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Document and Entity Information

v2.4.0.6
Document and Entity Information
9 Months Ended
Feb. 28, 2013
Apr. 10, 2013
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Feb. 28, 2013  
Document Fiscal Year Focus 2013  
Document Fiscal Period Focus Q3  
Entity Registrant Name GREYSTONE LOGISTICS, INC.  
Entity Central Index Key 0001088413  
Current Fiscal Year End Date --05-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   26,111,201

Consolidated Balance Sheets (Unaudited)

v2.4.0.6
Consolidated Balance Sheets (Unaudited) (USD $)
Feb. 28, 2013
May 31, 2012
Current Assets:    
Cash $ 381,822 $ 194,400
Accounts receivable -    
Trade, net of allowance of $50,000 2,086,142 2,715,893
Related party 949,320 0
Inventory 1,109,307 956,638
Prepaid expenses and other 154,392 45,090
Total Current Assets 4,680,983 3,912,021
Property, Plant and Equipment 15,454,712 15,134,061
Less: Accumulated Depreciation (8,321,845) (7,335,883)
Property, Plant and Equipment, net 7,132,867 7,798,178
Deferred Tax Asset 822,400 585,000
Other Assets 74,183 86,454
Total Assets 12,710,433 12,381,653
Current Liabilities:    
Current portion of long-term debt 1,291,736 1,286,312
Preferred dividends payable 3,168,971 2,924,108
Accounts payable and accrued expenses 2,400,052 2,581,787
Accounts payable and accrued expenses - related parties 1,482,722 1,285,714
Total Current Liabilities 8,343,481 8,077,921
Long-Term Debt, net of current portion 9,813,123 10,757,561
Deficit:    
Preferred stock, $0.0001 par value, $5,000,000 liquidation preference; Shares authorized: 20,750,000; Shares issued and outstanding: 50,000 5 5
Common stock, $0.0001 par value; Shares authorized: 5,000,000,000; Shares issued and outstanding: 26,111,201 2,611 2,611
Additional paid-in capital 53,129,361 53,089,293
Accumulated deficit (59,703,145) (60,586,143)
Total Greystone Stockholders' Deficit (6,571,168) (7,494,234)
Non-controlling interests 1,124,997 1,040,405
Total Deficit (5,446,171) (6,453,829)
Total Liabilities and Deficit $ 12,710,433 $ 12,381,653

Consolidated Balance Sheets (Unaudited) (Parenthetical)

v2.4.0.6
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
Feb. 28, 2013
May 31, 2012
Current Assets:    
Allowance for doubtful accounts $ 50,000 $ 50,000
Deficit:    
Preferred stock, par value $ 0.0001 $ 0.0001
Liquidation preference $ 5,000,000 $ 5,000,000
Preferred stock authorized shares 20,750,000 20,750,000
Preferred stock shares issued 50,000 50,000
Preferred stock shares outstanding 50,000 50,000
Common stock, par value $ 0.0001 $ 0.0001
Common stock authorized shares 5,000,000,000 5,000,000,000
Common stock shares issued 26,111,201 26,111,201
Common stock shares outstanding 26,111,201 26,111,201

Consolidated Statements of Income

v2.4.0.6
Consolidated Statements of Income (USD $)
3 Months Ended 9 Months Ended
Feb. 28, 2013
Feb. 29, 2012
Feb. 28, 2013
Feb. 29, 2012
Sales $ 4,517,453 $ 4,875,856 $ 16,705,437 $ 16,872,981
Cost of Sales 3,687,258 3,960,606 13,467,061 13,821,507
Gross Profit 830,195 915,250 3,238,376 3,051,474
General, Selling and Administrative Expenses 472,912 554,801 1,573,995 1,454,146
Operating Income 357,283 360,449 1,664,381 1,597,328
Other Income (Expense):        
Other Income (Expense) 0 4,932 6,500 (1,909)
Interest Expense (200,668) (201,583) (620,022) (680,480)
Total Other Expense, net (200,668) (196,651) (613,522) (682,389)
Income before income taxes 156,615 163,798 1,050,859 914,939
Benefit from income taxes 17,600 0 226,900 0
Net Income 174,215 163,798 1,277,759 914,939
Income Attributable to Variable Interest Entities, net (45,688) (50,489) (149,898) (96,669)
Preferred Dividends (80,137) (79,247) (244,863) (160,274)
Net Income Available to Common Stockholders $ 48,390 $ 34,062 $ 882,998 $ 657,996
Income Available to Common Stockholders:        
Per Share of Common Stock - Basic $ 0.00 $ 0.00 $ 0.03 $ 0.03
Per Share of Common Stock - Diluted $ 0.00 $ 0.00 $ 0.03 $ 0.03
Weighted Average Shares of Common Stock Outstanding -        
Basic 26,111,201 26,111,201 26,111,201 26,111,201
Diluted 27,554,523 26,111,201 27,366,000 26,111,201

Consolidated Statements of Cash Flows

v2.4.0.6
Consolidated Statements of Cash Flows (USD $)
9 Months Ended
Feb. 28, 2013
Feb. 29, 2012
Cash Flows from Operating Activities:    
Net income $ 1,277,759 $ 914,939
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 995,749 867,005
Deferred income taxes (237,400) 0
Stock-based compensation 40,068 0
Changes in receivables (319,569) (294,002)
Changes in inventory (152,669) (1,339,103)
Changes in prepaid expenses and other (109,302) (82,994)
Changes in other assets 2,484 (3,320)
Changes in accounts payable and accrued expenses 15,273 1,500,827
Net cash provided by operating activities 1,512,393 1,563,352
Cash Flows from Investing Activities:    
Purchase of property and equipment (320,651) (435,211)
Cash Flows from Financing Activities:    
Payments on long-term debt and capitalized leases (939,014) (935,964)
Payments on advances from related party 0 (93,500)
Capital contributions to variable interest entity 0 75,000
Distributions by variable interest entity (65,306) (54,560)
Net cash used in financing activities (1,004,320) (1,009,024)
Net Increase in Cash 187,422 119,117
Cash, beginning of period 194,400 169,420
Cash, end of period 381,822 288,537
Non-Cash Activities:    
Acquisition of equipment by capital lease 0 563,026
Preferred dividend accrual 244,863 160,274
Net decrease in liabilities due to deconsolidation of VIE 0 990,378
Supplemental Information:    
Interest paid $ 329,737 $ 398,523

Basis of Financial Statements

v2.4.0.6
Basis of Financial Statements
9 Months Ended
Feb. 28, 2013
Basis of Financial Statements

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, 2013, and the results of its operations for the nine-month and three-month periods ended February 28, 2013 and February 29, 2012 and its cash flows for the nine-month periods ended February 28, 2013 and February 29, 2012.  These consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the fiscal year ended May 31, 2012 and the notes thereto included in Greystone's Form 10-K for such period. The results of operations for the nine-month and three-month periods ended February 28, 2013 and February 29, 2012 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 its variable interest entities, Greystone Real Estate, L.L.C. (“GRE”) and GLOG Investments, L.L.C. (“GLOG”), except that GLOG was deconsolidated effective September 1, 2011.  GRE owns two buildings located in Bettendorf, Iowa which are leased to GSM. 

 

Earnings Per Share

v2.4.0.6
Earnings Per Share
9 Months Ended
Feb. 28, 2013
Earnings Per Share

Note 2.       Earnings Per Share

 

Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income available to common stockholders by the weighted-average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.

 

Greystone excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is anti-dilutive.  Equity instruments which have been excluded are certain options to purchase common stock totaling 350,000 and 1,940,000 shares for the nine and three months ended February 28, 2013 and February 29, 2012, respectively, and convertible preferred stock which is convertible into 3,333,334 shares of common stock for both the nine months and three months ended February 28, 2013, and 2012.

 

The following table sets forth the computation of basic and diluted shares for the nine and three months ended February 28, 2013 and February 29, 2012:

February 28, 2013

February 29, 2012

For the Nine-Month Periods:

Weighted-average shares outstanding:

    Basic

     26,111,201

    26,111,201

Incremental shares from assumed conversion of options

       1,254,799

                     -

Diluted shares

     27,366,000

    26,111,201

For the Three-Month Periods:

Weighted-average shares outstanding:

     26,111,201

    26,111,201

    Basic

Incremental shares from assumed conversion of options

       1,443,322

                     -

Diluted shares

     27,554,523

    26,111,201

 

 

 

 

 

 

 

 

 

 

 

Inventory

v2.4.0.6
Inventory
9 Months Ended
Feb. 28, 2013
Inventory

Note 3.   Inventory

               Inventory consists of the following:

                       

February 28,

 May 31,

2013

2012

Raw materials

 $        647,879

 $        593,225

Finished goods

           461,428

           363,413

Total inventory

 $     1,109,307

 $        956,638

 

Related Party Transactions

v2.4.0.6
Related Party Transactions
9 Months Ended
Feb. 28, 2013
Related Party Transactions

Note 4.               Related Party Transactions

 

            Yorktown Management & Financial Services, LLC (“Yorktown”), an entity wholly owned by Greystone's CEO and President, owns certain equipment that Greystone uses for its pallet and resin production. Greystone pays advances to Yorktown in recognition of the amounts owed pursuant to certain agreements.  As of February 28, 2013, Greystone has a receivable from Yorktown in the amount of $2,985,051.  Mr. Kruger has agreed that, if necessary, the amounts due Greystone should be offset against certain amounts that Greystone owes him or Yorktown.  At February 28, 2013, the offset against the net advances is the combined total of (i) the accrued interest of $802,551 payable to Mr. Kruger, (ii) advances payable to Mr. Kruger of $513,180 and (iii) an account payable of $720,000 for deferred compensation payable to Mr. Kruger.

 

Effective February 1, 2013, the arrangement between Greystone and Yorktown whereby Yorktown provided the pelletizing equipment and received a 40% share of the gross profit from the sale of pelletized resin was replaced by an arrangement whereby Greystone will pay Yorktown a fee of $0.02 per pound for utilization of Yorktown's pelletizing equipment. Also, Greystone no longer purchases raw materials for pallet production from Yorktown and the grinding fee for utilization of Yorktown's equipment was increased to $0.05 per pound.

              

Notes Payable

v2.4.0.6
Notes Payable
9 Months Ended
Feb. 28, 2013
Notes Payable

Note 5.   Notes Payable

 

               Notes payable as of February 28, 2013 and May 31, 2012 are as follows:

 

              

February 28,

May 31,

2013

2012

Note payable to F&M Bank & Trust Company, prime rate of interest not less than 4.5%, due March 13, 2015, monthly principal payments of $76,561 plus interest

 $       4,573,333

 $       5,226,665

Note payable by variable interest entity to F&M Bank & Trust Company, prime rate of interest but not less than 4.75%, due March 15, 2014, monthly installments of $35,512, secured by buildings and land

          3,431,356

          3,623,070

Capitalized lease payable, due August 15, 2016, 5% interest, monthly payments of $10,625 plus $0.50 per pallet for monthly sales in excess of 12,500

             417,492

             481,597

Note payable to BancFirst, prime rate of interest plus 1%, paid June 2012

                        -

                 8,047

Note payable to Robert Rosene, 7.5% interest, due January 15, 2014

          2,066,000

          2,066,000

Note payable to Warren Kruger, 7.5% interest, due January 15, 2014

             527,716

             527,716

Other notes payable

               88,962

             110,778

Total Notes Payable

        11,104,859

        12,043,873

Less: Current portion

          1,291,736

                   

         1,286,312

Long-term Debt

 $       9,813,123

 $     10,757,561

 

            Greystone, GSM, GRE, Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a director, are parties to a loan agreement dated as of March 4, 2005, as amended (the “Loan Agreement”), with F&M Bank & Trust Company (“F&M”).  The Loan Agreement (a) includes cross-collateralization and cross-default provisions among property and debts of GSM and GRE, an entity owned by Messrs. Kruger and Rosene, and Messrs. Kruger and Rosene, as owners of Greystone's Series 2003 Preferred Stock (debt in the amount of approximately $3,400,000 owed by Messrs. Kruger and Rosene to F&M is collateralized by the preferred stock), (b) contains certain financial covenants, and (c) restricts the payments of dividends. Greystone's note payable to F&M is secured by Greystone's cash, accounts receivable, inventory and equipment.

 

On March 1, 2013, F&M and GSM entered into a Fourth Amendment (the “Fourth Amendment”) to the Loan Agreement.  The Fourth Amendment (a) has an effective date of February 28, 2013, (b) extends the maturity date of the loan from F&M to GSM under the Loan Agreement (the “Loan”) to March 13, 2015, and (c) increases the amount of the Loan by $250,000. The loan increase of $250,000 was funded on March 1, 2013, whereby the outstanding principal balance of the Loan became $4,823,333.  In connection with the execution of the Fourth Amendment, (y) Greystone ratified its existing guaranty of GSM's obligations under the Loan Agreement, and (z) GSM executed a promissory note in favor of F&M, whereby GSM promises to repay the Loan.

 

Fair Value of Financial Instruments

v2.4.0.6
Fair Value of Financial Instruments
9 Months Ended
Feb. 28, 2013
Fair Value of Financial Instruments

Note 6.   Fair Value of Financial Instruments

                                             

The following methods and assumptions are used in estimating the fair-value disclosures for financial instruments:

 

Long-Term Debt: The carrying amount of loans with floating rates of interest approximate fair value.  Fixed rate loans are valued based on cash flows using estimated rates of comparable loans.  The carrying amounts reported in the balance sheet approximate fair value.

 

Risks and Uncertainties

v2.4.0.6
Risks and Uncertainties
9 Months Ended
Feb. 28, 2013
Risks and Uncertainties

Note 7.   Risks and Uncertainties

 

Greystone derives a substantial portion of its revenue from a national brewer.  This customer accounted for approximately 67% and 68% of Greystone's pallet sales and 59% and 57% of Greystone's total sales for the nine months ended February 28, 2013 and February 29, 2012, respectively.  Greystone's recycled plastic pallets are approved for use by the customer and, at the current time, are the only plastic pallets used by the customer for shipping products. There is no assurance that Greystone will retain this customer's business at the same level, or at all.  The loss of a material amount of business from this customer could have a material adverse effect on Greystone.

 

            Warren F. Kruger, President and CEO, Robert B. Rosene, Jr., a Greystone director, have provided financing and guarantees on Greystone's bank debt.  As of February 28, 2013, Greystone is indebted to Mr. Kruger in the amount of $527,716 for a note payable and to Mr. Rosene in the amount of $3,548,701 for a note payable and related accrued interest.  Effective January 15, 2012, Messrs. Kruger and Rosene agreed to a two year extension on the debt.  There is no assurance that these individuals will continue to provide extensions in the future.

 

             See Note 5 for a discussion of the cross-default and cross-collateralization provisions contained in the loan agreement dated as of March 4, 2005, as amended, with F&M.

Earnings Per Share (Tables)

v2.4.0.6
Earnings Per Share (Tables)
9 Months Ended
Feb. 28, 2013
Computation of Basic and Diluted Shares

The following table sets forth the computation of basic and diluted shares for the nine and three months ended February 28, 2013 and February 29, 2012:

February 28, 2013

February 29, 2012

For the Nine-Month Periods:

Weighted-average shares outstanding:

    Basic

     26,111,201

    26,111,201

Incremental shares from assumed conversion of options

       1,254,799

                     -

Diluted shares

     27,366,000

    26,111,201

For the Three-Month Periods:

Weighted-average shares outstanding:

     26,111,201

    26,111,201

    Basic

Incremental shares from assumed conversion of options

       1,443,322

                     -

Diluted shares

     27,554,523

    26,111,201

Inventory (Tables)

v2.4.0.6
Inventory (Tables)
9 Months Ended
Feb. 28, 2013
Inventory

               Inventory consists of the following:

                       

February 28,

 May 31,

2013

2012

Raw materials

 $        647,879

 $        593,225

Finished goods

           461,428

           363,413

Total inventory

 $     1,109,307

 $        956,638

Notes Payable (Tables)

v2.4.0.6
Notes Payable (Tables)
9 Months Ended
Feb. 28, 2013
Notes Payable

               Notes payable as of February 28, 2013 and May 31, 2012 are as follows:

 

              

February 28,

May 31,

2013

2012

Note payable to F&M Bank & Trust Company, prime rate of interest not less than 4.5%, due March 13, 2015, monthly principal payments of $76,561 plus interest

 $       4,573,333

 $       5,226,665

Note payable by variable interest entity to F&M Bank & Trust Company, prime rate of interest but not less than 4.75%, due March 15, 2014, monthly installments of $35,512, secured by buildings and land

          3,431,356

          3,623,070

Capitalized lease payable, due August 15, 2016, 5% interest, monthly payments of $10,625 plus $0.50 per pallet for monthly sales in excess of 12,500

             417,492

             481,597

Note payable to BancFirst, prime rate of interest plus 1%, paid June 2012

                        -

                 8,047

Note payable to Robert Rosene, 7.5% interest, due January 15, 2014

          2,066,000

          2,066,000

Note payable to Warren Kruger, 7.5% interest, due January 15, 2014

             527,716

             527,716

Other notes payable

               88,962

             110,778

Total Notes Payable

        11,104,859

        12,043,873

Less: Current portion

          1,291,736

                   

         1,286,312

Long-term Debt

 $       9,813,123

 $     10,757,561

Earnings Per Share (Details 1)

v2.4.0.6
Earnings Per Share (Details 1)
3 Months Ended 9 Months Ended
Feb. 28, 2013
Feb. 29, 2012
Feb. 28, 2013
Feb. 29, 2012
Weighted-average shares outstanding:        
Basic 26,111,201 26,111,201 26,111,201 26,111,201
Incremental shares from assumed conversion of options 1,443,322   1,254,799  
Diluted shares 27,554,523 26,111,201 27,366,000 26,111,201

Earnings Per Share (Details Text)

v2.4.0.6
Earnings Per Share (Details Text)
3 Months Ended 9 Months Ended
Feb. 28, 2013
Feb. 29, 2012
Feb. 28, 2013
Feb. 29, 2012
Convertible Preferred Stock
       
Antidilutive Securities 3,333,334 3,333,334 3,333,334 3,333,334
Call Option
       
Antidilutive Securities 1,940,000 1,940,000 350,000 350,000

Inventory (Details 1)

v2.4.0.6
Inventory (Details 1) (USD $)
Feb. 28, 2013
May 31, 2012
Raw materials $ 647,879 $ 593,225
Finished goods 461,428 363,413
Total inventory $ 1,109,307 $ 956,638

Related Party Transactions (Details Text)

v2.4.0.6
Related Party Transactions (Details Text) (USD $)
Feb. 28, 2013
Feb. 01, 2013
Advances Payable $ 2,985,051  
Accrued Interest 802,551  
Advances Payable 513,180  
Deferred Compensation Payable $ 720,000  
Percent of Gross Profit Share for Pelletizing Equipment   40.00%
Per Pound Fee for Utilization of Pelletizing Equipment   0.02
Per Pound Grinding Fee for Utilization of Equipment   0.05

Notes Payable (Details 1)

v2.4.0.6
Notes Payable (Details 1) (USD $)
Feb. 28, 2013
May 31, 2012
Note payable $ 527,716  
Other notes payable 88,962 110,778
Total Notes Payable 11,104,859 12,043,873
Less: Current portion 1,291,736 1,286,312
Long-term Debt 9,813,123 10,757,561
Capitalized lease payable, due August 15, 2016, 5% interest, monthly payments of $10,625 plus $0.50 per pallet for monthly sales in excess of 12,500 417,492 481,597
Note payable to F&M Bank & Trust Company, prime rate of interest not less than 4.5%, due March 13, 2015, monthly principal payments of $76,561 plus interest
   
Note payable 4,573,333 5,226,665
Note payable by variable interest entity to F&M Bank & Trust Company, prime rate of interest but not less than 4.75%, due March 15, 2014, monthly installments of $35,512, secured by buildings and land
   
Note payable 3,431,356 3,623,070
Note payable to BancFirst, prime rate of interest plus 1%, paid June 2012
   
Note payable   8,047
Note payable to Robert Rosene, 7.5% interest, due January 15, 2014
   
Note payable 2,066,000 2,066,000
Note payable to Warren Kruger, 7.5% interest, due January 15, 2014
   
Note payable $ 527,716 $ 527,716

Notes Payable (Details Text)

v2.4.0.6
Notes Payable (Details Text) (USD $)
Mar. 13, 2015
Mar. 04, 2005
Debt owed by Messrs. Kruger and Rosene to F&M   $ 3,400,000
Increase in the loan 250,000  
Outstanding principal balance $ 4,823,333  

Risks and Uncertainties (Details Text)

v2.4.0.6
Risks and Uncertainties (Details Text) (USD $)
9 Months Ended
Feb. 28, 2013
Feb. 29, 2012
Percent of pallet sales to largest customer 67.00% 68.00%
Percent of total sales to largest customer 59.00% 57.00%
Note payable $ 527,716  
Note payable and related accrued interest $ 3,548,701