Note 3 - Debt

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

3.

      

Debt

Note payable – related party

On

November 30, 2016,

the Company issued a promissory note (the “Earn-Out Note”) to Anthony Tomasello, our President, as part of the merger transaction with Advanced Gaming Associates LLC. The note had a principal amount of

$1.0

million and an interest rate of

5%

per annum. The note matures on

November 30, 2019

and is payable in

thirty-six

equal payments of

$29,971

on the

first

of each month. Pursuant to the terms of the Earn-Out Note, an additional Earn-Out Note was issued to Mr. Tomasello as of

November 30, 2017

because the Company achieved in excess of

$5

million in service revenue in the

first

earn-out period of

December 1, 2016

through

November 30, 2017.

This additional Earn-Out Note has similar terms to the original note with the exception of a maturity date of

November 30, 2020.

The principal amount outstanding under the Earn-Out Notes was

$1.8

million as of

March 31, 2018.

Pursuant to the terms of the original Earn-Out Note, an additional Earn-Out Note in the principal of

$1.0

million could be issued to Mr. Tomasello as of

November 30, 2018

upon the achievement of

$7.0

million of service revenue for the

12

-month period ending

November 30, 2018.

 At

March 31, 2018,

it was

not

probable that service revenue would achieve

$7.0

million for the

12

-month period ending

November 30, 2018.

Therefore,

no

accrual was made for this contingency. Payments of principal and interest on the Earn-Out Note are deferred while balances remain payable on the North Mill Capital, LLC revolving credit facility described below.

Note payable – line of credit

On

November 22, 2017,

AG&E entered into a

$3.5

million revolving credit facility (the “Credit Facility”) with North Mill Capital LLC (“North Mill”), pursuant to a Loan and Security Agreement (the “Loan Agreement”). AG&E’s obligations under the Loan Agreement are guaranteed by the Company. The Credit Facility has a term of

one

year and is collateralized by a

first

-priority security interest in all of the assets of AG&E. Borrowings under the Credit Facility accrue interest at a fluctuating rate of interest equal to the prime rate plus

0.75%,

subject to a floor of

4.75%.

Subject to certain exceptions, the Loan Agreement provides for advances under the Credit Facility of up to

85%

of eligible accounts receivable. As of

March 31, 2018,

outstanding borrowings under the Credit Facility were

$865,000,

the interest rate thereunder was

5.25%,

and AG&E had additional borrowing availability of

$341,000

under the Credit Facility based on eligible collateralized assets. The Loan Agreement will terminate on

November 22, 2018

unless extended in writing by North Mill for an additional year. There is

no

assurance that North Mill will extend the Loan Agreement beyond the termination date.