UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31,November 30, 2022
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 000-26331
GREYSTONE LOGISTICS, INCINC.
(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 15th Street, Tulsa, Oklahoma | 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’s classes of common stock, as of the latest practicable date: October 7, 2022 -January 13, 2023 –
GREYSTONE LOGISTICS, INC.
FORM 10-Q
For the Period Ended August 31,November 30, 2022
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Greystone Logistics, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
| August 31, 2022 | May 31, 2022 | November 30, 2022 | May 31, 2022 | |||||||||||||
| Assets | ||||||||||||||||
| Current Assets: | ||||||||||||||||
| Cash | $ | 2,934,898 | $ | 3,143,257 | $ | 1,019,246 | $ | 3,143,257 | ||||||||
| Accounts receivable - | ||||||||||||||||
| Trade | 4,730,076 | 6,001,049 | 4,386,851 | 6,001,049 | ||||||||||||
| Related parties | 213,431 | 252,112 | 212,701 | 252,112 | ||||||||||||
| Other | - | 156,162 | - | 156,162 | ||||||||||||
| Inventory | 6,336,813 | 4,112,496 | 5,107,021 | 4,112,496 | ||||||||||||
| Prepaid expenses | 71,415 | 148,078 | 171,731 | 148,078 | ||||||||||||
| Total Current Assets | 14,286,633 | 13,813,154 | 10,897,550 | 13,813,154 | ||||||||||||
| Property, Plant and Equipment, net | 29,397,701 | 31,876,765 | 28,315,962 | 31,876,765 | ||||||||||||
| Right-of-Use Operating Lease Assets | 5,520,333 | 55,535 | 5,435,198 | 55,535 | ||||||||||||
| Total Assets | $ | 49,204,667 | $ | 45,745,454 | $ | 44,648,710 | $ | 45,745,454 | ||||||||
| Liabilities and Equity | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Current portion of long-term debt | $ | 2,604,380 | $ | 4,160,403 | $ | 2,101,460 | $ | 4,160,403 | ||||||||
| Current portion of financing leases | 1,492,365 | 1,630,895 | 47,151 | 1,630,895 | ||||||||||||
| Current portion of operating leases | 244,584 | 33,881 | 244,242 | 33,881 | ||||||||||||
| Accounts payable and accrued liabilities | 8,242,556 | 7,820,837 | 5,550,436 | 7,820,837 | ||||||||||||
| Deferred revenue | 313,527 | 5,329,047 | 23,007 | 5,329,047 | ||||||||||||
| Preferred dividends payable | 109,418 | 85,377 | 119,349 | 85,377 | ||||||||||||
| Total Current Liabilities | 13,006,830 | 19,060,440 | 8,085,645 | 19,060,440 | ||||||||||||
| Long-Term Debt, net of current portion and debt issuance costs | 13,949,456 | 9,306,037 | 14,964,060 | 9,306,037 | ||||||||||||
| Financing Leases, net of current portion | 251,558 | 532,148 | 39,571 | 532,148 | ||||||||||||
| Operating Leases, net of current portion | 5,275,749 | 21,654 | 5,190,956 | 21,654 | ||||||||||||
| Deferred Tax Liability | 1,808,694 | 1,743,694 | 1,762,694 | 1,743,694 | ||||||||||||
| Equity: | ||||||||||||||||
| Preferred stock, $ par value, cumulative, shares authorized, shares issued and outstanding, liquidation preference of $5,000,000 | 5 | 5 | 5 | 5 | ||||||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding, respectively | 2,828 | 2,828 | ||||||||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding, | 2,828 | 2,828 | ||||||||||||||
| Additional paid-in capital | 53,533,272 | 53,533,272 | 53,533,272 | 53,533,272 | ||||||||||||
| Accumulated deficit | (38,623,725 | ) | (39,838,449 | ) | (38,930,321 | ) | (39,838,449 | ) | ||||||||
| Total Greystone Stockholders’ Equity | 14,912,380 | 13,697,656 | 14,605,784 | 13,697,656 | ||||||||||||
| Non-controlling interest | - | 1,383,825 | - | 1,383,825 | ||||||||||||
| Total Equity | 14,912,380 | 15,081,481 | 14,605,784 | 15,081,481 | ||||||||||||
| Total Liabilities and Equity | $ | 49,204,667 | $ | 45,745,454 | $ | 44,648,710 | $ | 45,745,454 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 1 |
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Income
For the ThreeSix Months Ended August 31,November 30,
(Unaudited)
| 2022 | 2021 | |||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Sales | $ | 18,953,599 | $ | 14,774,399 | $ | 31,055,273 | $ | 30,618,966 | ||||||||
| Cost of Sales | 16,490,453 | 13,312,305 | 27,369,753 | 28,179,906 | ||||||||||||
| Gross Profit | 2,463,146 | 1,462,094 | 3,685,520 | 2,439,060 | ||||||||||||
| Selling, General and Administrative Expenses | 1,105,591 | 1,218,604 | 2,311,579 | 2,352,504 | ||||||||||||
| Operating Income | 1,357,555 | 243,490 | 1,373,941 | 86,556 | ||||||||||||
| Other Income (Expense): | ||||||||||||||||
| Gain from forgiveness of debt | - | 3,068,497 | - | 3,068,497 | ||||||||||||
| Gain on deconsolidation of variable interest entity | 569,997 | - | 569,997 | - | ||||||||||||
| Other income | 5,635 | 26,825 | 6,318 | 32,043 | ||||||||||||
| Interest expense | (219,446 | ) | (223,354 | ) | (507,762 | ) | (429,123 | ) | ||||||||
| Income before Income Taxes | 1,713,741 | 3,115,458 | 1,442,494 | 2,757,973 | ||||||||||||
| Benefit from (Provision for) Income Taxes | (340,000 | ) | 7,000 | (256,000 | ) | 135,000 | ||||||||||
| Net Income | 1,373,741 | 3,122,458 | 1,186,494 | 2,892,973 | ||||||||||||
| Income Attributable to Non-controlling Interest | (49,599 | ) | (69,619 | ) | (49,599 | ) | (137,951 | ) | ||||||||
| Preferred Dividends | (109,418 | ) | (81,918 | ) | (228,767 | ) | (162,945 | ) | ||||||||
| Net Income Attributable to Common Stockholders | $ | 1,214,724 | $ | 2,970,921 | $ | 908,128 | $ | 2,592,077 | ||||||||
| Income Per Share of Common Stock - | ||||||||||||||||
| Basic | $ | 0.04 | $ | 0.10 | ||||||||||||
| Diluted | $ | 0.04 | $ | 0.09 | ||||||||||||
| Basic and Diluted | $ | 0.03 | $ | 0.09 | ||||||||||||
| Weighted Average Shares of Common Stock Outstanding - | ||||||||||||||||
| Basic | 28,279,701 | 28,385,114 | 28,279,701 | 28,472,676 | ||||||||||||
| Diluted | 32,106,455 | 32,214,447 | 28,773,207 | 32,301,736 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 2 |
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended November 30,
(Unaudited)
| 2022 | 2021 | |||||||
| Sales | $ | 12,101,674 | $ | 15,844,567 | ||||
| Cost of Sales | 10,879,300 | 14,867,601 | ||||||
| Gross Profit | 1,222,374 | 976,966 | ||||||
| Selling, General and Administrative Expenses | 1,205,988 | 1,133,900 | ||||||
| Operating Income (Loss) | 16,386 | (156,934 | ) | |||||
| Other Income (Expense): | ||||||||
| Other income | 683 | 5,218 | ||||||
| Interest expense | (288,316 | ) | (205,769 | ) | ||||
| Loss before Income Taxes | (271,247 | ) | (357,485 | ) | ||||
| Benefit from Income Taxes | 84,000 | 128,000 | ||||||
| Net Loss | (187,247 | ) | (229,485 | ) | ||||
| Income Attributable to Non-controlling Interest | - | (68,332 | ) | |||||
| Preferred Dividends | (119,349 | ) | (81,027 | ) | ||||
| Loss Attributable to Common Stockholders | $ | (306,596 | ) | $ | (378,844 | ) | ||
| Loss Per Share of Common Stock - | ||||||||
| Basic and Diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
| Weighted Average Shares of Common Stock Outstanding - | ||||||||
| Basic and diluted | 28,279,701 | 28,561,201 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 3 |
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Changes in Equity
For the ThreeSix Months Ended August 31,November 30, 2022 and 2021
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Greystone Stockholders’ | Non-controlling | Total | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Balances, May 31, 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 ($ per 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, May 31, 2022 | 50,000 | $ | 5 | 28,279,201 | $ | 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 ($ 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 | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 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, $ per share | - | - | - | - | - | (81,918 | ) | (81,918 | ) | - | (81,918 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 3,052,839 | 3,052,839 | 69,619 | 3,122,458 | |||||||||||||||||||||||||||
| Balances, August 31, 2021 | 50,000 | 5 | 28,561,201 | 2,856 | 53,814,744 | (40,806,006 | ) | 13,011,599 | 1,253,781 | 14,265,380 | ||||||||||||||||||||||||||
| Preferred dividends, $ per 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, 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, $ 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, $ per share | - | - | - | - | - | (119,349 | ) | (119,349 | ) | - | (119,349 | ) | ||||||||||||||||||||||||
| Preferred dividends | - | - | - | - | - | (119,349 | ) | (119,349 | ) | - | (119,349 | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (187,247 | ) | (187,247 | ) | - | (187,247 | ) | ||||||||||||||||||||||||
| 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 | |||||||||||||||||||
| Ending balance | 50,000 | $ | 5 | 28,279,701 | $ | 2,828 | $ | 53,533,272 | $ | (38,930,321 | ) | $ | 14,605,784 | $ | - | $ | 14,605,784 | |||||||||||||||||||
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended August 31,
(Unaudited)
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 1,373,741 | $ | 3,122,458 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities - | ||||||||
| Gain from forgiveness of debt | - | (3,068,497 | ) | |||||
| Gain on deconsolidation of variable interest entity | (569,997 | ) | - | |||||
| Gain on disposition of net assets | - | (22,336 | ) | |||||
| Depreciation and amortization | 1,370,771 | 1,374,324 | ||||||
| Change in deferred tax expenses | 65,000 | (7,000 | ) | |||||
| Decrease (increase) in trade accounts receivable | 1,427,135 | (578,662 | ) | |||||
| Decrease in related party receivables | 38,681 | 33,213 | ||||||
| Decrease (increase) in inventory | (2,224,317 | ) | 322,579 | |||||
| Decrease (increase) in prepaid expenses | 76,663 | (12,877 | ) | |||||
| Increase in accounts payable and accrued liabilities | 153,634 | 336,666 | ||||||
| Decrease in deferred revenue | (5,015,520 | ) | (1,124,225 | ) | ||||
| Net cash provided by (used in) operating activities | (3,304,209 | ) | 375,643 | |||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | (1,151,784 | ) | (659,279 | ) | ||||
| Deconsolidation of variable interest entity | (2,806 | ) | - | |||||
| Proceeds from sale of assets | - | 50,000 | ||||||
| Net cash used in investing activities | (1,154,590 | ) | (609,279 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from long-term debt | 7,682,425 | 837,000 | ||||||
| Principal payments on long-term debt and financing leases | (2,694,060 | ) | (1,931,045 | ) | ||||
| Principal payments on related party note payable and financing lease | (3,325,394 | ) | (138,591 | ) | ||||
| Proceeds from revolving loan | 1,075,000 | - | ||||||
| Payments for debt issuance costs | (71,154 | ) | (4,696 | ) | ||||
| Proceeds from stock options exercised | - | 24,000 | ||||||
| Dividends paid on preferred stock | (85,377 | ) | - | |||||
| Capital contribution to non-controlling interest | 1,669,000 | |||||||
| Distributions paid by non-controlling interest | - | (52,200 | ) | |||||
| Net cash provided by (used in) financing activities | 4,250,440 | (1,265,532 | ) | |||||
| Net Decrease in Cash | (208,359 | ) | (1,499,168 | ) | ||||
| Cash, beginning of period | 3,143,257 | 4,387,533 | ||||||
| Cash, end of period | $ | 2,934,898 | $ | 2,888,365 | ||||
| Non-cash Activities: | ||||||||
| Deconsolidation of net assets of variable interest entity | $ | 3,102,424 | $ | - | ||||
| Refinancing of certain term loans | $ | 2,669,892 | $ | - | ||||
| Capital expenditures in accounts payable | $ | 394,213 | $ | 410,921 | ||||
| Preferred dividend accrual | $ | 109,418 | $ | 81,918 | ||||
| Supplemental information: | ||||||||
| Interest paid | $ | 218,693 | $ | 221,551 | ||||
| Taxes paid | $ | - | $ | 80,000 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended November 30,
(Unaudited)
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 1,186,494 | $ | 2,892,973 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities - | ||||||||
| Gain on forgiveness of debt | - | (3,068,497 | ) | |||||
| Gain on deconsolidation of variable interest entity | (569,997 | ) | - | |||||
| Gain on sale of assets | - | (22,336 | ) | |||||
| Depreciation and amortization | 2,722,174 | 2,784,864 | ||||||
| Deferred tax expense (benefit) | 19,000 | (135,000 | ) | |||||
| Decrease (increase) in trade accounts receivable | 1,770,360 | (147,493 | ) | |||||
| Decrease in related party receivables | 39,411 | 51,336 | ||||||
| Increase in inventory | (994,525 | ) | (937,363 | ) | ||||
| Increase in prepaid expenses | (23,653 | ) | (249,359 | ) | ||||
| Increase (decrease) in accounts payable and accrued liabilities | (2,153,136 | ) | 757,788 | |||||
| Increase (decrease) in deferred revenue | (5,306,040 | ) | 10,551,925 | |||||
| Net cash provided by (used in) operating activities | (3,309,912 | ) | 12,478,838 | |||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property, plant and equipment | (1,805,395 | ) | (1,538,664 | ) | ||||
| Deconsolidation of variable interest entity | (2,806 | ) | - | |||||
| Proceeds from sale of assets | - | 50,000 | ||||||
| Net cash used in investing activities | (1,808,201 | ) | (1,488,664 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from long-term debt | 8,707,426 | 837,000 | ||||||
| Payments on long-term debt and financing leases | (4,823,623 | ) | (3,146,683 | ) | ||||
| Payments on related party note payable and financing lease | (3,340,533 | ) | (277,777 | ) | ||||
| Proceeds from revolving loan | 1,090,648 | 1,400,000 | ||||||
| Payments on revolving loan | (42,867 | ) | - | |||||
| Proceeds from stock options exercised | - | 24,000 | ||||||
| Payments for debt issuance costs | (71,154 | ) | (4,752 | ) | ||||
| Dividends paid on preferred stock | (194,795 | ) | (162,945 | ) | ||||
| Capital contribution to non-controlling interest | 1,669,000 | - | ||||||
| Distributions paid by non-controlling interest | - | (52,200 | ) | |||||
| Net cash provided by (used in) financing activities | 2,994,102 | (1,383,357 | ) | |||||
| Net Increase (Decrease) in Cash | (2,124,011 | ) | 9,606,817 | |||||
| Cash, beginning of period | 3,143,257 | 4,387,533 | ||||||
| Cash, end of period | $ | 1,019,246 | $ | 13,994,350 | ||||
| Non-cash Activities: | ||||||||
| Refinancing of certain term loans | $ | 2,669,892 | $ | - | ||||
| Deconsolidation of net assets of variable interest entity | $ | 3,102,424 | $ | - | ||||
| Acquisition of equipment through financing lease | $ | - | $ | 24,441 | ||||
| Capital expenditures in accounts payable | $ | 8,863 | $ | 124,331 | ||||
| Preferred dividend accrual | $ | 119,349 | $ | - | ||||
| Supplemental information: | ||||||||
| Interest paid | $ | 505,723 | $ | 425,338 | ||||
| Income taxes paid | $ | 160,000 | $ | 255,000 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
Greystone Logistics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Financial Statements
In the opinion of Greystone Logistics, Inc. (“Greystone”), the accompanying unaudited consolidated financial statements contain all adjustments and reclassifications, which are of a normal recurring nature, necessary to present fairly its financial position as of August 31,November 30, 2022, and the results of its operations for the six months and three months ended November 30, 2022 and 2021 and its changes in equity and cash flows for the threesix months ended August 31,November 30, 2022 and 2021. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended May 31, 2022 and the notes thereto included in the Form 10-K/A10-K for such period. The results of operations for the six months and three months ended August 31,November 30, 2022 and 2021 are not necessarily indicative of the results to be expected for the full fiscal year.
The consolidated financial statements of Greystone include its wholly ownedwholly-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 the manufacturing facilities which are occupied by Greystone and is wholly ownedwholly-owned by a member of Greystone’s Board of Directors.Directors, owns two primary manufacturing facilities which are occupied by Greystone. Effective July 29, 2022, GRE paid off its mortgage note payable and, in conjunction with the Company’sGreystone’s refinancing described in Note 6, GRE was removed from the cross-collateralization agreement.in the loan agreement between Greystone and International Bank of Commerce. Following these transactions, Greystone was no longer determined to be the primary beneficiary of GRE. Accordingly, GRE was deconsolidated from the GreystoneGreystone’s consolidated financial statements as of July 29, 2022, resulting in the recognition of a gain in the amount of $569,997. Subsequent to the deconsolidation, the CompanyGreystone entered into a new lease agreement with the related party and recorded right of use assets and liabilities for the new lease, see Note 7.
Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income (loss) 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.
Schedule of Anti-dilutive Earnings Per Share
| 2022 | 2021 | |||||||
| For the six months ended November 30: | ||||||||
| Preferred stock convertible into common stock | 3,333,333 | - | ||||||
| For the three months ended November 30: | ||||||||
| Preferred stock convertible into common stock | 3,333,333 | 3,333,333 | ||||||
| Warrants exercisable into common stock | 500,000 | 500,000 | ||||||
| Total | 3,833,333 | 3,833,333 | ||||||
.
Schedule of Basic and Diluted Earnings Per Share
| 2022 | 2021 | |||||||
| Basic earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 1,214,724 | $ | 2,970,921 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,279,701 | 28,385,114 | ||||||
| Income per share of common stock - basic | $ | 0.04 | $ | 0.10 | ||||
| Diluted earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 1,214,724 | $ | 2,970,921 | ||||
| Add: Preferred stock dividends for assumed conversion | 109,418 | 81,918 | ||||||
| Net income allocated to common stockholders | $ | 1,324,142 | $ | 3,052,839 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,279,701 | 28,385,114 | ||||||
| Incremental shares from assumed conversion of options, warrants and preferred stock, as appropriate | 3,826,754 | 3,829,333 | ||||||
| Weighted average common stock outstanding - diluted | 32,106,455 | 32,214,447 | ||||||
| Income per share of common stock - diluted | $ | 0.04 | $ | 0.09 | ||||
For the six months ended November 30, 2022 and 2021:
| 2022 | 2021 | |||||||
| Basic earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 908,128 | $ | 2,592,077 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,279,701 | 28,472,676 | ||||||
| Income per share of common stock - basic | $ | 0.03 | $ | 0.09 | ||||
| Diluted earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net income attributable to common stockholders | $ | 908,128 | $ | 2,592,077 | ||||
| Add: Preferred stock dividends for assumed conversion | - | 162,945 | ||||||
| Net income allocated to common stockholders | $ | 908,128 | $ | 2,755,022 | ||||
| Denominator - | ||||||||
| Weighted-average shares outstanding – basic | 28,279,701 | 28,472,676 | ||||||
| Incremental shares from assumed conversion of warrants and preferred stock, as appropriate | 493,506 | 3,829,060 | ||||||
| Weighted average common stock outstanding – diluted | 28,773,207 | 32,301,736 | ||||||
| Income per share of common stock – diluted | $ | 0.03 | $ | 0.09 | ||||
For the three months ended November 30, 2022 and 2021:
| 2022 | 2021 | |||||||
| Basic earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net loss attributable to common stockholders | $ | (306,596 | ) | $ | (378,844 | ) | ||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,279,701 | 28,561,201 | ||||||
| Loss per share of common stock - basic | $ | (0.01 | ) | $ | (0.01 | ) | ||
| Diluted earnings per share of common stock: | ||||||||
| Numerator - | ||||||||
| Net loss attributable to common stockholders | $ | (306,596 | ) | $ | (378,844 | ) | ||
| Denominator - | ||||||||
| Weighted-average shares outstanding - basic | 28,279,701 | 28,561,201 | ||||||
| Incremental shares from assumed conversion of warrants and preferred stock, as appropriate | - | - | ||||||
| Weighted average common stock outstanding – diluted | 28,279,701 | 28,561,201 | ||||||
| Loss per share of common stock - diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
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Note 3. Inventory
Inventory consists of the following:
Schedule of Inventory
| August 31, | May 31, | November 30, | May 31, | |||||||||||||
| 2022 | 2022 | 2022 | 2022 | |||||||||||||
| Raw materials | $ | 2,819,372 | $ | 2,091,550 | $ | 2,170,635 | $ | 2,091,551 | ||||||||
| Finished goods | 3,517,441 | 2,020,946 | 2,936,386 | 2,020,945 | ||||||||||||
| Total inventory | $ | 6,336,813 | $ | 4,112,496 | $ | 5,107,021 | $ | 4,112,496 | ||||||||
Note 4. Property, Plant and Equipment
A summary of property, plant and equipment for Greystone is as follows:
Schedule of Property, Plant and Equipment
| August 31, 2022 | May 31, 2022 | |||||||
| Production machinery and equipment | $ | 58,754,890 | $ | 57,341,906 | ||||
| Plant buildings and land | 2,364,089 | 7,020,543 | ||||||
| Leasehold improvements | 1,487,398 | 1,487,398 | ||||||
| Furniture and fixtures | 542,057 | 542,057 | ||||||
| Property plant and equipment gross | 63,148,434 | 66,391,904 | ||||||
| Less: Accumulated depreciation and amortization | (33,750,733 | ) | (34,515,139 | ) | ||||
| Net Property, Plant and Equipment | $ | 29,397,701 | $ | 31,876,765 | ||||
November 30, 2022 | May 31, 2022 | |||||||
| Production machinery and equipment | $ | 58,957,411 | $ | 57,341,906 | ||||
| Plant buildings and land | 2,364,089 | 7,020,543 | ||||||
| Leasehold improvements | 1,553,138 | 1,487,398 | ||||||
| Furniture and fixtures | 542,057 | 542,057 | ||||||
| Property plant and equipment gross | 63,416,695 | 66,391,904 | ||||||
| Less: Accumulated depreciation and amortization | (35,100,733 | ) | (34,515,139 | ) | ||||
| Net Property, Plant and Equipment | $ | 28,315,962 | $ | 31,876,765 | ||||
Production machinery includes deposits on equipment in the amount of $3,199,9962,374,216 as of August 31,November 30, 2022, 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 expense, including amortization expense related to financing leases, for the threesix months ended August 31,November 30, 2022 and 2021 was $1,369,3122,719,312 and $1,373,0892,782,057, respectively.
Note 5. Related Party Transactions/Activity
Yorktown Management & Financial Services, LLC
Yorktown Management & Financial Services, LLC (“Yorktown”), an entity wholly-owned by Greystone’s CEOPresident and President,CEO, owns and rents to Greystone (1) grinding equipment used to grind raw materials for Greystone’s pallet production and (2) extruders for pelletizing recycled plastic into pellets for resale and for use as raw material in the manufacture of pallets. GSM pays weekly rental fees to Yorktown of $27,500 for use of Yorktown’s grinding equipment and pelletizing equipment. Rental fees, which are reflected as short term lease expense in Note 7, were $357,500715,000 for the each of the threesix months ended August 31,November 30, 2022 and 2021.
Effective January 1, 2017, Greystone and Yorktown entered into a five-year lease for office space at a monthly rental of $4,000 per month with a one-year extension at $5,200 per month which extension was executed by Greystone. Total rent expense was $15,60031,200 and $12,00024,000 for the threesix months ended August 31,November 30, 2022 and 2021, respectively.
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TriEnda Holdings, L.L.C.
TriEnda Holdings, L.L.C. (“TriEnda”) is a manufacturer of plastic pallets, protective packagingpacking and dunnage utilizing thermoform processing for which Warren F. Kruger, Greystone’s President and CEO, serves TriEnda as the non-executive Chairman of the Board and is a partner in a partnership which has a majority ownership interest in TriEnda. Greystone may purchase pallets from TriEnda for resale or sell Greystone pallets to TriEnda. During the threesix months ended August 31,November 30, 2022 and 2021, Greystone purchases from TriEnda totaled $-$0431- and $27,1044,222, respectively, and sales to TriEnda totaled $5,68925,039 and $30,63052,129, respectively. As of August 31,November 30, 2022, TriEnda owed $157,841177,191 to Greystone.Greystone while Greystone owed $431 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 President and CEO. Greystone had sales to Green of $180,540438,420 and $160,650300,390 for the threesix months ended August 31,November 30, 2022 and 2021, respectively. The account receivable due from Green as of August 31,November 30, 2022 was $55,59035,510.
Note 6. Long-term Debt
Debt as of August 31,November 30, 2022 and May 31, 2022 is as follows:
Schedule of Long-Term Debt
| August 31, | May 31, | November 30, | May 31, | |||||||||||||
| 2022 | 2022 | 2022 | 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 | $ | 7,496,498 | $ | - | ||||||||||||
| 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 | $ | 7,762,822 | $ | - | $ | 7,496,498 | $ | - | ||||||||
| 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 | 2,406,700 | - | 3,306,211 | - | ||||||||||||
| Term loans payable to International Bank of Commerce, prime rate of interest plus 0.5% with interest floors between 4.0% and 5.25%, maturing between February 28, 2023 and April 30, 2024. These loans were refinanced by the IBC Restated Loan Agreement dated July 29, 2022, and rolled into Term Loan A above. | - | 2,870,169 | ||||||||||||||
| 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 4.50%, due July 29, 2024 | 4,775,000 | 3,700,000 | ||||||||||||||
| 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 | 4,747,781 | 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 | - | 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 | 813,836 | 888,642 | 738,515 | 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 | 792,950 | 803,941 | 782,021 | 803,941 | ||||||||||||
| Note payable to Robert Rosene, 7.5% interest, paid off August 3, 2022 | - | 3,295,704 | - | 3,295,704 | ||||||||||||
| Other | 101,974 | 111,374 | 92,537 | 111,374 | ||||||||||||
| Total long-term debt | 16,653,282 | 13,496,191 | 17,163,563 | 13,496,191 | ||||||||||||
| Debt issuance costs, net of amortization | (99,446 | ) | (29,751 | ) | (98,043 | ) | (29,751 | ) | ||||||||
| Total debt, net of debt issuance costs | 16,553,836 | 13,466,440 | 17,065,520 | 13,466,440 | ||||||||||||
| Less: Current portion of long-term debt | (2,604,380 | ) | (4,160,403 | ) | (2,101,460 | ) | (4,160,403 | ) | ||||||||
| Long-term debt, net of current portion | $ | 13,949,456 | $ | 9,306,037 | $ | 14,964,060 | $ | 9,306,037 | ||||||||
The prime rate of interest as of August 31,November 30, 2022 was 5.507.00%. Effective September 22,December 14, 2022, the prime rate of interest increased to 6.257.50%.
Debt Issuance Costsissuance costs consists of the amounts paid to third parties in connection with the issuance and modification of debt instruments. These costs are shown on the consolidated balance sheet as a direct reduction to the related debt instrument. Amortization of these costs is included in interest expense. Greystone recorded amortization of debt issuance costs of $1,4592,862 and $1,2912,808 for the threesix months ended August 31,November 30, 2022 and 2021, respectively.
Restated and Amended Loan Agreement between Greystone and IBC
On July 29, 2022, Greystone and GSM (collectively “Borrowers”) and IBC entered into an Amended and Restated Loan Agreement (“IBC Restated Loan Agreement”) that provides for 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, the aggregate payments for the IBC term loans are approximately $251,000231,000 per month.
The IBC Restated Loan Agreement provides for IBC to make 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 credit in the amount of $3,271,987 to pay off a note payable to Robert B. Rosene, Jr. and extend additional credit to fund 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 to an aggregate principal amount of $6,000,000 (the “Revolving Loan”), subject to borrowing base limitations. As of August 31,November 30, 2022, Greystone’s available revolving loan borrowing capacity was approximately $1,225,0001,252,000.
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. 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, President and CEO, and Robert B. Rosene, Jr. have provided limited guaranties of the Borrowers’ obligations under the IBC Restated Loan Agreement. Mr. Kruger’s guarantee is limited to 32.4% of all debt obligations to IBC. Mr. Rosene’s limited guaranty is the lesser of (i) $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 events of default, including events of default relating to non-payment of principal and other amounts owing under the FIB Loan Agreement from time to time, inaccuracy of representations, violation of covenants, defaults under other agreements, bankruptcy and similar events, certain material adverse changes relating to a Borrower, certain judgments or awards against a Borrower, or guarantor’s ability to perform under the 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.
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 August 31,November 30, 2022, are $2,604,3802,101,460, $7,531,4176,968,620, $1,611,6352,147,857, $1,369,7951,851,171 and $2,982,4023,553,879 with $553,653540,576 due thereafter.
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Note 7. Leases
Financing Leases
Financing leases as of August 31,November 30, 2022 and May 31, 2022:
Schedule of Financing Lease
| August 31, 2022 | May 31, 2022 | November 30, 2022 | May 31, 2022 | |||||||||||||
| Non-cancellable financing leases | $ | 1,743,923 | $ | 2,163,043 | $ | 86,722 | $ | 2,163,043 | ||||||||
| Less: Current portion | (1,492,365 | ) | (1,630,895 | ) | (47,151 | ) | (1,630,895 | ) | ||||||||
| Non-cancellable financing leases, net of current portion | $ | 251,558 | $ | 532,148 | $ | 39,571 | $ | 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 a capitalizedan effective interest rate of 7.4%. Each ofEffective October 17, 2022, Greystone and the lease agreements include a bargain purchase optionprivate company entered into an agreement for Greystone to pay off the leases and acquire the production equipment at the endunamortized principal balance of the lease term. The leased equipment is principally used to produce pallets for the private company. Lease payments are made asleases or a credit on the sales invoice at the ratetotal of $3.32 for each pallet produced and shipped from the respective leased equipment. The estimated aggregate monthly rental payments are approximately $155,0001,527,293. The rent payments can vary each month depending on the quantity of pallets produced from each machine. The lease agreements provide for minimum monthly lease rental payments based upon the total pallets sold over a specified amount not to exceed the monthly productive capacity of the leased machines.
Effective December 28, 2018, Yorktown purchased certain production equipment from Greystone at net book value of $968,168 and entered into a lease agreement with Greystone for the equipment with a monthly rent of $27,915 for the initial thirty-six months and $7,695 for the following twelve months and maturing December 27, 2022. The lease agreement has a $10,000 purchase option at the end of the lease.lease which was exercised and paid on December 29, 2022.
The production equipment under the remaining non-cancelable financing leases as of August 31,November 30, 2022, and May 31, 2022 washas a gross carrying amount of $1,144,733 as follows:
Schedule of Non Cancelable Financing Lease
| August 31, 2022 | May 31, 2022 | |||||||
| Production equipment under financing leases | $ | 8,497,798 | $ | 8,497,798 | ||||
| Less: Accumulated amortization | (3,700,137 | ) | (3,481,223 | ) | ||||
| Production equipment under financing leases, net | $ | 4,797,661 | $ | 5,016,575 | ||||
November 30, 2022. Amortization of the carrying amount of $218,914180,240 and $252,967505,935 was included in depreciation and amortization expense for the threesix months ended August 31,November 30, 2022 and 2021, 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 month term and a forty-eight month month term and a discount rate of 5.40% and (ii) office spacetwo buildings, discussed in the following paragraph, on a sixty monthten year lease with a termfive year renewal option and a discount rate of 5.06.0%. All of theseThe leases are single termsingle-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 properties in the amount of $5,516,006, using a term of one hundred eighty (180(180)) months and a discount rate of 6.00%.
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Lease Summary Information
For the six-month periods ending August 31:November 30, 2022 and 2021:
Summary of Lease Activity
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Lease Expense | ||||||||||||||||
| Financing lease expense - | ||||||||||||||||
| Amortization of right-of-use assets | $ | 218,914 | $ | 252,967 | $ | 180,240 | $ | 505,935 | ||||||||
| Interest on lease liabilities | 19,509 | 44,966 | 25,261 | 99,412 | ||||||||||||
| Operating lease expense | 52,970 | 20,470 | 190,343 | 40,941 | ||||||||||||
| Short-term lease expense | 395,810 | 364,285 | 783,360 | 1,016,148 | ||||||||||||
| Total | $ | 687,203 | $ | 682,688 | $ | 1,179,204 | $ | 1,662,436 | ||||||||
| Other Information | ||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities for finance leases - | ||||||||||||||||
| Operating cash flows | $ | 19,509 | $ | 44,966 | $ | 25,261 | $ | 99,412 | ||||||||
| Financing cash flows | $ | 419,120 | $ | 389,204 | $ | 549,029 | $ | 832,239 | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities for operating leases - | ||||||||||||||||
| Operating cash flows | $ | 52,970 | $ | 20,470 | $ | 190,343 | $ | 40,941 | ||||||||
| Weighted-average remaining lease term (in years) - | ||||||||||||||||
| Financing leases | 1.1 | 2.0 | 1.9 | 1.9 | ||||||||||||
| Operating leases | 14.8 | 2.0 | 14.6 | 2.0 | ||||||||||||
| Weighted-average discount rate - | ||||||||||||||||
| Financing leases | 7.3 | % | 7.4 | % | 4.7 | % | 7.3 | % | ||||||||
| Operating leases | 6.0 | % | 5.3 | % | 6.0 | % | 5.4 | % | ||||||||
Future minimum lease payments under non-cancelable leases as of August 31,November 30, 2022, are approximately:
Schedule of Future Minimum Lease Payments
| Financing Leases | Operating Leases | |||||||
| Twelve months ended August 31, 2023 | $ | 1,586,050 | $ | 568,915 | ||||
| Twelve months ended August 31, 2024 | 239,373 | 550,160 | ||||||
| Twelve months ended August 31, 2025 | 13,953 | 534,000 | ||||||
| Twelve months ended August 31, 2026 | 3,007 | 534,000 | ||||||
| Twelve months ended August 31, 2027 | - | 536,230 | ||||||
| Thereafter | - | 5,700,670 | ||||||
| Total future minimum lease payments | 1,842,383 | 8,423,975 | ||||||
| Present value discount | 68,770 | 2,903,642 | ||||||
| Present value of minimum lease payments | $ | 1,743,923 | $ | 5,520,333 | ||||
Financing Leases | Operating Leases | |||||||
| Twelve months ended November 30, 2023 | $ | 49,880 | $ | 564,816 | ||||
| Twelve months ended November 30, 2024 | 29,720 | 546,792 | ||||||
| Twelve months ended November 30, 2025 | 9,598 | 534,000 | ||||||
| Twelve months ended November 30, 2026 | 1,503 | 534,000 | ||||||
| Twelve months ended November 30, 2027 | - | 542,920 | ||||||
| Thereafter | - | 5,560,480 | ||||||
| Total future minimum lease payments | 90,701 | 8,283,008 | ||||||
| Present value discount | 3,979 | 2,847,810 | ||||||
| Present value of minimum lease payments | $ | 86,722 | $ | 5,435,198 | ||||
Note 8. Deferred Revenue
Advances from customersa customer pursuant to a contract for the sale of plastic pallets is recognized as deferred revenue. Revenue is recognized by Greystone as pallets are shipped to the customer which totaled $5,015,5205,306,040 and $1,184,7253,008,575 during the threesix months ended August 31,November 30, 2022 and 2021, respectively. Customer advances received during the threesix months ended August 31,November 30, 2022 and 2021 totaledwere $-0- and $60,50013,560,500, respectively. The unrecognized balance of deferred revenue as of August 31,November 30, 2022 and May 31, 2022, was $313,52723,007 and $5,329,047, respectively.
Note 9. Revenue and Revenue Recognition
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 $125,0001.0% and $184,0001.6% of sales during the threesix months ended August 31,November 30, 2022 and 2021, respectively.
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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 threesix months ended August 31,November 30, 2022 and 2021, respectively, were as follows:
Schedule of Sale of Revenues for Customer Categories
| Category | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| End user customers | 77 | % | 71 | % | ||||||||||||
| End User Customers | 73 | % | 74 | % | ||||||||||||
| Distributors | 23 | % | 29 | % | 27 | % | 26 | % | ||||||||
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 approximate 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
Greystone derived approximately 7773% and 7174% of its total sales from three customers during the threesix months ended August 31,November 30, 2022 and 2021, 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 $226,232313,050 and $158,365524,321 during the three months ended August 31,in fiscal years 2022 and 2021, respectively, iswere from one of its major 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
As of August 31,November 30, 2022, Greystone had commitments totaling $5,053,3905,065,888 toward the purchase of production equipment.
Note 13. Subsequent Events
By notices dated January 9, 2023, the Department of Treasury notified Greystone of Employee Retention Credits awarded under the CARES Act in the total amount of approximately $3,270,000 due to Greystone for the quarters ended June 30, 2021 and September 30, 2021. Greystone will record these credits in January 2023, which is the point in which the uncertainty surrounding them is resolved and they become realizable.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
General to All Periods
The unaudited consolidated statements include Greystone Logistics, Inc., and its two wholly ownedwholly-owned subsidiaries, Greystone Manufacturing, L.L.C. (“GSM”) and Plastic Pallet Production, Inc. (“PPP”). Greystone also consolidates the variable interest entity, Greystone Real Estate, L.L.C. (“GRE”) for the period from June 1, 2022 through July 29, 2022. Effective July 29, 2022, the relationship of Greystone as a beneficiary of GRE ceased to exist. All material intercompany accounts and transactions have been eliminated.
References to fiscal year 2023 refer to the six months and three months ended August 31,November 30, 2022. References to fiscal year 2022 refer to the six months and three months ended August 31,November 30, 2021.
Sales
Greystone’s primary focus is to provide quality plastic pallets to its existing customers while continuing its marketing efforts to broaden its customer base. Greystone’s existing customers are primarily located in the United States and engaged in the beverage, pharmaceutical and other industries. Greystone has generated, and plans to continue to generate, interest in its pallets by attending trade shows sponsored by industry segments that would benefit from Greystone’s products. Greystone hopes to gain wider product acceptance by marketing the concept that the widespread use of plastic pallets could greatly reduce the destruction of trees on a worldwide basis. Greystone’s marketing is conducted through contract distributors, its President and other employees.
Personnel
Greystone had full-time equivalentsfull-time-equivalents of approximately 202195 and 264 regularfull-time employees and 6440 and 1973 temporary employees as of August 31,November 30, 2022 and 2021, respectively. Full-time equivalent is a measure based on time worked.
ThreeSix Months Ended August 31,November 30, 2022 Compared to ThreeSix Months Ended August 31,November 30, 2021
Sales
Sales for fiscal year 2023 were $18,953,599$31,055,273 compared to $14,774,399$30,618,966 in fiscal year 20212022 for an increase of $4,179,200,$436,307, or 28%1.4%. IncreasesWhile the quantity of pallets sold in pallet pricing accounted forfiscal year 2023 decreased by approximately 13% and anfrom the prior period, the average price of pallets sold increased by approximately 15%. The increase in the typesaverage price of pallets sold toward higher-end units accounted for approximately 15%.during the current period is the result of product mix and price increases.
Greystone had three customers thatwhich accounted for approximately 77%73% and 71%74% of sales in fiscal years 2023 and 2022, respectively. Greystone is not able to predict the future needs of these major customers and will continue its efforts to grow sales through the addition of new customers developed through Greystone’s marketing efforts.
Cost of Sales
Cost of sales in fiscal year 2023 was $16,490,453,$27,369,753, or 87%88% of sales, compared to $13,312,305,$28,179,906, or 90%92% of sales, in fiscal year 2022. The decrease in cost of sales to sales in fiscal year 2023 from the prior period was primarily the result of improvements in productivity. Management anticipates further improvements inselling price increases as noted under Sales and the ratiocost control measures implemented by Greystone to offset the impact of lower pallet production. Greystone’s inflexible costs of production are a significant factor impacting the profit margins realized from the sale of product. While cost of sales to sales asshowed improvements over the cost of raw materials are expected to show declines inprior period, Greystone anticipates continued improvements during the remainder of fiscalthe current year 2023.as increases are anticipated in pallet production.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were $1,105,591,$2,311,579, or 5.8%7.4% of sales, in fiscal year 2023 compared to $1,218,604,$2,352,504, or 8.2%7.7% of sales, in fiscal year 2022 for a decrease of $113,013. The decrease in fiscal year 2023 from fiscal year 2022 was principally attributable to a reduction of legal fees in$(40,925). SG&A during the current year.period compared to the prior period shows general consistency.
Other Income (Expenses)
During fiscal year 2023, Greystone recognized a gain on the deconsolidation of the variable interest entity GRE in the amount of $569,997. During fiscal year 2022, a gain was recognized on the forgiveness of debt plus accrued interest in the amount of $3,068,497 for the Paycheck Protection Program loan under the Coronavirus Aid, Relief, and Economic Security Act.
Other income was $6,318 in fiscal year 2023 and $32,043 in fiscal year 2022 from the sale of scrap material was $5,635and a gain on the sale of assets in fiscal year 2023 compared to $26,825 in fiscal year 2022.the prior period.
Interest expense was $219,446$507,762 in fiscal year 2023 compared to $223,354$429,123 in fiscal year 2022 for a decreasean increase of $3,908.$78,639. The increase is attributable to increases in the prime rate of interest which was 7.00% as of November 30, 2022 compared to 3.25% as November 30, 2021.
Provision for (Benefit from) Income Taxes
The provision for (benefit from) income taxes was $340,000$256,000 and $(7,000)$(135,000) 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.
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 $1,186,494 in fiscal year 2023 compared to $2,892,973 in fiscal year 2022 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 2023 was $908,128, or $0.03 per share, compared $2,592,077, or $0.09 per share, in fiscal year 2022 primarily for the reasons discussed above.
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Three Months Ended November 30, 2022 Compared to Three Months Ended November 30, 2021
Sales
Sales for fiscal year 2023 were $12,101,674 compared to $15,844,567 in fiscal year 2022 for a decrease of $(3,742,893). This decrease in sales from fiscal year 2022 was principally the result of a decrease of approximately 27% in the quantity of pallets sold offset somewhat by an increase of approximately 5% in the average price per pallet sold.
Greystone had three customers which accounted for approximately 66% and 78% of sales in fiscal years 2023 and 2022, respectively. Greystone is not able to predict the future needs of these major customers and will continue its efforts to grow sales through the addition of new customers developed through Greystone’s marketing efforts.
Cost of Sales
Cost of sales in fiscal year 2023 was $10,879,300, or 90% of sales, compared to $14,867,601, or 94% of sales, in fiscal year 2022. The decrease in cost of sales to sales in fiscal year 2023 from the prior period was primarily the result of selling price increases as noted under Sales and cost control measures implemented by Greystone to offset the impact of lower pallet production during the current period. Greystone’s inflexible costs of production are a significant factor impacting the profit margins realized from the sale of product. While cost of sales to sales showed improvements over the prior period, Greystone anticipates continued improvements during the remainder of the current year as increases are anticipated in pallet production.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were $1,205,988, or 10.0% of sales, in fiscal year 2023 compared to $1,133,900, or 7.2% of sales, in fiscal year 2022 for an increase of $72,088. SG&A costs during the current period compared to the prior period showed general consistency. The increase in the percent of SG&A to sales results from the decline of sales in the current period.
Other Income (Expenses)
Other income from sales of scrap material was $683 in fiscal year 2023 compared to $5,218 in fiscal year 2022.
Interest expense was $288,316 in fiscal year 2023 compared to $205,769 in fiscal year 2022 for an increase of $82,547. The increase is attributable to increases in the prime rate of interest which was 7.00% as of November 30, 2022 compared to 3.25% as November 30, 2021.
Provision for Income Taxes
The benefit from income taxes was $84,000 and $128,000 in fiscal years 2023 and 2022, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges (income)or income which have no tax benefit (expense),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.
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Net IncomeLoss
Greystone recorded net incomelosses of $1,373,741$(187,247) in fiscal year 2023 compared to $3,122,458$(229,485) in fiscal year 2022 primarily for the reasons discussed above.
Net IncomeLoss Attributable to Common Stockholders
The net incomeloss attributable to common stockholders (net loss less preferred dividends and GRE’s net income) for fiscal year 2023 was $1,214,724,$(306,596), or $0.04$(0.01) per share, compared $2,970,921,$(378,844), or $0.10$(0.01) per share, in fiscal year 2022 primarily for the reasons discussed above.
Liquidity and Capital Resources
A summary of cash flows for the threesix months ended August 31,November 30, 2022 is as follows:
| Cash used in operating activities | $ | (3,304,209 | ) | $ | (3,309,912 | ) | ||
| Cash used in investing activities | $ | (1,154,590 | ) | $ | (1,808,201 | ) | ||
| Cash provided by financing activities | $ | 4,250,440 | $ | 2,994,102 | ||||
Cash used in operating activities resulted primarily from providing goods totaling approximately $5,000 000 to the customer against the customer’s deposit. Cash provided by financing activities resulted primarily from cash proceeds from loans payable to IBC used in part to payoff Greystone’s note payable of approximately $3,200,000 to a director and a capital contribution to the variable interest entity GRE by its sole member to pay off its mortgage note of approximately $1,800,000 to IBC.
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 | $ | 16,653,282 | $ | 2,604,380 | $ | 9,143,052 | $ | 4,352,197 | $ | 553,653 | $ | 17,163,563 | $ | 2,101,460 | $ | 9,116,477 | $ | 5,405,050 | $ | 540,576 | ||||||||||||||||||||
| Financing leases | $ | 1,842,383 | $ | 1,586,050 | $ | 253,326 | $ | 3,007 | $ | - | ||||||||||||||||||||||||||||||
| Operating leases | $ | 8,423,975 | $ | 568,915 | $ | 1,084,160 | $ | 1,070,230 | $ | 5,700,670 | ||||||||||||||||||||||||||||||
| Financing lease rents | $ | 90,701 | $ | 49,880 | $ | 39,318 | $ | 1,503 | $ | - | ||||||||||||||||||||||||||||||
| Operating lease rents | $ | 8,283,008 | $ | 564,816 | $ | 1,080,792 | $ | 1,076,920 | $ | 5,560,480 | ||||||||||||||||||||||||||||||
| Commitments | $ | 5,053,390 | $ | 5,053,390 | $ | - | $ | - | $ | - | $ | 5,065,888 | $ | 5,065,888 | $ | - | $ | - | $ | - | ||||||||||||||||||||
Greystone had a working capital of $1,279,803$2,811,905 as of August 31,November 30, 2022. To provide for the funding to meet Greystone’s operating activities and contractual obligations as of August 31,November 30, 2022, Greystone will have to continue to produce positive operating results or explore various options including additional long-term debt and equity financing. However, there is no guarantee that Greystone will continue to create positive operating results or be able to raise sufficient capital to meet these obligations.
By notice dated January 9, 2023, the Department of Treasury notified Greystone of Employee Retention Credits awarded under the CARES Act in the total amount of approximately $3,270,000 due to Greystone for the quarters ended June 30, 2021 and September 30, 2021. Greystone anticipates the receipt of these funds during its fiscal third quarter 2023, and plans to use the funds to improve its working capital, reduce debt, and cover portions of our unfinanced commitments.
As of August 31,November 30, 2022, Greystone had commitments for capital expenditures of approximately $5.0 million of which $4.6$3.5 million wasis available under the advancing term loan with IBC, see Note 6 to the consolidated financial statements.
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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. From time to time,Greystone and from loans have been provided by certain officers and directors of Greystone of which there are none outstanding as of August 31, 2022.Greystone. Greystone continues to be dependent upon its officers and directors to secure, provide and/or possibly provide,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 Restated Loan Agreement, as discussed in Note 6 to the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $500,000 per year.
Forward Looking Statements and Material Risks
This Quarterly Report on Form 10-Q includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that Greystone expects, believes or anticipates will or may occur in the future, including decreased costs, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone’s prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone’s business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone’s business are more fully described in Greystone’s Form 10-K/A10-K for the fiscal year ended May 31, 2022, which was filed on August 23,19, 2022. Actual results may vary materially from the forward-looking statements. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
As of the end of the period covered by this Quarterly Report on Form 10-Q, Greystone carried out an evaluation under the supervision of Greystone’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of Greystone’s disclosure controls and procedures pursuant to the Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based on an evaluation as of May 31, 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, Greystone’s CEO and Chief Financial Officer concluded that the design and operation of Greystone’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) were effective as of August 31,November 30, 2022.
During the three months ended August 31,November 30, 2022, there were no changes in Greystone’s internal controls over financial reporting that have materially affected, or that are reasonably likely to materially affect, Greystone’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GREYSTONE LOGISTICS, INC. | |
| (Registrant) | |
| Date: | /s/ Warren F. Kruger |
| Warren F. Kruger, President and Chief | |
| Executive Officer (Principal Executive Officer) | |
| Date: | /s/ William W. Rahhal |
| William W. Rahhal, Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
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Index to Exhibits
The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.
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