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Document and Entity Information

v2.4.0.8
Document and Entity Information (USD $)
12 Months Ended
May 31, 2014
Apr. 10, 2014
Nov. 30, 2013
Document And Entity Information      
Entity Registrant Name GREYSTONE LOGISTICS, INC.    
Entity Central Index Key 0001088413    
Document Type 10-K    
Document Period End Date May 31, 2014    
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 Public Float     $ 6,377,390
Entity Common Stock, Shares Outstanding   26,461,201  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2014    

Consolidated Balance Sheets

v2.4.0.8
Consolidated Balance Sheets (USD $)
May 31, 2014
May 31, 2013
Current Assets:    
Cash $ 661,263 $ 366,896
Accounts receivable, Trade, net of allowance of $71,462 and $100,000 respectively 2,023,563 2,239,594
Accounts receivable, Related party 219,505 0
Inventory 1,616,165 1,044,379
Deferred tax asset - current 1,077,000 0
Prepaid expenses 97,170 119,198
Total Current Assets 5,694,666 3,770,067
Property, Plant and Equipment, net of accumulated depreciation 8,776,137 7,044,139
Deferred Tax Asset - non-current 1,133,000 1,159,000
Other Assets 163,188 71,371
Total Assets 15,766,991 12,044,577
Current Liabilities:    
Current portion of long-term debt 3,979,376 1,344,160
Accounts payable and accrued expenses 782,591 1,643,339
Accrued expenses - related party 1,835,999 1,551,154
Preferred dividends payable 27,603 1,883,959
Total Current Liabilities 6,625,569 6,422,612
Long-Term Debt, net of current portion 10,524,745 9,658,020
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 isssued and outstanding 2,646 2,611
Additional paid-in capital 53,336,106 53,142,717
Accumulated deficit (55,715,203) (58,321,266)
Total Greystone Stockholders' Deficit (2,376,446) (5,175,933)
Non-controlling interest 993,123 1,139,878
Total Deficit (1,383,323) (4,036,055)
Total Liabilities and Deficit $ 15,766,991 $ 12,044,577

Consolidated Balance Sheets (Parenthetical)

v2.4.0.8
Consolidated Balance Sheets (Parenthetical) (USD $)
May 31, 2014
May 31, 2013
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 71,462 $ 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 26,461,201 26,111,201
Common stock shares outstanding 26,461,201 26,111,201

Consolidated Statements of Income

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Consolidated Statements of Income (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
Income Statement [Abstract]    
Sales $ 23,449,936 $ 24,085,184
Cost of Sales 18,107,627 18,828,452
Gross Profit 5,342,309 5,256,732
General, Selling and Administrative Expenses 2,409,115 2,189,125
Operating Income 2,933,194 3,067,607
Other Income (Expense):    
Other income 5,000 6,500
Interest expense (846,568) (828,897)
Total Other Expense, net (841,568) (822,397)
Income before Income Taxes 2,091,626 2,245,210
Benefit from Income Taxes 1,040,000 548,000
Net Income 3,131,626 2,793,210
Income Attributable to Variable Interest Entities, net (200,563) (201,552)
Preferred Dividends (325,000) (326,781)
Net Income Available to Common Stockholders $ 2,606,063 $ 2,264,877
Income Per Share of Common Stock -    
Basic $ 0.1 $ 0.09
Diluted $ 0.09 $ 0.08
Weighted Average Shares of Common Stock Outstanding -    
Basic 26,198,701 26,111,201
Diluted 27,674,939 27,480,039

Statement of Changes in Deficit

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Statement of Changes in Deficit (USD $)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total Greystone Stockholders Deficit [Member]
Variable Interest Entities [Member]
Total
Beginning Balance, amount at May. 31, 2012 $ 5 $ 2,611 $ 53,089,293 $ (60,586,143) $ (7,494,234) $ 1,040,405 $ (6,453,829)
Beginning Balance, shares at May. 31, 2012 50,000 26,111,201 0 0 0 0 0
Cash distributions 0 0 0 0 0 (102,079) (102,079)
Preferred dividends 0 0 0 (326,781) (326,781) 0 (326,781)
Net income 0 0 0 2,591,658 2,591,658 201,552 2,793,210
Stock based compensation 0 0 53,424 0 53,424 0 53,424
Ending Balance, amount at May. 31, 2013 5 2,611 53,142,717 (58,321,266) (5,175,933) 1,139,878 (4,036,055)
Ending Balance, shares at May. 31, 2013 50,000 26,111,201          
Cash distributions           (347,318) (347,318)
Preferred dividends       (325,000) (325,000)   (325,000)
Net income       2,931,063 2,931,063 200,563 3,131,626
Stock based compensation     53,424   53,424   53,424
Common stock options exercised, amount   35 139,965   140,000   140,000
Common stock options exercised, shares   350,000          
Ending Balance, amount at May. 31, 2014 $ 5 $ 2,646 $ 53,336,106 $ (55,715,203) $ (2,376,446) $ 993,123 $ (1,383,323)
Ending Balance, shares at May. 31, 2014 50,000 26,461,201          

Consolidated Statements of Cash Flows

v2.4.0.8
Consolidated Statements of Cash Flows (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
Cash Flows from Operating Activities:    
Net income $ 3,131,626 $ 2,793,210
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 1,309,573 1,387,987
Increase in deferred tax asset (1,051,000) (574,000)
Stock-based compensation 53,424 53,424
Changes in trade accounts receivable 216,031 476,299
Changes in related party receivables (491,682) (1,218,430)
Changes in inventory (571,786) (87,741)
Changes in prepaid expenses 22,028 (74,108)
Changes in accounts payable and accrued expenses (459,814) (673,008)
Other 2,785 2,033
Net cash provided by operating activities 2,161,185 2,085,666
Cash Flows from Investing Activities:    
Purchase of property and equipment (2,246,101) (620,898)
Cash Flows from Financing Activities:    
Proceeds from long-term debt 12,612,500 250,000
Proceeds from revolving loan 885,000 0
Payments on long-term debt and capitalized leases (8,640,891) (1,291,693)
Payments on revolving loan (500,000) 0
Issuance cost of long-term debt (129,722) 0
Payments on advances from related party (92,000) (148,500)
Proceeds from exercised stock options 140,000 0
Preferred dividends paid (3,548,286) 0
Distributions by variable interest entity (347,318) (102,079)
Net cash provided by (used in) financing activities 379,283 (1,292,272)
Net Increase in Cash 294,367 172,496
Cash, beginning of period 366,896 194,400
Cash, end of period 661,263 366,896
Non-Cash Activities:    
Acquisition of equipment in exchange for net related party receivable 1,087,302 0
Reduction in carrying value of equipment resulting from capital lease termination 212,311 0
Settlement of related party note payable in acquisition of equipment 527,716 0
Preferred dividend accrual 27,603 326,781
Supplemental Information:    
Interest paid 567,507 423,530
Taxes paid $ 26,045 $ 0

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

v2.4.0.8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
May 31, 2014
Accounting Policies [Abstract]  
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 VIE, Greystone Real Estate, L.L.C. (“GRE”), which owns the manufacturing facilities which are occupied by Greystone.  GRE is owned by Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a member of Greystone’s board of directors.

 

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.

 

Other Assets

 

Other assets includes certain intangible costs as follows:

 

(1) Patents on the modular pallet system and accessories which are being amortized on the straight-line method over the estimated life of 15 years.

 

(2) Debt issue costs which are being amortized over the term of the underlying note payable or five 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 consolidated financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and tax bases of assets and liabilities and tax loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

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 2014 and 2013, 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, 2014 and 2013 as their effect would have been antidilutive:

 

      2014       2013  
Options to purchase common stock     -       350,000  
Convertible preferred stock     3,333,333       3,333,333  
      3,333,333       3,683,333  

Recent Accounting Pronouncement

 

In May 2014, the Financial Accounting Standards  ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers" ("ASU 14-09") which creates a comprehensive set of guidelines for the recognition of revenue under the principle: "Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." The requirements of ASU 14-09 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and will require either retrospective application to each prior period presented or retrospective application with the cumulative effect of initially applying the standard at the date of adoption. Greystone is currently evaluating the impact this ASU will have on our financial position and results of operations.

 

Reclassification

 

Certain reclassifications have been made to the prior years' consolidated financial statements to conform to the classifications adopted for the year ended May 31, 2014. These reclassifications have no effect on previously reported net income or accumulated deficit.

 

2. INVENTORY

v2.4.0.8
2. INVENTORY
12 Months Ended
May 31, 2014
Inventory

Inventory consists of the following as of May 31:

 

    2014     2013  
Raw materials   $ 1,043,411     $ 750,819  
Finished pallets     572,754       293,560  
                 
Total Inventory   $ 1,616,165     $ 1,044,379  

3. PROPERTY, PLANT AND EQUIPMENT

v2.4.0.8
3. PROPERTY, PLANT AND EQUIPMENT
12 Months Ended
May 31, 2014
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:

 

    2014     2013  
Production machinery and equipment   $ 12,826,529     $ 10,717,493  
Building and land     4,663,339       4,663,339  
Leasehold improvements     203,034       203,034  
Furniture and fixtures     210,196       171,093  
      17,903,098       15,754,959  
                 
Less: Accumulated depreciation     (9,126,961 )     (8,710,820 )
                 
Net Property, Plant and Equipment   $ 8,776,137     $ 7,044,139  

 

 

Production machinery and equipment includes equipment in the amount of $235,074 that had not been placed into service as of May 31, 2014.  Building and land are owned by a VIE for which the net book value is $3,475,906 at May 31, 2014.

 

Depreciation expense for the years ended May 31, 2014 and 2013 is $1,274,453 and $1,374,937, respectively.

4. OTHER ASSETS

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4. OTHER ASSETS
12 Months Ended
May 31, 2014
Other Assets [Abstract]  
OTHER ASSETS

Other assets consist of the following as of May 31:

 

    2014     2013  
Patents   $ 190,739     $ 190,739  
Debt issue costs     129,722       18,726  
Accumulated amortization     (157,273 )     (140,879 )
Customer deposits     -       2,785  
                 
Total Other Assets   $ 163,188     $ 71,371  

 

Amortization of intangibles was $35,120 and $13,050 for 2014 and 2013, respectively.   Future amortization for the next five years will be $37,384, $37,274, $36,573, $35,983 and $15,974.

 

5. LONG-TERM DEBT

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5. LONG-TERM DEBT
12 Months Ended
May 31, 2014
Debt Disclosure [Abstract]  
5. LONG-TERM DEBT

Long-term debt consists of the following as of May 31:

 

    2014     2013  
Note payable to International Bank of Commence, interest rate of 4.5%, monthly principal and interest payments of $171,760, maturing January 31, 2019   $ 8,647,777     $ -  
                 
Revolving note payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4%, due January 31, 2016     385,000       -  
                 
Term note payable by GRE to International Bank of Commerce, interest rate of 4.5%, monthly principal and interest payments of $26,215, due January 31, 2019     3,371,660       -  
                 
Note payable to F&M Bank & Trust Company, prime rate of interest but not less than 4.5%,     -       4,593,650  
                 
Note payable by GRE to F&M Bank & Trust Company, prime rate of interest but not less than 4.75%     -       3,366,108  
                 
Capitalized lease payable, 5% interest     -       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  
                 
Other note payable     33,684       66,979  
      14,504,121       11,002,180  
Less: Current portion     (3,979,376 )     (1,344,160 )
Long-term debt   $ 10,524,745     $ 9,658,020  

 

The prime rate of interest as of May 31, 2014 was 3.25%.

                                                                                         

Loan Agreement between Greystone and International Bank of Commerce (“IBC”)

On January 31, 2014, Greystone and GSM (the “Borrowers”) and IBC entered into a Loan Agreement (the “IBC Loan Agreement”).  The IBC Loan Agreement provides for a revolving loan in an aggregate principal amount of up to $2,500,000 (the “Revolving Loan”) and a term loan in the aggregate principal amount of $9,200,000 (the “Term Loan”).  The exact amount which can be borrowed under the Revolving Loan from time to time is dependent upon the amount of the borrowing base, but can in no event exceed $2,500,000.

 

The Revolving Loan bears interest at the New York Prime Rate plus 0.5% but not less than 4.0% and matures January 31, 2016.  As of May 31, 2014, the interest rate on the Revolving Loan was 4%. The Borrowers are required to pay all interest accrued on the outstanding principal balance of the Revolving Loan on a monthly basis.   Any principal on the Revolving Loan that is prepaid by the Borrowers may be reborrowed by the Borrowers. The proceeds from the Revolving Loan will be used for general working capital purposes.

 

The Term Loan bears interest at 4.5% per annum and matures January 31, 2019.  The Borrowers are required to make equal payments of principal and interest in an amount sufficient to amortize the principal balance of the Term Loan over five years. The proceeds from the Term Loan were primarily used to repay the Borrowers’ obligations to The F&M Bank & Trust Company in the amount of $3,992,083, to pay accrued preferred dividends of $3,469,040 and to pay $1,312,697 to Yorktown for the acquisition of equipment.

  

The IBC Loan Agreement required the Borrowers to pay a fee in the amount of $100,000 to IBC on January 31, 2014.

 

The IBC Loan Agreement includes customary representations and warranties and affirmative and negative covenants which include (i) requiring the Borrowers to maintain a debt service coverage ratio of 1:25 to 1:00 and a funded debt to EBIDA ratio not exceeding 3:00 to 1:00, (ii) subject to certain exceptions, limiting the Borrowers’ combined capital expenditures on fixed assets to $1,000,000 per year, (iii) prohibiting Greystone, without IBC’s prior written consent, from declaring or paying any dividends, redemptions of stock or membership interests, distributions and withdrawals (as applicable) in respect of its capital stock or any other equity interest, other than (A) a one-time payment of accrued preferred dividends to holders of its preferred stock in an amount not to exceed $3,470,000 within 10 days of the date of the IBC Loan Agreement, and (B) additional payments to holders of its preferred stock in an amount not to exceed $500,000 in any fiscal year, (iv) subject to certain exceptions, prohibiting the incurrence of additional indebtedness by the Borrowers, and (v) requiring the Borrowers to prevent (A) any change in capital ownership such that there is a material change in the direct or indirect ownership of (1) Greystone’s outstanding preferred stock, and (2) any equity interest in GSM, or (B) Warren Kruger from ceasing to be actively involved in the management of Greystone as President and/or Chief Executive Officer.  The foregoing list of covenants is not exhaustive and there are several other covenants contained in the IBC Loan Agreement.

 

The IBC Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the IBC Loan Agreement from time to time, inaccuracy of representations, violation of covenants, defaults under other agreements, bankruptcy and similar events, the death of a guarantor, certain material adverse changes relating to a Borrower or guarantor, certain judgments or awards against a Borrower, or government action affecting a Borrower’s or guarantor’s ability to perform under the IBC Loan Agreement or the related loan documents.  Among other things, a default under the IBC Loan Agreement would permit IBC to cease lending funds under the IBC Loan Agreement, and require immediate repayment of any outstanding loans with interest and any unpaid accrued fees.

 

The IBC Loan Agreement is secured by a lien on substantially all of the assets of the Borrowers.  In addition, the IBC Loan Agreement is secured by a mortgage granted by GRE on the real property owned by GRE in Bettendorf, Iowa (the “Mortgage”).  GRE is owned by Warren F. Kruger, Greystone’s President and CEO, and Robert B. Rosene, Jr., a director of Greystone.  Messrs. Kruger and Rosene have provided a combined limited guaranty of the Borrowers’ obligations under the IBC Loan Agreement, with such guaranty being limited to a combined amount of $6,500,000 (the “Guaranty”).  The Mortgage and the Guaranty also secure or guaranty, as applicable, the obligations of GRE under the Loan Agreement between GRE and IBC dated January 31, 2014 as discussed in the following paragraph.

 

As discussed in Note 6, Related Party Transactions, Greystone paid a fee to Robert B. Rosene, Jr., a member of Greystone’s board of directors, in connection with procuring the loan with IBC including providing a personal guarantee.

 

Loan Agreement between GRE and IBC

On January 31, 2014, GRE and IBC entered into a Loan Agreement which provided for a mortgage loan to GRE of $3,412,500.  The loan provides for a 4.5% interest rate and a maturity of January 31, 2019.  The loan is secured by a mortgage on the property. In addition, the mortgage property is cross collateralized pursuant to the IBC Loan Agreement with Greystone. The proceeds of the loan were used to pay $3,197,682 to pay the outstanding obligation with The F&M Bank & Trust Company.

 

Capitalized Lease Payable

Effective January 2, 2014, Greystone paid $114,641 to terminate its capitalized lease and purchase the underlying equipment.  There was a difference of $212,312 between the outstanding balance of the capital lease obligation and the buyout payment which was recorded as a reduction in the asset’s carrying value.

 

Maturities of Greystone’s long-term debt for the five years after May 31, 2014 are $3,979,376, $2,337,388, $2,044,472, $2,139,726 and $4,003,159.

 

6. RELATED PARTY TRANSACTIONS

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6. RELATED PARTY TRANSACTIONS
12 Months Ended
May 31, 2014
Related Party Transactions [Abstract]  
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 and rents to Greystone (1) grinding equipment used to grind raw materials for Greystone’s pallet production and (2) extruders for pelletizing recycled plastic into pellets for resale and for use as raw material in the manufacture of pallets.  Yorktown also owns a plastic grinding and wash line facility used to recycle plastic into usable raw material which Greystone may purchase at market prices.  Greystone compensates Yorktown for the use of equipment as discussed below.  In addition, Yorktown provides office space for Greystone in Tulsa, Oklahoma at a monthly rental of $2,000.

 

Greystone pays the labor on behalf of Yorktown’s Tulsa, Oklahoma grinding operation. These costs are invoiced to Yorktown on a monthly basis. As of May 31, 2014, Mr. Kruger and Yorktown owe Greystone $219,505 primarily from the aforementioned labor costs incurred by Greystone on behalf of Yorktown.

 

Acquisition of raw material and resin sales. For the period from June 1, 2012 through January 31, 2013, Greystone had the following arrangements with Yorktown which were terminated effective January 31, 2013:

 

Greystone purchased its raw materials through Yorktown for which Yorktown invoiced Greystone for the actual cost of the materials plus a grinding fee of $0.04 per pound. During the period from June 1, 2012 through January 31, 2013, GSM’s raw material purchases and grinding fees from Yorktown totaled approximately $3,623,000 pursuant to this arrangement.

 

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 year 2013 was approximately $80,000.

 

Effective February 1, 2013, GSM commenced purchasing raw materials direct from unrelated third parties and the processing of pelletized material for resale was undertaken solely by GSM.  Further, effective February 1, 2013, GSM commenced paying a weekly grinding equipment rental fee to Yorktown of $22,500 plus a rental fee of $0.02 per pound for the use of Yorktown’s pelletizing equipment. Subsequently, the grinding fee was converted to a weekly fee of $5,000. GSM paid Yorktown total equipment rental fees of approximately $1,430,000 and $465,667 in fiscal years 2014 and 2013 respectively.

 

Acquisition of equipment. On and effective January 31, 2014, Greystone, GSM, Warren Kruger, Greystone’s President and CEO, and Yorktown entered into a Bill of Sale and Assignment (the “Bill of Sale”) providing for the acquisition of an injection molding machine, a lift crane and several injection molds by GSM from Yorktown for $2,400,000.  Immediately prior to the acquisition, Yorktown owed GSM $3,750,085 and Greystone owed Mr. Kruger $2,662,782. The Bill of Sale provided for the offset of GSM’s receivable and Greystone’s payable, on a dollar-for-dollar basis, leaving a balance of $1,087,302 owed by Yorktown.  The purchase price of $2,400,000 was offset by the balance of $1,087,303 owed by Yorktown resulting in a cash payment to Yorktown of $1,312,697. Greystone made payments to Yorktown for use of this equipment in fiscal year 2013 and fiscal year 2014 through the date of acquisition. Such payments during the year ended May 31, 2014 totaled $84,983 and such payments in fiscal year 2013 totaled $132,200.

 

Other transactions. 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, 2015. As discussed above effective January 31, 2014, Mr. Kruger applied this note and advances and accrued interest of $1,318,295 as an offset against certain balances which Yorktown owed to Greystone. Through January 31, 2014, Greystone accrued interest on advances and note payable to Mr. Kruger at the rate of 7.5% per year which totaled $93,729 and $140,487 fiscal years 2014 and 2013, respectively.

 

Transactions with Robert B. Rosene, Jr., Director

Effective December 15, 2005, Greystone entered into an 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 $284,845 and $265,440 in fiscal years 2014 and 2013, respectively. Accrued interest due to Mr. Rosene at May 31, 2014 is $1,835,999.

 

In connection with services provided by Robert B. Rosene, Jr., a member of Greystone’s board of directors, in assisting Greystone in procuring its loan with International Bank of Commerce, including providing a corresponding personal guarantee, Greystone’s board of directors approved the payment of an annual fee to Mr. Rosene equal to 1% of the dollar amount of his personal guarantee on the IBC term and revolving loans. During fiscal year 2014, Greystone paid a fee of $65,000 to Mr. Rosene.

 

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 March 31, 2014 to extend the lease through September 30, 2015.  Lease payments were $300,000 for each of fiscal years 2014 and 2013.

 

7. FEDERAL INCOME TAXES

v2.4.0.8
7. FEDERAL INCOME TAXES
12 Months Ended
May 31, 2014
Income Tax Disclosure [Abstract]  
FEDERAL INCOME TAXES

Deferred taxes as of May 31, 2014 and 2013 are as follows:

 

 

    2014     2013  
Net operating loss carryforward   $ 1,936,834     $ 1,965,370  
Depreciation and amortization, financial                
    reporting in excess of tax     219,838       443,177  
Deferred compensation accrual     -       244,800  
Stock compensation costs     36,328       18,164  
Allowance for doubtful accounts     17,000       34,000  
      2,210,000       2,705,511  
Valuation allowance     -       (1,546,511 )
                 
Net deferred tax asset   $ 2,210,000     $ 1,159,000  

 

Deferred tax assets were classified in the consolidated balance sheets at May 31, as follows:

 

    2014     2013  
Deferred tax assets - current   $ 1,077,000     $ -  
Deferred tax assets - non-current     1,133,000       1,159,000  
Deferred tax assets - total   $ 2,210,000     $ 1,159,000  

 

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 reduced the valuation allowance which allows for recognition of the tax benefits as deferred tax assets for May 31, 2014 and 2013, respectively.

 

The net change in deferred taxes for the year ended May 31, 2014 and 2013 is as follows:

 

    2014       2013  
Net operating loss carryforward $ (28,536 )   $ (583,561 )
Depreciation and amortization, financial              
    reporting in excess of tax   (223,339 )     (174,289 )
Stock compensation costs   18,164       18,164  
Deferred compensation accrual   (244,800 )     -  
Allowance for doubtful accounts             (17,000 )     17,000  
Valuation allowance   1,546,511       1,296,686  
               
Total $ 1,051,000     $ 574,000  

 

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

 

    2014     2013  
Federal   $ 11,000     $ 26,000  
Deferred income tax benefit     (1,051,000     (574,000 )
Total   $ (1,040,000   $ (548,000 )

 

Greystone's provision (benefit) for income taxes for the years ended May 31, 2014 and 2013 differs from the federal statutory rate as follows:

 

    2014       2013  
Tax provision (benefit) using statutory rates     34 %     34  %
Net change in valuation allowance     (75 )     (54 )
Other     (9     (11 )
Tax benefit per financial statements     (50 )%     (31 )%

 

At May 31, 2014, Greystone had a net operating loss (NOL) for Federal income tax purposes from inception through May 31, 2005 of $17,243,600 expiring in fiscal year 2014 through fiscal year 2025 of which $2,475,000 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   $ 2,475,000       2015 - 2025  
Year ended May 31, 2006     323,133       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.

 

8. STOCKHOLDERS' EQUITY

v2.4.0.8
8. STOCKHOLDERS' EQUITY
12 Months Ended
May 31, 2014
Stockholders' Equity Note [Abstract]  
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.  

9. STOCK OPTIONS

v2.4.0.8
9. STOCK OPTIONS
12 Months Ended
May 31, 2014
Proceeds from Issuance of Shares under Incentive and Share-based Compensation Plans, Including Stock Options [Abstract]  
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, 2014.  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, 2014:

 

    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        
Exercised during fiscal year 2014     (350,000 )   $ 0.40                
Total outstanding May 31, 2014     2,100,000     $ 0.12       8.0        
Exercisable as of May 31, 2014     525,000     $ 0.12       8.0     $ 204,750  
Non-vested as of May 31, 2014     1,575,000     $ 0.12       8.0     $ 614,250  

 

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 for fiscal years 2014 and 2013, respectively.  As of May 31, 2014, the unrecognized compensation expense related to non-vested share-based options was $106,848. This unrecognized compensation expense as of May 31, 2014 will be amortized equally over the remaining vesting period of 2 years.

 

10. FINANCIAL INSTRUMENTS

v2.4.0.8
10. FINANCIAL INSTRUMENTS
12 Months Ended
May 31, 2014
Financial Instruments, Owned, at Fair Value [Abstract]  
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.  As of May 31, 2014 and 2013, the carrying amounts reported in the balance sheet approximate fair value.

11. SUPPLEMENTAL INFORMATION OF CASH FLOWS

v2.4.0.8
11. SUPPLEMENTAL INFORMATION OF CASH FLOWS
12 Months Ended
May 31, 2014
Supplemental Information:  
SUPPLEMENTAL INFORMATION OF CASH FLOWS

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

  

    2014     2013  
Non-cash investing and financing activities:            

   Acquisition of equipment in exchange for net

      related party receivable

   $ 1,087,302          $ -  

   Reduction in net carrying value  of equipment

      resulting from capital lease termination

   $ 212,311      $ -  

    Settlement of related party note payable in

      acquisition of equipment

  $ 527,716      $ -  
   Preferred dividend accrual    $ 27,603      $ 326,781  
                 
Supplemental information:                
       Interest paid    $ 567,507      $ 423,530  
   Taxes paid    $ 26,045      $ -  

 

12. CONCENTRATIONS

v2.4.0.8
12. CONCENTRATIONS
12 Months Ended
May 31, 2014
Concentration Risks, Types, No Concentration Percentage [Abstract]  
CONCENTRATIONS

For the fiscal years ended May 31, 2014 and 2013, one customer accounted for approximately 56% and 63% of total sales, respectively. The account receivable from this customer at May 31, 2014 totaled $924,261.

 

Greystone purchases damaged pallets from its customers at a price based on the value of the raw material content of the pallet.  A majority of these purchases are from Greystone’s major customer which were approximately $1,499,000 and $1,472,000 in fiscal years 2014 and 2013, respectively.

 

For the fiscal year 2013, 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.

13. VARIABLE INTEREST ENTITIES (VIE)

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13. VARIABLE INTEREST ENTITIES (VIE)
12 Months Ended
May 31, 2014
Variable Interest Entity, Measure of Activity [Abstract]  
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.  GRE was created solely to own and lease one of the buildings that GSM occupies at 2600 Shoreline Drive, Bettendorf, Iowa. In fiscal year 2012, GRE purchased the second building occupied by Greystone, 2601 Shoreline Drive, Bettendorf, Iowa, in a sale and leaseback transaction with Greystone.

 

The buildings, having a carrying value of $3,475,909 and $3,591,781 at May 31, 2014 and 2013, respectively, serve as collateral for GRE’s debt.  The debt had a carrying value of $3,371,660 and $3,366,108 at May 31, 2014 and 2013, respectively.

 

14. COMMITMENTS

v2.4.0.8
14. COMMITMENTS
12 Months Ended
May 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Commitments

At May 31, 2014, Greystone had commitments totaling $192,000 for the acquisition of equipment.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

v2.4.0.8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
12 Months Ended
May 31, 2014
Accounting Policies [Abstract]  
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 VIE, Greystone Real Estate, L.L.C. (“GRE”), which owns the manufacturing facilities which are occupied by Greystone.  GRE is owned by Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a member of Greystone’s board of directors.

 

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.

Other Assets

Other assets includes certain intangible costs as follows:

 

(1)   Patents on the modular pallet system and accessories which are being amortized on the straight-line method over the estimated life of 15 years.

 

(2)   Debt issue costs which are being amortized over the term of the underlying note payable or five 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 consolidated financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and tax bases of assets and liabilities and tax loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse.

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 2014 and 2013, 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, 2014 and 2013 as their effect would have been antidilutive:

 

      2014       2013  
Options to purchase common stock     -       350,000  
Convertible preferred stock     3,333,333       3,333,333  
      3,333,333                      3,683,333  

 

Recent Accounting Pronouncement

In May 2014, the Financial Accounting Standards  ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers" ("ASU 14-09") which creates a comprehensive set of guidelines for the recognition of revenue under the principle: "Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." The requirements of ASU 14-09 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and will require either retrospective application to each prior period presented or retrospective application with the cumulative effect of initially applying the standard at the date of adoption. Greystone is currently evaluating the impact this ASU will have on our financial position and results of operations.

Reclassifications

Certain reclassifications have been made to the prior years' consolidated financial statements to conform to the classifications adopted for the year ended May 31, 2014. These reclassifications have no effect on previously reported net income or accumulated deficit.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

v2.4.0.8
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
12 Months Ended
May 31, 2014
Accounting Policies [Abstract]  
Useful life of property plant and equipment
Plant buildings 39 years
Production machinery and equipment 5-10 years
Office equipment & furniture & fixtures 3-5 years
Antidilutive securities
      2014       2013  
Options to purchase common stock     -       350,000  
Convertible preferred stock     3,333,333       3,333,333  
      3,333,333                      3,683,333  

2. INVENTORY (Tables)

v2.4.0.8
2. INVENTORY (Tables)
12 Months Ended
May 31, 2014
Inventory
    2014     2013  
Raw materials   $ 1,043,411     $ 750,819  
Finished pallets     572,754       293,560  
                 
Total Inventory   $ 1,616,165     $ 1,044,379  

3. PROPERTY, PLANT AND EQUIPMENT (Tables)

v2.4.0.8
3. PROPERTY, PLANT AND EQUIPMENT (Tables)
12 Months Ended
May 31, 2014
Property Plant And Equipment Tables  
Schedule of property plant and equipment
    2014     2013  
Production machinery and equipment   $ 12,826,529     $ 10,717,493  
Building and land     4,663,339       4,663,339  
Leasehold improvements     203,034       203,034  
Furniture and fixtures     210,196       171,093  
      17,903,098       15,754,959  
                 
Less: Accumulated depreciation     (9,126,961 )     (8,710,820 )
                 
Net Property, Plant and Equipment   $ 8,776,137     $ 7,044,139  

4. OTHER ASSETS (Tables)

v2.4.0.8
4. OTHER ASSETS (Tables)
12 Months Ended
May 31, 2014
Other Assets Tables  
Schedule of other assets
    2014     2013  
Patents   $ 190,739     $ 190,739  
Debt issue costs     129,722       18,726  
Accumulated amortization     (157,273 )     (140,879 )
Customer deposits     -       2,785  
                 
Total Other Assets   $ 163,188     $ 71,371  

5. LONG-TERM DEBT (Tables)

v2.4.0.8
5. LONG-TERM DEBT (Tables)
12 Months Ended
May 31, 2014
Long-Term Debt Tables  
Schedule of long term debt
    2014     2013  
Note payable to International Bank of Commence, interest rate of 4.5%, monthly principal and interest payments of $171,760, maturing January 31, 2019   $ 8,647,777     $ -  
                 
Revolving note payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4%, due January 31, 2016     385,000       -  
                 
Term note payable by GRE to International Bank of Commerce, interest rate of 4.5%, monthly principal and interest payments of $26,215, due January 31, 2019     3,371,660       -  
                 
Note payable to F&M Bank & Trust Company, prime rate of interest but not less than 4.5%,     -       4,593,650  
                 
Note payable by GRE to F&M Bank & Trust Company, prime rate of interest but not less than 4.75%     -       3,366,108  
                 
Capitalized lease payable, 5% interest     -       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  
                 
Other note payable     33,684       66,979  
      14,504,121       11,002,180  
Less: Current portion     (3,979,376 )     (1,344,160 )
Long-term debt   $ 10,524,745     $ 9,658,020  

7. FEDERAL INCOME TAXES (Tables)

v2.4.0.8
7. FEDERAL INCOME TAXES (Tables)
12 Months Ended
May 31, 2014
Federal Income Taxes Tables  
Deferred taxes
    2014     2013  
Net operating loss carryforward   $ 1,936,834     $ 1,965,370  
Depreciation and amortization, financial                
    reporting in excess of tax     219,838       443,177  
Deferred compensation accrual     -       244,800  
Stock compensation costs     36,328       18,164  
Allowance for doubtful accounts     17,000       34,000  
      2,210,000       2,705,511  
Valuation allowance     -       (1,546,511 )
                 
Net deferred tax asset   $ 2,210,000     $ 1,159,000  
Net changes in deferred taxes

    2014     2013  
Deferred tax assets - current   $ 1,077,000     $ -  
Deferred tax assets - non-current     1,133,000       1,159,000  
Deferred tax assets - total   $ 2,210,000     $ 1,159,000  

Provision for income taxes
    2014       2013  
Net operating loss carryforward $ (28,536 )   $ (583,561 )
Depreciation and amortization, financial              
    reporting in excess of tax   (223,339 )     (174,289 )
Stock compensation costs   18,164       18,164  
Deferred compensation accrual   (244,800 )     -  
Allowance for doubtful accounts             (17,000 )     17,000  
Valuation allowance   1,546,511       1,296,686  
               
Total $ 1,051,000     $ 574,000  
Difference between provision and federal statutory rate

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

 

    2014     2013  
Federal   $ 11,000     $ 26,000  
Deferred income tax benefit     (1,051,000     (574,000 )
Total   $ (1,040,000   $ (548,000 )

 

Greystone's provision (benefit) for income taxes for the years ended May 31, 2014 and 2013 differs from the federal statutory rate as follows:

 

    2014       2013  
Tax provision (benefit) using statutory rates     34 %     34  %
Net change in valuation allowance     (75 )     (54 )
Other     (9     (11 )
Tax benefit per financial statements     (50 )%     (31 )%
Net operating loss carryforward
   

NOL

Carryforward

   

Year

Expiring

 
Cumulative as of May 31, 2005   $ 2,475,000       2015 - 2025  
Year ended May 31, 2006     323,133       2026  
Year ended May 31, 2007     2,151,837       2027  
Year ended May 31, 2011     746,484       2031  

9. STOCK OPTIONS (Tables)

v2.4.0.8
9. STOCK OPTIONS (Tables)
12 Months Ended
May 31, 2014
Stock Options Tables  
Option activity
    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        
Exercised during fiscal year 2014     (350,000 )   $ 0.40                
Total outstanding May 31, 2014     2,100,000     $ 0.12       8.0        
Exercisable as of May 31, 2014     525,000     $ 0.12       8.0     $ 204,750  
Non-vested as of May 31, 2014     1,575,000     $ 0.12       8.0     $ 614,250  
Assumptions used in Black-Scholes option model
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-  

11. SUPPLEMENTAL INFORMATION OF CASH FLOWS (Tables)

v2.4.0.8
11. SUPPLEMENTAL INFORMATION OF CASH FLOWS (Tables)
12 Months Ended
May 31, 2014
Supplemental Information Of Cash Flows Tables  
Supplemental information of cash flows
    2014     2013  
Non-cash investing and financing activities:            

   Acquisition of equipment in exchange for net

      related party receivable

   $ 1,087,302          $ -  

   Reduction in net carrying value  of equipment

      resulting from capital lease termination

   $ 212,311      $ -  

    Settlement of related party note payable in

      acquisition of equipment

  $ 527,716      $ -  
   Preferred dividend accrual    $ 27,603      $ 326,781  
                 
Supplemental information:                
       Interest paid    $ 567,507      $ 423,530  
   Taxes paid    $ 26,045      $ -  

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)

v2.4.0.8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)
12 Months Ended
May 31, 2014
May 31, 2013
Accounting Policies [Abstract]    
Options to purchase common stock 0 350,000
Convertible preferred stock 3,333,333 3,333,333
Antidilutive securities 3,333,333 3,683,333

2. INVENTORY (Details)

v2.4.0.8
2. INVENTORY (Details) (USD $)
May 31, 2014
May 31, 2013
Inventory Details    
Raw materials $ 1,043,411 $ 750,819
Finished goods 572,754 293,560
Total inventory $ 1,616,165 $ 1,044,379

3. PROPERTY, PLANT AND EQUIPMENT (Details 1)

v2.4.0.8
3. PROPERTY, PLANT AND EQUIPMENT (Details 1) (USD $)
May 31, 2014
May 31, 2013
Property, Plant and Equipment [Abstract]    
Production machinery and equipment $ 12,826,529 $ 10,717,493
Building and land 4,663,339 4,663,339
Leasehold improvements 203,034 203,034
Furniture and fixtures 210,196 171,093
Gross Property, Plant and Equipment 17,903,098 15,754,959
Less: Accumulated depreciation (9,126,961) (8,710,820)
Net Property, Plant and Equipment $ 8,776,137 $ 7,044,139

4. OTHER ASSETS (Details)

v2.4.0.8
4. OTHER ASSETS (Details) (USD $)
May 31, 2014
May 31, 2013
Other Assets [Abstract]    
Patents $ 190,739 $ 190,739
Debt issue costs 129,722 18,726
Accumulated amortization (157,273) (140,879)
Customer deposits 0 2,785
Total Other Assets $ 163,188 $ 71,371

4. LONG-TERM DEBT (Details)

v2.4.0.8
4. LONG-TERM DEBT (Details) (USD $)
May 31, 2014
May 31, 2013
LONG-TERM DEBT [Abstract]    
Note payable to International Bank $ 8,647,777 $ 0
Revolving Note payable to International Bank 385,000 0
Term note payble by GRE to International Bank 3,371,660 0
Other notes payable 33,684 66,979
Notes payable 14,504,121 11,002,180
Less: Current portion (3,979,376) (1,344,160)
Long-term Debt 10,524,745 9,658,020
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 0 381,727
Note Payable FM Bank [Member]
   
LONG-TERM DEBT [Abstract]    
Note payable 0 4,593,650
Note Payable President [Member]
   
LONG-TERM DEBT [Abstract]    
Note payable 0 527,716
Note Payable FM Bank By Minority Interest [Member]
   
LONG-TERM DEBT [Abstract]    
Note payable 0 3,366,108
Note Payable Director [Member]
   
LONG-TERM DEBT [Abstract]    
Note payable $ 2,066,000 $ 2,066,000

7. FEDERAL INCOME TAXES (Details)

v2.4.0.8
7. FEDERAL INCOME TAXES (Details) (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
Income Tax Disclosure [Abstract]    
Net operating loss carryforward $ 1,936,834 $ 1,965,370
Depreciation and amortization, financial reporting in excess of tax 219,838 443,177
Deferred compensation accrual 0 244,800
Stock compensation costs 36,328 18,164
Allowance for doubtful accounts 17,000 34,000
Gross Deferred Tax Asset 2,210,000 2,705,511
Valuation allowance 0 (1,546,511)
Net Deferred Tax Asset $ 2,210,000 $ 1,159,000

7. FEDERAL INCOME TAXES (Details 1)

v2.4.0.8
7. FEDERAL INCOME TAXES (Details 1) (USD $)
May 31, 2014
May 31, 2013
Federal Income Taxes Details 1    
Deferred tax assets - current $ 1,077,000 $ 0
Deferred tax assets - non-current 1,133,000 1,159,000
Deferred tax assets - total $ 2,210,000 $ 1,159,000

7. FEDERAL INCOME TAXES (Details 2)

v2.4.0.8
7. FEDERAL INCOME TAXES (Details 2) (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
Income Tax Disclosure [Abstract]    
Net operating loss carryforward $ (28,536) $ (583,561)
Depreciation and amortization, financial reporting in excess of tax (223,339) (174,289)
Stock compensation costs 18,164 18,164
Deferred compensation accrual (244,800) 0
Allowance for doubtful accounts (17,000) 17,000
Valuation allowance 1,546,511 1,296,686
Change in deferred tax assets $ 1,051,000 $ 574,000

7. FEDERAL INCOME TAXES (Details 3)

v2.4.0.8
7. FEDERAL INCOME TAXES (Details 3) (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
Income Tax Disclosure [Abstract]    
Federal $ 11,000 $ 26,000
Deferred income tax benefit (1,051,000) (574,000)
Total $ (1,040,000) $ (548,000)

7. FEDERAL INCOME TAXES (Details 4)

v2.4.0.8
7. FEDERAL INCOME TAXES (Details 4)
12 Months Ended
May 31, 2014
May 31, 2013
Income Tax Disclosure [Abstract]    
Tax provision (benefit) using statutory rates 34.00% 34.00%
Net change in valuation allowance (75.00%) (54.00%)
Other (9.00%) (11.00%)
Tax benefit per financial statements 50.00% 31.00%

7. FEDERAL INCOME TAXES (Details Narrative)

v2.4.0.8
7. FEDERAL INCOME TAXES (Details Narrative) (USD $)
108 Months Ended
May 31, 2014
Income Tax Disclosure [Abstract]  
Net operating losses exipring by 2025 $ 17,243,600
Yearly utilization of NOL's accumularted through fiscal year 2005 $ 225,000

9. STOCK OPTIONS (Details)

v2.4.0.8
9. STOCK OPTIONS (Details) (USD $)
12 Months Ended
May 31, 2014
May 31, 2013
May 31, 2012
Proceeds from Issuance of Shares under Incentive and Share-based Compensation Plans, Including Stock Options [Abstract]      
Options outstanding 2,100,000 2,450,000 2,100,000
Options outstanding - Weighted average exercise price $ 0.12 $ 0.16 $ 0.12
Options outstanding - Remaining Contractual Life (years) 8 years 7 years 9 months  
Options awarded   2,100,000  
Options awarded - Weighted average exercise price   $ 0.12  
Options expired   (1,050,000)  
Options expired - Weighted average exercise price   $ 0.61  
Options excercisable 525,000    
Options excercisable - Weighted average exercise price $ 0.12    
Options excercisable - Remaining Contractual Life (years) 8 years    
Options excercisable - Intrinsic Value $ 204,750    
Non-vested options 1,575,000    
Non-vested options - Weighted average exercise price $ 0.12    
Non-vested options - Remaining Contractual Life (years) 8 years    
Non-vested options - Intrinsic Value $ 614,250