DIRECT FINANCING LEASE

3 Months Ended

Mar. 31, 2017

Direct Financing Lease

DIRECT FINANCING LEASE

NOTE 12 – DIRECT FINACING LEASE

In September 2015, the Company and an entity in Colombia entered into a rental contract for the rental of 78 kiosks to provide cash collection and fare services at transportation stations. The lease term began in May 2016 when the kiosk were installed and operational and when the lease commenced. The term of the rental contract is ten years at an approximate monthly rental of $11,900. The lease has the option at the end of the lease term to purchase each unit for approximately $40. The term of the lease approximates the expected economic life of the kiosks. The lease was accounted for as a direct financing lease.

The Company has recorded the transaction as it net investment in the lease and will receive monthly payments of $11,856 before estimated executory costs, or $142,272, annually, to reduce investment in the lease and record income associated with the related amount due. Executory costs are estimated to be $1,677 month and initial direct costs are not considered significant. The transaction resulted in incremental revenue for the three months ended March 31, 2017 of approximately $19,000. There was no income in the first three months of 2016 as the equipment was placed into service in May 2016.

The equipment is subject to direct lease valued at approximately $748,000. At the inception of the lease term, the aggregate minimum future lease payments to be received is approximately $1,422,000 before executory cost. Unearned income is recorded at the inception of this lease was approximately $474,000 and will be recorded over the term of the lease using the effective income rate method. Future minimum lease payments to be received under the lease for the next five years and thereafter are as follows:

2017	$	91,608
2018		122,145
2019		122,145
2020		122,145
2021		122,145
Thereafter		529,322
Sub-total		1,109,510
Less deferred revenue		(401,899	)
Net investment in lease	$	707,611