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 29, 2020 and the results of its operations and cash flows for the nine months and three months ended February
29(28), 2020 and 2019. 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, 2019 and the notes thereto included in Greystone’s Form 10-K for
such period. The results of operations for the nine months and three months ended February 29(28), 2020 and 2019 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 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.
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 for the nine months and three months ended February 29(28) are
as follows:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Preferred stock convertible into common stock
|
|
|
3,333,333
|
|
|
|
3,333,333
|
|
The
following tables set forth the computation of basic and diluted earnings per share:
For
the nine months ended February 29(28), 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Numerator -
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
$
|
2,546,483
|
|
|
$
|
789,399
|
|
Denominator -
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - basic
|
|
|
28,361,201
|
|
|
|
28,361,201
|
|
Incremental shares from assumed conversion of warrants and options
|
|
|
642,000
|
|
|
|
648,214
|
|
Diluted shares
|
|
|
29,003,201
|
|
|
|
29,009,415
|
|
Income per share -
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
0.09
|
|
|
$
|
0.03
|
|
For
the three months ended February 29(28), 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Numerator -
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
$
|
1,799,805
|
|
|
$
|
59,118
|
|
Denominator -
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - basic
|
|
|
28,361,201
|
|
|
|
28,361,201
|
|
Incremental shares from assumed conversion of warrants and options
|
|
|
638,298
|
|
|
|
650,847
|
|
Diluted shares
|
|
|
28,999,499
|
|
|
|
29,012,048
|
|
Income per share -
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
0.06
|
|
|
$
|
0.00
|
|
Note
3. Inventory
Inventory
consists of the following:
|
|
February 29, 2020
|
|
|
May
31, 2019
|
|
Raw materials
|
|
$
|
1,919,222
|
|
|
$
|
1,295,991
|
|
Finished goods
|
|
|
1,956,877
|
|
|
|
1,325,000
|
|
Total inventory
|
|
$
|
3,876,099
|
|
|
$
|
2,620,991
|
|
Note
4. Property, Plant and Equipment
A
summary of property, plant and equipment for Greystone is as follows:
|
|
February 29, 2020
|
|
|
May
31, 2019
|
|
Production machinery and equipment
|
|
$
|
49,077,097
|
|
|
$
|
45,645,910
|
|
Plant buildings and land
|
|
|
6,869,380
|
|
|
|
6,336,855
|
|
Leasehold improvements
|
|
|
1,095,961
|
|
|
|
979,890
|
|
Furniture and fixtures
|
|
|
601,586
|
|
|
|
563,074
|
|
Right-to-use assets under operating leases
|
|
|
199,653
|
|
|
|
180,794
|
|
|
|
|
57,843,677
|
|
|
|
53,706,523
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(24,937,955
|
)
|
|
|
(21,026,051
|
)
|
|
|
|
|
|
|
|
|
|
Net Property, Plant and Equipment
|
|
$
|
32,905,722
|
|
|
$
|
32,680,472
|
|
Production
machinery and equipment includes right-to-use equipment capitalized pursuant to financing leases in the amount of $8,473,357 and
$7,861,233 at February 29, 2020 and May 31, 2019, respectively. The financing leases all include an option to purchase which management
anticipates exercising and, accordingly, the related equipment is being amortized over the estimated useful life using the straight-line
method over 3.5 years for pallet molds, 5 and 7 year for material handling equipment and 12 years for injection molding machines.
Production
machinery includes deposits on equipment in the amount of $1,680,960 at February 29, 2020 which have not been placed into service.
Two plant buildings and land are owned by GRE, a variable interest entity (“VIE”), having a net book value of $2,809,645
at February 29, 2020.
Depreciation
expense, including amortization expense related to right-to-use assets under financing leases, for the nine months ended February
29(28), 2020 and 2019 was $3,911,904 and $3,255,939, 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 $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 29(28), 2020 and 2019.
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 $36,000 for each of the nine months ended February 29(28), 2020 and 2019. At February 29, 2020, future
minimum payments under the non-cancelable operating lease for the remaining two years are $48,000 and $40,000.
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 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 nine months ended February 29(28), 2020 and 2019 totaled $5,400 and $42,349, 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 $393,720 and $167,400 for the nine months ended February
29(28), 2020 and 2019, respectively. The account receivable due from Green at February 29, 2020 was $122,400.
Note
6. Long-term Debt
Debt
as of February 29, 2020 and May 31, 2019 is as follows:
|
|
February 29, 2020
|
|
|
May 31, 2019
|
|
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
|
|
$
|
2,664,063
|
|
|
$
|
3,234,947
|
|
|
|
|
|
|
|
|
|
|
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, 2024
|
|
|
1,228,697
|
|
|
|
1,399,490
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
1,293,713
|
|
|
|
1,744,235
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
756,372
|
|
|
|
927,199
|
|
|
|
|
|
|
|
|
|
|
Term loan F payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing February 29, 2024
|
|
|
2,919,586
|
|
|
|
3,398,247
|
|
|
|
|
|
|
|
|
|
|
Term loan G payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing April 30, 2024
|
|
|
848,448
|
|
|
|
876,934
|
|
|
|
|
|
|
|
|
|
|
Term loan H payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing January 1, 2022
|
|
|
499,585
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.5%, due January 31, 2022
|
|
|
1 090,000
|
|
|
|
3,205,000
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
561,105
|
|
|
|
800,488
|
|
|
|
|
|
|
|
|
|
|
Term loan payable by GRE to International Bank of Commerce, interest rate of 5.5%, monthly principal and interest payment of $27,688, due April 30, 2023
|
|
|
2,312,223
|
|
|
|
2,461,116
|
|
|
|
|
|
|
|
|
|
|
Note payable to Robert Rosene, 7.5% interest, due January 15, 2022
|
|
|
4,297,169
|
|
|
|
4,426,631
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
189,246
|
|
|
|
223,177
|
|
Total long-term debt
|
|
|
18,660,207
|
|
|
|
22,697,464
|
|
Debt issuance costs, net of amortization
|
|
|
(37,176
|
)
|
|
|
(37,686
|
)
|
Total debt, net of debt issuance costs
|
|
|
18,623,031
|
|
|
|
22,659,778
|
|
Less: Current portion of long-term debt
|
|
|
(3,525,314
|
)
|
|
|
(3,030,630
|
)
|
Long-term debt, net of current portion and debt issue costs
|
|
$
|
15,097,717
|
|
|
$
|
19,629,148
|
|
The
prime rate of interest as of February 29, 2020 was 4.75%. Effective March 16, 2020, the prime rate of interest was reduced to
3.25%.
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”) provides for certain term loans and a
revolver loan.
Effective
July 1, 2019, the Borrowers and IBC entered into the Tenth Amendment to the IBC Loan Agreement providing for Term Loan H in the
amount of $672,000 with a maturity date of January 1, 2022, for the procurement of production equipment.
The
IBC term loans make equal monthly payments of principal and interest in such amounts sufficient to amortize the principal balance
as follows: (i) Term Loan A over a seven-year period beginning February 29, 2016 (currently $78,260 per month), (ii) Term Loan
C over a seven-year period beginning November 30, 2017 (currently $25,205 per month), (iii) Term Loan D over a four-year period
beginning February 10, 2019 (currently $57,469 per month), (iv) Term Loan E over a four-year period beginning February 10, 2019
(currently $23,060 per month), (v) Term Loan F over a five-year period beginning February 28, 2019 (currently $67,674 per month),
(vi) Term Loan G over a fifteen-year period beginning April 30, 2019 (currently $7,092 per month) and (vii) Term Loan H over 30
months beginning August 1, 2019 (currently $23,891 per month). 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, as amended, provides a revolving loan in an aggregate principal amount of up to $4,000,000 (the “Revolving
Loan”). The amount which can be borrowed from time to time is dependent upon the amount of the borrowing base not to exceed
$4,000,000. The Revolving Loan bears interest at the greater of the prime rate of interest plus 0.5%, or 5.50% and matures January
31, 2022. 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, among other things, requires a quarterly affirmation that the Borrowers have maintained a debt service coverage
ratio of 1:25 to 1:00. As of February 29, 2020, Greystone was in compliance with this debt service coverage ratio.
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 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%. 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, 2022. 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
February 29, 2020 was $4,297,169.
There
is no assurance that Mr. Rosene will renew the note as of the maturity date.
Maturities
Maturities
of Greystone’s long-term debt for the five years subsequent to February 29, 2020 are $3,525,314, $9,251,335, $2,203,898,
$2,906,782 and $772,878.
Note
7. Leases
Financing
Leases
Financing
leases as of February 29, 2020 and May 31, 2019:
|
|
February 29, 2020
|
|
|
May 31, 2019
|
|
Present value of non-cancellable financing leases
|
|
$
|
5,922,843
|
|
|
$
|
6,754,819
|
|
Less: Current portion
|
|
|
(2,146,923
|
)
|
|
|
(1,516,629
|
)
|
Present value of non-cancellable financing leases, net of current portion
|
|
$
|
3,775,920
|
|
|
$
|
5,238,190
|
|
Greystone
and an unrelated private company entered into three lease agreements for certain production equipment with a total cost of approximately
$7.4 million during the period from February 24, 2018 through December 21, 2018 with five-year terms and a capitalized interest
rate of 7.4%. Each of the lease agreements include a bargain purchase option to acquire the production equipment at the end of
the lease term. The leased equipment is principally used to produce pallets for the private company. Lease payments are made as
a credit on the sales invoice at the rate of $3.32 for each pallet produced from the respective leased equipment and shipped to
the private company. The estimated aggregate monthly rental payments are approximately $178,500. The rent payments can vary each
month depending on the quantity of pallets produced from each machine. Due to improvements in the production process, pallet production
has increased since May 31, 2019 thereby resulting in an increase in the estimated annual future rental payments and a corresponding
reduction in the estimated term of the lease. The lease agreements 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.
Effective
December 28, 2018, Yorktown purchased certain production equipment from Greystone at net book value of $968,168 and entered into
a lease agreement with Greystone for the equipment with a monthly rent of $27,915 for the initial thirty-nine months and $7,695
for the following twelve months and maturing December 27, 2022. The lease agreement has a $10,000 purchase option at the end of
the lease.
The
production equipment under the non-cancelable financing leases has a gross carrying amount of $8,473,357 at February 29, 2020.
Amortization of the carrying amount of $653,942 and $775,530 was included in depreciation expense for the nine months ended February
29(28), 2020 and 2019, respectively.
Operating
Leases
Greystone
recognize 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, reported in property,
plant and equipment on the consolidated balance sheets, 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 statement
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) office space on a ninety-month term and a discount rate of 5.0%. The leases are single-term with constant
monthly rental rates.
Lease
Summary Information
For
the nine months ended February 29(28), 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Lease Expense
|
|
|
|
|
|
|
|
|
Financing lease expense -
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
653,942
|
|
|
$
|
775,530
|
|
Interest on lease liabilities
|
|
|
355,692
|
|
|
|
236,875
|
|
Operating lease expense
|
|
|
63,185
|
|
|
|
36,000
|
|
Short-term lease expense
|
|
|
1,207,008
|
|
|
|
1,136,617
|
|
Total
|
|
$
|
2,279,827
|
|
|
$
|
2,185,022
|
|
|
|
|
|
|
|
|
|
|
Other Information
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities for finance leases -
|
|
|
|
|
|
|
|
|
Operating cash flows
|
|
$
|
355,692
|
|
|
$
|
236,875
|
|
Financing cash flows
|
|
$
|
1,487,489
|
|
|
$
|
644,677
|
|
Cash paid for amounts included in the measurement of lease liabilities for operating leases -
|
|
|
|
|
|
|
|
|
Operating cash flows
|
|
$
|
63,185
|
|
|
$
|
36,000
|
|
Right-of-use assets obtained in exchange for lease liabilities -
|
|
|
|
|
|
|
|
|
Financing leases
|
|
$
|
612,124
|
|
|
$
|
4,667,380
|
|
Operating leases
|
|
$
|
67,750
|
|
|
$
|
-
|
|
Weighted-average remaining lease term (in years) -
|
|
|
|
|
|
|
|
|
Financing leases
|
|
|
3.6
|
|
|
|
3.1
|
|
Operating leases
|
|
|
3.0
|
|
|
|
2.8
|
|
Weighted-average discount rate -
|
|
|
|
|
|
|
|
|
Financing leases
|
|
|
7.1
|
%
|
|
|
7.2
|
%
|
Operating leases
|
|
|
5.2
|
%
|
|
|
5.0
|
%
|
Future
minimum lease payments under non-cancelable leases as of February 29, 2020, are approximately: ,
|
|
Financing
Leases
|
|
|
Operating
Leases
|
|
Twelve months ended February 28, 2021
|
|
$
|
2,513,000
|
|
|
$
|
81,881
|
|
Twelve months ended February 28, 2022
|
|
|
2,395,000
|
|
|
|
73,881
|
|
Twelve months ended February 28, 2023
|
|
|
1,552,000
|
|
|
|
33,881
|
|
Twelve months ended February 29, 2024
|
|
|
149,000
|
|
|
|
23,154
|
|
Twelve months ended February 28, 2025
|
|
|
20,000
|
|
|
|
-
|
|
Total future minimum lease payments
|
|
|
6,629,000
|
|
|
|
212,797
|
|
Present value discount
|
|
|
706,157
|
|
|
|
13,144
|
|
Present value of minimum lease payments
|
|
$
|
5,922,843
|
|
|
$
|
199,653
|
|
Note
8. Deferred Revenue
Advances
from a customer pursuant to a contract for the sale of plastic pallets is recognized as deferred revenue. Revenue is recognized
by Greystone as pallets are shipped to the customer(s). Customer advances totaled $5,981,710 and $3,280,500 during the nine months
ended February 29(28), 2020 and 2019, respectively. Revenue recognition from customer advances during the nine months ended
February 29, 2020 was $2,242,184. The unrecognized balance of deferred revenue at February 29, 2020 and May 31, 2019, was $5,940,593
and $2,201,067, respectively.
Note
9. Revenue and Revenue Recognition
Revenue
is recognized at the point in time as 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.
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 $2,187,000
and $291,000 in fiscal years 2020 and 2019, 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 29(28), 2020 and 2019, respectively, were as follows:
Category
|
|
2020
|
|
|
2019
|
|
End Users – Major Customers
|
|
|
87
|
%
|
|
|
85
|
%
|
End Users - Other
|
|
|
1
|
%
|
|
|
1
|
%
|
Distributors
|
|
|
12
|
%
|
|
|
14
|
%
|
Note
10. Fair Value of Financial Instruments
The
following methods and assumptions are used in estimating the fair-value disclosures for financial instruments:
Debt:
The carrying amount of notes with floating rates of interest approximate fair value. Fixed rate notes are valued based on cash
flows using estimated rates of comparable notes. The carrying amounts reported on the balance sheets approximate fair value.
Note
11. Concentrations, Risks and Uncertainties
Greystone
derived approximately 87% and 85% of its total sales from four customers (three in fiscal year 2019) in fiscal years 2020 and
2019, 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 $1,409,045 and $1,249,653 in fiscal years 2020 and 2019, respectively, is from one of its major customers.
COVID-19
The
recent global outbreak of COVID-19 has created much uncertainty in the marketplace, and the full economic impact, duration and
spread of the COVID-19 virus is uncertain and difficult to predict at this time considering the rapidly evolving landscape. To
date, the demand for Greystone’s products has not been affected as Greystone’s pallets are generally used logistically
by essential entities. Going forward, the major issue that Greystone has incurred is maintaining adequate work force to meet demand
for pallets. While there has not been a reported case of COVID-19 at Greystone, the virus has impacted the overall workforce in
the area as recruiting new employees has slowed, and a portion of the employees have opted to remain home for protection. Management
is currently unable to estimate the impact of this economic event on its future financial position, results of operations and
cash flows. Therefore, Greystone can give no assurances that this event will not have a material adverse effect on its financial
position or results of operations. If the COVID-19 outbreak continues to evolve causing disruption to our workforce, customers
and vendors, this economic event could have a material adverse effect on Greystone’s business, results of operations, financial
condition and cash flows.
On
March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law providing certain economic aid
packages for small business. Greystone qualifies as a small business under CARES and has submitted an application for funding
under the Paycheck Protections Program.
Note
12. Commitments
At
February 29, 2020, Greystone had commitments totaling $2,867,000 toward the purchase of production equipment.
Note
13. Subsequent Event
On
March 24, 2020, Greystone entered into a loan agreement with Great Western Bank to borrow $1,508,000 under a term loan, 3.7% interest
and maturing March 19, 2025, for the purchase of an injection molding machine.