Leases

9 Months Ended

Feb. 28, 2023

Leases

Leases

Note 7. Leases

Financing Leases

Financing leases as of February 28, 2023 and May 31, 2022:

	February 28, 2023			May 31, 2022
Non-cancellable financing leases	$	69,337		$	2,163,043
Less: Current portion		(41,487	)		(1,630,895	)
Non-cancellable financing leases, net of current portion	$	27,850		$	532,148

Greystone and an unrelated private company entered into three lease agreements for certain production equipment with a total cost of approximately $6.9 million which were effective February 24, 2018, August 2, 2018 and December 21, 2018, respectively, with five-year terms and an effective interest rate of 7.4%. Effective October 17, 2022, Greystone and the private company entered into an agreement for Greystone to pay off the leases and acquire the equipment at the unamortized principal balance of the leases or a total of $1,527,293.

Effective December 29, 2022, Greystone exercised its option under a lease agreement dated December 28, 2017, with Yorktown to purchase the production equipment therein for $10,000.

The production equipment under the remaining non-cancelable financing leases as of February 28, 2023, have a gross carrying amount of $176,565.

Amortization of the carrying amount of $189,927 and $721,923 was included in depreciation expense for the nine months ended February 28, 2023 and 2022, respectively.

Operating Leases

Greystone recognized a lease liability for each lease based on the present value of remaining minimum fixed rental payments, using a discount rate that approximates the rate of interest for a collateralized loan over a similar term. A right-of-use asset is recognized for each lease, valued at the lease liability. Minimum fixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expenses on the consolidated statements of income. Variable and short-term rental payments are recognized as costs and expenses as they are incurred.

Greystone has three non-cancellable operating leases for (i) equipment with a fifty-two month term and a forty-eight month term and a discount rate of 5.40% and (ii) two buildings on a ten year lease with a five year renewal option and a discount rate of 6.0%. The leases are single-term with defined constant monthly rental rates.

As discussed in Note 1, effective August 1, 2022, Greystone and GRE entered into a non-cancellable ten-year lease agreement with a five-year extension for which Greystone recorded a right-of-use asset and liability based on the present value of the lease payments in the amount of $5,516,006, using a term of one hundred eighty (180) months and a discount rate of 6.00%.

Lease Summary Information

For the periods ending February 28, 2023 and 2022:

	2023			2022
Lease Expense
Financing lease expense -
Amortization of right-of-use assets	$	189,927		$	721,923
Interest on lease liabilities		30,614			119,000
Operating lease expense		335,378			53,411
Short-term lease expense		1,217,095			1,101,133
Total	$	1,773,014		$	1,995,467
Other Information
Cash paid for amounts included in the measurement of lease liabilities for finance leases -
Operating cash flows	$	30,614		$	119,000
Financing cash flows	$	626,329		$	1,248,371
Cash paid for amounts included in the measurement of lease liabilities for operating leases -
Operating cash flows	$	335,378		$	53,411
Right-of-use assets obtained in exchange for lease liabilities -
Financing leases	$	-		$	24,441
Operating leases	$	5,516,006		$	-
Weighted-average remaining lease term (in years) -
Financing leases		1.9			1.5
Operating leases		14.4			1.9
Weighted-average discount rate -
Financing leases		4.4	%		7.3	%
Operating leases		6.0	%		5.4	%

Future minimum lease payments under non-cancelable leases as of February 28, 2023, are approximately:

	Financing Leases		Operating Leases
Twelve months ended February 29, 2024	$	42,185	$	561,947
Twelve months ended February 28, 2025		22,440		543,612
Twelve months ended February 28, 2026		7,811		534,000
Twelve months ended February 28, 2027		-		534,000
Twelve months ended February 29, 2028		-		549,610
Thereafter		-		5,420,290
Total future minimum lease payments		72,436		8,143,459
Present value discount		3,099		2,740,690
Present value of minimum lease payments	$	69,337	$	5,402,769