UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-Q/A


Amendment
No. 1


(Mark
One)





x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
      ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED November 30,
      2008








o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934FOR
      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.
      EmployerIdentification
      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 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   oNon-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:                                                                January 12, 2009 -
26,111,201














Explanatory
Note





This Form
10-Q/A is being filed by Greystone Logistics, Inc. (the “Company”), as Amendment
No. 1 to the Company’s Quarterly Report on Form 10-Q for the period ended
November 30, 2008.  The Company is filing this Form 10-Q/A for the
purpose of including income statements for the three month periods ended
November 30, 2008 and 2007, as these items were not included when the Form 10-Q
was originally filed.  In addition, the Company is filing this Form
10-Q/A in order to revise the MD&A to cover the three month period ended
November 30, 2008 and in order to make a few nonsubstantive changes to the Form
10-Q as originally filed.  The information contained herein has not
been updated to reflect events or developments that may have occurred subsequent
to November 30, 2008.

































GREYSTONE
LOGISTICS, INC.


FORM
10-Q


For
the Period Ended November 30, 2008





PART
I.  FINANCIAL INFORMATION






Item
      1.  Financial Statements
              PageConsolidated
      Balance Sheetsas
      of November 30, 2008 (Unaudited) and May 31, 2008
              1Consolidated
      Statements of Income (Unaudited)For
      the Six Month Periods Ended November 30, 2008 and 2007
              2Consolidated
      Statements of Income (Unaudited)For
      the Three Month Periods Ended November 30, 2008 and 2007
              3Consolidated
      Statements of Cash Flows (Unaudited)For
      the Six Month Periods Ended November 30, 2008 and 2007
              4Notes
      to Consolidated Financial Statements (Unaudited)
              5Item
      2.  Management’s Discussion and Analysis of Financial Condition
      And
      Results of Operations
              10SIGNATURES
              15











ITEM
1.  FINANCIAL STATEMENTS
  Greystone
Logistics, Inc. and Subsidiaries
 Consolidated
Balance Sheets


November
      30,
              
              
              May
      31,2008
              
              
              2008Assets
              
              (Unaudited)Current
      Assets:Cash
              
              $
              381,577
              
              
              $
              201,301Accounts
      receivable
              
              
              847,316
              
              
              
              1,286,948Inventory
              
              
              1,508,413
              
              
              
              899,485Prepaid
      expenses and other
              
              
              121,853
              
              
              
              61,114Total
      Current Assets
              
              
              2,859,159
              
              
              
              2,448,848Property,
      Plant and Equipment,net
      of accumulated depreciation of $4,169,090 and $3,693,398at
      November 30, 2008 and May 31, 2008, respectively
              
              
              8,625,177
              
              
              
              8,878,716Other
      Assets
              
              
              109,915
              
              
              
              118,440Total
      Assets
              
              $
              11,594,251
              
              
              $
              11,446,004Liabilities and
      Stockholders’ DeficiencyCurrent
      Liabilities:Current
      portion of long-term debt
              
              $
              4,604,996
              
              
              $
              9,013,395Advances
      payable - related party
              
              
              1,031,894
              
              
              
              1,231,499Accounts
      payable and accrued expenses
              
              
              1,902,513
              
              
              
              1,138,735Accounts
      payable and accrued expenses - related parties
              
              
              1,959,425
              
              
              
              2,490,080Preferred
      dividends payable
              
              
              1,795,958
              
              
              
              1,597,499Total
      Current Liabilities
              
              
              11,294,786
              
              
              
              15,471,208Long-Term Debt, net of
      current portion
              
              
              8,591,327
              
              
              
              4,465,291Deferred
      Income
              
              
              48,000
              
              
              
              80,000Minority
      Interest
              
              
              748,064
              
              
              
              708,872Stockholders’
      Deficiency:Preferred
      stock, $0.0001 par value, 20,750,000 sharesauthorized,
      50,000 shares issued and outstanding,
              
              
              5
              
              
              
              5liquidation
      preference of $5,000,000Common
      stock, $0.0001 par value, 5,000,000,000 sharesauthorized,
      26,111,201 issued and outstanding
              
              
              2,611
              
              
              
              2,611Additional
      paid-in capital
              
              
              52,873,365
              
              
              
              52,825,381Accumulated
      deficit
              
              
              (61,963,907
              )
              
              
              (62,107,364
              )Total
      Stockholders’ Deficiency
              
              
              (9,087,926
              )
              
              
              (9,279,367
              )Total
      Liabilities and Stockholders’ Deficiency
              
              $
              11,594,251
              
              
              $
              11,446,004
  The
accompanying notes are an integral part of these consolidated financial
statements.
  - 1
-
 
 Greystone
Logistics, Inc. and Subsidiaries
 Consolidated
Statements of Income
 (Unaudited)
 Six
      Months Ended November 30,2008
              
              
              2007Sales
              
              $
              8,193,974
              
              
              $
              10,843,275Cost
      of Sales
              
              
              6,650,517
              
              
              
              8,953,073Gross
      Profit
              
              
              1,543,457
              
              
              
              1,890,202General,
      Selling and Administration Expenses
              
              
              877,134
              
              
              
              780,358Operating
      Income
              
              
              666,323
              
              
              
              1,109,844Other
      Income (Expense):Other
      income
              
              
              165,015
              
              
              
              68,151Interest
      expense
              
              
              (541,512
              )
              
              
              (668,985
              )Total
      Other Expense
              
              
              (376,497
              )
              
              
              (600,834
              )Income
      Attributable to Minority Interest
              
              
              (19,910
              )
              
              
              (36,840
              )Net
      Income
              
              
              269,916
              
              
              
              472,170Preferred
      Dividends
              
              
              198,459
              
              
              
              283,040Net
      Income Available to Common Stockholders
              
              $
              71,457
              
              
              $
              189,130Income
      Available to Common StockholdersPer
      Share of Common Stock - Basic and Diluted
              
              $
              0.00
              
              
              $
              0.01Weighted
      Average Shares of Common Stock OutstandingBasic
              
              
              26,111,000
              
              
              
              26,061,000Dilutive
      effect of warrants outstanding
              
              
              -
              
              
              
              94,000Diluted
              
              
              26,111,000
              
              
              
              26,155,000
   The
accompanying notes are an integral part of these consolidated financial
statements.
   - 2
-
 
 Greystone
Logistics, Inc. and Subsidiaries
 Consolidated
Statements of Income
 (Unaudited)
 Three
      Months Ended November 30,2008
              
              
              2007Sales
              
              $
              4,020,917
              
              
              $
              5,246,064Cost
      of Sales
              
              
              3,218,590
              
              
              
              4,265,935Gross
      Profit
              
              
              802,327
              
              
              
              980,129General,
      Selling and Administration Expenses
              
              
              466,950
              
              
              
              368,151Operating
      Income
              
              
              335,377
              
              
              
              611,978Other
      Income (Expense):Other
      income
              
              
              149,015
              
              
              
              16,000Interest
      expense
              
              
              (244,532
              )
              
              
              (313,992
              )Total
      Other Expense
              
              
              (95,517
              )
              
              
              (297,992
              )Income
      Attributable to Minority Interest
              
              
              (19,665
              )
              
              
              (18,420
              )Net
      Income
              
              
              220,195
              
              
              
              295,566Preferred
      Dividends
              
              
              94,487
              
              
              
              138,108Net
      Income Available to Common Stockholders
              
              $
              125,708
              
              
              $
              157,458Income
      Available to Common StockholdersPer
      Share of Common Stock - Basic and Diluted
              
              $
              0.00
              
              
              $
              0.01Weighted
      Average Shares of Common Stock OutstandingBasic
              
              
              26,111,000
              
              
              
              26,061,000Dilutive
      effect of warrants outstanding
              
              
              -
              
              
              
              49,000Diluted
              
              
              26,111,000
              
              
              
              26,110,000
   The
accompanying notes are an integral part of these consolidated financial
statements.
  - 3
-
 
 Greystone
Logistics, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 (Unaudited)
 Six
      Months Ended November 30,2008
                  
                  
                  2007Cash
      Flows from Operating Activities:Net
      income
                  
                  $
                  269,916
                  
                  
                  $
                  472,170Adjustments
      to reconcile net income to net cashprovided
      by operating activitiesDepreciation
      and amortization
                  
                  
                  484,217
                  
                  
                  
                  351,697Stock
      based compensation
                  
                  
                  47,984
                  
                  
                  
                  —Recognition
      of deferred income
                  
                  
                  (32,000
                  )
                  
                  
                  (32,000
                  )Change
      in minority interest
                  
                  
                  39,192
                  
                  
                  
                  36,840Changes
      in accounts receivable
                  
                  
                  439,632
                  
                  
                  
                  (647,895
                  )Changes
      in inventory
                  
                  
                  (608,928
                  )
                  
                  
                  (260,422
                  )Changes
      in prepaid expenses and other
                  
                  
                  (60,739
                  )
                  
                  
                  5,271Changes
      in accounts payable and accrued expenses
                  
                  
                  178,816
                  
                  
                  
                  587,792Net
      cash provided by operating activities
                  
                  
                  758,090
                  
                  
                  
                  513,453Cash
      Flows from Investing Activities:Purchase
      of property and equipment
                  
                  
                  (222,153
                  )
                  
                  
                  (144,512
                  )Cash
      Flows from Financing Activities:Proceeds
      from notes payable
                  
                  
                  280,580
                  
                  
                  
                  —Payments
      on notes payable
                  
                  
                  (436,636
                  )
                  
                  
                  (443,993
                  )Payments
      on advances payable
                  
                  
                  (199,605
                  )
                  
                  
                  —Net
      cash used in financing activities
                  
                  
                  (355,661
                  )
                  
                  
                  (443,993
                  )Net
      Increase (Decrease) in Cash
                  
                  
                  180,276
                  
                  
                  
                  (75,052
                  )Cash,
      beginning of period
                  
                  
                  201,301
                  
                  
                  
                  340,334Cash,
      end of period
                  
                  $
                  381,577
                  
                  
                  $
                  265,282Noncash
      activities:Preferred
      dividend accrual
                  
                  $
                  198,459
                  
                  
                  $
                  283,040Supplemental
      Information:Interest
      paid
                  
                  $
                  468,004
                  
                  
                  $
                  549,835
  The
accompanying notes are an integral part of these consolidated financial
statements.
 - 4
-


GREYSTONE
LOGISTICS, INC.


Notes
to Consolidated Financial Statements


(Unaudited)




1.  In the
opinion of Greystone Logistics, Inc. (“Greystone”), the accompanying unaudited
consolidated financial statements contain all adjustments and reclassifications,
which are of a normal recurring nature, necessary to present fairly its
financial position as of November 30, 2008, and the results of its operations
and its cash flows for the six month and three month periods ended November 30,
2008 and 2007.  These consolidated financial statements should be read
in conjunction with the consolidated financial statements as of and for the
fiscal 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 $8,435,627 a stockholders’ deficiency of $9,087,926 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 six month and three month periods ended November 30, 2008 and
2007 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 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:









- 5
-





Six
      Months ended November 30,2008
            
            
            2007(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
            
            
            —
            
            
            
            (156,000
            )Net
      additional shares issuable
            
            
            —
            
            
            
            94,000Adjusted
      common shares outstanding for computing dilutive EPS
            
            
            26,111,000
            
            
            
            26,155,000








Three
      Months ended November 30,2008
            
            2007(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
            
            
            —
            
            
            
            (201,000
            )Net
      additional shares issuable
            
            
            —
            
            
            
            49,000Adjusted
      common shares outstanding for computing dilutive EPS
            
            
            26,111,000
            
            
            
            26,110,000




4.   Inventory
consists of the following:




November
      30,
              
              
              May
      31,2008
              
              
              2008(Unaudited)Raw
      materials
              
              $
              800,689
              
              
              $
              341,937Finished
      goods
              
              
              707,724
              
              
              
              557,548Total
      inventory
              
              $
              1,508,413
              
              
              $
              899,485





5.   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




- 6
-


measurements.
SFAS 157 is effective for fiscal years beginning after November 15, 2007.
In February 2008, the FASB issued FASB Staff Position 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 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 delays 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.  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 ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. FAS No. 160 is
effective for us in our fiscal year 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.  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.





6.   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
income for the six and three month periods ended November 30, 2007 did not
include the operations of Greystone Properties, LLC.  Accordingly, the
statements of income for the periods ended November 30, 2007 have been restated
to correct the error are noted in the following table:




- 7
-




As
      Restated
            
            
            As
      Originally
              Filed
            
            
            Net
      ChangeSix
      Months Ended November 30, 2007:Sales
            
            $
            10,843,275
            
            
            $
            10,843,275
            
            
            $
            —Cost
      of sales
            
            
            8,953,073
            
            
            
            9,031,763
            
            
            
            (78,690
            )Gross
      profit
            
            
            1,890,202
            
            
            
            1,811,512
            
            
            
            78,690General
      and administrative expenses
            
            
            780,358
            
            
            
            780,358
            
            
            
            —Operating
      income
            
            
            1,109,844
            
            
            
            1,031,154
            
            
            
            78,690Other
      income (expenses) -Other
      income
            
            
            68,151
            
            
            
            68,151
            
            
            
            —Interest
      expense
            
            
            (668,985
            )
            
            
            (627,135
            )
            
            
            (41,850
            )Total
      other expense
            
            
            (600,834
            )
            
            
            (558,984
            )
            
            
            (41,850
            )Income
      attributable to minority interest
            
            
            (36,840
            )
            
            
            —
            
            
            
            (36,840
            )Net
      income
            
            
            472,170
            
            
            
            472,170
            
            
            
            —Preferred
      dividends
            
            
            283,040
            
            
            
            283,040
            
            
            
            —Net
      income available to commonstockholders
            
            $
            189,130
            
            
            $
            189,130
            
            
            $
            —Per
      share of common stock – Basic
              and
      Diluted
            
            $
            0.01
            
            
            $
            0.01
            
            
            $
            —








Three
      Months Ended November 30, 2007:Sales
            
            $
            5,246,064
            
            
            $
            5,246,064
            
            
            $
            —Cost
      of sales
            
            
            4,265,935
            
            
            
            4,305,280
            
            
            
            (39,345
            )Gross
      profit
            
            
            980,129
            
            
            
            940,784
            
            
            
            (39,345
            )General
      and administrative expenses
            
            
            368,151
            
            
            
            368,151
            
            
            
            —Operating
      income
            
            
            611,978
            
            
            
            572,633
            
            
            
            39,345Other
      income (expenses) -Other
      income
            
            
            16,000
            
            
            
            16,000
            
            
            
            —Interest
      expense
            
            
            (313,992
            )
            
            
            (293,067
            )
            
            
            (20,925
            )Total
      other expense
            
            
            (297,992
            )
            
            
            (277,067
            )
            
            
            (20,925
            )Income
      attributable to minority interest
            
            
            (18,420
            )
            
            
            —
            
            
            
            (18,420
            )Net
      income
            
            
            295,566
            
            
            
            295,566
            
            
            
            —Preferred
      dividends
            
            
            138,108
            
            
            
            138,108
            
            
            
            —Net
      income available to commonstockholders
            
            $
            157,458
            
            
            $
            157,458
            
            
            $
            —Per
      share of common stock – Basic
              and
      Diluted
            
            $
            0.01
            
            
            $
            0.01
            
            
            $
            —








The
balance sheet as of November 30, 2007 was restated as a result of the
consolidation of Greystone Properties, LLC, as follows:





- 8
-







As
      Restated
            
            
            As
      Originally
              Filed
            
            
            Net
      ChangeASSETSCurrent
      Assets
            
            $
            2,476,396
            
            
            $
            2,476,396
            
            
            $
            —Property,
      Plant & Equipment
            
            
            8,751,564
            
            
            
            6,860,406
            
            
            
            1,891,158Other
      Assets
            
            
            129,122
            
            
            
            129,122
            
            
            
            —Total
      Assets
            
            $
            11,357,082
            
            
            $
            9,465,924
            
            
            $
            1,891,158LIABILITIES AND
      STOCKHOLDERS’DEFICIENCY:Current
      Liabilities
            
            $
            14,916,504
            
            
            $
            14,984,787
            
            
            $
            (68,283
            )Long-Term
      Debt
            
            
            5,317,214
            
            
            
            4,027,263
            
            
            
            1,289,951Minority
      Interest
            
            
            669,490
            
            
            
            —
            
            
            
            669,490Deferred
      Income
            
            
            96,000
            
            
            
            96,000
            
            
            
            —Stockholders’
      Deficiency
            
            
            (9,642,126
            )
            
            
            (9,642,126
            )
            
            
            —Total
      Liabilities and Stockholders’Deficiency
            
            $
            11,357,082
            
            
            $
            9,465,924
            
            
            $
            1,891,158





Greystone Properties, LLC
(“Properties”), is wholly-owned by the two Directors of Greystone. Greystone has
no equity interest in Properties.  Properties owns and leases to
Greystone a warehouse located in Bettendorf, Iowa which is adjacent to
Greystone’s existing plant.  Properties is a variable interest entity
as defined under the Financial Accounting Standards Board “Financial
Interpretation No. 46.”





As reflected in the tables above for
the six month and three month periods ended November 30, 2007, the impact of the
consolidation of Properties does not affect net income or net income available
to stockholders. The effect of the consolidation on the restated statements of
income is (1) the elimination of rents paid to Properties offset by the addition
of depreciation and property taxes in the cost of sales in the net amounts of
$78,690 and $39,345, (2) the addition of interest expense from a mortgage on the
building owned by Properties in the amounts of $41,850 and $20,925, and (3) the
recognition of the income of Properties as being totally attributable to the
minority interest in the amounts of $36,840 and $18,420, all for the six month
and three month periods ended November 30, 2007, respectively.





The effect on the restated balance
sheet is (1) the addition of the building net of accumulated depreciation in the
amount of $1,289,951, (2) an adjustment to current liabilities to recognize the
current portion of long-term debt of Properties in the amount of $47,115 offset
by the elimination of an account payable of $115,398 to Properties as recorded
on Greystone’s accounts, (3) the addition of the long-term portion of the
mortgage payable by Properties in the amount of $1,289,951, and (4) the
recognition of the equity of Properties held by the minority interest in the
amount of $669,490.





7.  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.





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Greystone’s
previously reported two major customers have been combined into one
company.  Greystone’s agreements with this major customer either
provide that (1) risk of loss or damages for product in transit remain with
Greystone or (2) acceptance of product shipped is subject to approval at 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.







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





Results of
Operations





General
to All Periods





The unaudited  consolidated
statements include Greystone Logistics, Inc., or Greystone, and its two
wholly-owned subsidiaries, Greystone Manufacturing, LLC, or GSM, and 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
continue to achieve profitability or obtain funds necessary to finance its
operations in the future.





References to fiscal year 2009 refer to
the six month and three month periods ended November 30,
2008.  References to fiscal year 2008 refer to the six month and three
month periods ended November 30, 2007.





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.




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-


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,
respectively, full-time employees as of November 30, 2008 and 2007.





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
income.





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 November 30,
2008, Greystone had no unrecognized tax benefits.





Six
Month Period Ended November 30, 2008 Compared to Six Month Period Ended November
30, 2007





Sales for fiscal year 2009 were
$8,193,974 compared to $10,843,275 in fiscal year 2008, for a decrease of
$2,649,301.  Sales to Greystone’s major customer(s) accounted
for 79% and 86% of total sales for fiscal years 2009 and 2008,
respectively. The decrease is primarily due to a delay in deliveries due to a
merger of its two large brewery customers.  Sales to this customer are
expected to increase during the third quarter of fiscal 2009.  Sales
of recycled resin material were 7% of total sales in fiscal year
2009.  There were no sales of recycled resin material in fiscal year
2008.





Cost of
sales in fiscal year 2009 was $6,653,517, or 81% of sales, compared to
$8,953,073, or 83% of sales, in fiscal year 2008.  The improvement in
the ratio of cost of sales to sales is due to decreases in the cost of raw
material.





General,
selling and administrative expenses increased $96,776 from $780,358 in fiscal
year 2008 to $877,134 in fiscal year 2009.  The increase is primarily
due to stock compensation costs of $47,984 in fiscal year 2009.





Interest
expense decreased $127,473 from $668,985 in fiscal year 2008 to $541,512 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 4.8% during the six month period ended
November 30, 2008 compared to 8.0% during the six month period ended November
30, 2007.





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Preferred
dividends decreased $84,581 from $283,040 in fiscal year 2008 to $198,459 in
fiscal year 2009.  The rate for preferred 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 income of $269,916 in fiscal year 2009 compared to net income of
$472,170 in fiscal year 2008 for the reasons discussed above.





After
deducting preferred dividends, the net income available to common stockholders
was $71,457, or $0.00 per share, in fiscal year 2009 compared to $189,130, or
$0.01 per share, in fiscal year 2008 for the reasons discussed
above.





Three
Month Period Ended November 30, 2008 Compared to Three Month Period Ended
November 30, 2007





Sales for fiscal year 2009 were
$4,020,917 compared to $5,246,064 in fiscal year 2008, for a decrease of
$1,225,147. Sales to Greystone’s major customer(s) accounted for  76%
and 84% of total sales for fiscal years 2009 and 2008, respectively. The
decrease is primarily due to a delay in deliveries due to a merger of its two
large brewery customers.  Sales to this customer are expected to
increase during the third quarter of fiscal 2009.  Sales of recycled
resin material were 7% of total sales in fiscal year 2009.  There were
no sales of recycled resin material in fiscal year 2008.





Cost of sales in fiscal year 2009 was
$3,218,590, or 80% of sales, compared to $4,265,935, or 81% of sales, in fiscal
year 2008.  The improvement in the cost of sales to sales is due to
decreases in the cost of raw material.





General,
selling and administrative expenses increased $98,799 from $368,151 in fiscal
year 2008 to $466,950 in fiscal year 2009.  The increase is primarily
due to stock compensation costs of $23,992 and an increase of $36,434 in
professional fees in fiscal year 2009.





Interest
expense decreased $69,460 from $313,992 in fiscal year 2008 to $244,532 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 5% during the three month period ended
November 30, 2008 compared to 8.25% during the three month period ended November
30, 2007.





Preferred dividends decreased $43,621
from $138,108 in fiscal year 2008 to $94,487 in fiscal year 2009.  The
rate for preferred 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 income of
$220,195 in fiscal year 2009 compared to net income of $295,566 in fiscal year
2008 for the reasons discussed above.





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-


After deducting preferred dividends,
the net income available to common stockholders was $125,708, or $0.00 per
share, in fiscal year 2009 compared to $157,458, or $0.01 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 six
months ended November 30, 2008 is as follows:




Cash
      provided by operating activities
              
              $
              758,090Cash
      used in investing activities
              
              
              (222,153
              )Cash
      used in financing activities
              
              
              (355,661
              )




The contractual obligations of
Greystone are as follows:





Total
            
            
            Less
      than
              1 year
            
            
            1-3 years
            
            
            4-5 years
            
            
            Over
              5 yearsLong-term
      debt
            
            $
            13,196,323
            
            
            $
            4,604,996
            
            
            $
            2,279,775
            
            
            $
            1,109,758
            
            
            $
            5,201,794






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 $8,435,627 at November 30, 2008, which includes current
portion of long-term debt of $4,604,996 and $3,921,938 in accounts payable and
accrued liabilities. 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.





In December 2008, F&M Bank and
Trust Company approved a renewal of Greystone’s note payable in the amount of
$4,783,963 and $4,575,050 at May 31, 2008 and November 30, 2008, respectively,
for a term of five years with an interest rate of the prime rate of interest
plus 1% and a monthly amortization of approximately $60,000 per
month.





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-


Substantially all of the financing that
Greystone has received through November 30, 2008, 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 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.





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 in this Quarterly Report on Form
10-Q.







- 14
-


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:     
      February 10, 2009
              By:
              /s/ Warren
      F. KrugerWarren
      F. KrugerPresident
      and Chief Executive Officer
































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