Acquisition of Viascanqdata

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Acquisition of Viascanqdata

NOTE 5 – ACQUISITION OF VIASCANQDATA

Effective October 1, 2015, the Company completed the purchase of ViascanQdata, a Canadian based company in the same industry of technology, software, and mobile data collection systems business which also has a media and label business.

The purchase price for the shares of ViascanQdata was 1 share of Series B Preferred Stock (which are convertible into 5,200,000 common shares, with no other preferential rights) as well as a promissory note of one million five hundred thousand dollars ($1,500,000). Given the associated assumed debts at the closing, the goodwill acquired was estimated at $11,137,861.

ViascanQdata historically has used the Canadian Dollar (CDN) as their functional currency. All numbers have been adjusted based on the exchange rate with the US Dollar as of the date of the transaction.

In accordance with ASC 805-10-25-13, the following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition and the preliminary allocation of the purchase price to the fair value of net assets acquired:

Cash	$	74,855
Accounts receivable, net		2,163,502
Inventory		1,587,272
Fixed assets, net		1,399,796
Other assets		114,709
Goodwill		11,137,861
Total purchase price allocated	$	16,477,995

Accounts Payable and other Current Liabilities	$	12,008,825
Long Term Debts Assumed		837,170
Promissory Note Issued		1,500,000
Stock Issued		2,132,000
Total purchase price allocated	$	16,477,995

Discontinued Operations – Divesture of Quest Solution Canada, Inc.

Effective September 30, 2016, the Company sold all of the outstanding shares of Quest Solution Canada Inc. The Company decided to sell this division primarily because it has incurred significant operating losses.

The consideration received was $1.0 million in cash of which $576,592 was received at closing and the balance is to be received before April 30, 2017. In addition, the Company has redeemed 1 share of Preferred Class B Stock and 1,839,030 shares of Preferred Class C Stock of the Company, as well as the accrued dividend of $31,742 thereon. Lastly, Quest Exchange Ltd., a wholly owned subsidiary of the Company, redeemed 5,200,000 exchangeable shares as part of the divestiture.

Additionally, as part of the transaction, Viascan Group Inc., the acquirer, assumed $1.0 million of liabilities which the Company had at September 30, 2016. Other consideration that is part of the transaction included:

● Full release from five employment contracts, inclusive of the former CEO, Gilles Gaudreault. This release included cancelation of the contracts as well as the deferred salary and signing bonus provisions which would have inured to the employee.

● The Company canceled the intercompany debts of approximately $7.0 million as well. The Company will also receive a contingent consideration of 15% of the net value proceeds, up to a maximum of $2.3 million, received upon a liquidity event or a change of control of Quest Solution Canada Inc. for a period of 7 years subsequent to the transaction.

● The Company also negotiated a right of first refusal for any offer to purchase Quest Solution Canada Inc. for a 7 year period.

● The assets sold consisted primarily of accounts receivable, inventories, property and equipment, and other assets. The buyer also assumed certain accounts payable and accrued liabilities.

On September 30, 2016, the Company divested its Canadian operations, Quest Solution Canada, Inc., in order to focus its efforts and resources on its US operations. This represented a strategic shift that had a major effect on the Company’s operations and financial results.

Accordingly, the assets and liabilities, operating results, and operating and investing activities cash flows for the former Canadian operations are presented as a discontinued operation separate from the Company’s continuing operations, for all periods presented in these consolidated financial statements and footnotes, unless indicated otherwise.

The following is a reconciliation of the major line items constituting pretax loss of discontinued operations to the after-tax loss of discontinued operations that are presented in the condensed consolidated statements of operations as indicated below The 2016 fiscal year has 9 months of operations and the 2015 fiscal year has 3 months of operations:

	For the year
	ending December 31,
	2016			2015
Revenues	$	11,326,849		$	5,255,601
Cost of goods sold		(9,751,651	)		(4,046,494	)
Gross profit		1,575,198			1,209,107
Operating expenses
General and administrative		(874,506	)		(300,668	)
Salary and employee benefits		(2,074,977	)		(623,276	)
Depreciation and amortization		(178,069	)		(104,215	)
Professional fees		(58,138	)		(18,258	)
Goodwill impairment		(4,800,000	)		-
Total operating expenses		(7,985,690	)		(1,046,417	)
Operating (loss) income		(6,410,492	)		162,690
Other income (expenses):
Restructuring expenses		(108,640	)		-
Gain (loss) on foreign currency		117,138			229,442	)
Interest expense		(443,019	)		(171,815	)
Other (expenses) income		129			(1,389	)
Total other income (expenses)		(434,392	)		(402,646	)
Net Income (Loss) Before Income Taxes		(6,844,884	)		(239,956	)
Provision for Current Income Taxes		(6,991	)		-
Net Loss from discontinued operations	$	(6,851,875	)	$	(239,956	)

The major classes of assets and liabilities of Quest Solution Canada Inc. classified as held for disposal as at December 31, 2015 are, as follows:

	As of
	December 31, 2015
ASSETS
Current assets
Cash	$	19,324
Accounts receivable, net		3,505,920
Inventory, net		2,260,133
Prepaid expenses		81,468
Other current assets		1,133
Total current assets		5,867,978
Fixed assets		1,248,763
Goodwill		11,137,860
Total assets	$	18,254,601
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
Current liabilities
Accounts payable and accrued liabilities	$	5,488,998
Line of credit		2,490,315
Accrued payroll and sales tax		276,147
Deferred revenue, net		57,659
Notes payable, related parties, current portion		356,672
Current portion of note payable		1,255,477
Other current liabilities		64,175
Total current liabilities		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		-
Total liabilities	$	10,795,906
Net Assets held for disposal	$	7,458,695

The net cash flows incurred by Quest Solution Canada Inc. for the year ended December 31, are presented below. The 2016 fiscal year has 9 months of operations and the 2015 fiscal year has 3 months of operations:

	For the year
	ending December 31,
	2016			2015
Net cash used by operating activities	$	(1,743,606	)	$	(3,476,756	)
Net cash provided in investing activities		16,097			-
Net cash (used) provided in financing activities		(2,867,565	)		479,965
Net Cash Outflow from discontinued operations	$	(4,595,074	)	$	(2,996,791	)