10-Q

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 SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED August 31, 2011

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

Commission file number        000-26331      

GREYSTONE LOGISTICS, INC.

(Exact name of registrant as specified in its charter)

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

1613 East 15th Street, 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:   October 18, 2011 - 26,111,201

GREYSTONE LOGISTICS, INC.

FORM 10-Q

For the Period Ended August 31, 2011

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements		Page
	Consolidated Balance Sheets as of August 31, 2011 (Unaudited) and May 31, 2011	1
	Consolidated Statements of Operations (Unaudited) For the Three-Month Periods Ended August 31, 2011 and 2010	2
	Consolidated Statements of Cash Flows (Unaudited) For the Three-Month Periods Ended August 31, 2011 and 2010	3
	Notes to Consolidated Financial Statements (Unaudited)	4
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations		7
Item 4.  Controls and Procedures		10
PART II.  OTHER INFORMATION
Item 5.  Other Information		11
Item 6.  Exhibits		12
SIGNATURES		13
Index to Exhibits		14

ITEM 1.  Financial Statements.

Greystone Logistics, Inc. and Subsidiaries

Consolidated Balance Sheets

	August 31,			May 31,
	2011			2011
	(Unaudited)
Assets
Current Assets:
Cash	$	317,356		$	169,420
Accounts receivable -
Trade, net of allowance of $75,000 at August 31, 2011 and May 31, 2011		1,500,324			1,769,387
Related party		625,929			652,402
Inventory		1,217,584			543,557
Prepaid expenses and other		39,523			70,990
Total Current Assets		3,700,716			3,205,756
Property, Plant and Equipment		9,983,652			9,237,236
Less: Accumulated Depreciation		(5,589,664	)		(5,346,073	)
Property, Plant and Equipment, net		4,393,988			3,891,163
Assets of Variable Interest Entity		4,663,339			4,663,339
Less: Accumulated Depreciation		(869,592	)		(840,894	)
Assets of Variable Interest Entity, net		3,793,747			3,822,445
Other Assets		95,783			100,693
Total Assets	$	11,984,234		$	11,020,057
Liabilities and Deficit
Current Liabilities:
Current portion of long-term debt	$	3,722,179		$	3,689,738
Advances payable - related party		690,580			725,080
Current portion of variable interest entities' long-term debt		369,517			383,016
Accounts payable and accrued expenses		2,086,703			1,927,162
Accounts payable and accrued expenses - related parties		1,730,759			1,621,838
Total Current Liabilities		8,599,738			8,346,834
Long-Term Debt, net of current portion		5,451,017			5,192,259
Long-Term Debt of Variable Interest Entities, net of current portion		7,106,222			7,185,955
Deficit:
Common stock, $0.0001 par value
Shares authorized: 5,000 000 000
Shares issued:  26,111,201 at August 31, 2011 and May 31, 2011		2,611			2,611
Additional paid-in capital		48,089,298			48,089,298
Accumulated deficit		(61,801,507	)		(62,297,986	)
Total Greystone Stockholders' Deficit		(13,709,598	)		(14,206,077	)
Non-controlling interests		4,536,855			4,501,086
Total Deficit		(9,172,743	)		(9,704,991	)
Total Liabilities and Deficit	$	11,984,234		$	11,020,057

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

- 1 -

Greystone Logistics, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended August 31,
	2011			2010
Sales	$	5,783,624		$	4,994,208
Cost of Sales		4,627,974			4,738,456
Gross Profit		1,155,650			255,752
General, Selling and Administrative Expenses		411,987			491,084
Operating Income (Loss)		743,663			(235,332	)
Other Income (Expense):
Other Income (Expense)		(2,950	)		7,650
Interest Expense		(265,353	)		(189,960	)
Total Other Expense, net		(268,303	)		(182,310	)
Net Income (Loss)		475,360			(417,642	)
Loss (Income) Attributable to Variable Interest Entities, net		4,375			(20,592	)
Preferred Dividends		—			(81,918	)
Net Income (Loss) Available to Common Stockholders	$	479,735		$	(520,152	)
Income (Loss) Available to Common Stockholders
Per Share of Common Stock - Basic and Diluted	$	0.02		$	(0.02	)
Weighted Average Shares of Common Stock Outstanding -
Basic and Diluted		26,211,201			26,211,201

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

- 2 -

Greystone Logistics, Inc. and Subsidiaries

 Consolidated Statements of Cash Flows

 (Unaudited)

	Three Months Ended August 31,
	2011			2010
Cash Flows from Operating Activities:
Net income (loss)	$	475,360		$	(417,642	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization		276,509			272,246
Stock-based compensation		—			23,992
Changes in receivables		295,536			392,018
Changes in inventory		(674,027	)		(264,189	)
Changes in prepaid expenses and other		31,467			16,861
Change in other assets		690			(3,750	)
Changes in accounts payable and accrued expenses		268,462			481,241
Net cash provided by operating activities		673,997			500,777
Cash Flows from Investing Activities:
Purchase of property and equipment		(183,390	)		(192,724	)
Cash Flows from Financing Activities:
Payments on long-term debt		(271,827	)		(97,208	)
Payments on advances from related party		(34,500	)		(126,501	)
Payments on long-term debt of variable interest entities		(93,232	)		(13,447	)
Capital contributions to variable interest entity		75,000			—
Distributions by variable interest entity		(18,112	)		—
Net cash used in financing activities		(342,671	)		(237,156	)
Net Increase in Cash		147,936			70,897
Cash, beginning of period		169,420			163,749
Cash, end of period	$	317,356		$	234,646
Non-Cash Activities:
Acquisition of equipment by capital lease or debt	$	563,026		$	390,000
Preferred dividend accrual		—			81,918
Supplemental Information:
Interest paid		159,995			100,310

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

- 3 -

GREYSTONE LOGISTICS, INC.

Notes to  Consolidated Financial Statements

(Unaudited)

Note 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 August 31, 2011, and the results of its operations and its cash flows for the three-month periods ended August 31, 2011 and 2010.  These consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the fiscal year ended May 31, 2011 and the notes thereto included in Greystone's Form 10-K for such period. The results of operations for the three-month periods ended August 31, 2011 and 2010 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.  Greystone reported a net loss for the fiscal year ended May 31, 2011 and net income for the two fiscal years prior thereto.  Greystone believes that it has the capacity to produce sufficient plastic pallets to achieve profitability.  However, Greystone continues to be dependent on one customer. Sales to this major customer were approximately 73% of pallet sales (54% of total sales) for the three-month period ended August 31, 2011 and 77% of pallet sales (58% of total sales) for the three-month period ended August 31, 2010. To date, Greystone has received substantial advances from investors to finance its operations and will require additional substantial funding and/or personal guarantees of debt in order to attain its business plan and continue to achieve profitable operations.  Historically, Greystone has been successful in financing its operations primarily through short-term loans and personal guarantees of bank loans by its officers and directors. Management has continued to seek long-term and/or permanent financing, and on March 15, 2011, Greystone entered into an amended bank loan agreement which provides for a three-year term on Greystone’s primary indebtedness.  While such amendment’s extended terms provided important near-term relief, profitable growth will still require additional capital resources. Neither the receipt of additional funding in adequate amounts nor the successful implementation of Greystone’s business plan can be assured.  The combination of these factors raises substantial doubt about Greystone's ability to continue as a going concern.

Note 2.                  Earnings Per Share

For the three-month period ended August 31, 2011, basic and diluted EPS were the same as the effect of the stock options to purchase common stock and the convertible provisions of the Series 2003 preferred stock were anti-dilutive.

The following securities (rounded to thousands) were not included in the computation of diluted earnings per share for the three month period ended August 31, 2011 as their effect would have been antidilutive:

- 4 -

Options to purchase common stock	1,940,000
Convertible preferred stock	3,333,000
	5,273,000

Note 3.                  Inventory consists of the following:

	August 31,		May 31,
	2011		2011
	(Unaudited)
Raw materials	$	525,771	$	171,104
Finished goods		691,813		372,453
Total inventory	$	1,217,584	$	543,557

Note 4.                  Capitalized Lease

Effective August 12, 2011, Greystone entered into an agreement with Sonoco Products Company to lease certain molds for a period of sixty months at a monthly rental of $10,625 per month plus $0.50 per pallet sold each month in excess of 12,500.  The lease and related debt have been capitalized at 5% interest for a total amount of $563,026.

Note 5.                 Note Payable

Greystone, GSM, GRE and GLOG are parties to a loan agreement dated as of March 4, 2005, as amended, with F&M Bank & Trust Company (“F&M”).  Effective August 31, 2011, GLOG distributed its assets, Greystone’s Series 2003 Convertible Preferred Stock, to its members, Warren F. Kruger, Greystone’s president and CEO, and Robert B. Rosene, Jr., a member of Greystone’s board of directors (collectively, the “Borrowers”).   Effective as of August 31, 2011, the loan agreement was amended to (a) cause all of GLOG’s rights and obligations under the loan agreement to be transferred to  Warren F. Kruger and Robert B. Rosene, Jr., (b) affirm the cross-collateralization and cross-default provisions of the loan agreement among property and debts of GSM, GLOG and Greystone Real Estate, L.L.C., an entity owned by Warren F. Kruger and Robert B. Rosene, Jr., (c) amend the cross-collateralization and cross-default provisions of the loan agreement to include Messrs. Kruger and Rosene and (d) amend certain financial covenants of the loan agreement. GLOG was dissolved effective September 20, 2011.

Note 6.                 Variable Interest Entities (VIE)

The consolidated financial statements of Greystone include Greystone Real Estate, L.L.C. (“GRE”) and GLOG Investments, L.L.C. (“GLOG”).  GRE owns two buildings located in Bettendorf, Iowa which are leased to Greystone Manufacturing, L.L.C.(“GSM”).  At August 31, 2011 and prior to the asset distribution discussed in Note 5 above, GLOG’s sole asset was Greystone’s Series 2003 Convertible Preferred Stock in the face amount of $5,000,000 and its only liability was a $3,669,084

- 5 -

note payable to F&M Bank & Trust Company (“F&M”).  GRE, GLOG, and GSM were parties to an amended loan agreement with F&M which contained cross-collateralization and cross-default provisions.  Effective with the August 31, 2011 loan amendment with F&M as discussed in Note 5 above, GLOG was replaced by the Borrowers under the loan agreement.

Note 7.                 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.

Note 8.                 Subsequent Event

As discussed in Note 5, GLOG was dissolved effective September 20, 2011 and, accordingly, ceased to be a variable interest entity of Greystone.  Accordingly, GLOG will be de-consolidated effective September 1, 2011.  A condensed pro forma balance sheet as of August 31, 2011 showing the effect of the de-consolidation is as follows:

Assets:
Current assets	$	3,700,716
Property, plant and equipment, net of accumulated depreciation		4,393,988
Assets of variable interest entity, net of accumulated depreciation		3,793,747
Other assets		95,783
Total Assets	$	11,984,234
Liabilities and Deficit:
Current liabilities	$	11,156,983
Long-term debt, net of current portion		5,451,017
Long-term debt of variable interest entity, net of current portion		3,558,598
Deficit -
Greystone stockholders’ deficit		(9,109,392	)
Non-controlling interests		927,028
Total deficit		(8,182,364	)
Total Liabilities and Deficit	$	11,984,234

- 6 -

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, L.L.C., or GSM, and Plastic Pallet Production, Inc., or PPP.  Greystone also consolidates its variable interest entities, Greystone Real Estate, L.L.C., or GRE, and GLOG Investment, L.L.C., or GLOG.  All material intercompany accounts and transactions have been eliminated.

References to fiscal year 2012 refer to the three month period ended August 31, 2011, as applicable.  References to fiscal year 2011 refer to the three month period ended August 31, 2010, as applicable.

Sales

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

Greystone also sells its pallets and pallet leasing services to certain large customers direct through contract distributors and its President and other employees.

Greystone derives a substantial portion of its revenue from a national brewer.  This customer accounted for approximately 73% and 77% of Greystone’s pallet sales and 54% and 58% of Greystone’s total sales in fiscal years 2012 and 2011, respectively.  The design of Greystone’s recycled plastic pallets are approved for use by the customer and are the only plastic pallets in use for case goods at the current time by the customer. There is no assurance that Greystone will retain this customer’s business at the same level, or at all.  The loss of a material amount of business from this customer could have a material adverse effect on Greystone.

Personnel

Greystone had approximately 94 and 87 full-time employees as of August 31, 2011 and 2010, respectively.

- 7 -

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 and sustain profitability, a valuation reserve has been established that offsets the amount of any tax benefit available for each period presented in the consolidated statements of operations.

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 August 31, 2011, Greystone had no unrecognized tax benefits.

Three Month Period Ended August 31, 2011 Compared to Three Month Period Ended August 31, 2010

Sales

Sales for fiscal year 2012 were $5,783,624 compared to $4,994,208 in fiscal year 2011 for an increase of $789,416.  Pallet sales were $4,288,919 in fiscal year 2012 compared to $3,739,631 in fiscal year 2011 for an increase of $549,288. Greystone’s sales to its major customer in fiscal year 2012 were 73% of total pallet sales compared to 77% of total pallet sales in fiscal year 2011.  Pallet sales during fiscal year 2011 were hindered primarily due to lost production time on the pallet production lines for necessary repair and maintenance.

Pallet sales to Greystone’s major customer are generally based on the customer’s need to maintain its pallet inventory and may vary by period.  Greystone cannot predict the major customer’s future needs to maintain or grow its pallet inventory but has been able to grow sales to new pallet customers developed through Greystone’s marketing efforts to broaden its customer base.

Sales of recycled plastic resin were $1,494,705 in fiscal year 2012 compared to $1,254,577 in fiscal year 2011 for an increase of $240,128.  Greystone’s strategic plan is to continue to grow the sales of recycled plastic resin.

Cost of Sales

Cost of sales in fiscal year 2012 was $4,627,974, or 80% of sales, compared to $4,738,456, or 95% of sales, in fiscal year 2011.  The higher ratio of cost of sales to sales in fiscal year 2011 was primarily due to inelastic manufacturing costs for pallet production during a period of reduced product volume resulting from lost production time on the pallet production lines for necessary repair and maintenance. The profit margin for resin sales was approximately nil in fiscal year 2012 and 2011 due to pricing, production costs and the fees (40% of revenue less material, freight and commissions) paid or accrued to Yorktown Management, LLC, an entity owned by Warren Kruger, President and CEO of Greystone.  Greystone’s business plan is to increase resin sales with improved profit margins toward the realization of a positive gross margin. Yorktown’s share of gross profits from resin sales totaled approximately $53,102 and $104,042 in fiscal years 2012 and 2011, respectively. During fiscal year 2012, the profit margins for recycled plastic resin decreased due to increases in the cost of raw materials.

- 8 -

General, Selling and Administrative Expenses

General, selling and administrative expenses were $411,987 in fiscal year 2012 compared to $491,084 in fiscal year 2011 for a decrease of $79,097. The decrease in selling, general and administrative expenses was primarily due to the salary and related expenses associated with the resignation of the Senior Vice President for Sales and Marketing in April, 2011.

Net Income (Loss)

Greystone recorded net income of $475,360 compared to a net loss of $(417,642) in fiscal year 2011 for the reasons discussed above.

Net Income (Loss) Attributable to Common Stockholders

Net income available to common stockholders for fiscal year 2012 was $479,735, or $0.02 per share, compared to the net loss attributable to common stockholders  of $(520,152), or $(0.02) per share, in fiscal year 2011 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 three month period ended August 31, 2011. While the amendment to the loan agreement provided important near-term relief, Greystone will require additional cash to achieve growth and to meet Greystone's contractual obligations, and Greystone continues to explore 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 three months ended August 31, 2011 is as follows:

Cash provided by operating activities	$	673,997
Cash used in investing activities		(183,390	)
Cash used in financing activities		(342,671	)

The contractual obligations of Greystone are as follows:

	Total		Less than 1 year		1-3 years		4-5 years		Over 5 years
Long-term debt	$	9,173,196	$	3,722,179	$	5,168,410	$	250,997	$	31,610

- 9 -

Greystone had a working capital deficit of $4,899,022 at August 31, 2011, which includes the current portion of long-term debt of $3,722,179, including $2,593,716 to related parties, and accounts payable and accrued liabilities of $3,817,462, including $1,730,759 to related parties. The working capital deficit reflects the uncertain financial condition of Greystone resulting from its limitations on its ability to obtain long-term financing.  There is no assurance that Greystone will secure additional long-term financing.

Substantially all of the financing that Greystone has received through the last few fiscal years has been provided by loans or through loan guarantees from the officers and directors of Greystone.

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, 2011, which was filed on September 16, 2011.  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 Chief Financial

- 10 -

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, 2011, Warren F. Kruger, Greystone's Chief Executive Officer, and William W. Rahhal, Greystone’s Chief Financial Officer, identified two material weaknesses.  As a result of these two material weaknesses, Greystone’s CEO and Chief Financial Officer concluded that Greystone did not maintain effective internal control over financial reporting as of August 31, 2011. The material weaknesses as of August 31, 2011 were as follows:

1.   Greystone does not have a risk assessment process for identifying and mitigating risks that financial statements may be materially misstated and 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 and the lack of an audit committee and a well-defined communication process, 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.

During the quarter ended August 31, 2011, 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 5.   Other Information

Effective as of August 31, 2011, (a) Warren F. Kruger, President, Chief Executive Officer and a director of the Company, (b) Robert B. Rosene, Jr., a director of the Company, (c) F&M, (d) GSM, a wholly-owned subsidiary of the Company, and (e) GLOG, an entity owned by Warren F. Kruger and Robert B. Rosene, Jr., entered into an amendment (the “Third Amendment”) to that certain Loan Agreement, dated March 4, 2005 (as amended from time to time, the “Loan Agreement”).  The Third Amendment (v) causes all of GLOG’s rights and obligations under the Loan Agreement to be transferred to  Warren F. Kruger and Robert B. Rosene, Jr., (w) affirms the cross-collateralization and cross-default provisions of the Loan Agreement among property and debts of GSM, GLOG and Greystone Real Estate, L.L.C., an entity owned by Warren F. Kruger and Robert B. Rosene, Jr., (x) amends the cross-collateralization and cross-default provisions of the Loan Agreement to include Messrs. Kruger and Rosene, (y) amends certain financial covenants of the Loan Agreement and (z) includes certain other provisions that are customary in such types of agreements.  The Third Amendment was a result of GLOG distributing its assets to its members, Warren F. Kruger and Robert B. Rosene, Jr., and subsequently being dissolved.

- 11 -

Item 6.   Exhibits.

10.1  Third 2011 Amendment to Loan Agreement dated March 5, 2005.

11.1  Computation of Loss per Share is in Note 2 in the Notes to the financial statements.

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

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

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

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

- 12 -

SIGNATURES

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: October 24, 2011	By:	/s/ Warren F. Kruger
		Warren F. Kruger
		President and Chief Executive Officer

Date: October 24, 2011	By:	/s/ William W. Rahhal
		William W. Rahhal
		Chief Financial Officer

- 13 -

INDEX TO EXHIBITS

10.1  Third 2011 Amendment to Loan Agreement dated March 5, 2005.

11.1  Computation of Loss per Share is in Note 2 in the Notes to the financial statements.

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

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

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

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

- 14 -

EX-10.1

EXHIBIT 10.1

THIRD 2011 AMENDMENT TO LOAN AGREEMENT

THIS THIRD 2011 AMENDMENT TO LOAN AGREEMENT, dated as of August 31, 2011 (the "2011 Amendment #3"), is made and entered into between and among WARREN F. KRUGER, an individual, and ROBERT B. ROSENE, JR., an individual (collectively, the "Borrowers"), GLOG INVESTMENTS, L.L.C., an Oklahoma limited liability company ("GLOG"), GREYSTONE MANUFACTURING, L.L.C., an Oklahoma limited liability company ("Greystone" and collectively with the Borrowers, the "Loan Parties"), and THE F&M BANK & TRUST COMPANY, a state banking corporation (the "Bank").

WITNESSETH:

WHEREAS, GLOG, Greystone and the Bank entered into that certain Loan Agreement dated as of March 4, 2005, as previously amended from time to time, including that certain February 2009 Amendment to Loan Agreement dated as of February 16, 2009 and that certain 2011 Amendment to Loan Agreement and Second 2011 Amendment to Loan Agreement, each dated as of March 15, 2011 (collectively, the "Existing Loan Agreement"), pursuant to which the Bank (i) made a certain $3,684,523.86 term loan to GLOG (the "GLOG Loan") and (ii) made a $6,097,776.21 term loan to Greystone (the "Greystone Loan"); and

WHEREAS, GLOG has distributed its assets to the Borrowers and the Borrowers have agreed to become jointly and severally liable for the unpaid balance of the note evidencing the GLOG Loan in the face principal amount of $3,663,902.57; and

WHEREAS, subject to the terms, provisions and conditions hereinafter set forth, the Bank is willing to release GLOG from liability under the GLOG Loan and to modify, amend, and rearrange the unpaid balance of the note evidencing the GLOG Loan such that the Borrowers shall be jointly and severally liable on such note in the principal amount of $3,663,902.57 until the existing final maturity date of March 15, 2014;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, receipt of which is acknowledged by the parties hereto, the parties agree to amend the Existing Loan Agreement as follows:

1.           Definition.  Any capitalized term used herein (including in the recitals hereto) but not otherwise defined shall have the meaning given to such term in the Existing Loan Agreement.

2.           GLOG Loan.  The existing GLOG Loan issued by the Bank to GLOG, as borrower, is hereby modified, rearranged, and amended such that the GLOG Loan in the principal amount of $3,663,902.57 until the existing maturity date of March 15, 2014 shall be in favor of the Borrowers who shall be jointly and severally liable under the GLOG Loan, and GLOG shall be released from liability thereunder.  All of the Indebtedness created pursuant thereto shall be evidenced by that certain replacement Promissory Note (Term Note # 60066) dated as of even date herewith from the Borrowers payable to the order of the Bank in the face principal amount of $3,663,902.57 (the "Restated Note").  The GLOG Loan shall be payable in accordance with the terms and provisions of the Restated Note.  All references in the Existing Loan Agreement to the GLOG Note previously issued by GLOG to the order of the Bank shall hereafter refer to the Restated Note issued by Borrowers to the order of the Bank.

3.           Interest Rate.  All amounts outstanding on the Restated Note shall bear interest at a per annum rate equal to the Base Rate (as defined in the Restated Note), but in no event shall be less than the then applicable Index Floor Rate or more than the maximum rate allowed by law.

4.           Pledge Agreement.  Effective as of even date with this 2011 Amendment #3, GLOG is distributing its 50,000 shares of $100 stated value Greystone Series 2003 Preferred Stock (the "Stock") to the Borrowers.  The Stock is currently pledged to the Bank as security for the GLOG Note pursuant to a certain Pledge and Security Agreement from GLOG dated as of March 4, 2005 (the "Existing Pledge Agreement").  The Borrowers shall execute an Amended and Restated Pledge Agreement in form, scope and substance acceptable to the Bank (the "Restated Pledge") in replacement of the Existing Pledge Agreement, pledging their interest in the Stock to the Bank.

5.           Guaranty.  Effective upon issuance of the Restated Note, Borrowers and Guarantors shall be the same.  Therefore, the 5.00 MM Guaranty shall become null and void and Guarantors shall be primarily liable on the Restated Note.

6.           Ratification. The remaining terms, provisions and conditions set forth in the Existing Loan Agreement shall remain in full force and effect for all purposes and are incorporated herein by reference. Each of the Loan Parties and GLOG restates, confirms, adopts and ratifies the warranties, covenants and representations set forth therein and further represents to the Bank that, as of the date hereof, no Default or Event of Default exists under the Existing Loan Agreement, as amended by this 2011 Amendment #3 (collectively, the "Loan Agreement").

7.           Conditions Precedent.  The Bank's obligations hereunder are expressly conditioned on the Borrowers executing and delivering, or causing to be executed and delivered to the Bank the following:

(a) this 2011 Amendment #3 and the Restated Note; and

(b) the Restated Pledge and originals of the Stock certificates.

8.           Collateral and Cross Collateralization and Cross Default.  All of the Indebtedness of each of the Loan Parties to the Bank, including as evidenced by the Restated Note shall be secured in all respects by the collateral described in the Restated Pledge as well as the Collateral described or defined in the Security Agreement described and defined in the Loan Agreement or any other Loan Document, including such amendments thereto or restatements thereof as may be deemed necessary or appropriate by the Bank.  Each of the Loan Parties acknowledge and stipulate that the collateral described in the Restated Pledge as well as the Collateral described and defined in the Loan Agreement and the Security Agreement and all items and types of collateral, whether real property, personal property or otherwise, granted from time to time, including, without limitation, now in existence, by any of Greystone Real Estate, L.L.C., GLOG, and/or Greystone, as collateral or security for any and all debts, liabilities and obligations of any thereof, whether evidenced by promissory notes or otherwise, shall be and hereby are cross collateralized with each other to the fullest and maximum extent permitted by

2

applicable law and each thereof is cross-defaulted with each of the other notes, security agreements, pledge agreements, mortgages, guaranties and loan agreements thereof for all purposes and in all respects.  Notwithstanding the foregoing provisions, if and to the extent the Maximum Funded Debt to EBITDA ratio of Section 6.11 of the Loan Agreement is reduced to 4.0 to 1.0 for two (2) consecutive fiscal year ends, the Bank agrees to release the subordinated and junior mortgage liens against the respective properties leased by Greystone Real Estate, L.L.C., as landlord, to Greystone, as tenant.  Notwithstanding the provisions to the contrary contained in Section 9 of the 2011 Amendment to Loan Agreement dated as of March 15, 2011, the Indebtedness of the Loan Parties is not cross-defaulted with any indebtedness of Native American Plastics, LLC, an Oklahoma limited liability company ("NAP") to the Bank, and no collateral from NAP shall be pledged against the Indebtedness of the Loan Parties hereunder.

9.           Financial Covenants.  The following financial covenants shall replace Section 6.11 and Section 6.12 of the Existing Loan Agreement:

6.11           Maximum Funded Debt to EBITDA.  The maximum aggregate Funded Debt to EBITDA (net of (minus) pledged certificates of deposit by the Guarantors to the Bank and inclusive of the net income of Yorktown Management, L.L.C.'s ("Yorktown")) of Greystone and its Financial Covenant Affiliates shall be as follows; calculated annually based upon the fiscal year end audited financial statements of Greystone:

Maximum Ratio	Effective as of:
9.0 to 1.0	May 31, 2011
6.0 to 1.0	May 31, 2012
4.0 to 1.0	May 31, 2013 and thereafter

6.12           Debt Service Coverage Ratio (DSCR).  The minimum Debt Service Coverage Ratio (Greystone's and its Financial Covenant Affiliates' aggregate Net Operating Income (inclusive of the net operating income of Yorktown and, insofar and only insofar as Greystone is concerned, inclusive of its interest, depreciation and amortization) to principal and interest on the aggregate Funded Debt of Greystone and its Financial Covenant Affiliates' ratio) shall be as follows; calculated annually based upon the fiscal year end audited financial statements of Greystone:

Minimum Ratio	Effective as of
1.00 to 1.0	May 31, 2011
1.25 to 1.0	May 31, 2012
1.40 to 1.0	May 31, 2013 and thereafter

3

10.          CONSENT TO JURISDICTION AND VENUE.  GLOG AND EACH OF THE LOAN PARTIES HEREBY CONSENT TO THE JURISDICTION OF ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN TULSA COUNTY, OKLAHOMA, AND WAIVE ANY OBJECTION WHICH THEY MAY HAVE BASED ON IMPROPER VENUE OR FORUMNONCONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVE PERSONAL SERVICE OR ANY AND ALL PROCESS UPON THEM, AND CONSENT THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO THEM AT THE ADDRESS SET FORTH IN THE EXISTING LOAN AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) BUSINESS DAYS AFTER MAILED OR DELIVERED BY MESSENGER.

11.          Fees and Expenses.  The Loan Parties agree to pay to the Bank on demand all costs, fees and expenses (including, without limitation, reasonable attorneys fees and legal expenses) incurred or accrued by the Bank in connection with the preparation, execution, closing, delivery, and administration of this 2011 Amendment #3 (including the Existing Loan Agreement) and the other Loan Documents, or any amendment, waiver, consent or modification thereto or thereof, or any enforcement thereof.  In any action to enforce or construe the provisions of the Loan Agreement or any of the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys' fees and all costs and expenses related thereto.

12.          WAIVER OF JURY TRIAL.  GLOG AND EACH OF THE LOAN PARTIES FULLY, VOLUNTARILY AND EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS 2011 AMENDMENT #3, THE CONSOLIDATED TERM NOTE, RESTATED GLOG NOTE, THE LOAN AGREEMENT OR UNDER ANY AMENDMENT, ANY SECURITY INSTRUMENT, OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THE LOAN AGREEMENT.  GLOG AND EACH OF THE LOAN PARTIES AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

13.          Counterparts.  This 2011 Amendment #3 may be executed in multiple counterparts, each of which, when so executed, shall constitute an original copy.

[Signature Pages Follow]

4

IN WITNESS WHEREOF, GLOG and each of the Loan Parties has caused this 2011 Amendment #3 to be delivered to Bank in Tulsa, Oklahoma, individually or by its undersigned duly authorized manager, as applicable, effective for all purposes as of the day and year first above written.

GREYSTONE MANUFACTURING, L.L.C., an Oklahoma limited liability company

By /s/ Warren F. Kruger                                   

      Warren F. Kruger, manager

"Greystone"

GLOG INVESTMENT, L.L.C.

an Oklahoma limited liability company

By /s/ Robert B. Rosene, Jr.                            

     Robert B. Rosene, Jr., Manager

"GLOG"

 /s/ Warren F. Kruger                                        

 Warren F. Kruger, individually

 /s/ Robert B. Rosene, Jr.                                  

 Robert B. Rosene, Jr., individually

"Borrowers"

The undersigned hereby approves and accepts the cross pledge and cross default provisions of paragraph 8 above.

GREYSTONE REAL ESTATE, L.L.C.,

an Oklahoma limited liability company

By  /s/ Warren F. Kruger                                  

       Warren F. Kruger, manager

THE F&M BANK & TRUST COMPANY, a state banking corporation

By  /s/ Craig Huston                                         

       Craig Huston, Senior Executive President

"Bank"

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Warren F. Kruger, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Greystone Logistics, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)        All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 24, 2011 /s/ Warren F. Kruger                                         

Warren F. Kruger

Pesident and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, William W. Rahhal, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Greystone Logistics, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)        All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 24, 2011 /s/ William W. Rahhal                                  

William W. Rahhal

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Greystone Logistics, Inc. (the “Company”) on Form 10-Q for the period ending August 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Warren F. Kruger, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 24, 2011 /s/ Warren F. Kruger                                      

Warren F. Kruger

President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part of the Report.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Greystone Logistics, Inc. (the “Company”) on Form 10-Q for the period ending August 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William W. Rahhal, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 24, 2011 /s/ William W. Rahhal                         

William W. Rahhal

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part of the Report.