Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 22, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | Quest Solution, Inc. | |
Entity Central Index Key | 278,165 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 34,307,389 | |
Trading Symbol | QUES | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash | $ 321,888 | $ 823,391 |
Restricted Cash | 767,688 | 690,850 |
Accounts receivable, net | 7,629,822 | 7,903,338 |
Inventory, net | 595,913 | 471,479 |
Prepaid expenses | 561,123 | 649,123 |
Deferred tax asset, current portion | 160,545 | 160,545 |
Other current assets | 84,623 | 395,642 |
Assets held for disposal | 11,650,973 | 18,254,601 |
Total current assets | 21,772,575 | 29,348,969 |
Fixed assets | 155,858 | 201,897 |
Deferred tax asset | 433,997 | 433,997 |
Goodwill | 10,114,164 | 10,114,164 |
Trade name | 3,080,731 | 3,513,481 |
Intangibles, net | 8,250 | |
Customer Relationships | 6,716,827 | 7,560,352 |
Other assets | 174,696 | 689,347 |
Total assets | 42,448,848 | 51,870,457 |
Current liabilities | ||
Accounts payable and accrued liabilities | 7,626,126 | 14,360,980 |
Accounts payable and accrued liabilities, related party | 468,839 | 177,776 |
Line of credit | 4,194,719 | 2,960,342 |
Advances, related party | 100,000 | 400,000 |
Accrued payroll and sales tax | 2,047,476 | 1,322,188 |
Deferred revenue, net | 825,534 | 685,317 |
Current portion of note payable | 11,879,131 | |
Notes payable, related parties, current portion | 8,207,637 | 6,790,148 |
Other current liabilities | (220,980) | (369,609) |
Liabilities held for disposal | 5,598,343 | 10,795,906 |
Total current liabilities | 41,168,785 | 37,862,266 |
Long term liabilities | ||
Note payable, related party, net of debt discount | 8,936,204 | 13,546,840 |
Long term portion of note payable | 76,638 | 126,942 |
Deferred revenue, net | 482,870 | 533,874 |
Other long term liabilities | 646,030 | 271,902 |
Total liabilities | 51,310,527 | 52,341,824 |
Stockholders' deficit | ||
Common stock; $0.001 par value; 100,000,000 shares authorized; 33,980,478 and 36,871,478 shares outstanding of September 30, 2016 and December 31, 2015, respectively. | 33,980 | 36,871 |
Additional paid-in capital | 22,205,127 | 17,943,798 |
Accumulated Other Comprehensive Loss | (361,744) | |
Accumulated deficit | (30,749,225) | (18,457,236) |
Total stockholders' deficit | (8,861,679) | (471,367) |
Total liabilities and stockholders' deficit | 42,448,848 | 51,870,457 |
Series A Preferred Stock [Member] | ||
Stockholders' deficit | ||
Preferred stock, value | ||
Series B Preferred Stock [Member] | ||
Stockholders' deficit | ||
Preferred stock, value | 5,200 | 5,200 |
Series C Preferred Stock [Member] | ||
Stockholders' deficit | ||
Preferred stock, value | $ 4,983 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares outstanding | 33,980,478 | 36,871,478 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Series B Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1 | 1 |
Preferred stock, shares outstanding | 1 | 1 |
Preferred stock voting right | 5,200,000 | 5,200,000 |
Series C Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 15,000,000 | 15,000,000 |
Preferred stock, shares outstanding | 4,982,560 | 0 |
Dividends payable price per share | $ 0.06 | $ 0.06 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues | ||||
Gross Sales | $ 13,841,279 | $ 16,961,830 | $ 44,288,975 | $ 41,405,032 |
Less sales returns, discounts, & allowances | (277,128) | (250,491) | (849,256) | (460,108) |
Total Revenues | 13,564,151 | 16,711,339 | 43,439,719 | 40,944,924 |
Cost of goods sold | ||||
Cost of goods sold | 10,910,089 | 13,523,544 | 34,648,909 | 32,031,714 |
Total costs of goods sold | 10,910,089 | 13,523,544 | 34,648,909 | 32,031,714 |
Gross profit | 2,654,062 | 3,187,795 | 8,790,810 | 8,913,210 |
Operating expenses | ||||
General and administrative | 505,903 | 597,210 | 1,571,102 | 2,053,868 |
Salary and employee benefits | 1,871,610 | 1,836,929 | 6,471,563 | 5,825,720 |
Depreciation and amortization | 442,428 | 24,052 | 1,347,077 | 69,916 |
Professional fees | 192,814 | 92,359 | 603,190 | 288,922 |
Total operating expenses | 3,012,755 | 2,550,550 | 9,992,932 | 8,238,426 |
Income (loss) from continuing operations | (358,693) | 637,245 | (1,202,122) | 674,784 |
Other income (expenses): | ||||
Restructuring expenses | (84,317) | (544,941) | ||
Gain (loss) on foreign currency | (90,215) | 129,589 | ||
Interest expense | (1,110,804) | (274,349) | (2,802,980) | (1,012,415) |
Gain on intangible license settlement | 374,500 | 374,500 | ||
Write-off of other assets | (450,000) | (450,000) | ||
Other (expenses) income | 3,065 | (39,981) | 6,871 | 17,224 |
Total other income (expenses) | (1,732,271) | 60,170 | (3,661,461) | (620,691) |
Net Income (Loss) Before Income Taxes | (2,090,964) | 697,415 | (4,863,583) | 54,093 |
Provision for Current Income Taxes | (376,326) | (491,254) | (64,209) | |
Net Income (Loss) from continuing operations | (2,467,290) | 697,415 | (5,354,837) | (10,116) |
Net Loss from discontinued operations | (3,919,175) | (6,851,875) | ||
Net Income (Loss) | (6,386,465) | 697,415 | (12,206,712) | (10,116) |
Other Comprehensive Loss Foreign Currency Adjustments | 120,333 | (361,744) | ||
Comprehensive Income (Loss) from Operations | $ (6,266,132) | $ 697,415 | $ (12,568,456) | $ (10,116) |
Net income (loss) per share - basic | $ (0.18) | $ 0.02 | $ (0.34) | $ 0 |
Net income (loss) per share - diluted | (0.18) | 0.02 | (0.34) | 0 |
Net income (loss) per share from continuing operations - basic | (0.07) | 0.02 | (0.15) | 0 |
Net income (loss) per share from continuing operations- diluted | (0.07) | 0.02 | (0.15) | 0 |
Net income (loss) per share from discontinued operations - basic | (0.11) | (0.19) | ||
Net income (loss) per share from discontinued operations - diluted | $ (0.11) | $ (0.19) | ||
Weighted average number of common shares outstanding - basic | 35,762,326 | 36,637,523 | 36,506,733 | 35,702,188 |
Weighted average number of common shares outstanding - diluted | 49,451,156 | 39,630,570 | 50,195,563 | 39,630,570 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flow (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net loss from continuing operations | $ (5,354,837) | $ (10,116) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Restructuring expenses | 544,941 | |
Stock based compensation | 308,079 | 244,262 |
Warrants granted | 19,758 | |
Debt discount accretion | 860,824 | 518,206 |
Depreciation and amortization | 1,347,077 | 69,916 |
Interest expense unpaid | 105,060 | |
Loss on write-off of other assets | 450,000 | |
Unrealized Foreign Exchange Loss | 42,875 | |
Gain on intangible license settlement | (374,500) | |
Changes in operating assets and liabilities: | ||
(Increase) / decrease in accounts receivable | 273,516 | (3,801,009) |
(Increase) in prepaid expenses | 10,714 | (423,178) |
(Increase) / decrease in inventory | (124,434) | 124,949 |
(Increase) / decrease in customer deposit | 4,900 | |
Increase / (decrease) in accounts payable and accrued liabilities | 5,763,282 | 4,868,321 |
Increase/(decrease) in accounts payable and accrued liabilities, related party | 297,447 | 241,755 |
Increase in deferred revenues, net | 89,213 | 725,926 |
Increase / (decrease) in accrued payroll and sales taxes payable | 264,664 | |
(Increase) / decrease in other assets | 475,670 | (351,652) |
Increase / (decrease) in other liabilities | 34,041 | 309,829 |
Net cash provided by operating activities | 5,388,132 | 2,167,367 |
Cash flows from investing activities: | ||
(Increase) decrease in restricted Cash | (76,838) | |
Purchase of property and equipment | (16,513) | (45,155) |
Net cash used in investing activities | (93,351) | (45,155) |
Cash flows from financing activities: | ||
Proceeds (payment) on line of credit | 1,234,377 | (571,711) |
Proceeds from notes payable | 350,000 | |
Payment of notes/loans payable | (1,971,627) | (2,069,299) |
Proceeds from shares sold | 200,000 | |
Share issuance expenses | (41,259) | |
Net cash used in financing activities | (778,509) | (2,091,010) |
Cash used from discontinued operations | (5,017,775) | |
Net (decrease) increase in cash | (501,503) | 31,202 |
Cash, beginning of period | 823,391 | 233,741 |
Cash, end of period | 321,888 | 264,943 |
Cash paid for interest | 128,723 | |
Cash paid for taxes | ||
Supplementary cash flow information: | ||
Stock issued for services | 33,675 | 192,546 |
Stock options vested during period | 274,404 | 204,840 |
Warrants issued | 19,758 | |
Gain on sale of intangible asset | $ 374,500 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | NOTE 1 BASIS OF PRESENTATION AND Summary of Significant Accounting Policies- BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The interim consolidated financial statements of Quest Solution, Inc. include the combined accounts of Quest Marketing, Inc., an Oregon Corporation, Bar Code Specialties, Inc., (BCS) a California Corporation, Quest Canada, Inc., (formerly known as ViascanQdata, Inc.), (Viascan) a Canadian based corporation with operations in the same business line as Quest and Quest Exchange Limited, a Canadian based holding company. Effective October 1, 2015, the financial statements of Viascan have been consolidated into the Companys consolidated results of operations. On September 19, 2016, the Company publicly announced the decision of its Board of Directors to enter into a Letter of Intent to sell the shares of its wholly owned subsidiary, Quest Solution Canada Inc., to Viascan Group Inc. The operations of Quest Solution Canada Inc. have been classified as a discontinued operation and the assets and liabilities of Quest Solution Canada Inc have been classified as held for disposal. The companies currently operate as a single business unit. All material intercompany transactions and accounts have been eliminated in consolidation. The interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited interim condensed financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2015 and notes thereto included in the Companys Form 10-K filed with the SEC on April 18, 2016. The Company follows the same accounting policies in the preparation of interim reports. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. Summary of Significant Accounting Policies This summary of significant accounting policies of Quest Solution, Inc. is presented to assist in understanding the Companys consolidated financial statements. The consolidated financial statements and notes are representations of the Companys management who is responsible for the integrity and objectivity of the financial statements. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Cash Cash consists of petty cash, checking, savings, and money market accounts. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of September 30, 2016 and December 31, 2015. The Company maintains its cash in bank deposit accounts which, at times, may exceed federal insured limits. The Company has restricted cash on deposit with a federally insured bank in the amount of $767,688 at September 30, 2016. This cash is security and collateral for a corporate credit card agreement with a bank and for deposit against a letter of credit issued for executive life insurance policies owned by the Company. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. The Company evaluates its estimates and assumptions on a regular basis. The Company uses historical experience and various other assumptions that are believed to be reasonable under the circumstances to form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates and assumptions used in preparation of the consolidated financial statements. PURCHASE ACCOUNTING AND BUSINESS COMBINATIONS The Company accounts for its business combinations using the purchase method of accounting which requires that intangible assets be recognized apart from goodwill if they are contractual in nature or separately identifiable. Acquisitions are measured on the fair value of consideration exchanged and, if the consideration given is not cash, measurement is based on the fair value of the consideration given or the fair value of the assets acquired, whichever is more reliably measurable. The excess of cost of an acquired entity over the fair value of identifiable acquired assets and liabilities assumed is allocated to goodwill. The valuation and allocation process relies on significant assumptions made by management. In certain situations, the allocations of excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when the Company receives updated information, including appraisals and other analyses, which are completed within one year of the acquisition. Revisions to the fair values, which may be significant, are recorded when pending information is finalized, within one year from the acquisition date. ACCOUNTS RECEIVABLE Accounts receivable are carried at their estimated collectible amounts. The Company provides allowances for uncollectible accounts receivable equal to the estimated collection losses that will be incurred in collection of all receivables. Accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. The Companys management determines which accounts are past due and if deemed uncollectible, the Company charges off the receivable in the period the determination is made. The Company generally requires no collateral to secure its ordinary accounts receivable. Based on managements evaluation, accounts receivable has a balance in the allowance for doubtful accounts of $20,249 for the period ending September 30, 2016 and December 31, 2015, respectively. PROPERTY AND EQUIPMENT Property and equipment are stated at purchased cost and depreciated using both straight-line and accelerated methods over estimated useful lives ranging from 3 to 15 years. Upon disposition of property and equipment, related gains and losses are recorded in the results of operations. Depreciation expense for period ending September 30, 2016 and December 31, 2015 was $70,802 and $92,656, respectively. For federal income tax purposes, depreciation is computed using the modified accelerated cost recovery system. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. INTANGIBLE ASSETS Intangible assets are stated at cost, net of accumulated amortization. The assets are being amortized on the straight-line method over useful lives ranging from 3 to 10 years. Amortization expense for the period ending September 30, 2016 and December 31, 2015 was $1,276,275 and $2,506,167, respectively. September 30, 2016 December 31, 2015 Goodwill $ 10,114,164 $ 10,114,164 Trade Names 4,390,000 4,390,000 Customer Relationships 9,190,000 9,190,000 Accumulated amortization (3,782,442 ) (2,506,167 ) Intangibles, net $ 19,911,722 $ 21,187,997 Goodwill is not amortized, but is evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of intangibles. The annual evaluation for impairment of goodwill and intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. None of the goodwill is deductible for income tax purposes. For the three month period ended September 30, 2016, the goodwill in relation to the Companys investments in Viascan was impaired by $2,500,000 and for the nine months ended September 30, 2016 the goodwill impairment charge was $4,800,000 which was all included in the net loss from discontinued operations. The impairment charge was driven by the following reasons: ● Net operating losses for the first nine months of the year ● Negative cash flow resulting in the Company funding $8.0 million to date since the acquisition date ● Negative working capital ● Conversion of $1.8 million of notes related to the acquisition to Series C preferred shares at condition significantly move favorable to the Company ● Forgiveness of $0.5 million of notes related to the acquisition ● The Companys decision to dispose of the shares of Viascan making it a discontinued operation ADVERTISING The Company generally expenses advertising costs as incurred. During the nine month period ending September 30, 2016 and September 30, 2015, the Company spent $77,205 and $150,689 on advertising (marketing, trade show and store front expense), net of co-operative rebates, respectively. The Company received rebates on advertising from co-operative advertising agreements with several vendors and suppliers. These rebates have been recorded as a reduction to the related advertising and marketing expense in the period earned. INVENTORY Substantially all of the inventory consists of raw materials and finished goods and are valued based upon first-in first-out (FIFO) cost, not in excess of market. The determination of whether the carrying amount of inventory requires a write-down is based on a detailed evaluation of inventory relative to any potential slow moving products or discontinued items as well as the market conditions for the specific inventory items. There were no inventory reserves recorded as of September 30, 2016 and December 31, 2015, respectively. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense primarily consists of the non-cash write-down of tangible and intangible assets over their expected economic lives. We expect this expense to continue to grow in absolute dollars and potentially as a percentage of revenue as we continue to grow and incur capital expenditures to improve our technological infrastructure and acquire assets through potential future acquisitions. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the price that would be received from selling an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides a hierarchy for inputs used in measuring fair value that prioritize the use of observable inputs over the use of unobservable inputs, when such observable inputs are available. The three levels of inputs that may be used to measure fair value are as follows: ● Level 1 - Quoted prices in active markets for identical assets or liabilities. ● Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data. ● Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by the Company. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observable inputs may result in a reclassification of assets and liabilities within the three levels of the hierarchy outlined above. NET LOSS PER COMMON SHARE Net loss per share is provided in accordance with FASB ASC 260-10, Earnings per Share. Basic net loss per common share (EPS) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS as of September 30, 2016 and September 30, 2015 were 36,323,489 and 35,702,188, respectively. The fully diluted number of common stock amounts to 50,195,563 which includes the potential of the existing senior subordinated debt holders converting their debt into common shareholder equity at $1.00 per share (for $3,231,388 in debt) and $2.00 per share (for $274,882 in debt) and 10,182,560 preferred Series B and C shares converting to common shares. Despite the fact the conversion is out of the money, accounting rules require these amounts to be included in diluted shares outstanding. Additional terms of the debt would require the Board of Directors to consent to any debt holder converting and having a position greater than 4.99% outstanding on the date of conversion. FOREIGN CURRENCY TRANSLATION, FOREIGN EXCHANGE CONTRACTS AND COMPREHENSIVE LOSS The functional currency of the Companys foreign subsidiaries is the local currency. Gains and losses resulting from the translation of the foreign subsidiaries financial statements are included in accumulated other comprehensive income (loss) and reported as a separate component of stockholders equity. Gains and losses resulting from foreign currency transactions are included in net income (loss). The Company currently does not enter into financial instruments for either trading or speculative purposes. There were no forward foreign exchange contracts used during the nine month periods ended September 30, 2016 and 2015. Total comprehensive loss is comprised of net loss and other comprehensive earnings losses, such as foreign currency translation gains or losses and unrealized gains or losses on available-for-sale marketable securities. RECENT ACCOUNTING PRONOUNCEMENTS The Company has evaluated the recent pronouncements and believes that none of them will have a material effect on the Companys financial statements. |
Going Concern
Going Concern | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | NOTE 2 GOING CONCERN The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has acquired a significant working capital deficit and issued a substantial amount of subordinated debt in connection with its recent acquisitions. As of September 30, 2016, the Company had a working capital deficit of $19,396,210 and an accumulated deficit and accumulated other comprehensive loss of $31,110,969. The Company is dependent on the completion of working capital financings, vendor trade credit extensions, restructuring of subordinated debt and private placement of its securities in order to continue operations. These factors taken together raise doubt about the Companys ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Concentrations | NOTE 3 CONCENTRATIONS Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, accounts receivable, and accounts payable. Beginning January 1, 2015, all of our cash balances were insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor at each financial institution. This coverage is available at all FDIC member institutions. The Company uses Citizens National Bank and Wells Fargo Bank, which are FDIC insured institutions. Based on these facts, collectability of bank balances appears to be adequate. For the quarter ending September 30, 2016 and September 30, 2015, one customer accounted for 21% and another customer accounted for 33% of the Companys revenues, respectively. Accounts receivable at September 30, 2016 and December 31, 2015 are made up of trade receivables due from customers in the ordinary course of business. One customer made up 11% and another customer 20% of the trade accounts receivable balances at September 30, 2016 and December 31, 2015, respectively. Accounts payable are made up of payables due to vendors in the ordinary course of business at September 30, 2016 and December 31, 2015. One vendor made up 90% and 83%, respectively of the outstanding balance, which represented greater than 10% of accounts payable at September 30, 2016 and December 31, 2015, respectively. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Inventory | NOTE 4 INVENTORY At September 30, 2016 and December 31, 2015, inventories consisted of the following: September 30, 2016 December 31, 2015 Equipment and clearing service $ 415,967 $ 313,847 Raw Materials 122,415 119,065 Work in Progress 1,631 155 Finished Goods 55,900 38,412 Total inventories $ 595,913 $ 471,479 |
Prepaids
Prepaids | 9 Months Ended |
Sep. 30, 2016 | |
Prepaid Expense and Other Assets [Abstract] | |
Prepaids | NOTE 5 PREPAIDS The Company currently has $561,123 and $649,123 of expenses that were prepaid as of September 30, 2016 and December 31, 2015, respectively, which we expect to expense during the next year. |
Intellectual Property
Intellectual Property | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intellectual Property | NOTE 6 INTELLECTUAL PROPERTY On August 27, 2015, the Company entered into a Settlement Agreement with a former owner and current subordinated debt holder. Under the terms of the Settlement Agreement, the Company was required to pay $7,036,000 as full satisfaction for two (2) promissory notes by September 30, 2015. Included in this agreement (and deducted from the $7.036 million settlement) was the assignment of license rights with an assigned value of $1.15 million. The licenses were previously acquired for $450,000 from Rampart Systems. The assignee has agreed to pay Quest Solution a royalty fee of 3.5% of revenue related to the gun-barrel, rebar inspection, and air frame licenses for a five (5) year period, beginning on the effective date of the Assignment Agreement (as defined in the Settlement Agreement). The parties agreed to exclude the existing mining distribution license from the royalties to be paid to the Company by the assignee. On October 19, 2015, Quest Solution entered into that First Amendment to the Omnibus Settlement Agreement, which modified the payment schedule under the Settlement Agreement. |
Other Liabilities
Other Liabilities | 9 Months Ended |
Sep. 30, 2016 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities | NOTE 7 OTHER LIABILITIES At September 30, 2016 and December 31, 2015, other liabilities consisted of the following: September 30, 2016 December 31, 2015 Unearned Incentive from credit Cards $ 293,105 $ 100,000 License contingent liability 150,000 - Key Man life Insurance liability 126,095 92,776 Dividend payable 85,276 - Others 212,534 448,735 867,010 641,511 Less Current Portion (220,980 ) (369,609 ) Total long term other liabilities $ 646,030 $ 271,902 The Company has key man life insurance policies to insure the Company against risk of loss of an executive. The Company has a contingent liability of $150,000 in connection with the acquisition of technology licenses in 2015. This payment becomes due when the respective technology becomes operable and viable. As of the date of this filing, it is unknown when that will become due. |
Deferred Revenue
Deferred Revenue | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred Revenue | NOTE 8 DEFERRED REVENUE Deferred revenue consists of prepaid third party hardware service agreements, software maintenance service contracts and the related costs and expenses recorded net of the revenue charged to the customer and paid within normal business terms. The net amount recorded as a deferred revenue liability is being recognized into the results of operations over the related periods on a straight line basis, normally 1-5 years with 3 years being the average term. September 30, 2016 December 31, 2015 Deferred Revenue $ 7,959,950 $ 7,332,218 Less Deferred Costs & Expenses (6,651,546 ) (6,113,027 ) Net Deferred Revenue 1,308,404 1,219,191 Less Current Portion (825,534 ) (685,317 ) Total Long Term net Deferred Revenue $ 482,870 $ 533,874 |
Credit Facilities and Line of C
Credit Facilities and Line of Credit | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Credit Facilities and Line of Credit | NOTE 9 CREDIT FACILITIES AND LINE OF CREDIT The Company maintains operating lines of credit, factoring and revolving credit facilities with banks and finance companies to provide working capital for the business. On December 31, 2014, the Company entered into a 3 year, $8 million revolving line of credit agreement with Wells Fargo Bank (WFB) which provided for borrowings based on eligible trade accounts receivable, as defined in the WFB loan agreement dated December 31, 2014. The line was secured by trade accounts receivable and a first priority lien on substantially all of the assets of the Company. All other debt of the Company was subordinated to the WFB bank line of credit. In November 2015, the WFB line of credit was paid off. The Company continues to maintain a purchasing card relationship with WFB with a limit of approximately $300,000, of which $45,076 was outstanding as of September 30, 2016 and included in trade accounts payable. In November 2015, the Company entered into a Sale of Accounts and Security Agreement with Faunus Group International (FGI) for the USA with a maximum credit limit of $15,000,000. The line was secured by trade accounts receivable and a first priority lien on substantially all of the assets of the Company. The agreement contained certain pricing and fee structures for collateral management, minimum usage, early termination and facility fees. On July 1, 2016, FGI accepted full payment of all obligations of the Company under the U.S. and Canadian Sale of Accounts and Security Agreements (the Existing Financing Agreements), terminated the Existing Financing Agreements, terminated certain subordination agreements and guarantees, and released FGIs security interests in the Companys collateral. On July 1, 2016, the Company entered into a Factoring and Security Agreement (the FASA) with Action Capital Corporation (Action) to establish a sale of accounts facility, whereby the Company may obtain short-term financing by selling and assigning to Action acceptable accounts receivable. Pursuant to the FASA, the outstanding principal amount of advances made by Action to the Company at any time shall not exceed $5,000,000. Action will reserve and withhold an amount in a reserve account equal to 10% of the face amount of each account purchased under the FASA. The per annum interest rate with respect to the daily average balance of unpaid advances outstanding under the FASA (computed on a monthly basis) will be equal to the Prime Rate of Wells Fargo Bank N.A. plus 2%, plus a monthly fee equal to 0.75% of such average outstanding balance. The Company shall also pay all other costs incurred by Action under the FASA, including all bank fees. The FASA will continue in full force and effect unless terminated by either party upon 30 days prior written notice. Performance of the Companys obligations under the FASA is secured by a security interest in certain collateral of the Company. The FASA includes customary representations and warranties and default provisions for transactions of this type. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 10 - NOTES PAYABLE Notes payable at September 30, 2016 and December 31, 2015, consists of the following: September 30, 2016 December 31, 2015 Supplier Note Payable $ 11,621,585 $ - Insurance Notes 42,390 59,666 All Other 291,794 67,276 Total 11,955,769 126,942 Less current portion (11,879,131 ) - Long Term Notes Payable $ 76,638 $ 126,942 The Company finances its Directors and Officers Liability Insurance and its Property and Casualty Insurance Program with First Insurance Funding. The Directors and Officers Liability Insurance period is for twelve months and the premium is financed over 9 months in equal monthly installments of $15,688 at 6% interest and the Property and Casualty Insurance Program period is for twelve months and the premium is financed over 9 months in equal monthly installments of $3,490 at 3.25% interest. The outstanding balance at September 30, 2016 was $42,390 and the monthly payments are current. In connection with the BCS acquisition the Company assumed a related party note payable to the former CTO of the RFID division of BCS. The note is payable in equal monthly installments of $4,758 beginning October 31, 2014 and ending October 2018. The loan bears interest at 1.89% and is unsecured and subordinated to the Companys bank debt. The balance on this loan at September 30, 2016 was $130,294 of which $53,656 is classified as current and $76,638 is long term. On July 18, 2016, the Company and the supplier entered into that certain Secured Promissory Note, with an effective date of July 1, 2016, in the principal amount of $12,492,137. The USD Note accrues interest at 12% per annum and is payable in six consecutive monthly installments of principal and accrued interest in a minimum principal amount of $250,000 each, with any remaining principal and accrued interest due and payable on December 31, 2016. The balance on this note at September 30, 2016 was $11,621,585 which is all classified as current. On July 31, 2016 as part of the Separation Agreement with Mr. Ross, the Company issued a promissory note in the amount of $59,500 in connection with the redemption by the Company of 350,000 shares of restricted common stock. The promissory note will be repaid in 12 monthly installments commencing October 1, 2016 and this transaction was recorded as a restricting charge in the amount of $84,317 in the third quarter of 2016. In addition, the Company restated a promissory note in favor of Mr. Ross and will repay the balance of the $102,000 over 12 monthly installments commencing October 1, 2016. The balance on these two notes at September 30, 2016 was $161,500 which is all classified as current. |
Subordinated Notes Payable
Subordinated Notes Payable | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Subordinated Notes Payable | NOTE 11 SUBORDINATED NOTES PAYABLE Notes and loans payable at September 30, 2016 and December 31, 2015, consists of the following: September 30, 2016 December 31, 2015 Note payable - acquisition of Quest $ 5,962,370 $ 6,577,509 Note payable acquisition of BCS 10,348,808 10,348,808 Note payable acquisition of ViascanQdata 639,771 2,446,969 Quest Preferred Stock note payable 1,245,000 3,120,000 Stock repurchase notes 222,366 - Note payable License contingent liability - 150,000 Total notes payable 18,418,315 22,643,286 Less: debt discount (1,274,474 ) (2,306,298 ) Less: current portion (8,207,637 ) (6,790,148 ) Total long-term notes payable $ 8,936,204 $ 13,546,840 The note payable for acquisition of Quest was issued on January 9, 2014 in conjunction with the acquisition of Quest Marketing, Inc. The initial interest rate was 1.89%, subsequent to December 31, 2015, the interest was increased to 6% and is due in 2017. Principal and interest payments have been postponed. In addition, on June 17, 2016, the Company entered into Promissory Note Conversion Agreement with one of the Noteholders whereby $684,000 of the promissory note was converted into 684,000 shares of Series C Preferred Stock. As part of the transaction, the related debt discount of $171,000 was recorded against Additional paid in capital. As part of the acquisition of Quest Marketing, the Company engaged an independent valuation analysis to do a valuation of the purchase accounting. During this process, it was determined a debt discount of $4,000,000 (original issue discount, OID) should be assigned to the note. That debt discount is being accreted at $200,000 per quarter. The note payable for acquisition of BCS was issued on November 21, 2014 in conjunction with the acquisition of BCS. The current interest is at 1.89% and is due in 2018. This note is convertible at $2.00 per share, subject to board approval such that no debt holder can own more than 5% of the outstanding shares. Principal and interest payments have been postponed. The note payable in relation to the acquisition of ViascanQdata was issued effective October 1, 2015. $1,500,000 of the note was issued to Viascan Group, a related party due to the ownership interest of our CEO and head of Media Sales. The interest rate is 6% on this note with payments due in 2016 and 2018. The balance are debts assumed by the Company on the transaction date. On June 17, 2016, the Company entered into Promissory Note Conversion Agreement with the Noteholder whereby entire balance due at date which amounted to $1,049,250 comprising of capital and interest was converted into 1,049,250 shares of Series C Preferred Stock. The Quest preferred stock 6% note payable is in conjunction with the promissory note issued in October 2015 related to the redemption and cancelation of 100% of the issued and outstanding Series A preferred stock as well as 3,400,000 stock options that had been issued to a now former employee. The principal payments have been postponed. In addition, on June 17, 2016, the Company entered into Promissory Note Conversion Agreement with the Noteholder whereby $1,800,000 of the promissory note was converted into 1,800,000 shares of Series C Preferred Stock. The Company has a contingent liability of $150,000 in connection with the acquisition of technology licenses in 2015. This payment becomes due when the respective technology becomes operable and viable. As of the date of this filing, it is unknown when that will become due. At June 30, 2016 this amount was reclassified in Other Long Term Liabilities. |
Stockholders' Deficit
Stockholders' Deficit | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 12 STOCKHOLDERS DEFICIT PREFERRED STOCK Series A As of September 30, 2016, there were 1,000,000 Series A preferred shares authorized and 0 Series A preferred shares outstanding. On October 1, 2015, the Board of directors authorized the repurchase and retirement of all of the issued and outstanding Series A preferred shares and 3,400,000 stock options in exchange for a $3,120,000 subordinated note. Series B As of September 30, 2016 and December 31, 2015, there was 1 Series B preferred share authorized and 1 Series B preferred share outstanding. This preferred share was issued solely for the purpose of the acquisition of ViascanQdata. It has no preferential rights above common shares. There are 5,200,000 Exchangeable Shares of Quest Exchange Ltd. outstanding, each of which is exchangeable into one (1) share of common stock of Quest Solution, Inc. The holder of the Series B Preferred Stock is entitled to a number of votes equal to the number of the Exchangeable Shares of Quest Exchange Ltd. Series C As of September 30, 2016, there was 15,000,000 Series C preferred share authorized and 4,982,500 Series C preferred share outstanding. It has preferential rights above common shares and the Series B preferred shares and are entitled to receive a quarterly dividend at a rate of $0.06 per annum. Each Series C preferred share outstanding is convertible into one (1) share of common stock of Quest Solution, Inc. On June 17, 2016, 4,882,500 shares were issued as part of Promissory Note Conversion agreements as described in Note 11. On July 31, 2016 the Company issued 100,000 shares of Series C preferred stock pursuant to a Separation Agreement in exchange for the redemption of 42,500 restricted common shares. COMMON STOCK For the nine months ended September 30, 2016, the Company issued 112,500 shares to the board members in relation to the vesting schedule agreed to during 4 th On June 17, 2016, the Company entered into a Stock Redemption Agreement whereby it redeemed 1,000,000 restricted common stock in exchange for 357,000 shares of Series C preferred stock. On July 31, 2016 as part of the Separation Agreement with Mr. Ross, the Company issued a promissory note in the amount of $59,500 in connection with the redemption by the Company of 350,000 shares of restricted common stock. In addition, the Company issued 100,000 shares of Series C preferred stock pursuant to the same Separation Agreement in exchange for the redemption of 42,500 restricted common shares. Finally on September 30, 2016, the Company completed the redemption of 1,650,000 shares of restricted common stock pursuant to a Stock Redemption Agreement. In total, for the nine months ended September 30, 2016, the Company has redeemed a total of 3,042,500 shares of restricted common stock. As of September 30, 2016 the Company had 33,980,478 common shares outstanding. Warrants and Options Stock options/warrants For the nine months ended September 30, 2016, there were 381,250 stock options vested for employees. The calculated value of the vesting was $274,404. In addition, 500,000 stock options were forfeited, 2,900,000 stock options were cancelled and 5,000 stock options expired. As at September 30, 2016 there are 4,049,000 stock options that are outstanding of which 3,236,500 are fully vested. Included in Salary and Employment Benefit Expenses is $103,637 and $131,940 of stock based compensation expense for the three months ending September 30, 2016 and 2015, respectively, and $308,079 and $590,817 for the nine months ending September 30, 2016 and 2015, respectively. |
Discontinued Operations
Discontinued Operations | 9 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | NOTE 13 DISCONTINUED OPERATIONS On September 19, 2016, the Company publicly announced the decision of its Board of Directors to enter into a Letter of Intent to sell the shares of its wholly owned subsidiary, Quest Solution Canada Inc., to Viascan Group Inc. The operations of Quest Solution Canada Inc. have been classified as a discontinued operation and the assets and liabilities of Quest Solution Canada Inc. have been classified as held for disposal. The transaction is expected to close in the 4 th The results of Quest Solution Canada Inc. for the three and nine months ended September 30, are presented below: For the three months For the nine months ending September 30, ending September 30, 2016 2015 2016 2015 Revenues $ 3,911,501 $ - $ 11,326,849 $ - Cost of goods sold (3,988,733 ) - (9,751,651 ) - Gross profit (77,232 ) - 1,575,198 - Operating expenses General and administrative (315,088 ) - (874,506 ) - Salary and employee benefits (689,118 ) - (2,074,977 ) - Depreciation and amortization (61,076 ) - (178,069 ) - Professional fees (21,387 ) - (58,138 ) - Goodwill impairment (2,500,000 ) - (4,800,000 ) - Total operating expenses (3,586,669 ) - (7,985,690 ) - Operating loss (3,663,901 ) - (6,410,492 ) - Other income (expenses): Restructuring expenses - - (108,640 ) - Gain (loss) on foreign currency (155,548 ) - 117,138 - Interest expense (86,617 ) - (443,019 ) - Other (expenses) income 23 - 129 Total other income (expenses) (242,142 ) - (434,392 ) - Net Income (Loss) Before Income Taxes (3,906,043 ) - (6,844,884 ) - Provision for Current Income Taxes (13,132 ) - (6,991 ) - Net Loss from discontinued operations $ (3,919,175 ) $ - $ (6,851,875 ) $ - The major classes of assets and liabilities of Quest Solution Canada Inc. classified as held for disposal as at September 30, 2016 and December 31, 2015 are, as follows: As of September 30, 2016 December 31, 2015 ASSETS Current assets Cash $ (42,013 ) $ 19,324 Accounts receivable, net 2,302,399 3,505,920 Inventory, net 1,832,631 2,260,133 Prepaid expenses 97,990 81,468 Other current assets 24,858 1,133 Total current assets 4,215,865 5,867,978 Fixed assets 1,097,248 1,248,763 Goodwill 6,337,860 11,137,860 Total assets $ 11,650,973 $ 18,254,601 LIABILITIES AND STOCKHOLDERS (DEFICIT) Current liabilities Accounts payable and accrued liabilities $ 3,205,449 $ 5,488,998 Line of credit - 2,490,315 Accrued payroll and sales tax 329,874 276,147 Deferred revenue, net 99,905 57,659 Notes payable, related parties, current portion - 356,672 Current portion of note payable 1,841,297 1,255,477 Other current liabilities 114,265 64,175 Total current liabilities 5,590,790 9,989,443 Long term liabilities Note payable, related party, net of debt discount - 363,928 Long term portion of note payable - 442,535 Other long term liabilities 7,553 - Total liabilities $ 5,598,343 $ 10,795,906 Net Assets held for disposal $ 6,052,630 $ 7,458,695 The net cash flows incurred by Quest Solution Canada Inc. are as follows: For the nine months ending September 30, 2016 2015 Net cash used by operating activities $ (1,743,606 ) $ - Net cash provided in investing activities 16,097 - Net cash used in financing activities (3,290,265 ) - Net Cash Outflow from discontinued operations $ (5,017,774 ) $ - |
Restructuring Expenses
Restructuring Expenses | 9 Months Ended |
Sep. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Expenses | NOTE 14 RESTRUCTURING EXPENSES For the nine months ended September 30, 2016, the Company took steps to streamline and simplify its operations in North America. The employees to be separated from the Company as a result of these streamlining initiatives were offered severance or working notices. As a result, the Company has recorded a restructuring charge of $544,951 to realize the streamlining initiatives. The restructuring charges include severance pay, legal costs to execute contract terminations, and cost of stock redemptions. |
Litigation
Litigation | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | NOTE 15 LITIGATION As of September 30, 2016, the Company is not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Companys Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 16 RELATED PARTY TRANSACTIONS The Company leases a building from the former owner of BCS for $9,000 per month, which is believed to be the current fair market value of similar buildings in the area. In connection with the BCS acquisition the Company has an earn out/royalty receivable from the new owners of the BCS RFID business that was sold on November 19, 2014, prior to the acquisition by the Company. The maximum amount to be paid during the 4 year earn out period ending December 31, 2018 is $700,000. Payments to the Company are due within 30 days of the closing of each calendar quarter and the first royalty calculation and payment is due to the Company on April 30, 2015. The Company recorded the fair market value of this earn out receivable at $350,000 as of the acquisition date by the Company. No royalties have been earned and no payments made to or received by the Company as of September 30, 2016 and December 31, 2015, respectively. As a result, the Company has estimated that the probability of recovering any amounts have decreased significantly and as such has recorded a full write-off of the remaining balance of $350,000 in the quarter. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 17 SUSEQUENT EVENTS Share Issuance On October 1, 2016, the Company granted and issued 37,500 shares for board compensation pursuant to the vesting schedule agreed during the fourth quarter 2015. In addition the company issued 131,000 shares to an employee pursuant to his employment contract and 158,411 shares pursuant to the Employee Stock Purchase Program. |
Basis of Presentation and Sum23
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Principles of Consolidation | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The interim consolidated financial statements of Quest Solution, Inc. include the combined accounts of Quest Marketing, Inc., an Oregon Corporation, Bar Code Specialties, Inc., (BCS) a California Corporation, Quest Canada, Inc., (formerly known as ViascanQdata, Inc.), (Viascan) a Canadian based corporation with operations in the same business line as Quest and Quest Exchange Limited, a Canadian based holding company. Effective October 1, 2015, the financial statements of Viascan have been consolidated into the Companys consolidated results of operations. On September 19, 2016, the Company publicly announced the decision of its Board of Directors to enter into a Letter of Intent to sell the shares of its wholly owned subsidiary, Quest Solution Canada Inc., to Viascan Group Inc. The operations of Quest Solution Canada Inc. have been classified as a discontinued operation and the assets and liabilities of Quest Solution Canada Inc have been classified as held for disposal. The companies currently operate as a single business unit. All material intercompany transactions and accounts have been eliminated in consolidation. The interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited interim condensed financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2015 and notes thereto included in the Companys Form 10-K filed with the SEC on April 18, 2016. The Company follows the same accounting policies in the preparation of interim reports. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. |
Cash | Cash Cash consists of petty cash, checking, savings, and money market accounts. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of September 30, 2016 and December 31, 2015. The Company maintains its cash in bank deposit accounts which, at times, may exceed federal insured limits. The Company has restricted cash on deposit with a federally insured bank in the amount of $767,688 at September 30, 2016. This cash is security and collateral for a corporate credit card agreement with a bank and for deposit against a letter of credit issued for executive life insurance policies owned by the Company. |
Use of Estimates | USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. The Company evaluates its estimates and assumptions on a regular basis. The Company uses historical experience and various other assumptions that are believed to be reasonable under the circumstances to form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates and assumptions used in preparation of the consolidated financial statements. |
Purchase Accounting and Business Combinations | PURCHASE ACCOUNTING AND BUSINESS COMBINATIONS The Company accounts for its business combinations using the purchase method of accounting which requires that intangible assets be recognized apart from goodwill if they are contractual in nature or separately identifiable. Acquisitions are measured on the fair value of consideration exchanged and, if the consideration given is not cash, measurement is based on the fair value of the consideration given or the fair value of the assets acquired, whichever is more reliably measurable. The excess of cost of an acquired entity over the fair value of identifiable acquired assets and liabilities assumed is allocated to goodwill. The valuation and allocation process relies on significant assumptions made by management. In certain situations, the allocations of excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when the Company receives updated information, including appraisals and other analyses, which are completed within one year of the acquisition. Revisions to the fair values, which may be significant, are recorded when pending information is finalized, within one year from the acquisition date. |
Accounts Receivable | ACCOUNTS RECEIVABLE Accounts receivable are carried at their estimated collectible amounts. The Company provides allowances for uncollectible accounts receivable equal to the estimated collection losses that will be incurred in collection of all receivables. Accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. The Companys management determines which accounts are past due and if deemed uncollectible, the Company charges off the receivable in the period the determination is made. The Company generally requires no collateral to secure its ordinary accounts receivable. Based on managements evaluation, accounts receivable has a balance in the allowance for doubtful accounts of $20,249 for the period ending September 30, 2016 and December 31, 2015, respectively. |
Property and Equipment | PROPERTY AND EQUIPMENT Property and equipment are stated at purchased cost and depreciated using both straight-line and accelerated methods over estimated useful lives ranging from 3 to 15 years. Upon disposition of property and equipment, related gains and losses are recorded in the results of operations. Depreciation expense for period ending September 30, 2016 and December 31, 2015 was $70,802 and $92,656, respectively. For federal income tax purposes, depreciation is computed using the modified accelerated cost recovery system. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. |
Intangible Assets | INTANGIBLE ASSETS Intangible assets are stated at cost, net of accumulated amortization. The assets are being amortized on the straight-line method over useful lives ranging from 3 to 10 years. Amortization expense for the period ending September 30, 2016 and December 31, 2015 was $1,276,275 and $2,506,167, respectively. September 30, 2016 December 31, 2015 Goodwill $ 10,114,164 $ 10,114,164 Trade Names 4,390,000 4,390,000 Customer Relationships 9,190,000 9,190,000 Accumulated amortization (3,782,442 ) (2,506,167 ) Intangibles, net $ 19,911,722 $ 21,187,997 Goodwill is not amortized, but is evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of intangibles. The annual evaluation for impairment of goodwill and intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. None of the goodwill is deductible for income tax purposes. For the three month period ended September 30, 2016, the goodwill in relation to the Companys investments in Viascan was impaired by $2,500,000 and for the nine months ended September 30, 2016 the goodwill impairment charge was $4,800,000 which was all included in the net loss from discontinued operations. The impairment charge was driven by the following reasons: ● Net operating losses for the first nine months of the year ● Negative cash flow resulting in the Company funding $8.0 million to date since the acquisition date ● Negative working capital ● Conversion of $1.8 million of notes related to the acquisition to Series C preferred shares at condition significantly move favorable to the Company ● Forgiveness of $0.5 million of notes related to the acquisition ● The Companys decision to dispose of the shares of Viascan making it a discontinued operation |
Advertising | ADVERTISING The Company generally expenses advertising costs as incurred. During the nine month period ending September 30, 2016 and September 30, 2015, the Company spent $77,205 and $150,689 on advertising (marketing, trade show and store front expense), net of co-operative rebates, respectively. The Company received rebates on advertising from co-operative advertising agreements with several vendors and suppliers. These rebates have been recorded as a reduction to the related advertising and marketing expense in the period earned. |
Inventory | INVENTORY Substantially all of the inventory consists of raw materials and finished goods and are valued based upon first-in first-out (FIFO) cost, not in excess of market. The determination of whether the carrying amount of inventory requires a write-down is based on a detailed evaluation of inventory relative to any potential slow moving products or discontinued items as well as the market conditions for the specific inventory items. There were no inventory reserves recorded as of September 30, 2016 and December 31, 2015, respectively. |
Depreciation and Amortization | DEPRECIATION AND AMORTIZATION Depreciation and amortization expense primarily consists of the non-cash write-down of tangible and intangible assets over their expected economic lives. We expect this expense to continue to grow in absolute dollars and potentially as a percentage of revenue as we continue to grow and incur capital expenditures to improve our technological infrastructure and acquire assets through potential future acquisitions. |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the price that would be received from selling an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides a hierarchy for inputs used in measuring fair value that prioritize the use of observable inputs over the use of unobservable inputs, when such observable inputs are available. The three levels of inputs that may be used to measure fair value are as follows: ● Level 1 - Quoted prices in active markets for identical assets or liabilities. ● Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data. ● Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by the Company. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observable inputs may result in a reclassification of assets and liabilities within the three levels of the hierarchy outlined above. |
Net Loss Per Common Share | NET LOSS PER COMMON SHARE Net loss per share is provided in accordance with FASB ASC 260-10, Earnings per Share. Basic net loss per common share (EPS) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS as of September 30, 2016 and September 30, 2015 were 36,323,489 and 35,702,188, respectively. The fully diluted number of common stock amounts to 50,195,563 which includes the potential of the existing senior subordinated debt holders converting their debt into common shareholder equity at $1.00 per share (for $3,231,388 in debt) and $2.00 per share (for $274,882 in debt) and 10,182,560 preferred Series B and C shares converting to common shares. Despite the fact the conversion is out of the money, accounting rules require these amounts to be included in diluted shares outstanding. Additional terms of the debt would require the Board of Directors to consent to any debt holder converting and having a position greater than 4.99% outstanding on the date of conversion. |
Foreign Currency Translation, Foreign Exchange Contracts and Comprehensive Loss | FOREIGN CURRENCY TRANSLATION, FOREIGN EXCHANGE CONTRACTS AND COMPREHENSIVE LOSS The functional currency of the Companys foreign subsidiaries is the local currency. Gains and losses resulting from the translation of the foreign subsidiaries financial statements are included in accumulated other comprehensive income (loss) and reported as a separate component of stockholders equity. Gains and losses resulting from foreign currency transactions are included in net income (loss). The Company currently does not enter into financial instruments for either trading or speculative purposes. There were no forward foreign exchange contracts used during the nine month periods ended September 30, 2016 and 2015. Total comprehensive loss is comprised of net loss and other comprehensive earnings losses, such as foreign currency translation gains or losses and unrealized gains or losses on available-for-sale marketable securities. |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS The Company has evaluated the recent pronouncements and believes that none of them will have a material effect on the Companys financial statements. |
Basis of Presentation and Sum24
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Goodwill and Intangible Assets | Amortization expense for the period ending September 30, 2016 and December 31, 2015 was $1,276,275 and $2,506,167, respectively. September 30, 2016 December 31, 2015 Goodwill $ 10,114,164 $ 10,114,164 Trade Names 4,390,000 4,390,000 Customer Relationships 9,190,000 9,190,000 Accumulated amortization (3,782,442 ) (2,506,167 ) Intangibles, net $ 19,911,722 $ 21,187,997 |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | At September 30, 2016 and December 31, 2015, inventories consisted of the following: September 30, 2016 December 31, 2015 Equipment and clearing service $ 415,967 $ 313,847 Raw Materials 122,415 119,065 Work in Progress 1,631 155 Finished Goods 55,900 38,412 Total inventories $ 595,913 $ 471,479 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Liabilities | At September 30, 2016 and December 31, 2015, other liabilities consisted of the following: September 30, 2016 December 31, 2015 Unearned Incentive from credit Cards $ 293,105 $ 100,000 License contingent liability 150,000 - Key Man life Insurance liability 126,095 92,776 Dividend payable 85,276 - Others 212,534 448,735 867,010 641,511 Less Current Portion (220,980 ) (369,609 ) Total long term other liabilities $ 646,030 $ 271,902 |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Revenue Disclosure [Abstract] | |
Schedule of Deferred Revenue | September 30, 2016 December 31, 2015 Deferred Revenue $ 7,959,950 $ 7,332,218 Less Deferred Costs & Expenses (6,651,546 ) (6,113,027 ) Net Deferred Revenue 1,308,404 1,219,191 Less Current Portion (825,534 ) (685,317 ) Total Long Term net Deferred Revenue $ 482,870 $ 533,874 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | Notes payable at September 30, 2016 and December 31, 2015, consists of the following: September 30, 2016 December 31, 2015 Supplier Note Payable $ 11,621,585 $ - Insurance Notes 42,390 59,666 All Other 291,794 67,276 Total 11,955,769 126,942 Less current portion (11,879,131 ) - Long Term Notes Payable $ 76,638 $ 126,942 |
Subordinated Notes Payable (Tab
Subordinated Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Notes and Loans Payable | Notes and loans payable at September 30, 2016 and December 31, 2015, consists of the following: September 30, 2016 December 31, 2015 Note payable - acquisition of Quest $ 5,962,370 $ 6,577,509 Note payable acquisition of BCS 10,348,808 10,348,808 Note payable acquisition of ViascanQdata 639,771 2,446,969 Quest Preferred Stock note payable 1,245,000 3,120,000 Stock repurchase notes 222,366 - Note payable License contingent liability - 150,000 Total notes payable 18,418,315 22,643,286 Less: debt discount (1,274,474 ) (2,306,298 ) Less: current portion (8,207,637 ) (6,790,148 ) Total long-term notes payable $ 8,936,204 $ 13,546,840 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Discontinued Operations | The results of Quest Solution Canada Inc. for the three and nine months ended September 30, are presented below: For the three months For the nine months ending September 30, ending September 30, 2016 2015 2016 2015 Revenues $ 3,911,501 $ - $ 11,326,849 $ - Cost of goods sold (3,988,733 ) - (9,751,651 ) - Gross profit (77,232 ) - 1,575,198 - Operating expenses General and administrative (315,088 ) - (874,506 ) - Salary and employee benefits (689,118 ) - (2,074,977 ) - Depreciation and amortization (61,076 ) - (178,069 ) - Professional fees (21,387 ) - (58,138 ) - Goodwill impairment (2,500,000 ) - (4,800,000 ) - Total operating expenses (3,586,669 ) - (7,985,690 ) - Operating loss (3,663,901 ) - (6,410,492 ) - Other income (expenses): Restructuring expenses - - (108,640 ) - Gain (loss) on foreign currency (155,548 ) - 117,138 - Interest expense (86,617 ) - (443,019 ) - Other (expenses) income 23 - 129 Total other income (expenses) (242,142 ) - (434,392 ) - Net Income (Loss) Before Income Taxes (3,906,043 ) - (6,844,884 ) - Provision for Current Income Taxes (13,132 ) - (6,991 ) - Net Loss from discontinued operations $ (3,919,175 ) $ - $ (6,851,875 ) $ - |
Schedule of Disposal Assets and Liabilities | The major classes of assets and liabilities of Quest Solution Canada Inc. classified as held for disposal as at September 30, 2016 and December 31, 2015 are, as follows: As of September 30, 2016 December 31, 2015 ASSETS Current assets Cash $ (42,013 ) $ 19,324 Accounts receivable, net 2,302,399 3,505,920 Inventory, net 1,832,631 2,260,133 Prepaid expenses 97,990 81,468 Other current assets 24,858 1,133 Total current assets 4,215,865 5,867,978 Fixed assets 1,097,248 1,248,763 Goodwill 6,337,860 11,137,860 Total assets $ 11,650,973 $ 18,254,601 LIABILITIES AND STOCKHOLDERS (DEFICIT) Current liabilities Accounts payable and accrued liabilities $ 3,205,449 $ 5,488,998 Line of credit - 2,490,315 Accrued payroll and sales tax 329,874 276,147 Deferred revenue, net 99,905 57,659 Notes payable, related parties, current portion - 356,672 Current portion of note payable 1,841,297 1,255,477 Other current liabilities 114,265 64,175 Total current liabilities 5,590,790 9,989,443 Long term liabilities Note payable, related party, net of debt discount - 363,928 Long term portion of note payable - 442,535 Other long term liabilities 7,553 - Total liabilities $ 5,598,343 $ 10,795,906 Net Assets held for disposal $ 6,052,630 $ 7,458,695 |
Schedule of Discontinued Cash Flows | The net cash flows incurred by Quest Solution Canada Inc. are as follows: For the nine months ending September 30, 2016 2015 Net cash used by operating activities $ (1,743,606 ) $ - Net cash provided in investing activities 16,097 - Net cash used in financing activities (3,290,265 ) - Net Cash Outflow from discontinued operations $ (5,017,774 ) $ - |
Basis of Presentation and Sum31
Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Cash equivalents | |||||
Cash FDIC insured amount | 767,688 | 767,688 | |||
Allowance for doubtful accounts | 20,249 | 20,249 | 20,249 | ||
Depreciation expense | 70,802 | 92,656 | |||
Amortization of intangible assets | 1,276,275 | 2,506,167 | |||
Goodwill impairment | 2,500,000 | $ 4,800,000 | |||
Impairement of goodwill | Negative cash flow resulting in the Company funding $8.0 million to date | ||||
Notes related to acquisition | 500,000 | $ 500,000 | |||
Advertising expense | 77,205 | $ 150,689 | |||
Inventory reserves | |||||
Weighted average number of common shares outstanding - basic | 35,762,326 | 36,637,523 | 36,506,733 | 35,702,188 | |
Number of diluted shares | 50,195,563 | ||||
Percentage of debtholder converting outstanding on date of conversion | 4.99% | ||||
Series C Preferred Stock [Member] | |||||
Notes related to acquisition | $ 1,800,000 | $ 1,800,000 | |||
Shareholder Equity $1.00 per share [Member] | |||||
Senior subordinated debt holder converting debt into common shareholder equity | 3,231,388 | ||||
Shareholder Equity $2.00 per share [Member] | Series B Preferred Stock [Member] | |||||
Senior subordinated debt holder converting debt into common shareholder equity | 274,882 | ||||
Shareholder Equity $2.00 per share [Member] | Series C Preferred Stock [Member] | |||||
Senior subordinated debt holder converting debt into common shareholder equity | $ 10,182,560 | ||||
Minimum [Member] | |||||
Property and equipment estimated useful lives | 3 years | ||||
Intangible assets estimated useful lives | 3 years | ||||
Maximum [Member] | |||||
Property and equipment estimated useful lives | 15 years | ||||
Intangible assets estimated useful lives | 10 years |
Basis of Presentation and Sum32
Basis of Presentation and Summary of Significant Accounting Policies - Summary of Intangiable Assets (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accumulated amortization | $ (3,782,442) | $ (2,506,167) |
Intangibles, net | 19,911,722 | 21,187,997 |
Goodwill [Member] | ||
Intangibles gross | 10,114,164 | 10,114,164 |
Trade Names [Member] | ||
Intangibles gross | 4,390,000 | 4,390,000 |
Customer Relationships [Member] | ||
Intangibles gross | $ 9,190,000 | $ 9,190,000 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) | Sep. 30, 2016USD ($) |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Working capital deficit | $ 19,396,210 |
Accumulated deficit accumulated other comprehensive loss | $ 31,110,969 |
Concentrations (Details Narrati
Concentrations (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Uninsured cash | $ 250,000 | ||
Revenue [Member] | One Customer [Member] | |||
Percentage of concentration rate | 21.00% | 33.00% | |
Accounts Receivable [Member] | Another Customer [Member] | |||
Percentage of concentration rate | 11.00% | 20.00% | |
Accounts Payable [Member] | One Vendor [Member] | |||
Percentage of concentration rate | 90.00% | 83.00% | |
Accounts Payable [Member] | One Vendor [Member] | Minimum [Member] | |||
Percentage of concentration rate | 10.00% | 10.00% |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Equipment and clearing service | $ 415,967 | $ 313,847 |
Raw Materials | 122,415 | 119,065 |
Work in Progress | 1,631 | 155 |
Finished Goods | 55,900 | 38,412 |
Total inventories | $ 595,913 | $ 471,479 |
Prepaids (Details Narrative)
Prepaids (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Prepaid Expense and Other Assets [Abstract] | ||
Prepaid expenses | $ 561,123 | $ 649,123 |
Intellectual Property (Details
Intellectual Property (Details Narrative) | Aug. 27, 2015USD ($) |
Rampart Systems [Member] | Licensing Agreements [Member] | |
Licenses previous acquired | $ 450,000 |
Settlement Agreement [Member] | |
Payment of settlement | 7,036,000 |
Cost of license | $ 1,150,000 |
Percentage of royalty on sales | 3.50% |
Licenses term | 5 years |
Intelleutual property, description | Under the terms of the Settlement Agreement, the Company was required to pay $7,036,000 as full satisfaction for two (2) promissory notes by September 30, 2015. Included in this agreement (and deducted from the $7.036 million settlement) was the assignment of license rights with an assigned value of $1.15 million. The licenses were previously acquired for $450,000 from Rampart Systems. The assignee has agreed to pay Quest Solution a royalty fee of 3.5% of revenue related to the gun-barrel, rebar inspection, and air frame licenses for a five (5) year period, beginning on the effective date of the Assignment Agreement (as defined in the Settlement Agreement). |
Other Liabilities (Details Narr
Other Liabilities (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Other Liabilities Disclosure [Abstract] | ||
Contingent liability in connection with acquisition of technology licenses | $ 150,000 |
Other Liabilities - Schedule of
Other Liabilities - Schedule of Other Liabilities (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Other Liabilities Disclosure [Abstract] | ||
Unearned Incentive from credit Cards | $ 293,105 | $ 100,000 |
License contingent liability | 150,000 | |
Key Man life Insurance liability | 126,095 | 92,776 |
Dividend payable | 85,276 | |
Others | 212,534 | 448,735 |
Other liabilities gross | 867,010 | 641,511 |
Less Current Portion | (220,980) | (369,609) |
Total long term other liabilities | $ 646,030 | $ 271,902 |
Deferred Revenue (Details Narra
Deferred Revenue (Details Narrative) | 9 Months Ended |
Sep. 30, 2016 | |
Amortization period of deferred revenue liability | 3 years |
Minimum [Member] | |
Amortization period of deferred revenue liability | 1 year |
Maximum [Member] | |
Amortization period of deferred revenue liability | 5 years |
Deferred Revenue - Schedule of
Deferred Revenue - Schedule of Deferred Revenue (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Deferred Revenue Disclosure [Abstract] | ||
Deferred Revenue | $ 7,959,950 | $ 7,332,218 |
Less Deferred Costs & Expenses | (6,651,546) | (6,113,027) |
Net Deferred Revenue | 1,308,404 | 1,219,191 |
Less Current Portion | 825,534 | 685,317 |
Total Long Term net Deferred Revenue | $ 482,870 | $ 533,874 |
Credit Facilities and Line of42
Credit Facilities and Line of Credit (Details Narrative) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2014 | Sep. 30, 2016 | Jul. 02, 2016 | Dec. 31, 2015 | Nov. 30, 2015 | |
Line of credit, balance | $ 4,194,719 | $ 2,960,342 | |||
Line of Credit Agreement [Member] | Wells Fargo Bank [Member] | |||||
Line of credit term | 3 years | ||||
Line of credit, balance | $ 8,000,000 | ||||
Purchasing Card Agreement [Member] | Wells Fargo Bank [Member] | |||||
Line of credit limit | 300,000 | ||||
Letter of credit | $ 45,076 | ||||
Sale of Accounts and Security Agreement [Member] | Faunus Group International [Member] | |||||
Maximum borrowing limit | $ 15,000,000 | ||||
Factoring and Security Agreement [Member] | Action Capital Corporation [Member] | |||||
Percentage of reserve account | 10.00% | ||||
Factoring and Security Agreement [Member] | Action Capital Corporation [Member] | Prime Rate [Member] | |||||
Percentage of interest rate | 2.00% | ||||
Percentage of average outstanding balance | 0.75% | ||||
Factoring and Security Agreement [Member] | Action Capital Corporation [Member] | Maximum [Member] | |||||
Debt instrument face amount | $ 5,000,000 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Jul. 31, 2016 | Jul. 18, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Nov. 21, 2014 |
Notes payable | $ 11,955,769 | $ 11,955,769 | $ 126,942 | |||||
Restructuring expenses | 84,317 | 544,941 | ||||||
Mr. Ross [Member] | ||||||||
Debt instruments periodic payment | $ 102,000 | |||||||
Restricted shares of common stock | 350,000 | |||||||
Secured Promissory Note [Member] | ||||||||
Debt instruments periodic payment | $ 250,000 | |||||||
Debt instrument due date | Dec. 31, 2016 | |||||||
Debt instrument face amount | $ 12,492,137 | $ 11,621,585 | 11,621,585 | |||||
Percentage of reserve account | 12.00% | |||||||
Promissory Note [Member] | Mr. Ross [Member] | ||||||||
Promisory note issued | $ 59,500 | |||||||
BCS Acquisition [Member] | ||||||||
Debt instruments periodic payment | $ 4,758 | |||||||
Debt instruments interest rate | 1.89% | 1.89% | 1.89% | |||||
Debt instrument due date | Oct. 31, 2018 | |||||||
BCS Acquisition [Member] | Debt Non Current [Member] | ||||||||
Notes payable | $ 76,638 | $ 76,638 | ||||||
BCS Acquisition [Member] | Debt [Member] | ||||||||
Notes payable | 130,294 | 130,294 | ||||||
BCS Acquisition [Member] | Debt Current [Member] | ||||||||
Notes payable | $ 53,656 | 53,656 | ||||||
First Insurance Funding [Member] | ||||||||
Debt instruments periodic payment | $ 15,688 | |||||||
Debt instruments interest rate | 6.00% | 6.00% | ||||||
Notes payable | $ 42,390 | $ 42,390 | ||||||
First Insurance Funding [Member] | ||||||||
Debt instruments periodic payment | $ 3,490 | |||||||
Debt instruments interest rate | 3.25% | 3.25% | ||||||
Note One [Member] | ||||||||
Debt outstanding | $ 161,500 | $ 161,500 | ||||||
Note Two [Member] | ||||||||
Debt outstanding | $ 161,500 | $ 161,500 |
Notes Payable - Schedule of Not
Notes Payable - Schedule of Notes Payable (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Total notes payable | $ 11,955,769 | $ 126,942 |
Less: current portion | 11,879,131 | |
Long Term Notes Payable | 76,638 | 126,942 |
Supplier Note Payable [Member] | ||
Total notes payable | 11,621,585 | |
Insurance Note [Member] | ||
Total notes payable | 42,390 | 59,666 |
All Other [Member] | ||
Total notes payable | $ 291,794 | $ 67,276 |
Subordinated Notes Payable (Det
Subordinated Notes Payable (Details Narrative) - USD ($) | Jun. 17, 2016 | Oct. 01, 2015 | Nov. 21, 2014 | Jan. 09, 2014 | Oct. 31, 2015 | Sep. 30, 2016 | Dec. 31, 2015 |
Contingent liability | $ 150,000 | ||||||
Series A Preferred Stock [Member] | |||||||
Debt instruments Interest increase | 6.00% | ||||||
Percentage of redemption and cancelation | 100.00% | ||||||
Number of option issued | 3,400,000 | ||||||
Viascan Group [Member] | |||||||
Debt instruments Interest increase | 6.00% | ||||||
Debt due date description | due 2016-2018 | ||||||
Note issuance amount | $ 1,500,000 | ||||||
Promissory Note Conversion Agreement [Member] | Series C Preferred Stock [Member] | |||||||
Debt instrument conversion of shares | 4,882,500 | ||||||
Promissory Note Conversion Agreement [Member] | Noteholders [Member] | Series C Preferred Stock [Member] | |||||||
Debt instrument conversion of shares amount | $ 1,800,000 | ||||||
Debt instrument conversion of shares | 1,800,000 | ||||||
Quest Marketing, Inc [Member] | Promissory Note Conversion Agreement [Member] | Noteholders [Member] | Series C Preferred Stock [Member] | |||||||
Debt instrument conversion of shares amount | $ 684,000 | ||||||
Debt instrument conversion of shares | 684,000 | ||||||
Debt discount | $ 171,000 | ||||||
Viascan Group [Member] | Promissory Note Conversion Agreement [Member] | Series C Preferred Stock [Member] | |||||||
Debt instrument conversion of shares amount | $ 1,049,250 | ||||||
Debt instrument conversion of shares | 1,049,250 | ||||||
Quest Marketing, Inc [Member] | |||||||
Debt instruments interest rate | 1.89% | ||||||
Debt instruments Interest increase | 6.00% | ||||||
Debt due date description | 2,017 | ||||||
Debt discount | $ 4,000,000 | ||||||
Debt discount per quater | $ 200,000 | ||||||
BCS Acquisition [Member] | |||||||
Debt instruments interest rate | 1.89% | 1.89% | |||||
Debt due date description | 2,018 | ||||||
Debt convertible price per share | $ 2 | ||||||
Percentage of outstanding shares | 5.00% |
Subordinated Notes Payable - Sc
Subordinated Notes Payable - Schedule of Notes and Loans Payable (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Total notes payable | $ 18,418,315 | $ 22,643,286 |
Less: debt discount | (1,274,474) | (2,306,298) |
Less: current portion | (8,207,637) | (6,790,148) |
Total long-term notes payable | 8,936,204 | 13,546,840 |
Note Payable Acquisition of Quest [Member] | ||
Total notes payable | 5,962,370 | 6,577,509 |
Note Payable Acquisition of BCS [Member] | ||
Total notes payable | 10,348,808 | 10,348,808 |
Note Payable Acquisition of Viascan Qdata [Member] | ||
Total notes payable | 639,771 | 2,446,969 |
Quest Preferred Stock Note Payable [Member] | ||
Total notes payable | 1,245,000 | 3,120,000 |
Stock Repurchase Notes [Member] | ||
Total notes payable | 222,366 | |
Note Payable License Contingent Liability [Member] | ||
Total notes payable | $ 150,000 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Jul. 31, 2016 | Jun. 17, 2016 | Oct. 01, 2015 | Sep. 30, 2016 | Jul. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Common stock, shares outstanding | 33,980,478 | 33,980,478 | 36,871,478 | 33,980,478 | ||||||
Stock option vested shares | 381,250 | 381,250 | 381,250 | |||||||
Shares vested value | $ 274,404 | $ 204,840 | ||||||||
Number of stock option shares forfeited | 500,000 | |||||||||
Number of stock option shares cancelled | 2,900,000 | |||||||||
Number of stock option shares expired | 5,000 | |||||||||
Number of stock option shares outstanding | 4,049,000 | 4,049,000 | 4,049,000 | |||||||
Number of stock option shares vested | 3,236,500 | |||||||||
Stock option compensation expense | $ 103,637 | $ 131,940 | $ 308,079 | $ 590,817 | ||||||
Mr. Ross [Member] | ||||||||||
Restricted common shares | 350,000 | |||||||||
Board Of Directors [Member] | ||||||||||
Number of common stock shares issued for vesting | 112,500 | |||||||||
Number of shares issued for board compensation | 12,500 | |||||||||
Number of shares issued for board compensation amount | $ 25,875 | |||||||||
Employees [Member] | ||||||||||
Number of shares issued for employees, shares | 39,000 | |||||||||
Number of shares issued for employees | $ 7,800 | |||||||||
Stock Redemption Agreement [Member] | ||||||||||
Restricted common shares | 1,000,000 | 1,650,000 | 3,042,500 | |||||||
Separation Agreement [Member] | Mr. Ross [Member] | ||||||||||
Restricted common shares | 350,000 | |||||||||
Issued promissory note | $ 59,500 | |||||||||
Series B Preferred Stock [Member] | ||||||||||
Preferred shares authorized | 1 | 1 | 1 | 1 | ||||||
Preferred shares outstanding | 1 | 1 | 1 | 1 | ||||||
Exchangeable shares | 5,200,000 | |||||||||
Exchangeable shares description | There are 5,200,000 Exchangeable Shares of Quest Exchange Ltd. outstanding, each of which is exchangeable into one (1) share of common stock of Quest Solution, Inc. | |||||||||
Subordinated Note [Member] | ||||||||||
Stock options shares exchanged for debt | 3,400,000 | |||||||||
Stock options shares exchanged for debt amount | $ 3,120,000 | |||||||||
Series A Preferred Stock [Member] | ||||||||||
Preferred shares authorized | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||
Preferred shares outstanding | 0 | 0 | 0 | |||||||
Series C Preferred Stock [Member] | ||||||||||
Preferred shares authorized | 15,000,000 | 15,000,000 | 15,000,000 | 15,000,000 | ||||||
Preferred shares outstanding | 4,982,500 | 4,982,500 | 4,982,500 | |||||||
Exchangeable shares description | Each Series C preferred share outstanding is convertible into one (1) share of common stock of Quest Solution, Inc. | |||||||||
Preferred stock dividend price per annum | $ 0.06 | |||||||||
Preferred stock shares issued | 100,000 | |||||||||
Restricted common shares | 42,500 | |||||||||
Series C Preferred Stock [Member] | Promissory Note Conversion Agreement [Member] | ||||||||||
Shares issued for conversion of debt | 4,882,500 | |||||||||
Series C Preferred Stock [Member] | Stock Redemption Agreement [Member] | ||||||||||
Restricted common shares | 357,000 | |||||||||
Series C Preferred Stock [Member] | Separation Agreement [Member] | Mr. Ross [Member] | ||||||||||
Preferred stock shares issued | 100,000 | |||||||||
Restricted common shares | 42,500 |
Discontinued Operations - Sched
Discontinued Operations - Schedule of Discontinued Operations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Discontinued Operations and Disposal Groups [Abstract] | ||||
Revenues | $ 3,911,501 | $ 11,326,849 | ||
Cost of goods sold | (3,988,733) | (9,751,651) | ||
Gross profit | (77,232) | 1,575,198 | ||
General and administrative | (315,088) | (874,506) | ||
Salary and employee benefits | (689,118) | (2,074,977) | ||
Depreciation and amortization | (61,076) | (178,069) | ||
Professional fees | (21,387) | (58,138) | ||
Goodwill impairment | (2,500,000) | (4,800,000) | ||
Total operating expenses | (3,586,669) | (7,985,690) | ||
Operating loss | (3,663,901) | (6,410,492) | ||
Restructuring expenses | (242,142) | (434,392) | ||
Gain (loss) on foreign currency | (155,548) | 117,138 | ||
Interest expense | (86,617) | (443,019) | ||
Other (expenses) income | 23 | 129 | ||
Total other income (expenses) | (242,142) | (434,392) | ||
Net Income (Loss) Before Income Taxes | (3,906,043) | (6,844,884) | ||
Provision for Current Income Taxes | (13,132) | (6,991) | ||
Net Loss from discontinued operations | $ (3,919,175) | $ (6,851,875) |
Discontinued Operations - Sch49
Discontinued Operations - Schedule of Disposal Assets and Liabilities (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Total assets | $ 11,650,973 | $ 18,254,601 |
Total liabilities | 5,598,343 | 10,795,906 |
Discontinued Operations [Member] | ||
Cash | (42,013) | 19,324 |
Accounts receivable, net | 2,302,399 | 3,505,920 |
Inventory, net | 1,832,631 | 2,260,133 |
Prepaid expenses | 97,990 | 81,468 |
Other current assets | 24,858 | 1,133 |
Total current assets | 4,215,865 | 5,867,978 |
Fixed assets | 1,097,248 | 1,248,763 |
Goodwill | 6,337,860 | 11,137,860 |
Total assets | 11,650,973 | 18,254,601 |
Accounts payable and accrued liabilities | 3,205,449 | 5,488,998 |
Line of credit | 2,490,315 | |
Accrued payroll and sales tax | 329,874 | 276,147 |
Deferred revenue, net | 99,905 | 57,659 |
Notes payable, related parties, current portion | 356,672 | |
Current portion of note payable | 1,841,297 | 1,255,477 |
Other current liabilities | 114,265 | 64,175 |
Total current liabilities | 5,590,790 | 9,989,443 |
Note payable, related party, net of debt discount | 363,928 | |
Long term portion of note payable | 442,535 | |
Other long term liabilities | 7,553 | |
Total liabilities | 5,598,343 | 10,795,906 |
Net Assets held for disposal | $ 6,052,630 | $ 7,458,695 |
Discontinued Operations - Sch50
Discontinued Operations - Schedule of Discontinued Cash Flows (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Discontinued Operations and Disposal Groups [Abstract] | ||
Net cash used by operating activities | $ (1,743,606) | |
Net cash provided in investing activities | 16,097 | |
Net cash used in financing activities | (3,290,265) | |
Net Cash Outflow from discontinued operations | $ (5,017,775) |
Restructuring Expenses (Details
Restructuring Expenses (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Restructuring and Related Activities [Abstract] | ||||
Restructuring charge | $ 84,317 | $ 544,941 |
Litigation (Details Narrative)
Litigation (Details Narrative) | 9 Months Ended |
Sep. 30, 2016 | |
Maximum [Member] | |
Percentage of beneficially in common stock interest adverse | 5.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Payment for royalty | $ 0 |
Fair market value of this earn out receivable | 350,000 |
Repayment of related party debt | 350,000 |
Bar Code Specialties Inc. [Member] | |
Rent expense | $ 9,000 |
Earn out period | 4 years |
Earn out expiration date | Dec. 31, 2018 |
Payment for royalty | $ 700,000 |
Royalty payment due date | Apr. 30, 2015 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - shares | Oct. 01, 2016 | Oct. 01, 2016 |
Shares granted and issued for board compensation | 37,500 | |
Number of shares issued to employee | 131,000 | |
Employee Stock Purchase Program [Member] | ||
Number of shares issued to employee | 158,411 |