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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended February 28, 2023

 

☐ 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 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: April 10, 2023 - 28,279,701

 

 

 

 

 

 

GREYSTONE LOGISTICS, INC.

FORM 10-Q

For the Period Ended February 28, 2023

 

  Page
PART I. FINANCIAL INFORMATION
   
Item 1. Financial Statements  
     
  Consolidated Balance Sheets (Unaudited) As of February 28, 2023 and May 31, 2022 1
     
  Consolidated Statements of Income (Unaudited) For the Nine Months Ended February 28, 2023 and 2022

2

     
  Consolidated Statements of Income (Unaudited) For the Three Months Ended February 28, 2023 and 2022 3
     
  Consolidated Statements of Changes in Equity (Unaudited) For the Nine Months Ended February 28, 2023 and 2022

4

     
  Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended February 28, 2023 and 2022

5

     
  Notes to Consolidated Financial Statements (Unaudited) 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
     
Item 4. Controls and Procedures 18
     
PART II. OTHER INFORMATION 19
     
Item 1. Legal Proceedings 19
     
Item 1A. Risk Factors 19
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
     
Item 3. Defaults Upon Senior Securities 19
     
Item 4. Mine Safety Disclosures 19
     
Item 5. Other Information 19
     
Item 6. Exhibits 19
     
SIGNATURES 20

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Greystone Logistics, Inc.

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, $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   (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.

 

1
 

 

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.

 

2
 

 

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.

 

3
 

 

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, $1.64/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, $1.62/share   -    -    -    -    -    (81,027)   (81,027)   -    (81,027)
Net income (loss)   -    -    -    -    -    (297,817)   (297,817)   68,332    (229,485)
Balances, November 30, 2021   50,000    5    28,561,201    2,856    53,814,744    (41,184,850)   12,632,755    1,322,113    13,954,868 
Common stock purchase   -    -    (281,500)   (28)   (281,472)   -    (281,500)   -    (281,500)
Cash distributions   -    -    -    -    -    -    -    (80,000)   (80,000)
Preferred dividends, $1.60/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, 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/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/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 
Preferred dividends, $2.65/share   -    -    -    -    -    (132,500)   (132,500)   -    (132,500)
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 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4
 

 

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.

 

5
 

 

Greystone Logistics, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

 

Note 1. Basis of Financial Statements

 

In the opinion of Greystone Logistics, Inc. (“Greystone”), the accompanying unaudited consolidated financial statements contain all adjustments and reclassifications, which are of a normal recurring nature, necessary to present fairly its financial position as of February 28, 2023, the results of its operations for the nine months and three months ended February 28, 2023 and 2022 and its cash flows for the nine months ended February 28, 2023 and 2022. 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 for such period. The results of operations for the nine months and three months ended February 28, 2023 and 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

 

The consolidated financial statements of Greystone include its wholly-owned subsidiaries, Greystone Manufacturing, L.L.C. (“GSM”) and Plastic Pallet Production, Inc. (“PPP”), and the variable interest entity, Greystone Real Estate, L.L.C. (“GRE”) 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, which is wholly-owned by a member of Greystone’s Board of Directors, owns two primary manufacturing facilities which are occupied by Greystone. 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. 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. Subsequent to the deconsolidation, Greystone 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.

 

Certain balances in the consolidated balance sheet as of May 31, 2022, have been restated for comparative purposes.

 

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.

 

6
 

 

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 3,333,333 shares of common stock for the three months ended February 28, 2022.

 

The following tables set forth the computation of basic and diluted earnings per share.

 

For the nine months ended February 28, 2023 and 2022:

 

   2023   2022 
Basic earnings per share of common stock:          
Numerator -          
Net income attributable to common stockholders  $4,471,124   $3,044,535 
Denominator -          
Weighted-average shares outstanding - basic   28,279,701    28,472,256 
Income per share of common stock - basic  $0.16   $0.11 
           
Diluted earnings per share of common stock:          
Numerator -          
Net income attributable to common stockholders  $4,471,124   $3,044,535 
Add: Preferred stock dividends for assumed conversion   361,267    243,082 
Net income allocated to common stockholders  $4,832,391   $3,287,617 
Denominator -          
Weighted-average shares outstanding – basic   28,279,701    28,472,256 
Incremental shares from assumed conversion of options, warrants and preferred stock, as appropriate   3,825,723    3,828,828 
Weighted average common stock outstanding – diluted   32,105,424    32,301,084 
Income per share of common stock – diluted  $0.15   $0.10 

 

For the three months ended February 28, 2023 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 

 

7
 

 

Note 3. Inventory

 

Inventory consists of the following:

 

   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

 

A summary of property, plant and equipment is as follows:

 

  

February 28,

2023

  

May 31,

2022

 
Production machinery and equipment  $60,395,743   $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   64,855,027    66,391,904 
Less: Accumulated depreciation and amortization   (36,335,865)   (34,515,139)
           
Net Property, Plant and Equipment  $28,519,162   $31,876,765 

 

Production machinery includes deposits on equipment in the amount of $3,494,467 as of February 28, 2023, 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, 2023 and 2022 was $3,954,444 and $4,011,025, 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 President and 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 were $1,072,500 for the each of the nine months ended February 28, 2023 and 2022

 

8
 

 

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. Subsequent to the maturity on December 31, 2022, Greystone pays rent to Yorktown at the monthly rate of $5,200 on a month-to-month basis. Total rent expense was $46,800 and $36,000 for the nine months ended February 28, 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 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 nine months ended February 28, 2023 and 2022, Greystone purchases from TriEnda totaled $431 and $4,222, respectively, and sales to TriEnda totaled $31,231 and $62,089, respectively. As of February 28, 2023, TriEnda owed $41,284 to Greystone.

 

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 $574,768 and $348,330 for the nine months ended February 28, 2023 and 2022, respectively. The account receivable due from Green as of February 28, 2023 was $79,550.

 

Note 6. Long-term Debt

 

Debt as of February 28, 2023 and May 31, 2022 is as follows:

 

   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 

 

9
 

 

The prime rate of interest as of February 28, 2023, was 7.75%. Subsequent to February 28, 2023, the prime rate of interest was increased to 8.00% on March 23, 2023.

 

Debt issuance costs consists of the amounts paid to third parties in connection with the issuance and modification of debt instruments. These costs are shown on the consolidated balance sheet as a direct reduction to the related debt instrument. Amortization of these costs is included in interest expense. Greystone recorded amortization of debt issuance costs of $4,322 and $4,267 for the nine months ended February 28, 2023 and 2022, 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 $232,000 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 February 28, 2023, 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.

 

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 February 28, 2023, are $2,217,304, $5,387,090, $2,228,841, $1,215,659 and $3,260,851 with $527,229 thereafter.

 

10
 

 

Note 7. Leases

 

Financing Leases

 

Financing leases as of February 28, 2023 and May 31, 2022:

 

  

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, have a gross carrying amount of $176,565.

 

Amortization of the carrying amount of $189,927 and $721,923 was included in depreciation expense for the nine months ended February 28, 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% and (ii) two buildings on a ten year lease with a five year renewal option and a discount rate of 6.0%. 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%.

 

11
 

 

Lease Summary Information

 

For the periods ending February 28, 2023 and 2022:

 

   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, are approximately:

 

  

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

 

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 and $9,772,750 during the nine months ended February 28, 2023 and 2022, respectively. Customer advances received during the nine months ended February 28, 2023 and 2022 were $1,072,000 and $13,560,500, respectively. The unrecognized balance of deferred revenue as of February 28, 2023 and May 31, 2022, was $23,007 and $5,329,047, respectively.

 

12
 

 

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% and 1.6% of sales during the nine months ended February 28, 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, 2023 and 2022, respectively, were as follows:

 

Category  2023   2022 
End User Customers   71%   74%
Distributors   29%   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 approximates fair value. Fixed rate notes are valued based on cash flows using estimated rates of comparable notes. The carrying amounts reported on the balance sheets approximate fair value.

 

Note 11. Concentrations, Risks and Uncertainties

 

Greystone derived approximately 71% and 74% of its total sales from three customers during the nine months ended February 28, 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 and $313,050 in fiscal years 2023 and 2022, respectively, were from one of its principal 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 February 28, 2023, Greystone had commitments totaling approximately $5.3 million 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.

 

13
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Results of Operations

 

General to All Periods

The unaudited consolidated statements include Greystone Logistics, Inc., and its two wholly-owned subsidiaries, Greystone Manufacturing, L.L.C. (“GSM”) and Plastic Pallet Production, Inc. (“PPP”). Greystone also 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

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, contract sales personnel and its President and other employees.

 

Personnel

 

Greystone had full-time-equivalents of approximately 189 and 239 full-time employees and 56 and 80 temporary employees as of February 28, 2023 and 2022, respectively. Full-time equivalent is a measure based on time worked.

 

Nine Months Ended February 28, 2023 Compared to Nine Months Ended February 28, 2022

 

Sales

 

Sales for fiscal year 2023 were $44,633,542 compared to $53,069,648 in fiscal year 2022 for a decrease of $8,436,106, or 15.9%. The number of pallets sold in fiscal year 2023 decreased by about 24% from the prior period primarily related to sales to two principal customers. However, the average price per pallet sold in fiscal year 2023 increased by about 10% from the prior period. Sales to these two 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% and 74% of sales in fiscal years 2023 and 2022, respectively. Greystone is not able to predict the future needs of these principal 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 $38,590,544, or 86% of sales, compared to $47,914,061, or 90% of sales, in fiscal year 2022. The decrease in the ratio of cost of sales to sales in fiscal year 2023 was primarily the result of declines 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 pallets 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 decreases in production costs.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $3,918,205 in fiscal year 2023 compared to $4,033,483 in fiscal year 2022 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 in legal expenses was somewhat offset by increases in personnel costs during fiscal year 2023.

 

Other Income (Expenses)

 

During fiscal year 2023, Greystone received $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”). Also in fiscal year 2023, Greystone recognized a gain of $569,997 upon the deconsolidation GRE, a variable interest entity GRE.

 

During 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.

 

14
 

 

Other income in fiscal year 2023 of $189,914 resulted 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.

 

Interest expense was $821,138 in fiscal year 2023 compared to $631,115 in fiscal year 2022 for an increase of $190,023. Increases in the U.S. prime rate of interest was the primary cause of the increase.

 

Provision for Income Taxes

 

The provision for income taxes was $452,000 and $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.

 

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 $4,881,990 in fiscal year 2023 compared to $3,496,217 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 $4,471,124, or $0.16 per share, compared $3,044,535, or $0.11 per share, in fiscal year 2022 primarily for the reasons discussed above.

 

Three Months Ended February 28, 2023 Compared to Three Months Ended February 28, 2022

 

Sales

 

Sales for fiscal year 2023 were $13,578,269 compared to $22,450,682 in fiscal year 2022 for a decrease of $8,872,413, or 39.5%. The number of pallets sold in fiscal year 2023 decreased approximately 41% from fiscal year 2022 primarily related to sales to two principal customers. However, the average price per pallet sold in fiscal year 2023 increased by about 3% from the comparable prior period. Sales to these two 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% and 71% of sales in fiscal years 2023 and 2022, respectively. Greystone is not able to predict the future needs of these principal 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 $11,220,791, or 83% of sales, compared to $19,734,155, or 88% of sales, in fiscal year 2022. The decrease in the ratio of cost of sales to sales in fiscal year 2023 was primarily the result of declines 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 pallets due to anticipated savings from scheduled increases in the capacity for internally refining unprocessed recycled plastic.

 

15
 

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $1,606,626 in fiscal year 2023 compared to $1,680,979 in fiscal year 2022 for a decrease of $74,353. Legal fees decreased by approximately $297,000 from fiscal year 2022 as a result of the settlement of an arbitration dispute. However, the decrease in legal expenses was somewhat offset by increases in personnel costs during fiscal year 2023.

 

Other Income (Expenses)

 

During fiscal year 2023, Greystone received $3,270,424 from the Department of Treasury for claims filed pursuant to the Employee Retention Credits (“ERC”) under the CARES Act.

 

Other income in fiscal year 2023 of $183,596 primarily related to interest income received upon the payment of the ERC award. Oher income of $3,688 in fiscal year 2022 was primarily from scrap sales.

 

Interest expense was $313,376 in fiscal year 2023 compared to $201,992 in fiscal year 2022 for an increase of $111,384. Increases in the U.S. prime rate of interest was the primary cause of the increase.

 

Provision for Income Taxes

 

The provision for income taxes was $196,000 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 compared to $603,244 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 $3,562,996, or $0.13 per share, compared $452,458, or $0.02 per share, in fiscal year 2022 primarily for the reasons discussed above.

 

16
 

 

Liquidity and Capital Resources

 

A summary of cash flows for the nine months ended February 28, 2023, is as follows:

 

Cash provided by operating activities  $406,583 
      
Cash used in investing activities  $(3,203,993)
      
Cash provided by financing activities  $530,779 

 

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

 
Long-term debt  $14,836,974   $2,217,304   $7,615,931   $4,476,510   $527,229 
Financing lease rents  $72,436   $42,185   $30,251   $-   $- 
Operating lease rents  $8,143,459   $561,947   $1,077,612   $1,083,610   $5,420,290 
Commitments  $5,317,935   $5,317,935   $-   $-   $- 

 

Greystone had a working capital of $3,996,298 as of February 28, 2023. To provide for the funding to meet Greystone’s operating activities and contractual obligations as of February 28, 2023, 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 to the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $500,000 per year.

 

17
 

 

Forward Looking Statements and Material Risks

 

This Quarterly Report on Form 10-Q includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that Greystone expects, believes or anticipates will or may occur in the future, including decreased costs, timing of manufacturing enhancements, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone’s prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone’s business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone’s business are more fully described in Greystone’s 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-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 February 28, 2023.

 

During the three months ended February 28, 2023, 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.

 

18
 

 

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.

 

31.1Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
    
31.2Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
   
32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
   
32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
   
101Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at February 28, 2023 and May 31, 2022, (ii) the Consolidated Statements of Income for the nine months and three months ended February 28, 2023 and 2022, (iii) the Consolidated Statements of Changes in Equity for the nine months ended February 28, 2023 and 2022, (iv) the Consolidated Statements of Cash Flows for the nine months ended February 28, 2023 and 2022, and (v) the Notes to the Consolidated Financial Statements (submitted herewith).
   
104Cover Page Interactive Data File (embedded within the Inline XBRL document.)

 

19
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  GREYSTONE LOGISTICS, INC.
  (Registrant)
   
Date: April 14, 2023 /s/ Warren F. Kruger
  Warren F. Kruger, President and Chief
  Executive Officer (Principal Executive Officer)
   
Date: April 14, 2023 /s/ William W. Rahhal
  William W. Rahhal, Chief Financial Officer
  (Principal Financial Officer and Principal Accounting Officer)

 

20
 

 

Index to Exhibits

 

The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.

 

31.1Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
  
31.2Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
  
32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
  
32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (submitted herewith).
  
101Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at February 28, 2023 and May 31, 2022, (ii) the Consolidated Statements of Income for nine months and three months ended February 28, 2023 and 2022, (iii) the Consolidated Statements of Changes in Equity for the nine months ended February 28, 2023 and 2022, (iv) the Consolidated Statements of Cash Flows for the nine months ended February 28, 2023 and 2022, and (v) the Notes to the Consolidated Financial Statements (submitted herewith).
  
104Cover Page Interactive Data File (embedded within the Inline XBRL document.)

 

21

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Warren F. Kruger, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Greystone Logistics, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

April 14, 2023 /s/ Warren F. Kruger
  Warren F. Kruger
  President and Chief Executive Officer

 

 

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, William W. Rahhal, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Greystone Logistics, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

April 14, 2023 /s/ William W. Rahhal
  William W. Rahhal
  Chief Financial Officer

 

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of Greystone Logistics, Inc. (the “Company”) on Form 10-Q for the period ending February 28, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Warren F. Kruger, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

April 14, 2023 /s/ Warren F. Kruger
  Warren F. Kruger
  President and Chief Executive Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part of the Report.

 

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of Greystone Logistics, Inc. (the “Company”) on Form 10-Q for the period ending February 28, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William W. Rahhal, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

April 14, 2023 /s/ William W. Rahhal
  William W. Rahhal
  Chief Financial Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part of the Report.