Capital Leases

9 Months Ended

Feb. 28, 2018

Leases [Abstract]

Capital Leases

Note 7. Capital Leases

Capital leases as of February 28, 2018 and May 31, 2017:

	February 28, 2018			May 31, 2017
Non-cancellable capital leases with private company, interest rates of 7.4% and 5.0%, maturing February 24, 2023 and August 7, 2019	$	4,229,234		$	3,794,063
Less: Current portion		(2,432,198	)		(2,261,560	)
Non-cancellable capital leases, net of current portion	$	1,797,036		$	1,532,503

In February, 2018, Greystone entered into a five-year lease agreement, interest rate of 7.4% and maturity date of February 24, 2023, (“Agreement A”) with an unrelated private company to provide for certain production equipment with a cost of approximately $2.0 million. In August, 2016, Greystone entered into a three-year lease agreement, interest rate of 5.0% and maturity date of August 7, 2019, (“Agreement B”) with the same unrelated private company to provide for certain production equipment with a total cost of approximately $5.4 million. The lease agreements include a bargain purchase option to acquire the production equipment at the end of the lease terms. Lease payments are made on a per invoice basis at rates of (i) $3.32 per pallet produced on the leased equipment and sold to the private company, estimated payments of $40,000 per month, for Agreement A and (ii) $6.25 per pallet produced on the equipment and sold to the private company, approximately $200,000 per month, for Amendment B. Both Agreements A & B provide for minimum monthly lease rental payments based upon the total pallets sold in excess of a specified amount not to exceed the monthly productive capacity of the leased machines.

The production equipment under the non-cancelable capital leases has a gross carrying amount of $7,322,364 at February 28, 2018. Amortization of the carrying amount of approximately $402,000 and $246,000 was included in depreciation expense for the nine months ended February 28, 2018 and 2017, respectively.

Future minimum lease payments under non-cancelable capital leases as of February 28, 2018, are approximately:

Twelve months ended February 28, 2019	$	2,844,000
Twelve months ended February 28, 2020		573,700
Twelve months ended February 28, 2021		573,700
Twelve months ended February 28, 2022		573,700
Twelve months ended February 28, 2023		240,500
Total lease payments		4,805,600
Imputed interest		576,366
Present value of minimum lease payments	$	4,229,234