The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are
an integral part of these consolidated financial statements.
The accompanying notes are
an integral part of these consolidated financial statements.
The accompanying notes
are an integral part of these consolidated financial statements.
The accompanying notes are
an integral part of these consolidated financial statements.
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 28, 2023, the results of its operations for the nine months and three months ended February 28, 2023 and 2022 and its cash
flows for the nine months ended February 28, 2023 and 2022. 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, 2022 and the notes thereto included in the
Form 10-K for such period. The results of operations for the nine months and three months ended February 28, 2023 and 2022 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”)
for the period from June 1, 2022 through July 29, 2022. All material intercompany accounts and transactions have been eliminated in the
consolidated financial statements.
GRE,
which is wholly-owned by a member of Greystone’s Board of Directors, owns two primary manufacturing facilities which are occupied
by Greystone. Effective July 29, 2022, GRE paid off its mortgage payable and, in conjunction with Greystone’s refinancing described
in Note 6, GRE was removed from the cross-collateralization in the loan agreement between Greystone and International Bank of Commerce.
Following these transactions, Greystone was no longer determined to be the primary beneficiary of GRE. Accordingly, GRE was deconsolidated
from Greystone’s consolidated financial statements as of July 29, 2022, resulting in the recognition of a gain in the amount of
$569,997. Subsequent to the deconsolidation, Greystone entered into a new lease agreement with the related party and recorded right-of-use
assets and liabilities for the new lease, see Note 7.
Certain
balances in the consolidated balance sheet as of May 31, 2022, have been restated for comparative purposes.
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 are the preferred stock convertible into 3,333,333 shares of common stock for the three
months ended February 28, 2022.
The
following tables set forth the computation of basic and diluted earnings per share.
Schedule
of Basic and Diluted Earnings Per Share
For
the nine months ended February 28, 2023 and 2022:
| |
2023 | | |
2022 | |
Basic earnings per share of common stock: | |
| | | |
| | |
Numerator - | |
| | | |
| | |
Net income attributable to common stockholders | |
$ | 4,471,124 | | |
$ | 3,044,535 | |
Denominator - | |
| | | |
| | |
Weighted-average shares outstanding - basic | |
| 28,279,701 | | |
| 28,472,256 | |
Income per share of common stock - basic | |
$ | 0.16 | | |
$ | 0.11 | |
| |
| | | |
| | |
Diluted earnings per share of common stock: | |
| | | |
| | |
Numerator - | |
| | | |
| | |
Net income attributable to common stockholders | |
$ | 4,471,124 | | |
$ | 3,044,535 | |
Add: Preferred stock dividends for assumed conversion | |
| 361,267 | | |
| 243,082 | |
Net income allocated to common stockholders | |
$ | 4,832,391 | | |
$ | 3,287,617 | |
Denominator - | |
| | | |
| | |
Weighted-average shares outstanding – basic | |
| 28,279,701 | | |
| 28,472,256 | |
Incremental shares from assumed conversion of options, warrants and preferred stock, as appropriate | |
| 3,825,723 | | |
| 3,828,828 | |
Weighted average common stock outstanding – diluted | |
| 32,105,424 | | |
| 32,301,084 | |
Income per share of common stock – diluted | |
$ | 0.15 | | |
$ | 0.10 | |
For
the three months ended February 28, 2023 and 2022:
| |
2023 | | |
2022 | |
Basic earnings per share of common stock: | |
| | | |
| | |
Numerator - | |
| | | |
| | |
Net income attributable to common stockholders | |
$ | 3,562,996 | | |
$ | 452,458 | |
Denominator - | |
| | | |
| | |
Weighted-average shares outstanding – basic | |
| 28,279,701 | | |
| 28,472,639 | |
Income per share of common stock – basic | |
$ | 0.13 | | |
$ | 0.02 | |
| |
| | | |
| | |
Diluted earnings per share of common stock: | |
| | | |
| | |
Numerator - | |
| | | |
| | |
Net income attributable to common stockholders | |
$ | 3,562,996 | | |
$ | 452,458 | |
Add: Preferred stock dividends for assumed conversion | |
| 132,500 | | |
| - | |
Net income attributable to common stockholders | |
$ | 3,695,496 | | |
$ | 452,458 | |
Denominator - | |
| | | |
| | |
Weighted-average shares outstanding - basic | |
| 28,279,701 | | |
| 28,472,639 | |
Incremental shares from assumed conversion of warrants or options, as appropriate | |
| 3,824,564 | | |
| 494,505 | |
Weighted average common stock outstanding - diluted | |
| 32,104,265 | | |
| 28,967,144 | |
Income per share of common stock – diluted | |
$ | 0.12 | | |
$ | 0.02 | |
Note
3. Inventory
Inventory
consists of the following:
Schedule of Inventory
| |
February 28, | | |
May 31, | |
| |
2023 | | |
2022 | |
Raw materials | |
$ | 2,109,820 | | |
$ | 2,091,551 | |
Finished goods | |
| 2,717,259 | | |
| 2,020,945 | |
Total inventory | |
$ | 4,827,079 | | |
$ | 4,112,496 | |
Note
4. Property, Plant and Equipment
A
summary of property, plant and equipment is as follows:
Schedule of Property, Plant and Equipment
| |
February 28, 2023 | | |
May 31, 2022 | |
Production machinery and equipment | |
$ | 60,395,743 | | |
$ | 57,341,906 | |
Plant buildings and land | |
| 2,364,089 | | |
| 7,020,543 | |
Leasehold improvements | |
| 1,553,138 | | |
| 1,487,398 | |
Furniture and fixtures | |
| 542,057 | | |
| 542,057 | |
Property plant and equipment gross | |
| 64,855,027 | | |
| 66,391,904 | |
Less: Accumulated depreciation and amortization | |
| (36,335,865 | ) | |
| (34,515,139 | ) |
| |
| | | |
| | |
Net Property, Plant and Equipment | |
$ | 28,519,162 | | |
$ | 31,876,765 | |
Production
machinery includes deposits on equipment in the amount of $3,494,467 as of February 28, 2023, which has not been placed into service.
As of May 31, 2022, plant buildings and land included two properties which are owned by GRE, a variable interest entity (“VIE”),
and had an aggregate net book value of $2,548,933. As discussed in Note 1, GRE was deconsolidated effective July 29, 2022.
Depreciation
and amortization expense, including amortization expense related to financing leases, for the nine months ended February 28, 2023 and
2022 was $3,954,444 and $4,011,025, 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 $1,072,500 for
the each of the nine months ended February 28, 2023 and 2022
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 with
a one-year extension at $5,200 per month which extension was executed by Greystone. Subsequent to the maturity on December 31, 2022,
Greystone pays rent to Yorktown at the monthly rate of $5,200 on a month-to-month basis. Total rent expense was $46,800 and $36,000 for
the nine months ended February 28, 2023 and 2022, respectively.
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 may purchase pallets from TriEnda for resale or sell Greystone
pallets to TriEnda. During the nine months ended February 28, 2023 and 2022, Greystone purchases from TriEnda totaled $431 and $4,222,
respectively, and sales to TriEnda totaled $31,231 and $62,089, respectively. As of February 28, 2023, TriEnda owed $41,284 to Greystone.
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 $574,768 and $348,330 for the nine months ended February 28, 2023
and 2022, respectively. The account receivable due from Green as of February 28, 2023 was $79,550.
Note
6. Long-term Debt
Debt
as of February 28, 2023 and May 31, 2022 is as follows:
Schedule of Long-Term Debt
| |
February 28, | | |
May 31, | |
| |
2023 | | |
2022 | |
Term loan A dated July 29, 2022, payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, maturing July 29, 2027 | |
$ | 7,281,420 | | |
$ | - | |
Term loan A dated July 29, 2022, payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, maturing July 29, 2027 | |
$ | 7,281,420 | | |
$ | - | |
| |
| | | |
| | |
Term loan B dated July 29, 2022, payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, maturing July 29, 2027 | |
| 3,039,219 | | |
| - | |
| |
| | | |
| | |
Term loans payable to International Bank of Commerce, prime rate of interest plus 0.5% with interest floors between 4.0% and 5.25%. These loans were refinanced by the IBC Restated Loan Agreement dated July 29, 2022, and rolled into Term Loan A above | |
| - | | |
| 2,870,169 | |
| |
| | | |
| | |
Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.5%, due July 29, 2024 | |
| 3,000,000 | | |
| 3,700,000 | |
| |
| | | |
| | |
Term loan payable by GRE to International Bank of Commerce, interest rate of 5.5%, paid off July 27, 2022 | |
| - | | |
| 1,826,361 | |
| |
| | | |
| | |
Term loan payable to First Interstate Bank, interest rate of 3.7%, monthly principal and interest payments of $27,593, due March 19, 2025, secured by certain equipment | |
| 662,485 | | |
| 888,642 | |
| |
| | | |
| | |
Term loan payable to First Interstate Bank, interest rate of 3.5%, monthly principal and interest payments of $5,997, due August 10, 2028, secured by certain real estate | |
| 770,840 | | |
| 803,941 | |
| |
| | | |
| | |
Note payable to Robert Rosene, 7.5% interest, paid off August 3, 2022 | |
| - | | |
| 3,295,704 | |
| |
| | | |
| | |
Other | |
| 83,010 | | |
| 111,374 | |
Total long-term debt | |
| 14,836,974 | | |
| 13,496,191 | |
Debt issuance costs, net of amortization | |
| (96,583 | ) | |
| (29,751 | ) |
Total debt, net of debt issuance costs | |
| 14,740,391 | | |
| 13,466,440 | |
Less: Current portion of long-term debt | |
| (2,217,304 | ) | |
| (4,160,403 | ) |
Long-term debt, net of current portion | |
$ | 12,523,087 | | |
$ | 9,306,037 | |
The
prime rate of interest as of February 28, 2023, was 7.75%. Subsequent to February 28, 2023, the prime rate of interest was increased
to 8.00% on March 23, 2023.
Debt
issuance costs consists of the amounts paid to third parties in connection with the issuance and modification of debt instruments. These
costs are shown on the consolidated balance sheet as a direct reduction to the related debt instrument. Amortization of these costs is
included in interest expense. Greystone recorded amortization of debt issuance costs of $4,322 and $4,267 for the nine months ended February
28, 2023 and 2022, respectively.
Restated
and Amended Loan Agreement between Greystone and IBC
On
July 29, 2022, Greystone and GSM (collectively “Borrowers”) and IBC entered into an Amended and Restated Loan Agreement (“IBC
Restated Loan Agreement”) that provides for consolidation of certain term loans and a renewed revolver loan.
The
IBC term loans make equal monthly payments of principal and interest in such amounts sufficient to amortize the principal balance of
the loans over the remaining lives. The monthly payments of principal and interest on the IBC term loans may vary due to changes in the
prime rate of interest. Currently, the aggregate payments for the IBC term loans are approximately $232,000 per month.
The
IBC Restated Loan Agreement provides for IBC to make to Greystone (i) a term loan in the amount of $7,854,708, Term Loan A, to consolidate
all existing term loans in the aggregate amount of $2,669,892 with Lender, extend credit in the amount of $3,271,987 to pay off a note
payable to Robert B. Rosene, Jr. and extend additional credit to fund the purchase in the amount of $1,912,829 of the equipment subject
to the iGPS Logistics, LLC, leases and (ii) an advancing term loan facility, Term Loan B, whereby Greystone may obtain advances up to
the aggregate amount of $7,000,000 (items i and ii referred to as “Term Loans”) (iii) a renewal of the revolving loan with
an increase of $2,000,000 to an aggregate principal amount of $6,000,000 (the “Revolving Loan”), subject to borrowing base
limitations. As of February 28, 2023, Greystone’s available revolving loan borrowing capacity was approximately $3,000,000. In
addition, there is approximately $3,477,000 available to Greystone under the advancing Term Loan B for the purchase of equipment.
The
IBC Restated Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and
other amounts owing under the IBC Restated 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 Restated Loan Agreement or the related loan documents. Among other things, a default under the IBC Restated
Loan Agreement would permit IBC to cease lending funds under the IBC Restated Loan Agreement and require immediate repayment of any outstanding
notes with interest and any unpaid accrued fees.
The
IBC Restated Loan Agreement is secured by a lien on substantially all assets of the Borrowers. Warren F. Kruger, President and CEO, and
Robert B. Rosene, Jr. have provided limited guaranties of the Borrowers’ obligations under the IBC Restated Loan Agreement. Mr.
Kruger’s guarantee is limited to 32.4% of all debt obligations to IBC. Mr. Rosene’s limited guaranty is the lesser of (i)
$3,500,000 less all amounts paid on the principal amount of the loans after the date of the agreement excluding payments on the revolver
and (ii) the amount owed to IBC of the loans outstanding from time to time including accrued interest and fees.
Loan
Agreement with First Interstate Bank, formerly Great Western Bank
On
August 23, 2021, Greystone entered into a loan agreement with First Interstate Bank (“FIB Loan Agreement”) to include prior
commercial loans and subsequent loans. GSM is a named guarantor under the FIB Loan Agreement.
The
FIB Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts
owing under the FIB Loan Agreement from time to time, inaccuracy of representations, violation of covenants, defaults under other agreements,
bankruptcy and similar events, certain material adverse changes relating to a Borrower, certain judgments or awards against a Borrower,
or guarantor’s ability to perform under the FIB Loan Agreement. Among other things, a default under the FIB Loan Agreement would
permit FIB to cease lending funds under the FIB Loan Agreement and require immediate repayment of any outstanding notes with interest
and any unpaid accrued fees.
The
FIB Loan Agreement is secured by a mortgage on one of Greystone’s warehouses.
Maturities
Maturities
of Greystone’s long-term debt for the five years subsequent to February 28, 2023, are $2,217,304, $5,387,090, $2,228,841, $1,215,659
and $3,260,851 with $527,229 thereafter.
Note
7. Leases
Financing
Leases
Financing
leases as of February 28, 2023 and May 31, 2022:
Schedule of Financing Lease
| |
February 28,
2023 | | |
May 31,
2022 | |
Non-cancellable financing leases | |
$ | 69,337 | | |
$ | 2,163,043 | |
Less: Current portion | |
| (41,487 | ) | |
| (1,630,895 | ) |
Non-cancellable financing leases, net of current portion | |
$ | 27,850 | | |
$ | 532,148 | |
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%. Effective October 17, 2022, Greystone and the private company entered into an agreement for Greystone
to pay off the leases and acquire the equipment at the unamortized principal balance of the leases or a total of $1,527,293.
Effective
December 29, 2022, Greystone exercised its option under a lease agreement dated December 28, 2017, with Yorktown to purchase the production
equipment therein for $10,000.
The
production equipment under the remaining non-cancelable financing leases as of February 28, 2023, have a gross carrying amount of $176,565.
Amortization
of the carrying amount of $189,927 and $721,923 was included in depreciation expense for the nine months ended February 28, 2023 and
2022, 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) two buildings on a ten year lease with a five year renewal option and a discount rate of 6.0%. The leases are
single-term with defined constant monthly rental rates.
As
discussed in Note 1, effective August 1, 2022, Greystone and GRE entered into a non-cancellable ten-year lease agreement with a five-year
extension for which Greystone recorded a right-of-use asset and liability based on the present value of the lease payments in the amount
of $5,516,006, using a term of one hundred eighty (180) months and a discount rate of 6.00%.
Lease
Summary Information
For
the periods ending February 28, 2023 and 2022:
Summary of Lease Activity
| |
2023 | | |
2022 | |
Lease Expense | |
| | | |
| | |
Financing lease expense - | |
| | | |
| | |
Amortization of right-of-use assets | |
$ | 189,927 | | |
$ | 721,923 | |
Interest on lease liabilities | |
| 30,614 | | |
| 119,000 | |
Operating lease expense | |
| 335,378 | | |
| 53,411 | |
Short-term lease expense | |
| 1,217,095 | | |
| 1,101,133 | |
Total | |
$ | 1,773,014 | | |
$ | 1,995,467 | |
| |
| | | |
| | |
Other Information | |
| | | |
| | |
Cash paid for amounts included in the measurement of lease liabilities for finance leases - | |
| | | |
| | |
Operating cash flows | |
$ | 30,614 | | |
$ | 119,000 | |
Financing cash flows | |
$ | 626,329 | | |
$ | 1,248,371 | |
Cash paid for amounts included in the measurement of lease liabilities for operating leases - | |
| | | |
| | |
Operating cash flows | |
$ | 335,378 | | |
$ | 53,411 | |
Right-of-use assets obtained in exchange for lease liabilities - | |
| | | |
| | |
Financing leases | |
$ | - | | |
$ | 24,441 | |
Operating leases | |
$ | 5,516,006 | | |
$ | - | |
Weighted-average remaining lease term (in years) - | |
| | | |
| | |
Financing leases | |
| 1.9 | | |
| 1.5 | |
Operating leases | |
| 14.4 | | |
| 1.9 | |
Weighted-average discount rate - | |
| | | |
| | |
Financing leases | |
| 4.4 | % | |
| 7.3 | % |
Operating leases | |
| 6.0 | % | |
| 5.4 | % |
Future
minimum lease payments under non-cancelable leases as of February 28, 2023, are approximately:
Schedule of Future Minimum Lease Payments
| |
Financing
Leases | | |
Operating
Leases | |
Twelve months ended February 29, 2024 | |
$ | 42,185 | | |
$ | 561,947 | |
Twelve months ended February 28, 2025 | |
| 22,440 | | |
| 543,612 | |
Twelve months ended February 28, 2026 | |
| 7,811 | | |
| 534,000 | |
Twelve months ended February 28, 2027 | |
| - | | |
| 534,000 | |
Twelve months ended February 29, 2028 | |
| - | | |
| 549,610 | |
Thereafter | |
| - | | |
| 5,420,290 | |
Total future minimum lease payments | |
| 72,436 | | |
| 8,143,459 | |
Present value discount | |
| 3,099 | | |
| 2,740,690 | |
Present value of minimum lease payments | |
$ | 69,337 | | |
$ | 5,402,769 | |
Note
8. Deferred Revenue
Advances
from a customer pursuant to a contract for the sale of plastic pallets is recognized as deferred revenue. Revenue related to these advances
is recognized by Greystone as pallets are shipped to the customer which totaled $6,378,040 and $9,772,750 during the nine months ended
February 28, 2023 and 2022, respectively. Customer advances received during the nine months ended February 28, 2023 and 2022 were $1,072,000
and $13,560,500, respectively. The unrecognized balance of deferred revenue as of February 28, 2023 and May 31, 2022, was $23,007 and
$5,329,047, 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 1.6% of sales
during the nine months ended February 28, 2023 and 2022, 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 28, 2023 and 2022, respectively, were as follows:
Schedule of Sale of Revenues for Customer Categories
Category | |
2023 | | |
2022 | |
End User Customers | |
| 71 | % | |
| 74 | % |
Distributors | |
| 29 | % | |
| 26 | % |
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 approximates 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 71% and 74% of its total sales from three customers during the nine months ended February 28, 2023 and 2022, 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 $599,700 and $313,050 in fiscal years 2023 and 2022, respectively, were from one of its principal customers.
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.
Note
12. Commitments
As
of February 28, 2023, Greystone had commitments totaling approximately $5.3 million toward the purchase of production equipment.
Note
13. Employee Retention Credits
As
a response to the COVID-19 outbreak, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES
Act”) which authorized emergency loans to businesses by establishing, and providing funding for, forgivable loans under the Paycheck
Protection Program (PPP). The PPP provided loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses
of the qualifying business.
In
June 2021, the Company received forgiveness of its $3,034,000 PPP loan plus accrued interest by the Small Business Administration (“SBA”).
The Company recognized the forgiveness as other income for the year ended May 31, 2022.
The
CARES Act also provided an Employee Retention Credit (“ERC”) which is a refundable tax credit against certain employment
taxes equal to 50% of qualified wages paid, up to $10,000 per employee annually for wages paid. Additional relief provisions were passed
by the United States government, which extended and expanded the qualified wage caps on these credits to 70% of qualified wages paid,
up to $10,000 per employee per quarter, through September 30, 2021.
By
notices dated January 9, 2023, the Department of Treasury notified Greystone of ERC credits awarded under the CARES Act in the total
amount of $3,270,424 due to Greystone for the quarters ended June 30, 2021 and September 30, 2021. Due
to the subjectivity of the credit, the Company elected to account for the ERC as a gain analogizing to ASC 450-30, Gain Contingencies.
The Company recognized the amount as other income for the nine months ended February 28, 2023.
By
notice dated March 27, 2023, the Department of Treasury notified Greystone of ERC credits awarded under the CARES Act in the total amount
of approximately $1,641,000 due to Greystone for the quarter ended March 31, 2021. Greystone will
record these credits in March 2023, which is the point in which the uncertainty surrounding them is resolved and they become realizable.