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Capital Leases
12 Months Ended
May 31, 2018
Leases [Abstract]  
Capital Leases

Note 5. CAPITAL LEASES

 

Capital leases consist of the following as of May 31:

 

    2018     2017  
Non-cancelable capital leases with private pallet leasing
company
  $ 3,893,814     $ 3,794,063  
Less: Current portion     (2,160,807 )     (2,261,560 )
Non-cancelable capital leases, net of current portion   $ 1,733,007     $ 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 at $46,000 per month, for Agreement A and (ii) $6.25 per pallet produced on the equipment and sold to the private company, estimated at $154,000 per month, for Agreement 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 at May 31, 2018 and 2017 is as follows:

 

    2018     2017  
Production equipment under capital leases   $ 7,591,574     $ 5,365,889  
Less: Accumulated amortization     (974,811 )     (380,233 )
Production equipment under capital leases, net   $ 6,616,763     $ 4,985,656  

 

Amortization of the carrying amount of $594,578 and $380,233 was included in depreciation expense for the years ended May 31, 2018 and 2017, respectively.

 

Future minimum lease payments under non-cancelable capital leases as of May 31, 2018, are approximately:

 

Year ended May 31, 2019   $ 2,353,164  
Year ended May 31, 2020     547,800  
Year ended May 31, 2021     547,800  
Year ended May 31, 2022     547,800  
Year ended May 31, 2023     338,490  
Total lease payments     4,335,054  
Imputed interest     441,240  
Present value of minimum lease payments   $ 3,893,814