Download to XLS

Document and Entity Information

v2.4.0.8
Document and Entity Information
6 Months Ended
Nov. 30, 2013
Jan. 10, 2014
Document And Entity Information    
Entity Registrant Name GREYSTONE LOGISTICS, INC.  
Entity Central Index Key 0001088413  
Document Type 10-Q  
Document Period End Date Nov. 30, 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? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   26,111,201
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2014  

Consolidated Balance Sheets (Unaudited)

v2.4.0.8
Consolidated Balance Sheets (Unaudited) (USD $)
Nov. 30, 2013
May 31, 2013
Current Assets:    
Cash $ 621,997 $ 366,896
Accounts receivable, net of allowance of $100,000 1,554,031 2,239,594
Inventory 1,916,859 1,044,379
Prepaid expenses and other 257,241 119,198
Total Current Assets 4,350,128 3,770,067
Property, Plant and Equipment 16,395,398 15,754,959
Less: Accumulated Depreciation (9,313,497) (8,710,820)
Property, Plant and Equipment, net 7,081,901 7,044,139
Deferred Tax Asset 1,412,000 1,159,000
Other Assets 62,392 71,371
Total Assets 12,906,421 12,044,577
Current Liabilities:    
Current portion of long-term debt 1,353,905 1,344,160
Accounts payable and accrued expenses 1,672,760 1,643,339
Accounts payable and accrued expenses - related parties 1,691,284 1,551,154
Preferred dividends payable 1,809,905 1,883,959
Total Current Liabilities 6,527,854 6,422,612
Long-Term Debt, net of current portion 8,978,701 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 53,169,429 53,142,717
Accumulated deficit (57,023,240) (58,321,266)
Total Greystone Stockholders' Deficit (3,851,195) (5,175,933)
Non-controlling interests 1,251,061 1,139,878
Total Deficit (2,600,134) (4,036,055)
Total Liabilities and Deficit $ 12,906,421 $ 12,044,577

Consolidated Balance Sheets (Parenthetical) (Unaudited)

v2.4.0.8
Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
Nov. 30, 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
Liquidation preference $ 5,000,000 $ 5,000,000
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)

v2.4.0.8
Consolidated Statements of Income (Unaudited) (USD $)
3 Months Ended 6 Months Ended
Nov. 30, 2013
Nov. 30, 2012
Nov. 30, 2013
Nov. 30, 2012
Income Statement [Abstract]        
Sales $ 4,361,490 $ 5,059,118 $ 10,872,407 $ 12,187,984
Cost of Sales 3,635,151 4,175,786 8,000,696 9,779,803
Gross Profit 726,339 883,332 2,871,711 2,408,181
General, Selling and Administrative Expenses 545,569 542,444 1,141,882 1,101,083
Operating Income 180,770 340,888 1,729,829 1,307,098
Other Income (Expense):        
Other income (expense) 3,600 (3,500) 3,600 6,500
Interest expense (197,094) (210,511) (398,275) (419,354)
Total Other Expense, net (193,494) (214,011) (394,675) (412,854)
Income before Income Taxes (12,724) 126,877 1,335,154 894,244
Benefit from Income Taxes    9,900 237,000 209,300
Net Income (12,724) 136,777 1,572,154 1,103,544
Income Attributable to Variable Interest Entities, net (56,875) (52,256) (111,183) (104,210)
Preferred Dividends (81,027) (81,918) (162,945) (164,726)
Net Income Available to Common Stockholders $ (150,626) $ 2,603 $ 1,298,026 $ 834,608
Income Available to Common Stockholders:        
Per Share of Common Stock - Basic and Diluted $ (0.01)    $ 0.05 $ 0.03
Weighted Average Shares of Common Stock Outstanding -        
Basic 26,111,201 26,111,201 26,111,201 26,111,201
Diluted 26,111,201 27,447,565 27,558,600 27,241,970

Consolidated Statements of Cash Flows (Unaudited)

v2.4.0.8
Consolidated Statements of Cash Flows (Unaudited) (USD $)
6 Months Ended
Nov. 30, 2013
Nov. 30, 2012
Cash Flows from Operating Activities:    
Net income $ 1,572,154 $ 1,103,544
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 674,473 659,013
Deferred income taxes (253,000) (219,300)
Stock-based compensation 26,712 26,712
Changes in receivables 483,064 152,769
Changes in inventory (872,480) (176,924)
Changes in prepaid expenses and other (138,043) (123,706)
Change in other assets 2,454 4,143
Changes in accounts payable and accrued expenses 169,551 (341,191)
Net cash provided by operating activities 1,664,885 1,085,060
Cash Flows from Investing Activities:    
Purchase of property and equipment (705,710) (280,176)
Cash Flows from Financing Activities:    
Payments on long-term debt and capitalized leases (669,574) (638,902)
Payments on advances from related party (34,500) 0
Distributions by variable interest entity 0 (47,082)
Net cash used in financing activities (704,074) (685,984)
Net Increase in Cash 255,101 118,900
Cash, beginning of period 366,896 194,400
Cash, end of period 621,997 313,300
Non-Cash Activities:    
Preferred dividend accrual 162,945 164,726
Supplemental Information:    
Interest paid $ 181,029 $ 219,921

1. Basis of Financial Statements

v2.4.0.8
1. Basis of Financial Statements
6 Months Ended
Nov. 30, 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 November 30, 2013, and the results of its operations for the six-month and three-month periods ended November 30, 2013 and 2012, and its cash flows for the six-month periods ended November 30, 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 six-month and three-month periods ended November 30, 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”), and 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

v2.4.0.8
2. Earnings Per Share
6 Months Ended
Nov. 30, 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 for the six-month periods ended November 30, 2013 and 2012 and the three-month period ended November 30, 2012, respectively, are (1) certain options to purchase common stock totaling 350,000 shares and (2) convertible preferred stock which is convertible into 3,333,334 shares of common stock. Equity instruments which have been excluded for the three-month period ended November 30, 2013 due to the loss available to common stockholders are (1) certain options to purchase common stock totaling 2,450,000 shares and (2) convertible preferred stock which is convertible into 3,333,334 shares of common stock.

 

The following table sets forth the computation of basic and diluted common stock to calculate earnings per share for the six-month and three-month periods ended November 30, 2013 and 2012:

 

    2013     2012  
Six-Month Periods ended November 30, 2013 and 2012:            
Numerator -            
Net income available to common shareholders   $ 1,298,026     $ 834,608  
                 
Denominator -                
Weighted-average shares outstanding                
Basic     26,111,201       26,111,201  
Incremental shares from assumed conversion of options     1,447,399       1,130,769  
Diluted Shares     27,558,600       27,241,970  
                 
Three-Month Periods ended November 30, 2013 and 2012:                
Numerator -                
Net income (loss) available to common shareholders   $ (150,626 )   $ 2,603  
                 
Denominator -                
Weighted-average shares outstanding                
Basic     26,111,201       26,111,201  
Incremental shares from assumed conversion of options     -       1,336,364  
Diluted Shares     26,111,201       27,447,565  

 

3. Inventory

v2.4.0.8
3. Inventory
6 Months Ended
Nov. 30, 2013
Inventory

Inventory consists of the following:

 

    November 30,     May 31,  
    2013     2013  
Raw materials   $ 998,492     $ 750,819  
Finished goods     918,367       293,560  
Total inventory   $ 1,916,859     $ 1,044,379  

4. Related Party Receivable

v2.4.0.8
4. Related Party Receivable
6 Months Ended
Nov. 30, 2013
Related Party Receivable

Yorktown Management & Financial Services, LLC (“Yorktown”), an entity wholly owned by Warren Kruger, 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 $715,720 for the six-month period ended November 30, 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 November 30, 2013, net advances due from Yorktown totaled $3,715,873 in connection with the relationship between Greystone and Yorktown described in the paragraph above.  Mr. Kruger has agreed that, if necessary and if 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 November 30, 2013 is the combination of (i) the accrued interest of $909,852 payable to Mr. Kruger, (ii) advances payable to Mr. Kruger of $407,681, (iii) an account payable of $794,411 for deferred compensation payable to Mr. Kruger and (iv) preferred dividends of $1,603,929 payable to Mr. Kruger.

5. Notes Payable

v2.4.0.8
5. Notes Payable
6 Months Ended
Nov. 30, 2013
Notes Payable

Notes payable as of November 30, 2013 and May 31, 2013 are as follows:

 

    November 30,     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   $ 4,134,285     $ 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     3,232,827       3,366,108  
                 
Capitalized lease payable, 5% interest     326,953       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 note payable     44,825       66,979  
      10,332,606       11,002,180  
Less: Current portion     (1,353,905 )     (1,344,160 )
Long-term debt   $ 8,978,701     $ 9,658,020  

 

The prime rate of interest as of November 30, 2013 was 3.25%.

 

 

 

Loans with F&M Bank & Trust Company

 

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 $4,134,285 at November 30, 2013 with GSM as the borrower and Greystone, Mr. Kruger and Mr. Rosene as guarantors.

 

(b)   A term loan with a balance of $3,356,000 at November 30, 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. This term loan is the personal liability of Messrs. Kruger and Rosene and, accordingly, is not included in the Greystone financial statements.

 

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 November 30, 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.

 

Capitalized Lease Payable

 

Effective January 2, 2014, Greystone paid $114,641 to buy out the capitalized lease.  The difference of $212,312 between the outstanding debt balance and the purchase amount will be applied against the asset’s carrying value.

 

6. Fair Value of Financial Instruments

v2.4.0.8
6. Fair Value of Financial Instruments
6 Months Ended
Nov. 30, 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.

 

7. Risks and Uncertainties

v2.4.0.8
7. Risks and Uncertainties
6 Months Ended
Nov. 30, 2013
Risks and Uncertainties

Greystone derives a substantial portion of its revenue from a national brewer.  This customer accounted for approximately 58% and 74% of Greystone’s pallet sales and 56% and 65% of Greystone’s total sales for the six-month periods ended November 30, 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, and Robert B. Rosene, Jr., a Greystone director, have provided financing to Greystone and guarantees on Greystone’s bank debt.  As of November 30, 2013, Greystone was indebted to Mr. Kruger in the amount of $527,716 for a note payable and to Mr. Rosene in the amount of $3,757,267 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.

8. Commitments

v2.4.0.8
8. Commitments
6 Months Ended
Nov. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
8. Commitments

As of November 30, 2013, Greystone has outstanding commitments of $325,000 for the purchase of production equipment.

 

2. Earnings Per Share (Tables)

v2.4.0.8
2. Earnings Per Share (Tables)
6 Months Ended
Nov. 30, 2013
Computation of Basic and Diluted Shares
    2013     2012  
Six-Month Periods ended November 30, 2013 and 2012:            
Numerator -            
Net income available to common shareholders   $ 1,298,026     $ 834,608  
                 
Denominator -                
Weighted-average shares outstanding                
Basic     26,111,201       26,111,201  
Incremental shares from assumed conversion of options     1,447,399       1,130,769  
Diluted Shares     27,558,600       27,241,970  
                 
Three-Month Periods ended November 30, 2013 and 2012:                
Numerator -                
Net income (loss) available to common shareholders   $ (150,626 )   $ 2,603  
                 
Denominator -                
Weighted-average shares outstanding                
Basic     26,111,201       26,111,201  
Incremental shares from assumed conversion of options     -       1,336,364  
Diluted Shares     26,111,201       27,447,565  

3. Inventory (Tables)

v2.4.0.8
3. Inventory (Tables)
6 Months Ended
Nov. 30, 2013
Inventory
    November 30,     May 31,  
    2013     2013  
Raw materials   $ 998,492     $ 750,819  
Finished goods     918,367       293,560  
Total inventory   $ 1,916,859     $ 1,044,379  

5. Notes Payable (Tables)

v2.4.0.8
5. Notes Payable (Tables)
6 Months Ended
Nov. 30, 2013
Notes Payable
    November 30,     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   $ 4,134,285     $ 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     3,232,827       3,366,108  
                 
Capitalized lease payable, 5% interest     326,953       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 note payable     44,825       66,979  
      10,332,606       11,002,180  
Less: Current portion     (1,353,905 )     (1,344,160 )
Long-term debt   $ 8,978,701     $ 9,658,020  

2. Earnings Per Share (Details)

v2.4.0.8
2. Earnings Per Share (Details) (USD $)
3 Months Ended 6 Months Ended
Nov. 30, 2013
Nov. 30, 2012
Nov. 30, 2013
Nov. 30, 2012
Numerator:        
Net income available to common shareholders $ (150,626) $ 2,603 $ 1,298,026 $ 834,608
Denominator:        
Weighted-average shares outstanding: Basic 26,111,201 26,111,201 26,111,201 26,111,201
Incremental shares from assumed conversion of options 0 1,336,364 1,447,399 1,130,769
Diluted shares 26,111,201 27,447,565 27,558,600 27,241,970

2. Earnings Per Share (Details Narrative)

v2.4.0.8
2. Earnings Per Share (Details Narrative)
3 Months Ended
Nov. 30, 2013
Nov. 30, 2012
Convertible Preferred Stock [Member]
   
Antidilutive Securities 3,333,334 3,333,334
Call Option [Member]
   
Antidilutive Securities 2,450,000 350,000

3. Inventory (Details)

v2.4.0.8
3. Inventory (Details) (USD $)
Nov. 30, 2013
May 31, 2013
Inventory Details    
Raw materials $ 998,492 $ 750,819
Finished goods 918,367 293,560
Total inventory $ 1,916,859 $ 1,044,379

5. Notes Payable (Details)

v2.4.0.8
5. Notes Payable (Details) (USD $)
Nov. 30, 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 $ 4,134,285 $ 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 3,232,827 3,366,108
Capitalized lease payable, 5% interest 326,953 381,727
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 44,825 66,979
Total Notes Payable 10,332,606 11,002,180
Less: Current portion (1,353,905) (1,344,160)
Long-term Debt $ 8,978,701 $ 9,658,020

8. Commitments (Details Narrative)

v2.4.0.8
8. Commitments (Details Narrative) (USD $)
Nov. 30, 2013
Commitments Details Narrative  
Commitments $ 325,000