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, and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

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.

Cash

The Company maintains accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation (FDIC). Cash balances at times are in excess of FDIC insurance limits.

Accounts Receivable and Allowance for Credit Losses

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 credit losses based on a combination of specific customer circumstances, credit conditions and history of collections, and current economic conditions. Based on this evaluation, expected credit losses were not material as of May 31, 2026 and 2025.

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:

Leasehold improvements are amortized over the shorter of the useful lives or the term of the lease agreement. 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 consolidated balance sheets.

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 in the consolidated balance sheets. The lease liabilities are included in operating leases and financing leases (current and non-current) in the consolidated balance sheets.

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 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, lease expense is generally recognized on a straight-line basis over the lease term and recorded to cost of sales in the consolidated statements of operations.

For a sale-leaseback transaction, when the transaction involves real estate, sale-leaseback accounting shall be used by a seller-lessee only if the transaction includes all of the following a) normal leaseback; b) payment terms and provision that adequately demonstrate the buyer-lessor’s initial and continuing investment in the property; and c) payment terms and provisions that transfer all of the other risks and rewards of ownership as demonstrated by the absence of any other continuing involvement of the seller-lessee.

If a sale-leaseback includes an option for the seller-lessee to repurchase the asset, the exercise price of the option must be at fair value and substantially similar alternative assets must be readily available in the marketplace. If the underlying asset is real estate, which is considered unique, no substantially similar alternative asset exists. Therefore, the transaction does not qualify as a sale. Leasebacks that fail to qualify for sale accounting are accounted for as financing transactions, recognizing a financial obligation on the consolidated balance sheet.

In accordance with Accounting Standards Codification (ASC) 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 equipment, real estate and vehicles. 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.

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.

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

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 (Loss) Per Share

Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common stockholders by the weighted average number of common shares outstanding for the year. In arriving at income (loss) available to common stockholders, income (loss) attributable to non-controlling interest and preferred stock dividends are deducted from net income (loss) for the year. Diluted earnings per share is calculated by dividing net income (loss) attributable to common stockholders plus preferred dividends, unless the assumed conversion of the preferred stock is anti-dilutive, by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.

Reclassifications

Certain prior-year amounts have been reclassified to conform to the current-year presentation. During fiscal 2026, the Company refined its classification of depreciation expense based on the functional use of the underlying assets. Certain depreciation expense previously included in cost of goods sold has been reclassified to operating expenses. These reclassifications had no effect on previously reported operating income (loss), net income (loss), earnings (loss) per share, total assets, total liabilities, stockholders’ equity, or cash flows.

During the preparation of the fiscal 2026 consolidated financial statements, management determined that certain shares repurchased and retired during fiscal 2026 had been presented as treasury stock in previously reported interim periods. The accompanying consolidated financial statements reflect a reclassification of the interim period presentation to reflect the retirement of such shares. The reclassification affected the classification of amounts within stockholders’ equity and the number of issued shares reported but had no effect on total stockholders’ equity, net income (loss), earnings (loss) per share, cash flows, or results of operations.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The Company adopted ASU 2023-09 during fiscal 2026. The adoption did not impact the Company’s financial position, results of operations, or cash flows but resulted in expanded income tax disclosures.

Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public business entities to provide additional disclosures regarding specified categories of expenses included within relevant income statement captions. The standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that adoption of ASU 2024-03 will have on its financial statement disclosures. The Company does not expect the standard to have an impact on its consolidated financial position, results of operations, or cash flows, although it may require expanded disclosures in the notes to the consolidated financial statements.

The Company has evaluated other recently issued accounting standards, including ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, and ASU 2025-12, Codification Improvements, and does not currently expect their adoption to have a material impact on its consolidated financial statements.