Quarterly Report for Quarter Ending February 28, 2026 (Form 10-Q)

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, 2025, which was filed with the Securities and Exchange Commission on August 29, 2025, 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 nine months ended February 28, 2026, are not necessarily indicative of the results for the fiscal year ending May 31, 2026. 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 82 and 181 regular employees as of February 28, 2026 and 2025, respectively. As of February 28, 2026 with the reduction in the production schedule due to loss of a major customer, the Company has stopped using temporary employees, prior to the reduction in production, at any point in time, the Company could have between 65-70 temporary employees. Full-time equivalent is a measure based on time worked.

Nine months Ended February 28, 2026 Compared to Nine months Ended February 28, 2025

Sales

During fiscal year 2026, the Company lost a major customer. Based on historical sales to this customer, management expects a total loss of sales of approximately $30 million for fiscal year 2026. During the nine months ended February 28, 2026, total sales decreased $17,938,676, or 45%. Sales decreased primarily due to reductions of approximately $11 million from the lost major customer. The Company also experienced additional reductions in sales of $4.3 million from another major customer; however, this loss is due to delays in construction of specific production equipment related to this customers' orders. Sales for this customer are projected to return to normal in the fourth quarter. Additional miscellaneous fluctuations among other existing customers contributed to the overall change. No significant new or other lost customers were reported during the period.

Greystone's two major customers accounted for approximately 60% and 71% of total sales during the nine months ended February 28, 2026 and 2025, 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 nine months ended February 28, 2026, was $23,360,699 or 106% of sales, compared to $33,890,446, or 85% of sales, for the nine months ended February 28, 2025. The increase in the ratio of cost of sales to sales for the nine months ended February 28, 2026, over the prior period was primarily the result of reduced production during the nine months ended February 28, 2026, specifically, the Company capitalized less overhead costs as fewer pallets were produced due to loss of customers described above. 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 (Loss)

Gross profit (loss) for the nine months ended February 28, 2026, was $(1,387,683), or (6.3%) of sales, compared to $6,021,246, or 15% of sales, for the nine months ended February 28, 2025. The principal reason for decrease in gross profit margin for the nine months ended February 28, 2026, over the prior period was the decline in production as discussed above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $ 4,190,611, or 19% of sales, for the nine months ended February 28, 2026 compared to $4,556,062, or 11% of sales, for the nine months ended February 28, 2025, representing a decrease of $365,451. The decrease is primarily due to continued tight control of other expenses given the loss of a major customer.

Gain from Involuntary Conversion

During the nine months ended February 28, 2025, the Company and the insurer agreed on the amount of settlements on certain casualty losses occurring in fiscal years 2024 and 2023. The payments resulted in a gain of $741,821 recorded in the first quarter of fiscal year 2025, this did not reoccur in fiscal year 2026.

Other Income (Expenses)

Other income, generally from interest income and the sale of scrap material, was $12,400 and $115,956 for the nine months ended February 28, 2026 and 2025, respectively.

Interest expense was $712,473 for the nine months ended February 28, 2026, compared to $818,786 for the nine months ended February 28, 2025, representing a decrease of $106,313. This decrease is due to the continuing payments on the principal of outstanding debt as well as reductions in the prime rate of interest which was 6.75% at February 28, 2026, compared to 7.50% at February 28, 2025.

Benefit (Provision) for Income Taxes

The benefit (provision) for income taxes was $313,172 and $(407,770) for the nine months ended February 28, 2026 and 2025, respectively. The significant change in provision primarily reflects a shift from taxable income in 2025 to a pretax loss in 2026. As a result, the current year provision reflects an income tax benefit associated with the pretax loss, whereas the prior year included income tax expense related to taxable earnings. 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 (Loss)

Greystone recorded net loss of $(5,965,195) for the nine months ended February 28, 2026, compared to net income of $1,096,405 for nine months ended February 28, 2025, primarily for the reasons discussed above.

Net Income (Loss) Attributable to Common Stockholders

The net loss attributable to common stockholders for the nine months ended February 28, 2026, was $(5,965,195) or $(0.22) per share, compared to net income attributable to common stockholders of $691,942, or $0.02 per share, for the nine months ended February 28, 2025, primarily for the reasons discussed above.

Three months Ended February 28, 2026 Compared to Three months Ended February 28, 2025

Sales

During fiscal year 2026, the Company lost a major customer. Based on historical sales to this customer, management expects a total loss of sales of approximately $30 million for fiscal year 2026. During the three months ended February 28, 2026, total sales decreased $10,844,399, or 76%. Sales decreased primarily due to reductions of approximately $7.6 million from the lost major customer. The Company also experienced additional reductions in sales of $1.7 million from another major customer; however this loss is due to delays in construction of specific production equipment related to this customers' orders. Sales for this customer are projected to return to normal in the fourth quarter. Additional miscellaneous fluctuations among other existing customers contributed to the overall change. No significant new or other lost customers were reported during the period.

Greystone's two major customers discussed above accounted for approximately 22% and 71% of total sales during the three months ended February 28, 2026 and 2025, respectively. Additionally, Greystone has one other major customer that accounted for approximately 13% and 4% of total sales during the three months ended February 28, 2026 and 2025, 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 February 28, 2026, was $4,930,543 or 142% of sales, compared to $11,577,980, or 81% of sales, for the three months ended February 28, 2025. The increase in the ratio of cost of sales to sales for the three months ended February 28, 2026, over the prior period was primarily the result of reduced production during the three months ended February 28, 2026, specifically, the Company capitalized less overhead costs as fewer pallets were produced. 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 (Loss)

Gross profit (loss) for the three months ended February 28, 2026, was $(1,459,144), or (42%). of sales, compared to $2,737,818, or 19% of sales, for the three months ended February 28, 2025. The principal reason for decrease in gross profit margin for the three months ended February 28, 2026, over the prior period was the decline in production as discussed above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,202,930, or 35% of sales, for the three months ended February 28, 2026 compared to $1,374,914, or 10% of sales, for the three months ended February 28, 2025, representing a decrease of $171,984. The decrease is primarily due to continued tight control of other expenses given the loss of a major customer.

Other Income (Expenses)

Other income, generally from interest income and the sale of scrap material, was $3,012 and $45,486 for the three months ended February 28, 2026 and 2025.

Interest expense was $243,956 for the three months ended February 28, 2026, compared to $248,705 for the three months ended February 28, 2025, representing a decrease of $4,749. This decrease is due to the continuing payments on the principal of outstanding debt as well as reductions in the prime rate of interest which was 6.75% at February 28, 2026, compared to 7.50% at February 28, 2025.

Benefit (Provision) for Income Taxes

The benefit (provision) for income taxes was $100,940 and $(194,020) for the three months ended February 28, 2026 and 2025, respectively. The significant change in provision primarily reflects a shift from taxable income in 2025 to a pretax loss in 2026. As a result, the current year provision reflects an income tax benefit associated with the pretax loss, whereas the prior year included income tax expense related to taxable earnings. 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 (Loss)

Greystone recorded net loss of $(2,802,078) for the three months ended February 28, 2026, compared to net income of $965,665 for three months ended February 28, 2025, primarily for the reasons discussed above.

Net Income (Loss) Attributable to Common Stockholders

The net loss attributable to common stockholders for the three months ended February 28, 2026, was $(2,802,078) or $(0.10) per share, compared to net income attributable to common stockholders of $849,867, or $0.03 per share, for the three months ended February 28, 2025, primarily for the reasons discussed above.

Liquidity and Capital Resources

A summary of cash flows for the nine months ended February 28, 2026, was as follows:

Cash provided by operating activities		$	2,660
Cash used in investing activities		$	(1,796,189	)
Cash provided by financing activities		$	465,094

The contractual obligations and rents of Greystone as of February 28, 2026 were as follows:

						Less than
		Total				1 year				2-3 years				4-5 years				Thereafter
Long-term debt		$	11,763,650			$	11,763,650			$	-			$	-			$	-
Operating leases		$	6,791,400			$	609,000			$	1,260,370			$	1,184,020			$	3,738,010

Greystone had a working capital of $1,196,903 as of February 28, 2026.

Greystone's principal debt obligations include a $6,000,000 revolving loan, subject to borrowing base limitations, and several term notes. Greystone was not in compliance with certain financial covenants as of February 28, 2026. Therefore, all of the long term debt has been classified as current. To provide for the funding to meet Greystone's operating activities and contractual obligations as of February 28, 2026, Greystone will have 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 portion of debt financing that Greystone has received through February 28, 2026, has been provided by loans or through bank loan guarantees from the 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, or that they will do so on terms that are acceptable to Greystone.

During the third and fourth quarter of fiscal year 2025, the Company paid $5,000,000 to retire all shares of preferred stock. Prior to retiring, Greystone had 50,000 outstanding shares of cumulative 2003 preferred stock for a total of $5,000,000 with a preferred dividend rate at the prime rate of interest plus 3.25%. Greystone paid accrued dividends to its preferred stockholders during the nine months ended February 28, 2026 and 2025 of $1,610 and $378,938, respectively. Preferred stock dividend payments to the holders of its preferred stock were allowed under the terms of the IBC Restated Loan Agreement as discussed herein under the caption "Loans from International Bank of Commerce" which allows for such payments not to exceed $1,000,000 per year. 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, additional financing or otherwise. Further, pursuant to the terms and conditions of certain loan documentation with International Bank of Commerce, as discussed herein and the terms and conditions of Greystone's 2003 preferred stock, Greystone is restricted in its ability to pay dividends to holders of its common stock.

During the year ended May 31, 2025, the Company repurchased 519,124 shares of its common stock for an aggregate amount of $606,737 under a share repurchase program announced by the Board on June 28, 2024. During the first quarter of fiscal 2026, covering the three-month period ended August 31, 2025, the Company repurchased an additional 89,876 shares for $123,147 under the same program. No additional activity occurred during the second or third quarters of fiscal 2026. As disclosed in the Form 8-K filed on June 28, 2024, the Board's intent in authorizing the program was to employ strategic buybacks as a means of enhancing shareholder value.

During fiscal year 2026, the Company lost a major customer, which represented a significant portion of consolidated revenues. This change is expected to impact future sales values and will reduce operating cash flows in both the current and subsequent periods. In response, management plans to continue its efforts to expand the present market area and increase sales to its existing customers and seek new customer opportunities. Management also intends to continue tight control over all expenditures and an increased emphasis on inventory and production management. This will lead to decreased labor needs and the discontinued use of temporary labor. Management plans to make sales price adjustments in the future as necessary to correspond with current contribution margins. During the quarter ended February 28, 2026, the Company was able to modify terms of its debt to extend the maturity and require interest only payments for the next 10 months. Management believes that the successful execution of its business plan coupled with the debt modifications will be sufficient to meet its funding requirements for the foreseeable future.

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. Management has determined that as of February 28, 2026, Greystone will not be able to realize the full effect of the deferred tax assets so a valuation allowance of $1,293,139 has been recorded. As of May 31, 2025, no valuation allowance was recorded. As of February 28, 2026 and May 31, 2025, there was $692,035 and $268,935, respectively of prepaid tax expenses related to fiscal year 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.