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FEDERAL INCOME TAXES

12 Months Ended

May 31, 2013

Note 7. FEDERAL INCOME TAXES

Deferred taxes as of May 31, 2013 and 2012 are as follows:

	2013			2012
Net operating loss carryforward	$	1,965,370		$	2,548,931

Depreciation and amortization, financial reporting in excess of tax		443,177			617,466
Deferred compensation accrual		244,800			244,800
Stock compensation costs		18,164			-
Allowance for doubtful accounts		34,000			17,000
		2,705,511			3,428,197
Valuation allowance		(1,546,511	)		(2,843,197	)

Net Deferred Tax Asset	$	1,159,000		$	585,000

In assessing the reliability of deferred tax assets, management considers the likelihood of whether it is more likely than not the net deferred tax asset will be realized. Based on this evaluation, management has provided a valuation allowance which allows for recognition of the tax benefits as deferred tax assets for May 31, 2013 and 2012, respectively.

The net change in deferred taxes for the year ended May 31, 2013 and 2012 is as follows:

	2013			2012
Net operating loss carryforward	$	(583,561	)	$	(112,055	)

Depreciation and amortization, financial reporting in excess of tax		(174,289	)		(357,342	)
Stock compensation costs		18,164
Deferred compensation accrual		-			34,000
Allowance for doubtful accounts		17,000			(8,500	)
Valuation allowance		1,296,686			1,028,897

Total	$	574,000		$	585,000

The provision (benefit) for income taxes at May 31 consists of the following:

	2013		2012
Federal	$	26,000	$	-
Deferred income tax benefit		(574,000)		(585,000)
Total	$	(548,000)	$	(585,000)

Greystone's provision (benefit) for income taxes for the years ended May 31, 2013 and 2012 differs from the federal statutory rate as follows:

	2013		2012
Tax provision (benefit) using statutory rates	34	%	34	%
Net change in valuation allowance	(57)		(54)
Other	(1)		(11)
Tax benefit per financial statements	(24)	%	(31)	%

At May 31, 2013, Greystone had a net operating loss (NOL) for Federal income tax purposes from inception through May 31, 2005 of $17,468,000 expiring in fiscal year 2013 through fiscal year 2025 of which $2,700,000 is management's estimate of the usable amount pursuant to Internal Revenue Code Section 382. The limitation is due to a change in control of Greystone during the fiscal year ended May 31, 2005. The utilization of NOL's accumulated through fiscal year 2005 is limited to approximately $225,000 per year.

	NOL Carryforward		Year Expiring
Cumulative as of May 31, 2005	$	2,700,000		2013 - 2025
Year ended May 31, 2006		182,179		2026
Year ended May 31, 2007		2,151,837		2027
Year ended May 31, 2011		746,484		2031

Greystone is no longer subject to income tax examinations by tax authorities for years prior to fiscal year 2006.

Greystone does not have any uncertain tax positions that could result in a material change to its financial position.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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