Stockholders' Equity

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Stockholders' Equity

NOTE 17 – STOCKHOLDERS’ EQUITY

PREFERRED STOCK

Series A

As of December 31, 2016 and 2015, there were 1,000,000 Series A preferred shares designated and 0 preferred shares outstanding. The board of directors had previously set the voting rights for the preferred stock at 1 share of preferred to 250 common shares.

On October 1, 2015, the Board of directors approved the repurchase and retirement of all of the issued and outstanding Series A preferred shares and 3,400,000 stock options from a related party, in exchange for a $3,120,000 subordinated note.

Series B

As of December 31, 2016, there was 1 preferred share designated and 0 preferred shares outstanding. At December 31, 2015 there was 1 preferred share authorized and 1 preferred share issued and outstanding.

These preferred shares were issued solely for the purpose of the acquisition of ViascanQdata and are only convertible into common shares at the rate of 1 for 1 at any time. They have no preferential rights above common shares. Effective on September 30, 2016, with the divestiture of Quest Solution Canada Inc., the one share was redeemed by the Company and retired.

Series C

As of December 31, 2016, there was 15,000,000 Series C preferred share authorized and 3,143,530 Series C preferred share outstanding. It has preferential rights above common shares and the Series B preferred shares and is entitled to receive a quarterly dividend at a rate of $0.06 per annum. Each Series C preferred share outstanding is convertible into one (1) share of common stock of Quest Solution, Inc. On June 17, 2016, 4,882,500 shares were issued as part of Promissory Note Conversion agreements as described in Note 16. On July 31, 2016 the Company issued 100,000 shares of Series C preferred stock pursuant to a Separation Agreement in exchange for the redemption of 42,500 restricted common shares. Effective on September 30, 2016, with the sales of Quest Solution Canada Inc., 1,839,030 Series C preferred shares were redeemed by the Company and retired.

COMMON STOCK

On May 19, 2015, Quest entered into a Security Purchase Agreement (the “SPA”) with an accredited investor, who is also a subordinated debt holder and an employee of Quest, pursuant to which Quest issued 667,000 shares of Common Stock in exchange for $200,000.

On June 24, 2015, Quest issued subordinated promissory notes (the “Promissory Notes”) to three investors (who were Quest employees at the time) in the aggregate principal amount of $400,000 in exchange for an aggregate 170,000 shares of Quest’s restricted common stock, par value $0.001 per share. This amount is treated as a related party advance on the balance sheet. The Company recorded an interest expense of $62,731 relative to this issuance.

During the quarter ended June 30, 2015, the Company issued 650,000 shares of restricted common stock to consultants of the Company relative to a 12 month contract. The Company had the option to repurchase 550,000 of the shares issued within the 12 month period. The Company recorded a $219,853 expense related to the consulting contracts in fiscal 2015 and $69,027 was recorded to expense in fiscal 2016.

During the quarter ended September 30, 2015, a stockholder of the Company voluntarily returned 2,517 shares of Common Stock, which were canceled from the Company’s issued and outstanding shares.

During the quarter ended December 31, 2015, the Compensation Committee of the board of directors agreed to quarterly issuance / vesting of 12,500 common shares per independent board member as compensation, as a result, 37,500 shares were issued in conjunction with this agreement at a value of $15,375. In addition, the Company issued 100,000 common shares to a consultant for services valued at $22,000 and 20,000 common shares to an employee valued at $4,600.

For the year ended December 31, 2016, the Company issued 150,000 shares to the board members in relation to the vesting schedule agreed to in the 4^th quarter of 2015, which provides 12,500 common shares per independent board member as compensation. The shares were valued at $28,800.

In the first quarter of 2016, 39,000 shares were issued to certain employees that had a value of $7,800.

On June 17, 2016, the Company entered into a Stock Redemption Agreement whereby it redeemed 1,000,000 restricted common stock in exchange for 357,000 shares of Series C preferred stock.

On July 31, 2016 as part of the Separation Agreement with Mr. Ross, the Company issued a promissory note in the amount of $59,500 in connection with the redemption by the Company of 350,000 shares of restricted common stock. In addition, the Company issued 100,000 shares of Series C preferred stock pursuant to the same Separation Agreement in exchange for the redemption of 42,500 restricted common shares.

In January 2016, the Company entered into a Stock Redemption Agreement whereby the Company would repurchase 1,650,000 shares of common stock for $750,000 on an installment basis which was recorded as a note on the transaction date carrying interest at 9%. On September 30, 2016, the Company completed the redemption of 1,650,000 shares of common stock.

In January 2016, the Company entered into a Stock Redemption Agreement whereby the Company would repurchase 507,079 shares of common stock for $230,490 on an installment basis which was recorded as a note on the transaction date carrying interest at 9%. As at December 31, 2016, the Company did not complete the redemption of 507,079 shares of common stock and the remaining balance of the note and accrued interest is $241,159.

In November 2016, the Company issued 131,000 shares to an employee as a signing bonus and performance bonus, respectively, under his Employment Agreement. The shares were valued at $8,449.

In December 2016, the Company issued 708,000 shares to the Chief Financial Officer as a signing bonus and performance bonus, respectively, under his Employment Agreement. The shares were valued at $48,498.

For the year ended December 31, 2016, pursuant to the Employee Stock Purchase Program (“ESPP”) for which the Company filed an S-8 registration statement, 238,785 shares of Common Stock were issued for proceeds of $20,058.

In total, for the year ended December 31, 2016, the Company has redeemed a total of 3,042,500 shares of common stock.

Related Party

Quest Solution redeemed 900,000 shares of common stock from Thomet pursuant to the Settlement Agreement which was redeemed before December 31, 2015.

Quest Solution issued 1,000,000 shares of restricted common stock to a note holder pursuant to the Settlement Agreement valued at $357,000 during the third quarter of 2015.

As of December 31, 2016, the Company had 35,095,763 common shares outstanding.

Warrants and Stock Options

Warrants - The following table summarizes information about warrants granted during the years ended December 31, 2016 and 2015:

	December 31, 2016						December 31, 2015
	Number of warrants			Weighted Average Exercise Price			Number of warrants			Weighted Average Exercise Price
Balance, beginning of year		1,410,000			0.52			8,410,000			1.40
Warrants granted		-			-			-			-
Warrants expired		(5,000	)		(1.00	)		-			-
Warrants cancelled, forfeited		-			-			(7,000,000	)		(1.57	)
Warrants exercised		-			-						-
Balance, end of year		1,405,000			0.52			1,410,000			0.52
Exercisable warrants		1,405,000			0.52			1,410,000			0.52

During 2015, the Company canceled a total of 7,000,000 warrants that were issued in connection with the acquisition of Quest Marketing, Inc.

Outstanding warrants as at December 31, 2016 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Warrants		Weighted Average Exercise Price		Exercisable Warrants		Weighted Average Exercise Price
	0.25		1.25		900,000		0.25		900,000		0.25
	1.00		1.33		505,000		1.00		505,000		1.00
	0.25 to 1.00		1.28		1,405,000		0.52		1,405,000		0.52

Warrants outstanding at the end of the year have the following expiry date and exercise prices:

Expiry Date	Exercise Prices		December 31, 2016		December 31, 2015
July 10, 2016		1.00		-		5,000
March 22, 2018		1.00		300,000		300,000
April 1, 2018		0.25		900,000		900,000
April 30, 2018		1.00		5,000		5,000
July 10, 2018		1.00		200,000		200,000
				1,405,000		1,410,000

Share Purchase Option Plan

The Company has a stock option plan whereby the Board of Directors, may grant to directors, officers, employees, or consultants of the Company options to acquire common shares. The Board of Directors of the Company has the authority to determine the terms, limits, restrictions and conditions of the grant of options, to interpret the plan and make all decisions relating thereto. The plan was adopted by the Company’s Board of Directors on November 17, 2014 in order to provide an inducement and serve as a long term incentive program. The maximum number of common shares that may be reserved for issuance was set at 10,000,000.

The option exercise price is established by the Board of Directors and may not be lower than the market price of the common shares at the time of grant. The options may be exercised during the option period determined by the Board of Directors, which may vary, but will not exceed ten years from the date of the grant. There are 10,000,000 of the Company’s common shares which may be issued pursuant to the exercise of share options granted under the Plan. As at December 31, 2016, the Company had issued options, allowing for the subscription of 2,644,000 common shares of its share capital.

Stock Options - The following table summarizes information about stock options granted during the years ended December 31, 2016 and 2015:

	December 31, 2016						December 31, 2015
	Number of stock options			Weighted Average Exercise Price			Number of stock options			Weighted Average Exercise Price
Balance, beginning of year		6,044,000			0.50			9,300,000			0.50
Stock options granted		-			-			144,000			0.36
Stock options expired		-			-			-			-
Stock options cancelled, forfeited		(3,400,000	)		(0.50	)		(3,400,000	)		(0.50	)
Stock options exercised		-			-			-			-
Balance, end of year		2,644,000			0.49			6,044,000			0.50
Exercisable stock options		1,925,250			0.49			1,950,250			0.49

During 2015, the Company canceled a total of 3,400,000 stock options in connection with the redemption and cancellation of the Series A preferred stock from the former CEO.

During 2016, the Company canceled a total of 3,400,000 stock options in connection with the Separation Agreement signed with the former CFO.

Outstanding stock options as at December 31, 2016 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Stock Options		Weighted Average Exercise Price		Exercisable Stock Options		Weighted Average Exercise Price
	0.33 to 0.38		1.29		144,000		0.36		144,000		0.36
	0.50		7.89		2,500,000		0.50		1,781,250		0.50
	0.33 to 0.50		7.53		2,644,000		0.49		1,925,250		0.49

Stock options outstanding at the end of the year have the following expiry date and exercise prices:

Expiry Date	Exercise Prices		December 31, 2016		December 31, 2015
March 26, 2018		0.37		72,000		72,000
April 27, 2018		0.38		36,000		36,000
July 9, 2018		0.33		36,000		36,000
November 20, 2024		1.00		1,781,250		1,806,250
				1,925,250		1,950,250

For the year ending December 31, 2016 and December 31, 2015, the Company recorded stock compensation expense relating to the vesting of stock options as follows;

	December 31,
	2016		2015
Board compensation expense	$	28,880	$	15,375
Stock compensation		273,443		315,480
Stock Option vesting		73,128		420,199
Total	$	375,451	$	751,034