Results of Operations General to All Periods
The unaudited consolidated statements include
two wholly-owned subsidiaries,
variable interest entity,
intercompany accounts and transactions have been eliminated.
References to fiscal year 2021 refer to the six months and three months ended
three months ended
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
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 approximately 272 and 268 full-time employees as of
2020
certain personnel agencies. Greystone employed 37 and 145 personnel through
these agencies as of
Six Months Ended
2019
Sales
Sales for fiscal year 2021 were
year 2020 for a decrease of
fiscal year 2021 increased by approximately 3% over fiscal year 2020, the
overall decrease in the value of sales in fiscal year 2021 from fiscal year 2020
was primarily due to changes in the manufacturing process for certain pallets
and the related pricing for such pallets.
Greystone had four customers which accounted for approximately 86% and 88% of
sales in fiscal years 2021 and 2020, 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.
Effective
notified Greystone that the customer will be diversifying its purchases of
pallets for case goods with another vendor, but Greystone will continue to be
the sole provider of the keg pallet to the customer. This change is expected to
decrease Greystone’s annual revenues in the range of about 4% to 5%. Greystone
will continue to purchase damaged pallets from the customer. Management has
evaluated this impact in conjunction with other contractual adjustments that
were made with the customer, and management does not expect that this impact
will have a material adverse effect on Greystone’s consolidated financial
statements.
15 Cost of Sales
Cost of sales in fiscal year 2021 was
cost of sales to sales in fiscal year 2021 from the ratio during fiscal year
2020 is primarily the result of improved profit margins from changes in the
manufacturing process for certain pallets, increases in pallet production per
machine attributable to the utilization of new tools in managing the injection
molding machines and an increase of in-house capacity for grinding and
pelletizing plastic material.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were
compared to
The primary reason for the increase in fiscal year 2021 over fiscal year 2020
was due to a mix of items including increased costs for administrative
personnel, costs for resolution of a breach in the Company’s email system, legal
fees and research and development costs to develop an acceptable fire retardant
for Greystone pallets.
Other Income (Expenses)
Other income from sales of scrap material was
compared to
Interest expense was
year 2020 for a decrease of
approximately
Paycheck Protection Program note in the amount of
interest rate of 1.0% and the prime rate of interest was 3.25% as of
30, 2020
Provision for Income Taxes
The provision for income taxes was
and 2020, respectively. The effective tax rate differs from federal statutory
rates principally due to state income taxes, charges which have no tax benefit,
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 2021 was
per share, compared
for the reasons discussed above.
16
Three Months Ended
2019
Sales
Sales for fiscal year 2021 were
year 2020 for a decrease of
of the number of pallets sold during fiscal year 2021 from fiscal year 2020, the
overall decrease in the value of sales in fiscal year 2021 from fiscal year 2020
was primarily due to changes in the manufacturing process for certain pallets
and the related pricing for such pallets.
Greystone had four customers which accounted for approximately 84% and 88% of
sales in fiscal years 2021 and 2020, 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.
Effective
notified Greystone that the customer will be diversifying its purchases of
pallets for case goods with another vendor, but Greystone will continue to be
the sole provider of the keg pallet to the customer. This change is expected to
decrease Greystone’s annual revenues in the range of about 4% to 5%. Greystone
will continue to purchase damaged pallets from the customer. Management has
evaluated this impact in conjunction with other contractual adjustments that
were made with the customer, and management does not expect that this impact
will have a material adverse effect on Greystone’s consolidated financial
statements.
Cost of Sales
Cost of sales in fiscal year 2021 was
cost of sales to sales in fiscal year 2021 from the ratio during fiscal year
2020 is primarily the result of improved profit margins from changes in the
manufacturing process for certain pallets, increases in pallet production per
machine attributable to the utilization of new tools in managing the injection
molding machines and an increase of in-house capacity for grinding and
pelletizing plastic material.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were
compared to
The increase in fiscal year 2021 over fiscal year 2020 was due to a mix of items
including increased costs for administrative personnel, costs for resolution of
a breach in the Company’s email system, legal fees and research and development
costs to develop an acceptable fire retardant for Greystone pallets.
Other Income (Expenses)
Other income from sales of scrap material was
compared to
Interest expense was
year 2020 for a decrease of
approximately
Paycheck Protection Program note in the amount of
interest rate of 1.0% and the prime rate of interest was 3.25% as of
30, 2020
17 Provision for Income Taxes
The provision for income taxes was
and 2020, respectively. The effective tax rate differs from federal statutory
rates due principally to state income taxes, charges which have no tax benefit,
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
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 2021 was
share, compared
the reasons discussed above.
Liquidity and Capital Resources
A summary of cash flows for the six months endedNovember 30, 2020 is as follows: Cash provided by operating activities$ 5,802,911 Cash used in investing activities$ (1,290,604 ) Cash used in financing activities$ (4,891,905 )
The contractual obligations of Greystone are as follows:
Less than
Total 1 year 1-3 years 4-5 years
Long-term debt $ 19,115,998 $ 5,195,878 $ 12,422,606 $ 1,497,514
Financing lease rents $ 4,906,799 $ 2,186,436 $ 2,693,101 $ 27,262
Operating lease rents $ 156,550 $ 81,881 $ 65,632 $ 9,037
Commitments $ 445,040 $ 445,040 $ - $ -
Greystone had a working capital deficit of
provide for the funding to meet Greystone’s operating activities and contractual
obligations as of
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.
18
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
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
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 ended
2020
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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