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Document and Entity Information

v2.4.0.6
Document and Entity Information (USD $)
12 Months Ended
May 31, 2013
Aug. 26, 2013
Nov. 30, 2012
Document and Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date May 31, 2013    
Document Fiscal Year Focus 2013    
Document Fiscal Period Focus FY    
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 Public Float     $ 4,328,564
Entity Common Stock, Shares Outstanding   26,111,201  
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    

Consolidated Balance Sheets

v2.4.0.6
Consolidated Balance Sheets (USD $)
May 31, 2013
May 31, 2012
Current Assets:    
Cash $ 366,896 $ 194,400
Accounts receivable, net of allowance for doubtful accounts of $100.000 and $50,000 for 2013 and 2012, respectively 2,239,594 2,715,893
Inventory 1,044,379 956,638
Prepaid expenses 119,198 45,090
Total Current Assets 3,770,067 3,912,021
Property and Equipment, net of accumulated depreciation 7,044,139 7,798,178
Deferred Tax Asset 1,159,000 585,000
Other Assets 71,371 86,454
Total Assets 12,044,577 12,381,653
Current Liabilities:    
Current portion of long-term debt 1,344,160 1,286,312
Accounts payable and accrued expenses 1,643,339 2,581,787
Accounts payable and accrued expenses - related parties 1,551,154 1,285,714
Preferred dividends payable 1,883,959 2,924,108
Total Current Liabilities 6,422,612 8,077,921
Long-Term Debt, net of current portion 9,658,020 10,757,561
Deficit:    
Preferred stock, $0.0001 par value, cumulative, 20,750,000 shares authorized, 50,000 shares issued and outstanding, liquidation preference of $5,000,000 5 5
Common stock, $0.0001 par value, 5,000,000,000 shares authorized, 26,111,201 shares issued and outstanding 2,611 2,611
Additional paid-in capital 53,142,717 53,089,293
Accumulated deficit (58,321,266) (60,586,143)
Total Greystone Stockholders' Deficit (5,175,933) (7,494,234)
Non-controlling interest 1,139,878 1,040,405
Total Deficit (4,036,055) (6,453,829)
Total Liabilities and Deficit $ 12,044,577 $ 12,381,653

Consolidated Balance Sheets (Parenthetical)

v2.4.0.6
Consolidated Balance Sheets (Parenthetical) (USD $)
May 31, 2013
May 31, 2012
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 50,000 $ 50,000
Preferred stock par value $ 0.0001 $ 0.0001
Preferred stock shares authorized 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 shares authorized 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 Operations

v2.4.0.6
Consolidated Statements of Operations (USD $)
12 Months Ended
May 31, 2013
May 31, 2012
Income Statement [Abstract]    
Sales $ 24,085,184 $ 24,157,590
Cost of Sales 18,828,452 19,227,739
Gross Profit 5,256,732 4,929,851
General, Selling and Administrative Expenses 2,189,125 1,992,679
Operating Income 3,067,607 2,937,172
Other Income (Expense):    
Other income (expense) 6,500 (133,409)
Interest expense (828,897) (897,113)
Total Other Expense, net (822,397) (1,030,522)
Income before Income Taxes 2,245,210 1,906,650
Benefit from Income Taxes 548,000 585,000
Net Income 2,793,210 2,491,650
Income Attributable to Variable Interest Entities, net (201,552) (146,190)
Preferred Dividends (326,781) (242,192)
Net Income Attributable to Common Stockholders $ 2,264,877 $ 2,103,268
Income Per Share of Common Stock -    
Basic $ 0.09 $ 0.08
Diluted $ 0.08 $ 0.08
Weighted Average Shares of Common Stock Outstanding -    
Basic 26,111,201 26,111,201
Diluted 27,480,039 26,111,201

Consolidated Statements of Changes in Deficit

v2.4.0.6
Consolidated Statements of Changes in Deficit (USD $)
Total
Preferred Stock
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Total Greystone Stockholders' Deficit
Variable Interest Entities
Balances at May. 31, 2011 $ (9,704,991)   $ 2,611 $ 48,089,298 $ (62,297,986) $ (14,206,077) $ 4,501,086
Balances (in shares) at May. 31, 2011     26,111,201        
Adjustment for deconsolidating variable interest entities 990,376 5   4,999,995 (391,425) 4,608,575 (3,618,199)
Adjustment for deconsolidating variable interest entities (in shares)   50,000          
Capital contributions 75,000           75,000
Cash distributions (63,672)           (63,672)
Preferred dividends (242,192)       (242,192) (242,192)  
Net income 2,491,650       2,345,460 2,345,460 146,190
Balances at May. 31, 2012 (6,453,829) 5 2,611 53,089,293 (60,586,143) (7,494,234) 1,040,405
Balances (in shares) at May. 31, 2012   50,000 26,111,201        
Preferred dividends (326,781)       (326,781) (326,781)  
Net income 2,793,210       2,591,658 2,591,658 201,552
Stock based compensation 53,424     53,424   53,424  
Cash distributions (102,079)           (102,079)
Balances at May. 31, 2013 $ (4,036,055) $ 5 $ 2,611 $ 53,142,717 $ (58,321,266) $ (5,175,933) $ 1,139,878
Balances (in shares) at May. 31, 2013   50,000 26,111,201        

Consolidated Statements of Cash Flows

v2.4.0.6
Consolidated Statements of Cash Flows (USD $)
12 Months Ended
May 31, 2013
May 31, 2012
Cash Flows from Operating Activities:    
Net income $ 2,793,210 $ 2,491,650
Adjustments to reconcile net income to net cash provided by operating activities    
Depreciation and amortization 1,387,987 1,165,795
Increase in deferred tax asset (574,000) (585,000)
Loss on disposition of equipment 0 131,500
Stock based compensation 53,424 0
Changes in accounts receivable (742,131) (919,284)
Changes in inventory (87,741) (413,081)
Changes in prepaid expenses (74,108) 25,900
Changes in accounts payable and accrued expenses (673,008) 321,709
Other 2,033 (2,640)
Net cash provided by operating activities 2,085,666 2,216,549
Cash Flows from Investing Activities:    
Purchase of property and equipment (620,898) (801,960)
Cash Flows from Financing Activities:    
Payments on advances payable to related parties (148,500) (99,900)
Proceeds from long-term debt 250,000 0
Payments on notes and advances payable (1,291,693) (1,301,037)
Capital contributions by variable interest entity 0 75,000
Dividends paid by variable interest entity (102,079) (63,672)
Net cash used in financing activities (1,292,272) (1,389,609)
Net Increase in Cash 172,496 24,980
Cash, beginning of year 194,400 169,420
Cash, end of year $ 366,896 $ 194,400

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

v2.4.0.6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
May 31, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

Greystone Logistics, Inc. ("Greystone"), through its two wholly-owned subsidiaries, Greystone Manufacturing, LLC ("GSM") and Plastic Pallet Production, Inc. ("PPP"), is engaged in the manufacture and marketing of plastic pallets and pelletized recycled plastic resin.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Greystone, its subsidiaries and entities required to be consolidated by the accounting guidance for variable interest entities (“VIE”).  All material intercompany accounts and transactions have been eliminated.

 

Greystone consolidates its VIEs, Greystone Real Estate, L.L.C. (“GRE”) and, until its liquidation effective August 31, 2011, GLOG Investment, L.L.C. (“GLOG”).  GRE is owned by Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a member of Greystone's board of directors.  GLOG was owned by Messrs. Kruger and Rosene prior to its dissolution.

 

Use of Estimates

 

The preparation of Greystone's financial statements in conformity with accounting principles generally accepted in the United States of America requires Greystone's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes.  Actual results could differ materially from those estimates.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Greystone carries its accounts receivable at their face value less an allowance for doubtful accounts.  On a periodic basis, Greystone evaluates its accounts receivable and establishes an allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions and based on a history of collections. Based on periodic reviews of outstanding accounts receivable, Greystone writes off balances deemed to be uncollectible against the allowance for doubtful accounts.

 

Inventory

 

Inventory consists of finished pallets and raw materials and is stated at the lower of average cost or market value.

 

Property, Plant and Equipment

 

Greystone's property, plant and equipment is stated at cost.  Depreciation expense is computed on the straight-line method over the estimated useful lives, as follows:

 

 

 

Plant buildings

 

39 years

 

Production machinery and equipment

 

5-10 years

 

Office equipment & furniture & fixtures

 

3-5 years

 

Upon sale, retirement or other disposal, the related costs and accumulated depreciation of items of property, plant or equipment are removed from the related accounts and any gain or loss is recognized.  When events or changes in circumstances indicate that assets may be impaired, an evaluation is performed comparing the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount. If the asset carrying amount exceeds the cash flows, a write-down to fair value is required.

 

Patents

 

Amortization expense for the costs incurred by Greystone to obtain the patents on the modular pallet system and accessories is computed on the straight-line method over the estimated life of 15 years.

 

Stock Options

 

The grant-date fair value of stock options and other equity-based compensation issued to employees is amortized on the straight-line basis over the vesting period of the award as compensation cost.  The fair value of new option grants is estimated using the Black-Scholes option pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility, dividend yields and expected holding periods.

 

Recognition of Revenues

 

Greystone's sales agreements to customers other than its primary customer generally provide for risk of loss to pass to the customers upon shipment from Greystone's plant in Bettendorf, Iowa.  Revenue is recognized for these customers at date of shipment.

 

Greystone's agreement with its major customer provides that (1) risk of loss or damages for product in transit remain with Greystone or (2) product is subject to approval at the buyer's premises.  Accordingly, Greystone recognizes revenue when product has been delivered to the customer's sites and risk of loss has passed to the customer.

 

For sales to all customers, cost of goods sold is recognized when the related revenue is recognized.

 

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 financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the 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.

 

Earnings Per Share

 

Basic earnings per share is computed by dividing the earnings available to common stockholders by the weighted average number of common shares outstanding for the year. In arriving at income available to common stockholders, preferred stock dividends are deducted from net income for the year. For fiscal years 2013 and 2012, convertible preferred stock and stock options are not considered as their effect is antidilutive.

 

The following securities were not included in the computation of diluted earnings per share for the fiscal years ended May 31, 2013 and 2012 as their effect would have been antidilutive:

 

  

 

 

2013

 

 

 

2012

 

Options to purchase common stock

 

 

350,000

 

 

 

1,400,000

 

Convertible preferred stock

 

 

3,333,333

 

 

 

3,333,333

 

 

 

 

 

 

 

 

 

 

 

 

 

3,683,333

 

 

 

          4,733,333

 

 

                                  Recent Accounting Pronouncements

 

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 was issued to establish accounting and reporting standards for an unrecognized tax benefit. It requires that the unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets.  ASU 2013-11 is effective for Greystone in fiscal years beginning after December 15, 2013, and is not expected to have a material impact on the Greystone's consolidated financial position and results of operations.

 

 Reclassifications

 

Certain fiscal year 2012 amounts have been reclassified to conform with the fiscal year 2013 presentations. These reclassifications had no impact on net income.

 

 

INVENTORY

v2.4.0.6
INVENTORY
12 Months Ended
May 31, 2013
INVENTORY [Abstract]  
INVENTORY

Note 2.    INVENTORY

 

Inventory consists of the following as of May 31:

 

 

 

2013

 

 

2012

 

Raw materials

 

$

750,819

 

 

$

593,225

 

Finished pallets

 

 

293,560

 

 

 

363,413

 

 

 

 

 

 

 

 

 

 

Total Inventory

 

$

1,044,379

 

 

$

956,638

 

 

 

PROPERTY, PLANT AND EQUIPMENT

v2.4.0.6
PROPERTY, PLANT AND EQUIPMENT
12 Months Ended
May 31, 2013
PROPERTY, PLANT AND EQUIPMENT [Abstract]  
PROPERTY, PLANT AND EQUIPMENT

Note 3.    PROPERTY, PLANT AND EQUIPMENT

 

A summary of the property, plant and equipment for Greystone is as follows, as of May 31:

 

 

 

2013

 

 

2012

 

Production machinery and equipment

 

$

10,717,493

 

 

$

10,121,006

 

Building and land

 

 

4,663,339

 

 

 

4,663,339

 

Leasehold improvements

 

 

203,034

 

 

 

188,124

 

Furniture and fixtures

 

 

171,093

 

 

 

161,592

 

 

 

 

15,754,959

 

 

 

15,134,061

 

 

 

 

 

 

 

 

 

 

Less: Accumulated depreciation

 

 

(8,710,820

)

 

 

(7,335,883

)

 

 

 

 

 

 

 

 

 

Net Property, Plant and Equipment

 

$

7,044,139

 

 

$

7,798,178

 

 

 

Production machinery and equipment includes equipment in the amount of $379,716 that had not been placed into service as of May 31, 2013.  Building and land are owned by a variable interest entity for which the net book value is $3,591,781 at May 31, 2013.

 

Depreciation expense for the years ended May 31, 2013 and 2012 is $1,374,937 and $1,148,916, respectively.

 

OTHER ASSETS

v2.4.0.6
OTHER ASSETS
12 Months Ended
May 31, 2013
OTHER ASSETS [Abstract]  
OTHER ASSETS

Note 4.    OTHER ASSETS

 

Other assets consist of the following as of May 31:

 

 

 

2013

 

 

2012

 

Patents

 

$

190,739

 

 

$

190,739

 

Debt issue costs

 

 

18,726

 

 

 

18,726

 

Accumulated amortization

 

 

(140,879

)

 

 

(127,829

)

Customer deposits

 

 

2,785

 

 

 

4,818

 

 

 

 

 

 

 

 

 

 

Total Other Assets

 

$

71,371

 

 

$

86,454

 

 

Amortization of intangibles was $13,050 and $16,879 for 2013 and 2012, respectively.   Future amortization will be $14,465 per year for the next five fiscal years.

 

 

 

LONG-TERM DEBT

v2.4.0.6
LONG-TERM DEBT
12 Months Ended
May 31, 2013
LONG-TERM DEBT [Abstract]  
LONG-TERM DEBT

Note 5.    LONG-TERM DEBT

 

Long-term debt consists of the following as of 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

 

$

4,593,650

 

 

$

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 February 13, 2016, monthly installments of $35,512, secured by buildings and land

 

 

3,366,108

 

 

 

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

 

 

381,727

 

 

 

481,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

8,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note payable to Robert Rosene, 7.5% interest, due January 15, 2015

 

 

2,066,000

 

 

 

2,066,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note payable to Warren Kruger, 7.5% interest, due January 15, 2015

 

 

527,716

 

 

 

527,716

 

 

 

 

 

 

 

 

 

 

Other notes payable

 

 

66,979

 

 

 

110,778

 

 

 

 

11,002,180

 

 

 

12, 043,873

 

Less: Current portion

 

 

(1,344,160

)

 

 

(1,286,312

)

 

 

 

 

 

 

 

 

 

Long-term Debt

 

$

9,658,020

 

 

$

10,757,561

 

 

 

The prime rate of interest as of May 31, 2013 was 3.25%.

                                                                                         

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 $3,300,000 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.  Also, pursuant to the terms of a guaranty agreement, Greystone guaranteed GSM's performance and payment under the notes.  In addition, in order to induce F&M to enter into the F&M Loan Agreement, Messrs. Kruger and Rosene entered into a limited guaranty agreement with F&M.

 

On March 1, 2013, F&M and GSM entered into a Fourth Amendment (the “Fourth Amendment”) to the Loan Agreement.  The Fourth Amendment (a) had an effective date of February 28, 2013, (b) extended the maturity date of the loan from F&M to GSM under the Loan Agreement (the “Loan”) to March 13, 2015, and (c) increased the amount of the Loan by $250,000.  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.

 

Maturities of Greystone's long-term debt for the five years after May 31, 2013 are $1,344,160, $6,690,637, $2,935,772, and $31,611.

 

RELATED PARTY TRANSACTIONS

v2.4.0.6
RELATED PARTY TRANSACTIONS
12 Months Ended
May 31, 2013
RELATED PARTY TRANSACTIONS [Abstract]  
RELATED PARTY TRANSACTIONS

Note 6.   RELATED PARTY TRANSACTIONS

 

Transactions with Warren F. Kruger, Chairman

 

Yorktown Management & Financial Services, LLC (“Yorktown”), an entity wholly owned by Greystone's CEO and President, owns the grinding equipment Greystone uses to grind raw materials for Greystone's pallet production.  Yorktown also owns a plastic grinding and wash line facility used to recycle plastic into usable raw material.  Greystone compensates Yorktown for the use of equipment and molds as discussed below.  In addition, Yorktown provides office space and treasury services for Greystone.

 

Through January 31, 2013, Yorktown paid for raw materials purchases and invoiced Greystone for its cost plus a grinding fee of $0.04 per pound. During the period from June 1, 2012 through January 31, 2013 and fiscal year 2012, GSM's raw material purchases and grinding fees from Yorktown totaled approximately $3,623,000 and $3,911,000, respectively, pursuant to this arrangement.  This arrangement was terminated effective January 31, 2013.  Effective February 1, 2013, GSM purchased raw materials direct from unrelated third parties.  Further, effective February 1, 2013, in lieu of the $0.04 per pound grinding fee, GSM commenced paying a monthly fee of $97,500 subsequently adjusted to $119,167 per month effective May 1, 2013, a total of $411,667.

 

GSM also pays Yorktown for (i) the use of pallet molds owned by Yorktown at the rate of $1.00 per pallet of which approximately $59,000 and $38,000 was paid in fiscal years 2013 and 2012, respectively, (ii) office rent at the rate of $1,500 per month and (iii) equipment used for heavy lifting of which $73,200 was paid in each of fiscal years 2013 and 2012.  The lease for the heavy-lifting equipment ended February 29, 2012 and the equipment continues to be leased on a month-to-month basis.

 

For the period from June 1, 2012 through January 31, 2013 and for fiscal year 2012, Yorktown and GSM had an agreement for purchase, processing and selling pelletized recycled plastic resin.  Yorktown purchased the raw material and provided the pelletizing equipment and GSM supplied the labor and operating overhead.  Upon shipment to customers, Yorktown invoiced GSM for the cost of the raw material. GSM invoiced customers recognizing revenue and accruing profit-sharing expense to Yorktown at 40% of the gross profit, defined as revenue less cost of material and sales commissions of 2.5%.  Yorktown's profit share of the resin sales for fiscal years 2013 and 2012 was approximately $80,000 and $72,000, respectively. Effective January 31, 2013, this arrangement was terminated.  Effective February 1, 2013, the processing of pelletized material for resale was undertaken solely by GSM with Yorktown receiving a processing fee of $0.02 per pound for use of Yorktown's pelletizing equipment.  Yorktown received $54,000 in processing fees for the period from February 1, 2013 through May 31, 2013.

 

Greystone also pays the labor and certain other costs on behalf of Yorktown's Tulsa, Oklahoma grinding operation.  These costs are invoiced to Yorktown on a monthly basis.

 

As a result of the above transactions and other non-interest bearing advances, Yorktown owes Greystone $3,477,907 as of May 31, 2013.

 

For the period from November 2006 through May 2012, Mr. Kruger voluntarily elected to temporarily defer the payment of half of his salary. Effective June 1, 2012, Greystone resumed payment of the full salary to Mr. Kruger. The deferred compensation as of May 31, 2013 totaled $794,411.

 

Effective December 15, 2005, Greystone entered into a loan agreement with Warren Kruger to convert $527,716 of advances due him into a note payable at 7.5% interest and Mr. Kruger has waived payment of interest and principal thereon until January 15, 2014. Greystone accrues interest on advances and note payable to Mr. Kruger at the rate of 7.5% per year.  Interest accrued in fiscal years 2013 and 2012 was $140,487 and $137,543, respectively. At May 31, 2013, a note payable of $527,716, advances of $476,680 and accrued interest of $839,886 were due to Mr. Kruger or to entities owned or controlled by him.

 

Mr. Kruger has agreed that, as necessary, the amounts due Greystone of $3,477,907 should be offset against the amounts that Greystone owes him or Yorktown.  At May 31, 2013, the offset against the net advances is the combined total of (i) the accrued interest of $839,886 payable to Mr. Kruger, (ii) advances payable to Mr. Kruger of $476,680, (iii) an account payable of $794,411 for deferred compensation payable to Mr. Kruger and (iv) preferred dividends of $1,366,930 which have been accrued for the benefit of Mr. Kruger. 

 

Transactions with Robert B. Rosene, Jr., Director

 

Effective December 15, 2005, Greystone entered into a loan agreement with Mr. Rosene to convert $2,066,000 of the advances into a note payable at 7.5% interest and Mr. Rosene has waived the payment of principal until January 15, 2015. Greystone has accrued interest on the loans in the amounts of $265,440 and $244,032 in fiscal years 2013 and 2012, respectively. Accrued interest due to Mr. Rosene at May 31, 2013 is $1,551,154.

 

Transactions with Larry J. LeBarre, Director

 

Effective January 1, 2009, Greystone entered into a lease agreement with an entity owned by Mr. LeBarre to rent certain equipment to produce mid-duty pallets with a minimum monthly commitment of $25,000.  The lease was amended April 1, 2011 to provide for a three-year term through March 31, 2014.  Lease payments were $300,000 for each of fiscal years 2013 and 2012.

 

 

FEDERAL INCOME TAXES

v2.4.0.6
FEDERAL INCOME TAXES
12 Months Ended
May 31, 2013
FEDERAL INCOME TAXES [Abstract]  
FEDERAL INCOME TAXES

Note 7.    FEDERAL INCOME TAXES

 

Deferred taxes as of May 31, 2013 and 2012 are as follows:

 

 

 

 

2013

 

 

2012

 

Net operating loss carryforward

 

$

1,965,370

 

 

$

2,548,931

 

 

 

 

 

 

 

 

 

 

   Depreciation and amortization, financial reporting in excess of tax

 

 

443,177

 

 

 

617,466

 

Deferred compensation accrual

 

 

244,800

 

 

 

244,800

 

Stock compensation costs

 

 

18,164

 

 

 

-

 

Allowance for doubtful accounts

 

 

34,000

 

 

 

17,000

 

 

 

 

2,705,511

 

 

 

3,428,197

 

Valuation allowance

 

 

(1,546,511

)

 

 

(2,843,197

)

 

 

 

 

 

 

 

 

 

Net Deferred Tax Asset

 

$

1,159,000

 

 

$

585,000

 

 

In assessing the reliability 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 has provided a valuation allowance which allows for recognition of the tax benefits as deferred tax assets for May 31, 2013 and 2012, respectively.

 

The net change in deferred taxes for the year ended May 31, 2013 and 2012 is as follows:

 

 

 

2013

 

 

2012

 

Net operating loss carryforward

 

$

(583,561

)

 

$

(112,055

)

 

 

 

 

 

 

 

 

 

    Depreciation and amortization, financial reporting in excess of tax

 

 

(174,289

)

 

 

(357,342

)

Stock compensation costs

 

 

18,164

 

 

 

 

 

Deferred compensation accrual

 

 

-

 

 

 

34,000

 

Allowance for doubtful accounts

 

 

17,000

 

 

 

(8,500

)

Valuation allowance

 

 

1,296,686

 

 

 

1,028,897

 

 

 

 

 

 

 

 

 

 

Total

 

$

574,000

 

 

$

585,000

 

 

The provision (benefit) for income taxes at May 31 consists of the following:

 

2013

2012

Federal

$

             26,000

$

                       -

Deferred income tax benefit

     (574,000)

     (585,000)

Total

$

     (548,000)

$

     (585,000)

 

Greystone's provision (benefit) for income taxes for the years ended May 31, 2013 and 2012 differs from the federal statutory rate as follows:

 

2013

2012

Tax provision (benefit) using statutory rates

                     34

%

                  34

%

Net change in valuation allowance

             (57)

             (54)

Other

               (1)

 

             (11)

 

Tax benefit per financial statements

             (24)

%

             (31)

%

 

At May 31, 2013, Greystone had a net operating loss (NOL) for Federal income tax purposes from inception through May 31, 2005 of $17,468,000 expiring in fiscal year 2013 through fiscal year 2025 of which $2,700,000 is management's estimate of the usable amount pursuant to Internal Revenue Code Section 382. The limitation is due to a change in control of Greystone during the fiscal year ended May 31, 2005. The utilization of NOL's accumulated through fiscal year 2005 is limited to approximately $225,000 per year.

 

 

 

NOL

Carryforward

 

 

Year

Expiring

 

Cumulative as of May 31, 2005

 

$

2,700,000

 

 

 

2013 - 2025

 

Year ended May 31, 2006

 

 

182,179

 

 

 

2026

 

Year ended May 31, 2007

 

 

2,151,837

 

 

 

2027

 

Year ended May 31, 2011

 

 

746,484

 

 

 

2031

 

 

Greystone is no longer subject to income tax examinations by tax authorities for years prior to fiscal year 2006.

 

Greystone does not have any uncertain tax positions that could result in a material change to its financial position.

 

 

STOCKHOLDERS' EQUITY

v2.4.0.6
STOCKHOLDERS' EQUITY
12 Months Ended
May 31, 2013
STOCKHOLDERS' EQUITY [Abstract]  
STOCKHOLDERS' EQUITY

Note 8.    STOCKHOLDERS' EQUITY

 

Convertible Preferred Stock

 

In September 2003, Greystone issued 50,000 shares of Series 2003, cumulative, convertible preferred stock, par value $0.0001, for a total purchase price of $5,000,000.  Each share of the preferred stock has a stated value of $100 and a dividend rate equal to the prime rate of interest plus 3.25% and may be converted into common stock at the conversion rate of $1.50 per share or an aggregate of 3,333,333 shares of common stock. The holder of the preferred stock has been granted certain voting rights so that such holder has the right to elect a majority of the Board of Directors of Greystone.

 

Preferred stock dividends must be fully paid before a dividend on the common stock may be paid.  Dividends in arrears on the preferred stock were $3,250,889 and $2,924,108 as of May 31, 2013 and 2012, respectively.  The holders of the preferred stock waived their rights to compounded interest on unpaid dividends during the period from inception through May 31, 2013.  The preferred dividend liability is classified as a long-term liability due to the restrictions placed on payment of dividends pursuant to the Loan Agreement with F&M Bank & Trust Company as further discussed in Note 5 - Long-Term Debt.

 

STOCK OPTIONS

v2.4.0.6
STOCK OPTIONS
12 Months Ended
May 31, 2013
STOCK OPTIONS [Abstract]  
STOCK OPTIONS

Note 9.    STOCK OPTIONS

 

Greystone has a stock option plan that provides for the granting of options to key employees and non-employee directors. The options are to purchase common stock at not less than fair market value at the date of the grant.  Effective May 5, 2012, Greystone's board of directors approved the renewal and extension of Greystone's stock option plan through May 11, 2021 and increased the maximum number of shares of common stock for which options may be granted to 2,500,000 of which 25,000 were available for grant at May 31, 2013.  Stock options generally expire in ten years from date of grant or upon termination of employment and are generally exercisable one year from date of grant in cumulative annual installments of 25%. Following is a summary of option activity for the two years ended May 31, 2013:

 

 

 

Number

 

Weighted Average Exercise Price

 

Remaining

Contractual

Life (years)

 

Intrinsic Value

Total outstanding, May 31, 2012

 

  1,400,000

 

$0.53

 

 

 

 

Awarded during fiscal 2013

 

  2,100,000

 

$0.12

 

 

 

 

Expired during fiscal year 2013

 

(1,050,000)

 

$0.61

 

 

 

 

Total outstanding May 31, 2013

 

  2,450,000

 

$0.16

 

7.8

 

 

Exercisable as of May 31, 2013

 

     875,000

 

$0.23

 

5.7

 

$ 99,750

Non-vested as of May 31, 2013

 

  1,575,000

 

$0.12

 

9.0

 

$299,250

 

Effective June 1, 2012, Greystone's board of directors authorized the issuance of stock options to employees and members of the board of directors to purchase 2,100,000 shares of common stock at $0.12 per share with the options exercisable at the rate of 25% per year for the first four years and an expiration date of May 31, 2022.  The value of Greystone's common stock on June 1, 2012 was $0.105 per share.  In addition effective June 1, 2012, the board of directors with the concurrence of awardees cancelled stock options to purchase 500,000 shares of common stock which had an expiration date of February 28, 2014 and an option price of $0.40 per share.                                                                                                                                                     

                                                                                                                                                                                                                             

The estimated fair value at the date of the grant for stock options utilizing the Black-Scholes option valuation model and the assumptions that were used in the Black-Scholes option model for fiscal year 2013 are as follows:

 

Estimated fair value of options at date of grant

$213,696

Black-Scholes model assumptions

 

   Average expected life (years)

5

   Average expected volatility factor

353.3%

   Average risk-free interest rate

3.0%

   Average expected dividend yields

$-0-

                                                                                                                                                                                                             

Share-based compensation cost was $53,424 and $-0- for fiscal years 2013 and 2012, respectively.  As of May 31, 2013, the unrecognized compensation expense related to non-vested share-based options was $160,272. This unrecognized compensation expense as of May 31, 2013 will be amortized equally over the remaining vesting period of 3 years.

 

 

FINANCIAL INSTRUMENTS

v2.4.0.6
FINANCIAL INSTRUMENTS
12 Months Ended
May 31, 2013
FINANCIAL INSTRUMENTS [Abstract]  
FINANCIAL INSTRUMENTS

Note 10.  FINANCIAL INSTRUMENTS

 

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

 

Accounts Receivable and Accounts Payable:  The carrying amounts reported in the balance sheet for accounts receivable and accounts payable approximate fair value due to the short-term maturity of these 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 for comparable loans.  The carrying amounts reported in the balance sheet approximate fair value.

 

 

SUPPLEMENTAL INFORMATION OF CASH FLOWS

v2.4.0.6
SUPPLEMENTAL INFORMATION OF CASH FLOWS
12 Months Ended
May 31, 2013
SUPPLEMENTAL INFORMATION OF CASH FLOWS [Abstract]  
SUPPLEMENTAL INFORMATION OF CASH FLOWS

Note 11.  SUPPLEMENTAL INFORMATION OF CASH FLOWS

 

Supplemental information of cash flows for the years ended May 31:

  

 

 

2013

 

 

2012

 

Non-cash investing and financing activities:

 

 

 

 

 

 

   Preferred dividend accrual

 

$

326,781

 

 

$

242,192

 

   Equipment purchased through capital lease

 

 

 -

 

 

 

563,026

 

   Advances from related party applied

      against receivables from the related party

 

 

 -

 

 

 

625,180

 

Supplemental information:

 

 

 

 

 

 

 

 

   Interest paid

 

 

423,530

 

 

 

516,059

 

   Taxes paid

 

 

-

 

 

 

-

 

 

 

CONCENTRATIONS

v2.4.0.6
CONCENTRATIONS
12 Months Ended
May 31, 2013
CONCENTRATIONS [Abstract]  
CONCENTRATIONS

Note 12.  CONCENTRATIONS

 

For the fiscal years ended May 31, 2013 and 2012, one customer accounted for approximately 63% and 59% of sales, respectively. The account receivable from this customer at May 31, 2013 totaled $924,914.

 

Purchases from this major customer were approximately $1,472,000 and $3,626,000 in fiscal years 2013 and 2012, respectively. The purchases in fiscal year 2012 included $2,158,000 for a pallet size whose use was discontinued by the customer.

 

For the fiscal years 2013 and 2012, Greystone purchased approximately 49% of its raw materials from third-party vendors through Yorktown Management & Financial Services LLC, an entity owned by Warren Kruger, Greystone's President and CEO.   Effective February 1, 2013, the practice of purchasing raw materials from unrelated third-party vendors through Yorktown was terminated.  However, Yorktown has an operation that purchases, grinds and cleans recycled plastic material for sale to unrelated third-party customers as well as to Greystone.

 

 

VARIABLE INTEREST ENTITIES (VIE)

v2.4.0.6
VARIABLE INTEREST ENTITIES (VIE)
12 Months Ended
May 31, 2013
VARIABLE INTEREST ENTITIES (VIE) [Abstract]  
VARIABLE INTEREST ENTITIES (VIE)

Note 13.  VARIABLE INTEREST ENTITIES (VIE)

 

Greystone Real Estate, L.L.C.

GRE, is owned by Warren Kruger, President and CEO, and Robert Rosene, a member of the Board of Directors.  It was created solely to own and lease a building that GSM occupies at 2600 Shoreline Drive, Bettendorf, Iowa. Effective January 18, 2011, GRE acquired from GSM an adjacent building located at 2601 Shoreline Drive, Bettendorf, Iowa, in a sale and leaseback transaction based on an appraised market price of $2,700,000.  In addition, GRE and GSM entered into an amended lease agreement for 2600 Shoreline Drive.  The sale and leaseback and the amended lease terms and conditions are based on ten year leases at appraised market rates with options to purchase at appraised market value. The outstanding mortgage on the buildings is guaranteed by Messrs. Kruger and Rosene.

 

The building(s), having a carrying value of $3,591,781 and $3,707,653 at May 31, 2013 and 2012, respectively, serve as collateral for GRE's debt.  The debt had a carrying value of $3,366,108 and $3,623,070 at May 31, 2013 and 2012, respectively.

 

                GLOG Investment, L.L.C.

GLOG was created in March 2005 for the purpose of acquiring from a third party, all of the outstanding Series 2003 Preferred Stock of Greystone.  The owners of GLOG were Messrs. Kruger and Rosene.  GLOG was consolidated with Greystone as a VIE until August 31, 2011. At August 31, 2011, GLOG's sole asset was the preferred stock with a carrying value of $5,000,000 and GLOG's debt had a carrying value of $3,559,932.

 

Effective September 1, 2011, GLOG was liquidated, the assets were distributed to the owners and the debt was assumed by the owners.  Accordingly, the entity was deconsolidated effective with the liquidation of the entity.

  

RETIREMENT PLAN

v2.4.0.6
RETIREMENT PLAN
12 Months Ended
May 31, 2013
RETIREMENT PLAN [Abstract]  
RETIREMENT PLAN

Note 14.  RETIREMENT PLAN

 

Greystone sponsors a retirement plan for the benefit of all eligible employees. The retirement plan qualifies under Section 401(k) of the Internal Revenue Code thereby allowing eligible employees to make tax-deferred contributions. The retirement plan provides that Greystone may elect to make employer-matching contributions equal to a percentage of each participant's voluntary contribution and may also elect to make profit sharing contributions. Greystone has never made any matching or profit sharing contributions to the retirement plan.

 

 

Significant Accounting Policies (Policies)

v2.4.0.6
Significant Accounting Policies (Policies)
12 Months Ended
May 31, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Organization

Organization

 

Greystone Logistics, Inc. ("Greystone"), through its two wholly-owned subsidiaries, Greystone Manufacturing, LLC ("GSM") and Plastic Pallet Production, Inc. ("PPP"), is engaged in the manufacture and marketing of plastic pallets and pelletized recycled plastic resin.

 

Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements include the accounts of Greystone, its subsidiaries and entities required to be consolidated by the accounting guidance for variable interest entities (“VIE”).  All material intercompany accounts and transactions have been eliminated.

 

Greystone consolidates its VIEs, Greystone Real Estate, L.L.C. (“GRE”) and, until its liquidation effective August 31, 2011, GLOG Investment, L.L.C. (“GLOG”).  GRE is owned by Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a member of Greystone's board of directors.  GLOG was owned by Messrs. Kruger and Rosene prior to its dissolution.

 

Use of Estimates

Use of Estimates

 

The preparation of Greystone's financial statements in conformity with accounting principles generally accepted in the United States of America requires Greystone's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes.  Actual results could differ materially from those estimates.

 

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

 

Greystone carries its accounts receivable at their face value less an allowance for doubtful accounts.  On a periodic basis, Greystone evaluates its accounts receivable and establishes an allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions and based on a history of collections. Based on periodic reviews of outstanding accounts receivable, Greystone writes off balances deemed to be uncollectible against the allowance for doubtful accounts.

 

Inventory

Inventory

 

Inventory consists of finished pallets and raw materials and is stated at the lower of average cost or market value.

 

Property, Plant and Equipment

Property, Plant and Equipment

 

Greystone's property, plant and equipment is stated at cost.  Depreciation expense is computed on the straight-line method over the estimated useful lives, as follows:

 

 

 

Plant buildings

 

39 years

 

Production machinery and equipment

 

5-10 years

 

Office equipment & furniture & fixtures

 

3-5 years

 

Upon sale, retirement or other disposal, the related costs and accumulated depreciation of items of property, plant or equipment are removed from the related accounts and any gain or loss is recognized.  When events or changes in circumstances indicate that assets may be impaired, an evaluation is performed comparing the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount. If the asset carrying amount exceeds the cash flows, a write-down to fair value is required.

 

Patents

Patents

 

Amortization expense for the costs incurred by Greystone to obtain the patents on the modular pallet system and accessories is computed on the straight-line method over the estimated life of 15 years.

 

Stock Options

Stock Options

 

The grant-date fair value of stock options and other equity-based compensation issued to employees is amortized on the straight-line basis over the vesting period of the award as compensation cost.  The fair value of new option grants is estimated using the Black-Scholes option pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility, dividend yields and expected holding periods.

 

Recognition of Revenues

Recognition of Revenues

 

Greystone's sales agreements to customers other than its primary customer generally provide for risk of loss to pass to the customers upon shipment from Greystone's plant in Bettendorf, Iowa.  Revenue is recognized for these customers at date of shipment.

 

Greystone's agreement with its major customer provides that (1) risk of loss or damages for product in transit remain with Greystone or (2) product is subject to approval at the buyer's premises.  Accordingly, Greystone recognizes revenue when product has been delivered to the customer's sites and risk of loss has passed to the customer.

 

For sales to all customers, cost of goods sold is recognized when the related revenue is recognized.

 

Income Taxes

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 financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the 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.

 

Earnings Per Share

Earnings Per Share

 

Basic earnings per share is computed by dividing the earnings available to common stockholders by the weighted average number of common shares outstanding for the year. In arriving at income available to common stockholders, preferred stock dividends are deducted from net income for the year. For fiscal years 2013 and 2012, convertible preferred stock and stock options are not considered as their effect is antidilutive.

 

The following securities were not included in the computation of diluted earnings per share for the fiscal years ended May 31, 2013 and 2012 as their effect would have been antidilutive:

 

  

 

 

2013

 

 

 

2012

 

Options to purchase common stock

 

 

350,000

 

 

 

1,400,000

 

Convertible preferred stock

 

 

3,333,333

 

 

 

3,333,333

 

 

 

 

 

 

 

 

 

 

 

 

 

3,683,333

 

 

 

          4,733,333

 

 

                                  Recent Accounting Pronouncements

 

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 was issued to establish accounting and reporting standards for an unrecognized tax benefit. It requires that the unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets.  ASU 2013-11 is effective for Greystone in fiscal years beginning after December 15, 2013, and is not expected to have a material impact on the Greystone's consolidated financial position and results of operations.

 

Reclassifications

 Reclassifications

 

Certain fiscal year 2012 amounts have been reclassified to conform with the fiscal year 2013 presentations. These reclassifications had no impact on net income.

 

 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

v2.4.0.6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
12 Months Ended
May 31, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Useful life of property plant and equipment

Greystone's property, plant and equipment is stated at cost.  Depreciation expense is computed on the straight-line method over the estimated useful lives, as follows:

 

 

 

Plant buildings

 

39 years

 

Production machinery and equipment

 

5-10 years

 

Office equipment & furniture & fixtures

 

3-5 years

Antidilutive securities

The following securities were not included in the computation of diluted earnings per share for the fiscal years ended May 31, 2013 and 2012 as their effect would have been antidilutive:

 

  

 

 

2013

 

 

 

2012

 

Options to purchase common stock

 

 

350,000

 

 

 

1,400,000

 

Convertible preferred stock

 

 

3,333,333

 

 

 

3,333,333

 

 

 

 

 

 

 

 

 

 

 

 

 

3,683,333

 

 

 

          4,733,333

 

INVENTORY (Tables)

v2.4.0.6
INVENTORY (Tables)
12 Months Ended
May 31, 2013
INVENTORY [Abstract]  
Inventory

Inventory consists of the following as of May 31:

 

 

 

2013

 

 

2012

 

Raw materials

 

$

750,819

 

 

$

593,225

 

Finished pallets

 

 

293,560

 

 

 

363,413

 

 

 

 

 

 

 

 

 

 

Total Inventory

 

$

1,044,379

 

 

$

956,638

 

PROPERTY, PLANT AND EQUIPMENT (Tables)

v2.4.0.6
PROPERTY, PLANT AND EQUIPMENT (Tables)
12 Months Ended
May 31, 2013
PROPERTY, PLANT AND EQUIPMENT [Abstract]  
Property, plant and equipment

A summary of the property, plant and equipment for Greystone is as follows, as of May 31:

 

 

 

2013

 

 

2012

 

Production machinery and equipment

 

$

10,717,493

 

 

$

10,121,006

 

Building and land

 

 

4,663,339

 

 

 

4,663,339

 

Leasehold improvements

 

 

203,034

 

 

 

188,124

 

Furniture and fixtures

 

 

171,093

 

 

 

161,592

 

 

 

 

15,754,959

 

 

 

15,134,061

 

 

 

 

 

 

 

 

 

 

Less: Accumulated depreciation

 

 

(8,710,820

)

 

 

(7,335,883

)

 

 

 

 

 

 

 

 

 

Net Property, Plant and Equipment

 

$

7,044,139

 

 

$

7,798,178

 

OTHER ASSETS (Tables)

v2.4.0.6
OTHER ASSETS (Tables)
12 Months Ended
May 31, 2013
OTHER ASSETS [Abstract]  
Other assets

Other assets consist of the following as of May 31:

 

 

 

2013

 

 

2012

 

Patents

 

$

190,739

 

 

$

190,739

 

Debt issue costs

 

 

18,726

 

 

 

18,726

 

Accumulated amortization

 

 

(140,879

)

 

 

(127,829

)

Customer deposits

 

 

2,785

 

 

 

4,818

 

 

 

 

 

 

 

 

 

 

Total Other Assets

 

$

71,371

 

 

$

86,454

 

LONG-TERM DEBT (Tables)

v2.4.0.6
LONG-TERM DEBT (Tables)
12 Months Ended
May 31, 2013
LONG-TERM DEBT [Abstract]  
Long-term debt

Long-term debt consists of the following as of 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

 

$

4,593,650

 

 

$

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 February 13, 2016, monthly installments of $35,512, secured by buildings and land

 

 

3,366,108

 

 

 

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

 

 

381,727

 

 

 

481,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

8,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note payable to Robert Rosene, 7.5% interest, due January 15, 2015

 

 

2,066,000

 

 

 

2,066,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note payable to Warren Kruger, 7.5% interest, due January 15, 2015

 

 

527,716

 

 

 

527,716

 

 

 

 

 

 

 

 

 

 

Other notes payable

 

 

66,979

 

 

 

110,778

 

 

 

 

11,002,180

 

 

 

12, 043,873

 

Less: Current portion

 

 

(1,344,160

)

 

 

(1,286,312

)

 

 

 

 

 

 

 

 

 

Long-term Debt

 

$

9,658,020

 

 

$

10,757,561

 

FEDERAL INCOME TAXES (Tables)

v2.4.0.6
FEDERAL INCOME TAXES (Tables)
12 Months Ended
May 31, 2013
FEDERAL INCOME TAXES [Abstract]  
Deferred taxes

Deferred taxes as of May 31, 2013 and 2012 are as follows:

 

 

 

 

2013

 

 

2012

 

Net operating loss carryforward

 

$

1,965,370

 

 

$

2,548,931

 

 

 

 

 

 

 

 

 

 

   Depreciation and amortization, financial reporting in excess of tax

 

 

443,177

 

 

 

617,466

 

Deferred compensation accrual

 

 

244,800

 

 

 

244,800

 

Stock compensation costs

 

 

18,164

 

 

 

-

 

Allowance for doubtful accounts

 

 

34,000

 

 

 

17,000

 

 

 

 

2,705,511

 

 

 

3,428,197

 

Valuation allowance

 

 

(1,546,511

)

 

 

(2,843,197

)

 

 

 

 

 

 

 

 

 

Net Deferred Tax Asset

 

$

1,159,000

 

 

$

585,000

 

Net change in deferred taxes

The net change in deferred taxes for the year ended May 31, 2013 and 2012 is as follows:

 

 

 

2013

 

 

2012

 

Net operating loss carryforward

 

$

(583,561

)

 

$

(112,055

)

 

 

 

 

 

 

 

 

 

    Depreciation and amortization, financial reporting in excess of tax

 

 

(174,289

)

 

 

(357,342

)

Stock compensation costs

 

 

18,164

 

 

 

 

 

Deferred compensation accrual

 

 

-

 

 

 

34,000

 

Allowance for doubtful accounts

 

 

17,000

 

 

 

(8,500

)

Valuation allowance

 

 

1,296,686

 

 

 

1,028,897

 

 

 

 

 

 

 

 

 

 

Total

 

$

574,000

 

 

$

585,000

 

Provision for income taxes

The provision (benefit) for income taxes at May 31 consists of the following:

 

2013

2012

Federal

$

             26,000

$

                       -

Deferred income tax benefit

     (574,000)

     (585,000)

Total

$

     (548,000)

$

     (585,000)

Difference between provision and federal statutory rate

Greystone's provision (benefit) for income taxes for the years ended May 31, 2013 and 2012 differs from the federal statutory rate as follows:

 

2013

2012

Tax provision (benefit) using statutory rates

                     34

%

                  34

%

Net change in valuation allowance

             (57)

             (54)

Other

               (1)

 

             (11)

 

Tax benefit per financial statements

             (24)

%

             (31)

%

Net operating loss carryforward

At May 31, 2013, Greystone had a net operating loss (NOL) for Federal income tax purposes from inception through May 31, 2005 of $17,468,000 expiring in fiscal year 2013 through fiscal year 2025 of which $2,700,000 is management's estimate of the usable amount pursuant to Internal Revenue Code Section 382. The limitation is due to a change in control of Greystone during the fiscal year ended May 31, 2005. The utilization of NOL's accumulated through fiscal year 2005 is limited to approximately $225,000 per year.

 

 

 

NOL

Carryforward

 

 

Year

Expiring

 

Cumulative as of May 31, 2005

 

$

2,700,000

 

 

 

2013 - 2025

 

Year ended May 31, 2006

 

 

182,179

 

 

 

2026

 

Year ended May 31, 2007

 

 

2,151,837

 

 

 

2027

 

Year ended May 31, 2011

 

 

746,484

 

 

 

2031

 

STOCK OPTIONS (Tables)

v2.4.0.6
STOCK OPTIONS (Tables)
12 Months Ended
May 31, 2013
STOCK OPTIONS [Abstract]  
Option activity

Greystone has a stock option plan that provides for the granting of options to key employees and non-employee directors. The options are to purchase common stock at not less than fair market value at the date of the grant.  Effective May 5, 2012, Greystone's board of directors approved the renewal and extension of Greystone's stock option plan through May 11, 2021 and increased the maximum number of shares of common stock for which options may be granted to 2,500,000 of which 25,000 were available for grant at May 31, 2013.  Stock options generally expire in ten years from date of grant or upon termination of employment and are generally exercisable one year from date of grant in cumulative annual installments of 25%. Following is a summary of option activity for the two years ended May 31, 2013:

 

 

 

Number

 

Weighted Average Exercise Price

 

Remaining

Contractual

Life (years)

 

Intrinsic Value

Total outstanding, May 31, 2012

 

  1,400,000

 

$0.53

 

 

 

 

Awarded during fiscal 2013

 

  2,100,000

 

$0.12

 

 

 

 

Expired during fiscal year 2013

 

(1,050,000)

 

$0.61

 

 

 

 

Total outstanding May 31, 2013

 

  2,450,000

 

$0.16

 

7.8

 

 

Exercisable as of May 31, 2013

 

     875,000

 

$0.23

 

5.7

 

$ 99,750

Non-vested as of May 31, 2013

 

  1,575,000

 

$0.12

 

9.0

 

$299,250

Assumptions used in the Black-Scholes option model

The estimated fair value at the date of the grant for stock options utilizing the Black-Scholes option valuation model and the assumptions that were used in the Black-Scholes option model for fiscal year 2013 are as follows:

 

Estimated fair value of options at date of grant

$213,696

Black-Scholes model assumptions

 

   Average expected life (years)

5

   Average expected volatility factor

353.3%

   Average risk-free interest rate

3.0%