UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
|
[X] |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the quarterly period ended November 30, 2020
| [ ] |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For
the transition period from ___________ to ____________
|
Commission
file number |
000-26331 |
|
|
GREYSTONE LOGISTICS, INC. |
|
(Exact name of registrant as specified in its charter) |
|
Oklahoma |
|
75-2954680 |
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
1613 East
15th Street, Tulsa, Oklahoma 74120
(Address of
principal executive offices)
(Zip
Code)
|
(918)
583-7441 |
|
(Registrant’s
telephone number, including area code) |
|
|
|
(Former
name, former address and former fiscal year, if changed since last
report) |
Securities
registered pursuant to Section 12(b) of the Act:
|
Title
of each class |
|
Trading
Symbol |
|
Name
of each exchange on which registered |
|
NONE |
|
GLGI |
|
NONE |
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
[X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (Section 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to post and submit such files).
Yes[X]
No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer |
[ ] |
|
Accelerated
filer |
|
[ ] |
| Non-accelerated
filer |
[X] |
|
Smaller
reporting company |
|
[X] |
| |
|
|
Emerging
growth company |
|
[ ] |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by checkmark whether the registrant is a shell company (as defined
in rule 12b-2 of the Exchange Act).
Yes
[ ] No [X]
Applicable
only to corporate issuers:
Indicate
the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date: January 8, 2021
- 28,361,201
GREYSTONE
LOGISTICS, INC.
FORM
10-Q
For
the Period Ended November 30, 2020
PART I. FINANCIAL
INFORMATION
Item
1. Financial Statements
Greystone
Logistics, Inc. and Subsidiaries
Consolidated Balance
Sheets
(Unaudited)
| |
|
November
30, 2020 |
|
|
May 31,
2020 |
|
|
Assets |
|
|
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
752,252 |
|
|
$ |
1,131,850 |
|
|
Accounts
receivable - |
|
|
|
|
|
|
|
|
|
Trade |
|
|
4,086,279 |
|
|
|
6,670,771 |
|
|
Related
parties |
|
|
137,460 |
|
|
|
94,351 |
|
|
Inventory |
|
|
3,229,886 |
|
|
|
4,229,895 |
|
|
Prepaid
expenses |
|
|
76,549 |
|
|
|
7,488 |
|
|
Total
Current Assets |
|
|
8,282,426 |
|
|
|
12,134,355 |
|
|
Property,
Plant and Equipment, net |
|
|
32,428,271 |
|
|
|
34,142,407 |
|
|
Right-of-Use Operating
Lease Assets |
|
|
145,269 |
|
|
|
181,525 |
|
|
Total
Assets |
|
$ |
40,855,966 |
|
|
$ |
46,458,287 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
|
|
Current
portion of long-term debt |
|
$ |
5,195,878 |
|
|
$ |
4,416,377 |
|
|
Current
portion of financing leases |
|
|
1,920,854 |
|
|
|
1,838,251 |
|
|
Current
portion of operating leases |
|
|
76,052 |
|
|
|
74,024 |
|
|
Accounts
payable and accrued liabilities |
|
|
3,699,423 |
|
|
|
4,929,234 |
|
|
Deferred
revenue |
|
|
1,403,007 |
|
|
|
3,793,167 |
|
|
Preferred
dividends payable |
|
|
81,918 |
|
|
|
84,110 |
|
|
Total
Current Liabilities |
|
|
12,377,132 |
|
|
|
15,135,163 |
|
|
Long-Term Debt,
net of current portion and debt issue costs |
|
|
13,886,814 |
|
|
|
18,329,633 |
|
|
Financing
Leases, net of current portion |
|
|
2,579,223 |
|
|
|
3,617,405 |
|
|
Operating
Leases, net of current portion |
|
|
69,217 |
|
|
|
107,501 |
|
|
Deferred
Tax Liability |
|
|
2,020,052 |
|
|
|
1,109,052 |
|
|
Equity: |
|
|
|
|
|
|
|
|
Preferred stock,
$0.0001 par value, cumulative,
20,750,000 shares authorized, 50,000 shares issued and
outstanding, liquidation preference of $5,000,000 |
|
|
5 |
|
|
|
5 |
|
|
Common
stock, $0.0001 par value, 5,000,000,000 shares authorized,
28,361,201 shares issued and outstanding |
|
|
2,836 |
|
|
|
2,836 |
|
|
Additional
paid-in capital |
|
|
53,790,764 |
|
|
|
53,790,764 |
|
|
Accumulated
deficit |
|
|
(45,073,711 |
) |
|
|
(46,807,092 |
) |
|
Total
Greystone Stockholders’ Equity |
|
|
8,719,894 |
|
|
|
6,986,513 |
|
|
Non-controlling
interest |
|
|
1,203,634 |
|
|
|
1,173,020 |
|
|
Total
Equity |
|
|
9,923,528 |
|
|
|
8,159,533 |
|
| |
|
|
|
|
|
|
|
|
|
Total
Liabilities and Equity |
|
$ |
40,855,966 |
|
|
$ |
46,458,287 |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Greystone
Logistics, Inc.
Consolidated Statements of
Income
For
the Six Months Ended November 30,
(Unaudited)
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Sales |
|
$ |
33,091,494 |
|
|
$ |
38,167,971 |
|
| |
|
|
|
|
|
|
|
|
| Cost of
Sales |
|
|
27,032,690 |
|
|
|
33,656,973 |
|
| |
|
|
|
|
|
|
|
|
| Gross
Profit |
|
|
6,058,804 |
|
|
|
4,510,998 |
|
| |
|
|
|
|
|
|
|
|
| Selling, General and
Administrative Expenses |
|
|
2,471,457 |
|
|
|
2,190,228 |
|
| |
|
|
|
|
|
|
|
|
| Operating
Income |
|
|
3,587,347 |
|
|
|
2,320,770 |
|
| |
|
|
|
|
|
|
|
|
| Other Income
(Expense): |
|
|
|
|
|
|
|
|
| Other
income |
|
|
8,944 |
|
|
|
4,913 |
|
|
Interest
expense |
|
|
(653,060 |
) |
|
|
(913,699 |
) |
| |
|
|
|
|
|
|
|
|
| Income before Income
Taxes |
|
|
2,943,231 |
|
|
|
1,411,984 |
|
| Provision for Income
Taxes |
|
|
911,000 |
|
|
|
320,000 |
|
| Net Income |
|
|
2,032,231 |
|
|
|
1,091,984 |
|
| |
|
|
|
|
|
|
|
|
| Income Attributable to
Non-controlling Interest |
|
|
(135,014 |
) |
|
|
(130,306 |
) |
| |
|
|
|
|
|
|
|
|
| Preferred
Dividends |
|
|
(163,836 |
) |
|
|
(215,000 |
) |
| |
|
|
|
|
|
|
|
|
| Net Income
Attributable to Common Stockholders |
|
$ |
1,733,381 |
|
|
$ |
746,678 |
|
| |
|
|
|
|
|
|
|
|
| Income
Per Share of Common Stock - |
|
|
|
|
|
|
|
|
|
Basic and
Diluted |
|
$ |
0.06 |
|
|
$ |
0.03 |
|
| |
|
|
|
|
|
|
|
|
| Weighted Average
Shares of Common Stock Outstanding - |
|
|
|
|
|
|
|
|
| Basic |
|
|
28,361,201 |
|
|
|
28,361,201 |
|
| Diluted |
|
|
32,363,351 |
|
|
|
29,005,432 |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Greystone
Logistics, Inc.
Consolidated Statements of
Income
For
the Three Months Ended November 30,
(Unaudited)
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Sales |
|
$ |
15,523,318 |
|
|
$ |
19,503,462 |
|
| |
|
|
|
|
|
|
|
|
| Cost of
Sales |
|
|
12,423,073 |
|
|
|
17,353,239 |
|
| |
|
|
|
|
|
|
|
|
| Gross
Profit |
|
|
3,100,245 |
|
|
|
2,150,223 |
|
| |
|
|
|
|
|
|
|
|
| Selling, General and
Administrative Expenses |
|
|
1,331,219 |
|
|
|
1,112,630 |
|
| |
|
|
|
|
|
|
|
|
| Operating
Income |
|
|
1,769,026 |
|
|
|
1,037,593 |
|
| |
|
|
|
|
|
|
|
|
| Other Income
(Expense): |
|
|
|
|
|
|
|
|
| Other
income |
|
|
2,434 |
|
|
|
2,880 |
|
|
Interest
expense |
|
|
(291,387 |
) |
|
|
(432,788 |
) |
| |
|
|
|
|
|
|
|
|
| Income before Income
Taxes |
|
|
1,480,073 |
|
|
|
607,685 |
|
| Provision for Income
Taxes |
|
|
457,000 |
|
|
|
135,000 |
|
| Net Income |
|
|
1,023,073 |
|
|
|
472,685 |
|
| |
|
|
|
|
|
|
|
|
| Income Attributable to
Non-controlling Interest |
|
|
(67,975 |
) |
|
|
(65,620 |
) |
| |
|
|
|
|
|
|
|
|
| Preferred
Dividends |
|
|
(81,918 |
) |
|
|
(102,637 |
) |
| |
|
|
|
|
|
|
|
|
| Net Income
Attributable to Common Stockholders |
|
$ |
873,180 |
|
|
$ |
304,428 |
|
| |
|
|
|
|
|
|
|
|
| Income
Per Share of Common Stock - |
|
|
|
|
|
|
|
|
|
Basic and
Diluted |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
| Weighted Average
Shares of Common Stock Outstanding - |
|
|
|
|
|
|
|
|
| Basic |
|
|
28,361,201 |
|
|
|
28,361,201 |
|
| Diluted |
|
|
32,363,683 |
|
|
|
29,001,160 |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Greystone
Logistics, Inc. and Subsidiaries
Consolidated Statements of Changes in
Equity
For
the Six Months Ended November 30, 2020 and 2019
(Unaudited)
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional
Paid-in
|
|
|
Accumulated |
|
|
Total
Greystone Stockholders’ |
|
|
Non-controlling |
|
|
Total |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|
Interest |
|
|
Equity |
|
|
Balances, May 31, 2019 |
|
|
50,000 |
|
|
$ |
5 |
|
|
|
28,361,201 |
|
|
$ |
2,836 |
|
|
$ |
53,790,764 |
|
|
$ |
(51,108,677 |
) |
|
$ |
2,684,928 |
|
|
$ |
1,126,271 |
|
|
$ |
3,811,199 |
|
| Cash
distributions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(52,200 |
) |
|
|
(52,200 |
) |
| Preferred
dividends, $2.25 per share |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(112,363 |
) |
|
|
(112,363 |
) |
|
|
- |
|
|
|
(112,363 |
) |
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
554,613 |
|
|
|
554,613 |
|
|
|
64,686 |
|
|
|
619,299 |
|
| Balances,
August 31, 2019 |
|
|
50,000 |
|
|
|
5 |
|
|
|
28,361,201 |
|
|
|
2,836 |
|
|
|
53,790,764 |
|
|
|
(50,666,427 |
) |
|
|
3,127,178 |
|
|
|
1,138,757 |
|
|
|
4,265,935 |
|
| Cash
distributions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(69,600 |
) |
|
|
(69,600 |
) |
| Preferred
dividends, $2.05 per share |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(102,637 |
) |
|
|
(102,637 |
) |
|
|
- |
|
|
|
(215,000 |
) |
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
407,065 |
|
|
|
407,065 |
|
|
|
65,620 |
|
|
|
472,685 |
|
|
Balances, November 30, 2019 |
|
|
50,000 |
|
|
$ |
5 |
|
|
|
28,361,201 |
|
|
$ |
2,836 |
|
|
$ |
53,790,764 |
|
|
$ |
(50,361,999 |
) |
|
$ |
3,431,606 |
|
|
$ |
1,134,777 |
|
|
$ |
4,566,383 |
|
| Balances,
May 31, 2020 |
|
|
50,000 |
|
|
$ |
5 |
|
|
|
28,361,201 |
|
|
$ |
2,836 |
|
|
$ |
53,790,764 |
|
|
$ |
(46,807,092 |
) |
|
$ |
6,986,513 |
|
|
$ |
1,173,020 |
|
|
$ |
8,159,533 |
|
| Cash
distributions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(52,200 |
) |
|
|
(52,200 |
) |
| Preferred
dividends, $1.64 per share |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(81,918 |
) |
|
|
(81,918 |
) |
|
|
- |
|
|
|
(81,918 |
) |
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
942,119 |
|
|
|
942,119 |
|
|
|
67,039 |
|
|
|
1,009,158 |
|
| Balances,
August 31, 2020 |
|
|
50,000 |
|
|
|
5 |
|
|
|
28,361,201 |
|
|
|
2,836 |
|
|
|
53,790,764 |
|
|
|
(45,946,891 |
) |
|
|
7,846,714 |
|
|
|
1,187,859 |
|
|
|
9,034,573 |
|
| Cash
distributions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(52,200 |
) |
|
|
(52,200 |
) |
| Preferred
dividends, $1.64 per share |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(81,918 |
) |
|
|
(81,918 |
) |
|
|
- |
|
|
|
(81,918 |
) |
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
955,098 |
|
|
|
955,098 |
|
|
|
67,975 |
|
|
|
1,023,073 |
|
|
Balances, November 30, 2020 |
|
|
50,000 |
|
|
$ |
5 |
|
|
|
28,361,201 |
|
|
$ |
2,836 |
|
|
$ |
53,790,764 |
|
|
$ |
(45,073,711 |
) |
|
$ |
8,719,894 |
|
|
$ |
1,203,634 |
|
|
$ |
9,923,528 |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Greystone
Logistics, Inc. and Subsidiaries
Consolidated Statements of Cash
Flows
For
the Six Months Ended November 30,
(Unaudited)
| |
|
2020 |
|
|
2019 |
|
| Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
|
| Net income |
|
$ |
2,032,231 |
|
|
$ |
1,091,984 |
|
| Adjustments to
reconcile net income to net cash provided by operating activities
- |
|
|
|
|
|
|
|
|
| Depreciation and
amortization |
|
|
3,021,502 |
|
|
|
2,560,516 |
|
| Deferred tax
expense |
|
|
911,000 |
|
|
|
320,000 |
|
| Decrease in trade
accounts receivable |
|
|
2,584,492 |
|
|
|
1,929,597 |
|
| Increase in related
party receivables |
|
|
(43,109 |
) |
|
|
(53,514 |
) |
| Decrease (increase) in
inventory |
|
|
973,259 |
|
|
|
(1,072,000 |
) |
| Decrease (increase) in
prepaid expenses |
|
|
(69,061 |
) |
|
|
139,168 |
|
| Increase (decrease) in
accounts payable and accrued liabilities |
|
|
(1,217,243 |
) |
|
|
687,310 |
|
|
Decrease
in deferred revenue |
|
|
(2,390,160 |
) |
|
|
(686,572 |
) |
| Net cash provided by
operating activities |
|
|
5,802,911 |
|
|
|
4,916,489 |
|
| |
|
|
|
|
|
|
|
|
| Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
|
| Purchase of property
and equipment |
|
|
(1,290,604 |
) |
|
|
(2,018,815 |
) |
| |
|
|
|
|
|
|
|
|
| Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
| Proceeds from
long-term debt |
|
|
- |
|
|
|
672,000 |
|
| Payments on long-term
debt and financing leases |
|
|
(2,429,656 |
) |
|
|
(2,390,138 |
) |
| Proceeds from
revolving loan |
|
|
1,250,000 |
|
|
|
690,000 |
|
| Payments on revolving
loan |
|
|
(2,690,000 |
) |
|
|
(972,000 |
) |
| Payments on related
party note payable and financing lease |
|
|
(751,821 |
) |
|
|
(222,384 |
) |
| Payments for debt
issuance costs |
|
|
- |
|
|
|
(3,360 |
) |
| Dividends paid on
preferred stock |
|
|
(166,028 |
) |
|
|
(224,555 |
) |
|
Distributions paid by
non-controlling interest |
|
|
(104,400 |
) |
|
|
(121,800 |
) |
| Net cash used in
financing activities |
|
|
(4,891,905 |
) |
|
|
(2,572,237 |
) |
| Net Increase
(Decrease) in Cash |
|
|
(379,598 |
) |
|
|
325,437 |
|
| Cash, beginning of
period |
|
|
1,131,850 |
|
|
|
1,255,408 |
|
| Cash, end of
period |
|
$ |
752,252 |
|
|
$ |
1,580,845 |
|
| Non-cash
Activities: |
|
|
|
|
|
|
|
|
| Capital expenditures
in accounts payable |
|
$ |
282,540 |
|
|
$ |
507,851 |
|
| Equipment transferred
from inventory |
|
$ |
26,750 |
|
|
$ |
- |
|
| Preferred dividend
accrual |
|
$ |
81,918 |
|
|
$ |
102,637 |
|
|
Supplemental
information: |
|
|
|
|
|
|
|
|
| Interest
paid |
|
$ |
632,488 |
|
|
$ |
913,992 |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
GREYSTONE
LOGISTICS, INC.
Notes to Consolidated Financial
Statements
(Unaudited)
Note
1. Basis of Financial Statements
In
the opinion of Greystone Logistics, Inc. (“Greystone”), the
accompanying unaudited consolidated financial statements contain
all adjustments and reclassifications, which are of a normal
recurring nature, necessary to present fairly its financial
position as of November 30, 2020, the results of its operations for
the six months and three months ended November 30, 2020 and 2019
and its cash flows for the six months ended November 30, 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, 2020 and the notes thereto
included in the Form 10-K for such period. The results of
operations for the six months and three months ended November 30,
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 at
November 30 are as follows:
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
|
|
| Preferred stock
convertible into common stock |
|
|
- |
|
|
|
3,333,333 |
|
The following tables set forth the computation of basic and diluted
earnings per share.
For the six months ended November 30, 2020 and 2019:
| |
|
2020 |
|
|
2019 |
|
| Basic earnings per
share of common stock: |
|
|
|
|
|
|
| Numerator
- |
|
|
|
|
|
|
|
Net income
attributable to common stockholders |
|
$ |
1,733,381 |
|
|
$ |
746,678 |
|
| Denominator
- |
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding - basic |
|
|
28,361,201 |
|
|
|
28,361,201 |
|
| Income per share of
common stock - basic |
|
$ |
0.06 |
|
|
$ |
0.03 |
|
| |
|
|
|
|
|
|
|
|
| Diluted earnings per
share of common stock: |
|
|
|
|
|
|
|
|
| Numerator
- |
|
|
|
|
|
|
|
|
| Net income
attributable to common stockholders |
|
$ |
1,733,381 |
|
|
$ |
746,678 |
|
|
Add:
Preferred stock dividends for assumed conversion |
|
|
163,836 |
|
|
|
- |
|
|
Net income
allocated to common stockholders |
|
$ |
1,897,217 |
|
|
$ |
746,678 |
|
| Denominator
- |
|
|
|
|
|
|
|
|
| Weighted-average
shares outstanding - basic |
|
|
28,361,201 |
|
|
|
28,361,201 |
|
|
Incremental shares
from assumed conversion of options, warrants and preferred stock,
as appropriate |
|
|
4,002,150 |
|
|
|
644,231 |
|
|
Weighted
average common stock outstanding - diluted |
|
|
32,363,351 |
|
|
|
29,005,432 |
|
| Income per share of
common stock – diluted |
|
$ |
0.06 |
|
|
$ |
0.03 |
|
For
the three months ended November 30, 2020 and 2019:
| |
|
2020 |
|
|
2019 |
|
| Basic earnings per
share of common stock: |
|
|
|
|
|
|
| Numerator
- |
|
|
|
|
|
|
|
Net income
attributable to common stockholders |
|
$ |
873,180 |
|
|
$ |
304,428 |
|
| Denominator
- |
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding - basic |
|
|
28,361,201 |
|
|
|
28,361,201 |
|
| Income per share of
common stock - basic |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
| Diluted earnings per
share of common stock: |
|
|
|
|
|
|
|
|
| Numerator
- |
|
|
|
|
|
|
|
|
| Net income
attributable to common stockholders |
|
$ |
873,180 |
|
|
$ |
304,428 |
|
|
Add:
Preferred stock dividends for assumed conversion |
|
|
81,918 |
|
|
|
- |
|
|
Net income
allocated to common stockholders |
|
$ |
955,098 |
|
|
$ |
304,428 |
|
| Denominator
- |
|
|
|
|
|
|
|
|
| Weighted-average
shares outstanding - basic |
|
|
28,361,201 |
|
|
|
28,361,201 |
|
|
Incremental shares
from assumed conversion of options, warrants and preferred stock,
as appropriate |
|
|
4,002,482 |
|
|
|
639,959 |
|
|
Weighted
average common stock outstanding - diluted |
|
|
32,363,683 |
|
|
|
29,001,160 |
|
| Income per share of
common stock – diluted |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
Note 3. Inventory
Inventory consists of the following:
| |
|
November
30, |
|
|
May
31, |
|
| |
|
2020 |
|
|
2020 |
|
| Raw
materials |
|
$ |
1,586,089 |
|
|
$ |
1,953,957 |
|
| Finished
goods |
|
|
1,643,797 |
|
|
|
2,275,938 |
|
| Total
inventory |
|
$ |
3,229,886 |
|
|
$ |
4,229,895 |
|
Note
4. Property, Plant and Equipment
A
summary of property, plant and equipment is as follows:
| |
|
November
30, 2020 |
|
|
May
31,
2020 |
|
| Production machinery
and equipment |
|
$ |
51,262,623 |
|
|
$ |
51,637,883 |
|
| Plant buildings and
land |
|
|
6,931,302 |
|
|
|
6,881,326 |
|
| Leasehold
improvements |
|
|
1,428,281 |
|
|
|
1,323,535 |
|
| Furniture and
fixtures |
|
|
601,586 |
|
|
|
601,586 |
|
| |
|
|
60,223,792 |
|
|
|
60,444,330 |
|
| |
|
|
|
|
|
|
|
|
| Less: Accumulated
depreciation and amortization |
|
|
(27,795,521 |
) |
|
|
(26,301,923 |
) |
| |
|
|
|
|
|
|
|
|
| Net Property, Plant
and Equipment |
|
$ |
32,428,271 |
|
|
$ |
34,142,407 |
|
Production
machinery includes deposits on equipment in the amount of $207,160
at November 30, 2020, which has not been placed into service. Plant
buildings and land include two properties which are owned by GRE, a
variable interest entity (“VIE”) and have an aggregate net book
value of $2,722,741 at November 30, 2020.
Depreciation
expense, including amortization expense related to financing
leases, for the six months ended November 30, 2020 and 2019 was
$3,018,922 and $2,557,936, 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 President and CEO, owns and rents to
Greystone (1) grinding equipment used to grind raw materials for
Greystone’s pallet production and (2) extruders for pelletizing
recycled plastic into pellets for resale and for use as raw
material in the manufacture of pallets. GSM pays weekly rental fees
to Yorktown of $27,500 for use of Yorktown’s grinding equipment and
pelletizing equipment. Rental fees were $715,000 for the each of
the six months ended November 30, 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 $24,000 for each of the six months ended
November 30, 2020 and 2019. As of November 30, 2020, future minimum
payments under the non-cancelable operating lease for the remaining
two years are $48,000 and $4,000.
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 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, 2020 and
2019 totaled $52,356 and $5,400, respectively. As of November 30,
2020, Greystone owed $40,800 to TriEnda for such
purchases.
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
$236,250 and $271,320 for the six months ended November 30, 2020
and 2019, respectively. The account receivable due from Green at
November 30, 2020 was $129,150.
Note
6. Long-term Debt
Debt
as of November 30, 2020 and May 31, 2020 is as follows:
| |
|
November
30, |
|
|
May 31, |
|
| |
|
2020 |
|
|
2020 |
|
| 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 |
|
$ |
2,046,067 |
|
|
$ |
2,459,854 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
1,037,291 |
|
|
|
1,165,774 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
815,983 |
|
|
|
1,136,455 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
573,469 |
|
|
|
696,174 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
2,398,571 |
|
|
|
2,752,293 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
814,314 |
|
|
|
837,811 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
1,100,000 |
|
|
|
2,540,000 |
|
| |
|
|
|
|
|
|
|
|
| Paycheck Protection
Program note, interest rate of 1.0%, maturing April 13,
2022 |
|
|
3,034,000 |
|
|
|
3,034,000 |
|
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
2,157,320 |
|
|
|
2,261,425 |
|
| |
|
|
|
|
|
|
|
|
| Term note payable to
Great Western Bank, interest rate of 3.7%, monthly principal and
interest payments of $27,593, due March 19, 2025, secured by
certain equipment |
|
|
1,323,295 |
|
|
|
1,461,726 |
|
| |
|
|
|
|
|
|
|
|
| Note payable to Robert
Rosene, 7.5% interest, due January 15, 2022 |
|
|
3,649,878 |
|
|
|
4,253,228 |
|
| |
|
|
|
|
|
|
|
|
| Other |
|
|
165,810 |
|
|
|
183,156 |
|
| Total long-term
debt |
|
|
19,115,998 |
|
|
|
22,781,896 |
|
| Debt issuance costs,
net of amortization |
|
|
(33,306 |
) |
|
|
(35,886 |
) |
| Total debt, net of
debt issuance costs |
|
|
19,082,692 |
|
|
|
22,746,010 |
|
| Less: Current portion
of long-term debt |
|
|
(5,195,878 |
) |
|
|
(4,416,377 |
) |
| Long-term debt, net of
current portion |
|
$ |
13,886,814 |
|
|
$ |
18,329,633 |
|
The
prime rate of interest as of November 30, 2020 was
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.
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 $76,705 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 $68,402 per
month) and (vi) Term Loan G over a fifteen-year period beginning
April 30, 2019 (currently $7,466 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, as defined in the
IBC Loan Agreement, 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. Greystone’s
available revolving loan borrowing capacity was $2,900,000 at
November 30, 2020.
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 herein.
Paycheck Protection Program (“PPP”) Loan
On
April 10, 2020, the Company received a SBA Payroll Protection
Program (“PPP”) loan pursuant to the Paycheck Protection Program
under the Coronavirus Aid, Relief, and Economic Security Act
(“CARES Act”), with IBC for $3,034,000. The PPP loan bears interest
at 1.0% per annum, with monthly payments of principal and interest
in the amount of $236,909 commencing on April 14, 2021 and maturing
April 10, 2022. The Paycheck Protection Program provides that the
PPP loan may be partially or fully forgiven if the funds are used
for certain qualifying expenses as described in the CARES Act. The
Company believes that the proceeds from the PPP loan were used for
qualifying expenses in accordance with the terms in the CARES Act
and plans to apply for forgiveness of the PPP loan in accordance
with the requirements and limitations under the CARES Act, the PPP
Flexibility Act and SBA regulations and requirements. However,
there is no assurance that all or any portion of the PPP loan will
be forgiven.
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
November 30, 2020 was $3,649,878.
Maturities
Maturities
of Greystone’s long-term debt for the five years subsequent to
November 30, 2020 are $5,195,878, $8,929,312, $3,493,294,
$1,373,137 and $124,377.
Note
7. Leases
Financing Leases
Financing
leases as of November 30, 2020 and May 31, 2020:
| |
|
November
30, 2020 |
|
|
May 31,
2020
|
|
| Non-cancellable
financing leases |
|
$ |
4,500,077 |
|
|
$ |
5,455,656 |
|
| Less: Current
portion |
|
|
(1,920,854 |
) |
|
|
(1,838,251 |
) |
| Non-cancellable
financing leases, net of current portion |
|
$ |
2,579,223 |
|
|
$ |
3,617,405 |
|
Greystone
and an unrelated private company entered into three lease
agreements for certain production equipment with a total cost of
approximately $6.9 million which were effective February 24, 2018,
August 2, 2018 and December 21, 2018, respectively, with five-year
terms and an effective interest rate of 7.4%. 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 and shipped from the
respective leased equipment. The estimated aggregate monthly rental
payments are approximately $153,000. The rent payments can vary
each month depending on the quantity of pallets produced from each
machine. 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-six 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 November 30, 2020.
Amortization of the carrying amount of $505,935 and $416,314 was
included in depreciation expense for the six months ended November
30, 2020 and 2019, respectively.
Operating Leases
Greystone
recognized a lease liability for each lease based on the present
value of remaining minimum fixed rental payments, using a discount
rate that approximates the rate of interest for a collateralized
loan over a similar term. A right-of-use asset is recognized for
each lease, valued at the lease liability. Minimum fixed rental
payments are recognized on a straight-line basis over the life of
the lease as costs and expenses on the consolidated statements of
income. Variable and short-term rental payments are recognized as
costs and expenses as they are incurred.
Greystone
has three non-cancellable operating leases for (i) equipment with a
fifty-two month term and a forty-eight month term and a discount
rate of 5.40% and (ii) office space on a sixty month term and a
discount rate of 5.0%. The leases are single-term with constant
monthly rental rates.
Lease Summary Information
For
the periods ending November 30, 2020 and 2019:
| |
|
2020 |
|
|
2019 |
|
| Lease
Expense |
|
|
|
|
|
|
|
|
| Financing lease
expense - |
|
|
|
|
|
|
|
|
|
Amortization of
right-of-use assets |
|
$ |
505,935 |
|
|
$ |
416,000 |
|
| Interest on lease
liabilities |
|
|
156,059 |
|
|
|
220,255 |
|
| Operating lease
expense |
|
|
40,941 |
|
|
|
39,650 |
|
| Short-term lease
expense |
|
|
723,443 |
|
|
|
797,835 |
|
| Total |
|
$ |
1,426,378 |
|
|
$ |
1,473,740 |
|
| |
|
|
|
|
|
|
|
|
| Other
Information |
|
|
|
|
|
|
|
|
| Cash paid for amounts
included in the measurement of lease liabilities for finance leases
- |
|
|
|
|
|
|
|
|
| Operating cash
flows |
|
$ |
156,059 |
|
|
$ |
220,255 |
|
| Financing cash
flows |
|
$ |
955,580 |
|
|
$ |
911,529 |
|
| Cash paid for amounts
included in the measurement of lease liabilities for operating
leases - |
|
|
|
|
|
|
|
|
| Operating cash
flows |
|
$ |
40,941 |
|
|
$ |
39,650 |
|
| Right-of-use assets
obtained in exchange for lease liabilities - |
|
|
|
|
|
|
|
|
| Operating
leases |
|
$ |
- |
|
|
$ |
67,750 |
|
| Weighted-average
remaining lease term (in years) - |
|
|
|
|
|
|
|
|
| Financing
leases |
|
|
2.3 |
|
|
|
3.2 |
|
| Operating
leases |
|
|
2.4 |
|
|
|
3.5 |
|
| Weighted-average
discount rate - |
|
|
|
|
|
|
|
|
| Financing
leases |
|
|
7.4 |
% |
|
|
7.1 |
% |
| Operating
leases |
|
|
5.2 |
% |
|
|
5.3 |
% |
Future
minimum lease payments under non-cancelable leases as of November
30, 2020, are approximately:
| |
|
Financing
Leases |
|
|
Operating
Leases |
|
| Twelve months ended
November 30, 2021 |
|
$ |
2,186,436 |
|
|
$ |
81,881 |
|
| Twelve months ended
November 30, 2022 |
|
|
1,991,930 |
|
|
|
37,881 |
|
| Twelve months ended
November 30, 2023 |
|
|
701,171 |
|
|
|
27,751 |
|
| Twelve months ended
November 30, 2024 |
|
|
23,669 |
|
|
|
9,037 |
|
| Twelve months ended
November 30, 2025 |
|
|
3,593 |
|
|
|
- |
|
| Total future minimum
lease payments |
|
|
4,906,799 |
|
|
|
156,550 |
|
| Present value
discount |
|
|
406,722 |
|
|
|
11,281 |
|
| Present value of
minimum lease payments |
|
$ |
4,500,077 |
|
|
$ |
145,269 |
|
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
which totaled $3,770,160 and $686,572 during the six months ended
November 30, 2020 and 2019, respectively. Customer advances
received during the six months ended November 30, 2020 and 2019
were $1,380,000 and $-0-, respectively. The unrecognized balance of
deferred revenue as of November 30, 2020 and May 31, 2020, was
$1,403,007 and $3,793,167, respectively.
Note
9. Revenue and Revenue Recognition
Revenue
is recognized at the time a good or service is transferred to a
customer and the customer obtains control of that good or receives
the service performed. Sales arrangements with customers are
short-term in nature involving single performance obligations
related to the delivery of goods and generally provide for transfer
of control at the time of shipment. In limited circumstances, where
acceptance of the goods is subject to approval by the customer,
revenue is recognized upon approval by the customer unless,
historically, there have been insignificant rejections of goods by
the customer. Contract liabilities associated with sales
arrangements primarily relate to deferred revenue on prepaid sales
of goods. Greystone generally permits returns of product due to
defects; however, product returns are historically insignificant.
The amount of revenue recognized reflects the consideration to
which Greystone expects to be entitled to receive in exchange for
its products.
Greystone’s
principal product is plastic pallets produced from recycled plastic
resin. Sales are primarily to customers in the continental United
States of America. International sales are made to customers in
Canada and Mexico which totaled approximately 0.8% and 4.7% of
sales during the six months ended November 30, 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 six months ended November 30, 2020 and 2019,
respectively, were as follows:
|
Category |
|
2020 |
|
|
2019 |
|
| End User
Customers |
|
|
86 |
% |
|
|
89 |
% |
| Distributors |
|
|
14 |
% |
|
|
11 |
% |
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 86% and 88% of its total sales from four
customers during the six months ended November 30, 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 $524,321 and $1,019,279 in fiscal years
2021 and 2020, respectively, were 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, 2020,
Greystone is indebted to Mr. Rosene in the amount of $3,649,878 for
a note payable due January 15, 2022. There is no assurance that Mr.
Rosene will renew the note as of the maturity date.
COVID-19
Risks. The impact of COVID-19 has created much uncertainty in
the marketplace. To date, the demand for Greystone’s products has
not been affected as Greystone’s pallets are generally used
logistically by essential entities. The major issue that Greystone
has incurred is maintaining adequate work force to meet demand for
pallets. The virus has impacted the overall workforce in our
operating area as well as Greystone’s workforce due to employees
electing to stay at home for protection from COVID-19 and
reductions of recruitment of new employees. Management is unable to
predict the stability of its workforce as the longer that the virus
stays active, the greater the uncertainty.
Greystone
is subject to litigation, claims and other commitments and
contingencies arising in the ordinary course of business. Although
the asserted value of these matters may be significant, the company
currently does not expect that the ultimate resolution of any open
matters will have a material adverse effect on its consolidated
financial position or results of operations.
Effective
January 1, 2021, Greystone’s major customer in the beer industry
notified Greystone that the customer will be diversifying its
purchases of pallets for case goods with another vendor, but
Greystone will continue to be the sole provider of the keg pallet
to the customer. This change is expected to decrease Greystone’s
annual revenues in the range of about 4% to 5%. Greystone will
continue to purchase damaged pallets from the customer. Management
has evaluated this impact in conjunction with other contractual
adjustments that were made with the customer, and management does
not expect that this impact will have a material adverse effect on
Greystone’s consolidated financial statements.
Note
12. Commitments
As of
November 30, 2020, Greystone had commitments totaling $445,040
toward the purchase of production equipment.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.
Results of Operations
General
to All Periods
The
unaudited consolidated statements include Greystone Logistics,
Inc., and its two wholly-owned subsidiaries, Greystone
Manufacturing, L.L.C. (“GSM”) and Plastic Pallet Production, Inc.
(“PPP”). Greystone also consolidates the variable interest entity,
Greystone Real Estate, L.L.C. (“GRE”). All material intercompany
accounts and transactions have been eliminated.
References
to fiscal year 2021 refer to the six months and three months ended
November 30, 2020. References to fiscal year 2020 refer to the six
months and three months ended November 30, 2019.
Sales
Greystone’s
primary focus is to provide quality plastic pallets to its existing
customers while continuing its marketing efforts to broaden its
customer base. Greystone’s existing customers are primarily located
in the United States and engaged in the beverage, pharmaceutical
and other industries. Greystone has generated, and plans to
continue to generate, interest in its pallets by attending trade
shows sponsored by industry segments that would benefit from
Greystone’s products. Greystone hopes to gain wider product
acceptance by marketing the concept that the widespread use of
plastic pallets could greatly reduce the destruction of trees on a
worldwide basis. Greystone’s marketing is conducted through
contract distributors, its President and other
employees.
Personnel
Greystone
had approximately 272 and 268 full-time employees as of November
30, 2020 and 2019, respectively. In addition, employee recruitment
is outsourced to certain personnel agencies. Greystone employed 37
and 145 personnel through these agencies as of November 30, 2020
and 2019.
Six Months Ended November 30, 2020 Compared to Six Months Ended
November 30, 2019
Sales
Sales
for fiscal year 2021 were $33,091,494 compared to $38,167,971 in
fiscal year 2020 for a decrease of $5,076,477. While the number of
pallets sold during fiscal year 2021 increased by approximately 3%
over fiscal year 2020, the overall decrease in the value of sales
in fiscal year 2021 from fiscal year 2020 was primarily due to
changes in the manufacturing process for certain pallets and the
related pricing for such pallets.
Greystone
had four customers which accounted for approximately 86% and 88% of
sales in fiscal years 2021 and 2020, respectively. Greystone is not
able to predict the future needs of these major customers and will
continue its efforts to grow sales through the addition of new
customers developed through Greystone’s marketing
efforts.
Effective
January 1, 2021, Greystone’s major customer in the beer industry
notified Greystone that the customer will be diversifying its
purchases of pallets for case goods with another vendor, but
Greystone will continue to be the sole provider of the keg pallet
to the customer. This change is expected to decrease Greystone’s
annual revenues in the range of about 4% to 5%. Greystone will
continue to purchase damaged pallets from the customer. Management
has evaluated this impact in conjunction with other contractual
adjustments that were made with the customer, and management does
not expect that this impact will have a material adverse effect on
Greystone’s consolidated financial statements.
Cost of Sales
Cost
of sales in fiscal year 2021 was $27,032,690, or 82% of sales,
compared to $33,656,973, or 88% of sales, in fiscal year 2020. The
decrease in the ratio of cost of sales to sales in fiscal year 2021
from the ratio during fiscal year 2020 is primarily the result of
improved profit margins from changes in the manufacturing process
for certain pallets, increases in pallet production per machine
attributable to the utilization of new tools in managing the
injection molding machines and an increase of in-house capacity for
grinding and pelletizing plastic material.
Selling, General and Administrative Expenses
Selling,
general and administrative expenses were $2,471,457 in fiscal year
2021 compared to $2,190,228 in fiscal year 2020 for an increase of
$281,229 or 12.8%. The primary reason for the increase in fiscal
year 2021 over fiscal year 2020 was due to a mix of items including
increased costs for administrative personnel, costs for resolution
of a breach in the Company’s email system, legal fees and research
and development costs to develop an acceptable fire retardant for
Greystone pallets.
Other Income (Expenses)
Other
income from sales of scrap material was $8,944 in fiscal year 2021
compared to $4,913 in fiscal year 2020.
Interest
expense was $653,060 in fiscal year 2021 compared to $913,699 in
fiscal year 2020 for a decrease of $260,639. There was a reduction
in total debt of approximately $2,270,000 from the outstanding
balances at November 30, 2019 to November 30, 2020. In addition,
the debt as of November 30, 2020 included a Paycheck Protection
Program note in the amount of $3,034,000 which bears an interest
rate of 1.0% and the prime rate of interest was 3.25% as of
November 30, 2020 compared to 4.75% at November 30,
2019.
Provision for Income Taxes
The
provision for income taxes was $911,000 and $320,000 in fiscal
years 2021 and 2020, respectively. The effective tax rate differs
from federal statutory rates principally due to state income taxes,
charges which have no tax benefit, changes in the valuation
allowance, and the basis that net income from GRE is not taxable at
the corporate level because GRE is a limited liability company of
which Greystone has no equity ownership.
Based
upon a review of its income tax filing positions, Greystone
believes that its positions would be sustained upon an audit by the
Internal Revenue Service and does not anticipate any adjustments
that would result in a material change to its financial position.
Therefore, no reserves for uncertain income tax positions have been
recorded.
Net Income
Greystone
recorded net income of $2,032,231 in fiscal year 2021 compared to
$1,091,984 in fiscal year 2020 primarily for the reasons discussed
above.
Net Income Attributable to Common Stockholders
The
net income attributable to common stockholders (net income less
preferred dividends and GRE’s net income) for fiscal year 2021 was
$1,733,381, or $0.06 per share, compared $746,678, or $0.03 per
share, in fiscal year 2020 primarily for the reasons discussed
above.
Three Months Ended November 30, 2020 Compared to Three Months Ended
November 30, 2019
Sales
Sales
for fiscal year 2021 were $15,523,318 compared to $19,503,462 in
fiscal year 2020 for a decrease of $3,980,144. While there was a
slight decline of 3% of the number of pallets sold during fiscal
year 2021 from fiscal year 2020, the overall decrease in the value
of sales in fiscal year 2021 from fiscal year 2020 was primarily
due to changes in the manufacturing process for certain pallets and
the related pricing for such pallets.
Greystone
had four customers which accounted for approximately 84% and 88% of
sales in fiscal years 2021 and 2020, respectively. Greystone is not
able to predict the future needs of these major customers and will
continue its efforts to grow sales through the addition of new
customers developed through Greystone’s marketing
efforts.
Effective
January 1, 2021, Greystone’s major customer in the beer industry
notified Greystone that the customer will be diversifying its
purchases of pallets for case goods with another vendor, but
Greystone will continue to be the sole provider of the keg pallet
to the customer. This change is expected to decrease Greystone’s
annual revenues in the range of about 4% to 5%. Greystone will
continue to purchase damaged pallets from the customer. Management
has evaluated this impact in conjunction with other contractual
adjustments that were made with the customer, and management does
not expect that this impact will have a material adverse effect on
Greystone’s consolidated financial statements.
Cost of Sales
Cost
of sales in fiscal year 2021 was $12,423,073, or 80% of sales,
compared to $17,353,239, or 89% of sales, in fiscal year 2020. The
decrease in the ratio of cost of sales to sales in fiscal year 2021
from the ratio during fiscal year 2020 is primarily the result of
improved profit margins from changes in the manufacturing process
for certain pallets, increases in pallet production per machine
attributable to the utilization of new tools in managing the
injection molding machines and an increase of in-house capacity for
grinding and pelletizing plastic material.
Selling, General and Administrative Expenses
Selling,
general and administrative expenses were $1,331,219 in fiscal year
2021 compared to $1,112,630 in fiscal year 2020 for an increase of
$218,589 or 19.6%. The increase in fiscal year 2021 over fiscal
year 2020 was due to a mix of items including increased costs for
administrative personnel, costs for resolution of a breach in the
Company’s email system, legal fees and research and development
costs to develop an acceptable fire retardant for Greystone
pallets.
Other Income (Expenses)
Other
income from sales of scrap material was $2,434 in fiscal year 2021
compared to $2,880 in fiscal year 2020.
Interest
expense was $291,387 in fiscal year 2021 compared to $432,788 in
fiscal year 2020 for a decrease of $141,401. There was a reduction
in total debt of approximately $2,270,000 from the outstanding
balances at November 30, 2019 to November 30, 2020. In addition,
the debt as of November 30, 2020 included a Paycheck Protection
Program note in the amount of $3,034,000 which bears an interest
rate of 1.0% and the prime rate of interest was 3.25% as of
November 30, 2020 compared to 4.75% at November 30,
2019.
Provision for Income Taxes
The
provision for income taxes was $457,000 and $135,000 in fiscal
years 2021 and 2020, respectively. The effective tax rate differs
from federal statutory rates due principally to state income taxes,
charges which have no tax benefit, changes in the valuation
allowance, and the basis that the net income from GRE is not
taxable at the corporate level because GRE is a limited liability
company of which Greystone has no equity ownership.
Based
upon a review of its income tax filing positions, Greystone
believes that its positions would be sustained upon an audit by the
Internal Revenue Service and does not anticipate any adjustments
that would result in a material change to its financial position.
Therefore, no reserves for uncertain income tax positions have been
recorded.
Net Income
Greystone
recorded net income of $1,023,073 in fiscal year 2021 compared to
$472,685 in fiscal year 2020 primarily for the reasons discussed
above.
Net Income Attributable to Common Stockholders
The
net income attributable to common stockholders (net income less
preferred dividends and GRE’s net income) for fiscal year 2021 was
$873,180, or $0.03 per share, compared $304,428, or $0.01 per
share, in fiscal year 2020 primarily for the reasons discussed
above.
Liquidity and Capital Resources
A
summary of cash flows for the six months ended November 30, 2020 is
as follows:
| Cash provided by
operating activities |
|
$ |
5,802,911 |
|
| |
|
|
|
|
| Cash used in investing
activities |
|
$ |
(1,290,604 |
) |
| |
|
|
|
|
| Cash used in financing
activities |
|
$ |
(4,891,905 |
) |
The
contractual obligations of Greystone are as follows:
| |
|
Total
|
|
|
Less
than
1
year
|
|
|
1-3
years
|
|
|
4-5
years
|
|
| Long-term
debt |
|
$ |
19,115,998 |
|
|
$ |
5,195,878 |
|
|
$ |
12,422,606 |
|
|
$ |
1,497,514 |
|
| Financing lease
rents |
|
$ |
4,906,799 |
|
|
$ |
2,186,436 |
|
|
$ |
2,693,101 |
|
|
$ |
27,262 |
|
| Operating lease
rents |
|
$ |
156,550 |
|
|
$ |
81,881 |
|
|
$ |
65,632 |
|
|
$ |
9,037 |
|
| Commitments |
|
$ |
445,040 |
|
|
$ |
445,040 |
|
|
$ |
- |
|
|
$ |
- |
|
Greystone
had a working capital deficit of $(4,094,706) at November 30, 2020.
To provide for the funding to meet Greystone’s operating activities
and contractual obligations as of November 30, 2020, 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.
A
substantial amount of the Greystone’s debt financing has resulted
primarily from bank notes which are guaranteed by certain officers
and directors of Greystone and from loans provided by certain
officers and directors of Greystone. Greystone continues to be
dependent upon its officers and directors to provide and/or secure
additional financing and there is no assurance that its officers
and directors will continue to do so. As such, there is no
assurance that funding will be available for Greystone to continue
operations.
Greystone
has 50,000 outstanding shares of cumulative 2003 Preferred Stock
with a liquidation preference of $5,000,000 and a preferred
dividend rate of the prime rate of interest plus 3.25%. Greystone
does not anticipate that it will make cash dividend payments to any
holders of its common stock unless and until the financial position
of Greystone improves through increased revenues, another financing
transaction or otherwise. Pursuant to the IBC Loan Agreement, as
discussed in Note 6 to the consolidated financial statements,
Greystone may pay dividends on its preferred stock in an amount not
to exceed $500,000 per year.
Forward Looking Statements and Material Risks
This
Quarterly Report on Form 10-Q includes certain statements that may
be deemed “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements are made in reliance on the safe harbor
protections provided under the Private Securities Litigation Reform
Act of 1995. All statements, other than statements of historical
fact, that address activities, events or developments that
Greystone expects, believes or anticipates will or may occur in the
future, including decreased costs, 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 Form 10-K for the fiscal year ended May 31, 2020, which
was filed on August 24, 2020. Actual results may vary materially
from the forward-looking statements. Greystone undertakes no duty
to update any of the forward-looking statements contained in this
Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk.
Not
applicable.
Item 4. Controls and
Procedures.
As of
the end of the period covered by this Quarterly Report on Form
10-Q, Greystone carried out an evaluation under the supervision of
Greystone’s Chief Executive Officer and Chief Financial Officer of
the effectiveness of the design and operation of Greystone’s
disclosure controls and procedures pursuant to the Securities
Exchange Act Rules 13a-15(e) and 15d-15(e). Based on an evaluation
as of May 31, 2020, Warren F. Kruger, Greystone’s Chief Executive
Officer, and William W. Rahhal, Greystone’s Chief Financial
Officer, identified no material weakness in Greystone’s internal
control over financial reporting. As a result, Greystone’s CEO and
Chief Financial Officer concluded that the design and operation of
Greystone’s disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) under the Exchange Act) were effective as
of November 30, 2020.
During
the three months ended November 30, 2020, there were no changes in
Greystone’s internal controls over financial reporting that have
materially affected, or that are reasonably likely to materially
affect, Greystone’s internal control over financial
reporting.
PART II. OTHER
INFORMATION
Item 1. Legal
Proceedings.
None.
Item 1A. Risk Factors.
Not
applicable.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior
Securities.
None.
Item 4. Mine Safety
Disclosures.
Not
applicable.
Item 5. Other
Information.
None.
Item 6. Exhibits.
| |
The
following exhibits are filed or furnished as part of this Quarterly
Report on Form 10-Q. |
|
|
|
|
| |
31.1 |
Certification
of Chief Executive Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated under the Securities Exchange Act of 1934, as
amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted
herewith). |
| |
|
|
| |
31.2 |
Certification
of Chief Financial Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated under the Securities Exchange Act of 1934, as
amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted
herewith). |
| |
|
|
| |
32.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(submitted herewith). |
| |
|
|
| |
32.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(submitted herewith). |
| |
|
|
| |
101 |
Interactive
data files pursuant to Rule 405 of Regulation S-T: (i) the
Consolidated Balance Sheets at November 30, 2020 and May 31, 2020,
(ii) the Consolidated Statements of Income for the six months and
three months ended November 30, 2020 and 2019, (iii) the
Consolidated Statements of Changes in Equity for the six months
ended November 30, 2020 and 2019, (iv) the Consolidated Statements
of Cash Flows for the six months ended November 30, 2020 and 2019,
and (v) the Notes to the Consolidated Financial Statements
(submitted herewith). |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
|
GREYSTONE
LOGISTICS, INC. |
| |
(Registrant) |
| |
|
| Date:
January 14, 2021 |
/s/
Warren F. Kruger |
| |
Warren
F. Kruger, President and Chief |
| |
Executive
Officer (Principal Executive Officer) |
| |
|
| Date:
January 14, 2021 |
/s/
William W. Rahhal |
| |
William
W. Rahhal, Chief Financial Officer |
| |
(Principal
Financial Officer and Principal Accounting Officer) |
Index
to Exhibits
The
following exhibits are filed or furnished as part of this Quarterly
Report on Form 10-Q.
|
31.1 |
Certification
of Chief Executive Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated under the Securities Exchange Act of 1934, as
amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted
herewith). |
| |
|
| 31.2 |
Certification
of Chief Financial Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated under the Securities Exchange Act of 1934, as
amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted
herewith). |
| |
|
| 32.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(submitted herewith). |
| |
|
| 32.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(submitted herewith). |
| |
|
| 101 |
Interactive
data files pursuant to Rule 405 of Regulation S-T: (i) the
Consolidated Balance Sheets at November 30, 2020 and May 31, 2020,
(ii) the Consolidated Statements of Income for six months and three
months ended November 30, 2020 and 2019, (iii) the Consolidated
Statements of Changes in Equity for the six months ended November
30, 2020 and 2019, (iv) the Consolidated Statements of Cash Flows
for the six months ended November 30, 2020 and 2019, and (v) the
Notes to the Consolidated Financial Statements (submitted
herewith). |
