10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2018
or
[   ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to ____________

Commission File Number 1-8250

AG&E Holdings Inc.

(Exact name of registrant as specified in its charter)

Illinois	36-1944630
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

223 Pratt Street, Hammonton, New Jersey	08037
(Address of principal executive offices)	(Zip Code)

(609) 704-3000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☒

As of May 4, 2018, approximately 16,953,000 shares of the Common Stock, $1.00 par value of the registrant were outstanding.

AG&E HOLDINGS INC.

FORM 10-Q TABLE OF CONTENTS

For The Three Months Ended March 31, 2018

Item 1.
Financial Statements:			3
	Condensed Consolidated Statements of Operations (unaudited)
	-	Three Months Ended March 31, 2018 & 2017	3
	Condensed Consolidated Balance Sheets (unaudited)
	-	March 31, 2018 & December 31, 2017	4
	Condensed Consolidated Statements of Cash Flows (unaudited)
	-	Three Months Ended March 31, 2018 & 2017	5
	Notes to the Unaudited Condensed Consolidated Financial Statements		6
Item 2.
Management's Discussion & Analysis of Financial Condition & Results of Operations			9
Item 4.
Controls & Procedures			11
PART II - OTHER INFORMATION
Item 1A.
Risk Factors			12
Item 6.
Exhibits			12
SIGNATURES			13

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in $000’s except for share & per share data)

	Three Months Ended March 31,
	2018			2017
Net sales	$	2,822		$	3,187
Cost of sales		2,051			2,218
Gross margin		771			969
Selling & administrative costs		1,634			1,288
Transaction related costs		0			50
Intangible amortization		54			54
Operating loss		(917	)		(423	)
Other expense:
Interest		30			12
Loss before income tax		(947	)		(435	)
Income tax expense		0			0
Net loss	$	(947	)	$	(435	)
Basic and Diluted net loss per common share	$	(0.06	)	$	(0.03	)
Basic common weighted shares outstanding		16,953,176			16,953,176
Diluted common weighted shares outstanding		16,953,176			16,953,176

See accompanying notes to the unaudited condensed consolidated financial statements

3

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in $000’s except for share information)

	March 31, 2018			December 31, 2017
ASSETS
Current Assets:
Cash	$	49		$	47
Accounts receivable, net		2,143			2,117
Inventory		383			400
Prepaid expenses & other assets		630			486
Total current assets	$	3,205		$	3,050
Property, Plant & Equipment (at cost):
Leasehold improvements		3			3
Machinery, equipment & software		2,258			2,224
less: Accumulated depreciation & amortization		(2,208	)		(2,204	)
Property, plant & equipment, net	$	53		$	23
Other Assets:
Intangible Assets, net		1,343			1,397
Goodwill		1,152			1,152
Total other assets	$	2,495		$	2,549
Total Assets	$	5,753		$	5,622
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	1,425		$	1,225
Note payable – related party		617			327
Note payable – line of credit		865			514
Unearned revenue		223			2
Severance payable		180			0
Accrued expenses		310			250
Total current liabilities	$	3,620		$	2,318
Long term Liabilities:
Note payable – related party		1,174			1,517
Severance payable		119			0
Total long term liabilities	$	1,293		$	1,517
Total Liabilities	$	4,913		$	3,835
Shareholders' Equity:
Common shares:
$1 par value; 25,000,000 shares authorized; 16,953,176 shares issued and outstanding at March 31, 2018 and December 31, 2017		16,953			16,953
Capital in excess of par value		688			688
Accumulated deficit		(16,801	)		(15,854	)
Total Shareholders' Equity	$	840		$	1,787
Total Liabilities & Shareholders’ Equity	$	5,753		$	5,622

See accompanying notes to the unaudited condensed consolidated financial statements

4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)

(in $000’s)

	Three Months Ended
	March 31,			March 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(947	)	$	(435	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		58			67
Bad debt expense		(10	)		2
Changes in current assets & liabilities
Accounts receivable		(16	)		(977	)
Inventory		17			(6	)
Prepaid expenses & other		(144	)		(93	)
Accounts payable		200			379
Unearned revenue		221			0
Severance payable		299			0
Accrued expenses		60			130
Net cash used in operating activities	$	(262	)	$	(933	)
Cash used in investing activities:
Additions to plant & equipment		(34	)		(2	)
Net cash used in investing activities	$	(34	)	$	(2	)
Cash (used in) provided by financing activities:
Repayment – Note payable		(53	)		(26	)
Net borrowing – Line of credit		351			0
Net Cash (used in) provided by financing activities	$	298		$	(26	)
Net increase (decrease) in cash		2			(961	)
Cash at beginning of period		47			1,292
Cash at end of period	$	49		$	331
Supplemental cash flow disclosure:
Interest paid	$	29		$	13
Taxes paid	$	0		$	0

See accompanying notes to the unaudited condensed consolidated financial statements

5

AG&E HOLDINGS INC.

Notes to the Unaudited Condensed Consolidated Financial Statements 

1.       Description of the Business

AG&E Holdings Inc. (the “Company”) through its wholly owned subsidiary American Gaming & Electronics, Inc. (“AG&E”) distributes parts, and repairs and services gaming equipment to casinos throughout the United States with offices in Hammonton, New Jersey, Las Vegas, Nevada, Romeoville, Illinois and West Palm Beach, Florida.

2.       Summary of Significant Accounting Policies

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the financial position and results of operations for the periods presented. These condensed consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information or footnotes necessary for a complete presentation in conformity with accounting principles generally accepted in the United States. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the operating results for the full year.

Basic earnings per share are based on the weighted average number of shares outstanding whereas diluted earnings per share include the dilutive effect of unexercised common stock equivalents. Potentially dilutive securities are excluded from diluted earnings per share calculations for periods with a net loss.

The fair value of the Company’s financial instruments does not materially vary from the carrying value of such instruments.

Certain amounts in previously issued financial statements have been reclassified to conform to the current year’s presentation.

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.

6

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.

4.         Severance Payable

In March 2018, the Company agreed to a separation agreement with a contracted employee for severance pay and insurance reimbursements totaling $299,000, of which $180,000 is included in current liabilities. The separation agreement requires monthly payments of approximately $15,000 commencing in April 2018 through November 2019.

5.       Stock Plans

The Company maintains a Stock Award Plan under which officers and key employees may acquire up to a maximum of 2,155,028 restricted shares of common stock of the Company. As of March 31, 2018 and December 31, 2017, there were no restricted shares outstanding and no unrecognized compensation cost related to unvested stock awards.

6.        Inventory

Our inventory consists entirely of finished goods as of March 31, 2018 and December 31. 2017.

7.        Income Taxes

An income tax valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has net deferred tax assets of approximately $4.8 million at March 31, 2018, which are completely offset by a valuation allowance.  As of March 31, 2018, the Company has net operating loss carry forwards for Federal income tax purposes of approximately $12.9 million, which are available to offset future Federal taxable income, if any. The Federal net operating loss carry forwards begin to expire in 2021. The Company also has a net operating loss carry forward for Illinois state income tax purposes of approximately $15.7 million as of March 31, 2018.  The Company also has alternative minimum tax credit carry forwards of approximately $148,000, which are available to reduce future Federal regular income taxes, if any, over an indefinite period. No unrecognized tax benefits are set to expire in the next twelve months that may have an impact upon the Company’s effective tax rate. 

The Company files tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years 2014, 2015, 2016 and 2017 remain open to examinations. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. During the three months ended March 31, 2018, the Company did not recognize expense for interest or penalties related to income tax, and does not have any amounts accrued at March 31, 2018, as the Company does not believe it has taken any uncertain income tax positions.

8.        Revenue Recognition

In May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09 Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, and ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under U.S. GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein. These ASUs may be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption. As of January 1, 2018, the Company adopted this guidance and it did not have a material impact on our core business except for providing additional footnote disclosures related to revenue.

7

The Company records revenue under ASC Topic 606 at a single point in time, when control of the promised products or services is transferred to the customer, which is consistent with past practice. The Company’s revenue results from two sources, Parts and Service. All revenues for these two revenue streams are recorded for Parts when sold and Service when performed.  Revenue is recognized at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those products or services. The Company does not have any agreements or contracts that have special provisions which would affect revenue recognition.

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, we record unearned revenue, which represents a contract liability. Unearned revenue was $223,000 as of March 31, 2018 and $2,000 as of December 31, 2017. Unearned revenue was recorded as a result of customer deposits and not as a requirement of the newly implemented revenue recognition standard.

We recognize unearned revenue as net sales after we have transferred control of the goods or services to the customer and all revenue recognition criteria are met. The adoption of the new standard would have had no effect on the revenues, earnings and cash flows reported for the year ended December 31, 2017, had it been adopted prior to January 1, 2018. 

For the first quarter of 2018, Parts and Service revenues were $1,288,000 and $1,534,000, respectively.

9.         Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU No. 2016-02), which will replace the existing guidance in ASC 840, Leases. The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This amendment is effective for the Company in the fiscal year beginning after December 15, 2019, but early adoption is permissible. When the standard becomes effective, we expect that our property, plant and equipment will increase due to the addition of assets under lease.  Lease liabilities will have a corresponding increase.  There is not expected to be a significant impact on the statement of operations or on the Company’s cash flows. 

10.        Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the three months ended March 31, 2018, the Company had negative cash flows of $262,000 from operating activities. As of March 31, 2018 and December 31, 2017, the Company had an accumulated deficit of $16.8 million and $15.9 million, respectively. In addition, the Credit Facility will terminate on November 22, 2018 unless extended in writing by North Mill.  There is no assurance that North Mill will extend the Credit Facility beyond the termination date. In order to meet its current working capital needs, the Company intends to seek additional funding for its operations through a working capital loan and/or equity funding arrangements, although there can be no assurance that the Company will be successful in these efforts. The Company’s ability to raise funds in the equity market may be impacted by the absence of a liquid trading market in its common stock. The Company heavily relies on one customer for revenue generation and one vendor for parts that it sells (“Significant Vendor”). In the first quarter of 2018, total cost of goods sold for Parts sales were comprised of approximately 52% of the purchases from the Significant Vendor. In addition, on April 25, 2018, the Company was placed on credit hold by its Significant Vendor that supplies it with a necessary component for certain of its products. If the Company is unable to timely resolve this vendor issue, the Company will experience decreased sales in the second quarter, and its financial results will be adversely affected.  These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

11.           Related Party

The Company leases the Hammonton facility from a company which is owned by the Company’s Chief Executive Officer. The Hammonton facility lease is currently a month-to-month lease. For the three months ended March 31, 2018 and 2017, total rent paid to this company was approximately $26,000 and $17,000, respectively. The amount due to this company included in accounts payable was $0 as of March 31, 2018 and December 31, 2017.

8

Cautionary Note Regarding Forward Looking Statements

This report contains forward-looking statements – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: our ability to obtain required financing; changes in business conditions; changes in the marketplace; continued services of our executive management team; regulatory developments; acquisition matters; and statements of assumption underlying any of the foregoing, as well as other factors set forth under the caption “Risk Factors” in this report and our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. We assume no duty to update or revise our forward-looking statements.

Item 2. Management's Discussion & Analysis of Financial Condition & Results of Operations

Three Months Ended March 31, 2018 & 2017

For the first quarter ended March 31, 2018, net sales decreased $366,000 or 11%, to $2.8 million compared to $3.2 million in the first quarter 2017.  This decrease was attributable to reduced parts sales.

Gross margin for the first quarter of 2018 decreased $198,000, or 20%, to $771,000, or 27.6% of sales compared to $1.0 million, or 31.9% of sales in the first quarter of 2017.  Gross margin decreased due to reduced parts sales. Year to year gross margin percentages were reduced due to increased service revenue at lower gross margin rates.

Operating expenses increased $346,000 to $1.6 million in the first quarter of 2018 compared to $1.3 million in the first quarter of 2017. The increase was primarily due to the accrual of severance pay of $0.3 million under a separation agreement with a contracted employee who terminated employment in the quarter ended March 31, 2018.

Operating loss was $(917,000) in the first quarter of 2018 compared to $(423,000) in the first quarter of 2017, resulting in a $(495,000) operating loss increase.  The increased loss was primarily due to reduced sales and the severance costs in the quarter ended March 31, 2018.

Interest expense was $30,000 in the first quarter of 2018 compared to $12,000 in the first quarter of 2017 due to interest on the promissory note issued to Anthony Tomasello and on the Credit Facility, which did not exist in the first quarter of 2017.  

We did not have income tax expense in the first quarter of 2018 or 2017.

Net loss was $(947,000) for the first quarter of 2018 compared to $(435,000) for the first quarter of 2017. For the first quarter of 2018, basic and diluted loss per share were $(0.06) compared to $(0.03) basic and diluted earnings per share in the first quarter of 2017.

9

Liquidity & Capital Resources

Three Months Ended March 31, 2018

Accounts receivable increased $26,000 to $2.1 million at March 31, 2018.  Inventory decreased $17,000 to $383,000 at March 31, 2018.   The decrease was primarily due to an increase in the reserve for slow moving stock. Prepaid expenses increased $144,000 in the first quarter of 2018 primarily due to the purchase of equipment for the anticipated sale of slot machines to be made in the second quarter of 2018. Accounts payable increased $200,000 to $1.4 million at March 31, 2018 compared to $1.2 million at December 31, 2017.  Unearned revenue increased $221,000 primarily due to customer deposits related to the sale of slot machines to be made in the second quarter of 2018.  Severance payable increased $299,000 related to a severance agreement with a sales executive, of which $180,000 is included in current liabilities. Accrued expenses increased $60,000 in the first quarter of 2018.

The net of our loss, depreciation and amortization, and other non-cash adjustments to earnings in the first quarter of 2018 resulted in a $262,000 use of cash in operations. The net of operating loss and non-cash adjustments plus working capital changes resulted in $933,000 of cash being used by operations in the first quarter of 2017.

Net cash used in investing activities in the first quarter of 2018 was $34,000.  Net cash provided by financing activities in the first quarter of 2018 was $298,000.

Cash at the end of the first quarter 2018 of was $49,000 compared to $47,000 at December 31, 2017.

Shareholders’ equity was $840,000 at the end of the first quarter of 2018 compared to $1.8 million at December 31, 2017. 

On November 22, 2017, the Company obtained a $3.5 million revolving credit facility (the “Credit Facility”) from North Mill Capital LLC (“North Mill”). 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 Credit Facility provides for advances 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 the Company had additional borrowing availability of $341,000 under the Credit Facility based on eligible collateralized assets.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the three months ended March 31, 2018, the Company had negative cash flows of $262,000 from operating activities. As of March 31, 2018 and December 31, 2017, the Company had an accumulated deficit of $16.8 million and $15.9 million, respectively. In addition, the Credit Facility will terminate on November 22, 2018 unless extended in writing by North Mill.  There is no assurance that North Mill will extend the Credit Facility beyond the termination date. In order to meet its current working capital needs, the Company intends to seek additional funding for its operations through a working capital loan and/or equity funding arrangements, although there can be no assurance that the Company will be successful in these efforts. The Company’s ability to raise funds in the equity market may be impacted by the absence of a liquid trading market in its common stock. The Company heavily relies on one customer for revenue generation and one vendor for parts that it sells (“Significant Vendor”).  In addition, on April 25, 2018, the Company was placed on credit hold by its Significant Vendor that supplies it with a necessary component for certain of its products. If the Company is unable to timely resolve this vendor issue, the Company will experience decreased sales in the second quarter, and its financial results will be adversely affected.  These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Revenue Recognition

In May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09 Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, and ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under U.S. GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein. These ASUs may be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption. As of January 1, 2018, the Company adopted this guidance and it did not have a material impact on our core business except for providing additional footnote disclosures related to revenue (See Note 8).

Off Balance Sheet Arrangements

As of March 31, 2018, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

10

Item 4. Controls & Procedures

Evaluation of Disclosure Controls and Procedures.

The Company maintains internal controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our Disclosure Committee, which is comprised of the Company’s Chief Executive Officer, Chief Financial Officer and other management staff meets on a quarterly basis and has overview responsibility for these controls and procedures. The Disclosure Committee conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2018.

Based on the evaluation, the Disclosure Committee concluded that as of March 31, 2018, the Company’s disclosure controls were not effective due to the material weakness described in the “Management’s Annual Report on Internal Control over Financial Reporting” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The material weakness regarding segregation of duties and related information technology controls is being actively reviewed and possible remediation alternatives are currently under review by the Company.

Changes in Internal Control Over Financial Reporting

There have been no other changes in the Company’s internal controls and procedures during our most recent fiscal quarter that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

11

PART II - OTHER INFORMATION

Item 1A. Risk Factors

Except as set forth above under Liquidity and Capital Resources, there have been no material changes to the description of the risk factors associated with the Company's business previously disclosed in Part I, Item 1 "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in the Company's Annual Report on Form 10-K as they could materially affect our business, financial condition and future results. The risks described in the Company's Annual Report on Form 10-K and this report are not the only risks facing the Company. Additional risks and uncertainties not currently known, or that are currently deemed to be immaterial, also may materially and adversely affect the Company's business, financial condition or operating results.

Item 6. Exhibits
(a).	Exhibits:
	Exhibit 31.1	-	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2	-	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	-	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 101.INS	-	XBRL Instance Document
	Exhibit 101.SCH	-	XBRL Taxonomy Extension Schema
	Exhibit 101.CAL	-	XBRL Taxonomy Extension Calculation
	Exhibit 101.DEF	-	XBRL Taxonomy Extension Definition
	Exhibit 101.LAB	-	XBRL Taxonomy Extension Labels
	Exhibit 101.PRE		XBRL Taxonomy Extension Presentation

12

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AG&E HOLDINGS INC.

By:	/s/ ANTHONY TOMASELLO	President
	Anthony Tomasello	& Chief Executive Officer (Principal Executive Officer)	May 21, 2018
	/s/ Francis X. McCarthy	Chief Financial Officer,
	Francis X. McCarthy	Secretary & Treasurer
		(Principal Financial and Accounting Officer)	May 21, 2018

13

Exhibit Index

Item 6. Exhibits
	Exhibit 31.1	-	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2	-	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	-	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 101.INS	-	XBRL Instance Document
	Exhibit 101.SCH	-	XBRL Taxonomy Extension Schema
	Exhibit 101.CAL	-	XBRL Taxonomy Extension Calculation
	Exhibit 101.DEF	-	XBRL Taxonomy Extension Definition
	Exhibit 101.LAB	-	XBRL Taxonomy Extension Labels
	Exhibit 101.PRE		XBRL Taxonomy Extension Presentation

14

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Tomasello, certify that:

(1)	I have reviewed this Quarterly Report on Form 10-Q of AG&E Holdings, Inc.;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 21, 2018	By:	/s/ ANTHONY TOMASELLO
		Anthony Tomasello
		Chairman, President &
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Francis X. McCarthy, certify that:

(1)	I have reviewed this Quarterly Report on Form 10-Q of AG&E Holdings, Inc.
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 21, 2018	By:	/s/ FRANCIS X. MCCARTHY
		Francis X. McCarthy
		Chief Financial Officer, Secretary &Treasurer

EX-32.1

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Tomasello, and I, Francis X. McCarthy certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report of AG&E Holdings Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018:

(1)	Fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	That the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 21, 2018	By:	/s/ ANTHONY TOMASELLO
		Anthony Tomasello
		President &
		Chief Executive Officer
Date: May 21, 2018	By:	/s/ FRANCIS X. MCCARTHY
		Francis X. McCarthy
		Chief Financial Officer, Secretary &Treasurer

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 04, 2018
Document Information [Line Items]
Entity Registrant Name	AG&E HOLDINGS INC.
Entity Central Index Key	0000105608
Trading Symbol	agnu
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		16,953,000
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net sales	$ 2,822	$ 3,187
Cost of sales	2,051	2,218
Gross margin	771	969
Selling & administrative costs	1,634	1,288
Transaction related costs	0	50
Intangible amortization	54	54
Operating loss	(917)	(423)
Other expense:
Interest	30	12
Loss before income tax	(947)	(435)
Income tax expense	0	0
Net loss	$ (947)	$ (435)
Basic and Diluted net loss per common share (in dollars per share)	$ (0.06)	$ (0.03)
Basic common weighted shares outstanding (in shares)	16,953,176	16,953,176
Diluted common weighted shares outstanding (in shares)	16,953,176	16,953,176

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Current Assets:
Cash	$ 49,000	$ 47,000
Accounts receivable, net	2,143,000	2,117,000
Inventory	383,000	400,000
Prepaid expenses & other assets	630,000	486,000
Total current assets	3,205,000	3,050,000
Property, Plant & Equipment (at cost):
Leasehold improvements	3,000	3,000
Machinery, equipment & software	2,258,000	2,224,000
less: Accumulated depreciation & amortization	(2,208,000)	(2,204,000)
Property, plant & equipment, net	53,000	23,000
Other Assets:
Intangible Assets, net	1,343,000	1,397,000
Goodwill	1,152,000	1,152,000
Total other assets	2,495,000	2,549,000
Total Assets	5,753,000	5,622,000
Current Liabilities:
Accounts payable	1,425,000	1,225,000
Note payable – related party	617,000	327,000
Note payable – line of credit	865,000	514,000
Unearned revenue	223,000	2,000
Severance Payable, Current	180,000	0
Accrued expenses	310,000	250,000
Total current liabilities	3,620,000	2,318,000
Long term Liabilities:
Note payable – related party	1,174,000	1,517,000
Severance payable	119,000	0
Total long term liabilities	1,293,000	1,517,000
Total Liabilities	4,913,000	3,835,000
Shareholders' Equity:
$1 par value; 25,000,000 shares authorized; 16,953,176 shares issued and outstanding at March 31, 2018 and December 31, 2017	16,953,000	16,953,000
Capital in excess of par value	688,000	688,000
Accumulated deficit	(16,801,000)	(15,854,000)
Total Shareholders' Equity	840,000	1,787,000
Total Liabilities & Shareholders’ Equity	$ 5,753,000	$ 5,622,000

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	25,000,000	25,000,000
Common stock, shares issued (in shares)	16,953,176	16,953,176
Common stock, shares outstanding (in shares)	16,953,176	16,953,176

XML

Condensed Consolidated Statements of Cash Flow (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net loss	$ (947,000)	$ (435,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	58,000	67,000
Bad debt expense	(10,000)	2,000
Changes in current assets & liabilities
Accounts receivable	(16,000)	(977,000)
Inventory	17,000	(6,000)
Prepaid expenses & other	(144,000)	(93,000)
Accounts payable	200,000	379,000
Unearned revenue	221,000	0
Severance payable	299,000	0
Accrued expenses	60,000	130,000
Net cash used in operating activities	(262,000)	(933,000)
Cash used in investing activities:
Additions to plant & equipment	(34,000)	(2,000)
Net cash used in investing activities	(34,000)	(2,000)
Cash (used in) provided by financing activities:
Repayment – Note payable	(53,000)	(26,000)
Net borrowing – Line of credit	351,000	0
Net Cash (used in) provided by financing activities	298,000	(26,000)
Net increase (decrease) in cash	2,000	(961,000)
Cash at beginning of period	47,000	1,292,000
Cash at end of period	49,000	331,000
Supplemental cash flow disclosure:
Interest paid	29,000	13,000
Taxes paid	$ 0	$ 0

XML

Note 1 - Description of the Business

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Nature of Operations [Text Block]

1.

      

Description of the Business

AG&E Holdings Inc. (the “Company”) through its wholly owned subsidiary American Gaming & Electronics, Inc. (“AG&E”) distributes parts, and repairs and services gaming equipment to casinos throughout the United States with offices in Hammonton, New Jersey, Las Vegas, Nevada, Romeoville, Illinois and West Palm Beach, Florida.

XML

Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

2.

      

Summary of Significant Accounting Policies

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the financial position and results of operations for the periods presented. These condensed consolidated financial statements were prepared in accordance with the instructions for Form

10

-Q and, therefore, do

not

include all information or footnotes necessary for a complete presentation in conformity with accounting principles generally accepted in the United States. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company's Annual Report on Form

10

-K for the year ended

December 31, 2017.

The results of operations for the

three

months ended

March 31, 2018

are

not

necessarily indicative of the operating results for the full year.

Basic earnings per share are based on the weighted average number of shares outstanding whereas diluted earnings per share include the dilutive effect of unexercised common stock equivalents. Potentially dilutive securities are excluded from diluted earnings per share calculations for periods with a net loss.

The fair value of the Company’s financial instruments does

not

materially vary from the carrying value of such instruments.

Certain amounts in previously issued financial statements have been reclassified to conform to the current year’s presentation.

XML

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.

XML

Note 4 - Severance Payable

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Separation Agreement Disclosure [Tex tBlock]

4.

       

Severance Payable

In

March 2018,

the Company agreed to a separation agreement with a contracted employee for severance pay and insurance reimbursements totaling

$299,000,

of which

$180,000

is included in current liabilities. The separation agreement requires monthly payments of approximately

$15,000

commencing in

April 2018

through

November 2019.

XML

Note 5 - Stock Plans

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

5.

 

Stock Plans

The Company maintains a Stock Award Plan under which officers and key employees

may

acquire up to a maximum of

2,155,028

restricted shares of common stock of the Company. As of

March 31, 2018

and

December 31, 2017,

there were

no

restricted shares outstanding and

no

unrecognized compensation cost related to unvested stock awards.

XML

Note 6 - Inventory

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

6.

        

Inventory

Our inventory consists entirely of finished goods as of

March 31, 2018

and

December 31. 2017.

XML

Note 7 - Income Taxes

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

7.

        

Income Taxes

An income tax valuation allowance is provided when it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized. The Company has net deferred tax assets of approximately

$4.8

million at

March 31, 2018,

which are completely offset by a valuation allowance.  As of

March 31, 2018,

the Company has net operating loss carry forwards for Federal income tax purposes of approximately

$12.9

million, which are available to offset future Federal taxable income, if any. The Federal net operating loss carry forwards begin to expire in

2021.

The Company also has a net operating loss carry forward for Illinois state income tax purposes of approximately

$15.7

million as of

March 31, 2018. 

The Company also has alternative minimum tax credit carry forwards of approximately

$148,000,

which are available to reduce future Federal regular income taxes, if any, over an indefinite period.

No

unrecognized tax benefits are set to expire in the next

twelve

months that

may

have an impact upon the Company’s effective tax rate. 

The Company files tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years

2014,

2015,

2016

and

2017

remain open to examinations. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. During the

three

months ended

March 31, 2018,

the Company did

not

recognize expense for interest or penalties related to income tax, and does

not

have any amounts accrued at

March 31, 2018,

as the Company does

not

believe it has taken any uncertain income tax positions.

XML

Note 8 - Revenue Recognition

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

8.

        

Revenue Recognition

In

May 2014,

August 2015

and

May 2016,

the FASB issued ASU

2014

-

09

Revenue from Contracts with Customers, ASU

2015

-

14

Revenue from Contracts with Customers, Deferral of the Effective Date, and ASU

2016

-

12

Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, respectively, which implement ASC Topic

606.

ASC Topic

606

outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under U.S. GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after

December 15, 2017,

and interim periods therein. These ASUs

may

be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption. As of

January 1, 2018,

the Company adopted this guidance and it did

not

have a material impact on our core business except for providing additional footnote disclosures related to revenue.

The Company records revenue under ASC Topic

606

at a single point in time, when control of the promised products or services is transferred to the customer, which is consistent with past practice. The Company’s revenue results from

two

sources, Parts and Service. All revenues for these

two

revenue streams are recorded for Parts when sold and Service when performed.  Revenue is recognized at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those products or services. The Company does

not

have any agreements or contracts that have special provisions which would affect revenue recognition.

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, we record unearned revenue, which represents a contract liability. Unearned revenue was

$223,000

as of

March 31, 2018

and

$2,000

as of

December 31, 2017.

Unearned revenue was recorded as a result of customer deposits and

not

as a requirement of the newly implemented revenue recognition standard.

We recognize unearned revenue as net sales after we have transferred control of the goods or services to the customer and all revenue recognition criteria are met. The adoption of the new standard would have had

no

effect on the revenues, earnings and cash flows reported for the year ended

December 31, 2017,

had it been adopted prior to

January 1, 2018. 

For the

first

quarter of

2018,

Parts and Service revenues were

$1,288,000

and

$1,534,000,

respectively.

XML

Note 9 - Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

9.

        

Recent Accounting Pronouncements

In

February 2016,

the FASB issued ASU

No.

 

2016

-

02,

 Leases (ASU

No.

 

2016

-

02

), which will replace the existing guidance in ASC

840,

Leases. The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This amendment is effective for the Company in the fiscal year beginning after

December 

15,

2019,

but early adoption is permissible. When the standard becomes effective, we expect that our property, plant and equipment will increase due to the addition of assets under lease.  Lease liabilities will have a corresponding increase.  There is

not

expected to be a significant impact on the statement of operations or on the Company’s cash flows. 

XML

Note 10 - Going Concern

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

10.

       

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the

three

months ended

March 31, 2018,

the Company had negative cash flows of

$262,000

from operating activities. As of

March 31, 2018

and

December 31, 2017,

the Company had an accumulated deficit of

$16.8

million and

$15.9

million, respectively. In addition, the Credit Facility will terminate on

November 22, 2018

unless extended in writing by North Mill.  There is

no

assurance that North Mill will extend the Credit Facility beyond the termination date. In order to meet its current working capital needs, the Company intends to seek additional funding for its operations through a working capital loan and/or equity funding arrangements, although there can be

no

assurance that the Company will be successful in these efforts. The Company’s ability to raise funds in the equity market

may

be impacted by the absence of a liquid trading market in its common stock. The Company heavily relies on

one

customer for revenue generation and

one

vendor for parts that it sells (“Significant Vendor”). In the

first

quarter of

2018,

total cost of goods sold for Parts sales were comprised of approximately

52%

of the purchases from the Significant Vendor. In addition, on

April 25, 2018,

the Company was placed on credit hold by its Significant Vendor that supplies it with a necessary component for certain of its products. If the Company is unable to timely resolve this vendor issue, the Company will experience decreased sales in the

second

quarter, and its financial results will be adversely affected.  These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do

not

include any adjustments that might result from the outcome of this uncertainty.

XML

Note 11 - Related Party

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

11.

         

Related Party

The Company leases the Hammonton facility from a company which is owned by the Company’s Chief Executive Officer. The Hammonton facility lease is currently a month-to-month lease. For the

three

months ended

March 31, 2018

and

2017,

total rent paid to this company was approximately

$26,000

and

$17,000,

respectively. The amount due to this company included in accounts payable was

$0

as of

March 31, 2018

and

December 31, 2017.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

In

February 2016,

the FASB issued ASU

No.

 

2016

-

02,

 Leases (ASU

No.

 

2016

-

02

), which will replace the existing guidance in ASC

840,

Leases. The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This amendment is effective for the Company in the fiscal year beginning after

December 

15,

2019,

but early adoption is permissible. When the standard becomes effective, we expect that our property, plant and equipment will increase due to the addition of assets under lease.  Lease liabilities will have a corresponding increase.  There is

not

expected to be a significant impact on the statement of operations or on the Company’s cash flows. 

XML

Note 3 - Debt (Details Textual)			12 Months Ended
	Nov. 22, 2017 USD ($)	Nov. 30, 2016 USD ($)	Nov. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 3,500,000
Line of Credit Facility, Maximum Borrowing Capacity, Percentage of Outstanding Eligible Accounts Receivable	85.00%
Long-term Line of Credit, Total				$ 865,000
Line of Credit Facility, Interest Rate at Period End				5.25%
Line of Credit Facility, Remaining Borrowing Capacity				$ 341,000
Revolving Credit Facility [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Stated Percentage	4.75%
Revolving Credit Facility [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	0.75%
AGA [Member] | Company Note [Member] | President [Member]
Debt Instrument, Face Amount		$ 1,000,000
Debt Instrument, Interest Rate, Stated Percentage		5.00%
Debt Instrument, Number of Monthly Payments		36
Debt Instrument, Monthly Payment		$ 29,971
AGA [Member] | Company Note 2 [Member] | President [Member]
Minimum Service Revenue Covenant		$ 5,000,000
Notes Payable, Related Parties				1,800,000
Debt Instrument, Contingent Consideration Accrued				$ 0
AGA [Member] | Company Note 2 [Member] | President [Member] | Scenario, Forecast [Member]
Debt Instrument, Face Amount			$ 1,000,000
Minimum Service Revenue Covenant			$ 7,000,000

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Note 4 - Severance Payable (Details Textual) - USD ($)	1 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Severance Payable	$ 299,000
Severance Payable, Current	180,000	$ 0
Separation Agreement, Monthly Payment	$ 15,000

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Note 5 - Stock Plans (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	2,155,028
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number, Ending Balance	0	0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 0	$ 0

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Note 7 - Income Taxes (Details Textual)	3 Months Ended
	Mar. 31, 2018 USD ($)
Deferred Tax Assets, Gross, Total	$ 4,800,000
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax	148,000
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total	0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	$ 0
Tax Year 2014 [Member]
Open Tax Year	2014
Tax Year 2015 [Member]
Open Tax Year	2015
Tax Year 2016 [Member]
Open Tax Year	2016
Tax Year 2017 [Member]
Open Tax Year	2017
Domestic Tax Authority [Member]
Operating Loss Carryforwards, Total	$ 12.90
State and Local Jurisdiction [Member]
Operating Loss Carryforwards, Total	$ 15.70

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Note 8 - Revenue Recognition (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Contract with Customer, Liability, Total	$ 223,000		$ 2,000
Revenue from Contract with Customer, Including Assessed Tax	2,822,000	$ 3,187,000
Product [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,288,000
Service [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 1,534,000

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Note 10 - Going Concern (Details Textual)	3 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Net Cash Provided by (Used in) Operating Activities, Total	$ (262,000)	$ (933,000)
Retained Earnings (Accumulated Deficit), Ending Balance	$ (16,801,000)		$ (15,854,000)
Number of Major Customers	1
Number of Vendors	1
Supplier Concentration Risk [Member] | Cost of Goods, Product Line [Member]
Concentration Risk, Percentage	52.00%

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Note 11 - Related Party (Details Textual) - President and Chief Executive Officer [Member] - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Due to Related Parties, Total	$ 0		$ 0
Payments for Facility Lease [Member]
Related Party Transaction, Amounts of Transaction	$ 26,000	$ 17,000