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, 2025, which was filed with the Securities and Exchange Commission on August 29, 2025, 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 28, 2026, are not necessarily indicative of the results for the fiscal year ending May 31, 2026. 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, 2026, which was filed with the Securities and Exchange Commission on August 31, 2026, 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, 2026, are not necessarily indicative of the results for the fiscal year ending May 31, 2027. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.

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, 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. As part of its efforts to diversify its customer base and revenue streams, the Company has expanded its bin processing services during the three months ended August 31, 2026. Although demand for these services, the majority of which was from a related party, increased during the period, management does not currently expect bin processing revenues to constitute a material portion of consolidated revenues during fiscal year 2027. 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 82 and 181 regular employees as of February 28, 2026 and 2025, respectively. As of February 28, 2026 with the reduction in the production schedule due to loss of a major customer, the Company has stopped using temporary employees, prior to the reduction in production, at any point in time, the Company could have between 65-70 temporary employees. Full-time equivalent is a measure based on time worked.

Current wording

Greystone had full-time equivalents of approximately 95 and 143 regular employees as of August 31, 2026 and 2025, respectively. With the reduction in the production schedule that began in fiscal year 2026, due to loss of a major customer, the Company has significantly reduced the temporary personnel service that previously provided additional production personnel on an as needed basis, prior to the reduction in production, at any point in time, the Company could have between 65-70 temporary employees. Full-time equivalent is a measure based on time worked.

Previous wording

During fiscal year 2026, the Company lost a major customer. Based on historical sales to this customer, management expects a total loss of sales of approximately $30 million for fiscal year 2026. During the nine months ended February 28, 2026, total sales decreased $17,938,676, or 45%. Sales decreased primarily due to reductions of approximately $11 million from the lost major customer. The Company also experienced additional reductions in sales of $4.3 million from another major customer; however, this loss is due to delays in construction of specific production equipment related to this customers’ orders. Sales for this customer are projected to return to normal in the fourth quarter. Additional miscellaneous fluctuations among other existing customers contributed to the overall change. No significant new or other lost customers were reported during the period.

Current wording

During the three months ended August 31, 2026, total sales decreased $5,411,485, or 50%. Sales decreased primarily due to reductions of approximately $6,800,000 from the lost major customer. This was offset by additional miscellaneous fluctuations among other existing customers, specifically a related party, TriEnda, with an increase in sales of approximately $950,000. No significant new or other lost customers were reported during the period.

Previous wording

Greystone’s two major customers accounted for approximately 60% and 71% of total sales during the nine months ended February 28, 2026 and 2025, 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.

Current wording

A limited number of customers, generally ranging from one to three, one of which was a related party, accounted for approximately 42% and 63% of total sales during the three months ended August 31, 2026 and 2025, 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

The cost of sales for the three months ended February 28, 2026, was $4,930,543 or 142% of sales, compared to $11,577,980, or 81% of sales, for the three months ended February 28, 2025. The increase in the ratio of cost of sales to sales for the three months ended February 28, 2026, over the prior period was primarily the result of reduced production during the three months ended February 28, 2026, specifically, the Company capitalized less overhead costs as fewer pallets were produced. Due to Greystone’s inflexible manufacturing costs, the gross profit margin is directly affected by variations in the quantity of plastic pallets produced.

Current wording

The cost of sales for the three months ended August 31, 2026, was $6,099,892 or 115% of sales, compared to $10,229,018 or 95% of sales, for the three months ended August 31, 2025. The increase in the ratio of cost of sales to sales for the three months ended August 31, 2026, over the prior period was primarily the result of reduced production during the three months ended August 31, 2026, specifically, the Company capitalized less overhead costs as fewer pallets were produced due to loss of customers described above. 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

Gross profit (loss) for the three months ended February 28, 2026, was $(1,459,144), or (42%). of sales, compared to $2,737,818, or 19% of sales, for the three months ended February 28, 2025. The principal reason for decrease in gross profit margin for the three months ended February 28, 2026, over the prior period was the decline in production as discussed above.

Current wording

Gross profit (loss) for the three months ended August 31, 2026, was $(778,804), or (15)% of sales, compared to $503,555, or 5% of sales, for the three months ended August 31, 2025. The principal reason for decrease in gross profit margin for the three months ended August 31, 2026, over the prior period was the decline in production as discussed above.

Previous wording

Selling, general and administrative expenses were $1,202,930, or 35% of sales, for the three months ended February 28, 2026 compared to $1,374,914, or 10% of sales, for the three months ended February 28, 2025, representing a decrease of $171,984. The decrease is primarily due to continued tight control of other expenses given the loss of a major customer.

Current wording

Selling, general and administrative expenses were $1,103,477, or 21% of sales, for the three months ended August 31, 2026 compared to $1,728,539, or 16% of sales, for the three months ended August 31, 2025, representing a decrease of $625,062. The decrease is primarily due to continued tight control of other expenses given the loss of a major customer.

Previous wording

Other income, generally from interest income and the sale of scrap material, was $3,012 and $45,486 for the three months ended February 28, 2026 and 2025.

Current wording

Other income, generally from interest income and the sale of scrap material, was $3,269 and $5,119 for the three months ended August 31, 2026 and 2025, respectively.

Previous wording

The benefit (provision) for income taxes was $100,940 and $(194,020) for the three months ended February 28, 2026 and 2025, respectively. The significant change in provision primarily reflects a shift from taxable income in 2025 to a pretax loss in 2026. As a result, the current year provision reflects an income tax benefit associated with the pretax loss, whereas the prior year included income tax expense related to taxable earnings. 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.

Current wording

The benefit (provision) for income taxes was $(398,140) and $350,672 for the three months ended August 31, 2026 and 2025, respectively. The significant change in provision primarily reflects an increase to the valuation allowance as management has determined that Greystone will not be able to realize the full effect of the deferred tax assets as of August 31, 2026. As a result, the current year provision reflects an expense associated with the increased allowance, whereas the prior year included income tax benefit associated with the pretax loss. 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, and provision to return adjustments primarily attributable to fixed assets depreciation and lease accounting.

Previous wording

Greystone recorded net loss of $(2,802,078) for the three months ended February 28, 2026, compared to net income of $965,665 for three months ended February 28, 2025, primarily for the reasons discussed above.

Current wording

Greystone recorded net loss of $(2,558,995) for the three months ended August 31, 2026, compared to net loss of $(1,099,022) for three months ended August 31, 2025, primarily for the reasons discussed above.

Previous wording

The net loss attributable to common stockholders for the nine months ended February 28, 2026, was $(5,965,195) or $(0.22) per share, compared to net income attributable to common stockholders of $691,942, or $0.02 per share, for the nine months ended February 28, 2025, primarily for the reasons discussed above.

Current wording

Net Loss Attributable to Common Stockholders

Previous wording

The net loss attributable to common stockholders for the three months ended February 28, 2026, was $(2,802,078) or $(0.10) per share, compared to net income attributable to common stockholders of $849,867, or $0.03 per share, for the three months ended February 28, 2025, primarily for the reasons discussed above.

Current wording

The net loss attributable to common stockholders for the three months ended August 31, 2026, was $(2,558,995) or $(0.09) per share, compared to net loss attributable to common stockholders of $(1,099,022), or $(0.04) per share, for the three months ended August 31, 2025, primarily for the reasons discussed above.

Previous wording

A summary of cash flows for the nine months ended February 28, 2026, was as follows:

Current wording

A summary of cash flows for the three months ended August 31, 2026, was as follows:

Previous wording

Greystone had a working capital of $1,196,903 as of February 28, 2026.

Current wording

Greystone had a working capital deficit of $(8,761,289) as of August 31, 2026.

Previous wording

Greystone’s principal debt obligations include a $6,000,000 revolving loan, subject to borrowing base limitations, and several term notes. Greystone was not in compliance with certain financial covenants as of February 28, 2026. Therefore, all of the long term debt has been classified as current. To provide for the funding to meet Greystone's operating activities and contractual obligations as of February 28, 2026, Greystone will have 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’s principal debt obligations include a $3,500,000 revolving loan, subject to borrowing base limitations, and several term notes. Due to the covenant violations existing at May 31, 2026, and expected noncompliance within the next twelve months, all outstanding long-term debt has been classified as current in the accompanying balance sheets. To provide for the funding to meet Greystone's operating activities and contractual obligations as of August 31, 2026, Greystone will have 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

During the year ended May 31, 2025, the Company repurchased 519,124 shares of its common stock for an aggregate amount of $606,737 under a share repurchase program announced by the Board on June 28, 2024. During the first quarter of fiscal 2026, covering the three-month period ended August 31, 2025, the Company repurchased an additional 89,876 shares for $123,147 under the same program. No additional activity occurred during the second or third quarters of fiscal 2026. As disclosed in the Form 8-K filed on June 28, 2024, the Board’s intent in authorizing the program was to employ strategic buybacks as a means of enhancing shareholder value.

Current wording

During the year ended May 31, 2025, the Company paid $606,737 to repurchase 519,124 shares of outstanding common stock under a plan announced by the Board on June 28, 2024. During the first quarter of fiscal 2026, covering the three-month period ended August 31, 2025, the Company repurchased an additional 89,876 shares for $123,147 under the same program. No additional activity occurred during fiscal 2026. As disclosed in the Form 8-K filed on June 28, 2024, the Board’s intent in authorizing the program was to employ strategic buybacks as a means of enhancing shareholder value.

Previous wording

During fiscal year 2026, the Company lost a major customer, which represented a significant portion of consolidated revenues. This change is expected to impact future sales values and will reduce operating cash flows in both the current and subsequent periods. In response, management plans to continue its efforts to expand the present market area and increase sales to its existing customers and seek new customer opportunities. Management also intends to continue tight control over all expenditures and an increased emphasis on inventory and production management. This will lead to decreased labor needs and the discontinued use of temporary labor. Management plans to make sales price adjustments in the future as necessary to correspond with current contribution margins. During the quarter ended February 28, 2026, the Company was able to modify terms of its debt to extend the maturity and require interest only payments for the next 10 months. Management believes that the successful execution of its business plan coupled with the debt modifications will be sufficient to meet its funding requirements for the foreseeable future.

Current wording

During fiscal year 2026, the Company lost a major customer, which represented a significant portion of consolidated revenues. This change is expected to impact future sales values and will reduce operating cash flows in both the current and subsequent periods. In response, management plans to continue its efforts to expand the present market area and increase sales to its existing customers and seek new customer opportunities. Management also intends to continue tight control over all expenditures and an increased emphasis on inventory and production management. This will lead to decreased labor needs and the discontinued use of temporary labor. Management plans to make sales price adjustments in the future as necessary to correspond with current contribution margins. Management successfully negotiated with lenders to provide for interest‑only payments on certain debt obligations through December 31, 2026 as part of its liquidity management efforts. The revolving loan as well as the term loans are subject to certain financial covenants as well as cross default provisions. Greystone was not in compliance with certain financial covenants as of May 31, 2026. On July 5, 2026, the Company entered into a Fifth Amendment to its Amended and Restated Loan Agreement with International Bank of Commerce (“IBC”), pursuant to which IBC waived existing covenant violations through the amendment date and suspended testing of certain financial covenants through November 30, 2026. As of the issuance date of these consolidated financial statements, IBC had not exercised its rights to accelerate the indebtedness and the Company remained in compliance with the terms of the amended agreement. The Company continues to work with IBC regarding its future financing arrangements and covenant requirements. Management’s forecasts indicate that compliance with certain financial covenants upon the resumption of covenant testing may require additional amendments, waivers, or other accommodations from the lender. While IBC has waived specified covenant violations through the amendment date and suspended covenant testing through November 30, 2026, there can be no assurance that additional waivers or amendments, if needed, will be obtained on acceptable terms. Additionally, as of August 31, 2026, the Company is also in default related to term loans with First Interstate Bank and no waiver has been obtained. Therefore, all of the long term debt has been classified as current.

Previous wording

Greystone does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Current wording

As of August 31, 2026, the Company had an outstanding letter of credit for $230,000 for insurance purposes. Greystone does not have any additional off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Previous wording

Greystone believes that the following critical policies affect Greystone’s more significant judgments and estimates used in preparation of Greystone’s financial statements.

Current wording

Greystone believes that the following critical policies affect Greystone’s more significant judgments and estimates used in preparation of Greystone’s consolidated financial statements.

Previous wording

The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Current wording

The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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. Management has determined that as of February 28, 2026, Greystone will not be able to realize the full effect of the deferred tax assets so a valuation allowance of $1,293,139 has been recorded. As of May 31, 2025, no valuation allowance was recorded. As of February 28, 2026 and May 31, 2025, there was $692,035 and $268,935, respectively of prepaid tax expenses related to fiscal year 2025.

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. Management has determined that as of August 31, 2026, Greystone will not be able to realize the full effect of the deferred tax assets so a valuation allowance of $2,452,066 has been recorded. As of May 31, 2026, a valuation allowance of $1,757,711 was recorded. As of August 31, 2026 and May 31, 2026, there was approximately $350,000 of prepaid tax expenses related to fiscal year 2026.