Subordinated Notes Payable

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Subordinated Notes Payable

NOTE 10 – SUBORDINATED NOTES PAYABLE

Notes and loans payable consisted of the following:

	September 30, 2015			December 31, 2014
Notes payable - acquisition of QMI and BCS	$	21,127,734		$	24,408,825
Total notes payable		21,127,734			24,408,825
Less: debt discount		(2,506,289	)		(3,200,000	)
Less: current portion		(6,912,498	)		(4,201,650	)
Total long-term notes payable	$	11,708,947		$	17,077,175

As of September 30, 2015 and December 31, 2014, the Company recorded interest expense in connection with these notes in the amount of $335,768 and $51,806, respectively.

On August 27, 2015, Quest Solution entered into a Settlement Agreement with Thomet. Under the terms of the Settlement Agreement, Quest Solution was required to pay Thomet $7,036,000.00 as full satisfaction for two (2) promissory notes held by Thomet by September 30, 2015. Included in this agreement (and deducted from the $7.036 million settlement) was the assignment of license rights to Thomet with an assigned value of $1.15 million. The licenses were previously acquired for $450,000 from Rampart Systems. Thomet shall 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 Quest Solution by Thomet. On October 19, 2015, Quest Solution and Thomet entered into that certain First Amendment to the Omnibus Settlement Agreement (the “Settlement Agreement Amendment”), which modified the payment schedule under the Settlement Agreement. The foregoing description of the material terms of each of the Settlement Agreement and Settlement Agreement Amendment are not complete and are qualified in their entirety by reference to the full text of such agreements, which are filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 3, 2015, and Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed with the SEC on November 10, 2015.

On September 28, 2015, the Company entered into that certain Notice and Offer of Settlement under an Amended and Restated Secured Subordinated Convertible Promissory Note (the “Zicman Settlement Agreement”) with George Zicman, an investor and employee of the Company (“Zicman”), pursuant to which Zicman agreed to settle debt obligations with the Company of approximately $1,617,000 in exchange for (i) 1,000,000 shares of restricted common stock at $0.357 per share, (ii) a fixed payment of $50,000 per month, beginning January 15, 2016, with a balloon payment due April 15, 2017, at 1.89%, expected to be approximately $426,500, and (iii) within 30 days of the Zicman Settlement Agreement, a payment of Eighty-Four Thousand Dollars ($84,000). The foregoing description of the material terms of the Zicman Settlement Agreement is not complete and is qualified in its entirety by reference to the full text of such agreement, which is filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K, filed with the SEC on November 10, 2015.