taxes was $259,500$99,000 and $54,550$1,257,000 in fiscal years 20182022 and 2017,2021, respectively. The provision foreffective tax rate differs from federal statutory rates principally due to state income taxes, does not includecharges or income which have no tax benefit or expense, changes in the valuation allowance, and the basis that net income from the variable interest entity as the entityGRE is not included intaxable at the income tax returnscorporate level because GRE is a limited liability company of which Greystone and the taxable income of the entity is passed-through to the respective owners.has no equity ownership.
Based upon a review of its income tax filing positions, Greystone believes that its positions would be sustained upon an audit by the Internal Revenue Service and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.
Net Income
Greystone recorded net income of $674,353$3,496,217 in fiscal year 20182022 compared to $212,434$2,814,728 in fiscal year 20172021 primarily for the reasons discussed above.
Net Income (Loss) Attributable to Common Stockholders
NetThe net income attributable to common stockholders (net income less preferred dividends and GRE’s net income) for fiscal year 20182022 was $363,371,$3,044,535, or $0.01$0.11 per share, compared to a net loss attributable to common stockholders $(76,330),$2,366,837, or $(0.00)$0.08 per share, in fiscal year 20172021 primarily for the reasons discussed above.
Three-Month PeriodThree Months Ended November 30, 2017February 28, 2022 Compared to Three-Month PeriodThree Months Ended November 30, 2016February 28, 2021
Sales
Sales
Sales for fiscal year 20182022 were $9,722,102$22,450,682 compared to $9,221,711$14,511,196 in fiscal year 20172021 for an increase of $500,391.$7,939,486, or 54.7%. The increase in pallet salesnumber of pallets sold in fiscal year 20182022 reflected a 34% increase over 2017fiscal year 2021. Factors affecting the increase in sales during fiscal year 2022 include a substantial contract from a major retailer, the return business from a customer in the beer industry, and an approximately 91% increase in sales to distributors. Customer changes that occurred was primarily due to sales growth to a pallet leasing company, onethe number of Greystone’s major customers.
Greystone has two major customers whodecreasing from four to three as one customer’s demand for pallets was completed in fiscal year 2021.
Greystone had three customers (four in fiscal year 2021) which accounted for approximately 73%78% and 70%82% of sales in fiscal years 20182022 and 2017,2021, respectively. Pallet sales to Greystone’s major customers are generally based on the customers’ need which may vary by period. Greystone is not able to predict the future needs of these major customers and will continue its efforts to grow sales through the addition of new customers developed through Greystone’s marketing efforts.
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Cost of Sales
Cost of sales in fiscal year 20182022 was $8,588,065,$19,734,155, or 88% of sales, compared to $7,992,441,$11,954,222, or 87%82% of sales, in fiscal year 2017. Cost2021. The increase in cost of sales to sales in fiscal year 2018 were adversely affected because2022 over fiscal year 2021 was the result of (a) two injection molding machinesvarious factors, including cost of raw materials from inflationary increases in prices that were out-of-service duringoccurring faster that Greystone’s ability to compensate and increased wages. To achieve a reduction in the monthcost of November 2017 for maintenanceraw material, Greystone has ordered a new shredder and (b) setup costs incurredpelletizing system to place an additional injection molding machine into service in November 2017.increase the in-house capability to process unrefined recycled plastic which are expected to be operational about December 2022.
Selling, General Selling and Administrative Expenses
General, sellingSelling, general and administrative expenses were $621,013$1,680,979 in fiscal year 20182022 compared to $664,275$1,168,426 in fiscal year 20172021 for an increase of $512,553. Legal expenses of approximately $291,000 resulting from arbitration proceedings initiated by iGPS Logistics, LLC, were a primary factor for the increased costs during fiscal year 2022. In January 2022, Greystone and iGPS entered into an agreement to terminate the arbitration proceedings without any monetary settlement. Additionally, compensation bonuses paid during fiscal year 2022 contributed to the increase.
Other Income (Expenses)
Other income from sales of scrap material was $3,688 in fiscal year 2022 compared to $10,178 in fiscal year 2021.
Interest expense was $201,922 in fiscal year 2022 compared to $270,229 in fiscal year 2021 for a decrease of $43,262 or 7%.$68,237. The decrease infrom fiscal year 2018 over2021 to fiscal year 2017 is2022 was primarily attributabledue to timing of expensesthe decrease in the principal balances for the respective periods.
Other Income (Expenses)
Other income was $3,806 and $-0- in fiscal years 2018 and 2017, respectively. The source of other income is the sale of scrap material.
Interest expense was $334,059 in fiscal year 2018 compared to $306,169 in fiscal year 2017 for an increase of $27,890. The increase is principally attributable to increases in debt and an increase in the prime rate of interest by 0.75% at November 30, 2017 compared to November 30, 2016.financing lease obligations.
Provision for Income Taxes
The provision for income taxes was $38,700$234,000 and $73,400$346,000 in fiscal years 20182022 and 2017,2021, respectively. The provision foreffective tax rate differs from federal statutory rates due principally to state income taxes, does not includecharges or income which have no tax benefit or expense, changes in the valuation allowance, and the basis that the net income from the variable interest entity as the entityGRE is not included intaxable at the income tax returnscorporate level because GRE is a limited liability company of which Greystone and the taxable income from this entity is passed-through to the respective owners.has no equity ownership.
Based upon a review of its income tax filing positions, Greystone believes that its positions would be sustained upon an audit by the Internal Revenue Service and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.
Net Income
Greystone recorded net income of $144,071$603,244 in fiscal year 20182022 compared to $185,426$782,497 in fiscal year 20172021 primarily for the reasons discussed above.
Net Income (Loss) Attributable to Common Stockholders
The net lossincome attributable to common stockholders (net income less preferred dividends and GRE’s net income) for fiscal year 20182022 was $(11,337),$452,458, or $(0.00)$0.02 per share, compared to net income of $41,109,$633,456, or $0.00$0.02 per share, in fiscal year 20172021 primarily for the reasons discussed above.
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Liquidity and Capital Resources
A summary of cash flows for the six-month periodnine months ended November 30, 2017February 28, 2022, is as follows:
| Cash provided by operating activities | $ | 3,587,049 | $ | 9,184,533 | ||||
| Cash used in investing activities | (2,996,530 | ) | $ | (4,825,530 | ) | |||
| Cash used in financing activities | (641,090 | ) | $ | (764,364 | ) |
The contractual obligations of Greystone are as follows:
| Total | Less than 1 year | 1-3 years | 4-5 years | More than 5 years | ||||||||||||||||
| Long-term debt | $ | 18,762,018 | $ | 2,794,286 | $ | 15,534,028 | $ | 433,704 | $ | -0- | ||||||||||
| Total | Less than 1 year | 1-3 years | 4-5 years | Thereafter | ||||||||||||||||
| Long-term debt | $ | 14,245,772 | $ | 2,818,321 | $ | 10,717,891 | $ | 129,932 | $ | 579,628 | ||||||||||
| Financing lease rents | $ | 2,511,661 | $ | 1,709,132 | $ | 794,220 | $ | 8,309 | $ | - | ||||||||||
| Operating lease rents | $ | 65,899 | $ | 33,881 | $ | 24,550 | $ | 7,468 | $ | - | ||||||||||
| Commitments | $ | 5,308,262 | $ | 5,308,262 | $ | - | $ | - | $ | - | ||||||||||
Greystone had a working capital deficit of $(3,246,218) at November 30, 2017.$(3,904,765) as of February 28, 2022. To provide for the funding to meet Greystone’s operating activities and contractual obligations as of November 30, 2017,February 28, 2022, Greystone will have to continue to produce positive operating results or explore various options including additional long-term debt and equity financing. However, there is no guarantee that Greystone will continue to create positive operating results or be able to raise sufficient capital to meet these obligations.
As discussedGreystone issued purchase orders in Note 6January 2022 for equipment including two injection molding machines and one pelletizing system for about $5.5 million to increase its pallet production capacities. Because of the consolidatedsignificant decrease in debt and financial statements, Greystone has one relatively near-term loan with IBC, Term Loan A, which had an outstanding balance of $4,287,282 at November 30, 2017 with a maturity date of January 7, 2019. Greystone’slease balances through February 28, 2022, management believes that IBCfunding will renew this note at the appropriate time under similar terms. Effective January 10, 2018 and as discussed further in Note 12 to the consolidatedbe achieved through financial statements, Greystone and IBC entered into the Fifth Amendment to the IBC Loan Agreement dated January 31, 2014 which provided for (1) converting the existing revolving loan with a balance of $2,500,000 at November 30, 2017 into a four-year term loan, (2) new funding in theinstitutions.
A substantial amount of $1,000,000 for the purchase of production equipment with interest only for one year and principal and interest to be amortized over four years and (3) a new revolving loan for $3,000,000 with a maturity date of January 31, 2020.
Substantially all of theGreystone’s debt financing that Greystone has received through the last few fiscal years resulted primarily from loans providedbank notes which are guaranteed by certain officers and directors of Greystone and bank notes which are guaranteedfrom loans provided by certain officers and directors of Greystone. Greystone continues to be dependent upon its officers and directors to provide and/or secure additional financing and there is no assurance that its officers and directors will continue to do so. As such, there is no assurance that funding will be available for Greystone to continue operations.
Greystone has 50,000 outstanding shares of cumulative 2003 Preferred Stock with a liquidation preference of $5,000,000 and a preferred dividend rate of the prime rate of interest plus 3.25%. Greystone does not anticipate that it will make cash dividend payments to any holders of its common stock unless and until the financial position of Greystone improves through increased revenues, another financing transaction or otherwise. Pursuant to the IBC Loan Agreement, as discussed in Note 6 to the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $500,000 per year.
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Forward Looking Statements and Material Risks
This Quarterly Report on Form 10-Q includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that Greystone expects, believes or anticipates will or may occur in the future, including decreased costs, timing of manufacturing enhancements, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone’s prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone’s business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone’s business are more fully described in Greystone’s Form 10-K for the fiscal year ended May 31, 2017,2021, which was filed on August 25, 2017.20, 2021. Actual results may vary materially from the forward-looking statements. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
As of the end of the period covered by this Quarterly Report on Form 10-Q, Greystone carried out an evaluation under the supervision of Greystone’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of Greystone’s disclosure controls and procedures pursuant to the Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based on an evaluation as of May 31, 2017,2021, Warren F. Kruger, Greystone’s Chief Executive Officer, and William W. Rahhal, Greystone’s Chief Financial Officer, identified oneno material weakness in Greystone’s internal control over financial reporting. As of the end of the period covered by this Quarterly Report on Form 10-Q, such material weakness had not been rectified. As a result, of the continuation of this material weakness, Greystone’s CEO and Chief Financial Officer concluded that the design and operation of Greystone’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) were not effective at November 30, 2017.as of February 28, 2022.
During the six-month periodthree months ended November 30, 2017,February 28, 2022, there were no changes in Greystone’s internal controls over financial reporting that have materially affected, or that are reasonably likely to materially affect, Greystone’s internal control over financial reporting.
None.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
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None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.
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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.
| GREYSTONE LOGISTICS, INC. | |
| (Registrant) | |
| Date: April 14, 2022 | /s/ Warren F. Kruger |
| Warren F. Kruger, President and Chief | |
| Executive Officer (Principal Executive Officer) | |
| Date: April 14, 2022 | /s/ William W. Rahhal |
| William W. Rahhal, Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
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Index to Exhibits
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.
Index to Exhibits
The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.