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 November 30, 2018, the results of its operations for the six months and three months ended November 30, 2018 and
2017, and its cash flows for the six months ended November 30, 2018 and 2017. 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, 2018 and the
notes thereto included in Greystone’s Form 10-K for such period. The results of operations for the six months and three
months ended November 30, 2018 and 2017 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”).
GRE owns two buildings located in Bettendorf, Iowa which are leased to GSM. All material intercompany accounts and transactions
have been eliminated in the consolidated financial statements.
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 available to common stockholders by the weighted-average shares outstanding during the period. Diluted earnings per
share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares used
in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion
of all potentially dilutive common shares outstanding.
Greystone
excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is
anti-dilutive, as follows:
|
|
2018
|
|
|
2017
|
|
Six
months ended November 30:
|
|
|
|
|
|
|
|
|
Preferred
stock convertible into common stock
|
|
|
3,333,333
|
|
|
|
3,333,333
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,333,333
|
|
|
|
3,333,333
|
|
|
|
|
|
|
|
|
|
|
Three
months ended November 30:
|
|
|
|
|
|
|
|
|
Options
to purchase common stock
|
|
|
-
|
|
|
|
200,000
|
|
Warrants
to purchase common stock
|
|
|
-
|
|
|
|
500,000
|
|
Preferred
stock convertible into common stock
|
|
|
3,333,333
|
|
|
|
3,333,333
|
|
Total
|
|
|
3,333,333
|
|
|
|
4,033,333
|
|
The
following tables set forth the computation of basic and diluted earnings per share for the six months and three months ended November
30, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Six
months ended November 30:
|
|
|
|
|
|
|
|
|
Numerator
-
|
|
|
|
|
|
|
|
|
Net
income attributable to common stockholders
|
|
$
|
730
,281
|
|
|
$
|
363,371
|
|
Denominator
-
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding - basic
|
|
|
28,361,201
|
|
|
|
28,361,201
|
|
Incremental
shares from assumed conversion of options and warrants
|
|
|
648,748
|
|
|
|
627,500
|
|
Diluted
shares
|
|
|
29,009,949
|
|
|
|
28,988,701
|
|
Income per
share -
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$
|
0.03
|
|
|
$
|
0.01
|
|
Three
months ended November 30:
|
|
|
|
|
|
|
|
|
Numerator
-
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to common stockholders
|
|
$
|
128,893
|
|
|
$
|
(11,337
|
)
|
Denominator
-
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding - basic
|
|
|
28,361,201
|
|
|
|
28,361,201
|
|
Incremental
shares from assumed conversion of options and warrants
|
|
|
657,061
|
|
|
|
-
|
|
Diluted
shares
|
|
|
29,018,262
|
|
|
|
28,361,201
|
|
Income (Loss)
per share -
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Inventory
consists of the following:
|
|
November
30, 2018
|
|
|
May
31, 2018
|
|
Raw
materials
|
|
$
|
2,126,355
|
|
|
$
|
864,339
|
|
Finished
goods
|
|
|
3,261,651
|
|
|
|
2,224,928
|
|
Total
inventory
|
|
$
|
5,388,006
|
|
|
$
|
3,089,267
|
|
Note
4.
|
Property,
Plant and Equipment
|
A
summary of property, plant and equipment for Greystone is as follows:
|
|
November
30, 2018
|
|
|
May
31, 2018
|
|
Production
machinery and equipment
|
|
$
|
41,752,448
|
|
|
$
|
35,270,326
|
|
Plant
buildings and land
|
|
|
6,193,194
|
|
|
|
5,739,491
|
|
Leasehold
improvements
|
|
|
833,860
|
|
|
|
534,637
|
|
Furniture
and fixtures
|
|
|
540,937
|
|
|
|
396,882
|
|
|
|
|
49,320,439
|
|
|
|
41,941,336
|
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated depreciation and amortization
|
|
|
(18,719,431
|
)
|
|
|
(16,587,460
|
)
|
|
|
|
|
|
|
|
|
|
Net
Property, Plant and Equipment
|
|
$
|
30,601,008
|
|
|
$
|
25,353,876
|
|
Production
machinery and equipment includes equipment capitalized pursuant to a capital lease in the amount of $9,924,908. The equipment
is being amortized using the straight-line method over 3.5 years for pallet molds and 12 years for injection molding machines.
Production
machinery includes deposits on equipment in the amount of $3,435,276 that had not been placed into service as of November 30,
2018. Two plant buildings and land are owned by GRE, a variable interest entity (“VIE”), having a net book value of
$2,954,485 at November 30, 2018.
Depreciation
expense, including amortization expense related to assets under capital leases, for the six months ended November 30, 2018 and
2017 was $2,131,971 and $1,547,936, 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 CEO and President,
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 $22,500 for use of Yorktown’s grinding equipment and $5,000 for the use of Yorktown’s
pelletizing equipment for which GSM paid Yorktown rental fees of $715,000 for each of the six months ended November 30, 2018 and
2017.
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.
Total rent expense was $24,000 for each of fiscal year 2019 and 2018. At November 30, 2018, future minimum payments under the
non-cancelable operating lease are $48,000 for fiscal years 2019, 2020 and 2021 and $4,000 for fiscal year 2022
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 periodically purchases material
and pallets from TriEnda. Purchases for the six months ended November 30, 2018 and 2017 totaled $42,349 and $45,467, respectively.
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 $167,400 and $256,819 for the six months ended November
30, 2018 and 2017, respectively. The account receivable due from Green at November 30, 2018 was $93,960.
Debt
as of November 30, 2018 and May 31, 2018 is as follows:
|
|
November
30, 2018
|
|
|
May
31, 2018
|
|
Term
loan A payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing April
30, 2023
|
|
$
|
3,597,384
|
|
|
$
|
3,945,443
|
|
|
|
|
|
|
|
|
|
|
Term
loan C payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing August
4, 2020
|
|
|
1,506,584
|
|
|
|
1,613,445
|
|
|
|
|
|
|
|
|
|
|
Term
loan D payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.75%, maturing January
10, 2022
|
|
|
2,031,956
|
|
|
|
2,314,935
|
|
|
|
|
|
|
|
|
|
|
Term
loan E payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.75%, maturing January
10, 2022
|
|
|
1,000,000
|
|
|
|
843,200
|
|
|
|
|
|
|
|
|
|
|
Term
loan F payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing February
8, 2021
|
|
|
3,357,465
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Revolving
loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.75%, due January 31,
2020
|
|
|
3,000,000
|
|
|
|
1,879,000
|
|
|
|
|
|
|
|
|
|
|
Note
payable to First Bank, prime rate of interest plus 1.45% but not less than 4.95%, monthly principal and interest payment of
$30,628, due August 21, 2021, secured by production equipment
|
|
|
954,403
|
|
|
|
1,099,447
|
|
|
|
|
|
|
|
|
|
|
Term
loan payable by GRE to International Bank of Commerce, interest rate of 5.5%, monthly principal and interest payment of $26,215,
due April 30, 2023
|
|
|
2,554,987
|
|
|
|
2,652,428
|
|
|
|
|
|
|
|
|
|
|
Note
payable to Robert Rosene, 7.5% interest, due January 15, 2020
|
|
|
4,467,330
|
|
|
|
4,469,355
|
|
|
|
|
|
|
|
|
|
|
Note
payable to Yorktown Management & Financial Services, LLC, 5% interest, due February 28, 2019, monthly principal and interest
payments of $20,629
|
|
|
61,374
|
|
|
|
181,850
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
244,986
|
|
|
|
252,493
|
|
Total
debt
|
|
|
22,776,469
|
|
|
|
19,251,596
|
|
Debt
issue costs, net of amortization
|
|
|
(44,842
|
)
|
|
|
(91,370
|
)
|
Total
debt, net of debt issue costs
|
|
|
22,731,627
|
|
|
|
19,160,226
|
|
Less:
Current portion
|
|
|
(2,841,016
|
)
|
|
|
(2,324,046
|
)
|
Long-term
debt
|
|
$
|
19,890,611
|
|
|
$
|
16,836,180
|
|
The
prime rate of interest as of November 30, 2018 was 5.25%. Effective December 20, 2018, the prime rate of interest increased to
5.5%.
Loan
Agreement between Greystone and IBC
The
Loan Agreement (“IBC Loan Agreement”), dated January 31, 2014 and as amended from time to time, among Greystone and
GSM (the “Borrowers”) and International Bank of Commerce (“IBC”), as amended, provides for certain term
loans and a revolver loan.
Effective
August 10, 2018, the Borrowers and IBC entered into the Sixth Amendment to the IBC Loan Agreement providing (i) an advancing Term
Loan F of $3,600,000 with a maturity date of February 8, 2021 for the procurement of production equipment and (ii) an extension
of the maturity date of Term Loan A to April 30, 2023.
The
IBC term loans make equal monthly payments of principal and interest in such amounts sufficient to amortize the principal balance
of (i) Term Loan A over a seven-year period beginning January 31, 2016 (currently $77,166 per month), (ii) Term Loan C over a
seven-year period beginning November 30, 2017 (currently $25,205 per month) and (iii) Term Loan D over a four-year period beginning
August 4, 2020 (currently $57,469 per month). Term Loan E and Term Loan F require monthly interest payments through December 10,
2018 and January 28, 2019, respectively, after which monthly payments of principal and interest are required in an amount sufficient
to amortize the loans over a four-year and a five-year period, respectively. The monthly payments of principal and interest on
the IBC term loans may vary as a result of changes in the prime rate of interest.
The
IBC Loan Agreement provides a revolving loan in an aggregate principal amount of up to $4,000,000 ($3,000,000 at November 30,
2018) (the “Revolving Loan”). The Loan Agreement was amended December 28, 2018 increasing the principal amount under
the Revolving Loan to $4,000,000 of which the amount which can be borrowed from time to time is dependent upon the amount of the
borrowing base, but can in no event exceed $4,000,000. The Revolving Loan bears interest at the greater of the prime rate of interest
plus 0.5%, or 4.75% and matures January 31, 2020. The Borrowers are required to pay all interest accrued on the outstanding principal
balance of the Revolving Loan on a monthly basis. Any principal on the Revolving Loan that is prepaid by the Borrowers does not
reduce the original amount available to the Borrowers.
The
IBC Loan Agreement includes customary representations and warranties and affirmative and negative covenants which include (i)
requiring the Borrowers to maintain a debt service coverage ratio of 1:25 to 1:00 and a funded debt to EBIDA ratio not exceeding
3:00 to 1:00 measured quarterly, (ii) subject to certain exceptions, limiting the Borrowers’ combined capital expenditures
on fixed assets to $1,500,000 per year, (iii) prohibiting Greystone, without IBC’s prior written consent, from declaring
or paying any dividends, redemptions of stock or membership interests, distributions and withdrawals (as applicable) in respect
of its capital stock or any other equity interest, other than additional payments to holders of its preferred stock in an amount
not to exceed $500,000 in any fiscal year, (iv) subject to certain exceptions, prohibiting the incurrence of additional indebtedness
by the Borrowers, and (v) requiring the Borrowers to prevent (A) any change in capital ownership such that there is a material
change in the direct or indirect ownership of (1) Greystone’s outstanding preferred stock, and (2) any equity interest in
GSM, or (B) Warren Kruger from ceasing to be actively involved in the management of Greystone as President and/or Chief Executive
Officer. The foregoing list of covenants is not exhaustive and there are several other covenants contained in the IBC Loan Agreement.
As
of November 30, 2018, Greystone was not in compliance with the debt service coverage ratio of the IBC Loan Agreement. IBC has
issued a waiver with respect to this event of noncompliance.
The
IBC Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and
other amounts owing under the IBC 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 Loan Agreement or the related loan documents. Among other things, a default
under the IBC Loan Agreement would permit IBC to cease lending funds under the IBC Loan Agreement, and require immediate repayment
of any outstanding notes with interest and any unpaid accrued fees.
The
IBC Loan Agreement is secured by a lien on substantially all of the assets of the Borrowers. In addition, the IBC Loan Agreement
is secured by a mortgage granted by GRE on the real property owned by GRE in Bettendorf, Iowa (the “Mortgage”). GRE
is owned by Warren F. Kruger, Greystone’s President and CEO, and Robert B. Rosene, Jr., a director of Greystone. Messrs.
Kruger and Rosene have provided a combined limited guaranty of the Borrowers’ obligations under the IBC Loan Agreement,
with such guaranty being limited to a combined amount of $6,500,000 (the “Guaranty”). The Mortgage and the Guaranty
also secure or guaranty, as applicable, the obligations of GRE under the Loan Agreement between GRE and IBC dated January 31,
2014 as discussed in the following paragraph.
Loan
Agreement between GRE and IBC
On
August 10, 2018, GRE and IBC entered into an amended agreement to extend the maturity of the note to April 30, 2023 and increase
the interest rate to 5.5% interest rate. The note is secured by a mortgage on the two buildings in Bettendorf, Iowa which are
leased to Greystone.
Note
Payable between Greystone and Robert B. Rosene, Jr.
Effective
December 15, 2005, Greystone entered into an agreement with Robert B. Rosene, Jr., a member of Greystone’s board of directors,
to convert $2,066,000 of advances into an unsecured note payable at 7.5% interest. Effective June 1, 2016, the note was restated
(the “Restated Note”) to combine the outstanding principal, $2,066,000, and accrued interest, $2,475,690, into an
unsecured note payable of $4,541,690 with an extended maturity date of January 15, 2020. The Restated Note provides that accrued
interest is payable monthly and allows Greystone to use commercially reasonable efforts to pay such amounts as allowed by the
IBC Loan Agreement against the interest accrued prior to the restatement. The balance of the note at November 30, 2018 was $4,467,330.
Note
Payable between Greystone and Yorktown Management Financial Services, LLC (“Yorktown”)
On
February 29, 2016, Greystone entered into an unsecured note payable to Yorktown in the amount of $688,296 in connection with the
acquisition of equipment from Yorktown. The note payable bears interest at the rate of 5% and is payable over six years with monthly
principal and interest payments of $20,629.
Maturities
Maturities
of Greystone’s long-term debt for the five years subsequent to November 30, 2018 are $2,841,016, $13,829,912, $2,435,257,
$1,583,489 and $2,086,795.
Capital
leases as of November 30, 2018 and May 31, 2018:
|
|
November
30, 2018
|
|
|
May
31, 2018
|
|
Non-cancellable
capital leases with a private company, interest rates of 7.4% and 5.0%, maturing August 1, 2023, February 24, 2023 and August
7, 2019
|
|
$
|
4,893,448
|
|
|
$
|
3,893,814
|
|
Less:
Current portion
|
|
|
(1,646,872
|
)
|
|
|
(2,160,807
|
)
|
Non-cancellable
capital leases, net of current portion
|
|
$
|
3,246,576
|
|
|
$
|
1,733,007
|
|
Greystone
and an unrelated private company entered into three lease agreements for certain production equipment with a total cost of approximately
$9.9 million. The first agreement, dated August 7, 2016, was a three-year lease agreement for two injection molding machines and
pallet molds, interest rate of 5.0% and maturity date of August 7, 2019 (“Agreement A”). The remaining two agreements,
dated February 24, 2018 and August 2, 2018, were five-year lease agreements for two additional injection molding machines and
one pallet mold, interest rate of 7.4% and maturity dates of February 23, 2023 and August 1, 2023, (“Agreement B”).
The lease agreements include a bargain purchase option to acquire the production equipment at the end of the lease terms. Lease
payments are made on a per invoice basis at rates of (i) $6.25 per pallet produced on the equipment leased pursuant to Agreement
A and sold to the private company estimated at $180,000 per month and (ii) $3.32 per pallet produced on the equipment leased pursuant
to Agreement B and sold to the private company estimated at $96,000 per month. Both Agreements A & B provide for minimum monthly
lease rental payments based upon the total pallets sold in excess of a specified amount not to exceed the monthly productive capacity
of the leased machines.
The
production equipment under the non-cancelable capital leases has a gross carrying amount of $9,924,907 at November 30, 2018. Amortization
of the carrying amount of approximately $449,000 and $266,000 was included in depreciation expense for the six months ended
November 30, 2018 and 2017, respectively.
Future
minimum lease payments under non-cancelable capital leases as of November 30, 2018, are approximately:
Twelve
months ended November 30, 2019
|
|
$
|
1,918,000
|
|
Twelve
months ended November 30, 2020
|
|
|
1,135,000
|
|
Twelve
months ended November 30, 2021
|
|
|
1,135,000
|
|
Twelve
months ended November 30, 2022
|
|
|
1,049,000
|
|
Twelve
months ended November 30, 2023
|
|
|
318,000
|
|
Total
lease payments
|
|
|
5,555,000
|
|
Imputed
interest
|
|
|
661,552
|
|
Present
value of minimum lease payments
|
|
$
|
4,893,448
|
|
Deferred
revenue as of November 30, 2018 and May 31, 2018 represent advance payments from a customer to purchase plastic pallets with shipments
expected to be complete by December 30, 2018. Greystone recognizes revenue as plastic pallets are shipped to the customer. Recognized
revenue totaled $3,381,345 during the six months ended November 30, 2018.
Note
9.
|
Revenue
and Revenue Recognition
|
On
June 1, 2018, Greystone adopted Accounting Standards Update (ASU) 2014-09,
Revenue from Contracts with Customers (Topic 606)
,
as amended, using the retrospective method. Greystone determined that there was no cumulative effect adjustment to the Consolidated
Financial Statements and the adoption of the new standard did not require
any adjustments
to Greystone’s consolidated financial statements for prior periods
. Under the guidance of the new standard, 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. The following steps are applied in determining the amount and timing of revenue recognition:
|
1.
|
Identification
of a contract with a customer is a sales arrangement involving a purchase order issued by the customer stating each party’s
rights regarding the plastic pallets to be transferred. Payment terms vary by customer from net 30 days to 90 days. Discounts
on sales arrangements are generally not provided. Credit worthiness is determined by Greystone based on payment experience
and financial information available on the customer.
|
|
2.
|
Identification
of performance obligations in the sales arrangement which is predominantly the promise to transfer plastic pallets to Greystone’s
customer.
|
|
3.
|
Determination
of the transaction price which is specified in the purchase order based on product pricing negotiated between Greystone and
the customer.
|
|
4.
|
Allocate
the transaction price to performance obligations.
|
|
5.
|
Recognition
of revenue which predominantly occurs upon completion of the performance obligation and transfer of control. Transfer of control
generally occurs at the point of shipment which is Greystone’s manufacturing and warehouse locations.
|
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 $296,000
and $474,000 in fiscal years 2019 and 2018, respectively.
Greystone’s
customers include stocking and non-stocking distributors and direct sales to end-user customers. Sales to Greystone’s three
largest customers, which are end-users, totaled approximately 84% and 73% of sales in fiscal years 2019 and 2018, respectively.
Sales to distributors totaled approximately 14% and 23% of sales in fiscal years 2019 and 2018, respectively. Combined sales to
Greystone’s three largest customers and distributors totaled approximately 98% and 96% of sales in fiscal years 2019 and
2018, respectively. The third large customer was a new addition during the last quarter of fiscal year 2018 and had approximately
11% of sales in fiscal year 2019.
Note
10.
|
Fair
Value of Financial Instruments
|
The
following methods and assumptions are used in estimating the fair-value disclosures for financial instruments:
Debt:
The carrying amount of notes with floating rates of interest approximate fair value. Fixed rate notes are valued based on cash
flows using estimated rates of comparable notes. The carrying amounts reported in the balance sheet approximate fair value.
Note
11.
|
Concentrations,
Risks and Uncertainties
|
Greystone
derived approximately 84% and 73% of its total sales from three customers in fiscal years 2019 and 2018, 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 $814,764 and $1,215,431 in fiscal years 2019 and 2018, respectively, is from one of its major customers.
Robert
B. Rosene, Jr., a Greystone director, has provided financing and guarantees on Greystone’s bank debt. As of November 30,
2018, Greystone is indebted to Mr. Rosene in the amount of $4,467,330 for a note payable due January 15, 2020. There is no assurance
that Mr. Rosene will renew the note as of the maturity date.
Note
12.
|
Recent
Accounting Pronouncements
|
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, which is intended to improve financial reporting about
leasing transactions. The ASU will require organizations (“lessees”) that lease assets with lease terms of more than
twelve months to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases.
In addition, the ASU will require disclosures to help investors and other financial statement users better understand the amount,
timing and uncertainty of cash flows arising from leases. The effective date of this ASU is for fiscal years beginning after December
31, 2018 and interim periods within that year. Management has reviewed Greystone’s leases and determined that the implementation
of ASU 2016-02 will not have a material impact on the consolidated financial statements.
At
November 30, 2018, Greystone had commitments totaling $2,241,000 toward the purchase of production equipment.
Note
14.
|
Reclassifications
|
Certain
amounts in the Consolidated Statement of Cash Flows for the six months ended November 30, 2017 have been restated to conform to
classifications utilized in the six months ended November 30, 2018.
Note
15.
|
Subsequent
Event
|
Effective
December 31, 2018, Greystone executed a sale and leaseback agreement with Yorktown with respect to certain equipment which Greystone
acquired during fiscal year 2019 for a total of $968,168. The lease provides for rent of $27,913 for thirty-six months and $7,694
for the following twelve months with an option to purchase at the end of the lease.