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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2007
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM ______ TO ________
Commission file number 000-26331
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GREYSTONE LOGISTICS, INC.
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(Exact name of small business issuer as specified in its charter)
OKLAHOMA 75-2954680
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1613 EAST 15TH STREET, TULSA, OKLAHOMA 74120
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(Address of principal executive offices)
(918) 583-7441
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by checkmark whether the registrant is a shell company (as defined in
rule 12b-2 of the Exchange Act). Yes [_] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: March 10, 2007 - 26,061,201
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes [_] No [X]
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GREYSTONE LOGISTICS, INC.
FORM 10-QSB/A
FOR THE PERIOD ENDED FEBRUARY 28, 2007
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
Condensed Consolidated Balance Sheets
as of February 28, 2007 and May 31, 2006 1
Condensed Consolidated Statements of Operations
For the Nine Month Periods Ended February 28, 2007 and 2006 2
Condensed Consolidated Statements of Operations
For the Three Month Periods Ended February 28, 2007 and 2006 3
Condensed Consolidated Statements of Cash Flows
For the Nine Month Periods Ended February 28, 2007 and 2006 4
Notes to Condensed Consolidated Financial Statements 5
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS 8
SIGNATURES 9
ITEM 1. FINANCIAL INFORMATION
Explanatory Note
This Form 10-QSB/A is being filed by Greystone Logistics, Inc. ("Greystone" or
the "Company"), as Amendment No. 1 (the "Amendment") to the Company's Quarterly
Report on Form 10-QSB for the period ended February 28, 2007 (the " Prior Form
10-QSB"), to amend and restate Part I, Item 1 of the Prior Form 10-QSB in its
entirety because the cash and cash equivalents line item was inadvertently left
off the Company's balance sheet during the edgarization process. The information
contained herein has not been updated to reflect events or developments that may
have occurred subsequent to February 28, 2007.
GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
February 28, May 31,
2007 2006
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ASSETS
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CURRENT ASSETS:
Cash $ 82,837 $ 925
Accounts receivable, net of allowance for doubtful 151,860 842,375
accounts of $39,992 at February 28, 2007
Inventory 63,081 631,236
Prepaid expenses 31,117 8,913
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TOTAL CURRENT ASSETS 328,895 1,483,449
PROPERTY, PLANT AND EQUIPMENT,
net of accumulated depreciation of $2,517,125 and $2,060,091
at February 28, 2007 and May 31, 2006, respectively 7,164,894 8,028,275
OTHER ASSETS 114,990 151,661
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TOTAL ASSETS $ 7,608,779 $ 9,663,385
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
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CURRENT LIABILITIES:
Current portion of long-term debt $ 3,192,348 $ 2,055,463
Bank overdraft -- 143,928
Advances payable - related party 860,799 394,567
Accounts payable and accrued expenses:
Third parties 1,787,800 2,740,555
Related party 508,247 --
Preferred dividends payable 942,301 513,260
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TOTAL CURRENT LIABILITIES 7,291,495 5,847,773
LONG-TERM DEBT 9,946,663 10,886,176
DEFERRED INCOME 143,805 --
STOCKHOLDERS' DEFICIENCY:
Preferred stock, $0.0001 par value, 20,750,000 shares authorized,
50,000 shares outstanding, liquidation preference of $5,000,000 5 5
Common stock, $0.0001 par value, 5,000,000,000 shares
authorized, 26,061,201 and 24,061,201 outstanding, respectively 2,606 2,406
Additional paid-in capital 52,574,454 52,278,594
Deficit (62,350,249) (59,351,569)
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TOTAL STOCKHOLDERS' DEFICIENCY (9,773,184) (7,070,564)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 7,608,779 $ 9,663,385
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The accompanying notes are an integral part of these consolidated financial statements.
1
GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Nine Months Ended February 28,
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2007 2006
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Sales $ 9,065,259 $ 11,237,737
Cost of Sales, including depreciation expense of
$598,472 and $544,805 8,840,652 10,777,837
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Gross Profit 224,607 459,900
Expenses:
General, selling and administration expenses 1,368,902 1,733,876
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Operating Loss (1,144,295) (1,273,976)
Other Income (Expense):
Other income (expense) (472,323) 81,107
Interest expense (953,021) (772,745)
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Total Other Income (Expense) (1,425,344) (691,638)
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Net Loss (2,569,639) (1,965,614)
Preferred Dividends 429,041 409,629
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Net Loss Available to Common Stockholders $ (2,998,680) $ (2,375,243)
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Loss Available to Common Stockholders
Per Share of Common Stock - Basic and Diluted $ (0.12) $ (0.10)
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Weighted Average Shares of Common Stock Outstanding 24,283,000 24,061,000
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The accompanying notes are an integral part of these consolidated financial statements
2
GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended February 28,
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2007 2006
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Sales $ 2,574,428 $ 4,122,947
Cost of Sales, including depreciation expense of
$197,301 and $191,989 2,463,916 3,815,678
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Gross Profit (Loss) 110,512 307,269
Expenses:
General, selling and administration expenses 466,157 566,029
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Operating Loss (355,645) (258,760)
Other Income (Expense):
Other income (expense) (474,536) 6,808
Interest expense (348,140) (266,775)
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Total Other Income (Expense) (822,676) (259,967)
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Net Loss (1,178,321) (518,727)
Preferred Dividends 141,781 130,029
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Net Loss Available to Common Stockholders $ (1,320,102) $ (648,756)
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Loss Available to Common Stockholders
Per Share of Common Stock - Basic and Diluted $ (0.05) $ (0.03)
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Weighted Average Shares of Common Stock Outstanding 24,728,000 24,061,000
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The accompanying notes are an integral part of these consolidated financial statements
3
GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended February 28,
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2007 2006
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Cash Flows from Operating Activities:
Net Loss $ (2,569,639) $ (1,965,614)
Adjustments to reconcile net loss to cash used
in operating activities
Depreciation and amortization 628,511 556,265
Gain on sale of equipment and other assets (71,472) (6,571)
Stock option compensation 196,060 --
Loss on termination of long-term lease 619,061 --
Changes in accounts receivable 690,515 300,398
Changes in inventory 568,155 (89,185)
Changes in prepaid expenses and other (11,604) 3,855
Changes in accounts payable and accrued expenses (444,508) 211,741
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Net cash used in operating activities (394,921) (989,111)
Cash Flows from Investing Activities:
Purchase of property and equipment (517,016) (1,447,757)
Proceeds from sale of equipment 993,234 --
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Net cash provided by (used in) investing activities 476,218 (1,447,757)
Cash Flows from Financing Activities:
Proceeds from notes and advances payable 355,603 2,924,225
Payments on notes and advances payable (211,060) (453,279)
Payment of bank overdraft (143,928) --
Dividends paid on preferred stock -- (34,463)
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Net cash provided by financing activities 615 2,436,483
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Net Increase (Decrease) in Cash 81,912 (385)
Cash, beginning of period 925 1,410
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Cash, end of period $ 82,837 $ 1,025
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Noncash activities:
Sale of equipment in exchange for debt $ -- $ 20,000
Accrual of preferred dividends 429,041 375,166
Issuance of common stock for termination of long-term lease 100,000 --
Long-term payable for termination of long-term lease 519,061 --
Supplemental Information:
Interest paid $ 820,599 $ 772,745
The accompanying notes are an integral part of these consolidated financial statements
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GREYSTONE LOGISTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Greystone, 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 February 28, 2007, and the results of its operations and its cash flows for
the nine month and three month periods ended February 28, 2007 and 2006. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements as of and for the year ended May 31, 2006
and the notes thereto included in Greystone's Form 10-KSB. The financial
statements have been prepared assuming that Greystone will continue as a going
concern. The working capital deficit of $(6,962,600), a stockholders' deficiency
of $(9,773,184) and continuing losses from operations at February 28, 2007 and
its inability to obtain long term financing raises substantial doubt about
Greystone's ability to continue as a going concern. The accompanying financial
statements have been prepared assuming that Greystone will continue as a going
concern and do not reflect the possible effects of any adjustments that might
result from Greystone's inability to continue as a going concern.
2. The results of operations for the nine month and three month periods
ended February 28, 2007 and 2006 are not necessarily indicative of the results
to be expected for the full year.
3. The computation of loss per share is computed by dividing the loss
available to common shareholders by the weighted average shares outstanding for
the periods. Loss available to common shareholders is determined by adding
preferred dividends for the periods to the net loss. For the nine month periods
ended February 28, 2007 and 2006, the weighted average common shares outstanding
for all periods is 24,283,000 and 24,061,000, respectively. For the three month
periods ended February 28, 2007 and 2006, the weighted average common shares
outstanding for all periods is 24,728,000 and 24,061,000, respectively.
Convertible preferred stock, common stock options and warrants are not
considered as their effect is antidilutive.
4. Inventory consists of the following:
February 28, May 31,
2007 2006
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Raw materials $ -- $ 554,316
Finished goods 63,081 76,920
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Total inventory $ 63,081 $ 631,236
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5. Effective February 1, 2007, Greystone agreed to issue 2,000,000
shares of its common stock and agreed to pay $24,000 per month for twenty-four
months to 1607 Commerce LLC to terminate a long-term lease agreement on
equipment. The present value of the series of $24,000 monthly payments at 8.5%
interest or $519,060 and the value of the common stock on the effective date of
issuance of $100,000 were recorded as a loss on the termination agreement of the
long-term lease.
5
Also, effective February 1, 2007, Greystone issued a warrant to purchase up
to 250,000 shares of common stock at $0.15 per share to an individual in
consideration for providing certain financing and consulting services, which
facilitated the sale of certain of Greystone's equipment to Yorktown Management,
LLC, a company owned by Warren Kruger, Chairman and CEO. The warrants are valued
at $8,500.
6. In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123(R), "Share-Based Payment." This statement is a revision of
SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and its related
implementation guidance. SFAS No. 123(R) requires companies to recognize in the
income statement the grant-date fair value of stock options and other
equity-based compensation issued to employees and is effective for interim or
annual periods beginning after December 15, 2005. The Company adopted SFAS No.
123(R) as of March 1, 2006, using the modified prospective transition method.
Under the modified prospective transition method, awards that are granted,
modified or settled after the date of adoption will be measured in accordance
with SFAS No. 123(R). Unvested equity-classified awards that were granted prior
to March 1, 2006 will be accounted for using the straight-line basis for
recognizing compensation costs in accordance with SFAS No. 123, except that the
amounts will be recognized in the Company's consolidated statements of
operations. The effect of adopting SFAS No. 123(R) is a charge in the amount of
$196,060 and $71,020, including $8,500 for the issuance of warrants as discussed
in Note 5, to compensation expense for the nine month and three month periods
ending February 28, 2007, respectively.
For the nine month and three month periods ended February 28, 2006,
Greystone applied the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations, in accounting for its stock options. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. There
was no stock option cost during the nine month and three month periods ended
February 28, 2006.
7. Effective as of February 1, 2007, GSM entered into a purchase
agreement with Yorktown Management & Financial Services, LLC, an entity owned by
Greystone's CEO and Chairman, pursuant to which Yorktown purchased from GSM
existing finished goods inventory and certain raw materials for $1,018,582 and
grinding and peripheral equipment, resin contracts and molds for $981,418.
Greystone completed this transaction with Yorktown, in part, to alleviate the
working capital requirements in maintaining raw material inventory, and will
purchase the raw material used in its production process at Yorktown's cost plus
$0.03 per pound.
8. On February 8, 2007, Greystone entered into a settlement agreement
with 1607 Commerce Limited Partnership ("1607"), pursuant to which in exchange
for final settlement of all of 1607's claims under the PIPER 600 equipment lease
and certain related guaranties, Greystone agreed to (i) make a one time payment
to 1607 of $1,048,000, (ii) make monthly payments to 1607 of $24,000 for a term
of 24 months commencing March 1, 2007, which payments can be used towards the
purchase price of pallets purchased from 1607, (iii) transfer to 1607 2,000,000
shares of Greystone's common stock, and (iv) enter into an agreement with 1607
whereby, among other things, 1607 will be given floor space, utilities and
regrind resin in Greystone's Iowa facility and Greystone
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and its subsidiaries will be required to purchase up to 200,000 Granada pallets
at $8.00 per pallet and 200,000 nestable pallets at $3.00 per pallet from 1607
over a two year term. Also pursuant to the settlement agreement, the monthly
payments to be made by Greystone will be credited against the purchase price of
any Granada pallets purchased from 1607; provided, however, 1607 is not
obligated to produce any pallets, but has agreed to use it best efforts to do
so. For more information regarding these transactions, see Greystone's Current
Report on Form 8-K, which was filed on February 27, 2007.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
11.1 Computation of Loss per Share is in Note 3 in the Notes to the
financial statements.
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-B, 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-B, 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.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREYSTONE LOGISTICS, INC.
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(Registrant)
Date: May 21, 2007 /s/ Warren F. Kruger
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President and Chief Executive Officer
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