glgi_10q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED August 31, 2013
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM ______ TO ________
 
000-26331
Commission file number
 
GREYSTONE LOGISTICS, INC. 
(Exact name of registrant as specified in its charter)
 
Oklahoma   75-2954680
(State or other jurisdiction   (I.R.S. Employer 
of incorporation or organization)   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 Securities 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 þ  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).   Yesþ 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  Smaller reporting company þ
(Do not check if a smaller reporting company)      
 
Indicate by checkmark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).  Yeso No þ
 
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 15, 2013 - 26,111,201
 


 
 
 
 
 
GREYSTONE LOGISTICS, INC.
FORM 10-Q
For the Period Ended August 31, 2013
 
      Page
PART I.  FINANCIAL INFORMATION
   
       
Item 1.  Financial Statements   3
       
    3
       
    4
       
  Consolidated Statements of Cash Flows (Unaudited)  For the Three Months Ended August 31, 2013 and 2012   5
       
  Notes to Consolidated Financial Statements (Unaudited)   6
       
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations   11
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk   15
       
Item 4. Controls and Procedures     15
       
PART II.  OTHER INFORMATION
   
       
Item 1.  Legal Proceedings   16
       
Item 1A. Risk Factors   16
       
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   16
       
Item 3. Defaults Upon Senior Securities   16
       
Item 4. Mine Safety Disclosures   16
       
Item 5. Other Information   16
       
Item 6.  Exhibits   16
       
SIGNATURES    17
 
 
2

 
 
Item 1.  Financial Statements.
 
Greystone Logistics, Inc. and Subsidiaries
Consolidated Balance Sheets
 
   
August 31,
   
May 31,
 
   
2013
   
2013
 
   
(Unaudited)
       
Assets
           
Current Assets:
           
    Cash
  $ 717,879     $ 366,896  
    Accounts receivable, net of allowance of $100,000
    2,312,881       2,239,594  
    Inventory
    1,257,008       1,044,379  
    Prepaid expenses and other
    220,942       119,198  
Total Current Assets
    4,508,710       3,770,067  
Property, Plant and Equipment
    16,200,616       15,754,959  
Less: Accumulated Depreciation
    (8,979,523 )     (8,710,820 )
Property, Plant and Equipment, net
    7,221,093       7,044,139  
Deferred Tax Asset
    1,412,000       1,159,000  
Other Assets
    66,275       71,371  
Total Assets
  $ 13,208,078     $ 12,044,577  
                 
Liabilities and Deficit
               
Current Liabilities:
               
    Current portion of long-term debt
  $ 1,347,424     $ 1,344,160  
    Accounts payable and accrued expenses
    1,603,309       1,643,339  
    Accounts payable and accrued expenses - related parties
    1,620,926       1,551,154  
    Preferred dividends payable
    1,826,486       1,883,959  
Total Current Liabilities
    6,398,145       6,422,612  
Long-Term Debt, net of current portion
    9,329,672       9,658,020  
Deficit:
               
    Preferred stock, $0.0001 par value, $5,000,000 liquidation preference
               
      Shares authorized: 20,750,000
               
      Shares issued and outstanding: 50,000
    5       5  
    Common stock, $0.0001 par value
               
       Shares authorized: 5,000,000,000
               
       Shares issued and outstanding:  26,111,201
    2,611       2,611  
    Additional paid-in capital
    53,156,073       53,142,717  
    Accumulated deficit
    (56,872,614 )     (58,321,266 )
Total Greystone Stockholders' Deficit
    (3,713,925 )     (5,175,933 )
    Non-controlling interests
    1,194,186       1,139,878  
Total Deficit
    (2,519,739 )     (4,036,055 )
Total Liabilities and Deficit
  $ 13,208,078     $ 12,044,577  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
3

 
 
Greystone Logistics, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
   
Three Months Ended August 31,
 
   
2013
   
2012
 
             
             
Sales
  $ 6,510,917     $ 7,128,866  
                 
Cost of Sales
    4,365,545       5,604,017  
                 
Gross Profit
    2,145,372       1,524,849  
                 
General, Selling and Administrative Expenses
    596,313       558,639  
                 
Operating Income
    1,549,059       966,210  
                 
Other Income (Expense):
               
    Other income (expense)
    -       10,000  
    Interest expense
    (201,181 )     (208,843 )
Total Other Expense, net
    (201,181 )     (198,843 )
                 
Income before Income Taxes
    1,347,878       767,367  
Benefit from Income Taxes
    237,000       199,400  
Net Income
    1,584,878       966,767  
                 
Loss (Income) Attributable to Variable Interest Entities, net
    (54,308 )     (51,954 )
                 
Preferred Dividends
    (81,918 )     (82,808 )
                 
Net Income Available to Common Stockholders
  $ 1,448,652     $ 832,005  
                 
Income Available to Common Stockholders:
               
    Per Share of Common Stock - Basic
  $ 0.06     $ 0.03  
    Per Share of Common Stock - Diluted
  $ 0.05     $ 0.03  
                 
Weighted Average Shares of Common Stock Outstanding -
               
    Basic
    26,111,201       26,111,201  
    Diluted
    27,565,047       26,955,766  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
4

 
 
Greystone Logistics, Inc. and Subsidiaries
 Consolidated Statements of Cash Flows
 (Unaudited)
 
   
Three Months Ended August 31,
 
   
2013
   
2012
 
Cash Flows from Operating Activities:
           
   Net income
  $ 1,584,878     $ 966,767  
   Adjustments to reconcile net income to net cash
               
    provided by operating activities:
               
      Depreciation and amortization
    337,236       334,385  
      Deferred income taxes
    (253,000 )     (208,900 )
      Stock-based compensation
    13,356       13,356  
      Changes in receivables
    (178,178 )     329,111  
      Changes in inventory
    (212,629 )     109,796  
      Changes in prepaid expenses and other
    (101,744 )     (76,799 )
      Change in other assets
    1,834       2,290  
      Changes in accounts payable and accrued expenses
    29,742       61,591  
Net cash provided by operating activities
    1,221,495       1,531,597  
                 
Cash Flows from Investing Activities:
               
   Purchase of property and equipment
    (510,928 )     (362,677 )
                 
Cash Flows from Financing Activities:
               
   Payments on long-term debt and capitalized leases
    (325,084 )     (320,077 )
   Payments on advances from related party
    (34,500 )     -  
   Distributions by variable interest entity
    -       (22,782 )
Net cash used in financing activities
    (359,584 )     (342,859 )
                 
Net Increase in Cash
    350,983       826,061  
Cash, beginning of period
    366,896       194,400  
                 
Cash, end of period
  $ 717,879     $ 1,020,461  
                 
Non-Cash Activities:
               
   Preferred dividend accrual
  $ 81,918     $ 82,808  
Supplemental Information:
               
   Interest paid
    85,689       108,431  
 
The accompanying notes are an integral part of these consolidated financial statements
 
 
5

 
 
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, 2013, and the results of its operations and its cash flows for the three-month periods ended August 31, 2013 and 2012.  These consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the fiscal year ended May 31, 2013 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, 2013 and 2012 are not necessarily indicative of the results to be expected for the full fiscal year.

The consolidated financial statements of Greystone include its wholly-owned subsidiaries,  Greystone Manufacturing, L.L.C. (“GSM”), Plastic Pallet Production, Inc. (“PPP”), and its variable interest entity, Greystone Real Estate, L.L.C. (“GRE”).  GRE owns two buildings located in Bettendorf, Iowa which are leased to GSM.

Note 2. Earnings Per Share

Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income available to common stockholders by the weighted-average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.

Greystone excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is anti-dilutive.  Equity instruments which have been excluded are certain options to purchase common stock totaling 350,000 shares for the three months ended August 31, 2013 and 2012, respectively, and convertible preferred stock which is convertible into 3,333,334 shares of common stock for the three months ended August 31, 2013, and 2012.

 
6

 
 
The following table sets forth the computation of basic and diluted earnings per share for the three months ended August 31, 2013 and 2012:
 
   
2013
   
2012
 
Numerator:
           
Net income available to common shareholders
  $ 1,448,652     $ 832,005  
                 
Denominator:
               
Weighted-average shares outstanding:
               
    Basic
    26,111,201       26,111,201  
Incremental shares from assumed   conversion of options
    1,453,846       844,565  
Diluted shares
    27,565,047       26,955,766  
Earnings per share:
               
Basic
  $ 0.06     $ 0.03  
Diluted
  $ 0.05     $ 0.03  
 
Note 3. Inventory
 
Inventory consists of the following:
 
   
August 31,
   
May 31,
 
   
2013
   
2013
 
Raw materials
  $ 822,363     $ 750,819  
Finished goods
    434,645       293,560  
Total inventory
  $ 1,257,008     $ 1,044,379  
 
Note 4. Related Party Receivable

Yorktown Management & Financial Services, LLC (“Yorktown”), an entity wholly owned by Greystone’s CEO and President, owns certain equipment that Greystone uses for its pallet and resin production. Prior to February 1, 2013, Greystone paid advances to Yorktown in recognition of the amounts owed pursuant to certain agreements for the purchase of raw materials on Greystone’s behalf and use of Yorktown equipment.  While the agreements for the purchase of raw materials were terminated effective January 31, 2013, Greystone continues to pay Yorktown for the use of its equipment Payments for equipment rentals totaled $385,260 for the three months ended August 31, 2013. In addition, Greystone continues to pay the labor and certain other costs on behalf of Yorktown’s Tulsa, Oklahoma grinding operation and invoice Yorktown for the costs on a monthly basis.

As of August 31, 2013, net advances due from Yorktown totaled $3,618,003 in connection with the relationship between Greystone and Yorktown described in the paragraph above.  Mr. Kruger has agreed that, if necessary and as permitted under Greystone’s loan documentation, the amounts due Greystone could be offset against the amounts that Greystone owes him or Yorktown.  The offset against the net advances as reflected in the consolidated balance sheet as of August 31, 2013, is the combination of (i) the accrued interest of $875,091 payable to Mr. Kruger, (ii) advances payable to Mr. Kruger of $442,180, (iii) an account payable of $794,411 for deferred compensation payable to Mr. Kruger and (iv) preferred dividends of $1,506,321 payable to Mr. Kruger.
 
 
7

 
 
Note 5. Notes Payable

Notes payable as of August 31, 2013 and May 31, 2013 are as follows:

   
August 31,
   
May 31,
 
   
2013
   
2013
 
Note payable to F&M Bank & Trust Company,
           
prime rate of interest but not less than 4.5%, due
           
March 13, 2015, monthly principal payments of
           
$76,561 plus interest
  $ 4,363,968     $ 4,593,650  
                 
Note payable by GRE to F&M Bank & Trust
               
Company, prime rate of interest but not less than
               
4.75%, due February 15, 2016, monthly installments
               
$35,512, secured by buildings and land
    3,299,868       3,366,108  
                 
Capitalized lease payable, due August 15, 2016,
               
5% interest, monthly payments of $10,625 plus
               
$0.50 per pallet for monthly sales in excess of 12,500
    363,621       381,727  
                 
Note payable to Robert Rosene, 7.5% interest,
               
due January 15, 2015
    2,066,000       2,066,000  
                 
Note payable to Warren Kruger, 7.5% interest,
               
due January 15, 2015
    527,716       527,716  
                 
Other notes payable
    55,923       66,979  
      10,677,096       11,002,180  
Less: Current portion
    (1,347,424 )     (1,344,160 )
Long-term Debt
  $ 9,329,672     $ 9,658,020  
 
The prime rate of interest as of August 31, 2013 was 3.25%.
 
 
8

 
 
Greystone, GSM, GRE, Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a Greystone director, are parties to a loan agreement (the “F&M Agreement”) dated as of March 4, 2005, as amended, with F&M Bank & Trust Company (“F&M”).  There are two loans outstanding under the F&M Agreement as follows:

(a)  
A term loan as listed above in the amount of $4,363,968 at August 31, 2013 with GSM as the borrower and Greystone, Mr. Kruger and Mr. Rosene as guarantors.

(b)  
A term loan with a balance of $3,378,000 at August 31, 2013, with Messrs. Kruger and Rosene as borrowers and a maturity date of March 15, 2014.  The loan is collateralized with 25,000 shares of Greystone’s Series 2003 Preferred Stock owned by Mr. Kruger and 25,000 shares of Greystone’s Series 2003 Preferred Stock owned by Mr. Rosene.

All indebtedness outstanding under the F&M Agreement and the loan agreement governing the loan to GRE is cross-collateralized, which means that if an event of default occurs under the F&M Agreement, F&M could foreclose on the collateral that secures the indebtedness outstanding under the loan agreement with GRE in order to satisfy the indebtedness outstanding under the F&M Agreement, and vice versa.  In addition, all of the indebtedness outstanding under the F&M Agreement and the loan agreement with GRE is cross-defaulted, which means that an event of default under the F&M Agreement is also an event of default under the loan agreement with GRE, and vice versa

The F&M Agreement contains certain financial covenants and restricts the payments of dividends. GSM’s note payable to F&M is secured by cash, accounts receivable, inventory and equipment.

As of August 31, 2013, the parties to the F&M Agreement were in compliance with the covenants under the F&M Agreement and GRE was in compliance with its covenants under the loan agreement between F&M and GRE.

Note 6. Stock Options

Effective June 1, 2012, Greystone issued stock options to purchase 2,100,000 shares of its common stock to certain of its directors, officers and employees and cancelled options to purchase 1,300,000 shares. The new options are for a ten year period and are vested at the rate of 25% per year beginning with the first anniversary of the date of the grant. The fair value of the options, $213,696 as of the issuance date, is to be expensed ratably over the vesting period of four years. Stock compensation costs were $13,356 for the three months ended August 31, 2013 and 2012, respectively.  The unexpensed cost at August 31, 2013 totaled $146,916.

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.
 
 
9

 
 
Note 8. Risks and Uncertainties

Greystone derives a substantial portion of its revenue from a national brewer.  This customer accounted for approximately 69% and 82% of Greystone’s pallet sales and 69% and 73% of Greystone’s total sales for the three months ended August 31, 2013 and 2012, respectively.  Greystone’s recycled plastic pallets are approved for use by the customer and, at the current time, are the only plastic pallets used by the customer for shipping products. 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.
 
 
Warren F. Kruger, President and CEO, Robert B. Rosene, Jr., a Greystone director, have provided financing and guarantees on Greystone’s bank debt.  As of August 31, 2013, Greystone is indebted to Mr. Kruger in the amount of $527,716 for a note payable and to Mr. Rosene in the amount of $3,686,926 for a note payable and related accrued interest.  Effective January 15, 2013, Messrs. Kruger and Rosene agreed to a two year extension on the debt.  There is no assurance that these individuals will continue to provide extensions in the future.

 See Note 5 for a discussion of the cross-default and cross-collateralization provisions contained in the loan agreement dated as of March 4, 2005, as amended, with F&M.

Note 9. Commitments

As of August 31, 2013, Greystone has outstanding purchase commitments of $446,250 for the purchase of production equipment.

 
10

 
 
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 for the three months ended August 31, 2012, GLOG Investment, L.L.C., or (“GLOG”).  All material intercompany accounts and transactions have been eliminated.

References to fiscal year 2014 refer to the three month period ended August 31, 2013.  References to fiscal year 2013 refer to the three month period ended August 31, 2012.

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’s marketing is conducted through contract distributors, its President and other employees.
 
 
11

 
 
Greystone derives a substantial portion of its revenue from a national brewer.  This customer accounted for approximately 69% and 82% of Greystone’s pallet sales and 69% and 73% of Greystone’s total sales in fiscal years 2013 and 2012, respectively.

Personnel

Greystone had approximately 78 and 94 full-time employees as of August 31, 2013 and 2012, respectively.

Taxes

In assessing the reliability of recognizing estimated tax benefits from utilization of NOLs, management considers the likelihood of whether it is more likely than not the tax benefit will be realized from realization of prior period NOLs.  Based on this evaluation, management provided a valuation allowance and recognized a tax benefit of $237,000 and $199,400 for fiscal years 2014 and 2013, respectively.

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, 2013, Greystone had no unrecognized tax benefits.

Three Month Period Ended August 31, 2013 Compared to Three Month Period Ended August 31, 2012

Sales
 
Sales for fiscal year 2014 were $6,510,917 compared to $7,128,866 in fiscal year 2013 for a decrease of $617,949.  Pallet sales were $6,510,917, or 100% of total sales, in fiscal year 2014 compared to $6,410,224, or 90% of total sales, in fiscal year 2013 for an increase of $100,693. Greystone’s sales to its major customer in fiscal year 2014 were 69% of total pallet sales compared to 73% of total pallet sales in fiscal year 2013.
 
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.
 
 
12

 
 
Sales of recycled plastic resin were $-0- in fiscal year 2014 compared to $718,642 in fiscal year 2013 for a decrease of $718,642.  Greystone has continued to curtail its sales of resin due to unfavorable margins with respect to the cost of material compared to the resale pricing values.  Greystone intends to resume the sale of resin as market conditions improve.

Cost of Sales
 
Cost of sales in fiscal year 2014 was $4,365,545, or 67% of sales, compared to $5,604,017, or 79% of sales, in fiscal year 2013.  The decrease in the ratio of cost of sales to sales from fiscal year 2014 over fiscal year 2013 is primarily due to a lower margin and a decrease in labor costs while maintaining comparable sales volume.

The ratio of cost of resin sales to resin sales was approximately 119% in fiscal year 2013.  There were no sales of resin in fiscal year 2014.

Benefit from Income Taxes

Benefit from income taxes was $237,000 and $199,400 in fiscal years 2014 and 2013, respectively. See “Taxes” in this Item 2 as to the increase in the benefit for Greystone’s NOLs.

Net Income
 
Greystone recorded net income of $1,584,878 in fiscal year 2014 compared to $966,767 in fiscal year 2013 for the reasons discussed above.

Net Income Attributable to Common Stockholders
 
Net income available to common stockholders for fiscal year 2014 was $1,448,652, or $0.06 per share, compared to $832,005, or $0.03 per share, in fiscal year 2013 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, 2013. While these positive cash flows have been beneficial to Greystone’s ability to finance its operations, Greystone will require additional cash to achieve continued growth and to meet Greystone's contractual obligations. 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, 2013 is as follows:
 
Cash provided by operating activities    $ 1,221,495  
Cash used in investing activities
    (510,928 )
Cash used in financing activities     (359,584 )
 
 
13

 
 
The contractual obligations of Greystone are as follows:

   
Total
   
Less than
1 year
   
 
1-3 years
   
 
4-5 years
   
More than
5 years
 
Long-term debt
  $ 10,677,096     $ 1,347,424     $ 9,316,167     $ 13,505     $ -0-  

Greystone had a working capital deficit of $(1,889,435) at August 31, 2013 compared to a working capital deficit at May 31, 2013 of $(2,652,545).  Excluding preferred dividends payable, the working capital deficit at August 31, 2013 is reduced to $(62,949).  To provide for the funding to meet Greystone's operating activities and contractual obligations as of August 31, 2013, Greystone will have to continue to produce positive operating results or explore various options including long-term debt and equity financing.  However, there is no guarantee that Greystone will continue to create positive operating results or be able to raise sufficient capital to meet these obligations.

Substantially all of the financing that Greystone has received through the last few fiscal years resulted from loans provided by certain officers and directors of Greystone and bank loans which are guaranteed by certain 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, 2013, which was filed on September 14, 2013.  Actual results may vary materially from the forward-looking statements.  Greystone undertakes no duty to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q.
 
 
14

 
 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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 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, 2013, Warren F. Kruger, Greystone's Chief Executive Officer, and William W. Rahhal, Greystone’s Chief Financial Officer, identified two material weaknesses in Greystone's internal control over financial reporting.  As of the end of the period covered by this Quarterly Report on Form 10-Q, such material weaknesses had not been rectified. As a result of the continuation of these two material weaknesses, Greystone’s CEO and Chief Financial Officer concluded that Greystone's disclosure controls and procedures were not effective at August 31, 2013.
 
During the three-month period ended August 31, 2013, 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.
 
 
15

 
 
PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicable.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.   Defaults Upon Senior Securities.

None.

Item 4.   Mine Safety Disclosures.

Not applicable.

Item 5.   Other Information.

None.

Item 6.  Exhibits.

The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.
 
Exhibit No.   Description
     
 
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 (submitted herewith).
     
 
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 (submitted herewith).
     
 
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 (submitted herewith).
     
 
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 (submitted herewith).
     
101
 
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at August 31, 2013 and May 31, 2013, (ii) the Consolidated Statements of Income for the three month periods ended August 31, 2013 and 2012, (iii) the Consolidated Statements of Cash Flows for the three months ended August 31, 2013 and 2012, and (iv) the Notes to the Consolidated Financial Statements (submitted herewith).
 
 
16

 
 
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 15, 2013
By:
/s/ Warren F. Kruger  
   
Warren F. Kruger, President and Chief
 
   
Executive Officer (Principal Executive Officer)
 
       
Date: October 15, 2013
  /s/ William W. Rahhal  
   
William W. Rahhal, Chief Financial Officer
 
   
(Principal Financial Officer and Principal Accounting Officer)
 
       
 

 
17

 
 
Index to Exhibits

  The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q.
 
Exhibit No.   Description
     
 
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 (submitted herewith).
     
 
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 (submitted herewith).
     
 
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 (submitted herewith).
     
 
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 (submitted herewith).
     
101
 
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at August 31, 2013 and May 31, 2013, (ii) the Consolidated Statements of Income for the three month periods ended August 31, 2013 and 2012, (iii) the Consolidated Statements of Cash Flows for the three months ended August 31, 2013 and 2012, and (iv) the Notes to the Consolidated Financial Statements (submitted herewith).
 
 
 
18

 
glgi_ex311.htm
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 15, 2013
  /s/ Warren F. Kruger  
   
Warren F. Kruger
 
    President and Chief Executive Officer  
       

 
glgi_ex312.htm
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 15, 2013
By:
/s/ William W. Rahhal  
   
William W. Rahhal
 
   
Chief Financial Officer
 
       
 
glgi_ex321.htm
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, 2013, 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 15, 2013
  /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.



glgi_ex322.htm
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, 2013, 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 15, 2013
By:
/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.