Note 8. LEASES

Financing Leases

There was no outstanding liability for financing leases as of August 31, 2026 and May 31, 2026.

The production equipment under the non-cancelable financing leases is as follows:

Amortization of the carrying amount of $0 and $1,222 was included in depreciation and amortization expense for the three months ended August 31, 2026 and 2025, 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 operations. Variable and short-term rental payments are recognized as costs and expenses as they are incurred. As of August 31, 2026, Greystone had two non-cancellable operating leases remaining for (i) 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, which management has determined is reasonably certain to exercise, and a discount rate of 6.00%, escalating rent payments at 5% every 5 years and (ii) office space on a six year lease and a discount rate of 8.50%, entered into with a related party, Yorktown Management & Financial Services, LLC (“Yorktown”) (Note 6).

Note 8. LEASES (cont.)

The outstanding liability for right to use assets under operating leases is as follows:

Lease Summary Information

Lease summary information as of and for the three month period ending is as follows:

Note 8. LEASES (cont.)

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

Finance Obligation

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 $50,250 for the three months ending August 31, 2026 were accounted for as payments of interest on the financing obligation. The effective interest rate of the financing was 12.35%.

At August 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.