GREYSTONE LOGISTICS, INC. Results of Operations
General to All Periods
The unaudited consolidated statements includeGreystone Logistics, Inc. , and its two wholly-owned subsidiaries,Greystone Manufacturing, L.L.C. ("GSM") andPlastic Pallet Production, Inc. ("PPP"). Greystone also consolidates the variable interest entity,Greystone Real Estate, L.L.C. ("GRE") for the period fromJune 1, 2022 throughJuly 29, 2022 . EffectiveJuly 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 six months and three months endedNovember 30, 2022 . References to fiscal year 2022 refer to the six months and three months endedNovember 30, 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 inthe 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.
Personnel
Greystone had full-time-equivalents of approximately 195 and 264 full-time
employees and 40 and 73 temporary employees as of
Six Months Ended
Sales Sales for fiscal year 2023 were$31,055,273 compared to$30,618,966 in fiscal year 2022 for an increase of$436,307 , or 1.4%. While the quantity of pallets sold in fiscal year 2023 decreased by approximately 13% from the prior period, the average price of pallets sold increased by approximately 15%. The increase in the average price of pallets sold during the current period is the result of product mix and price increases. Greystone had three customers which accounted for approximately 73% and 74% 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$27,369,753 , or 88% of sales, compared to$28,179,906 , or 92% of sales, in fiscal year 2022. The decrease in cost of sales to sales in fiscal year 2023 from the prior period was primarily the result of selling price increases as noted under Sales and the cost control measures implemented by Greystone to offset the impact of lower pallet production. Greystone's inflexible costs of production are a significant factor impacting the profit margins realized from the sale of product. While cost of sales to sales showed improvements over the prior period, Greystone anticipates continued improvements during the remainder of the current year as increases are anticipated in pallet production. 14
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were$2,311,579 , or 7.4% of sales, in fiscal year 2023 compared to$2,352,504 , or 7.7% of sales, in fiscal year 2022 for a decrease of$(40,925) . SG&A during the current period compared to the prior period shows general consistency.
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 was
Interest expense was$507,762 in fiscal year 2023 compared to$429,123 in fiscal year 2022 for an increase of$78,639 . The increase is attributable to increases in the prime rate of interest which was 7.00% as ofNovember 30, 2022 compared to 3.25% asNovember 30, 2021 .
Provision for Income Taxes
The provision for (benefit from) income taxes was$256,000 and$(135,000) in fiscal years 2023 and 2022, respectively. The effective tax rate differs from federal statutory rates principally due to state income taxes, charges or income which have no tax benefit or expense, changes in the valuation allowance, and the basis that 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
Net Income Attributable to Common Stockholders
The net income attributable to common stockholders (net income less preferred dividends and GRE's net income) for fiscal year 2023 was$908,128 , or$0.03 per share, compared$2,592,077 , or$0.09 per share, in fiscal year 2022 primarily for the reasons discussed above. 15
Three Months Ended
Sales Sales for fiscal year 2023 were$12,101,674 compared to$15,844,567 in fiscal year 2022 for a decrease of$(3,742,893) . This decrease in sales from fiscal year 2022 was principally the result of a decrease of approximately 27% in the quantity of pallets sold offset somewhat by an increase of approximately 5% in the average price per pallet sold. Greystone had three customers which accounted for approximately 66% and 78% 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$10,879,300 , or 90% of sales, compared to$14,867,601 , or 94% of sales, in fiscal year 2022. The decrease in cost of sales to sales in fiscal year 2023 from the prior period was primarily the result of selling price increases as noted under Sales and cost control measures implemented by Greystone to offset the impact of lower pallet production during the current period. Greystone's inflexible costs of production are a significant factor impacting the profit margins realized from the sale of product. While cost of sales to sales showed improvements over the prior period, Greystone anticipates continued improvements during the remainder of the current year as increases are anticipated in pallet production.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were$1,205,988 , or 10.0% of sales, in fiscal year 2023 compared to$1,133,900 , or 7.2% of sales, in fiscal year 2022 for an increase of$72,088 . SG&A costs during the current period compared to the prior period showed general consistency. The increase in the percent of SG&A to sales results from the decline of sales in the current period.
Other Income (Expenses)
Other income from sales of scrap material was
Interest expense was$288,316 in fiscal year 2023 compared to$205,769 in fiscal year 2022 for an increase of$82,547 . The increase is attributable to increases in the prime rate of interest which was 7.00% as ofNovember 30, 2022 compared to 3.25% asNovember 30, 2021 .
Provision for Income Taxes
The benefit from income taxes was$84,000 and$128,000 in fiscal years 2023 and 2022, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges or income which have no tax benefit or 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. 16 Net Loss
Greystone recorded net losses of
Net Loss Attributable to Common Stockholders
The net loss attributable to common stockholders (net loss less preferred
dividends and GRE's net income) for fiscal year 2023 was
Liquidity and Capital Resources
A summary of cash flows for the six months ended
Cash used in operating activities
Cash used in investing activities
Cash provided by financing activities
The contractual obligations of Greystone are as follows:
Less than
Total 1 year 1-3 years 4-5 years Thereafter
Long-term debt $ 17,163,563 $ 2,101,460 $ 9,116,477 $ 5,405,050 $ 540,576
Financing lease rents $ 90,701 $ 49,880 $ 39,318 $ 1,503 $ -
Operating lease rents $ 8,283,008 $ 564,816 $ 1,080,792 $ 1,076,920 $ 5,560,480 Commitments$ 5,065,888 $ 5,065,888 $ - $ - $ - Greystone had a working capital of$2,811,905 as ofNovember 30, 2022 . To provide for the funding to meet Greystone's operating activities and contractual obligations as ofNovember 30, 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. By notice datedJanuary 9, 2023 , theDepartment of Treasury notified Greystone of Employee Retention Credits awarded under the CARES Act in the total amount of approximately$3,270,000 due to Greystone for the quarters endedJune 30, 2021 andSeptember 30, 2021 . Greystone anticipates the receipt of these funds during its fiscal third quarter 2023, and plans to use the funds to improve its working capital, reduce debt, and cover portions of our unfinanced commitments.
As of
17 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 and from loans provided by certain officers and directors of Greystone. Greystone continues to be dependent upon its officers and directors to provide and/or secure 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 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.
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 for the fiscal year endedMay 31, 2022 , which was filed onAugust 19, 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.
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