Quarterly Report for Quarter Ending August 31, 2024 (Form 10-Q)

glgi20240831_10q.htm

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Greystone Logistics, Inc.

Consolidated Balance Sheets

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc.

Consolidated Statements of Income

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc.

Consolidated Statements of Changes in Equity

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc.

Consolidated Statements of Cash Flows

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Greystone Logistics, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Basis of Financial Statements

In the opinion of Greystone Logistics, Inc. ("Greystone" or the "Company"), the accompanying unaudited consolidated financial statements contain all adjustments and reclassifications, which are of a normal recurring nature, necessary to present fairly its financial position as of August 31, 2024, and the results of its operations and cash flows for the three months ended August 31, 2024 and 2023. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended May 31, 2024, and the notes thereto included in Greystone's Annual Report on Form 10-K for such period, as filed with the Securities and Exchange Commission. The results of operations for the three months ended August 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the full fiscal year.

The unaudited consolidated financial statements of Greystone include its wholly owned subsidiaries, Greystone Manufacturing, L.L.C. ("GSM") and Plastic Pallet Production, Inc. ("PPP"). All material intercompany accounts and transactions have been eliminated in the unaudited consolidated financial statements.

Note 2. Earnings Per Share

Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income attributable to common stockholders by the weighted-average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income attributable to common stockholders by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.

Greystone excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is anti-dilutive. Instruments which have an anti-dilutive effect as of August 31 are as follows:

		2024			2023
Preferred stock convertible into common stock			3,333,333				-

The following tables set forth the computation of basic and diluted earnings per share for the three months ended August 31, 2024 and 2023:

		2024			2023
Basic earnings per share of common stock:
Numerator -
Net income attributable to common stockholders		$	187,372			$	1,598,020
Denominator -
Weighted-average shares outstanding - basic			28,279,701				28,279,701
Income per share of common stock - basic		$	0.01			$	0.06
Diluted earnings per share of common stock:
Numerator -
Net income attributable to common stockholders		$	187,372			$	1,598,020
Add: Preferred stock dividends for assumed conversion			-				146,199
Net income attributable to common stockholders		$	187,372			$	1,744,219
Denominator -
Weighted-average shares outstanding - basic			28,279,701				28,279,701
Incremental shares from assumed conversion of options, warrants and preferred stock, as appropriate			496,295				3,828,053
Weighted average common stock outstanding - diluted			28,775,996				32,107,754
Income per share of common stock - diluted		$	0.01			$	0.05

Note 3. Inventory

Inventory consisted of the following:

		August 31,			May 31,
		2024			2024
Raw materials		$	1,985,224			$	2,040,348
Finished goods			1,737,205				1,831,278
Total inventory		$	3,722,429			$	3,871,626

Note 4. Property, Plant and Equipment

A summary of property, plant and equipment for Greystone is as follows:

		August 31, 2024			May 31, 2024
Production machinery and equipment		$	70,339,386			$	68,532,989
Plant buildings and land			3,930,207				2,289,233
Leasehold improvements			1,658,751				1,658,751
Furniture and fixtures			542,057				542,057
			76,470,401				73,023,030
Less: Accumulated depreciation and amortization			(44,213,742	)			(42,956,911	)
Net Property, Plant and Equipment		$	32,256,659			$	30,066,119

Property, plant and equipment includes production equipment with a carrying value of $1,317,020 as of August 31, 2024, which has not been placed into service.

Depreciation expense, including amortization expense related to financing leases, for the three months ended August 31, 2024 and 2023 was $1,256,831 and $1,395,000, respectively.

In February 2024, one of the Company's storage warehouses caught fire with damage to finished goods inventory valued at $1,326,752 and the building with a net book value of $161,850. As of May 31, 2024, the Company recorded an insurance receivable of $2,058,602 as an estimate for damage to the inventory and building, which resulted in a gain from the involuntary conversion of $593,647 for the fiscal year ended May 31, 2024. The insurer and the Company finalized the claim value for the inventory as well as a prior claim for equipment damage from an electrical storm occurring in December 2022, resulting in an additional gain from the involuntary conversion of $741,821 for the three months ended August 31, 2024. As of August 31, 2024, Other receivables of $1,781,836, as shown on the consolidated balance sheet, is the outstanding balance due from the insurer. The other receivable was fully funded on September 13, 2024 by the insurer.

Note 5. Related Party Transactions/Activity

Yorktown Management & Financial Services, LLC

Yorktown Management & Financial Services, LLC ("Yorktown"), an entity wholly owned by Warren F. Kruger, Greystone's CEO, President, Chairman of the Board and a significant stockholder of Greystone, 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. GSM pays weekly rental fees to Yorktown of $27,500 for use of Yorktown's grinding equipment and pelletizing equipment. Rental fees were $357,500 for each of the three months ended August 31, 2024 and 2023.

Greystone leases administrative office space from Yorktown at a monthly rental of $6,250 per month under a six-year lease. Total rent expenses were $18,750 and $17,700 for the three months ended August 31, 2024 and 2023, respectively.

Greystone Real Estate, L.L.C. (GRE)

GRE owns two primary manufacturing facilities occupied by Greystone and is wholly owned by Robert B. Rosene, Jr., a member of Greystone's Board of Directors. Effective August 1, 2022, Greystone and GRE entered into a non-cancellable ten-yearlease agreement with a five-yearextension for the use of these manufacturing facilities at the initial rate of $44,500 per month, increasing 5.00% per month every fifth year. Rental payments to GRE totaled $133,500 for each of the three months ended August 31, 2024 and 2023.

TriEnda Holdings, L.L.C.

TriEnda Holdings, L.L.C. ("TriEnda") is a manufacturer of plastic pallets, protective packaging and dunnage utilizing thermoform processing for which Mr. Kruger, Greystone's President, CEO, Chairman of the Board and a significant stockholder of Greystone, serves TriEnda as the non-executive Chairman of the Board and is a partner in a partnership which has a majority ownership interest in TriEnda. Greystone may purchase pallets from TriEnda for resale or sell Greystone pallets to TriEnda. Greystone purchases from TriEnda during the three months ended August 31, 2024 totaled $42,840. During the three months ended August 31, 2024 and 2023, Greystone sales to TriEnda totaled $269,504 and $51,195, respectively. As of August 31, 2024 and May 31, 2024, TriEnda owed $369,848 and $143,290, respectively, to Greystone.

Green Plastic Pallets

Greystone sells plastic pallets to Green Plastic Pallets ("Green"), an entity that is owned by James Kruger, brother to Warren Kruger, Greystone's President, CEO, Chairman of the Board and a significant stockholder of Greystone. Greystone had sales to Green of $46,920 and $52,020 for the three months ended August 31, 2024 and 2023, respectively. The account receivable due from Green as of August 31, 2024 and May 31, 2024, was $117,300 and $122,280, respectively.

Note 6. Long-term Debt

Debt as of August 31, 2024 and May 31, 2024 was as follows:

		August 31,			May 31,
		2024			2024
Term loans dated July 29, 2022, payable to International Bank of Commerce, prime rateof interest plus 0.5% but not less than 4.50%, maturing July 29, 2027		$	12,041,817			$	12,519,501
Term loan payable to First Interstate Bank, interest rate of 3.70%, monthly principal and interest payments of $27,593, due March 19, 2025, secured by certain equipment			190,541				271,061
Term loan payable to First Interstate Bank, interest rate of 3.50%, monthly principal and interest payments of $5,997, due August 10, 2028, secured by certain real estate			702,121				709,916
Other			23,874				33,964
Total long-term debt			12,958,353				13,534,442
Debt issuance costs, net of amortization			(90,204	)			(91,494	)
Total debt, net of debt issuance costs			12,868,149				13,442,948
Less: Current portion of long-term debt			(2,336,625	)			(2,362,212	)
Long-term debt, net of current portion		$	10,531,524			$	11,080,736

The prime rateof interest as of August 31, 2024, was 8.50%.

Debt Issuance Costs consists of the amounts paid to third parties in connection with the issuance and modification of debt instruments. These costs are shown on the consolidated balance sheet as a direct reduction to the related debt instrument. Amortization of these costs is included in interest expense. Greystone recorded amortization of debt issuance costs of $1,290 and $1,460 for the three months ended August 31, 2024 and 2023, respectively.

Restated and Amended Loan Agreement between Greystone and IBC

On July 29, 2022, Greystone and GSM (each a "Borrower" and together, the "Borrowers") entered into an Amended and Restated Loan Agreement ("IBC Restated Loan Agreement") with International Bank of Commerce ("IBC") that provided for the consolidation of certain term loans and a renewed revolver loan.

The IBC term loans require equal monthly payments of principal and interest in such amounts sufficient to amortize the principal balance of the loans over the remaining lives. The monthly payments of principal and interest on the IBC term loans may vary due to changes in the prime rate of interest. As of August 31, 2024, the aggregate payments for the IBC term loans are approximately $254,000 per month.

The IBC Restated Loan Agreement, dated July 29, 2022, as amended, provided for IBC to make certain term loans to Greystone to consolidate all existing term loans and provide additional funding for the purchase of equipment and renewal of the revolving loan in the aggregate principal amount of $6,000,000 (the "Revolving Loan"), subject to borrowing base limitations. The Revolving Loan has an interest rate of the greater of 7.50% through February 4, 2025 and 6.50% beginning February 5, 2025 or prime rate of interest plus 0.50% and a maturity date of February 5, 2026. As of August 31, 2024, Greystone's available revolving loan borrowing capacity was approximately $4,125,000.

The IBC Restated Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the IBC Restated 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 Restated Loan Agreement or the related loan documents. In addition, without prior written consent, Greystone shall not declare or pay any dividends, redemptions, distributions and withdrawals with respect to its equity interest other than distributions to holders of its preferred stock in the aggregate of $1,000,000 in any fiscal year. Among other things, a default under the IBC Restated Loan Agreement would permit IBC to cease lending funds under the IBC Restated Loan Agreement and require immediate repayment of any outstanding notes with interest and any unpaid accrued fees.

The IBC Restated Loan Agreement is secured by a lien on substantially all assets of the Borrowers. Warren F. Kruger, the Company's President, CEO and Chairman of the Board and a significant stockholder of Greystone, and Robert B. Rosene, Jr., a member of the Company's Board of Directors, have provided limited guaranties of the Borrowers' obligations under the IBC Restated Loan Agreement. Mr. Kruger's guarantee is limited to 32.4% of all debt obligations to IBC. Mr. Rosene's limited guaranty is the lesser of (i) $3,500,000 less all amounts paid on the principal amount of the loans after the date of the agreement excluding payments on the revolver and (ii) the amount owed to IBC of the loans outstanding from time to time including accrued interest and fees.

Loan Agreement with First Interstate Bank, formerly Great Western Bank

On August 23, 2021, Greystone entered into a loan agreement with First Interstate Bank ("FIB Loan Agreement") to include prior commercial loans and subsequent loans. GSM is a named guarantor under the FIB Loan Agreement.

The FIB 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 1:25to 1:00 as of the end of each fiscal year end and debt to tangible net worth ratio of 4:00to 1:00 as of the end of each fiscal year end with a decrease of 0.50 in the ratio each year thereafter until reaching a minimum ratio of 3:00to 1:00. In addition, the FIB Loan Agreement provides that Greystone shall not, without prior consent of the bank, incur or assume additional indebtedness or capital leases.

The FIB Loan Agreement is secured by a mortgage on one of Greystone's warehouses.

Maturities

Maturities of Greystone's long-term debt for the years subsequent to August 31, 2024, are $2,336,625, $2,305,530, $7,762,751, and $553,447.

Note 7. Leases

Financing Leases

The outstanding liability for financing leases, as of August 31, 2024 and May 31, 2024, was as follows:

		August 31, 2024			May 31, 2024
Non-cancellable financing leases		$	17,455			$	23,143
Less: Current portion			(14,505	)			(19,171	)
Non-cancellable financing leases, net of current portion		$	2,950			$	3,972

The production equipment under the non-cancelable financing leases as of August 31, 2024 and May 31, 2024 was as follows:

		August 31, 2024			May 31, 2024
Production equipment under financing leases		$	97,047			$	176,565
Less: Accumulated amortization			(59,294	)			(119,759	)
Production equipment under financing leases, net		$	37,753			$	56,806

Amortization of the carrying amount of $4,045 and $7,699 was included in depreciation and amortization expense for the three months ended August 31, 2024 and 2023, respectively.

Operating Leases

Greystone recognized a lease liability for each lease based on the present value of remaining minimum fixed rental payments, using a discount rate that approximates the rate of interest for a collateralized loan over a similar term. A right-of-use asset is recognized for each lease, valued at the lease liability. Minimum fixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expenses on the consolidated statements of income. Variable and short-term rental payments are recognized as costs and expenses as they are incurred.

Greystone has two non-cancellable operating leases for (i) two buildings owned by GRE with a 120-month term, a 60-month renewal option and a discount rate of 6.0% and (ii) the corporate offices located in Tulsa, OK with a 72-month lease and a discount rate of 8.5%. The leases are single term with constant monthly rental rates.

The outstanding liability for right to use assets under operating leases as of August 31, 2024 and May 31, 2024, is as follows:

		August 31, 2024			May 31, 2024
Liability under operating leases		$	5,383,704			$	5,453,234
Less: Current portion			(239,543	)			( 286,221	)
Long-term portion of liability under operating leases		$	5,144,161			$	5,167,013

Lease Summary Information

Lease summary information as of and for the periods ending August 31, 2024 and 2023 was as follows:

		2024			2023
Lease Expense
Financing lease expense -
Amortization of right-of-use assets		$	4,045			$	7,699
Interest on lease liabilities			203				600
Operating lease expense			159,635				183,957
Short-term lease expense			385,095				360,353
Total		$	548,978			$	552,609
Other Information
Cash paid for amounts included in the measurement of lease liabilities for finance leases -
Operating cash flows		$	203			$	600
Financing cash flows		$	5,656			$	9,947
Cash paid for amounts included in the measurement of lease liabilities for operating leases -
Operating cash flows		$	153,541			$	177,217
Weighted-average remaining lease term (in years) -
Financing leases			1.0				1.6
Operating leases			12.5				13.9
Weighted-average discount rate -
Financing leases			3.9	%			4.3	%
Operating leases			6.1	%			6.0	%

Future minimum lease payments under non-cancelable leases as of August 31, 2024, are approximately:

		Financing Leases			Operating Leases
Twelve months ending August 31, 2025		$	14,818			$	609,000
Twelve months ending August 31, 2026			3,009				609,000
Twelve months ending August 31, 2027			-				611,230
Twelve months ending August 31, 2028			-				635,760
Twelve months ending August 31, 2029			-				635,760
Thereafter			-				4,604,150
Total future minimum lease payments			17,827				7,704,900
Less: Imputed interest			372				2,321,196
Present value of minimum lease payments		$	17,455			$	5,383,704

Note 8. Deferred Revenue

Advances from customers pursuant to a contract for the sale of plastic pallets is recognized as deferred revenue. Revenue is recognized by Greystone as pallets are shipped to the customer. Revenue related to prior advances totaled $817,981 and $-0- during the three months ended August 31, 2024 and 2023, respectively. The unrecognized balance of deferred revenue as of August 31, 2024 and May 31, 2024, was $22,964 and $840,945, respectively.

Note 9. Revenue and Revenue Recognition

Greystone's principal product is plastic pallets produced from recycled plastic resin. Sales are primarily to customers in the continental United States of America. International sales are made to customers in Canada and Mexico which totaled approximately $170,000 and $137,000 during the three months ended August 31, 2024 and 2023, respectively.

Greystone's customers include stocking and non-stocking distributors and direct sales to end-user customers. Sales to the following categories of customers for the three months ended August 31, 2024 and 2023, respectively, were as follows:

Category		2024			2023
End-user customers			76	%			85	%
Distributors			24	%			15	%

Note 10. Fair Value of Financial Instruments

The following methods and assumptions are used in estimating the fair-value disclosures for financial instruments:

Debt: The carrying amount of notes with floating rates of interest approximate fair value. Fixed rate notes are valued based on cash flows using estimated rates of comparable notes. The carrying amounts reported on the consolidated balance sheets approximate fair value.

Note 11. Concentrations, Risks and Uncertainties

Greystone derived approximately 76% and 85% of its total sales during the three months ended August 31, 2024 and 2023, respectively, from a limited number of customers, generally ranging from 2 to 4. The loss of a material amount of business from one or more of these customers could have a material adverse effect on Greystone.

Greystone purchases damaged pallets from its customers at a price based on the value of the raw material content in the pallet. A majority of these purchases, totaling $189,156 and $211,220 during the three months ended August 31, 2024 and 2023, respectively, is from one of its major customers.

Note 12. Commitments

As of August 31, 2024, Greystone had commitments totaling $330,209 toward the purchase of production equipment.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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. 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 Annual Report on Form 10-K for the fiscal year ended May 31, 2024, which was filed with the Securities and Exchange Commission on September 13, 2024, as the same may be updated from time to time. Actual results may vary materially from the forward-looking statements. The results of operations for the three months ended August 31, 2024, are not necessarily indicative of the results for the fiscal year ending May 31, 2024. Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.

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"). All material intercompany accounts and transactions have been eliminated.

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.

Personnel

Greystone had full-time equivalents of approximately 168 and 177 regular employees and 72 and 116 temporary employees as of August 31, 2024 and 2023, respectively. Full-time equivalent is a measure based on time worked.

Three Months Ended August 31, 2024 Compared to Three Months Ended August 31, 2023

Sales

Sales for the three months ended August 31, 2024, were $13,460,647 compared to $17,413,671for the three months ended August 31, 2023, representing a decrease of $3,953,024, or 23%. The reduction in sales for the three months ended August 31, 2024, compared to the prior period is primarily attributable to an approximate 43% decrease in demand from one of its significant customers, which was offset somewhat by an increase in demand from another of its significant customers. The increase in demand from the latter customer was due to a newly designed plastic pallet to specifically meet the customer's needs.

Greystone generally has a limited number of customers, generally 2 to 4, that accounted for approximately 76% and 85% of sales during the three months ended August 31, 2024 and 2023, respectively. Greystone is not able to predict the future needs of these major customers and will continue its efforts to increase sales through the addition of new customers developed through Greystone's marketing efforts.

Cost of Sales

The cost of sales for the three months ended August 31, 2024, was $11,557,753, or 86% of sales, compared to $13,368,909, or 77% of sales, for the three months ended August 31, 2023. The increase in the ratio of cost of sales to sales for the three months ended August 31, 2024, over the prior period was primarily the result of an approximate 30% decrease in production of plastic pallets. Due to Greystone's inflexible manufacturing costs, the gross profit margin is directly affected by variations in the quantity of plastic pallets produced.

Gross Profit

Gross profit for the three months ended August 31, 2024, was $1,902,894, or 14% of sales, compared to $4,044,762, or 23% of sales, for the three months ended August 31, 2023. The principal reason for decrease in gross profit margin for the three months ended August 31, 2024, over the prior period was the decline in production as discussed above.

Gain from Involuntary Conversion

During the three months ended August 31, 2024, the Company and the insurer agreed on the amount of settlements on certain casualty losses occurring in fiscal years 2024 and 2023. As of August 31, 2024, the outstanding balance on the receivable from the insurer is $1,781,836 as shown in Other receivable on the consolidated balance sheet. The payments resulted in a gain of $741,821.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,820,191, or 13.5% of sales, for the three months ended August 31, 2024 compared to $1,212,951, or 7.0% of sales, for the three months ended August 31, 2023, representing an increase of $607,240. The increase is primarily due to bonuses paid during the three months ended August 31, 2024.

Other Income (Expenses)

Other income, generally from interest income and the sale of scrap material, was $19,389 and $1,599 for the three months ended August 31, 2024 and 2023.

Interest expense was $294,709 for the three months ended August 31, 2024, compared to $342,191 for the three months ended August 31, 2023, representing a decrease of $47,482. This decrease is due to the continuing payments on the principal of outstanding debt.

Provision for Income Taxes

The provision for income taxes was $216,750 and $747,000 for the three months ended August 31, 2024 and 2023, respectively. The effective tax rate differs from federal statutory rates due principally to state income taxes, charges (income) which have no tax benefit (expense), and changes in the valuation allowance.

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 $498,733 for the three months ended August 31, 2024, compared to $1,744,219 for three months ended August 31, 2023, primarily for the reasons discussed above.

Net Income Attributable to Common Stockholders

The net income attributable to common stockholders for the three months ended August 31, 2024, was $350,651, or $0.02 per share, compared to $1,598,020, or $0.06 per share, for the three months ended August 31, 2023, primarily for the reasons discussed above.

Liquidity and Capital Resources

A summary of cash flows for the three months ended August 31, 2024, was as follows:

Cash provided by operating activities		$	2,100,285
Cash used in investing activities		$	(3,335,901	)
Cash used in financing activities		$	(678,352	)

The contractual obligations and rents of Greystone are as follows:

		Total			Less than 1 year			1-3 years			4-5 years			Thereafter
Long-term debt		$	12,958,353			$	2,336,625			$	10,068,281			$	553,447			$	-
Financing leases		$	17,827			$	14,818			$	3,009			$	-			$	-
Operating leases		$	7,704,900			$	609,000			$	1,220,230			$	1,271,520			$	4,604,150
Commitments		$	330,209			$	330,209			$	-			$	-			$	-

Greystone had a working capital of $7,321,684 as of August 31, 2024. To provide for the funding to meet Greystone's operating activities and contractual obligations as of August 31, 2024, 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.

A substantial amount of Greystone's debt financing has resulted primarily from bank notes which are guaranteed by certain officers and directors of Greystone. 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, or that they will do so on terms that are acceptable to Greystone. 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 unaudited consolidated financial statements, Greystone may pay dividends on its preferred stock in an amount not to exceed $1,000,000 per year.

Off-Balance Sheet Arrangements

Greystone does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

Greystone believes that the following critical policies affect Greystone's more significant judgments and estimates used in preparation of Greystone's financial statements.

General

The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recognition of Revenues

Revenue is recognized at the point in time a good or service is transferred to a customer and the customer obtains control of that good or receives the service performed. Sales arrangements with customers are short-term in nature involving single performance obligations related to the delivery of goods and generally provide for transfer of control at the time of shipment. In limited circumstances, where acceptance of the goods is subject to approval by the customer, revenue is recognized upon approval by the customer unless, historically, there have been insignificant rejections of goods by the customer.

Accounts receivable

Trade receivables are carried at the original invoice amount less an allowance for credit losses. Management determines the allowance by regularly evaluating individual customer receivables and considering a customer's financial condition, credit history and current economic conditions. Trade receivables are written off against the allowance when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. The Company generally does not charge interest on past due accounts.

Inventory

Inventory consists of finished pallets and raw materials which are stated at the lower of average cost or net realizable value. Management applies overhead costs to inventory based on an analysis of the Company's expense categories. The specific costs are then applied to inventory based on production during the period. Management relies on estimates and assumptions regarding the specific costs to include in the production costs, as well as the period to use in determining inventory production.

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.

A deferred tax asset is recognized for tax-deductible temporary differences and operating losses using the applicable enacted tax rate. In assessing the realizability 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 will provide a valuation allowance if it is determined more likely than not the associated asset will not be recognized. Based on this, management has determined that Greystone will be able to realize the full effect of the deferred tax assets as of August 31, 2024, and, accordingly, no valuation allowance was recorded. As of May 31, 2024, management determined that Greystone would not be able to realize the full effect of deferred taxes and a valuation allowance of $793,337 was recorded. The primary reason for no valuation allowance as of August 31, 2024, was the expiration of outstanding net operating losses during the current fiscal year ending May 31, 2025.

New Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying unaudited consolidated financial statements. As new accounting pronouncements are issued, Greystone will adopt those that are applicable under the circumstances.

Recent accounting pronouncements issued by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants and the SEC did not or are not believed by management to have a material effect on Greystone's unaudited consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, Greystone carried out an evaluation under the supervision of Greystone's Chief Executive Officer (CEO) of the effectiveness of Greystone's disclosure controls and procedures pursuant to the Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based on an evaluation as of August 31, 2024, Greystone's CEO and CFO concluded that Greystone's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) were not effective as of August 31, 2024, as a result of a weakness in the design of internal controls over financial reporting identified below.

Management has determined that a material weakness exists due for the following reasons:

●

The Company has an ineffective control environment due to a lack of the necessary corporate accounting resources with SEC financial reporting experience to ensure consistent, complete and accurate financial reporting, as well as disclosure controls and procedures.

●

The Company has limited resources to ensure that necessary internal controls are implemented and followed throughout the Company. The limited resources result in inadequate internal controls relating to the authorization, recognition, capture, and review of transactions, facts, circumstances and events that could have a material impact on the Company's financial reporting process.

During the three months ended August 31, 2024, there were no changes in Greystone's internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, Greystone's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.

	31.1*			Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2*			Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1**			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2**			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS*			Inline XBRL Instance Document.
	10. SCH*			Inline XBRL Taxonomy Extension Schema Document.
	101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase.
	101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase.
	101.LAB*			Inline XBRL Taxonomy Extension Labels Linkbase.
	101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase.
	104*			Cover Page Interactive Data File (embedded within the Inline XBRL document).

*	Filed herewith.

**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GREYSTONE LOGISTICS, INC.
	(Registrant)
Date: October 18, 2024	/s/ Warren F. Kruger
	Warren F. Kruger, President and Chief
	Executive Officer (Principal Executive Officer)
Date: October 18, 2024	/s/ Warren F. Kruger
	Warren F. Kruger, Interim Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

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