Subsequent Events

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

NOTE 14 – SUBSEQUENT EVENTS

Sale of Accounts and Security Agreement

On November 6, 2015, Quest Solution’s wholly owned subsidiaries, QMI and BCS (“the sellers”) entered into that certain Sale of Accounts and Security Agreement (the “SAS Agreement”) with Faunus Group International, Inc., a Delaware corporation (“FGI”), to establish a sale of accounts facility (the “FGI Facility”), whereby Sellers may offer to sell their accounts receivable to FGI each month during the term of the SAS Agreement, up to a maximum amount outstanding at any time of Fifteen Million Dollars ($15,000,000). Performance of Sellers’ obligations under the SAS Agreement is secured by a security interest in all of Sellers’ assets.

Acquisition Agreement

The Company entered into an Acquisition Agreement (the “Acquisition Agreement”), which closed on November 6, 2015, simultaneous with the closing of the SAS Agreement with FGI, which Acquisition Agreement is effective as of October 1, 2015, among the Company, Quest Exchange, Ltd., a Canadian corporation and a wholly-owned subsidiary of the Company (“Quest Exchange”), Viascan Group, Inc., a Canadian corporation (“Viascan Group”), and ViascanQData, Inc. a Canadian corporation (“ViascanQData”). Pursuant to the terms of the Acquisition Agreement, the Company acquired all of the issued and outstanding common shares of ViascanQData from Viascan Group, the sole stockholder of ViascanQData, in exchange for the issuance of 5,200,000 exchangeable shares of Quest Exchange, and two (2) subordinated promissory notes in the principal amounts of $1,000,000.00 and $500,000.00, respectively (as described in more detail herein). Each exchangeable share of Quest Exchange is exchangeable into one (1) share of the Company’s common stock at the election of Viascan Group or, in certain circumstances, of the Company.

Employment Agreements

Concurrent with the closing of the Acquisition Agreement, and effective as of October 1, 2015, the Company entered into Employment Agreements with the following former employees (the “Employees”) of Viascan Group (the “Employment Agreements”):

● Gilles Gaudreault;

● Jean-Paul Chartier;

● Denis Kurdi; and

● Bertrand Martelle.

The Employment Agreements provide for a base salary for each of the Employees, in addition to one-time sign-on or performance bonuses, as well as customary confidentiality, non-solicitation, non-disparagement and cooperation provisions.

Amendment to Settlement Agreement

On August 27, 2015, the Company entered into a Settlement Agreement with Thomet. Under the terms of the Settlement Agreement, the Company was required to pay Thomet $7,036,000.00 as full satisfaction for two (2) promissory notes held by Thomet by September 30, 2015. Related to the Company’s entry into the FGI Facility and acquisition of ViascanQData, which occurred after September 30, 2015, the Company was unable to make such payments to Thomet and was required to amend the terms of the Settlement Agreement. The Settlement Agreement was previously filed with the SEC on September 3, 2015 as Exhibit 10.1 to the Company’s Current Report on Form 8-K.

On October 19, 2015, the Company 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.

Wells Fargo Pay-Out

On November 5, 2015, Wells Fargo Bank, National Association (“Wells Fargo”) accepted full payment of all obligations of the Company and Sellers (together the “Borrowers”) under that certain Credit Agreement, dated December 31, 2014, as amended from time to time (the “Existing Credit Agreement”), terminated the Existing Credit Agreement and released Wells Fargo’s security interests in Sellers’ collateral. The Borrowers paid to Wells Fargo approximately $2.8 million representing payment for all unpaid principal, interest, fees, costs and expenses under the Existing Credit Agreement, as well as funds for additional reserves (the “Pay-Out Amount).

Notwithstanding the pay-out of Wells Fargo with respect to the amounts owed under the Existing Credit Agreement, Wells Fargo will continue to offer Borrowers, on an interim basis, depository account services and treasury management products. Further, Borrowers will continue to maintain in effect a letter of credit number with Wells Fargo, issued by Wells Fargo in favor of Barrington Bank & Trust Company, pursuant to the terms of the Existing Credit Agreement and any letter of credit agreement entered into between Wells Fargo and Borrowers.

Stock Repurchase and Cancellation

Under the terms of the Settlement Agreement, the Company agreed to redeem Thomet’s stock in the Company, totaling 900,000 shares, no later than December 31, 2015 for $342,000.

On October 1, 2015, the Company entered into a Stock Redemption Agreement (the “Stock Redemption Agreement”), pursuant to which the Company redeemed (i) 500,000 shares of the Company’s Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred”), and (ii) certain stock options to purchase up to 3,400,000 shares of the Company’s Common Stock at $0.50 per share, in exchange for a promissory note in the principal amount of $3,120,000.

Amendment to Subordinated Note Agreement

On October 8, 2015, the Company entered into that certain Second Amendment to Secured Subordinated Convertible Promissory Note (the “Second Amendment”) with David Marin, an investor and employee of the Company (“Marin”), pursuant to which the Company and Marin agreed to modify the payment schedule of Marin’s secured subordinated convertible promissory note, dated November 21, 2014, in the original principal amount of $11,000,000 (the “Marin Note”). Under the terms of the Second Amendment, the Company agreed to pay to Marin $100,000 within five (5) business days’ of the signing of the Second Amendment and, upon the closing of one or more financings by the Company that raise in the aggregate $10,000,000 (not including the FGI Facility), a $1,000,000 payment toward the Marin Note. The Second Amendment further modified the payment schedule of the Marin Note, providing for Maximum Payments and True-Up Payments (as those terms are defined in the Second Amendment) to Marin, contingent upon the occurrence of the Company’s regular monthly payments. The previous agreement was based off of interest only payments and a true-up related to a pro-rata share of EBITDA, whereas the amendment has fixed payments and a true-up related to pro-rata share of Net Income.

Additions to the Board of Directors and Changes to Management

Pursuant to the terms of the Acquisition Agreement, Thomas O. Miller, the Company’s then Chief Executive Officer, President and Chairman of the Board, resigned from his position as Chief Executive Officer, effective October 1, 2015. Mr. Miller will remain as the Company’s President and Chairman of the Board.

Simultaneous with the resignation of Mr. Miller as Chief Executive Officer and pursuant to the terms of the Acquisition Agreement, Gilles Gaudreault, was appointed as the Company’s Chief Executive Officer, effective October 1, 2015.

Certificate of Designation

The Company filed a Certificate of Designation of Series B Preferred Stock with the Delaware Secretary of State on October 10, 2015, pursuant to the Board’s unanimous approval, at a meeting held on October 1, 2015, to create a series of convertible preferred stock designated as Series B Preferred Stock (the “Series B Preferred Stock”). The shares of Series B Preferred Stock shall have a par value of $0.001 per share and each shall constitute one (1) share. These shares are only being issued for purposes of facilitating the ViascanQData transaction in the amount of 5.2 million shares.

Change of Headquarters

Effective October 1, 2015, the Company changed the location of its principal executive corporate office. The Company’s new address is 860 Conger Street, Eugene, Oregon 97402.

The foregoing description of the material terms of each of the transactions described in Note 14 of this report are not complete and are qualified in their entirety by reference to the full text of and the exhibits contained in the Company’s Current Report on Form 8-K, filed with the SEC on November 10, 2015.