Quarterly Report for Quarter Ending February 29, 2024 (Form 10-Q)

glgi20240229_10q.htm

GREYSTONE LOGISTICS, INC.

FORM 10-Q

For the Period Ended February 29, 2024

PART I. FINANCIAL INFORMATION	Page
Item 1. Financial Statements
	Consolidated Balance Sheets (Unaudited) As of February 29, 2024 and May 31, 2023	1
	Consolidated Statements of Income (Unaudited) For the Nine Months Ended February 29(28), 2024 and 2023	2
	Consolidated Statements of Income (Unaudited) For the Three Months Ended February 29(28), 2024 and 2023	3
	Consolidated Statements of Changes in Equity (Unaudited) For the Nine Months Ended February 29(28), 2024 and 2023	4
	Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended February 29(28), 2024 and 2023	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II. OTHER INFORMATION	20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
SIGNATURES	22

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Greystone Logistics, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc. and Subsidiaries

Consolidated Statements of Income

For the Nine Months Ended February 29(28),

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc. and Subsidiaries

Consolidated Statements of Income

For the Three Months Ended February 29(28),

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc.

Consolidated Statements of Changes in Equity

For the Nine Months Ended February 29(28), 2024 and 2023

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Nine Months Ended February 29(28),

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc. and Subsidiaries

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, 2024, the results of its operations for the nine months and three months ended February 29(28), 2024 and 2023 and its cash flows for the nine months ended February 29(28), 2024 and 2023. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended May 31, 2023 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 29(28), 2024 and 2023 are not necessarily indicative of the results to be expected for the full fiscal year.

The unaudited 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 owns two buildings located in Bettendorf, IA, which are occupied by Greystone. GRE is wholly owned by Robert B. Rosene, Jr., a member of Greystone's Board of Directors. 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 agreement. 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 GRE and recorded right-of-use assets and liabilities for the new lease. See Note 7.

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 periods ended February 29(28) are as follows:

		2024			2023
For the nine months ended February 29(28):
Preferred stock convertible into common stock			3,333,333				-
For the three months ended February 29(28):
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 nine months ended February 29(28), 2024 and 2023:

		2024			2023
Basic earnings per share of common stock:
Numerator -
Net income attributable to common stockholders		$	2,567,830			$	4,471,124
Denominator -
Weighted-average shares outstanding - basic			28,279,701				28,279,701
Income per share of common stock - basic		$	0.09			$	0.16
Diluted earnings per share of common stock:
Numerator -
Net income attributable to common stockholders		$	2,567,830			$	4,471,124
Add: Preferred stock dividends for assumed conversion			-				361,267
Net income allocated to common stockholders		$	2,567,830			$	4,832,391
Denominator -
Weighted-average shares outstanding - basic			28,279,701				28,279,701
Incremental shares from assumed conversion of warrants and preferred stock, as appropriate			495,000				3,825,723
Weighted average common stock outstanding - diluted			28,774,701				32,105,424
Income per share of common stock - diluted		$	0.09			$	0.15

For the three months ended February 29(28), 2024 and 2023:

			2024			2023
Basic earnings per share of common stock:
Numerator -
Net income attributable to common stockholders		$	151,456			$	3,562,996
Denominator -
Weighted-average shares outstanding - basic			28,279,701				28,279,701
Income per share of common stock - basic		$	0.01			$	0.13
Diluted earnings per share of common stock:
Numerator -
Net income attributable to common stockholders		$	151,456			$	3,562,996
Add: Preferred stock dividends for assumed conversion			-				132,500
			$	151,456			$	3,695,496
Denominator -
Weighted-average shares outstanding - basic			28,279,701				28,279,701
Incremental shares from assumed conversion of warrants and preferred stock, as appropriate			495,455				3,824,564
Weighted average common stock outstanding - diluted			28,775,156				32,104,265
Income per share of common stock - diluted		$	0.01			$	0.12

Note 3.

Inventory

Inventory consists of the following:

		February 29,			May 31,
		2024			2023
Raw materials		$	1,933,401			$	2,299,911
Finished goods			1,069,353				2,184,195
Total inventory		$	3,002,754			$	4,484,106

Note 4.

Property, Plant and Equipment

A summary of property, plant and equipment is as follows:

		February 29, 2024			May 31, 2023
Production machinery and equipment		$	67,786,046			$	66,068,625
Plant buildings and land			2,164,232				2,364,089
Leasehold improvements			1,624,513				1,553,138
Furniture and fixtures			542,057				542,057
			72,116,848				70,527,909
Less: Accumulated depreciation and amortization			(41,522,562	)			(37,343,203	)
Net Property, Plant and Equipment		$	30,594,286			$	33,184,706

Production machinery includes deposits on equipment in the amount of $450,454 as of February 29, 2024, which has not been placed into service.

Depreciation expense, including amortization expense related to financing leases, for the nine months ended February 29(28), 2024 and 2023 was $4,296,383 and $3,954,444, respectively.

Note 5.

Related Party Transactions/Activity

Yorktown Management & Financial Services, LLC

Yorktown Management & Financial Services, LLC ("Yorktown"), an entity wholly-owned by Warren F. Kruger, Greystone's CEO, President, Chairman of the Board, and a significant stockholder of Greystone, 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), 2024 and 2023.

Greystone leases office space from Yorktown at a monthly rental of $5,200 per month which increased to $6,250 per month effective July 1, 2023, with the intent of Greystone and Yorktown finalizing a new lease agreement, subject to the Board of Directors approval. Total rent expenses were $55,200 and $46,800 for the nine months ended February 29(28), 2024 and 2023, 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 CEO, President, Chairman of the Board, and a significant stockholder of Greystone, 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 29(28), 2024 and 2023, Greystone purchases from TriEnda totaled $7,516 and $431, respectively and sales to TriEnda totaled $150,389 and $31,231, respectively. As of February 29, 2024, TriEnda owed $65,907 to Greystone and Greystone owed $7,716 to TriEnda.

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 CEO, President, Chairman of the Board, and a significant stockholder of Greystone. Greystone had sales to Green of $146,454 and $574,768 for the nine months ended February 29(28), 2024 and 2023, respectively. The account receivable due from Green as of February 29, 2024 was $59,295.

Note 6.

Long-term Debt

Debt as of February 29, 2024 and May 31, 2023 is as follows:

		February 29,			May 31,
		2024			2023
Term loans 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		$	12,992,827			$	14,334,736
Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.50%, due July 29, 2024			-				1,500,000
Term loan payable to First Interstate Bank, interest rate of 3.70%, monthly principal and interest payments of $27,593, due March 19, 2025, secured by certain equipment			350,878				585,536
Term loan payable to First Interstate Bank, interest rate of 3.50%, monthly principal and interest payments of $5,997, due August 10, 2028, secured by certain real estate			725,647				759,639
Other			43,965				73,368
Total long-term debt			14,113,317				17,253,279
Debt issuance costs, net of amortization			(92,784	)			(84,022	)
Total debt, net of debt issuance costs			14,020,533				17,169,257
Less: Current portion of long-term debt			(2,384,993	)			(2,249,570	)
Long-term debt, net of current portion		$	11,635,540			$	14,919,687

The prime rate of interest as of February 29, 2024 was 8.50%.

Debt issuance costs consist 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 $4,323 and $4,322 for the nine months ended February 29(28), 2024 and 2023, respectively.

Restated and Amended Loan Agreement between Greystone and IBC

On July 29, 2022, Greystone and GSM (each a "Borrower" and together the "Borrowers") entered into an Amended and Restated Loan Agreement ("IBC Restated Loan Agreement") with International Bank of Commerce ("IBC") that provided for the 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. As of February 29, 2024, the aggregate payments for the IBC term loans are approximately $254,000 per month.

The IBC Restated Loan Agreement, dated July 29, 2022, as amended, provided for IBC to make certain term loans to Greystone, to consolidate all existing term loans in the aggregate amount of approximately $2,700,000 and additional funding in the approximate amount of $13,200,000 for the purchase of equipment and 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 29, 2024, Greystone's available revolving loan borrowing capacity was approximately $5,770,000.

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. In addition, without prior written consent, Greystone shall not declare or pay any dividends, redemptions, distributions and withdrawals with respect to its equity interest other than distributions to holders of its preferred stock in the aggregate of $500,000 in any fiscal year. 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, the Company's President, CEO and Chairman of the Board and a significant stockholder of Greystone, and Robert B. Rosene, Jr., a member of the Company's Board of Directors, 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 representations and warranties and affirmative and negative covenants which include (i) requiring the Borrowers to maintain a debt service coverage ratio of 1:25to 1:00 as of the end of each fiscal year end and debt to tangible net worth ratio of 4:00to 1:00 as of the end of each fiscal year end with a decrease of 0.50 in the ratio each year thereafter until reaching a minimum ratio of 3:00to 1:00. In addition, the FIB Loan Agreement provides that Greystone shall not, without prior consent of the bank, incur or assume additional indebtedness or capital leases.

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 29, 2024, are $2,384,993, $2,242,998, $2,404,975, $6,552,966 and $527,385.

Note 7.

Leases

Financing Leases

Financing leases as of February 29, 2024 and May 31, 2023:

		February 29, 2024			May 31, 2023
Non-cancellable financing leases		$	17,070			$	60,485
Less: Current portion			(15,288	)			(31,981	)
Non-cancellable financing leases, net of current portion		$	1,782			$	28,504

The production equipment under the remaining non-cancelable financing leases as of February 29, 2024, has a gross carrying amount of $63,457 as of February 29, 2024. Amortization of the carrying amount of $21,470 and $189,927 was included in depreciation expense for the nine months ended February 29(28), 2024 and 2023, 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-twomonth term and a forty-eightmonth 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 6.00%. The leases are single-term with defined constant monthly rental rates.

Lease Summary Information

For the nine-months ended February 29(28), 2024 and 2023:

		2024			2023
Lease Expense
Financing lease expense -
Amortization of right-of-use assets		$	21,470			$	189,927
Interest on lease liabilities			1,415				30,614
Operating lease expense			454,893				335,378
Short-term lease expense			1,205,951				1,217,095
Total		$	1,683,729			$	1,773,014
Other Information
Cash paid for amounts included in the measurement of lease liabilities for finance leases -
Operating cash flows		$	1,415			$	30,614
Financing cash flows		$	11,650			$	626,329
Cash paid for amounts included in the measurement of lease liabilities for operating leases -
Operating cash flows		$	467,182			$	335,378
Weighted-average remaining lease term (in years) -
Financing leases			1.0				1.9
Operating leases			13.4				14.4
Weighted-average discount rate -
Financing leases			4.8	%			4.4	%
Operating leases			6.0	%			6.0	%

Future minimum lease payments under non-cancelable leases as of February 29, 2024, are approximately:

		Financing Leases			Operating Leases
Twelve months ended February 28, 2025		$	15,715			$	534,000
Twelve months ended February 28, 2026			1,798				534,000
Twelve months ended February 28, 2027			-				534,000
Twelve months ended February 29, 2028			-				549,610
Twelve months ended February 28, 2029			-				560,760
Thereafter			-				4,859,530
Total future minimum lease payments			17,513				7,571,900
Present value discount			443				2,396,681
Present value of minimum lease payments		$	17,070			$	5,175,219

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 $-0- and $6,378,040 during the nine months ended February 29(28), 2024 and 2023, respectively. Customer advances received during the nine months ended February 29(28), 2024 and 2023 were $545,292 and $1,072,000, respectively. The unrecognized balance of deferred revenue as of February 29, 2024 and May 31, 2023, was $568,299 and $23,007, respectively.

Note 9.

Revenue and Revenue Recognition

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 0.8% of sales during the nine months ended February 29(28), 2024 and 2023, 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), 2024 and 2023, respectively, were as follows:

Category		2024			2023
End User Customers			83	%			71	%
Distributors			17	%			29	%

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 consolidated balance sheets approximate fair value.

Note 11.

Concentrations, Risks and Uncertainties

Greystone derived approximately 83% and 71% of its total sales from its major customers (which generally ranges from two to four customers) during the nine months ended February 29(28), 2024 and 2023, 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 $637,906 and $599,700 during the nine months ended February 29(28), 2024 and 2023, respectively, were from one of its major 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.

In February 2024, one of the Company's storage warehouses caught fire with damage to finished goods inventory valued at $1,326,752 and the building with a net book value of $161,850. The Company recorded an insurance receivable of $1,488,602 as an estimate primarily for damage to the inventory. The insurer is currently reviewing the claim which may result in a change to the recovery. The Company anticipates that the final settlement will result in a gain primarily due to the damage to the building; however, there is insufficient information currently available to determine a reasonable estimate.

Note 12.

Commitments

As of February 29, 2024, the Company had commitments outstanding of $166,800 toward the purchase of production equipment.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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. All statements, other than statements of historical fact, that address activities, events, or developments that Greystone expects, believes, or anticipates will or may occur in the future, including decreased costs, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks, and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone's prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone's business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone's business are more fully described in Greystone's Annual Report on Form 10-K for the fiscal year ended May 31, 2023, which was filed with the Securities and Exchange Commission on August 28, 2023, as the same may be updated from time to time. Actual results may vary materially from the forward-looking statements. The results of operations for the nine months ended February 29, 2024, are not necessarily indicative of the results for the fiscal year ending May 31, 2024. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.

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 consolidated the variable interest entity, Greystone Real Estate, L.L.C. ("GRE") through July 29, 2022, at which time a deconsolidation of the entity occurred. All material intercompany accounts and transactions have been eliminated.

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, contract sales personnel and its President and other employees.

Personnel

Greystone had full-time-equivalents of approximately 167 and 189 full-time employees and 79 and 56 temporary employees as of February 29(28), 2024 and 2023, respectively. Full-time equivalent is a measure based on time worked.

Nine Months Ended February 29, 2024 Compared to Nine Months Ended February 28, 2023

Sales

Sales for the nine months ended February 29, 2024, were $46,990,716 compared to $44,633,542 for the nine months ended February 28, 2023, for an increase of $2,357,174, or 5.3%. The number of pallets sold during the nine months ended February 29, 2024, increased by approximately 9% from the prior period offset by an approximate 3% decrease in the average price per pallet sold.

Greystone's principal customers, ranging from two to four customers, accounted for approximately 83% and 71% of sales for the nine months ended February 29(28), 2024 and 2023, respectively. Greystone is not able to predict the future needs of these principal customers and will continue its efforts to increase sales through the addition of new customers developed through Greystone's marketing efforts.

Cost of Sales

Cost of sales for the nine months ended February 29, 2024, was $37,942,179, or 81% of sales, compared to $38,590,544, or 86% of sales, for the nine months ended February 28, 2023. The decrease in the ratio of cost of sales to sales for the nine months ended February 29, 2024, from the prior period was primarily the result of declines in the cost of raw material and an improvement in the production overhead burden due to an increase in production of approximately 20% over the prior period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $3,863,975 for the nine months ended February 29, 2024, compared to $3,918,205 for the nine months ended February 28, 2023, for a decrease of $54,230. The change in selling, general and administrative expenses was nominal for the two periods.

Other Income (Expenses)

During nine months ended February 28, 2023, the Company realized:

●

Federal tax credits realized in the amount of $3,270,424 from the Department of Treasury for claims filed pursuant to the Employee Retention Credits ("ERC") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

●

Gain from deconsolidation of variable interest entity in the amount of $569,997 upon the deconsolidation GRE, a variable interest entity.

Other income for the nine months ended February 29(28), 2024 and 2023, was $180,004 and $189,914, respectively. The other income for the nine months ended February 29, 2024, consisted primarily of insurance recoveries and interest income. Other income for the nine months ended February 28, 2023, was primarily from interest income.

Interest expense was $982,592 for the nine months ended February 29, 2024, compared to $821,138 in the prior period for an increase of $161,454. The average U.S. prime rate of interest for the nine months ended February 29, 2024, was 8.50% compared the 6.14% for the prior period.

Provision for Income Taxes

The provision for income taxes was $1,375,000 and $452,000 for the nine months ended February 29(28), 2024 and 2023, respectively. The effective tax rate differs from federal statutory rates principally due to state income taxes, charges or income which have no tax benefit or expense, 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 $3,006,974 for the nine months ended February 29, 2024, compared to $4,881,990 for the nine months ended February 28, 2023, 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 the nine months ended February 29, 2024, was $2,567,830, or $0.09 per share, compared $4,471,124, or $0.16 per share, for the nine months ended February 28, 2023, primarily for the reasons discussed above.

Three Months Ended February 29, 2024 Compared to Three Months Ended February 28, 2023

Sales

Sales for the three months ended February 29, 2024, were $13,980,009 compared to $13,578,269 for the three months ended February 28, 2023, for an increase of $401,740, or 3.0%. The increase in sales for the nine months ended February 29, 2024, over the prior period was primarily due to an approximate 2% increase in the average price per pallet sold.

Greystone's principal customers, ranging from two to four customers, accounted for approximately 82% and 65% of sales for the nine months ended February 29(28), 2024 and 2023, respectively. Greystone is not able to predict the future needs of these principal customers and will continue its efforts to increase sales through the addition of new customers developed through Greystone's marketing efforts.

Cost of Sales

Cost of sales for the three months ended February 29, 2024, was $12,113,699, or 87% of sales, compared to $11,220,791, or 83% of sales, in the prior period. The increase in the ratio of cost of sales to sales for the current period over the prior period was primarily the result of an increase in the production overhead burden due to a decrease in production of approximately 12%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,277,001 for the three months ended February 2, 2024, compared to $1,606,626 in the prior period for a decrease of $329,625. The decrease resulted from employee bonuses paid during the three months ended February 28, 2023.

Other Income (Expenses)

During the three months ended February 28, 2023, the Company realized Federal tax credits realized in the amount of $3,270,424 from the Department of Treasury for claims filed pursuant to the Employee Retention Credits ("ERC") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

Other income for the three months ended February 29(28), 2024 and 2023, was $176,851 and $183,596, respectively The other income for the three months ended February 29, 2024, consisted primarily of insurance recoveries and interest income. Other income for the three months ended February 28, 2023, was primarily from interest income.

Interest expense was $310,231 for the three months ended February 29, 2024, compared to $313,376 in the prior period for a decrease of $3,145. The average U.S. prime rate of interest for the three months ended February 29, 2024, was 8.50% compared the 7.23% for the prior period. The amortization of long-term debt and financing leases offset by the effect of the increase in the average U.S. prime rate of interest for the comparable periods resulted in the net decrease.

Provision for Income Taxes

The provision for income taxes was $158,000 and $196,000 in the three months ended February 29(28), 2024 and 2023, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges or income which have no tax benefit or expense, 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 $297,929 for the three months ended February 29, 2024, compared to $3,695,496 for the three months ended February 28, 2023, 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 nine months ended February 29, 2024, was $151,456, or $0.01 per share, compared $3,562,996, or $0.13 per share, for the three months ended February 28, 2023, primarily for the reasons discussed above.

Liquidity and Capital Resources

A summary of cash flows for the nine months ended February 29, 2024, is as follows:

Cash provided by operating activities		$	9,272,967
Cash used in investing activities		$	(2,040,776	)
Cash provided by financing activities		$	(3,608,293	)

The contractual obligations of Greystone are as follows:

		Total			Less than 1 year			1-3 years			4-5 years			Thereafter
Long-term debt		$	14,113,317			$	2,384,993			$	4,647,973			$	7,080,351			$	-
Financing lease rents		$	17,513			$	15,715			$	1,798			$	-			$	-
Operating lease rents		$	7,571,900			$	534,000			$	1,068,000			$	1,110,370			$	4,859,530
Commitments		$	-			$	-			$	-			$	-			$	-

Greystone had a working capital of $8,490,873 as of February 29, 2024. To provide for the funding to meet Greystone's operating activities and contractual obligations as of February 29, 2024, 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 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 of the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $500,000 per year.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

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

General

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

Recognition of Revenues

Revenue is recognized at the point in 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.

Accounts receivable

Trade receivables are carried at original invoice amount less an estimate made for doubtful accounts. Management determines the allowance for credit losses by regularly evaluating individual customer receivables and considering a customer's financial condition, credit history and current economic conditions. Trade receivables are written off against the allowance when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. The Company generally does not charge interest on past due accounts.

Inventory

Inventory consists of finished pallets and raw materials which are stated at the lower of average cost or net realizable value. Management applies overhead costs to inventory based on an analysis of the Company's expense categories. The specific costs are then applied to inventory based on production during the period. Management relies on estimates and assumptions regarding the specific costs to include in the production costs, as well as the period to use in determining inventory production.

Income Taxes

Greystone accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and tax bases of assets and liabilities and tax loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse.

A deferred tax asset is recognized for tax-deductible temporary differences and operating losses using the applicable enacted tax rate. In assessing the realizability of deferred tax assets, management considers the likelihood of whether it is more likely than not the net deferred tax asset will be realized. Based on this evaluation, management will provide a valuation allowance if it is determined more likely than not the associated asset will not be recognized. Based on this, management has determined that Greystone will not be able to realize the full effect of the deferred tax assets and a valuation allowance of $793,337 and $1,044,361 has been recorded as of February 29, 2024 and May 31, 2023, respectively.

New Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying unaudited consolidated financial statements. As new accounting pronouncements are issued, Greystone will adopt those that are applicable under the circumstances.

Recent accounting pronouncements issued by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants and the SEC did not or are not believed by management to have a material effect on Greystone's unaudited consolidated financial statements.

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 (CEO) and Chief Financial Officer (CFO) of the effectiveness of Greystone's disclosure controls and procedures pursuant to the Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based on an evaluation as of February 29, 2024, Greystone's CEO and CFO concluded that Greystone's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) were effective as of February 29, 2024.

During the nine months ended February 29, 2024, 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.

dItem 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.
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.
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.
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.
101.INS*	Inline XBRL Instance Document.
10. SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB*	Inline XBRL Taxonomy Extension Labels Linkbase.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase.
104*	Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

**	Furnished 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: April 15, 2024	/s/ Warren F. Kruger
	Warren F. Kruger, President and Chief
	Executive Officer (Principal Executive Officer)
Date: April 15, 2024	/s/ R. Brice Dille
	R. Brice Dille, Interim Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

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