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): May 25, 2018
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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mart if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to (i) securing capital for general working purposes, and (ii) other risks and in statements filed from time to time with the Securities and Exchange Commission (the “SEC”). All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to, and will not, update any forward-looking statements to reflect events or circumstances after the date hereof.
Item 7.01 Regulation FD Disclosure
On May 23, 2018, Quest Solution, Inc. (the “Company”) issued a press release (the “Quarterly Press Release”) announcing the Company’s continued progress on its Turnaround Plan and results of operations for the quarter ended March 31, 2018. A copy of the Quarterly Press Release is attached hereto and incorporated herein by reference in its entirety as Exhibit 99.1.
On May 22, 2018, the Company issued a press release announcing the successful development and installation of a state-of-the-art Real Time Location System based on a new Bluetooth Low Energy beacon solution for Information Technology (IT) assets.
The information contained in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The furnishing of the information in this Current Report on Form 8-K is not intended to, and does not, constitute a representation that such furnishing is required by Regulation FD or that the information contained in this Current Report on Form 8-K constitutes material investor information that is not otherwise publicly available.
The Securities and Exchange Commission encourages registrants to disclose forward-looking information so that investors can better understand the future prospects of a registrant and make informed investment decisions. This Current Report on Form 8-K and exhibits may contain these types of statements, which are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and which involve risks, uncertainties and reflect the Registrant’s judgment as of the date of this Current Report on Form 8-K. Forward-looking statements may relate to, among other things, operating results and are indicated by words or phrases such as “expects,” “should,” “will,” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this Current Report on Form 8-K. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented within.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | ||
| Number | Description | |
| 99.1 | Quest Solution Reports Progress on Turnaround Plan And First Quarter 2018 Results | |
| 99.2 | Quest Solution Launches IOS Cloud based System |
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: May 24, 2018
| QUEST SOLUTION, INC. | ||
| By: | /s/ Shai S. Lustgarten | |
| Shai S. Lustgarten | ||
| Director, President and CEO | ||
Quest Solution Reports First Quarter Fiscal 2018 Results
● Revenue grew 5.1% to $15.2 million versus first quarter 2017
● Revenue grew 18% sequentially compared to fourth quarter 2017
● Shareholders’ Equity improved by $14.9 million to a deficit of $0.3 million; $15.2 at March 31, 2017
● Adjusted EBITDA for first quarter 2018 increased 18% to $0.66 million
● Company remains focused on driving turnaround of the business
EUGENE, OR., May 22, 2018 — Quest Solution, Inc. (OTCQB: QUES), a specialty systems integrator focused on field and supply chain mobility announced its financial results for the quarter ended March 31, 2018.
Financial Results:
For the quarter ended March 31, 2018, Quest Solution (Quest) reported revenues of $15.2 million, compared to $14.3 million in the comparable 2017 period. The Company achieved sequential revenue growth of 18% compared to the fourth quarter of 2017. Gross margin of 21% was consistent with the first quarter of 2017. Total operating expenses for first quarter of 2018 increased to $3.8 million, primarily related to the Company’s adoption of an equity incentive plan, increases in sales commissions related to revenue growth, increased professional fees attributable to the turnaround process and the Debt elimination. Net loss attributable to the common stockholders was $1 million, or a loss of $0.03 per share in the first quarter of 2018, compared to a net loss of $0.4 million, or a loss of $0.01 per share in the first quarter of 2017. Adjusted EBITDA (EBITDA plus Stock Based Compensation and one-time fees mainly related to the turnaround process) for the first quarter of 2018 improved by 18% to $656,000 compared to $555,000 in the first quarter of 2017. Shareholders’ equity improved to a deficit of $0.3 million at March 31, 2018 as compared to a deficit of $1.2 million at December 31, 2017 and a deficit of $14.9 million at March 31, 2017.
Shai Lustgarten, CEO, commented, “Quest is now better positioned to execute our strategy, further improve our financial results and drive differentiation in the market place by adding state of the art technologies to our product offering. During the first quarter we continued to make progress with our turnaround initiatives. Revenue grew due to organic growth in our customer base. Our sales team is focused on strengthening our existing customer relationships to generate new business as needs evolve and capturing new customers to drive incremental revenue growth in our multi Billion USD market place.
“Much of the increase in operating expenses that we saw in the quarter was related to non-cash equity compensation expense, increased sales commissions due to our reinvigorated sales and marketing effort, as well as some increased professional fees related to the turnaround and debt reduction agreements. Importantly, we drove a 13% reduction in salary expense during the quarter, and we expect operating expenses to moderate as a percentage of sales as we continue to execute the turnaround.”
Mr. Lustgarten continued, “We previously announced a $15 million reduction of our notes liability, which significantly enhanced our financial structure and provides a solid platform for the Company’s growth. Quest serves blue chip customers operating in attractive, growth industries and we remain focused on exceeding the needs of our existing customers and cultivating new opportunities to increase our market share as we move through 2018.”
Please refer to the financial tables included below for a reconciliation of generally accepted accounting principles in the United States (“GAAP”) to non-GAAP financial results. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results.
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.
Rated in the Top 1% of global solution providers, Quest specializes in the design, deployment and management of enterprise mobility solutions including Automatic Identification and Data Capture (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, risks related to 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 revenue growth, driving sales, operational and financial initiatives, cost reduction and profitability, and simplification of operations. 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.
Financial Tables Follow
QUEST SOLUTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AUDITED)
| For
the three months ended March 31 | ||||||||
| 2018 | 2017 | |||||||
| Revenues | ||||||||
| Total Revenues | $ | 15,180,547 | $ | 14,437,556 | ||||
| Cost of goods sold | ||||||||
| Cost of goods sold | 12,014,454 | 11,445,609 | ||||||
| Total costs of goods sold | 12,014,454 | 11,445,609 | ||||||
| Gross profit | 3,166,093 | 2,991,947 | ||||||
| Operating expenses | ||||||||
| General and administrative | 476,855 | 412,945 | ||||||
| Salary and employee benefits | 2,602,565 | 1,945,883 | ||||||
| Depreciation and amortization | 437,398 | 442,400 | ||||||
| Professional fees | 292,862 | 103,277 | ||||||
| Total operating expenses | 3,809,680 | 2,904,505 | ||||||
| Income (loss) from operations | (643,587 | ) | 87,442 | |||||
| Other income (expenses): | ||||||||
| Interest expense | (294,765 | ) | (355,658 | ) | ||||
| Other (expenses) income | 2,544 | (6,042 | ) | |||||
| Total other expenses | (292,221 | ) | (361,700 | ) | ||||
| Net loss before Income Taxes | (935,808 | ) | (274,258 | ) | ||||
| Provision for Income Taxes | ||||||||
| Current | (13,197 | ) | (56,900 | ) | ||||
| Total Provision for Income Taxes | (13,197 | ) | (56,900 | ) | ||||
| Net loss attributable to Quest Solution Inc. | $ | (949,005 | ) | $ | (331,158 | ) | ||
| Less: Preferred stock – Series C dividend | (48,124 | ) | (46,507 | ) | ||||
| Net loss attributable to the common stockholders | $ | (997,129 | ) | $ | (377,665 | ) | ||
| Net loss per share - basic | $ | (0.03 | ) | $ | (0.01 | ) | ||
| Net loss per share from continuing operations - basic | $ | (0.03 | ) | $ | (0.01 | ) | ||
| Weighted average number of common shares outstanding - basic | 37,125,286 | 35,141,560 | ||||||
QUEST SOLUTION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AUDITED)
| As of | ||||||||
| March 31, 2018 | December 31, 2017 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 244,596 | $ | 24,634 | ||||
| Restricted Cash | 381,494 | 684,610 | ||||||
| Accounts receivable, net | 9,418,463 | 6,387,734 | ||||||
| Inventory, net | 2,141,855 | 439,720 | ||||||
| Prepaid expenses | 2,411,851 | 476,840 | ||||||
| Other current assets | 30,251 | 126,187 | ||||||
| Total current assets | 14,628,510 | 8,139,725 | ||||||
| Fixed assets, net | 85,951 | 92,803 | ||||||
| Goodwill | 10,114,164 | 10,114,164 | ||||||
| Trade name, net | 2,215,231 | 2,359,481 | ||||||
| Customer Relationships, net | 5,029,759 | 5,310,938 | ||||||
| Other assets | 37,063 | 39,512 | ||||||
| Total assets | $ | 32,110,678 | $ | 26,056,623 | ||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 18,226,932 | $ | 13,239,810 | ||||
| Accrued interest on note payable | 43,323 | 38,430 | ||||||
| Line of credit | 4,832,353 | 3,667,417 | ||||||
| Accrued payroll and sales tax | 2,790,539 | 1,531,233 | ||||||
| Deferred revenue, net | - | 761,194 | ||||||
| Current portion of note payable | 2,275,404 | 3,429,025 | ||||||
| Notes payable, related parties | 106,500 | 106,500 | ||||||
| Other current liabilities | 156,957 | 121,117 | ||||||
| Total current liabilities | 28,432,008 | 22,894,726 | ||||||
| Long term liabilities | ||||||||
| Note payable, related party | 3,222,900 | 3,222,900 | ||||||
| Accrued interest, related party | 185,862 | 165,014 | ||||||
| Long term portion of note payable | 130,294 | 130,294 | ||||||
| Deferred revenue, net | - | 452,024 | ||||||
| Other long term liabilities | 486,538 | 439,833 | ||||||
| Total liabilities | 32,457,602 | 27,304,791 | ||||||
| Stockholders’ (deficit) | ||||||||
| Series A Preferred stock; $0.001 par value; 1,000,000 shares designated and 0 shares outstanding as of March 31, 2018 and December 31, 2017, respectively. | - | - | ||||||
| Series B Preferred stock; $0.001 par value; 1 share designated and 0 shares outstanding as of March 31, 2018 and December 31, 2017, respectively. | - | - | ||||||
| Series C Preferred stock; $0.001 par value; 15,000,000 shares designated, 3,143,530 shares outstanding as of March 31, 2018 and December 31, 2017, respectively, liquidation preference of $1.00 per share and a cumulative dividend of $0.06 per share. | 4,829 | 4,829 | ||||||
| Common stock; $0.001 par value; 100,000,000 shares designated, 39,673,631 and 36,828,371 shares outstanding of March 31, 2018 and December 31, 2017, respectively. | 39,673 | 36,828 | ||||||
| Common stock to be repurchased by the Company | (230,490 | ) | (230,490 | ) | ||||
| Additional paid-in capital | 35,177,970 | 34,495,659 | ||||||
| Accumulated (deficit) | (35,338,906 | ) | (35,554,994 | ) | ||||
| Total stockholders’ (deficit) | (346,924 | ) | (1,248,168 | ) | ||||
| Total liabilities and stockholders’ (deficit) | $ | 32,110,678 | $ | 26,056,623 | ||||
QUEST SOLUTION, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(UNAUDITED)
| Three months ended | ||||||||
| March 31, 2018 | March 31, 2017 | |||||||
| Operating income | $ | (644 | ) | $ | 87 | |||
| Depreciation & amortization | 437 | 442 | ||||||
| EBITDA | (204 | ) | 529 | |||||
| Stock based compensation | 681 | 26 | ||||||
| One-time turnaround expenses | 179 | - | ||||||
| Adjusted EBITDA | $ | 656 | $ | 555 | ||||
Investor Contact:
John Nesbett/Jen Belodeau
Institutional Marketing Services (IMS)
203.972.9200
jnesbett@institutionalms.com
QUEST SOLUTION LAUNCHES INNOVATIVE IOT CLOUD BASED SYSTEM FOR
ASSET MANAGEMENT OF VALUABLE INFORMATION TECHNOLOGY ASSETS
| ● | A unique solution to be offered to its Fortune 500 customers |
EUGENE, OR., May 23, 2018 — Quest Solution, Inc. (OTCQB: QUES) is pleased to announce it has successfully developed and installed a state-of-the-art Real Time Location System (RTLS) based on a new BLE (Bluetooth Low Energy) beacon solution for Information Technology (IT) assets.
“We are proud to add this revolutionary system to our portfolio of solutions offerings. Our initial customer, like other large corporations, has many locations with a fluid office environment for monitors, laptops and other valuable IT assets,” states Greg Canda, Director of Partner Solutions for Quest Solution. “Their challenge is ensuring that all of their equipment is where it should be at all times. They requested a working Proof of Concept, where their goal was to receive quick reporting of any change in IT asset location without the typical resource-intensive frequent cycle counts or a check-in/check-out scanning system.”
Quest considered several architectures and technologies and undertook a detailed benefit analysis comparing various IIoT (Industrial Internet of Things), RFID and BLE beacon alternatives. The proposed solution included a dynamic, extensible and secure mesh network infrastructure from Wirepas, winner of the 2017 European Internet of Things Award by Frost and Sullivan, with battery-operated BLE tags. This mesh network proved to be superior, related both to its relatively easy installment and lower infrastructure cost compared to other RFID and BLE hierarchical approaches.
Quest demonstrated that this Wirepas mesh infrastructure could be quickly installed and provide cloud-based tracking of the location and movement of the assets. Quest not only installed the asset tags and location beacon tags, but constructed the interface gateways for the cloud access (completely separate from the customers’ own network for security reasons). Additionally, Quest provided training with the asset management cloud software and assisted with API integration plans for their internal analytics systems.
The Proof of Concept was a success. The implementation was carefully planned and the execution was quickly accomplished, with little operational distraction for the customer. A late request was made to include a stock room, which was immediately implemented and verified, all on the last morning of the test, showing when equipment entered and exited the storage area.
Shai Lustgarten, President and CEO of Quest Solution, said “This breakthrough system developed by Quest is in line with our strategic decision to position our Company as a high tech leader and epitomizes what makes Quest different and successful in the multibillion supply chain and logistic markets. Working with the IT departments of some of the most prestigious corporations in the U.S. exposes us to opportunities related to their current and future needs, enabling us to initiate and implement innovative solutions for ever growing needs associated with supply chain and logistics management. We have again proven our ability to take leading edge technologies and integrate them with software, services and operational consulting for real-life business solutions, with careful attention to customer goals.”
A diagram of the architecture accompanies this release. For further information on Quest Solution or other Industrial Internet of Things (IIoT) solutions, please contact: Greg Canda, Director, Parnter Solutions, at gcanda@questsolution.com or (330) 603-2591.
About Quest Solution, Inc.
Quest Solution is a Specialty Systems Integrator focused on Field and Supply Chain Mobility. We are also a 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.
Rated in the Top 1% of global solution providers, Quest specializes in the design, deployment and management of enterprise mobility solutions including Automatic Identification and Data Capture (AIDC), Mobile Cloud Analytics, RFID (Radio Frequency Identification), Mobility software and an array of professional services. 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, risks related to 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 revenue growth, driving sales, operational and financial initiatives, cost reduction and profitability, and simplification of operations. 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.
Contact Information:
Greg Canada
Director, Partner Solutions
gcanda@questsolution.com
(330) 603-2591