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)

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)

Greystone Logistics, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

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:         

The contractual obligations and rents of Greystone are as follows:

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:

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 6. Exhibits.

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

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.