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Document and Entity Information

v2.4.0.6
Document and Entity Information
3 Months Ended
Aug. 31, 2013
Oct. 15, 2013
Document And Entity Information    
Entity Registrant Name GREYSTONE LOGISTICS, INC.  
Entity Central Index Key 0001088413  
Document Type 10-Q  
Document Period End Date Aug. 31, 2013  
Amendment Flag false  
Current Fiscal Year End Date --05-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? No  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   26,111,201
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2014  

Consolidated Balance Sheets (Unaudited)

v2.4.0.6
Consolidated Balance Sheets (Unaudited) (USD $)
Aug. 31, 2013
May 31, 2013
Current Assets:    
Cash $ 717,879 $ 366,896
Accounts receivable, net of allowance of $100,000 2,312,881 2,239,594
Inventory 1,257,008 1,044,379
Prepaid expenses and other 220,942 119,198
Total Current Assets 4,508,710 3,770,067
Property, Plant and Equipment 16,200,616 15,754,959
Less: Accumulated Depreciation (8,979,523) (8,710,820)
Property, Plant and Equipment, net 7,221,093 7,044,139
Deferred Tax Asset 1,412,000 1,159,000
Other Assets 66,275 71,371
Total Assets 13,208,078 12,044,577
Current Liabilities:    
Current portion of long-term debt 1,347,424 1,344,160
Accounts payable and accrued expenses 1,603,309 1,643,339
Accounts payable and accrued expenses - related parties 1,620,926 1,551,154
Preferred dividends payable 1,826,486 1,883,959
Total Current Liabilities 6,398,145 6,422,612
Long-Term Debt, net of current portion 9,329,672 9,658,020
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 53,156,073 53,142,717
Accumulated deficit (56,872,614) (58,321,266)
Total Greystone Stockholders' Deficit (3,713,925) (5,175,933)
Non-controlling interests 1,194,186 1,139,878
Total Deficit (2,519,739) (4,036,055)
Total Liabilities and Deficit $ 13,208,078 $ 12,044,577

Consolidated Balance Sheets (Parenthetical) (Unaudited)

v2.4.0.6
Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
Aug. 31, 2013
May 31, 2013
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 100,000 $ 100,000
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 Income (Unaudited)

v2.4.0.6
Consolidated Statements of Income (Unaudited) (USD $)
3 Months Ended
Aug. 31, 2013
Aug. 31, 2012
Income Statement [Abstract]    
Sales $ 6,510,917 $ 7,128,866
Cost of Sales 4,365,545 5,604,017
Gross Profit 2,145,372 1,524,849
General, Selling and Administrative Expenses 596,313 558,639
Operating Income 1,549,059 966,210
Other Income (Expense):    
Other income (expense)    10,000
Interest expense (201,181) (208,843)
Total Other Expense, net (201,181) (198,843)
Income before Income Taxes 1,347,878 767,367
Benefit from Income Taxes 237,000 199,400
Net Income 1,584,878 966,767
Loss (Income) Attributable to Variable Interest Entities, net (54,308) (51,954)
Preferred Dividends (81,918) (82,808)
Net Income Available to Common Stockholders $ 1,448,652 $ 832,005
Income Available to Common Stockholders:    
Per Share of Common Stock - Basic $ 0.06 $ 0.03
Per Share of Common Stock - Diluted $ 0.05 $ 0.03
Weighted Average Shares of Common Stock Outstanding -    
Basic 26,111,201 26,111,201
Diluted 27,565,047 26,955,766

Consolidated Statements of Cash Flows (Unaudited)

v2.4.0.6
Consolidated Statements of Cash Flows (Unaudited) (USD $)
3 Months Ended
Aug. 31, 2013
Aug. 31, 2012
Cash Flows from Operating Activities:    
Net income $ 1,584,878 $ 966,767
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 337,236 334,385
Deferred income taxes (253,000) (208,900)
Stock-based compensation 13,356 13,356
Changes in receivables (178,178) 329,111
Changes in inventory (212,629) 109,796
Changes in prepaid expenses and other (101,744) (76,799)
Change in other assets 1,834 2,290
Changes in accounts payable and accrued expenses 29,742 61,591
Net cash provided by operating activities 1,221,495 1,531,597
Cash Flows from Investing Activities:    
Purchase of property and equipment (510,928) (362,677)
Cash Flows from Financing Activities:    
Payments on long-term debt and capitalized leases (325,084) (320,077)
Payments on advances from related party (34,500)   
Distributions by variable interest entity    (22,782)
Net cash used in financing activities (359,584) (342,859)
Net Increase in Cash 350,983 826,061
Cash, beginning of period 366,896 194,400
Cash, end of period 717,879 1,020,461
Non-Cash Activities:    
Preferred dividend accrual 81,918 82,808
Supplemental Information:    
Interest paid $ 85,689 $ 108,431

1. Basis of Financial Statements

v2.4.0.6
1. Basis of Financial Statements
3 Months Ended
Aug. 31, 2013
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 August 31, 2013, and the results of its operations and its cash flows for the three-month periods ended August 31, 2013 and 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, 2013 and the notes thereto included in Greystone's Form 10-K for such period. The results of operations for the three-month periods ended August 31, 2013 and 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”), Plastic Pallet Production, Inc. (“PPP”), and its variable interest entity, Greystone Real Estate, L.L.C. (“GRE”).  GRE owns two buildings located in Bettendorf, Iowa which are leased to GSM.

2. Earnings Per Share

v2.4.0.6
2. Earnings Per Share
3 Months Ended
Aug. 31, 2013
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 shares for the three months ended August 31, 2013 and 2012, respectively, and convertible preferred stock which is convertible into 3,333,334 shares of common stock for the three months ended August 31, 2013, and 2012.

 

The following table sets forth the computation of basic and diluted earnings per share for the three months ended August 31, 2013 and 2012:

 

    2013     2012  
Numerator:            
Net income available to common shareholders   $ 1,448,652     $ 832,005  
                 
Denominator:                
Weighted-average shares outstanding:                
    Basic     26,111,201       26,111,201  
Incremental shares from assumed   conversion of options     1,453,846       844,565  
Diluted shares     27,565,047       26,955,766  
Earnings per share:                
Basic   $ 0.06     $ 0.03  
Diluted   $ 0.05     $ 0.03  

 

3. Inventory

v2.4.0.6
3. Inventory
3 Months Ended
Aug. 31, 2013
Inventory

Inventory consists of the following:

 

    August 31,     May 31,  
    2013     2013  
Raw materials   $ 822,363     $ 750,819  
Finished goods     434,645       293,560  
Total inventory   $ 1,257,008     $ 1,044,379  

4. Related Party Transactions

v2.4.0.6
4. Related Party Transactions
3 Months Ended
Aug. 31, 2013
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. Prior to February 1, 2013, Greystone paid advances to Yorktown in recognition of the amounts owed pursuant to certain agreements for the purchase of raw materials on Greystone’s behalf and use of Yorktown equipment.  While the agreements for the purchase of raw materials were terminated effective January 31, 2013, Greystone continues to pay Yorktown for the use of its equipment Payments for equipment rentals totaled $385,260 for the three months ended August 31, 2013. In addition, Greystone continues to pay the labor and certain other costs on behalf of Yorktown’s Tulsa, Oklahoma grinding operation and invoice Yorktown for the costs on a monthly basis.

 

As of August 31, 2013, net advances due from Yorktown totaled $3,618,003 in connection with the relationship between Greystone and Yorktown described in the paragraph above.  Mr. Kruger has agreed that, if necessary and as permitted under Greystone’s loan documentation, the amounts due Greystone could be offset against the amounts that Greystone owes him or Yorktown.  The offset against the net advances as reflected in the consolidated balance sheet as of August 31, 2013, is the combination of (i) the accrued interest of $875,091 payable to Mr. Kruger, (ii) advances payable to Mr. Kruger of $442,180, (iii) an account payable of $794,411 for deferred compensation payable to Mr. Kruger and (iv) preferred dividends of $1,506,321 payable to Mr. Kruger.

5. Notes Payable

v2.4.0.6
5. Notes Payable
3 Months Ended
Aug. 31, 2013
Notes Payable

Notes payable as of August 31, 2013 and May 31, 2013 are as follows:

 

    August 31,     May 31,  
    2013     2013  
Note payable to F&M Bank & Trust Company,            
prime rate of interest but not less than 4.5%, due            
March 13, 2015, monthly principal payments of            
$76,561 plus interest   $ 4,363,968     $ 4,593,650  
                 
Note payable by GRE to F&M Bank & Trust                
Company, prime rate of interest but not less than                
4.75%, due February 15, 2016, monthly installments                
$35,512, secured by buildings and land     3,299,868       3,366,108  
                 
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     363,621       381,727  
                 
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     55,923       66,979  
      10,677,096       11,002,180  
Less: Current portion     (1,347,424 )     (1,344,160 )
Long-term Debt   $ 9,329,672     $ 9,658,020  

 

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

 

Greystone, GSM, GRE, Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a Greystone director, are parties to a loan agreement (the “F&M Agreement”) dated as of March 4, 2005, as amended, with F&M Bank & Trust Company (“F&M”).  There are two loans outstanding under the F&M Agreement as follows:

 

(a)   A term loan as listed above in the amount of $4,363,968 at August 31, 2013 with GSM as the borrower and Greystone, Mr. Kruger and Mr. Rosene as guarantors.

 

(b)   A term loan with a balance of $3,378,000 at August 31, 2013, with Messrs. Kruger and Rosene as borrowers and a maturity date of March 15, 2014.  The loan is collateralized with 25,000 shares of Greystone’s Series 2003 Preferred Stock owned by Mr. Kruger and 25,000 shares of Greystone’s Series 2003 Preferred Stock owned by Mr. Rosene.

 

All indebtedness outstanding under the F&M Agreement and the loan agreement governing the loan to GRE is cross-collateralized, which means that if an event of default occurs under the F&M Agreement, F&M could foreclose on the collateral that secures the indebtedness outstanding under the loan agreement with GRE in order to satisfy the indebtedness outstanding under the F&M Agreement, and vice versa.  In addition, all of the indebtedness outstanding under the F&M Agreement and the loan agreement with GRE is cross-defaulted, which means that an event of default under the F&M Agreement is also an event of default under the loan agreement with GRE, and vice versa

 

The F&M Agreement contains certain financial covenants and restricts the payments of dividends. GSM’s note payable to F&M is secured by cash, accounts receivable, inventory and equipment.

 

As of August 31, 2013, the parties to the F&M Agreement were in compliance with the covenants under the F&M Agreement and GRE was in compliance with its covenants under the loan agreement between F&M and GRE.

6. Stock Options

v2.4.0.6
6. Stock Options
3 Months Ended
Aug. 31, 2013
Share-based Compensation [Abstract]  
6. Stock Options

Effective June 1, 2012, Greystone issued stock options to purchase 2,100,000 shares of its common stock to certain of its directors, officers and employees and cancelled options to purchase 1,300,000 shares. The new options are for a ten year period and are vested at the rate of 25% per year beginning with the first anniversary of the date of the grant. The fair value of the options, $213,696 as of the issuance date, is to be expensed ratably over the vesting period of four years. Stock compensation costs were $13,356 for the three months ended August 31, 2013 and 2012, respectively.  The unexpensed cost at August 31, 2013 totaled $146,916.

 

7. Fair Value of Financial Instruments

v2.4.0.6
7. Fair Value of Financial Instruments
3 Months Ended
Aug. 31, 2013
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.

 

8. Risks and Uncertainties

v2.4.0.6
8. Risks and Uncertainties
3 Months Ended
Aug. 31, 2013
Risks and Uncertainties

Greystone derives a substantial portion of its revenue from a national brewer.  This customer accounted for approximately 69% and 82% of Greystone’s pallet sales and 69% and 73% of Greystone’s total sales for the three months ended August 31, 2013 and 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 August 31, 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 $3,686,926 for a note payable and related accrued interest.  Effective January 15, 2013, 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.

 

9. Commitments

v2.4.0.6
9. Commitments
9 Months Ended
Feb. 28, 2013
Commitments and Contingencies Disclosure [Abstract]  
9. Commitments

As of August 31, 2013, Greystone has outstanding purchase commitments of $446,250 for the purchase of production equipment.

2. Earnings Per Share (Tables)

v2.4.0.6
2. Earnings Per Share (Tables)
3 Months Ended
Aug. 31, 2013
Computation of Basic and Diluted Shares

 

    2013     2012  
Numerator:            
Net income available to common shareholders   $ 1,448,652     $ 832,005  
                 
Denominator:                
Weighted-average shares outstanding:                
    Basic     26,111,201       26,111,201  
Incremental shares from assumed   conversion of options     1,453,846       844,565  
Diluted shares     27,565,047       26,955,766  
Earnings per share:                
Basic   $ 0.06     $ 0.03  
Diluted   $ 0.05     $ 0.03  

 

3. Inventory (Tables)

v2.4.0.6
3. Inventory (Tables)
3 Months Ended
Aug. 31, 2013
Inventory
    August 31,     May 31,  
    2013     2013  
Raw materials   $ 822,363     $ 750,819  
Finished goods     434,645       293,560  
Total inventory   $ 1,257,008     $ 1,044,379  

5. Notes Payable (Tables)

v2.4.0.6
5. Notes Payable (Tables)
3 Months Ended
Aug. 31, 2013
Notes Payable
    August 31,     May 31,  
    2013     2013  
Note payable to F&M Bank & Trust Company,            
prime rate of interest but not less than 4.5%, due            
March 13, 2015, monthly principal payments of            
$76,561 plus interest   $ 4,363,968     $ 4,593,650  
                 
Note payable by GRE to F&M Bank & Trust                
Company, prime rate of interest but not less than                
4.75%, due February 15, 2016, monthly installments                
$35,512, secured by buildings and land     3,299,868       3,366,108  
                 
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     363,621       381,727  
                 
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     55,923       66,979  
      10,677,096       11,002,180  
Less: Current portion     (1,347,424 )     (1,344,160 )
Long-term Debt   $ 9,329,672     $ 9,658,020  

2. Earnings Per Share (Details)

v2.4.0.6
2. Earnings Per Share (Details) (USD $)
3 Months Ended
Aug. 31, 2013
Aug. 31, 2012
Numerator:    
Net income available to common shareholders $ 1,448,652 $ 832,005
Denominator:    
Weighted-average shares outstanding: Basic 26,111,201 26,111,201
Incremental shares from assumed conversion of options 1,453,846 844,565
Diluted shares 27,565,047 26,955,766
Earnings per share:    
Basic $ 0.06 $ 0.03
Diluted $ 0.05 $ 0.03

2. Earnings Per Share (Details Narrative)

v2.4.0.6
2. Earnings Per Share (Details Narrative)
3 Months Ended
Aug. 31, 2013
Aug. 31, 2012
Convertible Preferred Stock [Member]
   
Antidilutive Securities 3,333,334 3,333,334
Call Option [Member]
   
Antidilutive Securities 350,000 350,000

3. Inventory (Details)

v2.4.0.6
3. Inventory (Details) (USD $)
Aug. 31, 2013
May 31, 2013
Inventory Details    
Raw materials $ 822,363 $ 750,819
Finished goods 434,645 293,560
Total inventory $ 1,257,008 $ 1,044,379

5. Notes Payable (Details)

v2.4.0.6
5. Notes Payable (Details) (USD $)
Aug. 31, 2013
May 31, 2013
Notes Payable Details    
Note payable to F&M Bank & Trust Company, prime rate of interest but not less than 4.5%, due March 13, 2015, monthly principal payments of $76,561 plus interest $ 4,363,968 $ 4,593,650
Note payable by GRE to F&M Bank & Trust Company, prime rate of interest but not less than 4.75%, due February 15, 2016, monthly installments $35,512, secured by buildings and land 3,299,868 3,366,108
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 12,500 363,621 381,727
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 55,923 66,979
Total Notes Payable 10,677,096 11,002,180
Less: Current portion (1,347,424) (1,344,160)
Long-term Debt $ 9,329,672 $ 9,658,020

9. Commitments (Details Narrative)

v2.4.0.6
9. Commitments (Details Narrative) (USD $)
Aug. 31, 2013
Commitments Details Narrative  
Commitments $ 446,250