Summary of Significant Accounting Policies

12 Months Ended

May 31, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Greystone Logistics, Inc. (“Greystone”), through its two wholly-owned subsidiaries, Greystone Manufacturing, LLC (“GSM”) and Plastic Pallet Production, Inc. (“PPP”), is engaged in the manufacturing and marketing of plastic pallets and pelletized recycled plastic resin.

Principles of Consolidation

The consolidated financial statements include the accounts of Greystone, its subsidiaries and entities required to be consolidated by the accounting guidance for variable interest entities (“VIE”). All material intercompany accounts and transactions have been eliminated.

Greystone consolidates its VIE, Greystone Real Estate, L.L.C. (“GRE”), which owns the manufacturing facilities which are occupied by Greystone. GRE is owned by Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a member of Greystone’s Board of Directors.

Use of Estimates

The preparation of Greystone’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires Greystone’s management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Credit Losses on Financial Instruments

Effective June 1, 2020, Greystone adopted Accounting Standards Update 2016-13, Financial Instruments-Credit Losses, which requires changes to the recognition of credit losses on financial instruments not accounted for at fair value including loans, debt securities, trade receivables among other things. The adoption of this policy did not have a material effect on Greystone’s consolidated financial statements.

Accounts Receivable and Allowance for Uncollectible Accounts

Greystone records its accounts receivable at their face value less an allowance for credit losses in an amount sufficient to absorb losses inherent in its accounts receivable portfolio based on projected expected credit losses. Greystone evaluates its accounts receivable and establishes an allowance for uncollectible accounts based on a combination of specific customer circumstances, credit conditions and history of collections.

Inventory

Inventory consists of finished pallets and raw materials which are stated at the lower of average cost or net realizable value.

Property, Plant and Equipment

Greystone’s property, plant and equipment is stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives, as follows:

Plant buildings	39 years
Production machinery and equipment	5-12 years
Leasehold improvements	5-7 years
Furniture & fixtures	3-5 years

Upon sale, retirement or other disposal, the related costs and accumulated depreciation of items of property, plant or equipment are removed from the related accounts and any gain or loss is recognized. When events or changes in circumstances indicate that long-lived assets may be impaired, an evaluation is performed comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount. If the asset’s carrying amount exceeds the cash flows, a write-down to fair value is required.

Leases

Greystone recognizes right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements.

Greystone has operating and finance leases for facilities, office space and plant equipment. Operating leases are included in right-of-use (“ROU”) operating lease assets and finance lease ROU assets are included in property, plant and equipment, net in the consolidated balance sheet. The lease liabilities are included in operating leases and financing leases (current and non-current) in the consolidated balance sheet.

The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate. The incremental borrowing rate is defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

For finance leases, lease expenses are the sum of interest on the lease obligations and amortization of the ROU assets. Finance lease ROU assets are amortized based on the lesser of the lease term and the useful life of the leased asset according to the capital asset accounting policy. If ownership of the ROU assets transfers to the Greystone at the end of the lease term or if Greystone is reasonably certain to exercise a purchase option, amortization is calculated using the estimated useful life of the leased asset.

For operating leases, the lease expenses are generally recognized on a straight-line basis over the lease term and recorded to general and administrative expenses in the consolidated statements of income.

In accordance with Accounting Standards Codification 842, Greystone has made accounting policy elections (1) to not recognize right-of-use assets and lease liabilities for lease arrangements with a term of twelve months or less and (2) to combine lease and non-lease components. The non-lease components are not material and do not result in significant timing differences in the recognition of lease expense. Short-term leases include real estate and vehicles and are not significant in comparison to the Greystone’s overall lease portfolio. For these leases, the Company recognizes the leases as an operating expense on a straight-line basis over the term of the lease.

Debt Issuance Costs

The Company capitalizes debt issuance costs as incurred and amortizes such costs on a straight-line basis across the term of the debt. Debt issuance costs are fully amortized when the debt is repaid or refinanced.

Stock Options

The grant-date fair value of stock options and other equity-based compensation issued to employees is amortized on the straight-line basis over the vesting period of the award as compensation cost. The fair value of new option grants is estimated using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option pricing models require the input of highly subjective assumptions including the expected stock price volatility, dividend yields and expected holding periods.

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. Contract liabilities associated with sales arrangements primarily relate to deferred revenue on prepaid sales of goods. Greystone generally purchases damaged pallets from its customers which are reground and used in Greystone’s pallet production process; however, damaged pallet purchases are historically insignificant.

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.

Earnings Per Share

Basic earnings per share is computed by dividing the earnings available to common stockholders by the weighted average number of common shares outstanding for the year. In arriving at income available to common stockholders, income attributable to non-controlling interest and preferred stock dividends are deducted from net income for the year.

Basic and diluted earnings per share of common stock for the years ending May 31, are as follows:

	2021		2020
Basic earnings per share of common stock:
Numerator -
Net income attributable to common stockholders	$	3,030,165	$	4,301,585
Denominator -
Weighted-average common shares outstanding		28,361,201		28,361,201
Income per share of common stock - Basic	$	0.11	$	0.15
Diluted earnings per share of common stock:
Numerator -
Net income attributable to common stockholders	$	3,030,165	$	4,301,585
Add: Preferred stock dividends due to assumed conversion		323,219		398,836
Net income allocated to common stockholders	$	3,353,384	$	4,700,421
Denominator -
Weighted-average common shares outstanding-basic		28,361,201		28,361,201
Incremental common shares from assumed conversion of warrants, options and preferred stock, as appropriate		4,003,741		3,982,456
Diluted weighted average common stock outstanding		32,364,942		32,343,657
Income per share of common stock - Diluted	$	0.10	$	0.15