Note 7. LEASES

Financing Leases

Financing leases consist of the following as of May 31:

The production equipment under the non-cancelable financing leases as of May 31, 2026 and 2025 was as follows:

Amortization of the carrying amount of the assets was $6,922 and $4,887 for the years ended May 31, 2026 and 2025, respectively. The amortization was included in depreciation and amortization expense.

Operating Leases

Greystone had four 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%, all of these leases had terminated as of May 31, 2026 (ii) two buildings owned by Greystone Real Estate, L.L.C. (GRE), a related party, on a ten year lease with a five year renewal option and a discount rate of 6.00%, escalating rent payments at 5% every 5 years, (iii) office space on a six year lease and a discount rate of 8.50%, and lease is with a related party, Yorktown Management & Financial Services, LLC (“Yorktown”) (Note 9). Management has determined it is not reasonably certain to exercise any renewal options so all leases are single-term.

The outstanding liability for right to use assets under operating leases as of May 31, 2026 and 2025 is as follows:

Lease Summary Information

For the years ended May 31, 2026 and 2025, a summary of lease activity follows:

Future minimum lease payments under non-cancelable operating leases as of May 31, 2026, are approximately:

Note 7. LEASES (cont.)

Finance Obligation

On April 23, 2026, the Company entered into an agreement with Robert B. Rosene, Jr., a member of the Company’s Board of Directors and the sole member of GRE, to sell certain commercial real estate located in Bettendorf, Iowa for proceeds of approximately $1.7 million.  Simultaneously, the parties entered into a long-term lease agreement for continued use of the property The non-cancellable five year lease agreement contains no extensions and requires initial monthly payments of $16,750, escalating annually by 2%. Pursuant to the purchase agreement, the Company retained an option to repurchase the property during the five-year period following the sale date. The repurchase price is the greater of the original purchase price or the property's then-current fair value as determined in accordance with the agreement.

Management evaluated the transaction under ASC 842 and concluded that the transfer of the property does not qualify for sale accounting. Accordingly, the transaction is accounted for as a financing obligation. The Company continues to recognize the underlying property within property, plant and equipment and recognizes a financial obligation for the proceeds received reflected on the statement of cash flows as financing activities. Payments made under the arrangement which totaled $33,500 for the year ending May 31, 2026 were accounted for as payments of interest on the financing obligation.  The effective interest rate of the financing was 12.35%. 

At May 31, 2026, the carrying amount of the property subject to the arrangement was approximately $1.64 million and the related financing obligation was approximately $1.67 million, of which all was classified as long-term as the Company does not expect to exercise the repurchase option and thus fulfill the financial obligation within the next twelve months.