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 |
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 202329, 2024
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ 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)
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)
Securities 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 |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “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 ☒
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’sissuer's classes of common stock, as of the latest practicable date: April 10, 2023 -
FORM 10-Q
For the Period Ended February 28, 202329, 2024
Item 1. Financial Statements
Greystone Logistics, Inc. and Subsidiaries |
Consolidated Balance Sheets |
(Unaudited) |
February 29, 2024 | May 31, 2023 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash | $ | 4,319,849 | $ | 695,951 | ||||
Accounts receivable - | ||||||||
Trade | 5,976,046 | 4,857,504 | ||||||
Related parties | 125,202 | 56,550 | ||||||
Other | 1,488,602 | 386,877 | ||||||
Inventory | 3,002,754 | 4,484,106 | ||||||
Prepaid expenses | 879,956 | 528,962 | ||||||
Total Current Assets | 15,792,409 | 11,009,950 | ||||||
Property, Plant and Equipment, net | 30,594,286 | 33,184,706 | ||||||
Right-of-Use Operating Lease Assets | 5,132,215 | 5,335,714 | ||||||
Total Assets | $ | 51,518,910 | $ | 49,530,370 | ||||
Liabilities and Equity | ||||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | $ | 2,384,993 | $ | 2,249,570 | ||||
Current portion of financing leases | 15,288 | 31,981 | ||||||
Current portion of operating leases | 232,481 | 240,346 | ||||||
Accounts payable and accrued liabilities | 3,954,002 | 3,337,410 | ||||||
Deferred revenue | 568,299 | 23,007 | ||||||
Preferred dividends payable | 146,473 | 134,414 | ||||||
Total Current Liabilities | 7,301,536 | 6,016,728 | ||||||
Long-Term Debt, net of current portion and debt issuance costs | 11,635,540 | 14,919,687 | ||||||
Financing Leases, net of current portion | 1,782 | 28,504 | ||||||
Operating Leases, net of current portion | 4,942,738 | 5,119,688 | ||||||
Deferred Tax Liability | 5,529,000 | 3,905,279 | ||||||
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, 28,279,701 shares issued and outstanding | 2,828 | 2,828 | ||||||
Additional paid-in capital | 53,533,272 | 53,533,272 | ||||||
Accumulated deficit | (31,427,791 | ) | (33,995,621 | ) | ||||
Total Equity | 22,108,314 | 19,540,484 | ||||||
Total Liabilities and Equity | $ | 51,518,910 | $ | 49,530,370 |
The accompanying notes are an integral part of these unaudited consolidated financial statements. |
Consolidated Statements of Income |
For the Nine Months Ended February 29(28), |
(Unaudited) |
2024 | 2023 | |||||||
Sales | $ | 46,990,716 | $ | 44,633,542 | ||||
Cost of Sales | 37,942,179 | 38,590,544 | ||||||
Gross Profit | 9,048,537 | 6,042,998 | ||||||
Selling, General and Administrative Expenses | 3,863,975 | 3,918,205 | ||||||
Operating Income | 5,184,562 | 2,124,793 | ||||||
Other Income (Expense): | ||||||||
Federal tax credits realized | - | 3,270,424 | ||||||
Gain on deconsolidation of variable interest entity | - | 569,997 | ||||||
Other income | 180,004 | 189,914 | ||||||
Interest expense | (982,592 | ) | (821,138 | ) | ||||
Income before Income Taxes | 4,381,974 | 5,333,990 | ||||||
Provision for Income Taxes | (1,375,000 | ) | (452,000 | ) | ||||
Net Income | 3,006,974 | 4,881,990 | ||||||
Income Attributable to Non-controlling Interest | - | (49,599 | ) | |||||
Preferred Dividends | (439,144 | ) | (361,267 | ) | ||||
Net Income Attributable to Common Stockholders | $ | 2,567,830 | $ | 4,471,124 | ||||
Income Per Share of Common Stock - | ||||||||
Basic | $ | 0.09 | $ | 0.16 | ||||
Diluted | $ | 0.09 | $ | 0.15 | ||||
Weighted Average Shares of Common Stock Outstanding - | ||||||||
Basic | 28,279,701 | 28,279,701 | ||||||
Diluted | 28,774,701 | 32,105,424 |
The accompanying notes are an integral part of these unaudited consolidated financial statements. |
Consolidated Statements of Income |
For the Three Months Ended February 29(28), |
(Unaudited) |
2024 | 2023 | |||||||
Sales | $ | 13,980,009 | $ | 13,578,269 | ||||
Cost of Sales | 12,113,699 | 11,220,791 | ||||||
Gross Profit | 1,866,310 | 2,357,478 | ||||||
Selling, General and Administrative Expenses | 1,277,001 | 1,606,626 | ||||||
Operating Income | 589,309 | 750,852 | ||||||
Other Income (Expense): | ||||||||
Federal tax credits realized | - | 3,270,424 | ||||||
Other income | 176,851 | 183,596 | ||||||
Interest expense | (310,231 | ) | (313,376 | ) | ||||
Income before Income Taxes | 455,929 | 3,891,496 | ||||||
Provision for Income Taxes | (158,000 | ) | (196,000 | ) | ||||
Net Income | 297,929 | 3,695,496 | ) | |||||
Preferred Dividends | (146,473 | ) | (132,500 | ) | ||||
Income Attributable to Common Stockholders | $ | 151,456 | $ | 3,562,996 | ||||
Income Per Share of Common Stock - | ||||||||
Basic | $ | 0.01 | $ | 0.13 | ||||
Diluted | $ | 0.01 | $ | 0.12 | ||||
Weighted Average Shares of Common Stock Outstanding - | ||||||||
Basic | 28,279,701 | 28,279,701 | ||||||
Diluted | 28,775,156 | 32,104,265 |
The accompanying notes are an integral part of these unaudited consolidated financial statements. |
Consolidated Statements of Changes in Equity |
For the Nine Months Ended February 29(28), 2024 and 2023 |
(Unaudited) |
Preferred Stock | Common Stock | Additional | Accumulated | Total Greystone Stockholders' | Non-controlling | Total | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-in Capital | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
Balances, May 31, 2022 | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (39,838,449 | ) | $ | 13,697,656 | $ | 1,383,825 | $ | 15,081,481 | |||||||||||||||||||
Capital contribution | - | - | - | - | - | - | - | 1,669,000 | 1,669,000 | |||||||||||||||||||||||||||
Deconsolidation of variable interest entity | - | - | - | - | - | - | - | (3,102,424 | ) | (3,102,424 | ) | |||||||||||||||||||||||||
Preferred dividends ($2.19 per share) | - | - | - | - | - | (109,418 | ) | (109,418 | ) | - | (109,418 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 1,324,142 | 1,324,142 | 49,599 | 1,373,741 | |||||||||||||||||||||||||||
Balances, August 31, 2022 | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (38,623,725 | ) | 14,912,380 | - | 14,912,380 | ||||||||||||||||||||||||||
Preferred dividends ($2.39 per share) | - | - | - | - | - | (119,349 | ) | (119,349 | ) | - | (119,349 | ) | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | (187,247 | ) | (187,247 | ) | - | (187,247 | ) | ||||||||||||||||||||||||
Balances, November 30, 2022 | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (38,930,321 | ) | 14,605,784 | - | 14,605,784 | ||||||||||||||||||||||||||
Preferred dividends ($2.65 per share) | - | - | - | - | - | (132,500 | ) | (132,500 | ) | - | (132,550 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 3,695,496 | 3,695,496 | - | 3,695,496 | |||||||||||||||||||||||||||
Balances, February 28, 2023 | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (35,367,325 | ) | $ | 18,168,780 | $ | - | $ | 18,168,780 | |||||||||||||||||||
Balances, May 31, 2023 | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (33,995,621 | ) | $ | 19,540,484 | $ | - | $ | 19,540,484 | |||||||||||||||||||
Preferred dividends ($2.92 per share) | - | - | - | - | - | (146,199 | ) | (146,199 | ) | - | (146,199 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 1,744,219 | 1,744,219 | - | 1,744,219 | |||||||||||||||||||||||||||
Balances, August 31, 2023 | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (32,397,601 | ) | 21,138,504 | - | 21,138,504 | ||||||||||||||||||||||||||
Preferred dividends ($2.93 per share) | - | - | - | - | - | (146,472 | ) | (146,472 | ) | - | (146,472 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 964,826 | 964,826 | - | 964,826 | |||||||||||||||||||||||||||
Balances, November 30, 2023 | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (31,579,247 | ) | 21,956,858 | - | 21,956,858 | ||||||||||||||||||||||||||
Preferred dividends ($2.93 per share) | - | - | - | - | - | (146,473 | ) | (146,473 | ) | - | (146,473 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 297,929 | 297,929 | - | 297,929 | |||||||||||||||||||||||||||
Balances, February 29, 2024 | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (31,427,791 | ) | $ | 22,108,314 | $ | - | $ | 22,108,314 |
The accompanying notes are an integral part of these unaudited consolidated financial statements. |
Consolidated Statements of Cash Flows |
For the Nine Months Ended February 29(28), |
(Unaudited) |
2024 | 2023 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 3,006,974 | $ | 4,881,990 | ||||
Adjustments to reconcile net income to net cash provided by operating activities - | ||||||||
Gain on deconsolidation of variable interest entity | - | (569,997 | ) | |||||
Loss on disposition of assets | 12,649 | - | ||||||
Depreciation and amortization | 4,319,390 | 3,958,766 | ||||||
Deferred tax expense | 1,623,721 | 296,000 | ||||||
Decrease (increase) in trade accounts receivable | (1,118,542 | ) | 934,369 | |||||
Decrease (increase) in related party receivables | (68,652 | ) | 131,278 | |||||
Increase in other receivable | (939,877 | ) | - | |||||
Decrease (increase) in inventory | 1,481,352 | (714,583 | ) | |||||
Increase in prepaid expenses | (350,994 | ) | (340,144 | ) | ||||
Increase (decrease) in accounts payable and accrued liabilities | 761,654 | (2,865,056 | ) | |||||
Increase (decrease) in deferred revenue | 545,292 | (5,306,040 | ) | |||||
Net cash provided by operating activities | 9,272,967 | 406,583 | ||||||
Cash Flows from Investing Activities: | ||||||||
Purchase of property, plant and equipment | (2,040,776 | ) | (3,201,187 | ) | ||||
Deconsolidation of variable interest entity | - | (2,806 | ) | |||||
Net cash used in investing activities | (2,040,776 | ) | (3,203,993 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from long-term debt | - | 8,707,426 | ||||||
Payments on long-term debt and financing leases | (1,668,123 | ) | (5,412,171 | ) | ||||
Payments on related party note payable and financing lease | - | (3,348,178 | ) | |||||
Proceeds from revolving loan | - | 1,090,648 | ||||||
Payments on revolving loan | (1,500,000 | ) | (1,790,648 | ) | ||||
Payments for debt issuance costs | (13,085 | ) | (71,154 | ) | ||||
Dividends paid on preferred stock | (427,085 | ) | (314,144 | ) | ||||
Capital contribution to non-controlling interest | - | 1,669,000 | ||||||
Net cash provided by (used in) financing activities | (3,608,293 | ) | 530,779 | |||||
Net Increase (Decrease) in Cash | 3,623,898 | (2,266,631 | ) | |||||
Cash, beginning of period | 695,951 | 3,143,257 | ||||||
Cash, end of period | $ | 4,319,849 | $ | 876,626 | ||||
Non-cash Activities: | ||||||||
Refinancing of certain term loans | $ | - | $ | 2,669,892 | ||||
Deconsolidation of net assets of variable interest entity | $ | - | $ | 3,102,424 | ||||
Capital expenditures in accounts payable | $ | - | $ | 51,403 | ||||
Net book value of leases terminated | $ | 27,903 | $ | - | ||||
Decrease in financing lease liabilities from termination | $ | 15,254 | $ | - | ||||
Preferred dividend accrual | $ | 146,473 | $ | 132,500 | ||||
Supplemental information: | ||||||||
Interest paid | $ | 990,877 | $ | 818,222 | ||||
Income taxes paid | $ | - | $ | 510,000 |
The accompanying notes are an integral part of these unaudited consolidated financial statements. |
Greystone Logistics, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
February 28, 2023 | May 31, 2022 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash | $ | 876,626 | $ | 3,143,257 | ||||
Accounts receivable - | ||||||||
Trade | 5,066,680 | 6,001,049 | ||||||
Related parties | 120,834 | 252,112 | ||||||
Inventory | 4,827,079 | 4,112,496 | ||||||
Prepaid expenses | 644,384 | 304,240 | ||||||
Total Current Assets | 11,535,603 | 13,813,154 | ||||||
Property, Plant and Equipment, net | 28,519,162 | 31,876,765 | ||||||
Right-of-Use Operating Lease Assets | 5,402,769 | 55,535 | ||||||
Total Assets | $ | 45,457,534 | $ | 45,745,454 | ||||
Liabilities and Equity | ||||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | $ | 2,217,304 | $ | 4,160,403 | ||||
Current portion of financing leases | 41,487 | 1,630,895 | ||||||
Current portion of operating leases | 243,951 | 33,881 | ||||||
Accounts payable and accrued liabilities | 4,881,056 | 7,820,837 | ||||||
Deferred revenue | 23,007 | 5,329,047 | ||||||
Preferred dividends payable | 132,500 | 85,377 | ||||||
Total Current Liabilities | 7,539,305 | 19,060,440 | ||||||
Long-Term Debt, net of current portion and debt issue costs | 12,523,087 | 9,306,037 | ||||||
Financing Leases, net of current portion | 27,850 | 532,148 | ||||||
Operating Leases, net of current portion | 5,158,818 | 21,654 | ||||||
Deferred Tax Liability | 2,039,694 | 1,743,694 | ||||||
Equity: | ||||||||
Preferred stock, $5,000,000 | par value, cumulative, shares authorized, shares issued and outstanding, liquidation preference of $5 | 5 | ||||||
Common stock, $ | par value, shares authorized, shares issued and outstanding2,828 | 2,828 | ||||||
Additional paid-in capital | 53,533,272 | 53,533,272 | ||||||
Accumulated deficit | (35,367,325 | ) | (39,838,449 | ) | ||||
Total Greystone Stockholders’ Equity | 18,168,780 | 13,697,656 | ||||||
Non-controlling interest | - | 1,383,825 | ||||||
Total Equity | 18,168,780 | 15,081,481 | ||||||
Total Liabilities and Equity | $ | 45,457,534 | $ | 45,745,454 |
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc.
Consolidated Statements of Income
For the Nine Months Ended February 28,
(Unaudited)
2023 | 2022 | |||||||
Sales | $ | 44,633,542 | $ | 53,069,648 | ||||
Cost of Sales | 38,590,544 | 47,914,061 | ||||||
Gross Profit | 6,042,998 | 5,155,587 | ||||||
Selling, General and Administrative Expenses | 3,918,205 | 4,033,483 | ||||||
Operating Income | 2,124,793 | 1,122,104 | ||||||
Other Income (Expense): | ||||||||
Federal tax credits realized | 3,270,424 | - | ||||||
Gain from forgiveness of debt | - | 3,068,497 | ||||||
Gain from deconsolidation of variable interest entity | 569,997 | - | ||||||
Other income | 189,914 | 35,731 | ||||||
Interest expense | (821,138 | ) | (631,115 | ) | ||||
Income before Income Taxes | 5,333,990 | 3,595,217 | ||||||
Provision for Income Taxes | (452,000 | ) | (99,000 | ) | ||||
Net Income | 4,881,990 | 3,496,217 | ||||||
Income Attributable to Non-controlling Interest | (49,599 | ) | (208,600 | ) | ||||
Preferred Dividends | (361,267 | ) | (243,082 | ) | ||||
Net Income Attributable to Common Stockholders | $ | 4,471,124 | $ | 3,044,535 | ||||
Income Per Share of Common Stock - | ||||||||
Basic | $ | 0.16 | $ | 0.11 | ||||
Diluted | $ | 0.15 | $ | 0.10 | ||||
Weighted Average Shares of Common Stock Outstanding - | ||||||||
Basic | 28,279,701 | 28,472,256 | ||||||
Diluted | 32,105,424 | 32,301,084 |
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc.
Consolidated Statements of Income
For the Three Months Ended February 28,
(Unaudited)
2023 | 2022 | |||||||
Sales | $ | 13,578,269 | $ | 22,450,682 | ||||
Cost of Sales | 11,220,791 | 19,734,155 | ||||||
Gross Profit | 2,357,478 | 2,716,527 | ||||||
Selling, General and Administrative Expenses | 1,606,626 | 1,680,979 | ||||||
Operating Income | 750,852 | 1,035,548 | ||||||
Other Income (Expense): | ||||||||
Federal tax credits realized | 3,270,424 | - | ||||||
Other income | 183,596 | 3,688 | ||||||
Interest expense | (313,376 | ) | (201,992 | ) | ||||
Income before Income Taxes | 3,891,496 | 837,244 | ||||||
Provision for Income Taxes | (196,000 | ) | (234,000 | ) | ||||
Net Income | 3,695,496 | 603,244 | ||||||
Income Attributable to Non-controlling Interest | - | (70,649 | ) | |||||
Preferred Dividends | (132,500 | ) | (80,137 | ) | ||||
Net Income Attributable to Common Stockholders | $ | 3,562,996 | $ | 452,458 | ||||
Income Per Share of Common Stock - | ||||||||
Basic | $ | 0.13 | $ | 0.02 | ||||
Diluted | $ | 0.12 | $ | 0.02 | ||||
Weighted Average Shares of Common Stock Outstanding - | ||||||||
Basic | 28,279,701 | 28,472,639 | ||||||
Diluted | 32,104,265 | 28,967,144 |
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc.
Consolidated Statements of Changes in Equity
For the Nine Months Ended February 28, 2023 and 2022
(Unaudited)
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
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, 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 | ||||||||||||||||||||||||||
Balances | 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 | ||||||||||||||||||||||||||
Balances | 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 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 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 | |||||||||||||||||||
Balances | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (40,732,392 | ) | $ | 12,803,713 | $ | 1,312,762 | $ | 14,116,475 | |||||||||||||||||||
Balances, May 31, 2022 | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (39,838,449 | ) | $ | 13,697,656 | $ | 1,383,825 | $ | 15,081,481 | |||||||||||||||||||
Balances | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (39,838,449 | ) | $ | 13,697,656 | $ | 1,383,825 | $ | 15,081,481 | |||||||||||||||||||
Capital contribution | - | - | - | - | - | - | - | 1,669,000 | 1,669,000 | |||||||||||||||||||||||||||
Deconsolidation of variable interest entity | - | - | - | - | - | - | - | (3,102,424 | ) | (3,102,424 | ) | |||||||||||||||||||||||||
Preferred dividends, /share | - | - | - | - | - | (109,418 | ) | (109,418 | ) | - | (109,418 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 1,324,142 | 1,324,142 | 49,599 | 1,373,741 | |||||||||||||||||||||||||||
Balances, August 31, 2022 | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (38,623,725 | ) | 14,912,380 | - | 14,912,380 | ||||||||||||||||||||||||||
Balances | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (38,623,725 | ) | 14,912,380 | - | 14,912,380 | ||||||||||||||||||||||||||
Preferred dividends, $ /share | - | - | - | - | - | (119,349 | ) | (119,349 | ) | - | (119,349 | ) | ||||||||||||||||||||||||
Net income (loss) | - | - | - | - | - | (187,247 | ) | (187,247 | ) | - | (187,247 | ) | ||||||||||||||||||||||||
Balances, November 30, 2022 | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (38,930,321 | ) | 14,605,784 | - | 14,605,784 | ||||||||||||||||||||||||||
Balances | 50,000 | 5 | 28,279,701 | 2,828 | 53,533,272 | (38,930,321 | ) | 14,605,784 | - | 14,605,784 | ||||||||||||||||||||||||||
Preferred dividends, $ /share | - | - | - | - | - | (132,500 | ) | (132,500 | ) | - | (132,500 | ) | ||||||||||||||||||||||||
Preferred dividends | - | - | - | - | - | (132,500 | ) | (132,500 | ) | - | (132,500 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 3,695,496 | 3,695,496 | - | 3,695,496 | |||||||||||||||||||||||||||
Net income (loss) | - | - | - | - | - | 3,695,496 | 3,695,496 | - | 3,695,496 | |||||||||||||||||||||||||||
Balances, February 28, 2023 | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (35,367,325 | ) | $ | 18,168,780 | $ | - | $ | 18,168,780 | |||||||||||||||||||
Balance | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (35,367,325 | ) | $ | 18,168,780 | $ | - | $ | 18,168,780 |
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended February 28,
(Unaudited)
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 4,881,990 | $ | 3,496,217 | ||||
Adjustments to reconcile net income to net cash provided by operating activities - | ||||||||
Depreciation and amortization | 3,958,766 | 4,015,292 | ||||||
Gain on forgiveness of debt | - | (3,068,497 | ) | |||||
Gain on deconsolidation of variable interest entity | (569,997 | ) | - | |||||
Gain on sale of assets | - | (22,336 | ) | |||||
Deferred tax expense | 296,000 | 99,000 | ||||||
Decrease (increase) in trade accounts receivable | 934,369 | (999,470 | ) | |||||
Decrease in related party receivables | 131,278 | 41,376 | ||||||
Increase in inventory | (714,583 | ) | (846,041 | ) | ||||
Increase in prepaid expenses | (340,144 | ) | (577,297 | ) | ||||
Increase (decrease) in accounts payable and accrued liabilities | (2,865,056 | ) | 3,258,539 | |||||
Increase (decrease) in deferred revenue | (5,306,040 | ) | 3,787,750 | |||||
Net cash provided by operating activities | 406,583 | 9,184,533 | ||||||
Cash Flows from Investing Activities: | ||||||||
Purchase of property and equipment | (3,201,187 | ) | (4,875,530 | ) | ||||
Deconsolidation of variable interest entity | (2,806 | ) | - | |||||
Proceeds from sale of assets | - | 50,000 | ||||||
Net cash used in investing activities | (3,203,993 | ) | (4,825,530 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from long-term debt | 8,707,426 | 837,000 | ||||||
Payments on long-term debt and financing leases | (5,412,171 | ) | (4,390,444 | ) | ||||
Payments on related party note payable and financing lease | (3,348,178 | ) | (353,523 | ) | ||||
Proceeds from revolving loan | 1,090,648 | 3,700,000 | ||||||
Payments on revolving loan | (1,790,648 | ) | - | |||||
Proceeds from stock options exercised | - | 24,000 | ||||||
Purchase of treasury stock | - | (281,500 | ) | |||||
Payments for debt issuance costs | (71,154 | ) | (4,752 | ) | ||||
Dividends paid on preferred stock | (314,144 | ) | (162,945 | ) | ||||
Capital contribution on non-controlling interest | 1,669,000 | - | ||||||
Distributions paid by non-controlling interest | - | (132,200 | ) | |||||
Net cash provided by (used in) financing activities | 530,779 | (764,364 | ) | |||||
Net Increase (Decrease) in Cash | (2,266,631 | ) | 3,594,639 | |||||
Cash, beginning of period | 3,143,257 | 4,387,533 | ||||||
Cash, end of period | $ | 876,626 | $ | 7,982,172 | ||||
Non-cash Activities: | ||||||||
Deconsolidation of variable interest entity | $ | 3,102,424 | $ | - | ||||
Refinancing of certain term loans | $ | 2,669,892 | $ | - | ||||
Capital expenditures in accounts payable | $ | 51,403 | $ | 255,062 | ||||
Acquisition of equipment through financing lease | $ | - | $ | 24,441 | ||||
Preferred dividend accrual | $ | 132,500 | $ | 80,137 | ||||
Supplemental information: | ||||||||
Interest paid | $ | 818,222 | $ | 627,555 | ||||
Income taxes paid | $ | 510,000 | $ | 1,015,000 |
The accompanying notes are an integral part of these consolidated financial statements.
Greystone Logistics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. | Basis of Financial Statements |
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 February 28, 2023,29, 2024, the results of its operations for the nine months and three months ended February 28,29(28), 2024 and 2023 and 2022 and its cash flows for the nine months ended February 28, 202329(28), 2024 and 2022.2023. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended May 31, 20222023 and the notes thereto included in the Form 10-K for such period. The results of operations for the nine months and three months ended February 28,29(28), 2024 and 2023 and 2022 are not necessarily indicative of the results to be expected for the full fiscal year.
The unaudited 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”) for the period from June 1, 2022 through July 29, 2022. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements.
GRE owns two buildings located in Bettendorf, IA, which are occupied by Greystone. GRE is wholly-ownedwholly owned by Robert B. Rosene, Jr., a member of Greystone’s Board of Directors, owns two primary manufacturing facilities which are occupied by Greystone.Directors. Effective July 29, 2022, GRE paid off its mortgage payable and, in conjunction with Greystone’s refinancing described in Note 6, GRE was removed from the cross-collateralization in the loan agreement between Greystone and International Bank of Commerce.agreement. Following these transactions, Greystone was no longer determined to be the primary beneficiary of GRE. Accordingly, GRE was deconsolidated from Greystone’s consolidated financial statements as of July 29, 2022, resulting in the recognition of a gain in the amount of $569,997.$569,997. Subsequent to the deconsolidation, Greystone entered into a new lease agreement with the related partyGRE and recorded right-of-use assets and liabilities for the new lease, seelease. See Note 7.
Certain balances in the consolidated balance sheet as of May 31, 2022, have been restated for comparative purposes.
Note 2. | Earnings Per Share |
Note 2. Earnings Per Share
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 attributable to common stockholders by the weighted-average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income attributable 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.
Greystone excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is anti-dilutive. Instruments which have an anti-dilutive effect are the preferred stock convertible into shares of common stock for the three monthsperiods ended February 28, 2022.29(28) are as follows:
2024 | 2023 | |||||||
For the nine months ended February 29(28): | ||||||||
Preferred stock convertible into common stock | 3,333,333 | - | ||||||
For the three months ended February 29(28): | ||||||||
Preferred stock convertible into common stock | 3,333,333 | - |
The following tables set forth the computation of basic and diluted earnings per share.
Schedule of Basic and Diluted Earnings Per Share
For the nine months ended February 28, 202329(28), 2024 and 2022:2023:
2023 | 2022 | 2024 | 2023 | |||||||||||||
Basic earnings per share of common stock: | ||||||||||||||||
Numerator - | ||||||||||||||||
Net income attributable to common stockholders | $ | 4,471,124 | $ | 3,044,535 | $ | 2,567,830 | $ | 4,471,124 | ||||||||
Denominator - | ||||||||||||||||
Weighted-average shares outstanding - basic | 28,279,701 | 28,472,256 | 28,279,701 | 28,279,701 | ||||||||||||
Income per share of common stock - basic | $ | 0.16 | $ | 0.11 | $ | 0.09 | $ | 0.16 | ||||||||
Diluted earnings per share of common stock: | ||||||||||||||||
Numerator - | ||||||||||||||||
Net income attributable to common stockholders | $ | 4,471,124 | $ | 3,044,535 | $ | 2,567,830 | $ | 4,471,124 | ||||||||
Add: Preferred stock dividends for assumed conversion | 361,267 | 243,082 | - | 361,267 | ||||||||||||
Net income allocated to common stockholders | $ | 4,832,391 | $ | 3,287,617 | $ | 2,567,830 | $ | 4,832,391 | ||||||||
Denominator - | ||||||||||||||||
Weighted-average shares outstanding – basic | 28,279,701 | 28,472,256 | 28,279,701 | 28,279,701 | ||||||||||||
Incremental shares from assumed conversion of options, warrants and preferred stock, as appropriate | 3,825,723 | 3,828,828 | ||||||||||||||
Incremental shares from assumed conversion of warrants and preferred stock, as appropriate | 495,000 | 3,825,723 | ||||||||||||||
Weighted average common stock outstanding – diluted | 32,105,424 | 32,301,084 | 28,774,701 | 32,105,424 | ||||||||||||
Income per share of common stock – diluted | $ | 0.15 | $ | 0.10 | $ | 0.09 | $ | 0.15 |
For the three months ended February 28, 202329(28), 2024 and 2022:
2023 | 2022 | |||||||
Basic earnings per share of common stock: | ||||||||
Numerator - | ||||||||
Net income attributable to common stockholders | $ | 3,562,996 | $ | 452,458 | ||||
Denominator - | ||||||||
Weighted-average shares outstanding – basic | 28,279,701 | 28,472,639 | ||||||
Income per share of common stock – basic | $ | 0.13 | $ | 0.02 | ||||
Diluted earnings per share of common stock: | ||||||||
Numerator - | ||||||||
Net income attributable to common stockholders | $ | 3,562,996 | $ | 452,458 | ||||
Add: Preferred stock dividends for assumed conversion | 132,500 | - | ||||||
Net income attributable to common stockholders | $ | 3,695,496 | $ | 452,458 | ||||
Denominator - | ||||||||
Weighted-average shares outstanding - basic | 28,279,701 | 28,472,639 | ||||||
Incremental shares from assumed conversion of warrants or options, as appropriate | 3,824,564 | 494,505 | ||||||
Weighted average common stock outstanding - diluted | 32,104,265 | 28,967,144 | ||||||
Income per share of common stock – diluted | $ | 0.12 | $ | 0.02 |
Note 3. Inventory2023:
2024 | 2023 | ||||||||
Basic earnings per share of common stock: | |||||||||
Numerator - | |||||||||
Net income attributable to common stockholders | $ | 151,456 | $ | 3,562,996 | |||||
Denominator - | |||||||||
Weighted-average shares outstanding - basic | 28,279,701 | 28,279,701 | |||||||
Income per share of common stock - basic | $ | 0.01 | $ | 0.13 | |||||
Diluted earnings per share of common stock: | |||||||||
Numerator - | |||||||||
Net income attributable to common stockholders | $ | 151,456 | $ | 3,562,996 | |||||
Add: Preferred stock dividends for assumed conversion | - | 132,500 | |||||||
$ | 151,456 | $ | 3,695,496 | ||||||
Denominator - | |||||||||
Weighted-average shares outstanding - basic | 28,279,701 | 28,279,701 | |||||||
Incremental shares from assumed conversion of warrants and preferred stock, as appropriate | 495,455 | 3,824,564 | |||||||
Weighted average common stock outstanding – diluted | 28,775,156 | 32,104,265 | |||||||
Income per share of common stock - diluted | $ | 0.01 | $ | 0.12 |
Note 3. | Inventory |
Inventory consists of the following:
February 29, | May 31, | |||||||
2024 | 2023 | |||||||
Raw materials | $ | 1,933,401 | $ | 2,299,911 | ||||
Finished goods | 1,069,353 | 2,184,195 | ||||||
Total inventory | $ | 3,002,754 | $ | 4,484,106 |
Schedule of Inventory
February 28, | May 31, | |||||||
2023 | 2022 | |||||||
Raw materials | $ | 2,109,820 | $ | 2,091,551 | ||||
Finished goods | 2,717,259 | 2,020,945 | ||||||
Total inventory | $ | 4,827,079 | $ | 4,112,496 |
Note 4. | Property, Plant and Equipment |
Note 4. Property, Plant and Equipment
A summary of property, plant and equipment is as follows:
Schedule of Property, Plant and Equipment
February 28, 2023 | May 31, 2022 | February 29, 2024 | May 31, 2023 | |||||||||||||
Production machinery and equipment | $ | 60,395,743 | $ | 57,341,906 | $ | 67,786,046 | $ | 66,068,625 | ||||||||
Plant buildings and land | 2,364,089 | 7,020,543 | 2,164,232 | 2,364,089 | ||||||||||||
Leasehold improvements | 1,553,138 | 1,487,398 | 1,624,513 | 1,553,138 | ||||||||||||
Furniture and fixtures | 542,057 | 542,057 | 542,057 | 542,057 | ||||||||||||
Property plant and equipment gross | 64,855,027 | 66,391,904 | ||||||||||||||
72,116,848 | 70,527,909 | |||||||||||||||
Less: Accumulated depreciation and amortization | (36,335,865 | ) | (34,515,139 | ) | (41,522,562 | ) | (37,343,203 | ) | ||||||||
Net Property, Plant and Equipment | $ | 28,519,162 | $ | 31,876,765 | $ | 30,594,286 | $ | 33,184,706 |
Production machinery includes deposits on equipment in the amount of $3,494,467$450,454 as of February 28, 2023,29, 2024, which has not been placed into service. As of May 31, 2022, plant buildings and land included two properties which are owned by GRE, a variable interest entity (“VIE”), and had an aggregate net book value of $2,548,933. As discussed in Note 1, GRE was deconsolidated effective July 29, 2022.
Depreciation and amortization expense, including amortization expense related to financing leases, for the nine months ended February 28,29(28), 2024 and 2023 was $4,296,383 and 2022 was $3,954,444 and $4,011,025,$3,954,444, respectively.
Note 5. | Related Party Transactions/Activity |
Note 5. Related Party Transactions/Activity
Yorktown Management & Financial Services, LLC
Yorktown Management & Financial Services, LLC (“Yorktown”), an entity wholly-owned by Warren F. Kruger, Greystone’s CEO, President, Chairman of the Board, and CEO,a significant stockholder of Greystone, 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 $27,500$27,500 for use of Yorktown’s grinding equipment and pelletizing equipment. Rental fees were $1,072,500$1,072,500 for the each of the nine months ended February 28, 202329(28), 2024 and 20222023.
Effective January 1, 2017, Greystone and Yorktown entered into a five-year lease forleases office space from Yorktown at a monthly rental of $4,000 per month with a one-year extension at $5,200$5,200 per month which extension was executed by Greystone. Subsequentincreased to $6,250 per month effective July 1, 2023, with the intent of Greystone and Yorktown finalizing a new lease agreement, subject to the maturity on December 31, 2022, Greystone pays rent to Yorktown at the monthly rateBoard of $5,200 on a month-to-month basis.Directors approval. Total rent expense was $46,800expenses were $55,200 and $36,000$46,800 for the nine months ended February 28,29(28), 2024 and 2023, and 2022, respectively.
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 CEO, President, Chairman of the Board, and CEO,a significant stockholder of Greystone, serves TriEnda as the non-executive Chairman of the Board and is a partner in a partnership which has a majority ownership interest in TriEnda. Greystone may purchase pallets from TriEnda for resale or sell Greystone pallets to TriEnda. During the nine months ended February 28,29(28), 2024 and 2023, and 2022, Greystone purchases from TriEnda totaled $431$7,516 and $4,222,$431, respectively and sales to TriEnda totaled $31,231$150,389 and $62,089,$31,231, respectively. As of February 28, 2023,29, 2024, TriEnda owed $ $65,907 to Greystone.Greystone and Greystone owed $7,716 to TriEnda.
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 CEO, President, Chairman of the Board, and CEO.a significant stockholder of Greystone. Greystone had sales to Green of $574,768$146,454 and $348,330$574,768 for the nine months ended February 28,29(28), 2024 and 2023, and 2022, respectively. The account receivable due from Green as of February 28, 202329, 2024 was $.$59,295.
Note 6. | Long-term Debt |
Note 6. Long-term Debt
Debt as of February 28, 202329, 2024 and May 31, 20222023 is as follows:
February 29, | May 31, | |||||||
2024 | 2023 | |||||||
Term loans dated July 29, 2022, payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, maturing July 29, 2027 | $ | 12,992,827 | $ | 14,334,736 | ||||
Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, due July 29, 2024 | - | 1,500,000 | ||||||
Term loan payable to First Interstate Bank, interest rate of 3.70%, monthly principal and interest payments of $27,593, due March 19, 2025, secured by certain equipment | 350,878 | 585,536 | ||||||
Term loan payable to First Interstate Bank, interest rate of 3.50%, monthly principal and interest payments of $5,997, due August 10, 2028, secured by certain real estate | 725,647 | 759,639 | ||||||
Other | 43,965 | 73,368 | ||||||
Total long-term debt | 14,113,317 | 17,253,279 | ||||||
Debt issuance costs, net of amortization | (92,784 | ) | (84,022 | ) | ||||
Total debt, net of debt issuance costs | 14,020,533 | 17,169,257 | ||||||
Less: Current portion of long-term debt | (2,384,993 | ) | (2,249,570 | ) | ||||
Long-term debt, net of current portion | $ | 11,635,540 | $ | 14,919,687 |
Schedule of Long-Term Debt
February 28, | May 31, | |||||||
2023 | 2022 | |||||||
Term loan A dated July 29, 2022, payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, maturing July 29, 2027 | $ | 7,281,420 | $ | - | ||||
Term loan A dated July 29, 2022, payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, maturing July 29, 2027 | $ | 7,281,420 | $ | - | ||||
Term loan B dated July 29, 2022, payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, maturing July 29, 2027 | 3,039,219 | - | ||||||
Term loans payable to International Bank of Commerce, prime rate of interest plus 0.5% with interest floors between 4.0% and 5.25%. These loans were refinanced by the IBC Restated Loan Agreement dated July 29, 2022, and rolled into Term Loan A above | - | 2,870,169 | ||||||
Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.5%, due July 29, 2024 | 3,000,000 | 3,700,000 | ||||||
Term loan payable by GRE to International Bank of Commerce, interest rate of 5.5%, paid off July 27, 2022 | - | 1,826,361 | ||||||
Term loan payable to First Interstate Bank, interest rate of 3.7%, monthly principal and interest payments of $27,593, due March 19, 2025, secured by certain equipment | 662,485 | 888,642 | ||||||
Term loan payable to First Interstate Bank, interest rate of 3.5%, monthly principal and interest payments of $5,997, due August 10, 2028, secured by certain real estate | 770,840 | 803,941 | ||||||
Note payable to Robert Rosene, 7.5% interest, paid off August 3, 2022 | - | 3,295,704 | ||||||
Other | 83,010 | 111,374 | ||||||
Total long-term debt | 14,836,974 | 13,496,191 | ||||||
Debt issuance costs, net of amortization | (96,583 | ) | (29,751 | ) | ||||
Total debt, net of debt issuance costs | 14,740,391 | 13,466,440 | ||||||
Less: Current portion of long-term debt | (2,217,304 | ) | (4,160,403 | ) | ||||
Long-term debt, net of current portion | $ | 12,523,087 | $ | 9,306,037 |
The prime rate of interest as of February 28, 2023,29, 2024 was 7.75%8.50%. Subsequent to February 28, 2023, the prime rate of interest was increased to 8.00% on March 23, 2023.
Debt issuance costs consistsconsist 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 $4,322$4,323 and $4,267$4,322 for the nine months ended February 28,29(28), 2024 and 2023, and 2022, respectively.
Restated and Amended Loan Agreement between Greystone and IBC
On July 29, 2022, Greystone and GSM (collectively(each a “Borrower” and together the “Borrowers”) and IBC entered into an Amended and Restated Loan Agreement (“IBC Restated Loan Agreement”) with International Bank of Commerce (“IBC”) that providesprovided for the consolidation of certain term loans and a renewed revolver loan.
The IBC term loans make equal monthly payments of principal and interest in such amounts sufficient to amortize the principal balance of the loans over the remaining 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,As of February 29, 2024, the aggregate payments for the IBC term loans are approximately $232,000$254,000 per month.
The IBC Restated Loan Agreement, providesdated July 29, 2022, as amended, provided for IBC to make certain term loans to Greystone, (i) a term loan in the amount of $7,854,708, Term Loan A, to consolidate all existing term loans in the aggregate amount of $2,669,892 with Lender, extend creditapproximately $2,700,000 and additional funding in the approximate amount of $3,271,987 to pay off a note payable to Robert B. Rosene, Jr. and extend additional credit to fund$13,200,000 for the purchase in the amount of $1,912,829 of the equipment subject to the iGPS Logistics, LLC, leases and (ii) an advancing term loan facility, Term Loan B, whereby Greystone may obtain advances up to the aggregate amount of $7,000,000 (items i and ii referred to as “Term Loans”) (iii) a renewal of the revolving loan with an increase of $2,000,000$2,000,000 to an aggregate principal amount of $6,000,000$6,000,000 (the “Revolving Loan”), subject to borrowing base limitations. As of February 28, 2023,29, 2024, Greystone’s available revolving loan borrowing capacity was approximately $3,000,000. In addition, there is approximately $3,477,000 available to Greystone under the advancing Term Loan B for the purchase of equipment.$5,770,000.
The IBC Restated Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the IBC Restated 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 Restated Loan Agreement or the related loan documents. In addition, without prior written consent, Greystone shall not declare or pay any dividends, redemptions, distributions and withdrawals with respect to its equity interest other than distributions to holders of its preferred stock in the aggregate of $500,000 in any fiscal year. Among other things, a default under the IBC Restated Loan Agreement would permit IBC to cease lending funds under the IBC Restated Loan Agreement and require immediate repayment of any outstanding notes with interest and any unpaid accrued fees.
The IBC Restated Loan Agreement is secured by a lien on substantially all assets of the Borrowers. Warren F. Kruger, the Company’s President, CEO and CEO,Chairman of the Board and a significant stockholder of Greystone, and Robert B. Rosene, Jr., a member of the Company’s Board of Directors, have provided limited guaranties of the Borrowers’ obligations under the IBC Restated Loan Agreement. Mr. Kruger’s guarantee is limited to 32.4%32.4% of all debt obligations to IBC. Mr. Rosene’s limited guaranty is the lesser of (i) $3,500,000$3,500,000 less all amounts paid on the principal amount of the loans after the date of the agreement excluding payments on the revolver and (ii) the amount owed to IBC of the loans outstanding from time to time including accrued interest and fees.
Loan Agreement with First Interstate Bank, formerly Great Western Bank
On August 23, 2021, Greystone entered into a loan agreement with First Interstate Bank (“FIB Loan Agreement”) to include prior commercial loans and subsequent loans. GSM is a named guarantor under the FIB Loan Agreement.
The FIB Loan Agreement includes customary eventsrepresentations and warranties and affirmative and negative covenants which include (i) requiring the Borrowers to maintain a debt service coverage ratio of default, including events1:25 to 1:00 as of default relatingthe end of each fiscal year end and debt to non-paymenttangible net worth ratio of principal and other amounts owing under4:00 to 1:00 as of the end of each fiscal year end with a decrease of 0.50 in the ratio each year thereafter until reaching a minimum ratio of 3:00 to 1:00. In addition, the FIB Loan Agreement from time to time, inaccuracyprovides that Greystone shall not, without prior consent of representations, violation of covenants, defaults under other agreements, bankruptcy and similar events, certain material adverse changes relating to a Borrower, certain judgmentsthe bank, incur or awards against a Borrower,assume additional indebtedness or guarantor’s ability to perform under the FIB Loan Agreement. Among other things, a default under the FIB Loan Agreement would permit FIB to cease lending funds under the FIB Loan Agreement and require immediate repayment of any outstanding notes with interest and any unpaid accrued fees.capital leases.
The FIB Loan Agreement is secured by a mortgage on one of Greystone’s warehouses.
Maturities
Maturities of Greystone’s long-term debt for the five years subsequent to February 28, 2023,29, 2024, are $2,217,304, $5,387,090, $2,228,841, $1,215,659$2,384,993, $2,242,998, $2,404,975, $6,552,966 and $3,260,851 with $527,229 thereafter.$527,385.
Note 7. | Leases |
Note 7. Leases
Financing Leases
Financing leases as of February 28, 202329, 2024 and May 31, 2022:2023:
February 29, 2024 | May 31, 2023 | |||||||
Non-cancellable financing leases | $ | 17,070 | $ | 60,485 | ||||
Less: Current portion | (15,288 | ) | (31,981 | ) | ||||
Non-cancellable financing leases, net of current portion | $ | 1,782 | $ | 28,504 |
Schedule of Financing Lease
February 28, 2023 | May 31, 2022 | |||||||
Non-cancellable financing leases | $ | 69,337 | $ | 2,163,043 | ||||
Less: Current portion | (41,487 | ) | (1,630,895 | ) | ||||
Non-cancellable financing leases, net of current portion | $ | 27,850 | $ | 532,148 |
Greystone and an unrelated private company entered into three lease agreements for certain production equipment with a total cost of approximately $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%. Effective October 17, 2022, Greystone and the private company entered into an agreement for Greystone to pay off the leases and acquire the equipment at the unamortized principal balance of the leases or a total of $1,527,293.
Effective December 29, 2022, Greystone exercised its option under a lease agreement dated December 28, 2017, with Yorktown to purchase the production equipment therein for $10,000.
The production equipment under the remaining non-cancelable financing leases as of February 28, 2023, have29, 2024, has a gross carrying amount of $176,565.
$63,457 as of February 29, 2024. Amortization of the carrying amount of $189,927$21,470 and $721,923$189,927 was included in depreciation expense for the nine months ended February 28,29(28), 2024 and 2023, and 2022, respectively.
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 three non-cancellable operating leases for (i) equipment with a fifty-two month term and a forty-eight month term and a discount rate of 5.40%5.40% and (ii) two buildings on a ten year lease with a five year renewal option and a discount rate of 6.0%6.00%. The leases are single-term with defined constant monthly rental rates.
As discussed in Note 1, effective August 1, 2022, Greystone and GRE entered into a non-cancellable ten-year lease agreement with a five-year extension for which Greystone recorded a right-of-use asset and liability based on the present value of the lease payments in the amount of $5,516,006, using a term of one hundred eighty (180) months and a discount rate of 6.00%.
Lease Summary Information
For the nine-months ended February 29(28), 2024 and 2023:
2024 | 2023 | |||||||
Lease Expense | ||||||||
Financing lease expense - | ||||||||
Amortization of right-of-use assets | $ | 21,470 | $ | 189,927 | ||||
Interest on lease liabilities | 1,415 | 30,614 | ||||||
Operating lease expense | 454,893 | 335,378 | ||||||
Short-term lease expense | 1,205,951 | 1,217,095 | ||||||
Total | $ | 1,683,729 | $ | 1,773,014 | ||||
Other Information | ||||||||
Cash paid for amounts included in the measurement of lease liabilities for finance leases - | ||||||||
Operating cash flows | $ | 1,415 | $ | 30,614 | ||||
Financing cash flows | $ | 11,650 | $ | 626,329 | ||||
Cash paid for amounts included in the measurement of lease liabilities for operating leases - | ||||||||
Operating cash flows | $ | 467,182 | $ | 335,378 | ||||
Weighted-average remaining lease term (in years) - | ||||||||
Financing leases | 1.0 | 1.9 | ||||||
Operating leases | 13.4 | 14.4 | ||||||
Weighted-average discount rate - | ||||||||
Financing leases | 4.8 | % | 4.4 | % | ||||
Operating leases | 6.0 | % | 6.0 | % |
For the periods ending February 28, 2023 and 2022:
Summary of Lease Activity
2023 | 2022 | |||||||
Lease Expense | ||||||||
Financing lease expense - | ||||||||
Amortization of right-of-use assets | $ | 189,927 | $ | 721,923 | ||||
Interest on lease liabilities | 30,614 | 119,000 | ||||||
Operating lease expense | 335,378 | 53,411 | ||||||
Short-term lease expense | 1,217,095 | 1,101,133 | ||||||
Total | $ | 1,773,014 | $ | 1,995,467 | ||||
Other Information | ||||||||
Cash paid for amounts included in the measurement of lease liabilities for finance leases - | ||||||||
Operating cash flows | $ | 30,614 | $ | 119,000 | ||||
Financing cash flows | $ | 626,329 | $ | 1,248,371 | ||||
Cash paid for amounts included in the measurement of lease liabilities for operating leases - | ||||||||
Operating cash flows | $ | 335,378 | $ | 53,411 | ||||
Right-of-use assets obtained in exchange for lease liabilities - | ||||||||
Financing leases | $ | - | $ | 24,441 | ||||
Operating leases | $ | 5,516,006 | $ | - | ||||
Weighted-average remaining lease term (in years) - | ||||||||
Financing leases | 1.9 | 1.5 | ||||||
Operating leases | 14.4 | 1.9 | ||||||
Weighted-average discount rate - | ||||||||
Financing leases | 4.4 | % | 7.3 | % | ||||
Operating leases | 6.0 | % | 5.4 | % |
Future minimum lease payments under non-cancelable leases as of February 28, 2023,29, 2024, are approximately:
Financing Leases | Operating Leases | |||||||
Twelve months ended February 28, 2025 | $ | 15,715 | $ | 534,000 | ||||
Twelve months ended February 28, 2026 | 1,798 | 534,000 | ||||||
Twelve months ended February 28, 2027 | - | 534,000 | ||||||
Twelve months ended February 29, 2028 | - | 549,610 | ||||||
Twelve months ended February 28, 2029 | - | 560,760 | ||||||
Thereafter | - | 4,859,530 | ||||||
Total future minimum lease payments | 17,513 | 7,571,900 | ||||||
Present value discount | 443 | 2,396,681 | ||||||
Present value of minimum lease payments | $ | 17,070 | $ | 5,175,219 |
Schedule
Financing Leases | Operating Leases | |||||||
Twelve months ended February 29, 2024 | $ | 42,185 | $ | 561,947 | ||||
Twelve months ended February 28, 2025 | 22,440 | 543,612 | ||||||
Twelve months ended February 28, 2026 | 7,811 | 534,000 | ||||||
Twelve months ended February 28, 2027 | - | 534,000 | ||||||
Twelve months ended February 29, 2028 | - | 549,610 | ||||||
Thereafter | - | 5,420,290 | ||||||
Total future minimum lease payments | 72,436 | 8,143,459 | ||||||
Present value discount | 3,099 | 2,740,690 | ||||||
Present value of minimum lease payments | $ | 69,337 | $ | 5,402,769 |
Note 8. | Deferred Revenue |
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 advances is recognized by Greystone as pallets are shipped to the customer which totaled $6,378,040$-0- and $9,772,750$6,378,040 during the nine months ended February 28,29(28), 2024 and 2023, and 2022, respectively. Customer advances received during the nine months ended February 28,29(28), 2024 and 2023 were $545,292 and 2022 were $1,072,000 and $13,560,500,$1,072,000, respectively. The unrecognized balance of deferred revenue as of February 28, 202329, 2024 and May 31, 2022,2023, was $23,007$568,299 and $5,329,047,$23,007, respectively.
Note 9. | Revenue and Revenue Recognition |
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 0.8%0.8% and 1.6%0.8% of sales during the nine months ended February 28,29(28), 2024 and 2023, and 2022, 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 28,29(28), 2024 and 2023, and 2022, respectively, were as follows:
Category | 2024 | 2023 | ||||||
End User Customers | 83 | % | 71 | % | ||||
Distributors | 17 | % | 29 | % |
Schedule of Sale of Revenues for Customer Categories
Category | 2023 | 2022 | ||||||
End User Customers | 71 | % | 74 | % | ||||
Distributors | 29 | % | 26 | % |
Note 10. | Fair Value of Financial Instruments |
Note 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 approximatesapproximate fair value. Fixed rate notes are valued based on cash flows using estimated rates of comparable notes. The carrying amounts reported on the consolidated balance sheets approximate fair value.
Note 11. | Concentrations, Risks and Uncertainties |
Note 11. Concentrations, Risks and Uncertainties
Greystone derived approximately 71%83% and 74%71% of its total sales from threeits major customers (which generally ranges from two to four customers) during the nine months ended February 28,29(28), 2024 and 2023, and 2022, respectively. The loss of a material amount of business from one or more 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 $599,700$637,906 and $313,050 in fiscal years$599,700 during the nine months ended February 29(28), 2024 and 2023, and 2022, respectively, were from one of its principalmajor customers.
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 does not expect that the ultimate resolution of any open matters will have a material adverse effect on its consolidated financial position or results of operations.
Note 12. Commitments
In February 2024, one of the Company’s storage warehouses caught fire with damage to finished goods inventory valued at $1,326,752 and the building with a net book value of $161,850. The Company recorded an insurance receivable of $1,488,602 as an estimate primarily for damage to the inventory. The insurer is currently reviewing the claim which may result in a change to the recovery. The Company anticipates that the final settlement will result in a gain primarily due to the damage to the building; however, there is insufficient information currently available to determine a reasonable estimate.
Note 12. | Commitments |
As of February 28, 2023, Greystone29, 2024, the Company had commitments totaling approximately $5.3 millionoutstanding of $166,800 toward the purchase of production equipment.
Note 13. Employee Retention Credits
As a response to the COVID-19 outbreak, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which authorized emergency loans to businesses by establishing, and providing funding for, forgivable loans under the Paycheck Protection Program (PPP). The PPP provided loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business.
In June 2021, the Company received forgiveness of its $3,034,000 PPP loan plus accrued interest by the Small Business Administration (“SBA”). The Company recognized the forgiveness as other income for the year ended May 31, 2022.
The CARES Act also provided an Employee Retention Credit (“ERC”) which is a refundable tax credit against certain employment taxes equal to 50% of qualified wages paid, up to $10,000 per employee annually for wages paid. Additional relief provisions were passed by the United States government, which extended and expanded the qualified wage caps on these credits to 70% of qualified wages paid, up to $10,000 per employee per quarter, through September 30, 2021.
By notices dated January 9, 2023, the Department of Treasury notified Greystone of ERC credits awarded under the CARES Act in the total amount of $3,270,424 due to Greystone for the quarters ended June 30, 2021 and September 30, 2021. Due to the subjectivity of the credit, the Company elected to account for the ERC as a gain analogizing to ASC 450-30, Gain Contingencies. The Company recognized the amount as other income for the nine months ended February 28, 2023.
By notice dated March 27, 2023, the Department of Treasury notified Greystone of ERC credits awarded under the CARES Act in the total amount of approximately $1,641,000 due to Greystone for the quarter ended March 31, 2021. Greystone will record these credits in March 2023, which is the point in which the uncertainty surrounding them is resolved and they become realizable.
Item 2. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
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. 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, 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 Annual Report on Form 10-K for the fiscal year ended May 31, 2023, which was filed with the Securities and Exchange Commission on August 28, 2023, as the same may be updated from time to time. Actual results may vary materially from the forward-looking statements. The results of operations for the nine months ended February 29, 2024, are not necessarily indicative of the results for the fiscal year ending May 31, 2024. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.
Results of Operations
General to All Periods
The unaudited consolidated statements include Greystone Logistics, Inc., and its two wholly-ownedwholly owned subsidiaries, Greystone Manufacturing, L.L.C. (“GSM”) and Plastic Pallet Production, Inc. (“PPP”). Greystone also consolidated the variable interest entity, Greystone Real Estate, L.L.C. (“GRE”) through July 29, 2022, at which time a deconsolidation of the entity occurred. All material intercompany accounts and transactions have been eliminated.
References to fiscal year 2023 refer to the nine months and three months ended February 28, 2023. References to fiscal year 2022 refer to the nine months and three months ended February 28, 2022.Sales
Sales
Greystone’sGreystone's primary focus is to provide quality plastic pallets to its existing customers while continuing its marketing efforts to broaden its customer base. Greystone’sGreystone'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’sGreystone'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, contract sales personnel and its President and other employees.
Personnel
Personnel
Greystone had full-time-equivalents of approximately 167 and 189 and 239 full-timefull‑time employees and 5679 and 8056 temporary employees as of February 28,29(28), 2024 and 2023, and 2022, respectively. Full-time equivalent is a measure based on time worked.
Nine Months Ended February 28, 202329, 2024 Compared to Nine Months Ended February 28, 20222023
Sales
Sales for fiscal year 2023the nine months ended February 29, 2024, were $44,633,542$46,990,716 compared to $53,069,648 in fiscal year 2022$44,633,542 for a decreasethe nine months ended February 28, 2023, for an increase of $8,436,106,$2,357,174, or 15.9%5.3%. The number of pallets sold in fiscal year 2023 decreasedduring the nine months ended February 29, 2024, increased by about 24%approximately 9% from the prior period primarily related to sales to two principal customers. However,offset by an approximate 3% decrease in the average price per pallet sold in fiscal year 2023 increased by about 10%sold.
Greystone’s principal customers, ranging from the prior period. Salestwo to these twofour customers, may vary by period and the decrease in fiscal year 2023 is not considered indicative of future sales therein.
Greystone had three customers which accounted for approximately 71%83% and 74%71% of sales in fiscal yearsfor the nine months ended February 29(28), 2024 and 2023, and 2022, respectively. Greystone is not able to predict the future needs of these principal customers and will continue its efforts to growincrease sales through the addition of new customers developed through Greystone’s marketing efforts.
Cost of Sales
Cost of sales in fiscal year 2023for the nine months ended February 29, 2024, was $37,942,179, or 81% of sales, compared to $38,590,544, or 86% of sales, compared to $47,914,061, or 90% of sales, in fiscal year 2022.for the nine months ended February 28, 2023. The decrease in the ratio of cost of sales to sales in fiscal year 2023for the nine months ended February 29, 2024, from the prior period was primarily the result of declines in the cost of raw material coupled with increasesand an improvement in the average price per pallet sold. Management continues to strive for additional reductions in the cost to produce palletsproduction overhead burden due to anticipated savings from scheduled increases in the capacity for internally refining unprocessed recycled plastic. While production decreases during fiscal year 2023 adversely affected the cost to produce pallets because of Greystone’s inflexible fixed costs, management believes that increases in pallet production will assist in further decreasesan increase in production costs.of approximately 20% over the prior period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $3,918,205 in fiscal year 2023$3,863,975 for the nine months ended February 29, 2024, compared to $4,033,483 in fiscal year 2022$3,918,205 for the nine months ended February 28, 2023, for a decrease of $115,278. Legal fees decreased by approximately $501,000 from fiscal year 2022 as a result of settlement of an arbitration dispute. However, the decrease$54,230. The change in legalselling, general and administrative expenses was somewhat offset by increases in personnel costs during fiscal year 2023.nominal for the two periods.
Other Income (Expenses)
During nine months ended February 28, 2023, the Company realized:
● Federal tax credits realized in the amount of $3,270,424 from the Department of Treasury for claims filed pursuant to the Employee Retention Credits (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). ● Gain from deconsolidation of variable interest entity in the amount of $569,997 upon the deconsolidation GRE, a variable interest entity. Other income Interest expense was $982,592 for the nine months ended February 29, 2024, compared to $821,138 in Provision for Income Taxes The provision for income taxes was $1,375,000 and $452,000 for the nine months ended February 29(28), 2024 and 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 Net Income Attributable to Common Stockholders The net income attributable to common stockholders (net income less preferred dividends and GRE’s net income) for Three Months Ended February Sales Sales for Greystone’s principal customers, ranging from During fiscal year 2023, Greystone receivedDuring fiscal year 2022, a gain was recognized on the forgiveness of debt plus accrued interest in the amount of $3,068,497 from the Paycheck Protection Program loan under the CARES Act.14in fiscal yearfor the nine months ended February 29(28), 2024 and 2023, was $180,004 and $189,914, respectively. The other income for the nine months ended February 29, 2024, consisted primarily of $189,914 resultedinsurance recoveries and interest income. Other income for the nine months ended February 28, 2023, was primarily from interest income related to the payment of the ERC award. Other income in fiscal year 2022 of $35,731 was primarily from gain on sale of equipment and scrap sales.income.fiscal year 2023 compared to $631,115 in fiscal year 2022the prior period for an increase of $190,023. Increases in the$161,454. The average U.S. prime rate of interest for the nine months ended February 29, 2024, was 8.50% compared the primary cause of6.14% for the increase.prior period.$99,000 in fiscal years 2023, and 2022, respectively. The effective tax rate differs from federal statutory rates principally due to state income taxes, charges or income which have no tax benefit or expense, changes in the valuation allowance, and the basis that net income from GRE is not taxable at the corporate level because GRE is a limited liability company of which Greystone has no equity ownership.$4,881,990 in fiscal year 2023$3,006,974 for the nine months ended February 29, 2024, compared to $3,496,217 in fiscal year 2022$4,881,990 for the nine months ended February 28, 2023, primarily for the reasons discussed above.fiscal year 2023the nine months ended February 29, 2024, was $2,567,830, or $0.09 per share, compared $4,471,124, or $0.16 per share, compared $3,044,535, or $0.11 per share, in fiscal year 2022for the nine months ended February 28, 2023, primarily for the reasons discussed above.28, 202329, 2024 Compared to Three Months Ended February 28, 20222023fiscal year 2023the three months ended February 29, 2024, were $13,578,269$13,980,009 compared to $22,450,682 in fiscal year 2022$13,578,269 for a decreasethe three months ended February 28, 2023, for an increase of $8,872,413,$401,740, or 39.5%3.0%. The number of pallets soldincrease in fiscal year 2023 decreased approximately 41% from fiscal year 2022sales for the nine months ended February 29, 2024, over the prior period was primarily relateddue to sales to two principal customers. However,an approximate 2% increase in the average price per pallet sold in fiscal year 2023 increased by about 3%sold.the comparable prior period. Salestwo to these twofour customers, may vary by period and the decrease in fiscal year 2023 is not considered indicative of future sales therein.
Greystone had three customers which accounted for approximately 65%82% and 71%65% of sales in fiscal yearsfor the nine months ended February 29(28), 2024 and 2023, and 2022, respectively. Greystone is not able to predict the future needs of these principal customers and will continue its efforts to growincrease sales through the addition of new customers developed through Greystone’s marketing efforts.
Cost of Sales
Cost of sales in fiscal year 2023for the three months ended February 29, 2024, was $12,113,699, or 87% of sales, compared to $11,220,791, or 83% of sales, compared to $19,734,155, or 88% of sales, in fiscal year 2022.the prior period. The decreaseincrease in the ratio of cost of sales to sales in fiscal year 2023for the current period over the prior period was primarily the result of declinesan increase in the cost of raw material coupled with increases in the average price per pallet sold. Management continues to strive for additional reductions in the cost to produce palletsproduction overhead burden due to anticipated savings from scheduled increasesa decrease in the capacity for internally refining unprocessed recycled plastic.production of approximately 12%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $1,277,001 for the three months ended February 2, 2024, compared to $1,606,626 in fiscal year 2023 compared to $1,680,979 in fiscal year 2022the prior period for a decrease of $74,353. Legal fees decreased by approximately $297,000$329,625. The decrease resulted from fiscal year 2022 as a result ofemployee bonuses paid during the settlement of an arbitration dispute. However, the decrease in legal expenses was somewhat offset by increases in personnel costs during fiscal yearthree months ended February 28, 2023.
Other Income (Expenses)
During fiscal yearthe three months ended February 28, 2023, Greystone receivedthe Company realized Federal tax credits realized in the amount of $3,270,424 from the Department of Treasury for claims filed pursuant to the Employee Retention Credits (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act.Act”).
Other income in fiscal yearfor the three months ended February 29(28), 2024 and 2023, was $176,851 and $183,596, respectively The other income for the three months ended February 29, 2024, consisted primarily of $183,596 primarily related toinsurance recoveries and interest income. Other income received uponfor the payment of the ERC award. Oher income of $3,688 in fiscal year 2022three months ended February 28, 2023, was primarily from scrap sales.interest income.
Interest expense was $310,231 for the three months ended February 29, 2024, compared to $313,376 in fiscal year 2023 compared to $201,992 in fiscal year 2022the prior period for an increasea decrease of $111,384. Increases in the$3,145. The average U.S. prime rate of interest for the three months ended February 29, 2024, was 8.50% compared the primary cause7.23% for the prior period. The amortization of long-term debt and financing leases offset by the effect of the increase.increase in the average U.S. prime rate of interest for the comparable periods resulted in the net decrease.
Provision for Income Taxes
The provision for income taxes was $158,000 and $196,000 in the three months ended February 29(28), 2024 and $234,000 in fiscal years 2023, and 2022, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges or income which have no tax benefit or expense, changes in the valuation allowance, and the basis that the net income from GRE is not taxable at the corporate level because GRE is a limited liability company of which Greystone 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 $3,695,496 in fiscal year 2023$297,929 for the three months ended February 29, 2024, compared to $603,244 in fiscal year 2022$3,695,496 for the three months ended February 28, 2023, primarily for the reasons discussed above.
Net Income Attributable to Common Stockholders
The net income attributable to common stockholders (net income less preferred dividends and GRE’s net income) for fiscal year 2023nine months ended February 29, 2024, was $151,456, or $0.01 per share, compared $3,562,996, or $0.13 per share, compared $452,458, or $0.02 per share, in fiscal year 2022for the three months ended February 28, 2023, primarily for the reasons discussed above.
Liquidity and Capital Resources
A summary of cash flows for the nine months ended February 28, 2023,29, 2024, is as follows:
Cash provided by operating activities | $ | 406,583 | $ | 9,272,967 | ||||
Cash used in investing activities | $ | (3,203,993 | ) | $ | (2,040,776 | ) | ||
Cash provided by financing activities | $ | 530,779 | $ | (3,608,293 | ) |
The cash provided by operating activities was impacted by the utilization of approximately $5.3 million of customer deposits during the current fiscal year. The cash provided by financing operations included new term loans of approximately $8.7 million for the acquisition of equipment and approximately $1.7 in capital provided by the non-controlling interest to pay off the mortgage loan of GRE.
The contractual obligations of Greystone are as follows:
Total | Less than 1 year |
1-3 years |
4-5 years |
Thereafter | Total | Less than 1 year | 1-3 years | 4-5 years | Thereafter | |||||||||||||||||||||||||||||||
Long-term debt | $ | 14,836,974 | $ | 2,217,304 | $ | 7,615,931 | $ | 4,476,510 | $ | 527,229 | $ | 14,113,317 | $ | 2,384,993 | $ | 4,647,973 | $ | 7,080,351 | $ | - | ||||||||||||||||||||
Financing lease rents | $ | 72,436 | $ | 42,185 | $ | 30,251 | $ | - | $ | - | $ | 17,513 | $ | 15,715 | $ | 1,798 | $ | - | $ | - | ||||||||||||||||||||
Operating lease rents | $ | 8,143,459 | $ | 561,947 | $ | 1,077,612 | $ | 1,083,610 | $ | 5,420,290 | $ | 7,571,900 | $ | 534,000 | $ | 1,068,000 | $ | 1,110,370 | $ | 4,859,530 | ||||||||||||||||||||
Commitments | $ | 5,317,935 | $ | 5,317,935 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
Greystone had a working capital of $3,996,298$8,490,873 as of February 28, 2023.29, 2024. To provide for the funding to meet Greystone’sGreystone's operating activities and contractual obligations as of February 28, 2023,29, 2024, 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.
By notice dated March 27, 2023, the Department of Treasury notified Greystone of Employee Retention Credits awarded under the CARES Act in the total amount of approximately $1,641,000 due to Greystone for the quarter ended March 31, 2021. Greystone anticipates the receipt of these funds during its fiscal fourth quarter 2023 and plans to use the funds to improve its working capital, reduce debt, and cover portions of our unfinanced commitments.
As of February 28, 2023, Greystone had commitments for capital expenditures of approximately $5.3 million of which approximately $3.5 million is available under the advancing term loan with IBC, see Note 6 to the consolidated financial statements.
A substantial amount of the Greystone’s debt financing has resulted primarily from bank notes which are guaranteed by certain officers and directors of Greystone and from 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 toof the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $500,000 per year.
Off-Balance Sheet Arrangements
Forward Looking Statements
Greystone does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Material RisksEstimates
Greystone believes that the following critical policies affect Greystone’s more significant judgments and estimates used in preparation of Greystone’s financial statements.
This Quarterly Report on Form 10-Q includes certainGeneral
The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that may be deemed “forward-looking statements” withinaffect the meaningreported amounts of Section 27Aassets and liabilities and disclosure of contingent assets and liabilities at the date of the Securities Actfinancial statements and the reported amounts of 1933, as amended,revenues and Section 21Eexpenses during the reporting period. Actual results could differ from those estimates.
Recognition of Revenues
Revenue is recognized at the point in 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 Securities Exchange Actgoods is subject to approval by the customer, revenue is recognized upon approval by the customer unless, historically, there have been insignificant rejections of 1934,goods by the customer.
Accounts receivable
Trade receivables are carried at original invoice amount less an estimate made for doubtful accounts. Management determines the allowance for credit losses by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Trade receivables are written off against the allowance when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. The Company generally does not charge interest on past due accounts.
Inventory
Inventory consists of finished pallets and raw materials which are stated at the lower of average cost or net realizable value. Management applies overhead costs to inventory based on an analysis of the Company's expense categories. The specific costs are then applied to inventory based on production during the period. Management relies on estimates and assumptions regarding the specific costs to include in the production costs, as amended. These forward-lookingwell as the period to use in determining inventory production.
Income Taxes
Greystone accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are made in reliancedetermined based on the safe harbor protections provided underdifference between the Private Securities Litigation Reform Actconsolidated financial statements and tax bases of 1995. All statements, otherassets and liabilities and tax loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse.
A deferred tax asset is recognized for tax-deductible temporary differences and operating losses using the applicable enacted tax rate. In assessing the realizability of deferred tax assets, management considers the likelihood of whether it is more likely than statements of historical fact, that address activities, events or developmentsnot the net deferred tax asset will be realized. Based on this evaluation, management will provide a valuation allowance if it is determined more likely than not the associated asset will not be recognized. Based on this, management has determined 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;realize the full effect of the deferred tax assets and a valuation allowance of $793,337 and $1,044,361 has been recorded as of February 29, 2024 and May 31, 2023, respectively.
New Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material portion of Greystone’s business is and will be dependent upon a few large customers and there is no assurance thateffect on the accompanying unaudited consolidated financial statements. As new accounting pronouncements are issued, Greystone will be ableadopt those that are applicable under the circumstances.
Recent accounting pronouncements issued by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants and the SEC did not or are not believed by management to retain such customers. These risks and other risks that could affecthave a material effect on Greystone’s business are more fully described in Greystone’s Amended Form 10-K for the fiscal year ended May 31, 2022, which was filed on August 23, 2022. Actual results may vary materially from the forward-lookingunaudited consolidated financial 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’sGreystone's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the effectiveness of the design and operation of Greystone’sGreystone's disclosure controls and procedures pursuant to the Securities Exchange Act Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based on an evaluation as of May 31, 2022, Warren F. Kruger, Greystone’s Chief Executive Officer, and William W. Rahhal, Greystone’s Chief Financial Officer, identified no material weakness in Greystone’s internal control over financial reporting. As a result,February 29, 2024, Greystone’s CEO and Chief Financial OfficerCFO 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 effective as of February 28, 2023.29, 2024.
During the threenine months ended February 28, 2023,29, 2024, there were no changes in Greystone’sGreystone's internal controls over financial reporting that have materially affected, or that are reasonably likely to materially affect, Greystone’sGreystone's internal control over financial reporting.
None.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
dItem 3.Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
None.
The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS* | Inline XBRL Instance Document. | |
10. SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase. | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase. | |
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase. | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase. | |
104* | Cover Page Interactive Data File (embedded within the Inline XBRL |
* | Filed herewith. |
** | Furnished herewith. |
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 | /s/ Warren F. Kruger | |
Warren F. Kruger, President and Chief | ||
Executive Officer (Principal Executive Officer) | ||
Date: April | /s/ | |
(Principal Financial Officer and Principal Accounting Officer) |
Index to Exhibits
The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.