----

----

| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

|   | For the fiscal year ended                         May 31, 2010                  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------|

----

| Oklahoma                                                            |   | 75-2954680                           |
|---------------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |

| 1613 East 15th Street, Tulsa, Oklahoma   |   | 74120      |
|------------------------------------------|--------|------------|
| (Address of principal executive offices) |   | (Zip Code) |

| Title of each class |   | Name of each exchange on which registered |
|---------------------|--------|-------------------------------------------|
|                |   |                                      |
| None                |   | None                                      |

----

----

----

| Large accelerated filer o | Accelerated filer o                  |
|---------------------------|--------------------------------------|
| Non-accelerated filer o   | Small reporting company  x |

----

| PART I                                                                     |                                                                                                               |   |
|----------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------|
|                                                                       |                                                                                                               |   |
| Item 1.                                                                    | Business                                                                                                           | 4      |
|                                                                       |                                                                                                               |   |
| Item 2.                                                                    | Properties                                                                                                         | 8      |
|                                                                       |                                                                                                               |   |
| Item 3.                                                                    | Legal Proceedings                                                                                                  | 8      |
|                                                                       |                                                                                                               |   |
|                                                                       |                                                                                                               |   |
| PART II                                                                    |                                                                                                               |   |
|                                                                       |                                                                                                               |   |
| Item 5.                                                                    | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 8      |
|                                                                       |                                                                                                               |   |
| Item 7.                                                                    | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 9      |
|                                                                       |                                                                                                               |   |
| Item 8.                                                                    | Financial Statements and Supplementary Data                                                                        | 19     |
|                                                                       |                                                                                                               |   |
| Item 9.                                                                    | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                               | 19     |
|                                                                       |                                                                                                               |   |
| Item 9A.            | Controls and Procedures                                                                                            | 19     |
|                                                                       |                                                                                                               |   |
| Item 9B.                                                                   | Other Information                                                                                                  | 21     |
|                                                                       |                                                                                                               |   |
|                                                                       |                                                                                                               |   |
| PART III                                                                   |                                                                                                               |   |
|                                                                       |                                                                                                               |   |
| Item 10.                                                                   | Directors, Executive Officers and Corporate Governance                                                             | 21     |
|                                                                       |                                                                                                               |   |
| Item 11.                                                                   | Executive Compensation                                                                                             | 24     |
|                                                                       |                                                                                                               |   |
| Item 12.                                                                   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                     | 25     |
|                                                                       |                                                                                                               |   |
| Item 13.                                                                   | Certain Relationships and Related Transactions, and Director Independence.                                         | 28     |
|                                                                       |                                                                                                               |   |
| Item 14.                                                                   | Principal Accounting Fees and Services                                                                             | 29     |
|                                                                       |                                                                                                               |   |
|                                                                       |                                                                                                               |   |
| PART IV                                                                    |                                                                                                               |   |
|                                                                       |                                                                                                               |   |
| Item 15.                                                                   | Exhibits, Financial Statement Schedules                                                                            | 30     |
|                                                                       |                                                                                                               |   |
|                                                                       | Signatures                                                                                                         | 36     |

----

| Item 1. | Business. |
|---------|-----------|

| ·   | 40” X 32” rackable pallet, |
|--------------------|----------------------------------------|

| ·   | 37” X 37” rackable pallet, |
|--------------------|----------------------------------------|

| ·   | 48” X 40” rackable pallet, |
|--------------------|----------------------------------------|

| ·   | 48” X 44” rackable pallet, |
|--------------------|----------------------------------------|

----

| ·   | 48” X 40” nestable pallet, |
|--------------------|----------------------------------------|

| ·   | 24”X 24” display pallet, |
|--------------------|--------------------------------------|

| ·   | 48”X 40” monoblock (one-piece) pallet, |
|--------------------|----------------------------------------------------|

| ·   | 48”X 45” stackable pallet, and |
|--------------------|--------------------------------------------|

| ·   | 120cm X 100cm nestable pallet. |
|--------------------|--------------------------------|

| ·   | Mid-duty(TM)Picture Frame – A picture frame, web-top pallet that utilizes a patented inter-locking design and is produced using a proprietary blend of recycled plastics.  It has a rackable capacity of 1,500 lbs., a dynamic load of 5,000 lbs., static load of 25,000 lbs., and weighs 50 lbs. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mid-duty(TM)Stackable – A web-top pallet that is produced using a proprietary blend of recycled plastics, has a dynamic load of 5,000 lbs., static load of 7,000 lbs., and weighs 32 lbs. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mid-duty(TM)3-Runner – A web-top pallet that utilizes a patented inter-locking design on a three runner bottom and is produced using a proprietary blend of recycled plastics.  It has a rackable load of 1,200 lbs., dynamic load of 5,000 lbs., static load of 12,000 lbs and weighs 41 lbs. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mid-duty Flat Deck – This pallet is the same as the Mid-duty picture frame,(TM) except it has a solid top and weighs 63 lbs. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| Item 2. | Properties. |
|---------|-------------|

| Item 3. | Legal Proceedings. |
|---------|--------------------|

| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
|---------|---------------------------------------------------------------------------------------------------------------------|

----

| Quarter Ending |   | High       |   | Low        |
|----------------|--------|------------|--------|------------|
| Aug. 31, 2008  |   | $0.28      |   | $0.10      |
| Nov. 30, 2008  |   |  0.13 |   |  0.05 |
| Feb. 28, 2009  |   |  0.11 |   |  0.04 |
| May 31, 2009   |   |  0.28 |   |  0.08 |
| Aug. 31, 2009  |   |  0.27 |   |  0.21 |
| Nov. 30, 2009  |   | 0.26       |   | 0.16       |
| Feb. 28, 2010  |   | 0.19       |   | 0.10       |
| May 31, 2010   |   | 0.19       |   | 0.10       |

| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations. |
|---------|----------------------------------------------------------------------------------------|

----

----

----

----

----

----

----

----

| Cash provided by operating activities |   | $      | 1,308,169  |   |
|---------------------------------------|--------|--------|------------|--------|
|                                  |   |   |       |   |
| Cash used in investing activities     |   |   | (342,518   | )      |
|                                  |   |   |       |   |
| Cash used in financing activities     |   |   | (1,076,667 | )      |

|  Total |   |  1 year |   |  2-3 years      |   |  4-5 years      |   | Over5 years |
|-------------|--------|--------------|--------|----------------------|--------|----------------------|--------|-------------|
| $11,714,200 |   | $9,005,904   |   | $  709,503 |   | $  528,625 |   | $1,470,168  |

----

----

| Item 8. | Financial Statements and Supplementary Data. |
|---------|----------------------------------------------|

| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
|---------|---------------------------------------------------------------------------------------|

| Item 9A.  | Controls and Procedures. |
|----------------|--------------------------|

----

| (i)   | Greystone lacks the necessary corporate accounting resources to maintain adequate segregation of duties. Reliance on these limited resources impairs Greystone’s ability to provide for proper segregation of duties and the ability to ensure consistently complete and accurate financial reporting, as well as disclosure controls and procedures. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   | Greystone, at the parent entity level, has limited resources to ensure that necessary internal controls are implemented and followed throughout the company, including its subsidiaries. Because of this limitation with respect to the ability to allocate sufficient resources to internal controls, material misstatements could occur and remain undetected, implementation of new accounting standards could be hindered and risk assessment and monitoring may not be addressed in a timely manner. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 9B. | Other Information. |
|----------|--------------------|

| Item 10. | Directors, Executive Officers and Corporate Governance. |
|----------|---------------------------------------------------------|

| Name                  |   | Position                                                    |   | Term as DirectorExpires |
|-----------------------|--------|-------------------------------------------------------------|--------|-------------------------|
| Warren F. Kruger      |   | President, Chief Executive Officer and Director             |   | 2010                    |
| Robert B. Rosene, Jr. |   | Director                                                    |   | 2010                    |
| William W. Rahhal     |   | Interim Chief Financial OfficerEffective January 13, 2010   |   | N/A                     |
| Robert H. Nelson      |   | Chief Financial Officer,Resigned Effective October 24, 2009 |   | N/A                     |
| Robert Noland         |   | Senior Vice President                                       |   | N/A                     |

----

----

----

| Item 11. | Executive Compensation. |
|----------|-------------------------|

| Name andPrincipal Position                                                        | Fiscal YearEnding May 31, | Salary                     | Bonus        |  OptionAwards | NonqualifiedDeferredCompensationEarnings |
|-----------------------------------------------------------------------------------|---------------------------|----------------------------|--------------|--------------------|------------------------------------------|
| Warren F. Kruger,    President and Chief Executive Officer    | 20102009             | $120,000$120,000           | -0--0-  | -0-250,000         | 120,000 1120,000 1                  |
|  Robert H. Nelson, Chief Financial Officer, through 10/24/2009               |  20102009            |  $ 12,692$ 30,000     |  -0--0- |  -0--0-       |                                     |
|  William W. Rahhal,Interim Chief FinancialOfficer, effective 1/13/2010  |   2010     |   $ 26,077  |         |               |                                     |
| Robert NolandSenior Vice President                                                | 20102009                  | $130,000$130,000           | -0--0-       | -0--0-             |                                     |

----

| Name              | Number ofSecuritiesUnderlyingUnexercisedOptions –Exercisable                                                                                                                                  | Number ofSecuritiesUnderlyingUnexercisedOptions –Unexercisable | OptionExercisePrice   | OptionExpirationDate                |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|-----------------------|-------------------------------------|
|              |                                                                                                                                                                                                |                                                                 |                  |                                |
| Warren F. Kruger  | 100,000  25,000150,000           187,500                | -0--0--0-62,500                                                      | $3.125$1.60$0.55$0.40 | 4/11/20126/26/20124/1/20132/28/2014 |
|              |                                                                                                                                                                                                |                                                                 |                  |                                |
| William W. Rahhal |            100,000                                                | -0-                                                                  | $0.55                 | 4/1/2013                            |
|              |                                                                                                                                                                                                |                                                                 |                  |                                |
| Robert Noland     | 150,000                                                                                                                                                                                        | 50,000                                                               | $0.40                 | 2/28/2014                           |

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
|----------|-------------------------------------------------------------------------------------------------|

----

|                                                       |   | (a)                                                                                      |      |   | (b)                                                                      |   |   | (c)                                                                                                                                     |   |
|------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|-----------|--------|--------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|
| Plan Category                                              |   | Number of securities to beissued upon exerciseof outstanding options,warrants and rights |      |   | Weighted-averageexercise price ofoutstanding options,warrants and rights |   |   | Number of securities remainingavailable for future issuanceunder equity compensationplans (excluding securitiesreflected in column (a)) |   |
| Equity compensation plans approved by security holders     |   |                                                                                     | 1,970,000 |   |                                                                     | $      | 1.01   |                                                                                                                                    |   |   | 18,005,000 |   |
|                                                       |   |                                                                                     |      |   |                                                                     |   |   |                                                                                                                                    |   |   |   |   |
| Equity compensation plans not approved by security holders |   |                                                                                     | -0-       |   |                                                                     |   | N/A    |                                                                                                                                    |   |   | -0- |   |
|                                                       |   |                                                                                     |      |   |                                                                     |   |   |                                                                                                                                    |   |   |   |   |
| Total                                                      |   |                                                                                     | 1,970,000 |   |                                                                     | $      | 1.01   |                                                                                                                                    |   |   | 18,005,000 |   |

| Name and Address ofBeneficial Owner                                                   | Amount and Nature ofBeneficial Owner(1) |  Percent of Class(2)  |
|---------------------------------------------------------------------------------------|-----------------------------------------|---------------------------------|
| GLOG Investment, L.L.C. 1613 E. 15th StreetTulsa, OK 74160                  | 3,333,333(3)                            | 11.3%                           |
| Warren F. KrugerChairman, President and CEO1613 East 15th StreetTulsa, OK 74120  | 10,023,388(4)                           | 33.5%                           |

----

| William W. RahhalInterim Chief Financial Officer1613 East 15th StreetTulsa, OK 74120              | 152,883(5)        |   0.6% |
|--------------------------------------------------------------------------------------------------------|-------------------|------------------|
| Robert B. Rosene, Jr.Director1323 E. 71st Street, Suite 300Tulsa, OK 74136                        | 6,179,284(6)      | 20.9%            |
| Robert H. NelsonChief Financial Officer, until 10/14/091613 E. 15th StreetTulsa, OK 74120         |  285,714 (7) | 1.1%             |
| Robert C. NolandSenior Vice President of Sales and Marketing1613 East 15th StreetTulsa, OK 74120  | 150,000(8)        | 0.6%             |
| William Pritchard1437 S. BoulderTulsa, OK 74119                                                   | 1,436,029(9)      | 5.4%             |
| All Directors & Officers as a Group 5 persons)                                                     | 13,457,936(10)    | 44.5%            |

| (1) | The number of shares beneficially owned by each holder is calculated in accordance with the rules of the Commission, which provide that each holder shall be deemed to be a beneficial owner of a security if that holder has the right to acquire beneficial ownership of the security within 60 days through options, warrants or the conversion of another security; provided, however, if such holder acquires any such rights in connection with or as a participant in any transaction with the effect of changing or influencing control of the issuer, then immediately upon such acquisition, the holder will be deemed to be the beneficial owner of the securities.  The number the shares of common stock beneficially owned by each holder includes common stock directly owned by such holder and the number of shares of common stock such holder has the right to acquire upon the conversion of 2003 preferred stock and/or upon the exercise of certain options or warrants. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The percentage ownership for each holder is calculated in accordance with the rules of the Commission, which provide that any shares a holder is deemed to beneficially own by virtue of having a right to acquire shares upon the conversion of warrants, options or other rights, or upon the conversion of preferred stock or other rights are considered outstanding solely for purposes of calculating such holder's percentage ownership. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The total includes 3,333,333 shares of common stock deemed to be owned directly by GLOG Investment, L.L.C. by virtue of its ownership of the 2003 Preferred Stock, which is convertible into common stock.  GLOG is wholly owned by the following officers and/or directors of the Registrant: Warren F. Kruger (Chairman, President and CEO) and Robert B. Rosene, Jr. (Director).  By virtue of their ownership of and control over GLOG, these shares are also included in the number of shares beneficially owned by each of Warren F. Kruger and Robert B. Rosene, Jr. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | The total includes: (i) 6,201,755 shares of common stock beneficially owned directly by Warren Kruger; (ii) 19,000 shares held of record by Yorktown; (iii) 462,500 shares of common stock that Warren Kruger directly has the right to acquire in connection with options; (iv) 6,800 shares of common stock that Warren Kruger holds as custodian for minor children; and (vii) 3,333,333 shares that GLOG Investment, L.L.C. has the right to acquire upon conversion of the 2003 preferred stock.  By virtue of his ability to control GLOG Investment, L.L.C., Warren Kruger is also deemed to beneficially own the shares directly owned by GLOG. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | The total includes: (i) 52,883 shares of common stock that William Rahhal which owns as a joint tenant and (ii) 100,000 shares of common stock that Mr. Rahhal has the right to acquire in connection with options. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (6) | The total includes: (i) 2,770,951 shares of common stock beneficially owned directly by Robert Rosene; (ii) 75,000 shares of common stock that Robert Rosene has the right to acquire with options; and (iii) 3,333,333 shares that GLOG Investment, L.L.C. has the right to acquire upon conversion of the 2003 preferred stock.  By virtue of his ability to control GLOG, Robert Rosene is also deemed to beneficially own the shares directly owned by GLOG. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | The total includes 285,714 shares of common stock beneficially owned by Mr. Nelson's wife, of which he disclaims any interest. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

| (8)  | The total includes 150,000 shares of common stock that Robert Noland has the right to acquire in connection with options. |
|-----------|---------------------------------------------------------------------------------------------------------------------------|

| (9) | The total includes: (i) 1,061,029 shares of common stock beneficially owned directly by William Pritchard; and (ii) 375,000 shares of common stock that William Pritchard has the right to acquire with options. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | The total includes: (i) 9,051,389 outstanding shares; (ii) 787,500 shares issuable upon exercise of vested stock options; and (iii) 3,333,333 shares that GLOG Investment, L.L.C. has the right to acquire upon conversion of the 2003 preferred stock.  By virtue of their ownership of and control over GLOG, these shares are also included in the number of shares beneficially owned by the directors and officers as a group. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
|----------|---------------------------------------------------------------------------|

----

| Item 14.  | Principal Accounting Fees and Services. |
|----------------|-----------------------------------------|

| Fee Category       |   | Fiscal 2010 Fees |   |   | Fiscal 2009 Fees |   |
|--------------------|--------|------------------|--------|--------|------------------|--------|
|               |   |             |   |   |             |   |
| Audit Fees(1)      |   | $                | 85,000 |   |             | $      | 85,000 |   |
| Audit-Related Fees |   |             | 0      |   |             |   | 0 |   |
| Tax Fees           |   |             | 0      |   |             |   | 0 |   |
| All Other Fees     |   |             | 0      |   |             |   | 0 |   |
|               |   |             |   |   |             |   |   |   |
| Total Fees         |   | $                | 85,000 |   |             | $      | 85,000 |   |

----

| Item 15. | Exhibits, Financial Statement Schedules. |
|----------|------------------------------------------|

| (a)   | (1)          Consolidated Financial Statements |
|-----------------|--------------------------------------------------------------------------------------------------|

| Exhibit No. | Description |
|-------------|-------------|
| 2.1    | Certificate of Ownership and Merger Merging PalWeb Corporation, a Delaware corporation, into PalWeb Oklahoma Corporation, an Oklahoma corporation, filed with the Delaware Secretary of State on May 2, 2002 (incorporated herein by reference to Exhibit 2.1 of the Company's Form 8-K12G3 dated May 2, 2002, which was filed with the SEC on May 24, 2002). |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                          |
| 2.2    | Certificate of Ownership and Merger Merging PalWeb Corporation, a Delaware corporation, into PalWeb Oklahoma Corporation, an Oklahoma corporation, filed with the Oklahoma Secretary of State on May 2, 2002 (incorporated herein by reference to Exhibit 2.2 of the Company's Form 8-K12G3 dated May 2, 2002, which was filed with the SEC on May 24, 2002). |

----

| Exhibit No. | Description |
|-------------|-------------|

| 3.1    | Certificate of Incorporation of PalWeb Oklahoma Corporation filed with the Oklahoma Secretary of State on May 2, 2002 (incorporated herein by reference to Exhibit 3.1 of the Company's Form 8-K12G3 dated May 2, 2002, which was filed with the SEC on May 24, 2002).                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                           |
| 3.2    | Bylaws of PalWeb Oklahoma Corporation as adopted on May 2, 2002 (incorporated herein by reference to Exhibit 3.2 of the Company's Form 8-K12G3 dated May 2, 2002, which was filed with the SEC on May 24, 2002).                                                                                               |
|   |                                                                                                                                                                                                                                                                                                           |
| 4.1    | Certificate of Incorporation of PalWeb Oklahoma Corporation filed with the Oklahoma Secretary of State on May 2, 2002 (included in Exhibit 3.1).                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                           |
| 4.2    | Certificate of the Designation, Preferences, Rights and Limitations of PalWeb Corporation's Series 2003 Cumulative Convertible Senior Preferred Stock (incorporated herein by reference to Exhibit 4.1 of the Company's Form 8-K dated September 8, 2003, which was filed with the SEC on September 23, 2003). |
|   |                                                                                                                                                                                                                                                                                                           |
| 4.3    | Certificate of Ownership and Merger Merging Greystone Logistics, Inc., into PalWeb Corporation filed with the Oklahoma Secretary of State on March 18, 2005 (incorporated herein by reference to Exhibit 4.1 of the Company's Form 8-K dated March 18, 2005, which was filed with the SEC on March 24, 2005).  |
|   |                                                                                                                                                                                                                                                                                                           |
| 10.1   | License Agreement by and between Westgate Capital Company, L.L.C., and PalWeb Corporation dated April 20, 2001 (incorporated herein by reference to Exhibit 10.21 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2002, which was filed with the SEC on September 13, 2002).                    |
|   |                                                                                                                                                                                                                                                                                                           |
| 10.2** | Form of Indemnity Agreement between Members of the Board of Directors and PalWeb Corporation (incorporated herein by reference to Exhibit 10.30 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2002, which was filed with the SEC on September 13, 2002).                                      |
|   |                                                                                                                                                                                                                                                                                                           |
| 10.3   | Indemnity Agreement by and between The Union Group, Inc., and Cabec Energy Corp. dated August 31, 1998 (incorporated herein by reference to Exhibit 10.6 of Amendment No. 3 to the Company's Form 10-SB, which was filed on May 2, 2000).                                                                      |
|   |                                                                                                                                                                                                                                                                                                           |
| 10.4** | Stock Option Plan of PalWeb Corporation (effective May 11, 2001), as amended (incorporated herein by reference to Exhibit 10.32 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2002, which was filed with the SEC on September 13, 2002).                                                      |
|   |                                                                                                                                                                                                                                                                                                           |
| 10.5** | Form of Non-Qualified Stock Option Agreement (incorporated herein by reference to Exhibit 99.8 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2001, which was filed with the SEC on September 13, 2001).                                                                                       |

----

| Exhibit No. | Description |
|-------------|-------------|

| 10.6**      | Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 99.9 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2001, which was filed with the SEC on September 13, 2001).                                                                                                          |
|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.7**      | Form of Nonemployee Director Stock Option Agreement (incorporated herein by reference to Exhibit 99.10 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2001, which was filed with the SEC on September 13, 2001).                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.8 **     | Form of Employee Director Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.36 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2002, which was filed with the SEC on September 13, 2002).                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.9        | Assignment and Indemnity Agreement between the Company and Paul A. Kruger (regarding transfer of stock of PP Financial, Inc.) dated May 30, 2002 (incorporated herein by reference to Exhibit 10.39 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2002, which was filed with the SEC on September 13, 2002). |
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.10       | Asset Purchase Agreement between Greystone Plastics, Inc. and Greystone Manufacturing, L.L.C. dated September 3, 2003 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K dated September 8, 2003, which was filed with the SEC on September 23, 2003).                                               |
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.11       | Real Estate Note in the amount of $2,500,000 payable to Greystone Plastics, Inc. (incorporated herein by reference to Exhibit 10.3 of the Company's Form 8-K dated September 8, 2003, which was filed with the SEC on September 23, 2003).                                                                                    |
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.12**     | Employment Agreement between PalWeb Corporation and Warren Kruger dated August 13, 2003 (incorporated herein by reference to Exhibit 10.35 of the Company's Form 10-KSB for the Fiscal Year Ended May 31, 2004, which was filed with the SEC on August 30, 2004).                                                             |
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.13  | Loan Agreement dated March 4, 2005, by and among Greystone Manufacturing, L.L.C., GLOG Investment, L.L.C., The F&M Bank & Trust Company and PalWeb Corporation (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K dated March 4, 2005, which was filed with the SEC on March 10, 2005).      |
|        |                                                                                                                                                                                                                                                                                                                          |
| 10.14       | Promissory Note dated November 30, 2004, in the amount of $1,500,000 issued by Greystone Manufacturing, L.L.C., to The F&M Bank & Trust Company (incorporated herein by reference to Exhibit 10.2 of the Company's Form 8-K dated March 4, 2005, which was filed with the SEC on March 10, 2005).                     |

----

| Exhibit No. | Description |
|-------------|-------------|

| 10.15  | Term Note dated March 4, 2005, in the amount of $5,500,000 issued by Greystone Manufacturing, L.L.C., to The F&M Bank & Trust Company (incorporated herein by reference to Exhibit 10.3 of the Company's Form 8-K dated March 4, 2005, which was filed with the SEC on March 10, 2005).                                                                |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                           |
| 10.16  | Security Agreement dated March 4, 2005, by and between Greystone Manufacturing, L.L.C., and The F&M Bank & Trust Company (incorporated herein by reference to Exhibit 10.4 of the Company's Form 8-K dated March 4, 2005, which was filed with the SEC on March 10, 2005).                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                           |
| 10.17  | Mortgage Agreement dated March 4, 2005, by and between Greystone Manufacturing, L.L.C., and The F&M Bank & Trust Company (incorporated herein by reference to Exhibit 10.5 of the Company's Form 8-K dated March 4, 2005, which was filed with the SEC on March 10, 2005).                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                           |
| 10.18  | Guaranty of PalWeb Corporation dated March 4, 2005 (incorporated herein by reference to Exhibit 10.6 of the Company's Form 8-K dated March 4, 2005, which was filed with the SEC on March 10, 2005).                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                           |
| 10.19  | Industrial Lease dated as of July 1, 2004, by and between Greystone Properties, LLC, and Greystone Manufacturing, L.L.C. (incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-QSB for the Quarterly Period Ended February 28, 2005, which was filed with the SEC on April 20, 2005).                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                           |
| 10.20  | Equipment Rental Contract dated as of November 1, 2004, by and between NYOK Partners and Greystone Manufacturing, L.L.C. relating to certain grinding equipment (incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-QSB for the Quarterly Period Ended February 28, 2005, which was filed with the SEC on April 20, 2005).              |
|   |                                                                                                                                                                                                                                                                                                                                                           |
| 10.21  | Equipment Rental Contract dated as of November 1, 2004, by and between NYOK Partners and Greystone Manufacturing, L.L.C. relating to plastic injection molding machine (incorporated herein by reference to Exhibit 10.3 of the Company's Form 10-QSB for the Quarterly Period Ended February 28, 2005, which was filed with the SEC on April 20, 2005).       |
|   |                                                                                                                                                                                                                                                                                                                                                           |
| 10.22  | Promissory Note dated as of December 15, 2005 in the amount of $2,066,000 issued by Greystone Logistics, Inc. and Greystone Manufacturing, L.L.C. to Robert B. Rosene, Jr. (incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-QSB for the Quarterly Period Ended November 30, 2005, which was filed with the SEC on January 17, 2006). |

----

| Exhibit No. | Description |
|-------------|-------------|

| 10.23      | Promissory Note dated as of December 15, 2005 in the amount of $527,716 issued by Greystone Logistics, Inc. and Greystone Manufacturing, L.L.C. to Warren F. Kruger, Jr. (incorporated herein by reference to Exhibit 10.3 of the Company's Form 10-QSB for the Quarterly Period Ended November 30, 2005, which was filed with the SEC on January 17, 2006).                                                                                                                               |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.24      | Security Agreement dated as of December 15, 2005 by and between Greystone Logistics, Inc. and Greystone Manufacturing, L.L.C. and Robert B. Rosene, Jr. relating to Promissory Note in the amount of $2,066,000 (incorporated herein by reference to Exhibit 10.5 of the Company's Form 10-QSB for the Quarterly Period Ended November 30, 2005, which was filed with the SEC on January 17, 2006).                                                                                        |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.25      | Security Agreement dated as of December 15, 2005 by and between Greystone Logistics, Inc. and Greystone Manufacturing, L.L.C. and Warren F. Kruger, Jr. relating to Promissory Note in the amount of $527,716 (incorporated herein by reference to Exhibit 10.6 of the Company's Form 10-QSB for the Quarterly Period Ended November 30, 2005, which was filed with the SEC on January 17, 2006).                                                                                          |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.26      | Yorktown Management & Financial Services, LLC Molds, Grinder, Ancillary Resin Handling Equipment, Bumper Contract, Raw Materials and Finished Goods Inventory Purchase Agreement and Bill of Sale dated as of February 7, 2007, by and between Greystone Logistics, Inc. and Yorktown Management & Financial Services, LLC (incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K dated February 7, 2007, which was filed with the SEC on February 27, 2007). |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.27      | Pallet Molds Lease Agreement dated as of February 7, 2007, by and between Greystone Manufacturing, LLC and Yorktown Management & Financial Services, LLC (incorporated herein by reference to Exhibit 10.2 of the Company's Form 8-K dated February 7, 2007, which was filed with the SEC on February 27, 2007).                                                                                                                                                                       |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 11.1       | Computation of Income Per Share is in Note 1 in the Notes to the Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                     |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 21.1       | Subsidiaries of Greystone Logistics, Inc. (submitted herewith).                                                                                                                                                                                                                                                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 23.1       | Consent of HoganTaylor LLP (submitted herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 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-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted herewith).                                                                                                                                                                                                    |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2  | Certification of Interim 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-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (submitted herewith).                                                                                                                                                                                            |

----

| Exhibit No. | Description |
|-------------|-------------|

| 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 (submitted herewith).         |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                            |
| 32.2   | Certification of Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (submitted herewith). |

----

|                                                     | GREYSTONE LOGISTICS, INC. |                                  |
|----------------------------------------------------------|---------------------------|---------------------------------------|
|                                                     | (Registrant)              |                                  |
|                                                     |                      |                                  |
|                                                     |                      |                                  |   |
| Date:        09/14/10 |                      | /s/ Warren F. Kruger             |   |
|                                                     |                      | Warren F. Kruger                      |   |
|                                                     |                      | President and Chief Executive Officer |   |
|                                                     |                      |                                  |   |

|                                                     |   |                                            |   |
|----------------------------------------------------------|--------|-------------------------------------------------|--------|
| Date:        09/14/10 |   | /s/ Warren F. Kruger                       |   |
|                                                     |   | Warren F. Kruger                                |   |
|                                                     |   | Director, President and Chief Executive Officer |   |
|                                                     |   |                                            |   |

|                                                     |   |                           |   |
|----------------------------------------------------------|--------|--------------------------------|--------|
| Date:        09/14/10 |   | /s/ Robert B. Rosene, Jr. |   |
|                                                     |   | Robert B. Rosene, Jr.          |   |
|                                                     |   | Director                       |   |
|                                                     |   |                           |   |

|                                                     |   |                            |   |
|----------------------------------------------------------|--------|---------------------------------|--------|
| Date:        09/14/10 |   | /s/ William W. Rahhal      |   |
|                                                     |   | William W. Rahhal               |   |
|                                                     |   | Interim Chief Financial Officer |   |
|                                                     |   |                            |   |

----

| Report of Independent Registered Public Accounting Firm     | F-1    |
|-------------------------------------------------------------|--------|
|                                                        |   |
| Consolidated Balance Sheets                                 | F-2    |
|                                                        |   |
| Consolidated Statements of Income                           | F-3    |
|                                                        |   |
| Consolidated Statements of Changes in Stockholders' Deficit | F-4    |
|                                                        |   |
| Consolidated Statements of Cash Flows                       | F-5    |
|                                                        |   |
| Notes to Consolidated Financial Statements                  | F-6    |

----

----

|                                                                                                                          |   | May 31, |        |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------|-------------|
|                                                                                                                          |   | 2010    |        |   | 2009 |   |
| Assets                                                                                                                        |   |    |        |   |   |   |
| Current Assets:                                                                                                               |   |    |        |   |   |   |
|       Cash                                                                                      |   | $       | 163,749     |   |   | $ | 274,765 |   |
|   Accounts receivable, net of allowance for doubtful accounts of $-0- and $60,578 at May 31, 2010 and 2009, respectively |   |    | 1,605,160   |   |   |   | 952,352 |   |
|       Inventory                                                                                 |   |    | 649,943     |   |   |   | 1,061,569 |   |
|       Prepaid expenses                                                                          |   |    | 68,673      |   |   |   | 67,382 |   |
| Total Current Assets                                                                                                          |   |    | 2,487,525   |   |   |   | 2,356,068 |   |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Property, Plant and Equipment, net of accumulated depreciation                                                                |   |    | 7,545,205   |   |   |   | 8,208,888 |   |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Other Assets:                                                                                                                 |   |    |        |   |   |   |   |   |
| Intangible assets, net of accumulated amortization                                                                            |   |    | 95,176      |   |   |   | 103,655 |   |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Total Assets                                                                                                                  |   | $       | 10,127,906  |   |   | $ | 10,668,611 |   |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Liabilities and Deficit                                                                                                       |   |    |        |   |   |   |   |   |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Current Liabilities:                                                                                                          |   |    |        |   |   |   |   |   |
| Current portion of long-term debt                                                                                             |   | $       | 9,005,904   |   |   | $ | 9,339,343 |   |
| Advances payable - related party                                                                                              |   |    | 851,581     |   |   |   | 1,010,081 |   |
| Accounts payable and accrued expenses                                                                                         |   |    | 1,301,344   |   |   |   | 1,158,513 |   |
| Accounts payable and accrued expenses - related parties                                                                       |   |    | 1,660,195   |   |   |   | 1,834,352 |   |
| Preferred dividends payable                                                                                                   |   |    | 2,282,122   |   |   |   | 1,958,012 |   |
| Total Current Liabilities                                                                                                     |   |    | 15,101,146  |   |   |   | 15,300,301 |   |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Long-Term Debt, net of current portion                                                                                        |   |    | 2,708,296   |   |   |   | 3,249,953 |   |
| Deferred Income                                                                                                               |   |    | —     |   |   |   | 32,000 |   |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Deficit:                                                                                                                      |   |    |        |   |   |   |   |   |
| Preferred stock, $0.0001 par value, cumulative, 20,750,000                                                                    |   |    |        |   |   |   |   |   |
|      shares authorized, 50,000 shares issued and outstanding,                                             |   |    |        |   |   |   |   |   |
|      liquidation preference of $5,000,000                                                                 |   |    | 5           |   |   |   | 5 |   |
| Common stock, $0.0001 par value, 5,000,000,000 shares                                                                         |   |    |        |   |   |   |   |   |
|      authorized, 26,111,201 issued and outstanding                                                        |   |    | 2,611       |   |   |   | 2,611 |   |
| Additional paid-in capital                                                                                                    |   |    | 53,017,317  |   |   |   | 52,921,349 |   |
| Accumulated deficit                                                                                                           |   |    | (61,527,891 | ) |   |   | (61,625,637 | ) |
| Total Greystone Stockholders' Deficit                                                                                         |   |    | (8,507,958  | ) |   |   | (8,701,672 | ) |
| Non-controlling interest                                                                                                      |   |    | 826,422     |   |   |   | 788,029 |   |
| Total Deficit                                                                                                                 |   |    | (7,681,536  | ) |   |   | (7,913,643 | ) |
|                                                                                                                          |   |    |        |   |   |   |   |   |
| Total Liabilities and Deficit                                                                                                 |   | $       | 10,127,906  |   |   | $ | 10,668,611 |   |

----

|                                                  |   | Year Ended May 31, |       |
|-------------------------------------------------------|--------|--------------------|------------|
|                                                  |   | 2010               |       |   | 2009 |   |
|                                                  |   |               |       |   |   |   |
| Sales                                                 |   | $                  | 16,230,555 |   |   | $ | 16,690,708 |   |
|                                                  |   |               |       |   |   |   |   |   |
| Cost of Sales                                         |   |               | 13,145,667 |   |   |   | 13,125,041 |   |
|                                                  |   |               |       |   |   |   |   |   |
| Gross Profit                                          |   |               | 3,084,888  |   |   |   | 3,565,667 |   |
|                                                  |   |               |       |   |   |   |   |   |
| General, Selling and Administration Expenses          |   |               | 2,058,302  |   |   |   | 1,852,126 |   |
|                                                  |   |               |       |   |   |   |   |   |
| Operating Income                                      |   |               | 1,026,586  |   |   |   | 1,713,541 |   |
|                                                  |   |               |       |   |   |   |   |   |
| Other Income (Expense):                               |   |               |       |   |   |   |   |   |
| Other income                                          |   |               | 304,793    |   |   |   | 187,705 |   |
| Interest expense                                      |   |               | (828,059   | ) |   |   | (988,845 | ) |
| Total Other Expense, net                              |   |               | (523,266   | ) |   |   | (801,140 | ) |
|                                                  |   |               |       |   |   |   |   |   |
| Net Income                                            |   |               | 503,320    |   |   |   | 912,401 |   |
|                                                  |   |               |       |   |   |   |   |   |
| Less: Income Attributable to Non-Controlling Interest |   |               | (81,464    | ) |   |   | (70,161 | ) |
|                                                  |   |               |       |   |   |   |   |   |
| Preferred Dividends                                   |   |               | (324,110   | ) |   |   | (360,513 | ) |
|                                                  |   |               |       |   |   |   |   |   |
| Net Income Attributable to Common Stockholders        |   | $                  | 97,746     |   |   | $ | 481,727 |   |
|                                                  |   |               |       |   |   |   |   |   |
| Income Available to Common Stockholders               |   |               |       |   |   |   |   |   |
| Per Share of Common Stock - Basic and Diluted         |   | $                  | 0.00       |   |   | $ | 0.02 |   |
|                                                  |   |               |       |   |   |   |   |   |
| Weighted Average Shares of Common Stock Outstanding   |   |               |       |   |   |   |   |   |
| Basic and Diluted                                     |   |               | 26,111,000 |   |   |   | 26,111,000 |   |

----

|                                             |   |            |    |   |         |   |    | Additional |   |   |        |   |   | Total         |    |   | Non-        |   |       |    |   |
|--------------------------------------------------|--------|-----------------|---------|--------|--------------|--------|---------|------------|--------|--------|-------------|--------|--------|---------------|---------|--------|-------------|--------|------------|---------|--------|
|                                             |   | Preferred Stock |    |   | Common Stock |   |    | Paid-In    |   |   | Accumulated |   |   | Stockholders' |    |   | Controlling |   |       | Total   |   |
|                                             |   | Shares          |    |   | Amount       |   |    | Shares     |   |   | Amount      |   |   | Capital       |    |   | Deficit     |   |       | Deficit |   |   | Interest |   |   | Deficit |   |
| Balances, May 31, 2008                           |   |            | 50,000  |   |         | $      | 5       |       |   |   | 26,111,201  |   |   | $             | 2,611   |   |        | $      | 52,825,381 |    |   | $ | (62,107,364 | ) |   | $ | (9,279,367 | ) |   | $ | 708,872 |   |   | $ | (8,570,495 | ) |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock based compensation                         |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | 95,968     |    |   |   | — |   |   |   | 95,968 |   |   |   | — |   |   |   | 95,968 |   |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred dividends accrued                      |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | (360,513 | ) |   |   | (360,513 | ) |   |   | — |   |   |   | (360,513 | ) |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-controlling interest contribution            |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | — |   |   |   | — |   |   |   | 8,996 |   |   |   | 8,996 |   |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income attributable to non-controlling interest  |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | — |   |   |   | — |   |   |   | 70,161 |   |   |   | 70,161 |   |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income attributable to Greystone Logistics, Inc. |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | 842,240 |   |   |   | 842,240 |   |   |   | — |   |   |   | 842,240 |   |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, May 31, 2009                           |   |            | 50,000  |   |         |   | 5       |       |   |   | 26,111,201  |   |   |          | 2,611   |   |        |   | 52,921,349 |    |   |   | (61,625,637 | ) |   |   | (8,701,672 | ) |   |   | 788,029 |   |   |   | (7,913,643 | ) |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock based compensation                         |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | 95,968     |    |   |   | — |   |   |   | 95,968 |   |   |   | — |   |   |   | 95,968 |   |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred dividends accrued                      |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | (324,110 | ) |   |   | (324,110 | ) |   |   | — |   |   |   | (324,110 | ) |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-controlling interest distribution            |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | — |   |   |   | — |   |   |   | (43,071 | ) |   |   | (43,071 | ) |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income attributable to non-controlling interest  |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | — |   |   |   | — |   |   |   | 81,464 |   |   |   | 81,464 |   |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income attributalble toGreystone Logistics, Inc. |   |            | — |   |         |   | — |       |   |   | —     |   |   |          | — |   |        |   | —    |    |   |   | 421,856 |   |   |   | 421,856 |   |   |   | — |   |   |   | 421,856 |   |
|                                             |   |            |    |   |         |   |    |       |   |   |        |   |   |          |    |   |        |   |       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, May 31, 2010                           |   |            | 50,000  |   |         | $      | 5       |       |   |   | 26,111,201  |   |   | $             | 2,611   |   |        | $      | 53,017,317 |    |   | $ | (61,527,891 | ) |   | $ | (8,507,958 | ) |   | $ | 826,422 |   |   | $ | (7,681,536 | ) |

----

|                                                                             |   | Year Ended May 31, |       |
|----------------------------------------------------------------------------------|--------|--------------------|------------|
|                                                                             |   | 2010               |       |   | 2009 |   |
|                                                                             |   |               |       |   |   |   |
| Cash Flows from Operating Activities:                                            |   |               |       |   |   |   |
| Net Income                                                                       |   | $                  | 503,320    |   |   | $ | 912,401 |   |
| Adjustments to reconcile net income to net cash provided by operating activities |   |               |       |   |   |   |   |   |
| Depreciation and amortization                                                    |   |               | 1,017,690  |   |   |   | 975,577 |   |
| Stock based compensation                                                         |   |               | 95,968     |   |   |   | 95,968 |   |
| Allowance for doubtful accounts                                                  |   |               | —    |   |   |   | 60,578 |   |
| Changes in accounts receivable                                                   |   |               | (652,808   | ) |   |   | 274,018 |   |
| Changes in inventory                                                             |   |               | 411,626    |   |   |   | (162,084 | ) |
| Changes in prepaid expenses                                                      |   |               | (1,291     | ) |   |   | (6,268 | ) |
| Changes in accounts payable and accrued expenses                                 |   |               | (31,326    | ) |   |   | (882,311 | ) |
| Other                                                                            |   |               | (35,010    | ) |   |   | (44,705 | ) |
| Net cash provided by operating activities                                        |   |               | 1,308,169  |   |   |   | 1,223,174 |   |
|                                                                             |   |               |       |   |   |   |   |   |
| Cash Flows from Investing Activities:                                            |   |               |       |   |   |   |   |   |
| Purchase of property and equipment                                               |   |               | (342,518   | ) |   |   | (294,259 | ) |
| Net cash used in investing activities                                            |   |               | (342,518   | ) |   |   | (294,259 | ) |
|                                                                             |   |               |       |   |   |   |   |   |
| Cash Flows from Financing Activities:                                            |   |               |       |   |   |   |   |   |
| Proceeds from notes and advances payable                                         |   |               | 300,000    |   |   |   | 376,092 |   |
| Payments on notes and advances payable                                           |   |               | (1,333,596 | ) |   |   | (1,240,539 | ) |
| Non-controlling interest contribution (distribution)                             |   |               | (43,071    | ) |   |   | 8,996 |   |
| Cash used in financing activities                                                |   |               | (1,076,667 | ) |   |   | (855,451 | ) |
|                                                                             |   |               |       |   |   |   |   |   |
| Net Increase (Decrease) in Cash                                                  |   |               | (111,016   | ) |   |   | 73,464 |   |
| Cash, beginning of year                                                          |   |               | 274,765    |   |   |   | 201,301 |   |
|                                                                             |   |               |       |   |   |   |   |   |
| Cash, end of year                                                                |   | $                  | 163,749    |   |   | $ | 274,765 |   |

----

| Note 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|---------|--------------------------------------------|

----

|   | Plant buildings |   | 39 years |
|--------|-----------------|--------|----------|

|   | Production machinery and equipment | 5-10 years |
|--------|------------------------------------|------------|

|   | Office equipment & furniture & fixtures | 3-5 years |
|--------|-------------------------------------------------|-----------|

----

----

| Note 2.   | CONTINUATION AS A GOING CONCERN |
|---------------------|---------------------------------|

| Note 3.  | INVENTORY |
|---------------|-----------|

|            |   | 2010   |    |   | 2009   |   |
|-----------------|--------|--------|---------|--------|--------|--------|
| Raw materials   |   | $      | 331,539 |   |   | $      | 376,328 |   |
| Finished goods  |   |   | 318,404 |   |   |   | 685,241 |   |
|            |   |   |    |   |   |   |   |   |
| Total inventory |   | $      | 649,943 |   |   | $      | 1,061,569 |   |

| Note 4.  | PROPERTY, PLANT AND EQUIPMENT |
|---------------|-------------------------------|

|                               |   | 2010   |       |   | 2009   |   |
|------------------------------------|--------|--------|------------|--------|--------|--------|
| Production machinery and equipment |   | $      | 7,777,025  |   |   | $      | 7,827,149 |   |
| Building and land                  |   |   | 4,809,713  |   |   |   | 4,803,368 |   |
| Furniture and fixtures             |   |   | 141,988    |   |   |   | 235,856 |   |
|                               |   |   | 12,728,726 |   |   |   | 12,866,373 |   |
| Less: accumulated depreciation     |   |   | (5,183,521 | )      |   |   | (4,657,485 | ) |
|                               |   |   |       |   |   |   |   |   |
|                               |   | $      | 7,545,205  |   |   | $      | 8,208,888 |   |

----

| Note 5. | OTHER ASSETS |
|---------|--------------|

|                     |   | 2010   |    |   | 2009   |   |
|--------------------------|--------|--------|---------|--------|--------|--------|
| Patents                  |   | $      | 190,738 |   |   | $      | 190,738 |   |
| Deposits                 |   |   | 3,273   |   |   |   | 263 |   |
| Accumulated amortization |   |   | (98,835 | )      |   |   | (87,346 | ) |
|                     |   |   |    |   |   |   |   |   |
| Total                    |   | $      | 95,176  |   |   | $      | 103,655 |   |

| Note 6.  | LONG-TERM DEBT |
|---------------|----------------|

|                                                                                                                                                                                         |   | 2010   |      |   | 2009   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Note payable to F&M Bank & Trust Company, bank’s base rate of interest but not less than 4.5%, due October, 15, 2010, payable in monthly installments of $60,577 plus interest |   | $      | 4,600,075 |   |   | $      | 4,705,846 |   |
|                                                                                                                                                                                         |   |   |      |   |   |   |   |   |
| Note payable to F&M Bank & Trust Company, bank’s base rate of interest but not less than 4.5%, due October 15, 2010                                                            |   |   | 1,261,000 |   |   |   | 1,461,000 |   |
|                                                                                                                                                                                         |   |   |      |   |   |   |   |   |
| Mortgage payable to Greystone Plastics, Inc., 7% interest, due September 7, 2018, payable in monthly installments of $13,889 plus accrued interest, secured by building                      |   |   | 1,402,738 |   |   |   | 1,569,417 |   |
|                                                                                                                                                                                         |   |   |      |   |   |   |   |   |
| Mortgage payable to Kansas City Life Insurance, 6.25% interest, due July 1, 2014, payable in monthly installments of $10,781, secured by building                                            |   |   | 1,213,877 |   |   |   | 1,265,616 |   |
|                                                                                                                                                                                         |   |   |      |   |   |   |   |   |
| Note payable to BancFirst, prime rate of interest plus 1%, due July 1, 2012 payable in monthly installments of $14,858, secured by equipment                                                 |   |   | 348,209   |   |   |   | 507,676 |   |
|                                                                                                                                                                                         |   |   |      |   |   |   |   |   |
| Note payable to F&M Bank & Trust Company, prime rate of interest, due March 15, 2011, payable in monthly installments of $12,205                                                     |   |   | 98,164    |   |   |   | 237,063 |   |
|                                                                                                                                                                                         |   |   |      |   |   |   |   |   |

----

| Note payable to Robert Rosene, 7.5% interest, due January15, 2011, unsecured  |   |   | 2,066,000  |   |   |   | 2,066,000  |   |
|-------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|
|                                                                          |   |   |       |   |   |   |       |   |
| Note payable to Warren Kruger, 7.5% interest, due January 15, 2011, unsecured |   |   | 527,716    |   |   |   | 527,716    |   |
|                                                                          |   |   |       |   |   |   |       |   |
| Other                                                                         |   |   | 196,421    |   |   |   | 248,962    |   |
|                                                                          |   |   |       |   |   |   |       |   |
| Total                                                                         |   |   | 11,714,200 |   |   |   | 12,589,296 |   |
|                                                                          |   |   |       |   |   |   |       |   |
| Less: Current portion                                                         |   |   | 9,005,904  |   |   |   | 9,339,343  |   |
|                                                                          |   |   |       |   |   |   |       |   |
| Long-term debt                                                                |   | $      | 2,708,296  |   |   | $      | 3,249,953  |   |

| Note 7.  | RELATED PARTY TRANSACTIONS |
|---------------|----------------------------|

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| Note 8.  | FEDERAL INCOME TAXES |
|---------------|----------------------|

|                                                                      |   | 2010   |         |   | 2009   |   |
|---------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|
| Deferred Tax Assets:                                                      |   |   |         |   |   |   |
|    Net operating loss                                      |   | $      | 2,364,568    |   |   | $      | 2,436,452 |   |
|    Amortization of intangibles                             |   |   | 1,156,403    |   |   |   | 1,297,563 |   |
|    Deferred compensation accrual                           |   |   | 170,000      |   |   |   | 129,200 |   |
|    Depreciation, financial reporting in excess of tax |   |   |  20,623 |   |   |   |  34,112 |   |
|    Provision for doubtful accounts                         |   |   | —      |   |   |   | 20,597 |   |
|                                                                      |   |   |         |   |   |   |   |   |
| Total deferred tax assets                                                 |   |   | 3,711,594    |   |   |   | 3,917,924 |   |
| Less: Valuation allowance                                                 |   |   | (3,711,594   | )      |   |   | (3,917,924 | ) |
|  Total                                                               |   | $      | —      |   |   | $      | — |   |

----

|                                   |   | 2010  |     |   | 2009  |   |
|----------------------------------------|--------|------------|----------|--------|------------|--------|
| Net operating loss                     |   | $          | (71,884  | )      |       | $      | (342,606 | ) |
| Depreciation of property and equipment |   |       | (13,489  | )      |       |   | (25,264 | ) |
| Amortization of intangibles            |   |       | (141,160 | )      |       |   | (141,319 | ) |
| Deferred compensation accrual          |   |       | 40,800   |   |       |   | 129,200 |   |
| Allowance for doubtful accounts        |   |       | (20,597  | )      |       |   | 20,597 |   |
| Change in valuation allowance          |   |       | 206,330  |   |       |   | 359,392 |   |
|      Total    |   | $          | —  |   |       | $      | — |   |

|                                          |   | 2010   |     |   | 2009  |   |
|-----------------------------------------------|--------|--------|----------|--------|------------|--------|
| Tax provision using statutory rates           |   | $      | 143,431  |   |       | $      | 286,362 |   |
| Net change in valuation allowance             |   |   | (206,330 | )      |       |   | ( 359,392 | ) |
| Compensation cost of stock options            |   |   | 32,629   |   |       |   | 32,629 |   |
| Other                                         |   |   | 30,270   |   |       |   | 40,401 |   |
|  Tax provision, per financial statements |   | $      | —  |   |       | $      | — |   |

| Cumulative as of May 31, 2005 |   |   | $2,177,000 |   |   | 2012 through 2025 |   |
|-------------------------------|--------|--------|------------|--------|--------|-------------------|--------|
| Year ending May 31, 2006      |   |   | 1,557,000  |   |   | 2026              |   |
| Year ending May 31, 2007      |   |   | 2,878,000  |   |   | 2027              |   |

----

| Note 9. | STOCKHOLDERS' EQUITY |
|---------|----------------------|

|              |   | 2010               |      |   | 2009                          |   |
|-------------------|--------|--------------------|-----------|--------|-------------------------------|--------|
|              |   |   Shares |      |   | Weightedaverageexercise price |   |   |   Shares |   |   | Weightedaverageexercise price |   |
| Beginning of year |   |               | 5,262,914 |   |                          | $      | 0.56 |   |   |   |  5,262,914 |   |   | $ | 0.56 |   |
| Retirements       |   |               | 5,262,914 |   |                          | $      | 0.56 |   |   |   | — |   |   |   | — |   |
| End of year       |   |               | —   |   |                          | $      | — |   |   |   | 5,262,914 |   |   | $ | 0.56 |   |

----

| Note 10.  | STOCK OPTIONS |
|----------------|---------------|

|                               |   | Number |       |   | ExercisePrice |   |    | FairValue |   |   | RemainingContractualLife(years) |   |   | AggregateIntrinsicValue |   |
|------------------------------------|--------|--------|------------|--------|---------------|--------|---------|-----------|--------|--------|---------------------------------|--------|--------|-------------------------|--------|
| Outstanding, May 31, 2008          |   |   | 2,970,000  |   |          |   | $0.84   |      |   |   |                            |   |   |                    |   |   |   |
| Outstanding, May 31, 2009          |   |   | 2,970,000  |   |          |   | $0.84   |      |   |   |                            |   |   |                    |   |   |   |
| Cancelled in fiscal year 2010      |   |   | (1,000,000 | )      |          |   | — |      |   |   |                            |   |   |                    |   |   |   |
| Outstanding, May 31, 2010          |   |   | 1,970,000  |   |          |   | $1.01   |      |   |   |                            |   |   | 3.1                     |   |   |   |   |
| Exercisable, May 31, 2010          |   |   | 1,707,500  |   |          |   | $1.10   |      |   |   |                            |   |   | 3.0                     |   |   |   |   |
| Non-vested options, May 31, 2008   |   |   | 787,500    |   |          |   | $0.40   |      |   |   | $0.37                           |   |   |                    | 5.8    |   |   | $ | 291,375 |   |
| Options vested in fiscal year 2009 |   |   | 262,500    |   |          |   | $0.40   |      |   |   | $0.37                           |   |   |                    |   |   |   | $ | 97,125 |   |
| Non-vested options, May 31, 2009   |   |   | 525,000    |   |          |   | $0.40   |      |   |   | $0.37                           |   |   |                    | 4.8    |   |   | $ | 194,250 |   |
| Options vested in fiscal year 2010 |   |   | 262,500    |   |          |   | $0.40   |      |   |   | $0.37                           |   |   |                    |   |   |   | $ | 97,125 |   |
| Non-vested options, May 31, 2010   |   |   | 262,500    |   |          |   | $0.40   |      |   |   | $0.37                           |   |   |                    | 3.8    |   |   | $ | 97,125 |   |

|   | Share-based compensation cost was $95,968 for each of fiscal years 2010 and 2009.  As of May 31, 2010, there is a total of $76,604 of unrecognized compensation expense related to non-vested share-based compensation for the management grants. That cost is expected to be recognized in fiscal year 2011. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Note 11. | FINANCIAL INSTRUMENTS |
|----------|-----------------------|

| Note 12. | SUPPLEMENTAL INFORMATION OF CASH FLOWS |
|----------|----------------------------------------|

|                                         |   | 2010   |    |   | 2009   |   |
|----------------------------------------------|--------|--------|---------|--------|--------|--------|
| Non-cash activities:                         |   |   |    |   |   |   |
|    Preferred dividend accrual |   | $      | 324,110 |   |   | $      | 360,513 |   |
| Supplemental information:                    |   |   |    |   |   |   |   |   |
|    Interest paid              |   |   | 473,154 |   |   |   | 651,915 |   |
|    Taxes paid                 |   |   | — |   |   |   | — |   |

| Note 13.  | CONCENTRATIONS OF CREDIT RISK |
|----------------|-------------------------------|

----

| Note 14. | OPERATING LEASE |
|----------|-----------------|

| Note 15.  | VARIABLE INTEREST ENTITY |
|----------------|--------------------------|

| Note 16.  | RETIRMENT PLAN |
|----------------|----------------|

----