Capital Leases

3 Months Ended

Aug. 31, 2018

Leases [Abstract]

Capital Leases

Note 7. Capital Leases

Capital leases as of August 31, 2018 and May 31, 2018:

	August 31, 2018			May 31, 2018
Non-cancellable capital leases with private company, interest rates of 7.4% and 5.0%, maturing August 1, 2023, February 24, 2023 and August 7, 2019	$	5,619,053		$	3,893,814
Less: Current portion		(2,162,340	)		(2,160,807	)
Non-cancellable capital leases, net of current portion	$	3,456,713		$	1,733,007

Greystone and an unrelated private company entered into three lease agreements for certain production equipment with a total cost of approximately $9.9 million. The first agreement, dated August 7, 2016, was a three-year lease agreement for two injection molding machines and pallet molds, interest rate of 5.0% and maturity date of August 7, 2019 (“Agreement A”). The remaining two agreements, dated February 24, 2018 and August 2, 2018, were five-year lease agreements for two additional injection molding machines and one pallet mold, interest rate of 7.4% and maturity dates of February 23, 2023 and August 1, 2023, (“Agreements B”). 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) $6.25 per pallet produced on the equipment leased pursuant to Agreement A and sold to the private company estimated at $180,000 per month and (ii) $3.32 per pallet produced on the equipment leased pursuant to Amendments B and sold to the private company estimated at $48,000 per month per machine. 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 $9,924,907 at August 31, 2018. Amortization of the carrying amount of approximately $402,000 and $246,000 was included in depreciation expense for the three months ended August 31, 2018 and 2017, respectively.

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

Twelve months ended August 31, 2019	$	2,456,000
Twelve months ended August 31, 2020		1,156,000
Twelve months ended August 31, 2021		1,156,000
Twelve months ended August 31, 2022		1,156,000
Twelve months ended August 31, 2023		398,000
Total lease payments		6,322,000
Imputed interest		702,947
Present value of minimum lease payments	$	5,619,053