UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 13, 2016
QUEST SOLUTION, INC.
(Exact name of registrant as specified in charter)
Delaware | 000-09047 | 20-3454263 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
860 Conger Street, Eugene, OR 97402
(Address of Principal Executive Offices) (Zip Code)
(714) 899-4800
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, If Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. Entry into a Material Definitive Agreement
On June 17, 2016, Quest Solution, Inc. (the “Company”) entered into Promissory Note Conversion Agreements (the “Promissory Note Conversion Agreements”) with each of Jason F. Griffith, Thomas Miller, Viascan Group F/B/O Danis Kurdi & 3587967 Canada, Inc., Viascan Group, Inc., and George Zicman (the “Noteholders”). The Promissory Note Conversion Agreements converted certain outstanding debt owed by the Company to the Noteholders into shares of Series C Preferred Stock, $0.001 par value (“Series C Preferred Stock”) at a conversion rate of one share for each $1.00 of principal and accrued but unpaid interest due on the debt, as follows:
● | $1,800,000 of an amount of debt owed by the Company to Mr. Griffith under a promissory note was converted into 1,800,000 shares of Series C Preferred Stock issued to Mr. Griffith; | |
● | $1,000,000 of debt owed by the Company to Viascan Group, Inc. under a promissory note was converted into 1,000,000 shares of Series C Preferred Stock issued to Viascan Group, Inc.; | |
● | $800,000 of debt owed by the Company to Viascan Group F/B/O Danis Kurdi & 3587967 Canada, Inc. under a promissory note was converted into 800,000 shares of Series C Preferred Stock issued to Viascan Group F/B/O Danis Kurdi & 3587967 Canada, Inc.; | |
● | $684,000 of and amount of debt owed by the Company to Mr. Zicman under a promissory note was converted into 684,000 shares of Series C Preferred Stock issued to Mr. Zicman; | |
● | $357,000 owed by the Company to Mr. Zicman in connection with the Company’s redemption of 1,000,000 shares of common stock previously granted to Mr. Zicman to settle debt obligations was converted into 357,000 shares of Series C Preferred Stock; and | |
● | $200,000 of debt owed by the Company to Mr. Miller was converted into 200,000 shares of Series C Preferred Stock. |
Item 3.02. Unregistered Sales of Equity Securities
The information contained in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
The Company filed a Certificate of Designation of Series C Preferred Stock with the Delaware Secretary of State on June 17, 2016, pursuant to the Board’s unanimous approval, at a meeting held on June 16, 2016, to create the Series C Preferred Stock. The shares of Series C Preferred Stock shall have a par value of $0.001 per share. The Certificate of Designation designates 15,000,000 shares as Series C Preferred Stock. The following description of the Certificate of Designation of Series C Preferred Stock is not complete and is qualified by reference to the complete document. A copy of the Certificate of Designation of Series C Preferred Stock is filed as Exhibit 3.1 to this report and is incorporated into this Item 5.03 by reference.
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Dividend and Distribution Rights
The holders of shares of Series C Preferred Stock, in preference to the holders of shares of common stock of the Company and of any other junior stock, shall be entitled to receive, out of funds legally available for the purpose, quarterly dividends at a rate of $0.06 per annum, payable quarterly in cash on the first day of January, April, July and October in each year, commencing on the first such date after the first issuance of a share or fraction of a share of Series C Preferred Stock.
Conversion Rights
The holders of the shares of Series C Preferred Stock shall be entitled, at their option, at any time, to convert all or any such shares of Series C Preferred Stock into a number of shares of common stock of the Company. Each share of Series C Preferred Stock shall convert into one share of common stock.
Redemption
The Company shall be entitled, at its option, at any time, to redeem all or any such shares of Series C Preferred Stock out of funds legally available therefor at a redemption price of $1.00 with no further action required on the part of the holders of Series C Preferred Stock.
Voting Rights
The holders of outstanding shares of Series C Preferred Stock generally shall be entitled to vote together with the holders of common stock as a single class on all matters submitted for a vote of holders of common stock and shall be entitled to one vote per share of Series C Preferred Stock.
Liquidation
Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, each share of Series C Preferred Stock entitles the holder to receive, before any distribution or payment may be made to a holder of any other securities of the Company, an amount of $1.00 plus any accrued and unpaid dividends thereon.
Item 7.01. Regulation FD Disclosure
On June 21, 2016, the Company issued a press release (the “Press Release”) announcing the creation of the Series C Preferred Stock and the reduction of debt. A copy of the Press Release is attached hereto as Exhibit 99.1 and incorporated into this Item 7.01 by reference.
Pursuant to the rules and regulations of the Securities and Exchange Commission, the information in this Item 7.01 disclosure, including Exhibit 99.1, and the information set forth therein, is deemed to have been furnished and shall not be deemed to be “filed” under the Securities Exchange Act of 1934.
Item 8.01. Other Events
On June 13, 2016, Viascan Group, Inc. agreed to discount its existing promissory note, dated October 1, 2015, by the amount of $500,000, effective June 30, 2016.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit | ||
Number | Description | |
3.1 | Certificate of Designation of Series C Preferred Stock of Quest Solution, Inc. | |
99.1 | Press Release, dated June 21, 2016 (furnished only) |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: June 21, 2016
QUEST SOLUTION, INC. | ||
By: | /s/ Gilles Gaudreault | |
Gilles Gaudreault | ||
Chief Executive Officer |
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EXHIBIT INDEX
Exhibit Number |
Description | |
3.1 | Certificate of Designation of Series C Preferred Stock of Quest Solution, Inc. | |
99.1 | Press Release, dated June 21, 2016 (furnished only) |
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Exhibit 3.1
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
OF
QUEST SOLUTION, INC.
The undersigned, Gilles Gaudreault, hereby certifies that:
1. | He is the Chief Executive Officer of Quest Solution, Inc., a Delaware corporation (the “Corporation”). |
2. | The Corporation is authorized to issue 25,000,000 shares of preferred stock, of which 1,000,000 shares are designated as Series A Preferred Stock and one share is designated as Series B Preferred Stock. |
3. | The following resolutions were duly adopted by the Board of Directors of the Corporation (the “Board”): |
WHEREAS, the Certificate of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of 25,000,000 shares, par value $0.001, issuable from time to time in one or more series;
WHEREAS, the Board is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of 15,000,000 of the 25,000,000 shares of preferred stock which the corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:
TERMS OF PREFERRED STOCK
SECTION 1
DESIGNATION AND AUTHORIZATION
1.1. Designation. Such series of preferred stock is hereby designated as Series C Preferred Stock. Shares of Series C Preferred Stock have a par value of $0.001 per share. In accordance with the terms hereof, each share of Series C Preferred Stock shall have the same relative rights as, and be identical in all respects with, each other share of Series C Preferred Stock.
1.2. Authorization. The number of shares constituting Series C Preferred Stock shall be 15,000,000 shares.
SECTION 2
DIVIDEND AND DISTRIBUTION RIGHTS
(a) The holders of shares of Series C Preferred Stock, in preference to the holders of shares of Common Stock, $0.001 par value per share (the “Common Stock”), of the Corporation and of any other junior stock, shall be entitled to receive, out of funds legally available for the purpose, quarterly dividends at a rate of $0.06 per annum, payable quarterly in cash on the first day of January, April, July and October in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Preferred Stock.
(b) Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series C Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty days prior to the date fixed for the payment thereof.
SECTION 3
CONVERSION RIGHTS
(a) Subject to and upon compliance with the provisions of this Section 3, the holders of the shares of Series C Preferred Stock shall be entitled, at their option, at any time, to convert all or any such shares of Series C Preferred Stock into a number of fully paid and non-assessable shares of Common Stock. Each share of Series C Preferred Stock shall convert into one (1) share of Common Stock.
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(b) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the authorized but unissued Common Stock or out of Common Stock held in treasury, for the purpose of effecting the conversion of Series C Preferred Stock, the full number of shares of Common Stock then issuable upon the conversion of all outstanding shares of Series C Preferred Stock.
SECTION 4
REDEMPTION
Series C Preferred Stock shall not be redeemable except as set forth in this Section 4.
The Corporation shall be entitled, at its option, at any time, to redeem all or any such shares of Series C Preferred Stock out of funds legally available therefor at a redemption price of $1.00 with no further action required on the part of the holders of Series C Preferred Stock. In case of any redemption of only part of the shares of Series C Preferred Stock at the time outstanding, the shares of Series C Preferred Stock to be redeemed shall be selected pro rata from the holders of record of Series C Preferred Stock in proportion to the number of Series C Preferred Stock held by such holders. The Series C holders shall be given written notice of any pending redemption and shall have five (5) business days to elect to convert all or any shares of their Series C Preferred Stock into Common Stock pursuant to Section 3(a) hereof in lieu of having their shares redeemed.
SECTION 5
VOTING RIGHTS
Except as otherwise provided by applicable law and in addition to any voting rights provided by law, the holders of outstanding shares of Series C Preferred Stock:
(a) shall be entitled to vote together with the holders of Common Stock as a single class on all matters submitted for a vote of holders of Common Stock;
(b) shall be entitled to one (1) vote per share of Series C Preferred Stock;
(c) shall have such other voting rights as are specified in the Certificate of Incorporation or as otherwise provided by Delaware law; and
(d) shall be entitled to receive notice of any stockholders’ meeting in accordance with the Certificate of Incorporation and By-laws of the Corporation.
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SECTION 6
LIQUIDATION
Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, each share of Series C Preferred Stock entitles the holder thereof to receive and to be paid out of the assets of the Corporation available for distribution, before any distribution or payment may be made to a holder of any other securities of the Corporation, an amount of one dollar ($1.00) plus any accrued and unpaid dividends thereon in funds consisting of cash or cash equivalents.
[Signature on following page]
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its duly authorized officers to be effective the 17th day of June, 2016.
QUEST SOLUTION, INC. | ||
By: | /s/ Gilles Gaudreault | |
Name: | Gilles Gaudreault | |
Title: | Chief Executive Officer |
Attest: | ||
By: | /s/ Joey Trombino | |
Name: | Joey Trombino | |
Title: | Secretary |
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Exhibit 99.1
Quest Solution Further Streamlines Capital Structure and Reduces Debt
Converts Debt to New Series C Convertible Preferred Stock in Non-Dilutive Balance Sheet Restructuring
Debt Holder Releases $500,000 Promissory Note
EUGENE, OR., June 21, 2016 — Quest Solution, Inc. “The Company” (OTCBB: QUES), today announced the Board of Directors has approved the creation of a Series C Preferred Stock for the purpose of converting approximately $4.5 million of subordinated debt into approximately 4.5 million of the newly created Series C shares as well as approximately 350,000 Series C shares in connection with the Company’s redemption of 1,000,000 common shares. In addition, the Viascan Group has voluntarily forgiven $500,000 of debt that was assumed in relation to the acquisition of ViascanQdata in October 2015.
“We took creative and non-dilutive steps to reduce our subordinated debt by nearly 25% from the end of the first quarter, significantly streamlining our capital structure and improving our balance sheet to help us better execute our growth strategy,” commented Gilles Gaudreault, Chief Executive Officer of Quest Solution, Inc. “Our capital structure is now better aligned with the long-term objectives of our business and places Quest Solution in an even stronger position to grow our business and serve our customers. Today’s announcement illustrates the support and confidence our debt holders and the previous owners of Viascan, including myself, have in the outlook for our business.”
As of June 21, 2016 there were 15 million Series C preferred shares authorized and approximately 4.9 million outstanding. These preferred shares are expected to pay a cash dividend of 6% per annum on a quarterly basis, pending Board approval and authorization. The Series C preferred shares are convertible into common shares of the company on a one-for-one basis. The Company has the option at any time to redeem the Series C preferred shares at a redemption price of $1 per share. For the second half of the year, the Company will continue its efforts to solidify the balance sheet position.
About Quest Solution, Inc.
Quest Solution is a Specialty Systems Integrator focused on Field and Supply Chain Mobility. We are also a manufacturer and distributor of consumables (labels, tags, and ribbons), RFID solutions and barcoding printers. Founded in 1994, Quest is headquartered in Eugene, Oregon, with offices in the United States and Canada.
Rated in the Top 1% of global solution providers, Quest specializes in the design, deployment and management of enterprise mobility solutions including Automatic Identification (AIDC), Mobile Cloud Analytics, RFID (Radio Frequency Identification) and proprietary Mobility software. Our mobility products and services offering is designed to identify, track, trace, share and connect data to enterprise systems such as CRM or ERP solutions. Our customers are leading Fortune 500 companies from several sectors including manufacturing, retail, distribution, food / beverage, transportation and logistics, health care and chemicals / gas / oil.
Information about Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 Statements in this press release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This release contains “forward-looking statements” that include information relating to future events and future financial and operating performance. The words “may,” “would,” “will,” “expect,” “estimate,” “can,” “believe,” “potential” and similar expressions and variations thereof are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to: fluctuations in demand for Quest Solution, Inc.’s products, the introduction of new products, the Company’s ability to maintain customer and strategic business relationships, the impact of competitive products and pricing, growth in targeted markets, the adequacy of the Company’s liquidity and financial strength to support its growth, the Company’s ability to manage credit and debt structures from vendors, debt holders and secured lenders, the Company’s ability to successfully integrate its acquisitions and other information that may be detailed from time-to-time in Quest Solution Inc.’s filings with the United States Securities and Exchange Commission. Examples of such forward looking statements in this release include statements regarding growth strategy, outlook, customer service, capital structure and balance sheet position. For a more detailed description of the risk factors and uncertainties affecting Quest Solution, Inc. please refer to the Company’s recent Securities and Exchange Commission filings, which are available at http://www.sec.gov. Quest Solution, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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