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,
      2010




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.
      Employer Identification No.)







1613 East
15thStreet, Tulsa,
Oklahoma 74120





(Address
of principal executive offices)     (Zip
Code)







(918) 583-7441





(Registrant's
telephone number, including area code)













(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, 2010 -
26,111,201










GREYSTONE
LOGISTICS, INC.


FORM
10-Q


For
the Period Ended February 28, 2010







PART
I.  FINANCIAL INFORMATION




Item
      1.    Financial Statements
              PageConsolidated
      Balance Sheets as of February 28, 2010 (Unaudited) and May 31,
      2009
              1Consolidated
      Statements of Operations (Unaudited) For the Nine Month Periods Ended
      February 28, 2010 and 2009
              2Consolidated
      Statements of Operations (Unaudited) For the Three Month Periods Ended
      February 28, 2010 and 2009
              3Consolidated
      Statements of Cash Flows (Unaudited) For the Nine Month Periods Ended
      February 28, 2010 and 2009
              4Notes
      to Consolidated Financial Statements (Unaudited)
              5Item
      2.    Management's Discussion and Analysis of Financial
      Condition and Results of Operations
              8Item
      4.    Controls and Procedures
              12PART
      II.  OTHER INFORMATIONItem
      6.    Exhibits
              13SIGNATURES
              14






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


February
      28,
                
                
                May
      31,2010
                
                
                2009Assets
                
                (Unaudited)Current
      Assets:Cash
                
                $
                435,199
                
                
                $
                274,765Accounts receivable, net of allowance for doubtful accounts of$-0- and $60,578 at February 28, 2010 and May 31, 2009, respectively
                
                
                996,778
                
                
                
                952,352Inventory
                
                
                860,695
                
                
                
                1,061,569Prepaid
      expenses and other
                
                
                88,217
                
                
                
                67,382Total
      Current Assets
                
                
                2,380,889
                
                
                
                2,356,068Property, Plant and Equipment,net of accumulated depreciationof
      $4,927,550 and $4,657,485 at February 28, 2010 andMay
      31, 2009, respectively
                
                
                7,695,642
                
                
                
                8,208,888Other Assets,net
                
                
                98,818
                
                
                
                103,655Total
      Assets
                
                $
                10,175,349
                
                
                $
                10,668,611Liabilities and DeficitCurrent
      Liabilities:Current
      portion of long-term debt
                
                $
                8,823,714
                
                
                $
                9,339,343Advances
      payable - related party
                
                
                873,143
                
                
                
                1,010,081Accounts
      payable and accrued expenses
                
                
                1,584,451
                
                
                
                1,158,513Accounts
      payable and accrued expenses - related parties
                
                
                1,969,952
                
                
                
                1,834,352Preferred
      dividends payable
                
                
                2,201,094
                
                
                
                1,958,012Total
      Current Liabilities
                
                
                15,452,354
                
                
                
                15,300,301Long-Term Debt, net of
      current portion
                
                
                2,853,012
                
                
                
                3,249,953Deferred
      Income
                
                
                —
                
                
                
                32,000Deficit:Preferred
      stock, $0.0001 par value, 20,750,000 shares authorized,50,000
      shares  issued and outstanding, liquidation
      preferenceof
      $5,000,000
                
                
                5
                
                
                
                5Common
      stock, $0.0001 par value, 5,000,000,000 sharesauthorized,
      26,111,201 shares issued and outstanding
                
                
                2,611
                
                
                
                2,611Additional
      paid-in capital
                
                
                52,993,325
                
                
                
                52,921,349Accumulated
      deficit
                
                
                (61,932,325
                )
                
                
                (61,625,637
                )Total
      Greystone Stockholders' Deficit
                
                
                (8,936,384
                )
                
                
                (8,701,672
                )Noncontrolling
      interest
                
                
                806,367
                
                
                
                788,029Total
      Deficit
                
                
                (8,130,017
                )
                
                
                (7,913,643
                )Total
      Liabilities and Deficit
                
                $
                10,175,349
                
                
                $
                10,668,611
  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 28,2010
                
                
                2009Sales
                
                $
                11,170,768
                
                
                $
                12,118,476Cost
      of Sales
                
                
                9,136,907
                
                
                
                10,043,569Gross
      Profit
                
                
                2,033,861
                
                
                
                2,074,907General,
      Selling and Administration Expenses
                
                
                1,446,358
                
                
                
                1,328,565Operating
      Income
                
                
                587,503
                
                
                
                746,342Other
      Income (Expense):Other
      Income
                
                
                32,000
                
                
                
                181,015Interest
      Expense
                
                
                (621,700
                )
                
                
                (746,623
                )Total
      Other Expense, net
                
                
                (589,700
                )
                
                
                (565,608
                )Net
      Income (Loss)
                
                
                (2,197
                )
                
                
                180,734Less:
      Income Attributable to Noncontrolling Interest
                
                
                (61,409
                )
                
                
                (39,801
                )Preferred
      Dividends
                
                
                (243,082
                )
                
                
                (278,596
                )Net
      Loss Attributable to Common Stockholders
                
                $
                (306,688
                )
                
                $
                (137,663
                )Loss
      Attributable to Common StockholdersPer
      Share of Common Stock - Basic and Diluted
                
                $
                (0.01
                )
                
                $
                (0.01
                )Weighted
      Average Shares of Common Stock Outstanding -Basic
      and Diluted
                
                
                26,111,000
                
                
                
                26,111,000
  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 28,2010
                
                
                2009Sales
                
                $
                3,544,522
                
                
                $
                3,924,502Cost
      of Sales
                
                
                2,958,816
                
                
                
                3,393,052Gross
      Profit
                
                
                585,706
                
                
                
                531,450General,
      Selling and Administration Expenses
                
                
                460,620
                
                
                
                451,431Operating
      Income
                
                
                125,086
                
                
                
                80,019Other
      Income (Expense):Other
      Income
                
                
                5,333
                
                
                
                16,000Interest
      Expense
                
                
                (206,717
                )
                
                
                (205,111
                )Total
      Other Expense, net
                
                
                (201,384
                )
                
                
                (189,111
                )Net
      Loss
                
                
                (76,298
                )
                
                
                (109,092
                )Less:
      Income Attributable to Noncontrolling Interest
                
                
                (20,671
                )
                
                
                (19,891
                )Preferred
      Dividends
                
                
                (80,137
                )
                
                
                (80,137
                )Net
      Loss Attributable to Common Stockholders
                
                $
                (177,106
                )
                
                $
                (209,120
                )Loss
      Attributable to Common StockholdersPer
      Share of Common Stock - Basic and Diluted
                
                $
                (0.01
                )
                
                $
                (0.01
                )Weighted
      Average Shares of Common Stock Outstanding -Basic
      and Diluted
                
                
                26,111,000
                
                
                
                26,111,000


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 28,2010
                
                
                2009Cash
      Flows from Operating Activities:Net
      income (loss)
                
                $
                (2,197
                )
                
                $
                180,734Adjustments
      to reconcile net income (loss) to netcash
      provided by operating activitiesDepreciation
      and amortization
                
                
                758,847
                
                
                
                726,457Stock-based
      compensation
                
                
                71,976
                
                
                
                71,976Recognition
      of deferred income
                
                
                (32,000
                )
                
                
                (48,000
                )Changes
      in accounts receivable
                
                
                (44,426
                )
                
                
                593,090Changes
      in inventory
                
                
                200,874
                
                
                
                (189,606
                )Changes
      in prepaid expenses and other
                
                
                (20,835
                )
                
                
                6,737Change
      in other assets
                
                
                (3,780
                )
                
                
                19,282Changes
      in accounts payable and accrued expenses
                
                
                518,467
                
                
                
                (479,529
                )Net
      cash provided by operating activities
                
                
                1,446,926
                
                
                
                881,141Cash
      Flows from Investing Activities:Purchases
      of property and equipment
                
                
                (236,984
                )
                
                
                (294,259
                )Cash
      Flows from Financing Activities:Proceeds
      from notes payable
                
                
                —
                
                
                
                376,092Payments
      on long-term debt
                
                
                (912,570
                )
                
                
                (732,026
                )Payments
      on advances from related parties
                
                
                (136,938
                )
                
                
                (131,271
                )Net
      cash used in financing activities
                
                
                (1,049,508
                )
                
                
                (487,205
                )Net
      Increase in Cash
                
                
                160,434
                
                
                
                99,677Cash,
      beginning of period
                
                
                274,765
                
                
                
                201,301Cash,
      end of period
                
                $
                435,199
                
                
                $
                300,978Non-cash
      Activities:Preferred
      Dividend Accrual
                
                $
                243,082
                
                
                $
                278,596Supplemental
      Information:Interest
      Paid
                
                $
                341,518
                
                
                $
                609,602





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




4


GREYSTONE
LOGISTICS, INC.


Notes
to  Consolidated Financial Statements


(Unaudited)







1. Basis of
Financial Statements


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 February 28,
2010, and the results of its operations for the nine and three month periods
ended February 28, 2010 and 2009 and its cash flows for the nine month periods
ended February 28, 2010 and 2009.  These consolidated financial
statements should be read in conjunction with the consolidated financial
statements as of and for the fiscal year ended May 31, 2009 and the notes
thereto included in Greystone's Form 10-K. The results of operations for the
nine and three month periods ended February 28, 2010 and 2009 are not
necessarily indicative of the results to be expected for the full fiscal
year.





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. The working capital
deficit of $13,071,465, a stockholders' deficiency of $8,130,017 and its ability
to obtain additional long-term financing, if necessary, raise questions about
Greystone’s ability to continue as a going concern. It is management’s opinion
that (1) based upon interest from potential customers, adequate sales will be
attained to reach a profitable status, (2) the funding for long-term financing
will be obtained, and (3) Greystone will continue as a going
concern.





2. Earnings
Per Share





For the
nine month periods ended February 28, 2010 and 2009 and for the three month
periods ended February 28, 2010 and 2009, basic and diluted EPS are the same due
to the loss attributable to common stockholders.




The
following securities (rounded to thousands) were not included in the computation
of diluted earnings per share for the nine and three month periods ended
February 28, 2010 as their effect would have been antidilutive:




Options
      to purchase common stock
            
            
            1,970,000Warrants
      to purchase common stock
            
            
            5,263,000Convertible
      preferred stock
            
            
            3,333,00010,566,000







5


3. Inventory




Inventory
consists of the following:
  February
      28,
                
                
                May
      31,2010
                
                
                2009(Unaudited)Raw
      materials
                
                $
                225,388
                
                
                $
                376,328Finished
      goods
                
                
                635,307
                
                
                
                685,241Total
      inventory
                
                $
                860,695
                
                
                $
                1,061,569







4. Revenue
Recognition





Greystone’s
sales agreements with 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’s
agreements with its major customer provide that (1) risk of loss or damages for
product in transit remain with Greystone, and (2) product is subject to approval
at the customer’s premises.  Accordingly, Greystone recognizes revenue
when the 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.





5. Long-Term
Debt





Effective
January 15, 2010, Warren F. Kruger, President and CEO, and Robert Rosene, a
member of Greystone’s board of directors, extended the maturity date for
principal and interest of certain notes in the principal amounts of $527,716 and
$2,066,000, respectively,  and dated December 15, 2005, from January
15, 2010 to January 15, 2011.





6. Related
Party Transaction





Effective January 15, 2010, Greystone
entered into an agreement with Yorktown Management & Financial Services,
L.L.C. (“Yorktown”), an entity owned by Greystone’s President and CEO, Warren
Kruger,  whereby Greystone will process material for Yorktown’s
plastic recycling activities. Greystone will provide facilities, equipment,
labor including insurance and taxes, and insurance on equipment owned by
Yorktown relating to the processing operation.   The term of the
agreement is through January 15, 2017 provided that Yorktown may cancel the
agreement with ninety days notice.  The fee charged to Yorktown for
processing the materials during the initial twelve months will be equal to 60%
of the difference between the sales price including transportation and the
purchase price of the materials including transportation.





6


The recycled material will
primarily be marketed throughan individual under contract with Greystone
who will be paid a commission of 2.5% of the selling price.





7. Commitments





Greystone
leases 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 is year-to-year with a renewal date of January
1.  Greystone maintains the right to renew or terminate the lease
annually and elected to renew the lease beginning January 1, 2010.





8.   Fair
Value Measurements





Greystone
has no assets or liabilities that are measured at fair value on a recurring
basis.





9.   Fair
Value of Financial Instruments





The
following methods and assumptions are used in estimating the fair-value
disclosures for financial instruments:





Long-Term
Debt: The carrying amount of loans with floating rates of interest approximate
fair value.  Fixed rate loans are valued based on cash flows using
estimated rates of comparable loans.  The carrying amounts reported in
the balance sheet approximate fair value.





10.   Accounting
Standards Issued But Not Adopted




In June 2009, the Financial
Accounting Standards Board (FASB) issued ASU 2009-17, Consolidations (Topic 810) –
Improvements to Financial Reporting by Enterprises Involved with Variable
Interests, to incorporate SFAS 167, Amendments to FASB Interpretation
No. 46R into the Accounting Standards Codification.SFAS 167 amends certain
requirements of FASB Interpretation No. 46 (Revised December 2003),
“Consolidation of Variable
Interest Entities — an interpretation of ARB No. 51,”to improve the
financial reporting by enterprises involved with variable interest entities and
to provide more relevant and reliable information to users of financial
statements. This standard is effective for Greystone in the fiscal year
beginning June 1, 2010.  Management is evaluating the impact of
ASU 2009-17 on its financial statements.





7


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., 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, and there is no assurance that future operations will be
profitable or that it can obtain funds necessary to finance its
operations.





References to fiscal year 2010 refer to
the nine and three month periods ended February 28, 2010, as
applicable.  References to fiscal year 2009 refer to the nine and
three month periods ended February 28, 2009, as applicable.





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 forms.  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 March
2010, Greystone announced that it had commenced recycled polyolefin production
at its Bettendorf, Iowa recycling facility.  Greystone uses extrusion
equipment leased from Yorktown Management and Financial Services, LLC, a company
owned by Greystone's CEO, Warren Kruger, to manufacture the recycled
polyolefin.  The product is principally marketed through a brokerage
agreement with an individual with significant experience in marketing recycled
resin.





Greystone’s sales to one national
brewer for fiscal years 2010 and 2009 were approximately 70% and 81% of total
sales, respectively.





Since July 2006, Greystone has operated
a beta test program involving the lease of a small pool of recycled plastic
pallets 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.





8


Personnel





Greystone had approximately 71 and 85
full-time employees as of February 28, 2010 and 2009, 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
operations and a deferred asset on the balance sheet.  However,
because of the current uncertainty as to Greystone's ability to achieve
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.





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,
2010, Greystone had no unrecognized tax benefits.





Nine
Month Period Ended February 28, 2010 Compared to Nine Month Period Ended
February 28, 2009





Sales


Sales for fiscal year 2010 were
$11,170,768 compared to $12,118,476 in fiscal year 2009 for a decrease of
$947,708.  The decrease is principally due to a decline in sales to
Greystone’s major customer in fiscal year 2010. Sales to Greystone’s major
customer were approximately 70% of total sales in fiscal year 2010 compared to
81% in fiscal year 2009.





On June 15, 2009, Greystone and Sonoco
Products Company ("Sonoco") entered into a Raw Materials/Goods Purchase Contract
(the "Contract") relating to the purchase by Sonoco of Greystone pallets made
from 100% recycled plastic.  Sonoco markets consumer packaging
products among other things and Greystone will produce a private label pallet
line for Sonoco.   The Contract does not obligate Sonoco to
purchase any particular quantity, volume or value of pallets.




Effective November 20, 2009, Greystone
entered into an agency agreement with an individual to market polyethylene and
polypropylene resins. The individual will be paid a commission of 2.5% of the
selling price. The agency agreement is for a three-year period with automatic
one-year renewals.





Cost of
Sales




Cost of sales in fiscal year 2010 was
$9,136,907, or 82% of sales, compared to $10,043,569, or 83% of sales, in fiscal
year 2009.




9


General, Selling and
Administration Expenses




General, selling and administration
expenses for fiscal year 2010 were $1,446,358 compared to $1,328,565 in fiscal
year 2009 for an increase of $117,793.  This increase is primarily
related to commissions and travel costs in marketing Greystone’s product
lines.





Other
Income




Other
income decreased $149,015 from $181,015 in fiscal year 2009 to $32,000 in fiscal
year 2010.  Other income for fiscal year 2009 includes an insurance
settlement stemming from a claim on a business interruption policy in the amount
of $132,815.  In addition, other income for fiscal
year  2010 and 2009 includes $32,000 and $48,000, respectively, from
the recognition of deferred income.





Interest
Expense




Interest expense decreased $124,923
from $746,623 in fiscal year 2009 to $621,700 in fiscal year
2010.  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 3.25% during the nine-month period ended February 28,
2010.





Net Income (Loss)
Attributable to Common Stockholders




After deducting preferred dividends and
income attributable to noncontrolling interests, the net loss attributable to
common stockholders was $(306,688), or $(0.01) per share, in fiscal year 2010
compared to a net loss attributable to common stockholders of $(137,663), or
$(0.01) per share, in fiscal year 2009 for the reasons discussed
above.





Three
Month Period Ended February 28, 2010 Compared to Three Month Period Ended
February 28, 2009





Sales


Sales for fiscal year 2010 were
$3,544,522 compared to $3,924,502 in fiscal year 2009 for a decrease of
$379,980.  Sales to Greystone’s major customer were approximately 72%
of total sales in fiscal year 2010 compared to 76% in fiscal year
2009.  Sales to new customers in fiscal year 2010 were approximately
18% of total sales.





Cost of
Sales




Cost of sales in fiscal year 2010 was
$2,958,816, or 83% of sales, compared to $3,393,052, or 86% of sales in fiscal
year 2009.  This decrease in cost of sales as a percentage of total
sales is primarily due to the variability of the product lines sold in the
respective periods with products having higher profit margins being realized in
fiscal year 2010.





General, Selling and
Administration Expenses




General, selling and administration
expenses for fiscal year 2010 were $460,620 compared to $451,431 in fiscal year
2009 for a decrease of $9,189.





10


Other
Income




Other
income decreased $10,667 from $16,000 in fiscal year 2009 to $5,333 in fiscal
year 2010.  Other income in each period results from the recognition
of deferred income.  The amortization was completed in fiscal year
2010.





Interest
Expense




Interest expense increased $1,606 from
$205,111 in fiscal year 2009 to $206,717 in fiscal year
2010.  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 3.375% during the three-month period ended February 28,
2009 compared to 3.25% during the three-month period ended February 28,
2010.





Net Income Attributable to
Common Stockholders




After deducting preferred dividends and
income attributable to noncontrolling interests, the net loss attributable to
common stockholders was $(177,106), or $(0.01) per share, in fiscal year 2010
compared to $(209,120), or $(0.01) per share, in fiscal year 2009 for the
reasons discussed above.





Liquidity and Capital
Resources





Greystone’s operations have provided
positive cash flows for each of the years beginning in fiscal year 2007 through
the nine months period ended February 28, 2010. 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.





A summary of cash flows for the nine
months ended February 28, 2010 is as follows:




Cash
      provided by operating activities
              
              $
              1,446,926Cash
      used in investing activities
              
              
              (236,984
              )Cash
      used in financing activities
              
              
              (1,049,508
              )







The contractual obligations of
Greystone are as follows:





Total
            
            
            Less
      than
              1 year
            
            
            1-3 years
            
            
            4-5 years
            
            
            Over
              5 yearsLong-term
      debt
            
            $
            11,676,726
            
            
            $
            8,823,714
            
            
            $
            769,654
            
            
            $
            522,765
            
            
            $
            1,560,593








Greystone had a working capital deficit
of $13,071,465 at February 28, 2010, which includes the current portion of
long-term debt of $8,823,714 and accounts payable and accrued liabilities of
$3,554,403. The working capital deficit reflects the uncertain financial
condition of Greystone resulting from its inability to obtain long-term
financing.  There is no assurance that Greystone will secure such
financing.





11


Substantially all of the financing that
Greystone has received through February 28, 2010 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 fiscal years 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 its officers and directors 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 with a liquidation preference of $5,000,000
and 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 transaction 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-K for the fiscal year ended May 31, 2009, which was filed on
September 15, 2009.  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.





Item
4.  Controls and Procedures





As of the end of the period covered by
this Quarterly Report on Form 10-Q, Greystone carried out an evaluation under
the supervision of Greystone's Chief Executive Officer and Interim 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 an evaluation as
of May 31, 2009, Greystone's Chief Executive Officer and Robert H. Nelson,
Greystone’s former Chief Financial Officer who resigned effective October 24,
2009, identified three





12


material
weaknesses.  During fiscal year 2010, Greystone implemented procedures
to correct one of the material weaknesses. As a result of the remaining two
material weaknesses, Greystone’s CEO and Interim Chief Financial Officer
concluded that Greystone did not maintain effective internal control over
financial reporting as of February 28, 2010. The material weaknesses as of
February 28, 2010 were as follows:


1.
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.





2.
Greystone has limited resources to ensure that necessary internal controls are
implemented and followed throughout the company. Because of this limitation with
respect to the ability to allocate sufficient resources to internal controls,
material misstatements could occur and remain undetected, implementation of new
accounting standards could be hindered and risk assessment and monitoring may
not be addressed in a timely manner.





As of May
31, 2009, Greystone’s costing procedure with respect to valuation of finished
goods inventory was reported as a material weakness. Greystone implemented
procedures during fiscal year 2010 to calculate labor and overhead rates on an
actual basis to ensure that finished goods are properly valued.





During the quarter ended February 28,
2010, except as noted in the previous paragraph, there were no changes in
Greystone's internal controls over financial reporting that have materially
affected, or that are reasonably likely to materially affect, Greystone's
internal control over financial reporting.








PART
II.  OTHER INFORMATION




Item
6.  Exhibits





11.1
            Computation
      of Income (Loss) 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 Interim Chief Financial Officer pursuant to Rules 13a-14(a) and
      15d-14(a) promulgated under the Securities Exchange Act of 1934, as
      amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of
2002





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.





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











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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 thereunto
duly authorized.






GREYSTONE
      LOGISTICS, INC.(Registrant)Date:     
      April 19, 2010
              By:
              /s/ Warren
      F. KrugerWarren
      F. KrugerPresident
      and Chief Executive Officer















































14