Results of Operations

General to All Periods

The unaudited consolidated statements include Greystone Logistics, Inc., and its two wholly owned subsidiaries, Greystone Manufacturing, L.L.C. ("GSM") and Plastic Pallet Production, Inc. ("PPP"). Greystone also consolidates the variable interest entity, Greystone Real Estate, L.L.C. ("GRE") for the period from June 1, 2022 through July 29, 2022. Effective July 29, 2022, the relationship of Greystone as a beneficiary of GRE ceased to exist. All material intercompany accounts and transactions have been eliminated.

References to fiscal year 2023 refer to the three months ended August 31, 2022. References to fiscal year 2022 refer to the three months ended August 31, 2021.

Sales

Greystone's primary focus is to provide quality plastic pallets to its existing customers while continuing its marketing efforts to broaden its customer base. Greystone's existing customers are primarily located in the United States and engaged in the beverage, pharmaceutical and other industries. Greystone has generated, and plans to continue to generate, interest in its pallets by attending trade shows sponsored by industry segments that would benefit from Greystone's products. Greystone hopes to gain wider product acceptance by marketing the concept that the widespread use of plastic pallets could greatly reduce the destruction of trees on a worldwide basis. Greystone's marketing is conducted through contract distributors, its President and other employees.



14





Personnel

Greystone had full-time equivalents of approximately 202 and 264 regular employees and 64 and 19 temporary employees as of August 31, 2022 and 2021, respectively. Full-time equivalent is a measure based on time worked.

Three Months Ended August 31, 2022 Compared to Three Months Ended August 31, 2021

Sales

Sales for fiscal year 2023 were $18,953,599 compared to $14,774,399 in fiscal year 2021 for an increase of $4,179,200, or 28%. Increases in pallet pricing accounted for approximately 13% and an increase in the types of pallets sold toward higher-end units accounted for approximately 15%.

Greystone had three customers that accounted for approximately 77% and 71% of sales in fiscal years 2023 and 2022, respectively. Greystone is not able to predict the future needs of these major customers and will continue its efforts to grow sales through the addition of new customers developed through Greystone's marketing efforts.

Cost of Sales

Cost of sales in fiscal year 2023 was $16,490,453, or 87% of sales, compared to $13,312,305, or 90% of sales, in fiscal year 2022. The decrease in cost of sales to sales in fiscal year 2023 was primarily the result of improvements in productivity. Management anticipates further improvements in the ratio of cost of sales to sales as the cost of raw materials are expected to show declines in the remainder of fiscal year 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,105,591, or 5.8% of sales, in fiscal year 2023 compared to $1,218,604, or 8.2% of sales, in fiscal year 2022 for a decrease of $113,013. The decrease in fiscal year 2023 from fiscal year 2022 was principally attributable to a reduction of legal fees in the current year.

Other Income (Expenses)

During fiscal year 2023, Greystone recognized a gain on the deconsolidation of the variable interest entity GRE in the amount of $569,997. During fiscal year 2022, a gain was recognized on the forgiveness of debt plus accrued interest in the amount of $3,068,497 for the Paycheck Protection Program loan under the Coronavirus Aid, Relief, and Economic Security Act.

Other income from the sale of scrap material was $5,635 in fiscal year 2023 compared to $26,825 in fiscal year 2022.

Interest expense was $219,446 in fiscal year 2023 compared to $223,354 in fiscal year 2022 for a decrease of $3,908.



15

Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes was $340,000 and $(7,000) in fiscal years 2023 and 2022, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges (income) which have no tax benefit (expense), changes in the valuation allowance, and the basis that the net income from GRE is not taxable at the corporate level because GRE is a limited liability company of which Greystone has no equity ownership.

Based upon a review of its income tax filing positions, Greystone believes that its positions would be sustained upon an audit by the Internal Revenue Service and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.

Net Income

Greystone recorded net income of $1,373,741 in fiscal year 2023 compared to $3,122,458 in fiscal year 2022 primarily for the reasons discussed above.

Net Income Attributable to Common Stockholders

The net income attributable to common stockholders for fiscal year 2023 was $1,214,724, or $0.04 per share, compared $2,970,921, or $0.10 per share, in fiscal year 2022 primarily for the reasons discussed above.

Liquidity and Capital Resources

A summary of cash flows for the three months ended August 31, 2022 is as follows:

Cash used in operating activities $ (3,304,209 )

Cash used in investing activities $ (1,154,590 )

Cash provided by financing activities $ 4,250,440

Cash used in operating activities resulted primarily from providing goods totaling approximately $5,000 000 to the customer against the customer's deposit. Cash provided by financing activities resulted primarily from cash proceeds from loans payable to IBC used in part to payoff Greystone's note payable of approximately $3,200,000 to a director and a capital contribution to the variable interest entity GRE by its sole member to pay off its mortgage note of approximately $1,800,000 to IBC.



16

The contractual obligations of Greystone are as follows:



                                     Less than
                      Total           1 year         1-3 years       4-5 years      Thereafter
Long-term debt     $ 16,653,282     $ 2,604,380     $ 9,143,052     $ 4,352,197     $   553,653
Financing leases   $  1,842,383     $ 1,586,050     $   253,326     $     3,007     $         -
Operating leases   $  8,423,975     $   568,915     $ 1,084,160     $ 1,070,230     $ 5,700,670
Commitments        $  5,053,390     $ 5,053,390     $         -     $         -     $         -

Greystone had a working capital of $1,279,803 as of August 31, 2022. To provide for the funding to meet Greystone's operating activities and contractual obligations as of August 31, 2022, Greystone will have to continue to produce positive operating results or explore various options including additional long-term debt and equity financing. However, there is no guarantee that Greystone will continue to create positive operating results or be able to raise sufficient capital to meet these obligations. As of August 31, 2022, Greystone had commitments for capital expenditures of approximately $5.0 million of which $4.6 million was available under the advancing term loan with IBC, see Note 6 to the consolidated financial statements.

A substantial amount of the Greystone's debt financing has resulted primarily from bank notes which are guaranteed by certain officers and directors of Greystone. From time to time, loans have been provided by certain officers and directors of Greystone of which there are none outstanding as of August 31, 2022. Greystone continues to be dependent upon its officers and directors to secure, or possibly provide, additional financing and there is no assurance that its officers and directors will continue to do so. As such, there is no assurance that funding will be available for Greystone to continue operations.

Greystone has 50,000 outstanding shares of cumulative 2003 Preferred Stock with a liquidation preference of $5,000,000 and a preferred dividend rate of the prime rate of interest plus 3.25%. Greystone does not anticipate that it will make cash dividend payments to any holders of its common stock unless and until the financial position of Greystone improves through increased revenues, another financing transaction or otherwise. Pursuant to the IBC Restated Loan Agreement, as discussed in Note 6 to the consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $500,000 per year.



17

Forward Looking Statements and Material Risks

This Quarterly Report on Form 10-Q includes certain statements that may be deemed "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that Greystone expects, believes or anticipates will or may occur in the future, including decreased costs, securing financing, the profitability of Greystone, potential sales of pallets or other possible business developments, are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q could be affected by any of the following factors: Greystone's prospects could be affected by changes in availability of raw materials, competition, rapid technological change and new legislation regarding environmental matters; Greystone may not be able to secure additional financing necessary to sustain and grow its operations; and a material portion of Greystone's business is and will be dependent upon a few large customers and there is no assurance that Greystone will be able to retain such customers. These risks and other risks that could affect Greystone's business are more fully described in Greystone's Form 10-K/A for the fiscal year ended May 31, 2022, which was filed on August 23, 2022. Actual results may vary materially from the forward-looking statements. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.

© Edgar Online, source Glimpses