GREYSTONE LOGISTICS INC

Previous wording

This Quarterly Report on Form 10-Q includes certain statements that may be deemed "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, that address activities, events, or developments that Greystone expects, believes, or anticipates will or may occur in the future, including decreased costs, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks, and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone's prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone's business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone's business are more fully described in Greystone's Annual Report on Form 10-K for the fiscal year ended May 31, 2023, which was filed with the Securities and Exchange Commission on August 28, 2023, as the same may be updated from time to time. Actual results may vary materially from the forward-looking statements. The results of operations for the nine months ended February 29, 2024, are not necessarily indicative of the results for the fiscal year ending May 31, 2024. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Current wording

This Quarterly Report on Form 10-Q includes certain statements that may be deemed "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, that address activities, events or developments that Greystone expects, believes or anticipates will or may occur in the future, including decreased costs, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone's prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone's business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone's business are more fully described in Greystone's Annual Report on Form 10-K for the fiscal year ended May 31, 2024, which was filed with the Securities and Exchange Commission on September 13, 2024, as the same may be updated from time to time. Actual results may vary materially from the forward-looking statements. The results of operations for the three months ended August 31, 2024, are not necessarily indicative of the results for the fiscal year ending May 31, 2024. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Previous wording

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.

Current wording

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”). All material intercompany accounts and transactions have been eliminated.

Previous wording

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.

Current wording

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.

Previous wording

Greystone had full-time-equivalents of approximately 167 and 189 full‑time employees and 79 and 56 temporary employees as of February 29(28), 2024 and 2023, respectively. Full-time equivalent is a measure based on time worked.

Current wording

Greystone had full-time equivalents of approximately 168 and 177 regular employees and 72 and 116 temporary employees as of August 31, 2024 and 2023, respectively. Full-time equivalent is a measure based on time worked.

Previous wording

Greystone’s principal customers, ranging from two to four customers, accounted for approximately 83% and 71% of sales for the nine months ended February 29(28), 2024 and 2023, respectively. Greystone is not able to predict the future needs of these principal customers and will continue its efforts to increase sales through the addition of new customers developed through Greystone’s marketing efforts.

Current wording

Greystone generally has a limited number of customers, generally 2 to 4, that accounted for approximately 76% and 85% of sales during the three months ended August 31, 2024 and 2023, respectively. Greystone is not able to predict the future needs of these major customers and will continue its efforts to increase sales through the addition of new customers developed through Greystone’s marketing efforts.

Previous wording

Cost of sales for the nine months ended February 29, 2024, was $37,942,179, or 81% of sales, compared to $38,590,544, or 86% of sales, for the nine months ended February 28, 2023. The decrease in the ratio of cost of sales to sales for the nine months ended February 29, 2024, from the prior period was primarily the result of declines in the cost of raw material and an improvement in the production overhead burden due to an increase in production of approximately 20% over the prior period.

Current wording

The cost of sales for the three months ended August 31, 2024, was $11,557,753, or 86% of sales, compared to $13,368,909, or 77% of sales, for the three months ended August 31, 2023. The increase in the ratio of cost of sales to sales for the three months ended August 31, 2024, over the prior period was primarily the result of an approximate 30% decrease in production of plastic pallets. Due to Greystone’s inflexible manufacturing costs, the gross profit margin is directly affected by variations in the quantity of plastic pallets produced.

Previous wording

The provision for income taxes was $1,375,000 and $452,000 for the nine months ended February 29(28), 2024 and 2023, 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.

Current wording

The provision for income taxes was $216,750 and $747,000 for the three months ended August 31, 2024 and 2023, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges (income) which have no tax benefit (expense), and changes in the valuation allowance.

Previous wording

Greystone recorded net income of $297,929 for the three months ended February 29, 2024, compared to $3,695,496 for the three months ended February 28, 2023, primarily for the reasons discussed above.

Current wording

Greystone recorded net income of $498,733 for the three months ended August 31, 2024, compared to $1,744,219 for three months ended August 31, 2023, primarily for the reasons discussed above.

Previous wording

The net income attributable to common stockholders (net income less preferred dividends and GRE’s net income) for nine months ended February 29, 2024, was $151,456, or $0.01 per share, compared $3,562,996, or $0.13 per share, for the three months ended February 28, 2023, primarily for the reasons discussed above.

Current wording

The net income attributable to common stockholders for the three months ended August 31, 2024, was $350,651, or $0.02 per share, compared to $1,598,020, or $0.06 per share, for the three months ended August 31, 2023, primarily for the reasons discussed above.

Previous wording

A summary of cash flows for the nine months ended February 29, 2024, is as follows:

Current wording

A summary of cash flows for the three months ended August 31, 2024, was as follows:

Previous wording

The contractual obligations of Greystone are as follows:

Current wording

The contractual obligations and rents of Greystone are as follows:

Previous wording

Greystone had a working capital of $8,490,873 as of February 29, 2024. To provide for the funding to meet Greystone's operating activities and contractual obligations as of February 29, 2024, Greystone will have to continue to produce positive operating results or explore various options including additional long-term debt and equity financing. However, there is no guarantee that Greystone will continue to create positive operating results or be able to raise sufficient capital to meet these obligations.

Current wording

Greystone had a working capital of $7,321,684 as of August 31, 2024. To provide for the funding to meet Greystone's operating activities and contractual obligations as of August 31, 2024, Greystone will have to continue to produce positive operating results or explore various options including additional long-term debt and equity financing. However, there is no guarantee that Greystone will continue to create positive operating results or be able to raise sufficient capital to meet these obligations.

Previous wording

A substantial amount of 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.

Current wording

A substantial amount of Greystone’s debt financing has resulted primarily from bank notes which are guaranteed by certain officers and directors of Greystone. Greystone continues to be dependent upon its officers and directors to secure, or possibly provide, additional financing and there is no assurance that its officers and directors will continue to do so, or that they will do so on terms that are acceptable to Greystone. As such, there is no assurance that funding will be available for Greystone to continue operations.

Previous wording

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 of the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $500,000 per year.

Current wording

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 unaudited consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $1,000,000 per year.

Previous wording

Trade receivables are carried at original invoice amount less an estimate made for doubtful accounts. Management determines the allowance for credit losses by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Trade receivables are written off against the allowance when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. The Company generally does not charge interest on past due accounts.

Current wording

Trade receivables are carried at the original invoice amount less an allowance for credit losses. Management determines the allowance by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Trade receivables are written off against the allowance when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. The Company generally does not charge interest on past due accounts.

Previous wording

A deferred tax asset is recognized for tax-deductible temporary differences and operating losses using the applicable enacted tax rate. In assessing the realizability of deferred tax assets, management considers the likelihood of whether it is more likely than not the net deferred tax asset will be realized. Based on this evaluation, management will provide a valuation allowance if it is determined more likely than not the associated asset will not be recognized. Based on this, management has determined that Greystone will not be able to realize the full effect of the deferred tax assets and a valuation allowance of $793,337 and $1,044,361 has been recorded as of February 29, 2024 and May 31, 2023, respectively.

Current wording

A deferred tax asset is recognized for tax-deductible temporary differences and operating losses using the applicable enacted tax rate. In assessing the realizability of deferred tax assets, management considers the likelihood of whether it is more likely than not the net deferred tax asset will be realized. Based on this evaluation, management will provide a valuation allowance if it is determined more likely than not the associated asset will not be recognized. Based on this, management has determined that Greystone will be able to realize the full effect of the deferred tax assets as of August 31, 2024, and, accordingly, no valuation allowance was recorded. As of May 31, 2024, management determined that Greystone would not be able to realize the full effect of deferred taxes and a valuation allowance of $793,337 was recorded. The primary reason for no valuation allowance as of August 31, 2024, was the expiration of outstanding net operating losses during the current fiscal year ending May 31, 2025.