================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                     For the Fiscal Year Ended MAY 31, 2007

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

         For the transition period from _______________ to______________

                        Commission file number 000-26331



                            GREYSTONE LOGISTICS, INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)


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

 1613 EAST 15TH STREET, TULSA, OKLAHOMA                           74120
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

                                 (918) 583-7441
                           (Issuer's Telephone Number)

Securities registered under Section 12(b) of the Exchange Act:

                                                   Name of each exchange
      Title of each class                           on which registered
--------------------------------------------------------------------------------
             NONE                                           NONE


Securities registered under Section 12(g) of the Exchange Act:

                         COMMON STOCK, $0.0001 PAR VALUE
--------------------------------------------------------------------------------
                                (Title of class)

Check whether the issuer is not required to file reports pursuant to Section 12
or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

<PAGE>

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

Indicate by check whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [X]

The issuer's revenue for the year ended May 31, 2007, was $12,454,293.

As of August 17, 2007, the aggregate market value of the voting common stock
held by non-affiliates of the registrant, computed by using the average of the
high and low price on such date, was $3,252,490.

As of August 17, 2007, the issuer had outstanding a total of 26,061,201 shares
of its $0.0001 par value common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]















                                        2
<PAGE>

                            GREYSTONE LOGISTICS, INC.
                                   FORM 10-KSB
                                TABLE OF CONTENTS

PART I

Item 1.    Description of Business                                            4

Item 2.    Description of Property                                            9

Item 3.    Legal Proceedings                                                  9

Item 4.    Submission of Matters to a Vote of Security Holders                9

PART II

Item 5.    Market for Common Equity and Related Stockholder Matters
             and Small Business Issuer Purchases of Equity Securities         9

Item 6.    Management's Discussion and Analysis or Plan of Operation         11

Item 7.    Financial Statements                                              20

Item 8.    Changes In and Disagreements with Accountants on Accounting
             and Financial Disclosure                                        20

Item 8A.   Controls and Procedures                                           20

Item 8B.   Other Information                                                 21

PART III

Item 9.    Directors, Executive Officers, Promoters, Control Persons
             and Corporate Governance; Compliance with Section 16(a)
             of the Exchange Act                                             21

Item 10.   Executive Compensation                                            23

Item 11.   Security Ownership of Certain Beneficial Owners and
             Management and Related Stockholder Matters                      24

Item 12.   Certain Relationships and Related Transactions, and
             Director Independence.                                          27

Item 13.   Exhibits                                                          29

Item 14.   Principal Accountant Fees and Services                            35

           Signatures                                                        36

                                        3
<PAGE>

PART I.

ITEM 1. DESCRIPTION OF BUSINESS

ORGANIZATION
------------

     Greystone Logistics, Inc. ("Greystone" or the "Company") was incorporated
in Delaware on February 24, 1969, under the name Permaspray Manufacturing
Corporation. It changed its name to Browning Enterprises Inc. in April 1982, to
Cabec Energy Corp. in June 1993, to PalWeb Corporation in April 1999 and became
Greystone Logistics, Inc. in March 2005 as further described below. In December
1997, Greystone acquired all of the issued and outstanding stock of Plastic
Pallet Production, Inc., a Texas corporation ("PPP"), and since that time,
Greystone has primarily been engaged in the business of manufacturing and
selling plastic pallets.

     Effective September 8, 2003, Greystone acquired substantially all of the
assets of Greystone Plastics, Inc., an Iowa corporation, through the purchase of
such assets by Greystone's newly formed, wholly-owned subsidiary, Greystone
Manufacturing, L.L.C., an Oklahoma limited liability company ("GSM"). Greystone
Plastics, Inc. was a manufacturer of plastic pallets used in the beverage
industry.

     Effective March 18, 2005, the Company caused its newly formed, wholly owned
subsidiary, Greystone Logistics, Inc., an Oklahoma corporation, to be merged
with and into the Company. In connection with such merger and as of the
effective time of the merger, the Company amended its certificate of
incorporation by changing its name to Greystone Logistics, Inc., pursuant to the
terms of the certificate of ownership and merger filed by the Company with the
Secretary of State of Oklahoma. Also in connection with such merger, the Company
amended its bylaws to change its name to Greystone Logistics, Inc.

RECENT TRANSACTIONS
-------------------

     On February 7, 2007, GSM entered into a Purchase Agreement and Bill of Sale
with Yorktown Management & Financial Services, LLC, an Oklahoma limited
liability company that is wholly owned by the Company's CEO and President
("Yorktown"), pursuant to which Yorktown purchased GSM's existing finished goods
inventory (including certain Coors Brewing inventory) and certain of GSM's raw
materials, grinding and peripheral equipment, resin contracts and molds for a
total purchase price of $2.2 million. In connection with the Purchase Agreement,
GSM and Yorktown entered into a Pallet Molds Lease Agreement, whereby for a
period of seven years, Yorktown will lease back to GSM the molds and resin
equipment purchased from GSM at the lease rate of $1.00 per pallet manufactured
using the molds and $0.03 per pound of resin provided using the resin equipment.
The assets sold pursuant to the Purchase Agreement were sold to Yorktown at
their fair market value and the transactions described above were approved by
the disinterested member of the Company's Board of Directors. For more
information

                                        4
<PAGE>

regarding these transactions, see the Company's Current Report on Form 8-K dated
February 7, 2007, filed with the SEC on February 27, 2007.

     On February 8, 2007, Greystone entered into a Settlement Agreement and
Release with 1607 Commerce Limited Partnership, a Texas limited partnership,
which subsequently changed its name to Commerce Plastics L.P. ("Commerce").
Pursuant to the Settlement Agreement and in exchange for full, final and
complete settlement of any and all claims that Commerce has asserted, or could
have asserted, in its lawsuit regarding an alleged default in the payment of
rent pursuant to terms of the Equipment Lease (defined below) and the
enforcement of certain related guaranties, the Company agreed to (i) to pay
outstanding rental accruals by Greystone to Commerce of $1,048,000.00, (ii) make
monthly payments to Commerce of $24,000.00 for a term of 24 months commencing
March 1, 2007, which payments can be used towards the purchase price of pallets
purchased from Commerce as further described below, (iii) transfer to Commerce
2,000,000 shares of the Company's common stock, and (iv) enter into an agreement
with Commerce whereby, among other things, Commerce will be given floor space,
utilities and regrind resin in the Company's Iowa facility and the Company will
be required to purchase up to 200,000 Granada pallets at $8.00 per pallet and
200,000 nestable pallets at $3.00 per pallet from Commerce over a two year term.
Also pursuant to the Settlement Agreement, the monthly payments to be made by
the Company will be credited against the purchase price of any Granada pallets
purchased from Commerce; provided, however, Commerce is not obligated to produce
any pallets, but has agreed to use it best efforts to do so. The Settlement
Agreement also included an immediate termination of that certain equipment lease
dated as of September 8, 2003, by and between Commerce and Plastic Pallet (the
"Equipment Lease"), whereby the registrant leased, for a term of 130 months
commencing September 8, 2003, at a rate of $48,000 per month, certain equipment
that was previously used to produce its pallets. For more information regarding
these transactions, see the Company's Current Report on Form 8-K dated February
7, 2007, filed with the SEC on February 27, 2007.

CURRENT BUSINESS
----------------

PRODUCTS

     Greystone's primary business is manufacturing and selling high quality,
recycled plastic pallets through its wholly owned subsidiary GSM. As of May 31,
2007, Greystone had an aggregate production capacity of approximately 70,000
pallets per month.

     GSM's product line as of May 31, 2007 consists of the following:

o    40" X 32" rackable pallet,

o    37" X 37" rackable pallet,

                                        5
<PAGE>

o    48" X 40" rackable pallet,

o    48" X 44" rackable pallet,

o    48" X 40" nestable pallet

     As of May 31, 2007, GSM was marketing the following pallets produced or
capable of being produced by Commerce:

o    GRANADA(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 47.5 lbs.

o    GRANADA(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.

o    GRANADA(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.

o    FLAT DECK - This pallet is the same as the Granada,(TM) except it has a
     solid top and weighs 55 lbs.

     The principal raw materials used in manufacturing Greystone's plastic
pallets are in abundant supply, and some of these materials may be obtained from
recycled plastic containers. At the present time, these materials are being
purchased from local, national and international suppliers.

OTHER BUSINESS

     In July 2006, Greystone entered into an agreement with Advanced Fiber
Products (AFP) of La Crosse, Wisconsin, pursuant to which Greystone and AFP
agreed to launch a beta test program involving the lease of a small pool of
recycled plastic pallets by Greystone to AFP to be utilized by AFP to ship a
portion of its manufactured products in a closed loop system. Pursuant to the
agreement, Greystone will deliver and track throughout the logistics cycle
sufficient quantities of plastic pallets for use in shipping a segment of the
AFP fiberglass product. The pallets will stay in a closed loop environment and
be continually sent back for reuse. If a pallet is damaged, Greystone will grind
the pallet and reutilize the resin.

                                        6
<PAGE>

PALLET INDUSTRY

     According to the U. S. Forest Service, as printed in the National Wooden
Pallet and Container Association publication, approximately 400 million new
pallets are purchased in the United States each year, and some research sources
estimate that even more than 400 million new pallets are purchased each year. At
an overall average selling price of $9/wood pallet, the pallet manufacturing and
sales business is approximately a $4 billion industry. It is estimated that the
United States wood pallet industry is served by approximately 3,600 companies,
most of which are small, privately held firms that operate in only one location.
The industry is generally comprised of companies that manufacture new pallets or
repair and recycle pallets. New pallet manufacturing generates about 60% to 65%
of the industry's revenues. The U.S. Forest Service estimates that approximately
1.9 billion wood pallets are in circulation in the United States today and that
roughly 400 million of the wood pallets currently in circulation were newly
manufactured. On an annual basis, approximately 175 million wood pallets are
recycled through a process of retrieval, repair, re-manufacturing and secondary
marketing, approximately 225 million are sent to landfills, and approximately
100 million are burned, lost, abandoned or leave the country.

     Infestation is a concern in the wood pallet industry. According to Virginia
Tech's Center for Unit Loan Design Center Tech Note No. 1, dated November 11,
1998, the Asian Longhorn Beetle ("ALB"), a devastating wood boring pest native
to China and other Asian countries, has invaded hardwood trees in New York City
and Chicago. The ALB outbreaks have been traced to solid wood packaging
materials ("SWPM"), including wood pallets imported from China. As a result, the
USDA Animal and Plant Health Inspection Service has proposed certain interim
rules, which include upgrading treatment procedures for SWPM. These treatments
are estimated to increase the cost of SWPM by at least 10%, and some treatments
will double the price of SWPM.

     Pallets are used in virtually all United States industries in which
products are broadly distributed, including, but not limited to, the automotive,
chemical, consumer products, grocery, produce and food production, paper and
forest products, retailing and steel and metals industries. Forklifts, pallet
trucks and pallet jacks are used to move loaded pallets, reducing the need for
costly hand loading and unloading at distribution centers and warehouses.

     Until very recently, plastic pallets had not penetrated the market
significantly, due in part to their cost. Heavy duty plastic pallets cost $46 to
$100, heavy duty wood pallets typically cost approximately $26, and less sturdy
wood pallets typically cost $8 to $11. As stated in an article in the July 1996
issue of Material Handling Engineering, wood pallets have an estimated useful
life of 7 to 10 trips before repair or recycling is required. A trip, or cycle,
is defined as the movement of a pallet under a load from a manufacturer to a
distributor (or from a distributor to a retailer) and the movement of the empty
pallet back to the manufacturer. Heavy duty plastic pallets, as currently
manufactured, have a useful life of 60 or more trips, on average. Greystone
management believes that the trend will continue to switch from wood to plastic,
with the only limiting factor being price.

                                        7
<PAGE>

     Greystone intends to conduct research on pallet design strength and
coefficient of friction and the materials used to make the plastic pallets as
required to meet market demands.

EMPLOYEES

     As of May 31, 2007, Greystone had 85 full-time employees and used a
temporary personnel service to provide additional production personnel as
needed.

MARKETING AND CUSTOMERS

     Greystone's primary focus is to provide quality plastic pallets to its
existing customers while continuing its marketing efforts to broaden its
customer base. Greystone's existing customers are primarily located in the
United States and engaged in the beverage, pharmaceutical and other industries.
Greystone has generated and plans to continue to generate interest in its
pallets by attending trade shows sponsored by industry segments that would
benefit from Greystone's products. Greystone hopes to gain wider product
acceptance by marketing the concept that the widespread use of plastic pallets
could greatly reduce the destruction of trees on a worldwide basis.

     Greystone sells its pallets through an exclusive arrangements with Decade
Products whereby Decade sells Greystone's pallets nationwide through direct
sales and a network of independent contractor distributors. Greystone also sells
its pallets and pallet leasing services to certain large customers direct
through its President, Senior Vice President of Sales and Marketing and other
employees.

     Greystone derives a substantial portion of its revenue from two national
brewers. These two customers currently account for approximately 85% of orders
for its pallets. The design of Greystone's recycled plastic pallets are approved
for use by both breweries and are the only plastic pallets in use for case goods
at the current time within their respective systems. There is no assurance that
Greystone will retain these customers' business at the same level, or at all.
The loss of a material amount of business from any one of Greystone's larger
customers could have a material adverse effect on Greystone.

COMPETITION

     Greystone's primary competitors are a large number of small, privately held
firms that sell wood pallets in very limited geographic locations. Greystone
believes that it can compete with manufacturers of wood pallets by emphasizing
the cost savings realized over the longer life of its plastic pallets as well as
the environmental benefits of its plastic pallets as compared to wood pallets.
Greystone also competes with approximately three large and fifteen medium to
small manufacturers of plastic pallets. Some of Greystone's competitors may have
substantially greater financial and other resources than Greystone and,
therefore, may be able to commit greater resources than Greystone in such areas
of product development, manufacturing and marketing.

                                        8
<PAGE>

However, Greystone believes that its proprietary designs coupled with the
competitive pricing of its products gives Greystone a competitive advantage over
other plastic pallet manufacturers.

GOVERNMENT REGULATION

     The business operations of Greystone are subject to existing and potential
federal, state and local environmental laws and regulations pertaining to the
handling and disposition of wastes (including solid and hazardous wastes) or
otherwise relating to the protection of the environment. In addition, both the
plastics industry and Greystone are subject to existing and potential federal,
state, local and foreign legislation designed to reduce solid wastes by
requiring, among other things, plastics to be degradable in landfills, minimum
levels of recycled content, various recycling requirements, disposal fees and
limits on the use of plastic products.

PATENTS AND TRADEMARKS

     Greystone seeks to protect its technical advances by pursuing national and
international patent protection for its products and methods when appropriate.35

     Greystone has access to a patent-pending CJ2(TM) fire retardant formula
licensed from Westgate Capital Company, L.L.C. ("WCC"), a company of which
Greystone's President and CEO is a member, in connection with the potential
production of fire retardant plastic pallets. Pallets produced with CJ2(TM) fire
retardant have met UL 2335 classification requirements with respect to fire
retardancy.

ITEM 2. DESCRIPTION OF PROPERTY

     Greystone has approximately 3 acres of land in Bettendorf, Iowa and a
building with 60,000 square feet of manufacturing and warehouse space. In
addition, Greystone entered in a lease agreement with Greystone Properties, LLC,
for an adjacent building with 60,000 square feet of manufacturing and warehouse
space. The lease is for a ten year period with monthly rental of $25,000 plus
insurance and taxes, amended January 1, 2006 to $17,500 plus insurance and
taxes. The manufacturing and warehouse space is sufficiently equipped and
designed to accommodate the manufacturing of plastic pallets and is currently
used for grinding, processing and re-pelletizing recycled plastic. Greystone
Properties, LLC is owned by Warren Kruger, Greystone's President and CEO, and
Robert Rosene, a member of Greystone's Board of Directors.

ITEM 3. LEGAL PROCEEDINGS

     William Hamilton d/b/a WHACO, also d/b/a Greystone Bill Hamilton Trucking
Company v. Greystone Manufacturing, LLC, Law No. 107023, Iowa District Court for
Scott County. William Hamilton, one of the former owners of Greystone Plastics,
Inc., the entity from which Greystone purchase certain assets in 2003, claims
$104,390 in damages for Greystone's alleged breach of contract involving the
provision of materials and services. Greystone has denied all allegations and
has asserted a counterclaim arising from the sale by Mr. Hamilton of the
Bettendorf manufacturing facility to Greystone. The action is in the early
stages of discovery and is being vigorously defended.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                        9
<PAGE>

PART II.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION
------------------

     Greystone's common stock is traded on the National Association of
Securities Dealers Automatic Quotation (NASDAQ) over-the-counter bulletin board
system ("OTCBB"), under the symbol "GLGI." The following table sets forth the
range of high and low prices at which Greystone's common stock traded during the
time periods indicated, as reported by NASDAQ:


           QUARTER ENDING                HIGH                 LOW
           --------------                ----                 ---

            Aug. 31, 2005               $0.40                $0.14

            Nov. 30, 2005                0.20                 0.10

            Feb. 29, 2006                0.12                 0.05

            May 31, 2006                 0.22                 0.06

            Aug. 31, 2006                0.17                 0.07

            Nov. 30, 2006                0.37                 0.14

            Feb. 29, 2007                0.19                 0.08

            May 31, 2007                 0.28                 0.12

Quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.

HOLDERS
-------

     As of May 31, 2007, Greystone had approximately 1,361 common shareholders
of record.

     As of May 31, 2007, there were approximately 2,906 beneficial owners
(including those holding in street names) of Greystone's common stock.

DIVIDENDS
---------

     Greystone paid no cash dividends to its common shareholders during the last
two fiscal years and does not plan to pay any cash dividends in the near future.

                                       10
<PAGE>

SALES OF EQUITY SECURITIES
--------------------------

     There were no sales of equity securities by Greystone during the fiscal
year ended May 31, 2007, other than previously disclosed in Greystone's Form 8-K
dated February 7, 2007, which was filed with the SEC on February 27, 2007.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
----------------------------------------------------------

     This Annual Report on Form 10-KSB includes "forward looking statements" as
defined by the Securities and Exchange Commission. These statements concern
Greystone's plans, expectations and objectives for future operations. All
statements, other than statements of historical facts, included in this Form
10-KSB that address activities, events or developments that Greystone expects,
believes or anticipates will or may occur in the future are forward-looking
statements. The words "believe," "plan," "intend," "anticipate," "estimate,"
"project" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements include, among others, such things
as:

o    expansion and growth of Greystone's business and operations;
o    future financial performance;
o    future acquisitions and developments;
o    potential sales of products;
o    future financing activities; and
o    business strategy.

     These forward-looking statements are based on assumptions that Greystone
believes are reasonable based on current expectations and projections about
future events and industry conditions and trends affecting Greystone's business.
However, whether actual results and developments will conform to Greystone's
expectations and predictions is subject to a number of risks and uncertainties
that could cause actual results to differ materially from those contained in the
forward-looking statements, including those factors discussed under the section
of this Form 10-KSB entitled "Risk Factors." In addition, Greystone's historical
financial performance is not necessarily indicative of the results that may be
expected in the future and Greystone believes that such comparisons cannot be
relied upon as indicators of future performance.

RISK FACTORS
------------

GREYSTONE OPERATES AT A LOSS BUT HAS RECENTLY ATTAINED AN OPERATING PROFIT AND
CASH FLOW POSITIVE RESULTS.

     The Company was incorporated on February 24, 1969. From April 1993 to
December 1997, the Company was engaged in various businesses, including the
business of exploration, production, and development of oil and gas properties
in the continental United States and the operation of a related service
business. In December 1997, the Company acquired all of the issued and
outstanding stock of Plastic Pallet Production, Inc., and its principal business
changed to selling plastic pallets.

                                       11
<PAGE>

Since such time, the Company has continued to incur losses from operations.
However, the results of Greystone's operations for the quarter ended May 31,
2007 showed an operating profit and positive cash flow. There is no assurance
that Greystone will continue to achieve a positive gross profit or otherwise
obtain funds to finance continued operations.

GREYSTONE'S FINANCIAL STATEMENTS HAVE BEEN QUALIFIED ON A GOING CONCERN BASIS
AND GREYSTONE MAY NOT BE ABLE TO SECURE ADDITIONAL FINANCING NECESSARY TO
SUSTAIN AND GROW ITS OPERATIONS.

     Greystone's financial statements have been qualified on a going concern
basis principally due to lack of sufficient operating income or long term
financing to achieve Greystone's goal of producing and marketing plastic pallets
to compete with wood pallets. Greystone has funded its operations to date
primarily through equity and debt financings but has recently achieved positive
cash flow from operations. Greystone may need to raise additional funds to
implement any expansion strategy beyond current allocation of cash flow for
capital projects. There can be no assurance that additional financing will be
available or, if available, that such financing will be on favorable terms.
Failure to obtain such additional financing could have a material adverse effect
on Greystone.

GREYSTONE HAS GRANTED SECURITY INTERESTS IN SUBSTANTIALLY ALL OF ITS ASSETS IN
CONNECTION WITH CERTAIN DEBT FINANCINGS AND OTHER TRANSACTION.

     In connection with certain debt financings and other transactions,
Greystone has granted third parties security interests in substantially all of
its assets pursuant to agreements entered into with such third parties. Upon the
occurrence of an event of default under such agreements, the secured parties may
enforce their rights and Greystone may lose all or a portion of its assets. As a
result, Greystone could be forced to materially reduce its business activities
or cease operations.

GREYSTONE'S BUSINESS COULD BE AFFECTED BY CHANGES IN AVAILABILITY OF RAW
MATERIALS.

     Greystone use a proprietary mix of raw materials to produce its plastic
pallets. Such raw materials are generally readily available and some may be
obtained from a broad range of recycled plastic suppliers and unprocessed waste
plastic. At the present time, these materials are being purchased from local,
national and international suppliers. The availability of Greystone's raw
materials could change at any time for various reasons. For example, the market
demand for Greystone's raw materials could suddenly increase, or the rate at
which plastic materials are recycled could decrease, affecting both availability
and price. Additionally, the laws and regulations governing the production of
plastics and the recycling of plastic containers could change and, as a result,
affect the supply of Greystone's raw materials. Any interruption in the supply
of raw materials or components could have a material adverse effect on
Greystone. Furthermore, certain potential alternative suppliers may have
pre-existing exclusive relationships with Greystone's competitors and others
that may preclude Greystone from obtaining raw materials from such suppliers.

GREYSTONE'S BUSINESS COULD BE AFFECTED BY COMPETITION AND RAPID TECHNOLOGICAL
CHANGE.

     Greystone currently faces competition from many companies that produce
wooden pallets at

                                       12
<PAGE>

prices that are substantially lower than the prices Greystone charge for its
plastic pallets and other companies that manufacture plastic pallets. It is
anticipated that the plastic pallet industry will be subject to intense
competition and rapid technological change. Greystone could potentially face
additional competition from recycling and plastics companies, many of which have
substantially greater financial and other resources than Greystone and,
therefore, are able to spend more than Greystone in areas such as product
development, manufacturing and marketing. Competitors may develop products that
render Greystone's products or proposed products uneconomical or result in
products being commercialized that may be superior to Greystone's products. In
addition, alternatives to plastic pallets could be developed, which would have a
material adverse effect on Greystone.

GREYSTONE IS DEPENDENT ON A FEW LARGE CUSTOMERS.

     Greystone derives, and expect that in the foreseeable future it will
continue to derive, a large portion of its revenue from a few large customers.
In fact, two of Greystone's customers currently account for approximately 85% of
its orders. There is no assurance that Greystone will retain these customers'
business at the same level, or at all. The loss of a material amount of business
from any one of these customers could have a material adverse effect on
Greystone.

GREYSTONE MAY NOT BE ABLE TO EFFECTIVELY PROTECT GREYSTONE'S PATENTS AND
PROPRIETARY RIGHTS.

     Greystone relies upon a combination of patents and trade secrets to protect
its proprietary technology, rights and know-how. There can be no assurance that
such patent rights will not be infringed upon, that Greystone's trade secrets
will not otherwise become known to or independently developed by competitors,
that non-disclosure agreements will not be breached, or that Greystone would
have adequate remedies for any such infringement or breach. Litigation may be
necessary to enforce Greystone's proprietary rights or to defend Greystone
against third-party claims of infringement. Such litigation could result in
substantial cost to, and a diversion of effort by, Greystone and its management
and may have a material adverse effect on Greystone. Greystone's success and
potential competitive advantage is dependent upon its ability to exploit the
technology under these patents. There can be no assurance that Greystone will be
able to exploit the technology covered by these patents or that Greystone will
be able to do so exclusively.

GREYSTONE'S BUSINESS COULD BE AFFECTED BY CHANGING NEW LEGISLATION REGARDING
ENVIRONMENTAL MATTERS.

     Greystone's business is subject to changing federal, state and local
environmental laws and regulations pertaining to the discharge of materials into
the environment, the handling and disposition of wastes (including solid and
hazardous wastes) or otherwise relating to the protection of the environment. As
is the case with manufacturers in general, if a release of hazardous substances
occurs on or from Greystone's properties or any associated off-site disposal
location, or if contamination from prior activities is discovered at any of
Greystone's properties, Greystone may be held liable. No assurances can be given
that additional environmental issues will not require future expenditures. In
addition, both the plastics industry and Greystone are subject to existing and

                                       13
<PAGE>

potential federal, state, local and foreign legislation designed to reduce solid
wastes by requiring, among other things, plastics to be degradable in landfills,
minimum levels of recycled content, various recycling requirements and disposal
fees and limits on the use of plastic products. In addition, various consumer
and special interest groups have lobbied from time to time for the
implementation of these and other such similar measures. Although Greystone
believes that the legislation promulgated to date and such initiatives to date
have not had a material adverse effect on it, there can be no assurance that any
such future legislative or regulatory efforts or future initiatives would not
have a material adverse effect.

GREYSTONE'S BUSINESS COULD BE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS.

     The testing, manufacturing and marketing of Greystone's products and
proposed products involve inherent risks related to product liability claims or
similar legal theories that may be asserted against Greystone, some of which may
cause Greystone to incur significant defense costs. Although Greystone currently
maintains product liability insurance coverage that it believes is adequate,
there can be no assurance that the coverage limits of its insurance will be
adequate under all circumstances or that all such claims will be covered by
insurance. In addition, these policies generally must be renewed every year.
While Greystone has been able to obtain product liability insurance in the past,
there can be no assurance it will be able to obtain such insurance in the future
on all of its existing or future products. A successful product liability claim
or other judgment against Greystone in excess of its insurance coverage, or the
loss of Greystone's product liability insurance coverage could have a material
adverse effect upon Greystone.

GREYSTONE CURRENTLY DEPEND ON CERTAIN KEY PERSONNEL.

     Greystone is dependent on the experience, abilities and continued services
of its current management. In particular, Warren Kruger, Greystone's President
and CEO, has played a significant role in the development, management and
financing of Greystone. The loss or reduction of services of Warren Kruger or
any other key employee could have a material adverse effect on Greystone. In
addition, there is no assurance that additional managerial assistance will not
be required, or that Greystone will be able to attract or retain such personnel.

GREYSTONE'S EXECUTIVE OFFICERS AND DIRECTORS CONTROL A LARGE PERCENTAGE OF
GREYSTONE'S OUTSTANDING COMMON STOCK, WHICH ALLOWS THEM TO CONTROL MATTERS
SUBMITTED TO GREYSTONE'S SHAREHOLDERS FOR APPROVAL, AND ALL OF GREYSTONE'S 2003
PREFERRED STOCK, WHICH ENTITLES THEM TO CERTAIN VOTING RIGHTS, INCLUDING THE
RIGHT TO ELECT A MAJORITY OF GREYSTONE'S BOARD OF DIRECTORS.

     Greystone's executive officers and directors (and their affiliates), in the
aggregate, own over 50% of Greystone's outstanding common stock. Therefore,
Greystone's executive officers and directors have the ability to decide the
outcome of matters submitted to Greystone's shareholders for approval (including
the election and removal of directors and any merger, consolidation or sale of
all or substantially all of Greystone's assets) and to control Greystone's
management and affairs. In addition, an entity that is wholly owned by
Greystone's executive officers and directors owns all of Greystone's outstanding
2003 preferred stock. The terms and conditions of Greystone's 2003

                                       14
<PAGE>

preferred stock provide that such holder has the right to elect a majority of
Greystone's Board of Directors. Such concentration of ownership may have the
effect of delaying, deferring or preventing a change in control, impeding a
merger, consolidation, takeover or other business combination or discouraging a
potential acquirer from making a tender offer or otherwise attempting to obtain
control, which in turn could have an adverse effect on the market price of
Greystone's common stock.

CERTAIN RESTRICTED SHARES OF GREYSTONE WILL BE ELIGIBLE FOR SALE IN THE FUTURE
AND ARE LIKELY TO BE SOLD IN THE FUTURE, WHICH COULD AFFECT THE PREVAILING
MARKET PRICE OF GREYSTONE'S COMMON STOCK.

     Certain of the outstanding shares of Greystone's common stock are
"restricted securities" under Rule 144 of the Securities Act, and (except for
shares purchased by "affiliates" of Greystone as such term is defined in Rule
144) would be eligible for sale as the applicable holding periods expire or in
the event that the Company files a registration statement relating to such
shares. In the future, these shares may be sold only pursuant to a registration
statement under the Securities Act or an applicable exemption, including
pursuant to Rule 144. Under Rule 144, a person who has owned common stock for at
least one year may, under certain circumstances, sell within any three-month
period a number of shares of common stock that does not exceed the greater of 1%
of the then outstanding shares of common stock or the average weekly trading
volume during the four calendar weeks prior to such sale. A person who is not
deemed to have been an affiliate of Greystone at any time during the three
months preceding a sale, and who has beneficially owned the restricted
securities for the last two years is entitled to sell all such shares without
regard to the volume limitations, current public information requirements,
manner of sale provisions and notice requirements. In addition, Greystone has
agreed to file a registration statement in connection with some of these
outstanding shares of restricted stock. Sales or the expectation of sales of a
substantial number of shares of common stock in the public market by selling
shareholders could adversely affect the prevailing market price of the common
stock, possibly having a depressive effect on any trading market for the common
stock, and may impair Greystone's ability to raise capital at that time through
additional sales of its equity securities.

GREYSTONE'S STOCK TRADES IN A LIMITED PUBLIC MARKET, IS SUBJECT TO PRICE
VOLATILITY AND THERE CAN BE NO ASSURANCE THAT AN ACTIVE TRADING MARKET WILL
DEVELOP OR BE SUSTAINED.

     There has been a limited public trading market for Greystone's common stock
and there can be no assurance that an active trading market will develop or be
sustained. There can be no assurance that Greystone's common stock will trade at
or above any particular price in the public market, if at all. The trading price
of Greystone's common stock could be subject to significant fluctuations in
response to variations in quarterly operating results or even mild expressions
of interest on a given day. Accordingly, Greystone's common stock should be
expected to experience substantial price changes in short periods of time. Even
if Greystone is performing according to its plan and there is no legitimate
company-specific financial basis for this volatility, it must still be expected
that substantial percentage price swings will occur in Greystone's common stock
for the foreseeable future. In addition, the limited market for Greystone's
common stock may restrict Greystone's shareholders ability to liquidate their
shares.

                                       15
<PAGE>

GREYSTONE DOES NOT EXPECT TO DECLARE OR PAY ANY DIVIDENDS IN THE FORESEEABLE
FUTURE.

     Greystone has not declared or paid any dividends on its common stock.
Greystone currently intends to retain future earnings to fund the development
and growth of its business, to repay indebtedness and for general corporate
purposes, and, therefore, does not anticipate paying any cash dividends on its
common stock in the foreseeable future. In addition, pursuant to the terms and
conditions of certain loan documentation between Greystone and F&M Bank and the
terms and conditions of Greystone's 2003 preferred stock, Greystone is
restricted in its ability to pay dividends to holders of its common stock.

GREYSTONE'S COMMON STOCK MAY BE SUBJECT TO SECONDARY TRADING RESTRICTIONS
RELATED TO PENNY STOCKS.

     Certain transactions involving the purchase or sale of Greystone's common
stock may be affected by a Commission rule for "penny stocks" that imposes
additional sales practice burdens and requirements upon broker-dealers that
purchase or sell such securities. For transactions covered by this penny stock
rule, among other things, broker-dealers must make certain disclosures to
purchasers prior to the purchase or sale. Consequently, the penny stock rule may
impede the ability of broker-dealers to purchase or sell Greystone's common
stock for their customers and the ability of persons now owning or subsequently
acquiring Greystone's common stock to resell such securities.

GREYSTONE MAY ISSUE ADDITIONAL EQUITY SECURITIES, WHICH WOULD LEAD TO FURTHER
DILUTION OF GREYSTONE'S ISSUED AND OUTSTANDING STOCK.

     The issuance of additional common stock or securities convertible into
common stock would result in further dilution of the ownership interest in
Greystone held by existing shareholders. Greystone is authorized to issue,
without shareholder approval, 20,700,000 shares of preferred stock, $0.0001 par
value per share, in one or more series, which may give other shareholders
dividend, conversion voting and liquidation rights, among other rights, which
may be superior to the rights of holders of Greystone's common stock. In
addition, Greystone is authorized to issue, without shareholder approval, over
4,960,000,000 additional shares of its common stock and securities convertible
into common stock.

RESULTS OF OPERATIONS
---------------------

GENERAL

     The consolidated statements include Greystone and its wholly-owned
subsidiaries, Greystone Manufacturing, L.L.C., or GSM, and Plastic Pallet
Production, Inc., or PPP.

     Greystone's primary business is the manufacturing and selling of plastic
pallets through its wholly owned subsidiary GSM.

                                       16
<PAGE>

     As of May 31, 2007, Greystone had 85 full-time employees and used temporary
personnel as needed. Greystone's production capacity is about 70,000 plastic
pallets per month, or 840,000 per year. Production levels have generally been
governed by sales and will increase as sales dictate.

     Greystone has incurred significant losses from operations and only recently
achieved positive cash flow from operations, and there is no assurance that it
will achieve operating profitability or otherwise obtain funds necessary to
finance continued operations. See "Liquidity and Capital Resources" under this
Item 6.

     For all years presented, Greystone's effective tax rate is 0%. Greystone
has generated net operating losses since inception, which would normally reflect
a tax benefit in the statement of operations and a deferred asset on the balance
sheet. However, a valuation reserve has been established to offset the amount of
any tax benefit available for each period presented in the consolidated
statement of operations until such time as Greystone demonstrates the ability to
show sustained profitability.

YEAR ENDED MAY 31, 2007, COMPARED TO YEAR ENDED MAY 31, 2006

     Sales were $12,454,293 for fiscal year 2007 compared to $15,956,386 for
fiscal year 2006 for a decrease of $3,502,093. The decrease is due to a decrease
in sales to a principal customer, barrel and screw work on an injection
equipment line, and delayed production startup due to the pushback of the
delivery of the new 48x40 molds and the retooling of the 48x44 mold. The new
48x40 molds were put into service in the last month of the fourth quarter

     Cost of sales was $11,588,057 (93% of sales) and $15,030,690 (94% of sales)
in fiscal years 2007 and 2006, respectively.

     General and administrative expense was $1,828,395 for fiscal year 2007
compared to $2,248,719 for fiscal year 2006 for a decrease of $420,324. The
primary factor affecting the decrease in general and administrative expense from
fiscal year 2006 to fiscal year 2007 was reductions in principally in
administrative salaries and travel expense incurred in 2006 in connection with
seeking capital to provide for future growth.

     Other expenses of $452,276 in fiscal year 2007 includes a charge of
$619,060 resulting from a settlement for termination of the operating lease for
the PIPER injection molding machines and a charge of $45,000 in settlement of an
employment claim by a former employee. Effective February 1, 2007, Greystone
issued 2,000,000 shares of its common stock and agreed to pay $24,000 per month
for twenty-four months to 1607 Commerce LLC to terminate a long-term lease
agreement on equipment. The $619,060 charge included the present value of the
series of $24,000 monthly payments at 8.5% interest or $519,060 plus the value
of the common stock on the effective date of issuance or $100,000.

                                       17
<PAGE>

     Interest expense was $1,185,541 in fiscal year 2007 compared to $1,013,830
in fiscal year 2006 for an increase of $171,711. The increase is primarily
attributable to debt incurred in the acquisition of equipment and funding
provided by related parties for working capital.

     The consolidated net loss, before the deduction for preferred dividends, in
fiscal year 2007 was $(2,599,976) compared to $(2,335,153) in fiscal year 2006
for an increase in its loss of $264,823. This increase results from the reasons
discussed above.

     After deducting dividends to preferred shareholders of $575,548 and
$513,938 in fiscal years 2007 and 2006, respectively, the consolidated net loss
available to common shareholders was $(3,175,524) ($(0.13) per share of common
stock) in fiscal year 2007 compared to $(2,849,091) ($(0.12) per share of common
stock) in fiscal year 2006.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

GENERAL

     Greystone's cash requirements for operating activities consist principally
of accounts receivable, inventory, accounts payable, operating leases and
scheduled payments of interest on outstanding indebtedness. Greystone is
dependent on outside sources of cash to fund its operations. As of May 31, 2007,
revenues from sales remain insufficient to meet current liabilities.

           A summary of cash flows for the year ended May 31, 2007 is as
follows:

                     Cash provided by operating activities       $  197,539

                     Cash provided by investing activities          412,984

                     Cash used in financing activities             (271,114)

           Contractual obligations of Greystone are as follows:

<TABLE><CAPTION>
                                                                                   OVER
                            TOTAL        1 YEAR      2-3 YEARS     4-5 YEARS     5 YEARS
                            -----        ------      ---------     ---------     -------
<S>                      <C>           <C>          <C>           <C>          <C>
      Long-term debt     $12,952,945   $8,655,518   $ 2,894,658   $  333,336   $1,069,433
      Operating leases
                           1,522,500      210,000       420,000      420,000      472,500
                         -----------   ----------   -----------   ----------   ----------
      Total              $14,475,445   $8,865,518   $ 3,314,658   $  753,336   $1,541,933
                         ===========   ==========   ===========   ==========   ==========
</TABLE>

     To provide for the funding to meet Greystone's operating activities and
contractual obligations for fiscal 2007, Greystone will have to continue to
produce positive operating results or explore various options including
long-term debt and equity financing. However, there is no

                                       18
<PAGE>

guarantee that Greystone will continue to create positive operating results or
be able to raise sufficient capital to meet these obligations.

     Greystone has accumulated a working capital deficit of $(12,525,733) at May
31, 2007, which includes advances payable to related parties of $618,959,
current portion of long-term debt of $8,655,518 and accounts payable and accrued
liabilities of 3,817,619. This deficit reflects the uncertain financial
condition of Greystone resulting from its inability to obtain long term
financing from traditional financing sources. There is no assurance that
Greystone will secure such financing.

     As described below, substantially all of the financing that Greystone has
received through May 31, 2007, has been provided by loans or through loan
guarantees from the officers and directors of Greystone, the offerings of
preferred stock to current and former officers and directors of Greystone in
2001 and 2003 and through a private placement of common stock completed in March
2005.

     Greystone continues to be dependent upon its officers and directors to
provide and/or secure additional financing and there is no assurance that either
will do so. As such, there is no assurance that funding will be available for
Greystone to continue operations.

     Greystone has 50,000 outstanding shares of cumulative 2003 Preferred Stock
for a total of $5,000,000 with a preferred dividend rate of the prime rate of
interest plus 3.25%. Greystone does not anticipate that it will make cash
dividend payments to any holders of its preferred stock or its common stock
unless and until the financial position of Greystone improves through increased
revenues, another financing or otherwise.

ADVANCES AND LOANS FROM WARREN KRUGER

     During 2007, Warren Kruger advanced working capital funds to Greystone in
the amount of $745,682 and Greystone repaid Warren Kruger the amount of
$509,041. During 2006, Warren Kruger advanced $429,100 to Greystone. Effective
December 15, 2005, Greystone entered into a loan agreement with Warren Kruger to
convert $527,716 of the advances into a note payable at 7.5% interest and
payable in three equal installments of principal and accrued interest beginning
January 15, 2008 through January 15, 2010. At May 31, 2007, note payable of
$527,716, advances of $618,951 and accrued interest of $206,117 were due to
entities owned or controlled by Warren Kruger.

LOANS FROM F&M BANK

     On March 4, 2005, Greystone entered into a loan agreement with GLOG
Investment, L.L.C. ("GLOG") and The F&M Bank & Trust Company ("F&M), which,
among other things, sets forth certain terms applicable to a $1,500,000
revolving loan extended by F&M to GSM on or about December 18, 2004 and a new
$5,500,000 term loan extended by F&M to GSM on March 4, 2005. GLOG is wholly
owned by the following officers and/or directors of the Registrant: Warren F.

                                       19
<PAGE>

Kruger (President and CEO) and Robert B. Rosene, Jr. (Director). GLOG was a
party to the loan agreement for the sole purpose of securing the funds necessary
to purchase 50,000 shares of Greystone's 2003 preferred stock previously owned
by Paul A. Kruger. The revolving loan, which bears interest at the prime rate
plus 1%, is renewable annually and is currently due on January 5, 2008.
Substantially all of the proceeds available under the revolving note have been
used to retire the loan from another bank. Amounts borrowed under the term loan
are represented by a promissory note, which bears interest at the prime rate
plus 2% and GSM is required to make monthly payments based upon a full fifteen
year amortization of the outstanding principal balance under the term note with
any outstanding principal and all accrued and unpaid interest payable in full on
March 15, 2008. Substantially all of the proceeds from the term loan have been
used to refinance certain short-term debt of GSM, including the repayment of the
notes issued by GSM to Greystone Plastics, Inc. and Bill Hamilton that were the
subject of dispute as further described under the heading "Acquisition of
Greystone Plastics, Inc." in Item 1 of this Form 10-KSB.

     Greystone's obligations under the loan agreement with F&M are secured by a
lien in favor of F&M on substantially all of GSM's assets pursuant to the terms
of a security agreement and second mortgage. Also, pursuant to the terms of a
guaranty agreement, Greystone guaranteed GSM's performance and payment under the
notes. In addition, in order to induce F&M to enter into the loan agreement,
certain officers and directors of the Company (Messrs. Kruger and Rosene)
entered into a limited guaranty agreement with F&M and Mr. Rosene entered into a
pledge agreement with F&M.

ADVANCES AND LOANS FROM ROBERT ROSENE

     In May 2005, Robert Rosene, a member of Greystone's Board of Directors,
advanced $500,000 to Greystone. During fiscal year 2006, Mr. Rosene advanced an
additional amount of $1,578,249. Effective December 15, 2005, Greystone entered
into a loan agreement with Mr. Rosene to convert $2,066,000 of the advances into
a note payable at 7.5% interest and payable in three equal annual installments
of principal and accrued interest beginning January 15, 2008 and ending January
15, 2010. Accrued interest due to Mr. Rosene as of May 31, 2007 is $175,295.

ITEM 7. FINANCIAL STATEMENTS

     The financial statements of Greystone are set forth on pages F-1 through
F-19 inclusive, found at the end of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.

ITEM 8A. CONTROLS AND PROCEDURES

     As of May 31, 2007, Greystone carried out an evaluation under the
supervision of Greystone's Chief Executive Officer and Chief Financial Officer
of the effectiveness of the design

                                       20
<PAGE>

and operation of Greystone's disclosure controls and procedures pursuant to the
Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation,
Greystone's Chief Executive Officer and Chief Financial Officer concluded that
the disclosure controls and procedures as of May 31, 2007 were effective.

     During the quarter ended May 31, 2007, there was no change in Greystone's
internal controls over financial reporting that has materially affected, or that
is reasonably likely to materially affect, Greystone's internal control over
financial reporting.

ITEM 8B. OTHER INFORMATION

     None.

PART III.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------

     The following lists the directors and executive officers of Greystone.
Directors of Greystone are elected at annual meetings of shareholders unless
appointed by the Board of Directors to fill a vacancy upon the resignation or
removal of a member or an increase in the number of members of the Board of
Directors. Executive officers serve at the pleasure of the Board of Directors.

                                                                TERM AS DIRECTOR
      NAME                             POSITION                     EXPIRES
      ----                             --------                     -------

Warren F. Kruger           President, Chief Executive Officer         2007
                                     and Director

Robert B. Rosene, Jr.                  Director                       2007

Robert H. Nelson               Chief Financial Officer                 N/A


WARREN F. KRUGER, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR

     Mr. Warren F. Kruger, Manager/CEO of privately held Yorktown Management &
Financial Services, L.L.C., is 50 years old. Yorktown Management is involved in
investment banking, real estate, manufacturing and energy endeavors. Mr. Kruger
earned a Bachelor of Business Administration degree from the University of
Oklahoma, and an Executive M.B.A. from Southern Methodist University. Mr. Kruger
has over thirty years experience in the financial services industry. In 1980,
Mr. Kruger co-founded MCM Group, Ltd., which owned and controlled United Bank
Club Association, Inc. until 1996 when the firm was sold to a subsidiary of
Cendant Corp. (CD-NYSE).

                                       21
<PAGE>

He also owned and operated Century Ice, a manufacturer and distributor of ice
products from 1996 to 1997, when Packaged Ice, Inc., acquired Century Ice in an
industry rollup. Mr. Kruger is a partner with William W. Pritchard in privately
held WCC, with investments in oil and gas, real estate and investment banking.

     Mr. Kruger became a director of Greystone on January 4, 2002, served as
President and Chief Executive Officer from January 10, 2003 to August 15, 2005
and, most recently, has served as President and Chief Executive Officer from
November 18, 2006 to the present.

MR. ROBERT B. ROSENE, JR., DIRECTOR

     Mr. Rosene, age 52, is President of Seminole Energy Services, L.L.C., a
natural gas marketing and gathering company that he co-founded in 1998. Also in
1998, Mr. Rosene co-founded Summit Exploration, L.L.C., an oil and gas
production company that holds oil and gas production in several states. Mr.
Rosene has served as a director of publicly traded Syntroleum Corporation since
1985. Mr. Rosene has a B.A. with an emphasis in accounting from Oklahoma Baptist
University.

     Mr. Rosene became a director of Greystone effective June 14, 2004.

ROBERT H. NELSON, CHIEF FINANCIAL OFFICER

     From 2001 until joining Greystone's company in 2004, Mr. Robert H. Nelson,
age 61, was a financial consultant to the Key Auto Group, a retail automobile
dealership chain. Mr. Nelson served as Chief Financial Officer to Fusion
Telecommunications International, Inc., a provider of long distance
international communication systems from 1999 to 2001. Mr. Nelson has also
served as Chief Financial Officer of: United Auto Group, the second largest
publicly traded retail auto group in the United States from 1996 to 1999; Trace
International Holding, Inc., a privately owned company with controlling
interests in a variety of public and privately owned companies from 1987 to
1999; and Ogden Allied Service and Allied Maintenance Corporation from 1982 to
1987. Prior to that, Mr. Nelson was with Coopers and Lybrand, the predecessor to
PricewaterhouseCoopers from 1970 to 1981. Mr. Nelson is a certified public
accountant and a graduate of Manhattan College.

     Mr. Nelson was named Chief Financial Officer effective as of November 1,
2004.

IDENTIFICATION OF THE AUDIT COMMITTEE; AUDIT COMMITTEE FINANCIAL EXPERT
-----------------------------------------------------------------------

     Due to Greystone's size and stage of development, it has had difficulty
recruiting individuals to serve on its Board of Directors who are qualified to
serve as an audit committee financial expert on an audit committee. As of May
31, 2007, the Company had not established an audit committee and the entire
Board of Directors essentially serves as Greystone's audit committee.

                                       22
<PAGE>

CODE OF ETHICS
--------------

     As of May 31, 2007, Greystone has not adopted a Code of Ethics applicable
to the Company's officers. Through May 31, 2007, Greystone's primary focus has
been on achieving profitability. Greystone intends to adopt a Code of Ethics
during fiscal year 2008.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934 requires Greystone's
directors, officers and persons who beneficially own more than 10% of any class
of the Company's equity securities registered under Section 12 to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of such registered securities of the Company. Officers,
directors and greater than 10% beneficial owners are required by regulation to
furnish to Greystone copies of all Section 16(a) reports they file.

     Based solely on review of the copies of such reports furnished to Greystone
and any written representations that no other reports were required during
fiscal 2007, to Greystone's knowledge, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
during fiscal 2007 were complied with on a timely basis, except as follows:


                                    NUMBER OF TRANSACTIONS
                       NUMBER OF         NOT REPORTED             NUMBER OF
NAME                  LATE REPORTS    ON A TIMELY BASIS       REPORTS NOT FILED
----                  ------------    -----------------       -----------------

Warren F. Kruger            3                5                        0


ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth the compensation paid to named executive
officers during the fiscal years ended May 31, 2007 and 2006:

<TABLE><CAPTION>
                           SUMMARY COMPENSATION TABLE

         NAME AND              FISCAL YEAR
    PRINCIPAL POSITION        ENDING MAY 31      SALARY     BONUS     OPTION AWARDS
    ------------------        -------------      ------     -----    ---------------
<S>                                <C>          <C>          <C>           <C>
Warren F. Kruger, President        2007         $124,615     -0-           -0-
and Chief Executive Officer        2006         $198,462     -0-           -0-

Robert H. Nelson, Chief            2007         $ 61,615     -0-           -0-
Financial Officer                  2006         $151,754     -0-        1,000,000
</TABLE>

                                       23
<PAGE>

     The following table provides information with respect to named executive
officers concerning outstanding equity awards as of May 31, 2007:
<TABLE><CAPTION>

                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
                  --------------------------------------------


                       NUMBER OF SECURITIES      NUMBER OF SECURITIES
                      UNDERLYING UNEXERCISED    UNDERLYING UNEXERCISED    OPTION      OPTION
                              OPTIONS                  OPTIONS           EXERCISE    EXPIRATION
    NAME                    EXERCISABLE              UNEXERCISABLE         PRICE       DATE
<S>                         <C>                           <C>             <C>        <C>
Warren F. Kruger               100,000                    -0-              $3.125     4/11/2012
                                25,000                    -0-              $1.60      6/26/2012
                               150,000                    -0-              $0.55      4/1/2013

Robert H. Nelson             1,000,000                    -0-              $0.50      11/1/2014
</TABLE>

DIRECTORS' COMPENSATION
-----------------------

     Greystone does not pay cash compensation to the members of its Board of
Directors for service on the Board. From time to time in the past, Greystone has
granted options to the members of its Board of Directors under its stock option
plan as compensation for serving on Greystone's Board of Directors. There were
no options granted to any members of its Board of Directors during the fiscal
year ended May 31, 2007 as consideration for serving on its Board.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
------------------------------------------------------------------

     As of May 31, 2007, Greystone had one equity incentive plan under which
equity securities have been authorized for issuance to Greystone's directors,
officers, employees and other persons who perform substantial services for or on
behalf of Greystone. The following table provides certain information relating
to such stock option plan during the year ended May 31, 2007:





                                       24
<PAGE>
<TABLE><CAPTION>

                      EQUITY COMPENSATION PLAN INFORMATION

                                                 (A)                            (B)                           (C)
                                      --------------------------        -------------------       -----------------------------
                                                                                                      NUMBER OF SECURITIES
                                                                                                            REMAINING
                                      NUMBER OF SECURITIES TO BE          WEIGHTED-AVERAGE        AVAILABLE FOR FUTURE ISSUANCE
                                         ISSUED UPON EXERCISE            EXERCISE PRICE OF          UNDER EQUITY COMPENSATION
                                       OF OUTSTANDING OPTIONS,          OUTSTANDING OPTIONS,       PLANS (EXCLUDING SECURITIES
   PLAN CATEGORY                         WARRANTS AND RIGHTS            WARRANTS AND RIGHTS         REFLECTED IN COLUMN (A))
   -------------                         -------------------            -------------------       -----------------------------
<S>                                           <C>                              <C>                         <C>
Equity compensation plans approved
 by security holders                          2,360,000                        $1.35                       17,615,000

Equity compensation plans not
 approved by security holders                     -0-                            N/A                            -0-
                                              ---------                        -----                       ----------
            Total                             2,360,000                        $1.35                       17,615,000
</TABLE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of August 17, 2007, Greystone had 26,061,201 shares of its common stock
and 50,000 shares of its 2003 preferred stock outstanding. Each share of the
2003 preferred stock is convertible into approximately 66.67 shares of
Greystone's common stock.

     The following table sets forth certain information regarding the shares of
Greystone's common stock beneficially owned as of May 31, 2007, by (i) each
person known by Greystone to own beneficially 5% or more of Greystone's
outstanding common stock, (ii) each of Greystone's directors and officers, and
(iii) all of Greystone's directors and officers as a group:

    Name and Address of              Amount and Nature of
     Beneficial Owner                 Beneficial Owner(1)    Percent of Class(2)
     ----------------                 -------------------    -------------------

Paul A. Kruger                           4,317,598(3)               16.4%
2500 South McGee, Ste. 147
Norman, OK 73072

Hildalgo Trading Company, LC             1,767,014(4)               6.8%
2500 South McGee
Norman, OK 73072

Commerce Plastics                        2,000,000(5)               7.7%
Norman, OK 73072

                                       25
<PAGE>

GLOG Investment, L.L.C.                  3,333,333(6)               11.3%
1613 E. 15th Street
Tulsa, OK 74160

Warren F. Kruger                         11,621,183(7)              37.5%
Chairman, President and CEO
1613 East 15th Street
Tulsa, OK 74120

Robert H. Nelson                         1,824,169(8)                6.6%
Chief Financial Officer
1613 East 15th Street
Tulsa, OK 74120

Marshall S. Cogan                        2,120,844(9)                7.9%
New York, NY

Robert B. Rosene, Jr.                    7,977,231(10)              25.5%
Director
Tulsa, OK

All Directors & Officers as a Group
  (3 persons)                           18,089,250(11)              52.5%
------------------------

(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: (i) 325,584 shares of common stock beneficially owned
     directly or indirectly; (ii) 225,000 shares of common stock that Paul
     Kruger directly has the right to acquire in connection with options; (iii)
     1,767,014 shares held of record by Hildalgo Trading Company, LC, an entity
     wholly owned by Paul Kruger; and (iv) 2,000,000 shares of common stock held
     of record by Commerce Plastics, an entity owned by Paul Kruger.

(4)  The total includes 1,767,014 shares of common stock beneficially owned
     directly by Hildalgo Trading Company, LC. By virtue of his ownership of and
     control over Hildalgo Trading Company, LC, these shares are also included
     in the number of shares beneficially owned by Paul Kruger.

(5)  The total is 2,000,000 shares of common stock beneficially owned directly
     by Commerce Plastics. By virtue of his ownership of and control of Commerce
     Plastics, these shares are also included in the number of shares
     beneficially owned by Paul Kruger.

(6)  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.

                                       26
<PAGE>

(7)  The total includes: (i) 6,557,233 shares of common stock beneficially owned
     directly by Warren Kruger; (ii) 1,198,299 shares of common stock that Mr.
     Kruger has the right to acquire in connections with warrants (iii) 19,000
     shares held of record by Yorktown; (iv) 275,000 shares of common stock that
     Warren Kruger directly has the right to acquire in connection with options;
     (v) 153,818 shares which Westgate has the right to acquire in connection
     with warrants, owned by Westgate Capital, L.L.C., an entity of which Warren
     Kruger owns 50%; (vi) 84,500 shares of common stock that Warren Kruger
     holds on behalf of his minor children, of which he only holds the power to
     vote; 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.

(8)  The total includes: (i) 1,000,000 shares of common stock that Robert Nelson
     directly has the right to acquire in connection with options; (ii) 500,000
     shares of common stock that Robert Nelson directly has the right to acquire
     in connection with warrants; (iii) 285,714 shares of common stock
     beneficially owned by Mr. Nelson's wife, of which he disclaims any
     interest; and (iv) 38,455 shares of common stock that Mr. Nelson's wife has
     the right to acquire in connection with warrants, of which he disclaims any
     interest..

(9)  The total includes: (i) 1,428,571 shares of common stock beneficially owned
     directly by Marshall Cogan; and (ii) 692,273 shares of common stock that
     Mr. Cogan directly has the right to acquire in connection with warrants.

(10) The total includes: (i) 2,770,951 shares of common stock beneficially owned
     directly by Robert Rosene; (ii) 1,872,947 shares of common stock that
     Robert Rosene directly has the right to acquire in connection with
     warrants; 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.

(11) The total includes: (i) 9,717,398 outstanding shares, (ii) 1,275,000 shares
     issuable upon exercise of vested stock options, (iii) 3,763,519 shares
     issuable upon exercise of vested warrants and (iv) 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.

CHANGE IN CONTROL
-----------------

     Effective March 8, 2005, GLOG Investment, L.L.C., which is currently owned
by Warren F. Kruger, Chairman, President and CEO, and Robert Rosene, Jr.,
Director, acquired the outstanding 50,000 shares of Series 2003 Preferred Stock
from Paul Kruger, a major shareholder of Greystone. In connection with such
transaction, the members of GLOG, as the holder of the Series 2003 Preferred
Stock, possess certain voting rights to elect a majority of the Board of
Directors of Greystone. These voting rights and other material terms and
conditions of the Series 2003 Preferred Stock are set forth in the Certificate
of Designation relating to such Series 2003 Preferred Stock included as an
exhibit to a Current Report on Form 8-K filed by Greystone on September 23,
2004.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

TRANSACTIONS WITH RELATED PERSONS
---------------------------------

LOANS AND ADVANCES

     For information regarding loans from Warren Kruger, see "Loans from Warren
Kruger" under the heading "Liquidity and Capital Resources" in Item 6 of this
Form10-KSB.

     For information regarding an advance from Robert Rosene, see "Advances and
Loans from Robert Rosene" under the heading "Liquidity and Capital Resources" in
Item 6 of this Form10-KSB.

                                       27
<PAGE>

TECHNOLOGY LICENSE AGREEMENT

     In April 2001, Greystone entered into a license agreement with WCC, an
entity owned by Warren Kruger and William Pritchard, providing for Greystone to
have the exclusive right and license to use fire retardancy technology then
being developed under the direction and expense of WCC. The license agreement
was negotiated and executed 9 months before Warren Kruger, William Pritchard, or
entities with which they are affiliated became directors or beneficial owners of
10% or more of Greystone's common stock in January 2002. Under the agreement,
Greystone must pay the greater of 2.5% of Greystone's gross monthly revenues
derived from the sale of UL listed pallets using the technology or a minimum
monthly royalty of $10,000. However, WCC also agreed in the license agreement to
convey to Greystone ownership of the licensed Process (as defined in the
agreement) in the event that cumulative royalties paid by Greystone equaled
$250,000 during the first two years of the agreement, subject to an override or
carried interest in favor of WCC equal to 2.5% of the gross monthly revenues
which are the same payments as would have been received under the license
agreement. Subsequent to the execution of the original agreement which provided
for a "coating" technology, Westgate Capital Company, L.L.C., developed an
additive process which Greystone used to successfully complete UL testing. The
technology is currently known as CJ2(TM).

     During fiscal year 2005, Greystone accrued $400,000 of past monthly royalty
fees under the license agreement and accordingly Greystone has entered into a
paid-up licensing agreement with Westgate Capital Company, L.L.C. However, as of
May 31, 2003, Greystone recorded expenses of approximately $126,000 associated
with the license agreement. WCC has not asserted that Greystone is in default
under the license agreement, and WCC has indicated that it has no current
intentions of asserting any default by Greystone under such agreement. Greystone
is exploring the possibility of purchasing the technology from WCC.

OTHER TRANSACTIONS

For information relating to a Purchase Agreement and Bill of Sale and related
Pallet Molds Lease Agreement entered into with Yorktown Management & Financial
Services, LLC, an entity wholly owned by the Company's CEO and President, see
"Recent Transactions" under Item 1 of this Form 10-KSB. Greystone completed this
transaction with Yorktown, in part, to alleviate the working capital
requirements in maintaining raw material inventory, by purchasing raw material
as it is used in the production process. During the fiscal year ended May 31,
2007, GSM's raw material purchases from Yorktown totaled $3,049,368.

For information relating to a Settlement Agreement entered into with Commerce
Plastics L.P., an entity wholly owned by Paul Kruger, a beneficial owner of more
than five percent of Greystone's common stock, see "Recent Transactions" under
Item 1 of this Form 10-KSB.

For information relating to a Lease Agreement entered into with Greystone
Properties, LLC, a limited liability company owned by Robert B. Rosene, Jr., a
member of Greystone's Board of Directors, and Warren Kruger, Greystone's
President and CEO, see Item 2 of the Form 10-KSB.

DIRECTOR INDEPENDENCE

Greystone has determined that Mr. Rosene is "independent" within the meaning of
Rule 4200(a)(15) of the NASDAQ listing standards. Because of the small size of
Greystone's Board of Directors, it has not established any committees. Rather,
the entire Board acts as, and performs the same functions as, the audit
committee, compensation committee and nominating committee. Mr. Kruger is not
considered "independent" within the meaning of Rule 4200(a)(15) of the NASDAQ
listing standards.


                                       28
<PAGE>

ITEM 13. EXHIBITS

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).

   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).

                                       29
<PAGE>

EXHIBIT NO.    DESCRIPTION

   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).

   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).

                                       30
<PAGE>

EXHIBIT NO.    DESCRIPTION

   10.11       Senior Secured Promissory Note in the amount of $5,000,000
               payable to Greystone Plastics, Inc. (incorporated herein by
               reference to Exhibit 10.2 of The Company's Form 8-K dated
               September 8, 2003, which was filed with the SEC on September 23,
               2003).

   10.12       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).

   10.13       Wraparound Promissory Note in the amount of $799,454.06 payable
               to Bill Hamilton (incorporated herein by reference to Exhibit
               10.4 of The Company's Form 8-K dated September 8, 2003, which was
               filed with the SEC on September 23, 2003).

   10.14       Security Agreement between Greystone Plastics, Inc. and Greystone
               Manufacturing, L.L.C. dated September 3, 2003 (incorporated
               herein by reference to Exhibit 10.5 of The Company's Form 8-K
               dated September 8, 2003, which was filed with the SEC on
               September 23, 2003).

   10.15**     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).

   10.16**     Employment Agreement dated as of November 1, 2004, by and between
               PalWeb Corporation and Robert H. Nelson (incorporated herein by
               reference to Exhibit 10.2 of the Company's Form 10-QSB for the
               Quarterly Period Ended November 30, 2004, which was filed with
               the SEC on January 19, 2005).

   10.17       Letter Agreement dated January 3, 2005, by and between Greystone
               Manufacturing, L.L.C., and Greystone Plastics, Inc. (incorporated
               herein by reference to Exhibit 10.4 of the Company's Form 10-QSB
               for the Quarterly Period Ended November 30, 2004, which was filed
               with the SEC on January 19, 2005).

   10.18       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).

                                       31
<PAGE>

EXHIBIT NO.    DESCRIPTION

   10.19       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).

   10.20       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).

   10.21       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).

   10.22       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).

   10.23       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).

   10.24       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).

   10.25       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).

   10.26       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).

                                       32
<PAGE>

EXHIBIT NO.    DESCRIPTION

   10.27       Promissory Note dated as of June 17, 2005 in the amount of
               $500,100 issued by Greystone Logistics, Inc. and Greystone
               Manufacturing, L.L.C. to Robert B. Rosene, Jr. (incorporated
               herein by reference to Exhibit 10.1 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).

   10.28       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).

   10.29       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).

   10.30       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 $500,100 (incorporated herein by reference to Exhibit 10.4 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).

   10.31       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).

   10.32       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).

                                       33
<PAGE>

EXHIBIT NO.    DESCRIPTION

   10.33       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).

   10.34       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).

   10.35       Settlement Agreement and Release dated as of February 8, 2007, by
               and among Greystone Logistics, Inc., 1607 Commerce Limited
               Partnership, Plastic Pallet Production, Inc. and Greystone
               Manufacturing, LLC (incorporated herein by reference to Exhibit
               10.3 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 Loss 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 Murrell, Hall, McIntosh & Co., PLLP (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-B,
               as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
               2002 (submitted herewith).

   31.2        Certification of Chief Financial Officer pursuant to Rules
               13a-14(a) and 15d-14(a) promulgated under the Securities Exchange
               Act of 1934, as amended, and Item 601(b)(31) of Regulation S-B,
               as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
               2002 (submitted herewith).

   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).

                                       34
<PAGE>

EXHIBIT NO.    DESCRIPTION

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

** Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this report.



<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The following is a summary of the fees billed to Greystone by Murrell, Hall
& McIntosh, PLLP, Greystone's independent registered public accounting firm, for
professional services rendered for the fiscal years ended May 31, 2006 and May
31, 2005:

Fee Category                       Fiscal 2007 Fees     Fiscal 2006 Fees
                                   ----------------     ----------------

Audit Fees(1)                         $   57,690           $    46,450
Audit-Related Fees                             0                     0
Tax Fees                                       0                     0
All Other Fees                                 0                     0
                                      ----------           -----------
Total Fees                            $   57,690           $    46,450
                                      ==========           ===========

-----------------
(1) Audit Fees consist of aggregate fees billed for professional services
rendered for the audit of Greystone's annual financial statements and review of
the interim financial statements included in quarterly reports or services that
are normally provided by the independent registered public accounting firm in
connection with statutory and regulatory filings or engagements during the
fiscal years ended May 31, 2007 and May 31, 2006, respectively.

     The entire Board of Directors of Greystone is responsible for the
appointment, compensation and oversight of the work of the independent
registered public accounting firm and approves in advance any services to be
performed by the independent registered public accounting firm, whether
audit-related or not. The entire Board of Directors reviews each proposed
engagement to determine whether the provision of services is compatible with
maintaining the independence of the independent registered public accounting
firm. All of the fees shown above were pre-approved by the entire Board of
Directors.


                                       35
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                       GREYSTONE LOGISTICS, INC.
                                             (Registrant)


Date: 08/29/07                /s/ Warren F. Kruger
                              -------------------------------------------
                              Warren F. Kruger, Chairman, President and
                              Chief Executive Officer

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


Date: 08/29/07                /s/ Warren F. Kruger
                              -------------------------------------------
                              Warren F. Kruger, Chairman, President and
                              Chief Executive Officer

Date: 08/29/07                /s/ Robert B. Rosene, Jr.
                              -------------------------------------------
                              Robert B. Rosene, Jr., Director


Date: 08/29/07                /s/ Robert H. Nelson
                              -------------------------------------------
                              Robert H. Nelson, Chief Financial Officer








                                       36
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------



CONSOLIDATED FINANCIAL STATEMENTS OF GREYSTONE LOGISTICS, INC.

Report of Independent Registered Public Accounting Firm..................... F-1

Consolidated Balance Sheets................................................. F-2

Consolidated Statements of Operations ...................................... 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





















                                       37
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders
of Greystone Logistics, Inc.

     We have audited the accompanying consolidated balance sheet of Greystone
Logistics, Inc. (an Oklahoma corporation) and its subsidiaries as of May 31,
2007, and the related consolidated statements of operations, changes in
stockholders' deficit and cash flows for each of the years ended May 31, 2007
and 2006. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated financial statements based on our audits.

     We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required, nor
have we been engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Greystone Logistics, Inc. and its subsidiaries as of May 31, 2007, and the
consolidated results of their operations and cash flows for each of the years
ended May 31, 2007 and 2006, in conformity with accounting principles generally
accepted in the United States of America.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered significant
losses from operations. Substantial additional funding will be required to
implement its business plan and to attain profitable operations. The lack of
adequate funding to maintain working capital and stockholders' deficits at May
31, 2007 raises substantial doubt about its ability to continue as a going
concern unless additional funds from outside sources, its president or other
board members are obtained. Management's plans in regard to these matters are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

MURRELL, HALL, MCINTOSH & CO., PLLP

Oklahoma City, Oklahoma
August 29, 2007

                                       F-1
<PAGE>
                   GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  MAY 31, 2007


<TABLE><CAPTION>
                                     ASSETS
                                     ------
<S>                                                                       <C>
CURRENT ASSETS:
      Cash                                                                $    340,334
      Accounts receivable                                                    1,019,415
      Inventory                                                                237,769
      Prepaid expenses                                                          57,653
                                                                          ------------
          TOTAL CURRENT ASSETS                                               1,655,171

PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION               7,037,764

OTHER ASSETS:
      Patents, net of accumulated amortization                                 127,140
                                                                          ------------

TOTAL ASSETS                                                              $  8,820,075
                                                                          ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                      -------------------------------------

CURRENT LIABILITIES:
      Current portion of long-term debt                                   $  8,655,518
      Advances payable - related party                                         618,959
      Accounts payable and accrued expenses                                  3,153,473
      Accounts payable to related parties                                      709,146
      Preferred dividends payable                                            1,088,808
                                                                          ------------
          TOTAL CURRENT LIABILITIES                                         14,225,904

LONG-TERM DEBT                                                               4,297,427
DEFERRED INCOME                                                                128,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
      Preferred stock, $0.0001 par value, 20,750,000 shares authorized,
        50,000 shares outstanding, liquidation preference of $5,000,000              5
      Common stock, $0.0001 par value, 5,000,000,000 shares
        authorized, 26,061,201 outstanding                                       2,606
      Additional paid-in capital                                            52,693,226
      Deficit                                                              (62,527,093)
                                                                          ------------
          TOTAL STOCKHOLDERS' DEFICIT                                       (9,831,256)
                                                                          ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                               $  8,820,075
                                                                          ============
</TABLE>
                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                       F-2
<PAGE>
                   GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE><CAPTION>
                                                                              YEAR ENDED MAY 31,
                                                                         ----------------------------
                                                                             2007            2006
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
Sales                                                                    $ 12,454,293    $ 15,956,386

Cost of Sales, including depreciation expense of $816,722 and $745,244     11,588,057      15,030,690
                                                                         ------------    ------------

Gross Profit                                                                  866,236         925,696

Expenses:
      General, selling and administration expenses                          1,828,395       2,248,719
                                                                         ------------    ------------

Operating Loss                                                               (962,159)     (1,323,023)

Other Income (Expense):
      Other income (expense)                                                 (452,276)          1,700
      Interest expense                                                     (1,185,541)     (1,013,830)
                                                                         ------------    ------------
          Total Other Income (Expense)                                     (1,637,817)     (1,012,130)
                                                                         ------------    ------------

Net Loss                                                                   (2,599,976)     (2,335,153)

Preferred Dividends                                                           575,548         513,938
                                                                         ------------    ------------

Net Loss Available to Common Stockholders                                $ (3,175,524)   $ (2,849,091)
                                                                         ============    ============
Loss Available to Common Stockholders
      Per Share of Common Stock - Basic and Diluted                      $      (0.13)   $      (0.12)
                                                                         ============    ============

Weighted Average Shares of Common Stock Outstanding                        24,728,000      24,061,000
                                                                         ============    ============
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                       F-3
<PAGE>
                   GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT



<TABLE><CAPTION>
                                  Preferred Stock                Common Stock            Additional                      Total
                            ---------------------------   ---------------------------     Paid-In      Accumulated    Accumulated
                               Shares         Amount         Shares         Amount        Capital        Deficit        Deficit
                            ------------   ------------   ------------   ------------   ------------   ------------   ------------
<S>                         <C>            <C>            <C>            <C>            <C>            <C>            <C>
BALANCES, MAY 31, 2005            50,000   $          5     24,061,201   $      2,406   $ 52,214,532   $(56,502,478)  $ (4,285,535)

Compensation cost of stock
   options/warrants                   --             --             --             --         64,062             --         64,062

Preferred dividends paid
   or accrued                         --             --             --             --             --       (513,938)      (513,938)

Net loss                              --                            --             --             --     (2,335,153)    (2,335,153)
                            ------------   ------------   ------------   ------------   ------------   ------------   ------------

BALANCES, MAY 31, 2006            50,000              5     24,061,201          2,406     52,278,594    (59,351,569)    (7,070,564)

Stock in settlement of lease          --             --      2,000,000            200         99,800             --        100,000

Compensation cost of stock
   options/warrants                   --             --             --             --        314,832             --        314,832

Preferred dividends accrued           --             --             --                            --       (575,548)      (575,548)

Net loss                              --             --             --             --             --     (2,599,976)    (2,599,976)
                            ------------   ------------   ------------   ------------   ------------   ------------   ------------

BALANCES, MAY 31, 2007            50,000   $          5     26,061,201   $      2,606   $ 52,693,226   $(62,527,093)  $ (9,831,256)
                            ============   ============   ============   ============   ============   ============   ============
</TABLE>



    The accompanying notes are an integral part of these financial statements

                                       F-4
<PAGE>
                   GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE><CAPTION>
                                                                       YEAR ENDED MAY 31,
                                                                  ----------------------------
                                                                      2007            2006
                                                                  ------------    ------------
<S>                                                               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net Loss                                                    $ (2,599,976)   $ (2,335,153)
      Adjustments to reconcile net loss to cash used in
      operating activities
          Depreciation and amortization                                806,725         768,438
          Settlement costs on termination of operating lease           619,061              --
          Stock option compensation cost                               314,832          64,062
          (Gain) Loss on sale of equipment                             (71,472)         12,887
          Changes in accounts receivable                              (177,040)        731,260
          Changes in inventory                                         393,467         (95,713)
          Changes in prepaid expenses                                  (48,740)          2,019
          Changes in accounts payable and accrued expenses             965,887         128,879
          Other                                                         (5,205)             --
                                                                  ------------    ------------
               Net cash provided (used) by operating activities        197,539        (723,321)

Cash Flows from Investing Activities:
      Purchase of property and equipment                              (580,250)     (1,626,658)
      Proceeds from sale of equipment                                  993,234              --
                                                                  ------------    ------------
               Net cash provided (used) by investing activities        412,984      (1,626,658)

Cash Flows from Financing Activities:
      Proceeds from notes and advances payable                         745,682       2,960,267
      Payments on notes and advances payable                          (872,868)       (720,238)
      Proceeds (repayment) of bank overdraft                          (143,928)        143,928
      Dividends paid on preferred stock                                     --         (34,463)
                                                                  ------------    ------------
          Cash provided (used) by financing activities                (271,114)      2,349,494
                                                                  ------------    ------------

Net Increase (Decrease) in Cash                                        339,409            (485)
Cash, beginning of year                                                    925           1,410
                                                                  ------------    ------------

Cash, end of year                                                 $    340,334    $        925
                                                                  ============    ============

Supplemental Information (Note 12)
</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements

                                       F-5
<PAGE>
                   GREYSTONE LOGISTICS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          ------------------------------------------

          ORGANIZATION
          ------------

          Greystone Logistics, Inc. ("Greystone") through its wholly-owned
          subsidiaries Greystone Manufacturing, LLC ("GSM"), and Plastic Pallet
          Production, Inc. ("PPP"), is engaged in the manufacture and marketing
          of plastic pallets.

          PRINCIPLES OF CONSOLIDATION
          ---------------------------

          The accompanying consolidated financial statements include the
          accounts of Greystone and its subsidiaries. All material intercompany
          accounts and transactions have been eliminated.

          STATEMENT OF CASH FLOWS
          -----------------------

          Greystone considers all short-term investments with an original
          maturity of three months or less to be cash equivalents.

          USE OF ESTIMATES
          ----------------

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

          ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
          -------------------------------------------------------

          Greystone carries its accounts receivable at their face value less an
          allowance for doubtful accounts. On a periodic basis, Greystone
          evaluates its accounts receivable and establishes an allowance for
          doubtful accounts based on a combination of specific customer
          circumstances and credit conditions and based on a history of
          collections. There is no allowance for doubtful accounts at May 31,
          2007.

          INVENTORY
          ---------

          Inventory consists of finished pallets and raw materials and is stated
          at the lower of cost (first-in, first-out) or market value.



                                       F-6
<PAGE>
          PROPERTY, PLANT AND EQUIPMENT
          -----------------------------

          Greystone's property, plant and equipment is stated at cost.
          Depreciation expense is computed on the straight-line over the
          estimated useful lives or the units of production method, as follows:

          Plant building                                            39 years
          Production machinery and equipment                      5-10 years
          Office equipment & furniture & fixtures                  3-5 years

          Upon sale, retirement or other disposal, the related costs and
          accumulated depreciation of items of property, plant or equipment are
          removed from the related accounts and any gain or loss is recognized.
          When events or changes in circumstances indicate that assets may be
          impaired, an evaluation is performed comparing the estimated future
          undiscounted cash flows associated with the asset to the asset's
          carrying amount. If the asset carrying amount exceeds the cash flows,
          a write-down to market value or discounted cash flow value is
          required. As discussed in Note 2, Continuation as a Going Concern, the
          financial statements have been prepared assuming that Greystone will
          continue operations as a going concern and, accordingly, do not
          include any adjustments to the carrying value of its property and
          equipment relating to any potential outcome of such uncertainties.

          PATENTS
          -------

          Amortization expense for the costs incurred by Greystone to obtain the
          patents on the modular pallet system and accessories is computed on
          the straight-line method over the estimated life of 15-17 years.

          STOCK OPTIONS
          -------------

          In December 2004, the Financial Accounting Standards Board ("FASB")
          issued SFAS No. 123(R), "Share-Based Payment." This statement is a
          revision of SFAS No. 123, "Accounting for Stock-Based Compensation,"
          and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
          Employees," and its related implementation guidance. SFAS No. 123(R)
          requires companies to recognize in the income statement the grant-date
          fair value of stock options and other equity-based compensation issued
          to employees and is effective for interim or annual periods beginning
          after December 15, 2005. The Company has adopted SFAS No. 123(R) as of
          March 1, 2006, using the modified prospective transition method. Under
          the modified prospective transition method, awards that are granted,
          modified or settled after the date of adoption will be measured in
          accordance with SFAS No. 123(R). Unvested equity-classified awards
          that were granted prior to March 1, 2006 will be accounted for using
          the straight-line basis for recognizing compensation costs in
          accordance with SFAS No. 123, except that the amounts will be
          recognized in the Company's consolidated statements of operations. The
          effect of adopting SFAS No. 123(R) is a charge in the amount of
          $64,062 to compensation



                                       F-7
<PAGE>
          expense during the quarter ended and the year ended May 31, 2006.
          During fiscal year 2007, Greystone charged $314,832 to general and
          administrative expense. As of May 31, 2007, there were no unamortized
          cost related to stock options.

          Prior to March 1, 2006, Greystone applied the intrinsic value-based
          method of accounting prescribed by Accounting Principles Board Opinion
          No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
          interpretations, in accounting for its stock options. As such,
          compensation expense would be recorded on the date of grant only if
          the current market price of the underlying stock exceeded the exercise
          price. SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
          established accounting and disclosure requirements for stock-based
          employee compensation plans. As allowed by SFAS No. 123, Greystone
          used the intrinsic value-based method of accounting under APB No. 25,
          through March 1, 2006, the adoption date of SFAS No. 123(R).

          RECOGNITION OF REVENUES
          -----------------------

          Revenue is recognized when the product is shipped.

          RESEARCH AND DEVELOPMENT COSTS
          ------------------------------

          Research and development costs are charged to operations in the period
          incurred.

          INCOME TAXES
          ------------

          Greystone accounts for income taxes under the liability method, which
          requires recognition of deferred tax assets and liabilities for the
          expected future tax consequences of events that have been included in
          the financial statements or tax returns. Under this method, deferred
          tax assets and liabilities are determined based on the difference
          between the financial statements and tax bases of assets and
          liabilities using enacted tax rates in effect for the year in which
          the differences are expected to reverse.

          EARNINGS (LOSS) PER SHARE
          -------------------------

          Basic loss per share is computed by dividing the loss available to
          common stockholders by the weighted average number of common shares
          outstanding for the year. In arriving at income (loss) available to
          common stockholders, preferred stock dividends are added to the net
          loss for the year. Convertible preferred stock, warrants and stock
          options are not considered as their effect is antidilutive.


NOTE 2.   CONTINUATION AS A GOING CONCERN
          -------------------------------

          The accompanying financial statements have been prepared assuming that
          Greystone will continue as a going concern. Greystone has suffered
          significant losses from operations. Currently, management believes
          that Greystone has the capacity to produce sufficient


                                       F-8
<PAGE>
          plastic pallets to achieve profitability; however, sales have not
          reached such level. To date, Greystone has received substantial
          advances from investors but will require additional substantial
          funding in order to attain its business plan and have an opportunity
          to achieve profitable operations. Historically, management has been
          successful in financing its operations primarily through short-term
          loans and personal guarantees on bank loans by its officers and
          directors. Management continues to seek long-term and/or permanent
          financing. Neither the receipt of additional funding in adequate
          amounts nor the successful implementation of its business plan can be
          assured. The combination of these factors raises substantial doubt
          about Greystone's ability to continue as a going concern. It is
          management's opinion that (1) based upon expressions of interest from
          potential customers, adequate sales will be attained to reach a
          profitable status, (2) the funding for working capital required to
          reach necessary production levels will be obtained and (3) Greystone
          will continue as a going concern.


NOTE 3.   INVENTORY
          ---------

          Inventory at May 31, 2007 consists of:

          Raw materials                                 $     66,832
          Finished goods                                     170,937
                                                        ------------

          Total inventory                               $    237,769
                                                        ============


NOTE 4.   PROPERTY, PLANT AND EQUIPMENT
          -----------------------------

          A summary of the property, plant and equipment at May 31, 2007, is as
          follows:

          Production machinery and equipment            $  6,869,287
          Building and land                                2,709,323
          Furniture and fixtures                             166,643
                                                        ------------
                                                           9,745,253
           Less: accumulated depreciation                 (2,707,489)
                                                        ------------

                                                        $  7,037,764
                                                        ============

          Depreciation expense for the years ended May 31, 2007 and 2006 is
          $792,804 and $755,148, respectively.


NOTE 5.   OTHER ASSETS
          ------------

          At May 31, 2007 other assets totaling $127,140 consist of patents, net
          of accumulated amortization of $52,878. Amortization of intangibles
          was $13,291 and $13,290 for 2007 and 2006, respectively.


                                       F-9
<PAGE>


NOTE 6.   LONG-TERM DEBT AND ADVANCES PAYABLE
          -----------------------------------
<TABLE><CAPTION>
<S>       <C>                                                              <C>
          Long-term debt at May 31, 2007 consists of the following:

             Note payable to F&M Bank & Trust Company, prime rate of
               interest plus 2%, due March 18, 2008, payable
               in monthly installments of $51,472                          $ 5,140,302

             Note payable to F&M Bank & Trust Company, prime rate of
               interest plus 1%, due January 5, 2007                         1,400,000

              Note payable to Greystone Plastics, Inc., 7% interest, due
                 September 7, 2018, payable in monthly installments of
              $13,889 plus accrued interest                                  1,902,773

             Note payable to First Bartlesville Bank, prime rate of
               interest plus 1%, due July 1, 2008, payable in monthly
               installments of $6,441                                          347,745

             Note payable to Robert Rosene, 7.5% interest, due January
               15, 2010, payable in three equal annual installments of
               principal
               and interest beginning January 15, 2008                       2,066,000

             Note payable to Robert Rosene, prime rate of interest plus
               0.5%, due July 1, 2008, payable in monthly installments
               of $7,546                                                       406,371

             Note payable to Warren Kruger, 7.5% interest, due January
               15, 2010, payable in three equal annual installments of
               principal
               and interest beginning January 15, 2007                         527,716

             Lease settlement obligation to 1607 Commerce LLC, 8.5%
                interest, payable in monthly installments for principal
                and interest of $24,000 per month, due February 1, 2009        448,268

             Capitalized lease purchase agreement with related party,
               7.5% interest, due February 18, 2009, payable in monthly
               installments of $21,136                                         713,770
                                                                           -----------

                         Total                                              12,952,945
                         Less: Current portion                               8,655,518
                                                                           -----------
                         Long-term debt                                    $ 4,297,427
                                                                           ===========
</TABLE>

                                      F-10
<PAGE>
          The prime rate of interest as of May 31, 2007 was 8.25%.

          The note payable to Greystone Plastics is secured by land and building
          with a net book value of $2,367,283.

          The note payable to First Bartlesville Bank is secured by equipment
          with a net book value of $1,000,048.

          The notes payable to F&M Bank and Trust Company are secured by
          Greystone's property and equipment, accounts receivable and cash
          balances. The loans are guaranteed by the officers and directors of
          Greystone in effect at May 31, 2007.

          Maturities of long-term debt for the five years after May 31, 2007 are
          $8,655,518, $1,863,418, $1,031,240, $166,668, $166,668, and $1,069,433
          thereafter.


NOTE 7.   RELATED PARTY TRANSACTIONS
          --------------------------

          TRANSACTIONS WITH GREYSTONE PROPERTIES, LLC
          -------------------------------------------

          Effective as of July 1, 2004, Greystone Properties, LLC, a limited
          liability company owned by Robert B. Rosene, Jr., a member of
          Greystone's Board of Directors, and Warren Kruger, Vice Chairman,
          entered into an industrial lease with GSM, pursuant to which Greystone
          Properties, LLC agreed to lease a building containing 60,000 square
          feet of space to GSM for ten years in exchange for lease payments of
          $25,000 per month, amended to $17,500 beginning January 1, 2006.
          Greystone paid Greystone Properties, LLC, rent of $20,000 per month
          for the period from beginning August 1, 2004, $25,000 per month
          beginning November 30, 2004 and $17,500 beginning January 1, 2006. The
          industrial building is located adjacent to Greystone's plant in
          Bettendorf, Iowa.

          TRANSACTIONS WITH PAUL KRUGER, A SIGNIFICANT STOCKHOLDER
          --------------------------------------------------------

          On February 8, 2007, Greystone entered into a Settlement Agreement and
          Release with 1607 Commerce Limited Partnership, a Texas limited
          partnership, which subsequently changed its name to Commerce Plastics
          L.P. ("Commerce"). Pursuant to the Settlement Agreement and in
          exchange for full, final and complete settlement of any and all claims
          that Commerce has asserted, or could have asserted, in its lawsuit
          regarding an alleged default in the payment of rent pursuant to terms
          of the Equipment Lease (defined below) and the enforcement of certain
          related guaranties, Greystone agreed to (i) to pay outstanding rental
          accruals by Greystone to Commerce of $1,048,000, (ii) make monthly
          payments to Commerce of $24,000 for a term of 24 months commencing
          March 1, 2007, which payments can be used towards the purchase price
          of pallets purchased from Commerce as further described below, (iii)
          transfer to Commerce 2,000,000 shares of the Company's common stock,
          and (iv) enter into an agreement with Commerce whereby,



                                      F-11
<PAGE>
          among other things, Commerce will be given floor space, utilities and
          regrind resin in the Company's Iowa facility and the Company will be
          required to purchase up to 200,000 Granada pallets at $8.00 per pallet
          and 200,000 nestable pallets at $3.00 per pallet from Commerce over a
          two year term. Also pursuant to the Settlement Agreement, the monthly
          payments to be made by the Company will be credited against the
          purchase price of any Granada pallets purchased from Commerce;
          provided, however, Commerce is not obligated to produce any pallets,
          but has agreed to use it best efforts to do so. The Settlement
          Agreement also included an immediate termination of that certain
          equipment lease dated as of September 8, 2003, by and between Commerce
          and Plastic Pallet (the "Equipment Lease"), whereby the registrant
          leased, for a term of 130 months commencing September 8, 2003, at a
          rate of $48,000 per month, certain equipment that PPP previously used
          to produce its pallets.

          Rental payments pursuant to the equipment lease agreement totaled
          $384,000 and $576,000 for fiscal years 2007 and 2006, respectively.

          TRANSACTIONS WITH WARREN KRUGER, VICE CHAIRMAN
          ----------------------------------------------

          Effective June 1, 2006, Yorktown Management & Services LLC, an entity
          owned by Warren Kruger, Chairman and CEO, commenced selling plastic
          raw material to GSM primarily as a sole provider. Effective February
          1, 2007, GSM entered into a purchase agreement with Yorktown pursuant
          to which Yorktown purchased from GSM existing finished goods inventory
          and certain raw materials for $1,018,582 and grinding and peripheral
          equipment, resin contracts and molds for $981,418. Greystone completed
          this transaction with Yorktown, in part, to alleviate the working
          capital requirements in maintaining raw material inventory, by
          purchasing raw material as it is used in the production process. GSM
          pays Yorktown's cost plus $0.03 per pound. During 2007, GSM raw
          material purchases from Yorktown totaled $3,049,368. During 2006,
          Warren Kruger through NYOK, as discussed in the following paragraph,
          provided to GSM grinding services on reclaimed plastic for use in the
          production of plastic pallets. GSM paid $44,000 to NYOK for this
          grinding service.

          Effective as of November 1, 2004, NYOK Partners, an entity of which
          Warren Kruger, Chairman and CEO, had an ownership interest, entered
          into an equipment rental contract with GSM to lease a Cincinnati
          Milacron Plastics Injection Molding Machine for a five-year term at
          the rate of $21,136 per month. At the end of such five-year term, GSM
          has the right to purchase the machine from NYOK for $100,000. The
          lease is reflected on Greystone's financial statements as a
          capitalized lease. About June 1, 2006, NYOK was dissolved and the
          equipment lease is now owned by Yorktown Management & Services, LLC,
          an entity owned by Warren Kruger. Effective June 1, 2006, Yorktown
          verbally agreed to receive interest only payments on the outstanding
          balance of the capitalized lease.


                                      F-12
<PAGE>
          During 2007, Warren Kruger advanced working capital funds to Greystone
          in the amount of $745,682 and Greystone repaid Warren Kruger the
          amount of $509,041. During 2006, Warren Kruger advanced $429,100 to
          Greystone. Effective December 15, 2005, Greystone entered into a loan
          agreement with Warren Kruger to convert $527,716 of the advances into
          a note payable at 7.5% interest and payable in three equal
          installments of principal and accrued interest beginning January 15,
          2008 through January 15, 2010. At May 31, 2007, note payable of
          $527,716, advances of $618,951 and accrued interest of $206,117 were
          due to entities owned or controlled by Warren Kruger.

          Greystone also reimburses an entity owned by Warren Kruger for office
          rent at the rate of $1,500 per month.

          TRANSACTIONS WITH ROBERT ROSENE, DIRECTOR
          -----------------------------------------

          During fiscal year 2006, Mr. Rosene advanced working capital funds to
          Greystone in the amount of $1,578,249 in addition to $500,000 advanced
          in the prior year. Effective December 15, 2005, Greystone entered into
          a loan agreement with Mr. Rosene to convert $2,066,000 of the advances
          into a note payable at 7.5% interest and payable in three equal
          installments of principal and accrued interest beginning January 15,
          2008 through January 15, 2010. Accrued interest due to Mr. Rosene as
          May 31, 2007 is $175,295.


NOTE 8.   FEDERAL INCOME TAXES
          --------------------

          Deferred taxes as of May 31, 2007 and 2006 are as follows:














                                      F-13
<PAGE>

                                                       2007            2006
                                                   ------------    ------------
          Deferred Tax Assets:
             Net operating loss                    $ 10,337,124    $  9,358,497
             Amortization of intangibles              1,579,890       1,725,005
             Capital loss carryover                   1,059,440       1,059,440
             Depreciation, financial reporting
                in excess of tax                         24,056              --
             Accrued expenses                            14,123         145,349
                                                   ------------    ------------

                Total deferred tax assets            13,014,633      12,288,291

          Deferred Tax Liabilities:
             Depreciation of property and
                equipment, Tax in excess of
                financial reporting                          --          (5,455)
                                                   ------------    ------------
                                                     13,014,633      12,282,836
          Less: Valuation allowance                 (13,014,633)    (12,282,836)
                                                   ------------    ------------
                Total                              $         --    $         --
                                                   ============    ============



          Management has provided a valuation allowance for the full amount of
          the deferred tax asset as Greystone continues to incur substantial
          losses from its operations. While management projects that the
          products being developed will be profitable and the deferred asset
          will ultimately be realized, Greystone has not yet reached sufficient
          reliability on product acceptance and marketability to reduce the
          valuation allowance.

          The net change in deferred taxes for the year ended May 31, is as
          follows:

                                                       2007            2006
                                                   ------------    ------------
          Net operating loss                       $    978,627    $    951,317
          Depreciation of property and equipment         29,511          40,181
          Amortization of intangibles                  (145,115)       (137,645)
          Accrued expenses                             (131,226)         14,123
          Loss on investments                                --           1,700
          Allowance for doubtful accounts                    --         (64,724)
          Change in valuation allowance                (731,797)       (804,952)
                                                   ------------    ------------
              Total                                $         --    $         --
                                                   ============    ============

          Greystone's effective tax rate for the year ended May 31, differs from
          the federal statutory rate as follows:

                                      F-14
<PAGE>
                                                       2007            2006
                                                   ------------    ------------
          Tax benefit using statutory rates        $    868,692    $    793,952
          Net change in valuation allowance            (731,797)       (804,952)
          Compensation cost of stock options           (107,043)        (21,781)
          Other                                         (29,852)         32,781
                                                   ------------    ------------
          Tax benefit, per financial statements    $         --    $         --
                                                   ============    ============


          Greystone has a net operating loss (NOL) for Federal income tax
          purposes as of May 31, 2007 of $30,403,000 expiring in fiscal year
          2012 through fiscal year 2027.

          Pursuant to Internal Revenue Code Section 382 and due to a change in
          control of Greystone, the amount of operating loss which may be
          applied in any one year will be substantially limited.


NOTE 9.   STOCKHOLDERS' EQUITY
          --------------------

          A summary of outstanding warrants for the years ending May 31 is as
          follows:
                                         2007                      2006
                               -----------------------   -----------------------
                                             Weighted                  Weighted
                                              average                   average
                                             exercise                  exercise
                                 Shares        price       Shares        price
                               ----------   ----------   ----------   ----------
          Beginning of year     5,012,914   $     0.59    5,012,914   $     0.59

          Additions                    --           --      250,000         0.15

          End of year           5,012,914   $     0.59    5,262,914   $     0.56


          All warrants issued and outstanding have a term of five years expiring
          in fiscal years 2009 and 2012.

          Effective February 1, 2007, Greystone issued a warrant to purchase up
          to 250,000 shares of common stock at $0.15 per share to an individual
          in consideration for providing certain financing and consulting
          services, which facilitated the sale of certain of Greystone's
          equipment to Yorktown Management, LLC, a company owned by Warren
          Kruger, Chairman and CEO. The warrants are valued at $8,500.

          Effective February 1, 2007, Greystone agreed to issue 2,000,000 shares
          of its common stock and agreed to pay $24,000 per month for
          twenty-four months to 1607 Commerce LLC to terminate a long-term lease
          agreement on equipment. The present value of the series of $24,000
          monthly payments at 8.5% interest or $519,060 and the value of the
          common stock on the effective date of issuance of $100,000 were
          recorded as a loss on the termination agreement of the long-term
          lease.

                                      F-15
<PAGE>
NOTE 10.  STOCK OPTIONS
          -------------

          Greystone has a stock option plan that provides for the granting of
          options to key employees and non-employee directors. The options are
          to purchase common stock at not less than fair market value at the
          date of the grant. The maximum number of shares of common stock for
          which options may be granted is 20,000,000 of which 16,015,000 are
          available for grant as of May 31, 2007. Stock options generally expire
          in ten years from date of grant or upon termination of employment and
          are generally exercisable one year from date of grant in cumulative
          annual installments of 25%, except that the options granted in fiscal
          2001 were 100% vested at the date of grant. Following is a summary of
          option activity for the three years ended May 31, 2007:
                                                                   Weighted
                                                                    Average
                                                       Shares      Exercise
                                                       (000's)       Price
                                                      --------     --------
               Options outstanding at May 31, 2004       1,935         1.68
               Options granted                           2,250         0.50
               Options cancelled                          (225)        0.50
                                                      --------     --------

               Options outstanding at May 31, 2005       3,960         1.01
               Options cancelled                          (350)        0.62
                                                      --------     --------

               Options outstanding at May 31, 2006       3,610         1.06
               Options cancelled                        (1,250)        0.54
                                                      --------     --------
               Options outstanding at May 31, 2007       2,360     $   1.35
                                                      ========     ========
               Exercisable as of May 31, 2005            2,045     $   1.41
                                                      ========     ========
               Exercisable as of May 31, 2006            2,404     $   1.33
                                                      ========     ========
               Exercisable as of May 31, 2007            2,360     $   1.35
                                                      ========     ========

          With respect to options outstanding at May 31, 2007:

                          Options      Weighted      Weighted
             Range      Outstanding  Average Life  Average Price    Exercisable
          -----------   -----------  ------------  -------------    -----------
          $0.50-$0.55    1,450,000     6.9 years      $0.52          1,450,000

             $1.60         185,000     5.1 years      $1.60            185,000

             $2.00         135,000     3.9 years      $2.00            135,000

          $3.125-$4.00     590,000     4.8 years      $3.18            590,000
                        ----------                                  ----------

             Total       2,360,000     6.1 years      $1.06          2,360,000


                                      F-16
<PAGE>

          For the period from June 1, 2005 through February 28, 2006, Greystone
          applied APB Opinion No. 25 in accounting for its stock options and,
          accordingly, no compensation cost was recognized for its stock options
          in the financial statements. As discussed in Note 1, Greystone adopted
          SFAS No. 31, and, accordingly, recorded compensation expense in the
          amount of $64,062 in the financials statements for the period from
          March 1, 2006 through May 31, 2006. Had Greystone, prior to March 1,
          2006, determined compensation cost at the grant date based on fair
          value under SFAS No. 123, Greystone's net loss for fiscal year 2006
          would have been increased to the pro forma amount indicated below:


          Net loss to common shareholders:
          As reported                              $(2,849,091)

          Pro forma                                $(3,055,960)

          Per share:
          As reported                              $     (0.12)

          Pro Forma                                $     (0.13)

          The fair value of the options used to compute the compensation cost is
          estimated using the Black-Scholes option pricing model using the
          following assumptions:

                  Dividend Yield                          None
                  Expected Volatility                     136%
                  Risk Free Interest Rate                   4%
                  Expected Holding Period              5 years

          There are no future costs under existing stock options agreements as
          of May 31, 2007.


NOTE 11.  FINANCIAL INSTRUMENTS
          ---------------------

          Greystone's financial instruments consist principally of accounts
          payable, accrued liabilities and notes and mortgages payable.
          Management estimates the market value of the notes and mortgage
          payable based on expected cash flows and believes these market values
          approximate carrying values at May 31, 2007 and 2006.

                                      F-17
<PAGE>
NOTE 12.  SUPPLEMENTAL INFORMATION OF CASH FLOWS
          --------------------------------------

          Supplemental information of cash flows for the years ended May 31:

                                                   2007             2006
                                                ----------       ----------
          Non-cash activities
             Common stock issued in
              settlement of lease agreement     $  100,000       $       --

             Debt in settlement of lease         1,205,475          519,060
             Preferred dividend accrual            575,938          479,475
             Sale of equipment for debt                 --           20,000

          Interest paid                            930,095          893,129
          Taxes paid                                    --               --



NOTE 13.  OPERATING LEASES
          ----------------

          Rental expense on operating leases totaled $594,000 and $725,522
          during 2007 and 2006, respectively. Commitments for operating leases
          for the five years after May 31, 2007 are $210,000, $210,000,
          $210,000, $210,000, and $210,000 and $472,500 thereafter. Operating
          leases are described further in Note 7, under the headings
          "Transactions with Paul Kruger, a significant stockholder," for the
          equipment lease and Transactions with "Transactions with Greystone
          Properties, LLC," for the industrial lease.


NOTE 14.  CONCENTRATIONS OF CREDIT RISK
          -----------------------------

          Financial instruments that potentially subject Greystone to
          concentrations of credit risk consist principally of cash deposits in
          excess of federally insured limits. As of May 31, 2007, Greystone's
          bank balances exceeded federally insured limits $313,574.


NOTE 15.  CONTINGENCIES
          -------------

          A court action was filed by William Hamilton dba WHACO and dba
          Greystone Bill Hamilton Trucking against GSM alleging damages in the
          amount of $104,390 for breach of contract involving provision of
          materials and services. William Hamilton is an owner in Greystone
          Plastics, Inc. from whom GSM purchased certain manufacturing assets in
          2003. GSM has denied all allegations and has asserted a counterclaim
          arising from the sale of manufacturing assets by Greystone Plastics,
          Inc. to GSM. The action is in the early stages of discovery and is
          being vigorously defended by GSM. However, GSM management cannot
          predict or guarantee the outcome of the action.

          Certain conditions may exist as of the date the financial statements
          are issued, which may result in a loss to Greystone but which will
          only be resolved when one or more future events occur or fail to
          occur. Greysstone's management and its legal counsel assess such
          contingent liabilities, and such assessment inherently involves an
          exercise of judgment. In assessing loss contingencies related to legal
          proceedings that are pending against Greystone or unasserted claims
          that may result in such proceedings, Greystone's legal counsel
          evaluates the perceived merits of any legal proceedings or unasserted
          claims as well as the perceived merits of the amount of relief sought
          or expected to be sought therein.


                                      F-18
<PAGE>

          If the assessment of a contingency indicates that it is probable that
          a material loss has been incurred and the amount of the liability can
          be estimated, then the estimated liability would be accrued in
          Greystone's financial statements. If the assessment indicates that a
          potentially material loss contingency is not probable but is
          reasonably possible, or is probable but cannot be estimated, then the
          nature of the contingent liability, together with an estimate of the
          range of possible loss if determinable and material, would be
          disclosed.

          Loss contingencies considered remote are generally not disclosed
          unless they involve guarantees, in which case the guarantees would be
          disclosed.

          Excelsoior aCapital Marketing and Howell Mergers and Acquisitions, LLC
          v. 1607 Commerce Limited Partnership, Plastic Pallet Production, Inc.
          and Palweb Corporation. On October 5, 2006 Excelsior Capital Marketing
          and Howell Mergers and Acquisitions, LLC ("HMA") filed suit against
          1607 Commerce Limited Partnership, Plastic Pallet Production, Inc.
          ("PPP") and Palweb HMA, under which PPP agreed to assign the insurance
          proceeds from Mt. Hawley to HMA if HMA repaired the damage to the real
          properly located at 1607 Commerce Street, Dallas, Texas (the
          "Building"). Plaintiffs allege that they allowed the Salvation Army to
          use the required repairs on the Building in exchange for being allowed
          by Plaintiffs to use the Building free of rent. Plaintiffs concede
          that they paid no rent on the Building during the period that they
          allowed the Salvation Army to use the Building. Plaintiffs also
          concede that, upon receiving the insurance checks from Mt. Hawley,
          Defendants endorsed the insurance checks over to Plaintiffs.

          Plaintiffs allege claims for breach of contract, fraud, negligent
          misrepresentation, unjust enrichment, and civil conspiracy. Plaintiffs
          seeks actual damages in the amount of $267,487.48 which represent the
          amount of insurance proceeds paid by Mt. Hawley Insurance Company for
          damage done to the Building. Plaintiffs also seek punitive damage,
          attorneys' fees, and prejudgment and post-judgment interest. The case
          is set for trial on February 11, 2008, and discover and pretrial
          motion practice are ongoing. Defendants intend to vigorously defend
          against the claims asserted by Plaintiffs.




                                      F-19