UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-Q


(Mark
One)





x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
      ACT OF 1934
                FOR
      THE QUARTERLY PERIOD ENDED February 28,
      2009


o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
              FOR
      THE TRANSITION PERIOD FROM ______ TO
  ________




Commission
file number  000-26331





GREYSTONE
LOGISTICS, INC.


(Exact
name of registrant as specified in its charter)





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





1613
East 15thStreet, Tulsa,
Oklahoma 74120


(Address
of principal executive offices)     (Zip
Code)





(918) 583-7441


(Registrant’s telephone
number)








(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 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 
o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to post and submit such files).   Yes  o   No 
o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large accelerated
      filer  o
            Accelerated
      filer  o
            Non-accelerated
      filer  o
              (Do not check if a
      smaller reporting company)
            Smaller reporting
      company  x




Indicate
by checkmark whether the registrant is a shell company (as defined in rule 12b-2
of the Exchange Act).  Yes  o   No 
x





Applicable
only to corporate issuers





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable
date:      April 12, 2009 -
26,111,201










GREYSTONE
LOGISTICS, INC.


FORM
10-Q


For
the Period Ended February 28, 2009





PART
I.  FINANCIAL INFORMATION





Item
      1.  Financial Statements
              PageConsolidated
      Balance Sheetsas
      of February 28, 2009 (Unaudited) and May 31, 2008
              1Consolidated
      Statements of Operations (Unaudited)For
      the Nine Month Periods Ended February 28, 2009 and February 29,
      2008
              2Consolidated
      Statements of Operations (Unaudited)For
      the Three Month Periods Ended February 28, 2009 and February 29,
      2008
              3Consolidated
      Statements of Cash Flows (Unaudited)For
      the Nine Month Periods Ended February 28, 2009 and February 29,
      2008
              4Notes
      to Consolidated Financial Statements (Unaudited)
              5Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              9Item
      4.  Controls and Procedures
              15PART
      II.  OTHER INFORMATIONItem
      1.  Legal Proceedings
              15Item
      6.  Exhibits
              16SIGNATURE
              17

















ITEM
1.  FINANCIAL STATEMENTS




Greystone
Logistics, Inc. and Subsidiaries


Consolidated
Balance Sheets


February
      28,
                                            
                                            
                                            May
      31,2009
                                            
                                            
                                            2008Assets
                                            
                                            (Unaudited)Current
      Assets:Cash
                                            
                                            $
                                            300,978
                                            
                                            
                                            $
                                            201,301Accounts
      receivable
                                            
                                            
                                            693,858
                                            
                                            
                                            
                                            1,286,948Inventory
                                            
                                            
                                            1,089,091
                                            
                                            
                                            
                                            899,485Prepaid
      expenses and other
                                            
                                            
                                            57,357
                                            
                                            
                                            
                                            61,114Total
      Current Assets
                                            
                                            
                                            2,141,284
                                            
                                            
                                            
                                            2,448,848Property,
      Plant and Equipment,net
      of accumulated depreciation of $4,411,238 and $3,693,398at
      February 28, 2009 and May 31, 2008, respectively
                                            
                                            
                                            8,455,135
                                            
                                            
                                            
                                            8,878,716Other
      Assets
                                            
                                            
                                            106,843
                                            
                                            
                                            
                                            118,440Total
      Assets
                                            
                                            $
                                            10,703,262
                                            
                                            
                                            $
                                            11,446,004Liabilities and Stockholders’
      DeficiencyCurrent
      Liabilities:Current
      portion of long-term debt
                                            
                                            $
                                            3,127,217
                                            
                                            
                                            $
                                            9,013,395Advances
      payable - related party
                                            
                                            
                                            1,100,228
                                            
                                            
                                            
                                            1,231,499Accounts
      payable and accrued expenses
                                            
                                            
                                            1,211,190
                                            
                                            
                                            
                                            1,138,735Accounts
      payable and accrued expenses - related parties
                                            
                                            
                                            2,064,403
                                            
                                            
                                            
                                            2,490,080Preferred
      dividends payable
                                            
                                            
                                            1,876,095
                                            
                                            
                                            
                                            1,597,499Total
      Current Liabilities
                                            
                                            
                                            9,379,133
                                            
                                            
                                            
                                            15,471,208Long-Term Debt, net of
      current portion
                                            
                                            
                                            9,869,228
                                            
                                            
                                            
                                            4,465,291Deferred
      Income
                                            
                                            
                                            32,000
                                            
                                            
                                            
                                            80,000Minority
      Interest
                                            
                                            
                                            767,955
                                            
                                            
                                            
                                            708,872Stockholders’
      Deficiency:Preferred
      stock, $0.0001 par value, 20,750,000 sharesauthorized,
      50,000 shares issued and outstanding,liquidation
      preference of $5,000,000
                                            
                                            
                                            5
                                            
                                            
                                            
                                            5Common
      stock, $0.0001 par value, 5,000,000,000 sharesauthorized,
      26,111,201 issued and outstanding
                                            
                                            
                                            2,611
                                            
                                            
                                            
                                            2,611Additional
      paid-in capital
                                            
                                            
                                            52,897,357
                                            
                                            
                                            
                                            52,825,381Accumulated
      deficit
                                            
                                            
                                            (62,245,027
                                            )
                                            
                                            
                                            (62,107,364
                                            )Total
      Stockholders’ Deficiency
                                            
                                            
                                            (9,345,054
                                            )
                                            
                                            
                                            (9,279,367
                                            )Total
      Liabilities and Stockholders’ Deficiency
                                            
                                            $
                                            10,703,262
                                            
                                            
                                            $
                                            11,446,004
 The
accompanying notes are an integral part of these consolidated financial
statements.
  - 1
-
 
 Greystone
Logistics, Inc. and Subsidiaries
 Consolidated
Statements of Operations
 (Unaudited)
  Nine
      Months Ended February 28/29,2009
                                                    
                                                    
                                                    2008Sales
                                                    
                                                    $
                                                    12,118,476
                                                    
                                                    
                                                    $
                                                    16,270,703Cost
      of Sales
                                                    
                                                    
                                                    10,043,569
                                                    
                                                    
                                                    
                                                    13,464,310Gross
      Profit
                                                    
                                                    
                                                    2,074,907
                                                    
                                                    
                                                    
                                                    2,806,393General,
      Selling and Administration Expenses
                                                    
                                                    
                                                    1,328,565
                                                    
                                                    
                                                    
                                                    1,184,601Operating
      Income
                                                    
                                                    
                                                    746,342
                                                    
                                                    
                                                    
                                                    1,621,792Other
      Income (Expense):Other
      income
                                                    
                                                    
                                                    181,015
                                                    
                                                    
                                                    
                                                    110,576Interest
      expense
                                                    
                                                    
                                                    (746,623
                                                    )
                                                    
                                                    
                                                    (992,832
                                                    )Total
      Other Expense, net
                                                    
                                                    
                                                    (565,608
                                                    )
                                                    
                                                    
                                                    (882,256
                                                    )Income
      Attributable to Minority Interest
                                                    
                                                    
                                                    (39,801
                                                    )
                                                    
                                                    
                                                    (54,989
                                                    )Net
      Income
                                                    
                                                    
                                                    140,933
                                                    
                                                    
                                                    
                                                    684,547Preferred
      Dividends
                                                    
                                                    
                                                    278,596
                                                    
                                                    
                                                    
                                                    403,656Net
      Income (Loss) Available to Common Stockholders
                                                    
                                                    $
                                                    (137,663
                                                    )
                                                    
                                                    $
                                                    280,891Income
      (Loss) Available to Common StockholdersPer
      Share of Common Stock - Basic and Diluted
                                                    
                                                    $
                                                    (0.01
                                                    )
                                                    
                                                    $
                                                    0.01Weighted
      Average Shares of Common Stock OutstandingBasic
                                                    
                                                    
                                                    26,111,000
                                                    
                                                    
                                                    
                                                    26,061,000Dilutive
      effect of warrants outstanding
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    100,000Diluted
                                                    
                                                    
                                                    26,111,000
                                                    
                                                    
                                                    
                                                    26,161,000
  The
accompanying notes are an integral part of these consolidated financial
statements.


- 2
-
 
 Greystone
Logistics, Inc. and Subsidiaries
 Consolidated
Statements of Operations
 (Unaudited)
 
 Three
      Months Ended February 28/29,2009
                                            
                                            
                                            2008Sales
                                            
                                            $
                                            3,924,502
                                            
                                            
                                            $
                                            5,427,428Cost
      of Sales
                                            
                                            
                                            3,393,052
                                            
                                            
                                            
                                            4,511,235Gross
      Profit
                                            
                                            
                                            531,450
                                            
                                            
                                            
                                            916,193General,
      Selling and Administration Expenses
                                            
                                            
                                            451,431
                                            
                                            
                                            
                                            404,243Operating
      Income
                                            
                                            
                                            80,019
                                            
                                            
                                            
                                            511,950Other
      Income (Expense):Other
      income
                                            
                                            
                                            16,000
                                            
                                            
                                            
                                            42,425Interest
      expense
                                            
                                            
                                            (205,111
                                            )
                                            
                                            
                                            (323,579
                                            )Total
      Other Expense, net
                                            
                                            
                                            (189,111
                                            )
                                            
                                            
                                            (281,154
                                            )Income
      Attributable to Minority Interest
                                            
                                            
                                            (19,891
                                            )
                                            
                                            
                                            (18,419
                                            )Net
      Income (Loss)
                                            
                                            
                                            (128,983
                                            )
                                            
                                            
                                            212,377Preferred
      Dividends
                                            
                                            
                                            80,137
                                            
                                            
                                            
                                            120,616Net
      Income (Loss) Available to Common Stockholders
                                            
                                            $
                                            (209,120
                                            )
                                            
                                            $
                                            91,761Income
      (Loss) Available to Common StockholdersPer
      Share of Common Stock - Basic and Diluted
                                            
                                            $
                                            (0.01
                                            )
                                            
                                            $
                                            0.00Weighted
      Average Shares of Common Stock OutstandingBasic
                                            
                                            
                                            26,111,000
                                            
                                            
                                            
                                            26,061,000Dilutive
      effect of warrants outstanding
                                            
                                            
                                            —
                                            
                                            
                                            
                                            106,000Diluted
                                            
                                            
                                            26,111,000
                                            
                                            
                                            
                                            26,167,000
  The
accompanying notes are an integral part of these consolidated financial
statements.


- 3
-


Greystone
Logistics, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 (Unaudited)




Nine
      Months Ended February 28/29,2009
                    
                    
                    2008Cash
      Flows from Operating Activities:Net
      income
                    
                    $
                    140,933
                    
                    
                    $
                    684,547Adjustments
      to reconcile net income to net cashprovided
      by operating activitiesDepreciation
      and amortization
                    
                    
                    726,457
                    
                    
                    
                    626,841Stock
      based compensation
                    
                    
                    71,976
                    
                    
                    
                    —Recognition
      of deferred income
                    
                    
                    (48,000
                    )
                    
                    
                    (48,000
                    )Change
      in minority interest
                    
                    
                    59,083
                    
                    
                    
                    54,989Changes
      in accounts receivable
                    
                    
                    593,090
                    
                    
                    
                    (533,832
                    )Changes
      in inventory
                    
                    
                    (189,606
                    )
                    
                    
                    (198,305
                    )Changes
      in prepaid expenses and other
                    
                    
                    6,737
                    
                    
                    
                    (10,638
                    )Changes
      in accounts payable and accrued expenses
                    
                    
                    (479,529
                    )
                    
                    
                    304,059Net
      cash provided by operating activities
                    
                    
                    881,141
                    
                    
                    
                    879,661Cash
      Flows from Investing Activities:Purchase
      of property and equipment
                    
                    
                    (294,259
                    )
                    
                    
                    (286,661
                    )Cash
      Flows from Financing Activities:Proceeds
      from notes payable
                    
                    
                    376,092
                    
                    
                    
                    70,050Payments
      on notes payable
                    
                    
                    (732,026
                    )
                    
                    
                    (645,287
                    )Payments
      on advances payable
                    
                    
                    (131,271
                    )
                    
                    
                    —Net
      cash used in financing activities
                    
                    
                    (487,205
                    )
                    
                    
                    (575,237
                    )Net
      Increase in Cash
                    
                    
                    99,677
                    
                    
                    
                    17,763Cash,
      beginning of period
                    
                    
                    201,301
                    
                    
                    
                    340,334Cash,
      end of period
                    
                    $
                    300,978
                    
                    
                    $
                    358,097Noncash
      activities:Preferred
      dividend accrual
                    
                    $
                    278,596
                    
                    
                    $
                    403,656Supplemental
      Information:Interest
      paid
                    
                    $
                    609,602
                    
                    
                    $
                    748,760
   The
accompanying notes are an integral part of these consolidated financial
statements.




- 4
-


GREYSTONE
LOGISTICS, INC.


Notes
to  Consolidated Financial Statements


(Unaudited)





1. The
unaudited consolidated financial statements include Greystone Logistics, Inc.,
or Greystone, and its wholly-owned subsidiaries, Greystone Manufacturing, LLC,
or GSM, and Plastic Pallet Production, Inc., or PPP, and variable interest
entity, Greystone Properties, LLC.  All material intercompany accounts
and transactions have been eliminated. In the opinion of Greystone, the
accompanying unaudited consolidated financial statements contain all adjustments
and reclassifications, which are of a normal recurring nature, necessary to
present fairly Greystone’s financial position as of February 28, 2009, and the
results of their operations and their cash flows for the nine month and three
month periods ended February 28, 2009 and February 29, 2008.  These
consolidated financial statements should be read in conjunction with the
consolidated financial statements as of and for the year ended May 31, 2008 and
the notes thereto included in Greystone’s Form 10-KSB.





The financial statements have been
prepared assuming that Greystone will continue as a going
concern.  The working capital deficit of $7,237,849, a stockholders’
deficiency of $9,345,054 and its ability to obtain additional long-term
financing, if necessary, raises questions about Greystone’s ability to continue
as a going concern. The accompanying financial statements have been prepared
assuming that Greystone will continue as a going concern and do not reflect the
possible effects of any adjustments that might result from Greystone’s inability
to continue as a going concern.





2. The results of
operations for the nine month and three month periods ended February 28, 2009
and February 29, 2008 are not necessarily indicative of the results to be
expected for the full year.





3. Greystone calculates
and discloses earnings per share (EPS) in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share(SFAS
128). SFAS 128 requires dual presentation of Basic and Diluted EPS on the face
of the statements of income and requires a reconciliation of the numerator and
denominator of the Basic EPS computation to the numerator and denominator of the
Diluted EPS computation. Basic EPS excludes dilution and is computed by dividing
income (loss) available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of Greystone.





In
computing Diluted EPS, only potential common shares that are dilutive—those that
reduce earnings per share or increase loss per share—are included. Exercise of
options and warrants or conversion of convertible securities is not assumed if
the result would be antidilutive, such as when a loss from continuing operations
is reported. The “control number” for determining whether




- 5
-


including
potential common shares in the diluted EPS computation would be antidilutive is
income from continuing operations. As a result, if there were a loss from
continuing operations, Diluted EPS would be computed in the same manner as Basic
EPS is computed, even if an entity has net income after adjusting for
discontinued operations, an extraordinary item or the cumulative effect of an
accounting change.  The following table presents the calculation of
number of shares for Basic and Diluted EPS:








Nine
      Months ended February 28/29,2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Unaudited)Basic:Weighted
      average common shares outstanding
                    
                    
                    26,111,000
                    
                    
                    
                    26,061,000Dilutive effect:Assumed
      exercise of warrants
                    
                    
                    —
                    
                    
                    
                    250,000Application
      of assumed proceeds towardrepurchase
      of  treasury stock
                    
                    
                    —
                    
                    
                    
                    (150,000
                    )Net
      additional shares issuable
                    
                    
                    —
                    
                    
                    
                    100,000Adjusted
      common shares outstanding for computing dilutive EPS
                    
                    
                    26,111,000
                    
                    
                    
                    26,161,000










Three Months ended February
      28/29,2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Unaudited)Basic:Weighted
      average common shares outstanding
                    
                    
                    26,111,000
                    
                    
                    
                    26,061,000Dilutive effect:Assumed
      exercise of warrants
                    
                    
                    —
                    
                    
                    
                    250,000Application
      of assumed proceeds towardrepurchase
      of  treasury stock
                    
                    
                    —
                    
                    
                    
                    (144,000
                    )Net
      additional shares issuable
                    
                    
                    —
                    
                    
                    
                    106,000Adjusted
      common shares outstanding for computing dilutive EPS
                    
                    
                    26,111,000
                    
                    
                    
                    26,167,000










4. Inventory consists of
the following:




February
      28,
                
                
                May
      31,2009
                
                
                2008(Unaudited)Raw
      materials
                
                $
                396,729
                
                
                $
                341,937Finished
      goods
                
                
                692,362
                
                
                
                557,548Total
      inventory
                
                $
                1,089,091
                
                
                $
                899,485





- 6
-


5.Effective
February 16, 2009, F&M Bank and Trust Company (“F&M”) renewed the
working capital note and the term note with Greystone in the amounts of
$1,617,460 and $4,783,963, respectively, at May 31, 2008. The working capital
note was renewed in the amount of $1,500,000 at the prime rate of interest but
not less than 4.5%, with monthly payments of interest only and a maturity date
of May 15, 2010. The term note was renewed for $4,922,298 at the prime rate of
interest but not less than 4.5% with monthly installments of principal and
interest of $60,577 and a maturity date of May 15,
2010.  F&M advanced under the working capital loan an
additional $258,000 to Greystone during fiscal year 2009 and, upon the renewal,
transferred $400,000 from the working capital loan to the term
loan.




6. Recent Accounting
Pronouncements.





In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements(SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. The issuance of this standard is
meant to increase consistency and comparability in fair value measurements. SFAS
157 is effective for fiscal years beginning after November 15, 2007. In
February 2008, the FASB issued FASB Staff Position No. 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13(FSP 157-1) and FASB Staff Position No.
157-2, Effective Date of FASB
Statement No. 157(FSP 157-2). FSP 157-1 amends SFAS 157 to remove
certain leasing transactions from its scope. FSP 157-2 delayed until
January 1, 2009, the effective date of SFAS 157 for all non-financial
assets and liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis.   In
October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active(FSP 157-3).
FSP 157-3 clarifies the application of SFAS 157 in a market that is not active.
Effective June 1, 2008, Greystone adopted SFAS 157 which does not have a
material effect on its consolidated financial statements and related
disclosures.





In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities(SFAS 159). SFAS 159 permits entities to
choose to measure many financial instruments and certain other items at fair
value, and establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. SFAS 159 is effective
for fiscal years beginning after November 15, 2007.  Effective June 1,
2008, Greystone adopted SFAS 159 which does not have a material effect on its
consolidated financial statements and related disclosures.





In December 2007, the FASB issued SFAS
No. 160, Noncontrolling
Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 was
issued to establish accounting and reporting standards for the noncontrolling
interest in a subsidiary (formerly called minority interests) and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an




- 7
-


ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. FAS No. 160 is effective for Greystone in
fiscal years beginning after December 15, 2008.  Greystone does not
expect the adoption of SFAS 160 to have a material effect on its consolidated
financial statements and related disclosures, except for the presentation of
non-controlling interests in the financial statements.




In December 2007, the FASB issued SFAS
No. 141 (revised 2007), Business Combinations(SFAS
141R). SFAS 141R was issued to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial reports about a business combination and its
effects.  In April 2009, the FASB issued FASB Staff Position No.
141R-1, Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies, was issued to deal
with the initial recognition and measurement of an asset acquired or a liability
assumed in a business combination that arises from a contingency provided the
asset or liability’s fair value on the date of acquisition can be determined.
This Statement is effective prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Greystone does not expect
the adoption of SFAS 141R to have a material effect on its consolidated
financial statements and related disclosures.





In April
2009, the FASB issued FASB Staff Position No. 107-1, Interim Disclosures about Fair Value
of Financial Instruments (FSP 107-1), which increases the frequency of
fair value disclosures to a quarterly basis instead of an annual basis. The
guidance relates to fair value disclosures for any financial instruments that
are not currently reflected on the balance sheet at fair value. FSP 107-1 is
effective for interim and annual periods ending after June 15, 2009, but
entities may choose to adopt the it for the interim and annual periods ending
after March 15, 2009. Greystone does not expect the adoption of FSP 107-1 to
have a material effect on its consolidated financial statements and related
disclosures.





7.           Effective
May 31, 2008, Greystone corrected an error in the application of accounting
principles as a result of failing to consolidate Greystone Properties, LLC, a
variable interest entity.  As a result, the consolidated statements of
operations for the nine and three month periods ended February 29, 2008 did not
include the operations of Greystone Properties, LLC.  Accordingly, the
line items of the statements of operations that have been restated to correct
the error are noted in the following table:




As
      Restated
                
                
                As
      Originally FiledNine
      Months Ended February 29, 2008:Sales
                
                $
                16,270,703
                
                
                $
                16,270,703Cost
      of sales
                
                
                13,464,310
                
                
                
                13,582,342Gross
      profit
                
                
                2,806,393
                
                
                
                2,688,361Operating
      income
                
                
                1,621,792
                
                
                
                1,503,760Interest
      expense
                
                
                (992,832
                )
                
                
                (929,789
                )Total
      other expense
                
                
                (882,256
                )
                
                
                (819,213
                )Income
      attributable to minority interest
                
                
                (54,989
                )
                
                
                —Net
      income
                
                
                684,547
                
                
                
                684,547Net
      income available to commonstockholders
                
                $
                280,891
                
                
                $
                280,891




- 8
-


Three
      Months Ended February 29, 2008:Sales
              
              $
              5,427,428
              
              
              $
              5,427,428Cost
      of sales
              
              
              4,511,235
              
              
              
              4,550,579Gross
      profit
              
              
              916,193
              
              
              
              876,849Operating
      income
              
              
              511,950
              
              
              
              472,606Interest
      expense
              
              
              (323,579
              )
              
              
              (302,654
              )Total
      other expense
              
              
              (281,154
              )
              
              
              (260,229
              )Income
      attributable to minority interest
              
              
              (18,419
              )
              
              
              —Net
      income
              
              
              212,377
              
              
              
              212,377Net
      income attributable to commonstockholders
              
              $
              91,761
              
              
              $
              91,761








8. Greystone’s
sales agreements to customers other than its primary customer generally provide
for risk of loss to pass to the customers upon shipment from Greystone’s plant
in Bettendorf, Iowa.  Revenue is recognized for these customers at
date of shipment.





Greystone
previously reported that two major customers have combined into one entity
resulting in one major customer.  Greystone’s agreements with this
major customer provide that (1) risk of loss or damages for product in transit
remain with Greystone or (2) product is subject to approval at the buyer’s
premises.  Accordingly, Greystone recognizes revenue when product has
been delivered to the customer’s sites and risk of loss has passed to the
customer.





For sales
to all customers, cost of goods sold is recognized when the related revenue is
recognized.




9. Effective January 1,
2009, Greystone entered into a lease agreement for the use of two injection
molding machines at a specified rental rate based on the number of pallets
produced with a minimum monthly rental of $25,000.  The lease
terminates in one year or at such time as the equipment is unusable for a period
of sixty days, whichever occurs first.  Greystone has the right to
renew or terminate the lease annually.










Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.





Results of
Operations





General
to All Periods





- 9
-


The unaudited consolidated financial
statements include Greystone Logistics, Inc., or Greystone, and its wholly-owned
subsidiaries, Greystone Manufacturing, LLC, or GSM, Plastic Pallet Production,
Inc., or PPP, and a variable interest entity, Greystone Properties,
LLC.  All material intercompany accounts and transactions have been
eliminated.





Greystone has incurred significant
losses from operations in previous years, and there is no assurance that it will
achieve profitability or obtain the funds necessary to finance its future
operations.





References to fiscal year 2009 refer to
the nine month and three month periods ended February 28,
2009.  References to fiscal year 2008 refer to the nine month and
three month periods ended February 29, 2008.





Sales





Greystone’s primary business is the
manufacturing and selling of plastic pallets through its wholly-owned
subsidiaries, GSM and PPP.  In addition, Greystone sells its excess
recycled resin in pelletized and ground form.  Greystone sells its
pallets 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.





In addition, in July 2006, Greystone
launched a beta test program involving the lease of a small pool of recycled
plastic pallets by Greystone to a customer to be utilized by the customer to
ship a portion of its manufactured products in a closed loop system. Pursuant to
the agreement with the customer, Greystone delivers and tracks throughout the
logistics cycle sufficient quantities of plastic pallets for use in shipping a
segment of the customer’s product.  The pallets stay in a closed loop
environment and are continually sent back for reuse.  If a pallet is
damaged, Greystone grinds the pallet and reutilizes the resin.





Personnel





Greystone had approximately 85 and 75
full-time employees as of February 28, 2009 and February 29, 2008,
respectively.





Taxes





For all years presented, Greystone’s
effective tax rate is 0%.  Greystone has generated substantial net
operating losses which would normally reflect a tax benefit in the statements of
income and a deferred asset on the balance sheet.  However, because of
the current uncertainty as to Greystone’s ability to sustain profitability, a
valuation reserve has been established that offsets the amount of any tax
benefit available for each period presented in the consolidated statements of
operations.





- 10
-


Based upon a review of its income tax
filing positions, Greystone believes that its positions would be sustained upon
an audit by the Internal Revenue Service and does not anticipate any adjustments
that would result in a material change to its financial position. Therefore, no
reserves for uncertain income tax positions have been recorded. At February 28,
2009, Greystone had no unrecognized tax benefits.





Nine
Month Period Ended February 28, 2009 Compared to Nine Month Period Ended
February 29, 2008





Sales for fiscal year 2009 were
$12,118,476 compared to $16,270,703 in fiscal year 2008, for a decrease of
$4,152,227.  Sales to Greystone’s major customer(s) accounted
for 82% and 83% of total sales for fiscal years 2009 and 2008,
respectively. Management believes the decrease in total sales is primarily due
to a delay in deliveries due to a merger of its two large brewery customers as
well as the economic recession that the United States of America has experienced
during past six to nine months.  Sales to this customer are expected
to increase as the economy improves.  Sales of recycled resin
accounted for 5% of total sales in fiscal year 2009.  There were no
sales of recycled resin in fiscal year 2008.





Cost of
sales in fiscal year 2009 was $10,043,569, or 83% of sales, compared to
$13,464,310, or 83% of sales, in fiscal year 2008.  While the ratio of
cost of sales to sales was comparable, there was an increase in the relationship
of fixed costs to the volume of sales offset by a decline of approximately 3.5%
in the ratio of material costs to sales.  Cost of sales in fiscal year
2009 also includes the payment of $72,000 for the settlement of a lawsuit as
discussed under the heading of “Legal Proceedings” in Part II of this Form
10-Q.





General,
selling and administrative expenses increased $143,964 from $1,184,601 in fiscal
year 2008 to $1,328,565 in fiscal year 2009.  The primary item which
caused this increase is stock compensation costs of $71,976 in fiscal year 2009
compared to none in fiscal year 2008.





Other income increased $70,439 from
$110,576 in fiscal year 2008 to $181,015 in fiscal year 2009.  Other
income for fiscal year 2009 consists primarily of an insurance settlement
stemming from a claim on a business interruption policy in the amount of
$132,815.  Other income for fiscal year 2008 included grants for
training from the State of Iowa in the total amount of $55,275.





Interest
expense decreased $246,209 from $992,832 in fiscal year 2008 to $746,623 in
fiscal year 2009.  Greystone’s cost of debt is primarily based upon
variable rates of interest tied to the prime rate of interest.  The
average prime rate of interest was 4.3% during the nine month period ended
February 28, 2009 compared to 7.6% during the nine month period ended February
29, 2008.





Preferred
dividends decreased $125,060 from $403,656 in fiscal year 2008 to $278,596 in
fiscal year 2009.  The rate for dividends on preferred stock is 3.25%
above the prime rate of interest. As discussed in the preceding paragraph, the
decrease is due to the decline in the prime rate of interest.




- 11
-


Greystone
reported net income of $140,933 in fiscal year 2009 compared to net income of
$684,547 in fiscal year 2008 for the reasons discussed
above.  Greystone’s results of operations for this nine month period
were also improved by an adjustment made to the carrying value of obligations
that Greystone has carried for several years.  During the quarter
ended February 28, 2009, Greystone determined that it was not legally obligated
to pay these obligations and credited $138,000 to operations.





After
deducting preferred dividends, the net income (loss) available to common
stockholders was $(137,663), or $(0.01) per share, in fiscal year 2009 compared
to $280,891, or $0.01 per share, in fiscal year 2008 for the reasons discussed
above.





Three
Month Period Ended February 28, 2009 Compared to Three Month Period Ended
February 29, 2008





Sales for fiscal year 2009 were
$3,924,502 compared to $5,427,428 in fiscal year 2008, for a decrease of
$1,502,926. Sales to Greystone’s major customer(s) accounted for 88% and
73% of total sales for fiscal years 2009 and 2008, respectively. Management
believes the decrease in total sales is primarily due to a delay in deliveries
due to a merger of its two large brewery customers as well as the economic
recession that the United States of America has experienced during past six to
nine months.  Sales to this customer are expected to increase as the
economy improves.  There were no sales of recycled resin in fiscal
year 2009 or in fiscal year 2008.





Cost of sales in fiscal year 2009 was
$3,393,052, or 86% of sales, compared to $4,511,235, or 83% of sales, in fiscal
year 2008.  The increase in the ratio of cost of sales to sales is
primarily attributable to the relationship of fixed costs to the volume of sales
offset by a decline of approximately 3.5% in the ratio of material costs to
sales.





General,
selling and administrative expenses increased $47,188 from $404,243 in fiscal
year 2008 to $451,431 in fiscal year 2009.  The increase is primarily
due to stock compensation costs of $23,992.




Interest expense decreased $118,468
from $323,579 in fiscal year 2008 to $205,111 in fiscal year
2009.  Greystone’s cost of debt is primarily based upon variable rates
of interest tied to the prime rate of interest.  The average prime
rate of interest was 3.4% during the three month period ended February 28, 2009
compared to 6.8% during the three month period ended February 29,
2008.





Preferred dividends decreased $40,479
from $120,616 in fiscal year 2008 to $80,137 in fiscal year 2009.  The
rate for dividends on preferred stock is 3.25% above the prime rate of interest.
As discussed in the preceding paragraph, the decrease is due to the decline in
the prime rate of interest.





Greystone reported net loss of
$(128,983) in fiscal year 2009 compared to net income of $212,377 in fiscal year
2008 for the reasons discussed above.  Greystone’s results of
operations for this
three month period were improved by an adjustment made to the carrying value of
obligations that Greystone has carried for several years.  During the
quarter ended February 28, 2009, Greystone determined that it was not legally
obligated to pay these obligations and credited $138,000 to
operations.




- 12
-





After deducting preferred dividends,
the net income (loss) available to common stockholders was $(209,120), or
$(0.01) per share, in fiscal year 2009 compared to $91,761, or $0.00 per share,
in fiscal year 2008 for the reasons discussed above.





Liquidity and Capital
Resources





Greystone’s cash requirements for
operating activities consist principally of accounts receivable, inventory,
accounts payable and scheduled payments of interest on outstanding
indebtedness.  Greystone is currently generating positive cash flows
from its operations but continues to be dependent on outside sources of cash to
fund its contractual obligations and capital needs.





A summary of cash flows for the nine
months ended February 28, 2009 is as follows:





Cash
      provided by operating activities
                
                $
                881,141Cash
      used in investing activities
                
                
                (294,259
                )Cash
      used in financing activities
                
                
                (487,205
                )




The contractual obligations of
Greystone are as follows:





Total
              
              
              Less
      than
                1 year
              
              
              1-3 years
              
              
              4-5 years
              
              
              Over
                5 yearsLong-term
      debt
              
              $
              12,996,445
              
              
              $
              3,127,217
              
              
              $
              7,548,356
              
              
              $
              560,233
              
              
              $
              1,760,639Lease
      obligations
              
              
              874,400
              
              
              
              211,200
              
              
              
              410,200
              
              
              
              253,000
              
              
              
              —





To
provide for the additional cash that might be necessary to meet Greystone’s
contractual obligations, Greystone is exploring various options including
refinancing long-term debt and equity financing.  However, there is no
guarantee that Greystone will be able to raise sufficient capital to meet these
obligations.





Greystone has accumulated a working
capital deficit of approximately $7,237,849 at February 28, 2009, which includes
current portion of long-term debt of $3,127,217 and accounts payable and accrued
liabilities of $3,275,593. The working capital deficit reflects the uncertain
financial condition of Greystone resulting from its inability to obtain
long-term financing until such time as it is able to maintain
profitability.  There is no assurance that Greystone will secure such
financing or continue to achieve profitability.





- 13
-


Effective February 16, 2009, F&M
renewed the working capital note and the term note with Greystone in the amounts
of $1,617,460 and $4,783,963, respectively, at May 31, 2008. The working capital
note was renewed in the amount of $1,500,000 at the prime rate of interest but
not less than 4.5% with monthly payments of interest only and a maturity date of
May 15, 2010. The term note was renewed for $4,922,298 at the prime rate of
interest but not less than 4.5% with monthly installments of principal and
interest of $60,577 and a maturity date of May 15,
2010.  F&M advanced under the working capital loan an
additional $258,000 to Greystone during fiscal year 2009 and, upon the renewal,
transferred $400,000 from the working capital loan to the term
loan.





Substantially all of the financing that
Greystone has received through February 28, 2009, 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 they will continue to 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 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.





Forward Looking Statements
and Material Risks





This
Quarterly Report on Form 10-Q includes certain statements that may be deemed
“forward-looking
statements”
within the meaning of federal securities laws.  All statements, other
than statements of historical fact, that address activities, events or
developments that Greystone expects, believes or anticipates will or may occur
in the future, including decreased costs, securing financing, the profitability
of Greystone, potential sales of pallets or other possible business
developments, are forward-looking statements.  Such statements are
subject to a number of assumptions, risks and uncertainties. The forward-looking
statements contained in this Quarterly Report on Form 10-Q could be affected by
any of the following factors: Greystone’s prospects could be affected by changes
in availability of raw materials, competition, rapid technological change and
new legislation regarding environmental matters; Greystone may not be able to
secure additional financing necessary to sustain and grow its operations; and a
material portion of Greystone’s business is and will be dependent upon a few
large customers and there is no assurance that Greystone will be able to retain
such customers.  These risks and other risks that could affect
Greystone’s business are more fully described in Greystone’s Form 10-KSB for the
fiscal year ended May 31, 2008, which was filed on September 15,
2008.  Actual results may vary materially from the forward-looking
statements.  Greystone undertakes no duty to update any of the
forward-looking statements contained




- 14
-


in this
Quarterly Report on Form 10-Q.





Item
4.  Controls and Procedures





As of the end of the period covered by
this Current Report on Form 10-Q, Greystone carried out an evaluation under the
supervision of Greystone’s Chief Executive Officer and Chief Financial Officer
of the effectiveness of the design 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 as of May 31, 2008,
Greystone’s Chief Executive Officer and Chief Financial Officer identified three
material weaknesses which are discussed below.  As a result of these
three material weaknesses, Greystone’s CEO and CFO concluded that Greystone did
not maintain effective internal control over financial reporting as of February
28, 2009.





First,
Greystone has not employed individuals with the necessary accounting knowledge
to identify and implement recently issued accounting standards. Until this
material weakness is corrected, material misstatements in the financial
statements could remain undetected.





Second,
Greystone did not maintain proper records to ensure proper cut-off of inventory
and accounts payable at February 28, 2009, specifically with its primary
supplier, Yorktown.  In addition, labor and overhead rates are not
calculated and updated as necessary to ensure proper valuation of finished goods
inventory.  Not ensuring inventory and accounts payable are properly
cut-off at period end and not ensuring appropriate labor and overhead rates are
applied to finished goods inventory resulted in adjustments to Greystone’s May
31, 2008 financial statements.





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





During the quarter ended February 28,
2009, 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.




PART
II.  OTHER INFORMATION





Item
1.    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.  As disclosed as a subsequent event in its Form 10-Q for the
period ended November 30, 2008, Greystone entered into a settlement agreement
with William Hamilton during the quarter ended February 28, 2009, pursuant to
which Greystone agreed to pay $72,000 in exchange for a complete release of all
claims against Greystone and its subsidiary, Greystone Manufacturing,




- 15
-


LLC, with
$15,000 of the settlement payment being paid immediately and the remaining
$57,000 being paid in 11 equal monthly installments. This settlement was
recorded in cost of sales at November 30, 2008 as the case related primarily to
freight charges.




Item
6.  Exhibits





11.1
            Computation
      of Income per Share is in Note 3 in the Notes to the financial
      statements.





31.1
            Certification
      of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a)
      promulgated under the Securities Exchange Act of 1934, as amended, and
      Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.





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-K, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.





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.





32.1
            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.















- 16
-


SIGNATURE





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned duly
authorized.





GREYSTONE
      LOGISTICS, INC.
                (Registrant)Date:
      April 20, 2009
              By:
              /s/ Warren
      F. KrugerWarren
      F. KrugerPresident
      and Chief Executive Officer



















- 17
-