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): September 15, 2016
QUEST SOLUTION, INC.
(Exact name of registrant as specified in charter)
| Delaware | 000-09047 | 20-3454263 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
860 Conger Street, Eugene, OR 97402
(Address of Principal Executive Offices) (Zip Code)
(514) 788-1000
(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 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Reference is hereby made to the discussion of the Letter of Intent in Item 8.01 below.
On September 15, 2016, in connection with the execution of the Letter of Intent (defined below), Gilles Gaudreault, the Chief Executive Officer of Quest Solution, Inc. (the “Company”), has taken a leave of absence. Mr. Gaudreault intends to resign as a director and officer of the Company and its affiliates effective as of the date of the closing of the Transaction (defined below). The Board of Directors of the Company (the “Board”) has appointed Thomas O. Miller, the Company’s current President and Chairman of the Board, to serve as the Company’s Interim Chief Executive Officer during Mr. Gaudreault’s leave of absence.
| Item 8.01. | Other Events. |
On September 15, 2016, the Company and Quest Exchange Ltd. (“Quest Exchange”) entered into a non-binding letter of intent (the “Letter of Intent”) with Viascan Group Inc. (“VGI”) for the sale of the outstanding shares of Quest Solution Canada Inc. (formerly known as ViascanQData, Inc.) (“Quest Canada”) to VGI (the “Transaction”). VGI was the owner of Quest Canada prior to its acquisition by the Company and Quest Exchange effective on October 1, 2015. Mr. Gaudreault has an equity interest in VGI. The Company’s entering into the Letter of Intent was approved by a special committee of the Board comprised of independent directors, as well as a majority of the disinterested directors of the Board.
The Letter of Intent contemplates that, in consideration for the Transaction, VGI will remit to the Company or Quest Exchange: 5,200,000 exchangeable shares of Quest Exchange and 1,839,030 shares of the Company’s Series C Preferred Stock and the accrued dividends thereon. Under the Letter of Intent, VGI will provide additional consideration in the form of forgiveness or payment of certain debts owed by the Company or by leaving certain assets to the Company, as well as making certain cash payments to the Company over four or five months (subject to adjustment for the assumption or release of certain contracts and adjustment based on the value of net assets at closing). The Letter of Intent further contemplates that certain employees of the Company who are former employees of VGI will remit to the Company shares of the Company’s common stock and forgive certain amounts owed to them by the Company. The consideration given for the Transaction to the Company is estimated to be approximately $5.0 million (exclusive of the value of the contingent consideration discussed below). In return, the Company will forgive the entire balance of the debts owing by Quest Canada to the Company, estimated to be approximately $7.0 million. The consideration and intercompany debt described above are estimates and subject to adjustment at closing. The accounting non-cash net loss of the Transaction to the Company will be approximately $3.0 to $4.0 million (exclusive of the value of the warrant discussed below). The final terms and conditions of the Transaction will be set forth in the definitive agreement.
The Letter of Intent contemplates that, for a period of 10 years after the closing of the Transaction, the Company will have a right of first refusal for any offer to purchase Quest Canada and will be entitled to a warrant to receive 15% of the net proceeds (up to $2.3 million) in the event of a change of control or liquidity event involving Quest Canada.
The completion of the Transaction is subject to, and conditioned upon, among other things, the execution of a definitive agreement, receipt of resignations and releases from certain employees of the Company who are former employees of VGI, satisfaction of regulatory requirements, and receipt of various third party consents and agreements.
| 2 |
Both parties have agreed to proceed to close the Transaction as soon as possible. Either party may terminate the Letter of Intent if the Transaction is not consummated by October 31, 2016, unless the only pending documents to be executed are third party consents, in which case the Letter of Intent may be terminated if the third party consents are not delivered by November 10, 2016.
On September 19, 2016, the Company issued a press release (the “Press Release”) announcing the entry into the Letter of Intent and the appointment of Mr. Miller as Interim Chief Executive Officer. The Press Release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit Number | Description | |
| 99.1 | Press Release, dated September 19, 2016 |
| 3 |
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: September 19, 2016
| QUEST SOLUTION, INC. | ||
| By: | /s/ Thomas O. Miller | |
| Thomas O. Miller | ||
| Interim Chief Executive Officer and President | ||
| 4 |
EXHIBIT INDEX
| Exhibit Number | Description | |
| 99.1 | Press Release, dated September 19, 2016 |
Quest Solution, Inc. and Viascan Group Inc. Sign a Letter Of Intent for the Sale of Quest Solution
Canada to Viascan
EUGENE, OR / ACCESSWIRE / September 19th 2016 / Quest Solution, Inc. “The Company” (OTCQB: QUES), a leading provider in the technology, software, and mobile data collection systems business, announced today that Viascan Group Inc. and Quest Solution, Inc. have signed a letter of intent whereby all the shares of Quest Solution Canada Inc. will be sold back to Viascan Group Inc. Both parties are working to complete the Definitive Agreement in order to close the transaction as soon as possible.
Under the terms of the Letter of Intent, Quest Solution, Inc. will receive shares of Common Stock and Preferred Stock of Quest Solution, Inc. and exchangeable shares of Quest Exchange Ltd., forgiveness or payment of certain debts or liabilities or retention of certain assets, cash over a period of 4-5 months subsequent to the effective date of the transaction (subject to adjustment for the assumption or release of certain contracts and adjustment based on the value of net assets at closing). Quest Solution, Inc. will also receive a contingent consideration upon a liquidity event or a change of control of Quest Solution Canada Inc. for a period of 10 years subsequent to the transaction. Quest Solution, Inc. will also have the right of first refusal for any offer to purchase Quest Solution Canada Inc. during the same 10 year period. The consideration given for the transaction to the Company is estimated to be approximately $5.0 million (exclusive of the value of the contingent consideration). In return, Quest Solution, Inc will forgive the entire balance of the debts owing by Quest Solution Canada to the Company, estimated to be approximately $7.0 million. The consideration and intercompany debt described above are estimates and subject to adjustment at closing. The final terms and conditions of the transaction will be set forth in the definitive agreement.
While the transaction is being completed, Gilles Gaudreault will take a leave of absence as CEO of Quest Solution, Inc. and will resign as a director and officer effective with the date of closing. Tom Miller, currently Quest Solution, Inc. President and Chairman, will serve as the Company’s Interim Chief Executive Officer during Mr. Gaudreault’s leave of absence. Once the transaction is completed, Mr. Gaudreault will become the CEO of the Canadian operations for Viascan Group Inc. Tom Miller commented, “The repurchase of the Canadian operations by Viascan Group Inc. will be beneficial for all the stakeholders. It will allow for the simplification of the respective operations, and will lead to more flexibility to affect operational and financial initiatives. This transaction will help us refocus on our respective strengths, reduce our costs and accelerate our path to profitability. Post transaction, the parties see potential opportunities to cooperate, especially on complementary products.”
Gilles Gaudreault added, “Both parties will benefit from this transaction. It will give us greater flexibility and help us refocus on our core business. In the end, we needed to best align our operations and strengths.”
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. 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.
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, risks related to the timing or ultimate completion of the sale of Quest Solution Canada Inc. to Viascan Group Inc. 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, among others, statements regarding the proposed sale of Quest Solution Canada Inc. to Viascan Group Inc. and the expected benefits of the transaction. 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, unless otherwise required by law.
Investor Contact:
Joey Trombino, CFO
(514) 744-1000 ext. 1228
jtrombino@questsolution.com