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"). All material intercompany accounts and transactions have been eliminated. References to fiscal year 2022 refer to the six months and three months endedNovember 30, 2021 . References to fiscal year 2021 refer to the six months and three months endedNovember 30, 2020 . 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 264 and 272 full-time
employees and 73 and 11 temporary employees as of
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Six Months Ended
Sales Sales for fiscal year 2022 were$30,618,966 compared to$33,091,494 in fiscal year 2021 for a decrease of$2,472,528 , or 7.5%. This decline in sales was principally due to a decline of approximately 13% in pallet production during fiscal year 2022 compared to the prior period. Greystone has been unable to operate on a full-time basis because of shortage of production personnel and machine downtime. The shortage of personnel appears to be a problem for companies as recovery from the COVID-19 and its variants has affected the availability of job seekers. Greystone has been working with a new temporary employment agency with the goal of expanding the workforce to achieve maximum productive capacity. Greystone is working with its customers to affect an increase in pricing, where possible, to mitigate the impact of material and labor price increases as discussed below under Cost of Sales. Based on new orders and relationships, Greystone believes that the demand for its pallets is increasing which is primarily expected to have a positive impact on operations during the last half of the current fiscal year as well as future years. Greystone had three customers (four in fiscal year 2021) which accounted for approximately 74% and 86% of sales in fiscal years 2022 and 2021, 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 2022 was$28,179,906 , or 92% of sales, compared to$27,032,690 , or 82% of sales, in fiscal year 2021. The increase in cost of sales to sales in fiscal year 2022 was the result of several factors. Because of the disruption in the supply chain from the COVID-19 and its variants, prices of raw materials have continued to increase significantly. Also as discussed above, a shortage of personnel and machine downtime resulted in an increase in production cost per pallet due to Greystone's relatively inflexible cost structure.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$2,352,504 in fiscal year 2022 compared to$2,471,457 in fiscal year 2021 for a decrease of$(118,953) . The decrease is the net of a decline in administrative salaries offset by an increase in legal expenses related to arbitration costs for the arbitration initiated by a major customer. While Greystone is striving to resolve the arbitration with the customer, it is not possible to determine the remaining cost associated therewith. Other Income (Expenses) A gain was recognized in fiscal year 2022 from the forgiveness of the PPP loan and accrued interest in the amount of$3,068,497 . Other income in fiscal year 2022 was$32,043 which included a gain of$22,336 from the sale of equipment plus sales of scrap material while fiscal year 2021 was from sales of scrap material in the amount of$8,944 . Interest expense was$429,123 in fiscal year 2022 compared to$653,060 in fiscal year 2021 for a decrease of$223,937 . Reductions in debt and financing lease obligations were the primary reason for the decline. 17 Provision for Income Taxes The benefit from (provision for income taxes) was$135,000 and$(911,000) in fiscal years 2022 and 2021, 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 2022 was$2,592,077 , or$0.09 per share, compared$1,733,381 , or$0.06 per share, in fiscal year 2021 primarily for the reasons discussed above.
Three Months Ended
Sales Sales for fiscal year 2022 were$15,844,567 compared to$15,523,318 in fiscal year 2021 for an increase of$321,249 . This increase in sales was principally the result of an approximately 8% increase in average price per pallet sold offset by an approximately 6% reduction in the number of pallets sold. Greystone had three customers (four in fiscal year 2021) which accounted for approximately 78% and 84% of sales in fiscal years 2022 and 2021, 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 2022 was$14,867,601 , or 94% of sales, compared to$12,423,073 , or 80% of sales, in fiscal year 2021. The increase in cost of sales to sales in fiscal year 2022 was the result of several factors. Because of the disruption in the supply chain from the COVID-19 and its variants, prices of raw materials have continued to increase significantly. Also as discussed above, a shortage of personnel and machine downtime resulted in an increase in production cost per pallet due to Greystone's relatively inflexible cost structure.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$1,133,900 in fiscal year 2022 compared to$1,331,219 in fiscal year 2021 for a decrease of$197,319 . The decrease from fiscal year 2021 to fiscal year 2022 was primarily due to a decrease in administrative personnel costs and is not considered to continue during the remainder of fiscal year 2022. Other Income (Expenses)
Other income from sales of scrap material was
18 Interest expense was$205,769 in fiscal year 2022 compared to$291,387 in fiscal year 2021 for a decrease of$85,618 . The decrease from fiscal year 2021 to fiscal year 2022 was primarily due to the decrease in debt and financing lease obligations. Provision for Income Taxes The benefit from (provision for) income taxes was$128,000 and$(457,000) in fiscal years 2022 and 2021, 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. Net Income
Greystone recorded net income (loss) of
Net Income Attributable to Common Stockholders
The net income (loss) attributable to common stockholders (net income (loss)
less preferred dividends and GRE's net income) for fiscal year 2022 was
Liquidity and Capital Resources
A summary of cash flows for the six months ended
Cash provided by operating activities
Cash used in investing activities
Cash used in 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 $ 12,849,147 $ 2,956,846 $ 9,078,637 $ 221,305 $ 592,359
Financing lease rents $ 2,983,696 $ 1,686,329 $ 1,285,755 $ 11,612 $ -
Operating lease rents $ 77,407 $ 37,881 $ 39,526 $ - $ -
Commitments $ 1,136,228 $ 1,136,228 $ - $ - $ -
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Greystone had a working capital deficit of$(2,583,893) as ofNovember 30, 2021 . To provide for the funding to meet Greystone's operating activities and contractual obligations as ofNovember 30, 2021 , 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. Greystone issued purchase orders inJanuary 2022 for equipment including two injection molding machines and one pelletizing system for about$5.5 million to increase its pallet production capacities. Because of the significant decrease in debt and financial lease balances throughNovember 30, 2021 , management believes funding will be achieved through financial institutions. 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, 2021 , which was filed onAugust 20, 2021 . 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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