QUEST RESOURCE HOLDING CORP, 10-Q filed on 11/16/2015
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2015
Nov. 1, 2015
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q3 
 
Trading Symbol
QRHC 
 
Entity Registrant Name
Quest Resource Holding Corporation 
 
Entity Central Index Key
0001442236 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
111,714,938 
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash equivalents
$ 5,054,120 
$ 3,154,540 
Accounts receivable, less allowance for doubtful accounts of $535,289 and $760,917 as of September 30, 2015 and December 31, 2014, respectively
29,785,568 
29,631,843 
Prepaid expenses and other current assets
1,270,534 
684,032 
Total current assets
36,110,222 
33,470,415 
Goodwill
58,337,290 
58,337,290 
Intangible assets, net
13,133,837 
15,115,617 
Property and equipment, net, and other assets
1,463,035 
753,493 
Total assets
109,044,384 
107,676,815 
Current liabilities:
 
 
Line of credit
 
5,250,000 
Accounts payable and accrued liabilities
33,861,459 
26,621,907 
Deferred revenue and other current liabilities
249,231 
282,189 
Total current liabilities
34,110,690 
32,154,096 
Line of credit
3,000,000 
 
Other long-term liabilities
105,776 
45,206 
Total liabilities
37,216,466 
32,199,302 
Commitments and contingencies
   
   
Stockholders’ equity:
 
 
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2015 and December 31, 2014, respectively
   
   
Common stock, $0.001 par value, 200,000,000 shares authorized, 111,714,938 and 111,601,304 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
111,715 
111,601 
Additional paid-in capital
151,816,614 
150,789,292 
Accumulated deficit
(80,100,411)
(75,423,380)
Total stockholders’ equity
71,827,918 
75,477,513 
Total liabilities and stockholders’ equity
$ 109,044,384 
$ 107,676,815 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Statement Of Financial Position [Abstract]
 
 
Allowance for doubtful accounts receivable
$ 535,289 
$ 760,917 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
200,000,000 
200,000,000 
Common stock, shares issued
111,714,938 
111,601,304 
Common stock, shares outstanding
111,714,938 
111,601,304 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Income Statement [Abstract]
 
 
 
 
Revenue
$ 43,567,822 
$ 46,981,143 
$ 125,906,645 
$ 127,655,458 
Cost of revenue
40,049,271 
43,129,793 
115,685,809 
116,962,978 
Gross profit
3,518,551 
3,851,350 
10,220,836 
10,692,480 
Operating expenses:
 
 
 
 
Selling, general, and administrative
4,110,442 
3,486,822 
11,793,700 
9,972,037 
Depreciation and amortization
989,105 
956,823 
2,940,576 
2,861,985 
Total operating expenses
5,099,547 
4,443,645 
14,734,276 
12,834,022 
Operating loss
(1,580,996)
(592,295)
(4,513,440)
(2,141,542)
Other expense:
 
 
 
 
Interest expense
(72,758)
(2,494,060)
(163,591)
(4,259,980)
Loss on extinguishment of debt
 
(1,658,531)
 
(1,658,531)
Total other expense
(72,758)
(4,152,591)
(163,591)
(5,918,511)
Loss before taxes
(1,653,754)
(4,744,886)
(4,677,031)
(8,060,053)
Net loss
(1,653,754)
(4,744,886)
(4,677,031)
(8,060,053)
Net loss applicable to common stockholders
$ (1,653,754)
$ (4,744,886)
$ (4,677,031)
$ (8,060,053)
Net loss per share
 
 
 
 
Basic and diluted
$ (0.01)
$ (0.05)
$ (0.04)
$ (0.08)
Weighted average number of common shares outstanding
 
 
 
 
Basic and diluted
111,714,938 
97,999,629 
111,673,440 
96,831,520 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (USD $)
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit[Member]
Beginning Balance at Dec. 31, 2014
$ 75,477,513 
$ 111,601 
$ 150,789,292 
$ (75,423,380)
Beginning Balance, Shares at Dec. 31, 2014
 
11,601,304 
 
 
Stock-based compensation
966,731 
 
966,731 
 
Shares issued for vested restricted stock units, Value
 
57 
(57)
 
Shares issued for vested restricted stock units, Shares
56,500 
56,500 
 
 
Shares issued for Employee Stock Purchase Plan options, Value
60,705 
57 
60,648 
 
Shares issued for Employee Stock Purchase Plan options, Shares
57,134 
57,134 
 
 
Net loss
(4,677,031)
 
 
(4,677,031)
Ending Balance at Sep. 30, 2015
$ 71,827,918 
$ 111,715 
$ 151,816,614 
$ (80,100,411)
Ending Balance, Shares at Sep. 30, 2015
 
111,714,938 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities:
 
 
Net loss
$ (4,677,031)
$ (8,060,053)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
Depreciation
218,225 
223,499 
Amortization of intangibles
2,722,351 
2,638,441 
Amortization of debt discount and deferred financing costs
2,998,403 
Loss on extinguishment of debt
 
1,658,531 
Interest converted to common stock
 
105,261 
Loss on disposal of property and equipment
2,050 
 
Provision for doubtful accounts
3,972 
41,183 
Stock-based compensation
931,874 
1,123,827 
Changes in operating assets and liabilities:
 
 
Accounts receivable
(157,697)
(7,228,939)
Prepaid expenses and other current assets
(586,502)
(163,112)
Security deposits and other assets
9,714 
(15,716)
Accounts payable and accrued liabilities
7,274,409 
1,499,081 
Deferred revenue and other current liabilities
(73,776)
76,785 
Other long-term liabilities
1,555 
21,755 
Net cash provided by (used in) operating activities
5,669,144 
(5,081,054)
Cash flows from investing activities:
 
 
Purchase of property and equipment
(819,608)
(103,119)
Purchase of capitalized software development
(740,571)
(859,259)
Net cash used in investing activities
(1,560,179)
(962,378)
Cash flows from financing activities:
 
 
Proceeds from line of credit
4,450,000 
2,500,000 
Repayments to line of credit
(6,700,000)
 
Proceeds from the sale of capital stock
60,705 
18,570,543 
Repayments of capital lease obligations
(20,090)
(14,601)
Repayment of senior convertible notes - related party
 
(11,000,000)
Net cash provided by (used in) financing activities
(2,209,385)
10,055,942 
Net increase in cash and cash equivalents
1,899,580 
4,012,510 
Cash and cash equivalents at beginning of period
3,154,540 
2,676,984 
Cash and cash equivalents at end of period
5,054,120 
6,689,494 
Supplemental cash flow information:
 
 
Cash paid for interest
166,035 
1,153,275 
Supplemental non-cash flow activities:
 
 
Common stock issued for services and loan fees
 
50,000 
Warrant liability issued for services
34,857 
26,826 
Acquisition of equipment under capital lease
119,923 
 
Notes Payable [Member]
 
 
Supplemental non-cash flow activities:
 
 
Common stock issued for conversion of notes payable
 
$ 11,025,000 
The Company, Description of Business, and Liquidity
The Company, Description of Business, and Liquidity

1. The Company, Description of Business, and Liquidity

The accompanying condensed consolidated financial statements include the accounts of Quest Resource Holding Corporation (“QRHC”) and its subsidiaries, Earth911, Inc. (“Earth911”), Quest Resource Management Group, LLC (“Quest”), Landfill Diversion Innovations, LLC, and Youchange, Inc. (“YouChange”) (collectively, “we,” “us,” or “our company”).

Operations – We are an environmental solutions company that serves as a single-source provider of full service recycling and waste stream management solutions, as well as an environmental program services and information provider. We offer innovative, cost-effective, one-stop reuse, recycling, and waste disposal management programs designed to provide regional and national customers with a single point of contact for managing a variety of recyclables and disposables. Two customers accounted for 60.0% and 72.2% of revenue for the three months ended September 30, 2015 and 2014, respectively.  Two customers accounted for 60.2% and 73.7% of revenue for the nine months ended September 30, 2015 and 2014, respectively.  We also own the Earth911.com website, offering original online environmental related content about reuse, recycling, and disposal of waste and recyclables, and we own a comprehensive online database of local recycling and proper disposal options. Our principal offices are located in The Colony, Texas.

Liquidity – As of September 30, 2015 and December 31, 2014, our working capital balance was $1,999,532 and $1,316,319, respectively.   

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principals of Presentation and Consolidation

The condensed consolidated financial statements included herein have been prepared by us without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.

The accompanying condensed consolidated financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our financial position at September 30, 2015 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2014 condensed consolidated balance sheet data from audited financial statements, but did not include all disclosures required by GAAP. As Quest, Earth911, and YouChange each operate as ecology based green service companies, we did not deem segment reporting necessary.

All intercompany accounts and transactions have been eliminated in consolidation. Interim results are subject to seasonal variations, and the results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year.

Revenue Recognition

We recognize revenue only when all of the following criteria have been met:

 

·

persuasive evidence of an arrangement exists;

 

·

delivery has occurred or services have been rendered;

 

·

the fee for the arrangement is fixed or determinable; and

 

·

collectability is reasonably assured.

Persuasive Evidence of an Arrangement Exists – We document all terms of an arrangement in a service agreement or quote signed or confirmed by the customer prior to recognizing revenue.

Delivery Has Occurred or Services Have Been Rendered – We perform all services or deliver all products prior to recognizing revenue. Services are deemed to be performed when the services are complete.

The Fee for the Arrangement is Fixed or Determinable – Prior to recognizing revenue, a customer’s fee is either fixed or determinable under the terms of the quote, service agreement, or accepted customer purchase order.

Collectability Is Reasonably Assured – We assess collectability on a customer by customer basis based on criteria outlined by management.

We provide businesses with management programs to reuse, recycle, and dispose of a wide variety of waste streams and recyclables generated by their business. We utilize third-party subcontractors to execute the collection, transport, and recycling or disposal of used motor oil, oil filters, scrap tires, cooking oil, and expired food products. We evaluate the criteria outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-45, Revenue Recognition—Principal Agent Considerations, in determining whether it is appropriate to record the gross amount of service revenue and related costs or the net amount earned as management fees. Generally, when we are primarily obligated in a transaction, have latitude in establishing prices and selecting suppliers, have credit risk, or have several but not all of these indicators, we record revenue gross and record amounts collected from customers for sales tax on a net basis. In situations in which we are not primarily obligated, we do not have credit risk, or we determine amounts earned using fixed percentage or fixed payment schedules, we record the net amounts as management fees earned. Currently, we have one contract accounted for as management fees.

Earth911 revenue primarily represents licensing fees that we recognize ratably over the term of the license. We derive some revenue from advertising contracts, which we recognize ratably over the term that the advertisement appears on our website.

Net Loss Per Share

We compute basic net loss per share by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. We have other potentially dilutive securities outstanding that are not shown in a diluted net loss per share calculation because their effect in both 2015 and 2014 would be anti-dilutive. These potentially dilutive securities include options, restricted stock units, and warrants and totaled 16,269,839 and 17,122,532 shares at September 30, 2015 and 2014, respectively.

The following table sets forth the anti-dilutive securities excluded from diluted loss per share:

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Anti-dilutive securities excluded from diluted loss per share:

 

 

 

 

 

 

 

 

Stock options

 

 

4,402,739

 

 

 

4,831,532

 

Restricted stock units

 

 

76,100

 

 

 

 

Warrants

 

 

11,791,000

 

 

 

12,291,000

 

 

 

 

16,269,839

 

 

 

17,122,532

 

 

Inventories

We record inventories within “Prepaid expenses and other current assets” in our condensed consolidated balance sheets.  As of September 30, 2015 and December 31, 2014, all inventories were finished goods with a balance of $13,377 and $30,759, respectively, and consisted of waste disposal equipment, with no reserve for inventory obsolescence at either date.

 

Property and Equipment, Net, and Other Assets
Property and Equipment, Net, and Other Assets

3. Property and Equipment, Net, and Other Assets

At September 30, 2015 and December 31, 2014, property and equipment, net, and other assets consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $1,895,096

     and $1,692,835 as of September 30, 2015 and December 31, 2014,

     respectively

 

$

1,253,093

 

 

$

533,837

 

Security deposits and other assets

 

 

209,942

 

 

 

219,656

 

    Property and equipment, net, and other assets

 

$

1,463,035

 

 

$

753,493

 

 

We compute depreciation using the straight-line method over the estimated useful lives of the property and equipment. The depreciation expense related to property and equipment was $71,844 and $81,038 for the three months ended September 30, 2015 and 2014, respectively.  The depreciation expense related to property and equipment was $218,225 and $223,499 for the nine months ended September 30, 2015 and 2014, respectively.  

 

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

4. Goodwill and Other Intangible Assets

The components of goodwill and other intangible assets were as follows:

  

September 30, 2015 (Unaudited)

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

5 years

 

$

12,720,000

 

 

$

5,618,000

 

 

$

7,102,000

 

Trademarks

 

7 years

 

 

6,230,000

 

 

 

1,965,417

 

 

 

4,264,583

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Software

 

7 years

 

 

1,754,285

 

 

 

126,677

 

 

 

1,627,608

 

Customer lists

 

5 years

 

 

307,153

 

 

 

167,507

 

 

 

139,646

 

Total finite lived intangible assets

 

 

 

$

21,242,121

 

 

$

8,108,284

 

 

$

13,133,837

 

 

December 31, 2014

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

5 years

 

$

12,720,000

 

 

$

3,710,000

 

 

$

9,010,000

 

Trademarks

 

7 years

 

 

6,230,000

 

 

 

1,297,917

 

 

 

4,932,083

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Software

 

7 years

 

 

1,013,714

 

 

 

25,899

 

 

 

987,815

 

Customer lists

 

5 years

 

 

307,153

 

 

 

121,434

 

 

 

185,719

 

Total finite lived intangible assets

 

 

 

$

20,501,550

 

 

$

5,385,933

 

 

$

15,115,617

 

 

September 30, 2015 (Unaudited) and December 31, 2014

 

Estimated

Useful Life

 

Carrying

Amount

 

Indefinite lived intangible asset:

 

 

 

 

 

 

Goodwill

 

Indefinite

 

$

58,337,290

 

 

We compute amortization using the straight-line method over the estimated useful lives of the finite lived intangible assets. The amortization expense related to finite lived intangible assets was $917,261 and $875,740 for the three months ended September 30, 2015 and 2014, respectively. The amortization expense related to finite lived intangible assets was $2,722,351 and $2,638,441 for the nine months ended September 30, 2015 and 2014, respectively.  We have no indefinite-lived intangible assets other than goodwill. The goodwill is not deductible for tax purposes. As required by FASB ASC Topic 350, Intangibles – Goodwill and Other, we performed our goodwill impairment analysis in the third quarter with no impairment recorded.

Line of Credit
Line of Credit

5. Line of Credit

On December 15, 2010, Quest entered into a Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”), a national banking association. This agreement, as amended, provides Quest with a loan facility up to $15,000,000 for working capital with advances generally limited to 80% of eligible accounts receivable from Quest’s largest customer and 85% of all other eligible accounts receivable. The facility matures May 13, 2018.  The interest on the outstanding principal amount accrues daily and is payable monthly based on a fluctuating interest rate per annum, which is the base rate plus 1.50% (2.46% as of September 30, 2015). The base rate for any day is the greater of (a) the federal funds rate plus one-half of 1%, (b) Region’s published effective prime rate, or (c) the Eurodollar rate for such day based on an interest period of one month. To secure the amounts due under the agreement, Quest granted Regions a security interest in all of its assets with guarantees from QRHC and Earth911. Quest had $3,000,000 outstanding and $12,000,000 available to be borrowed as of September 30, 2015. The amount of interest expense related to the Regions line of credit for the three months ended September 30, 2015 and 2014 was $65,026 and $35,607, respectively.  The amount of interest expense related to the Regions line of credit for the nine months ended September 30, 2015 and 2014 was $153,555 and $127,991, respectively.  As of September 30, 2015, we were in compliance with the financial covenants.  

During the nine months ended September 30, 2015, Quest entered into two amendments with Regions.  On May 13, 2015, Quest entered into a Seventh Amendment to Loan Agreement with Regions. The loan agreement was amended to, among other things, (i) reduce the applicable margin for eurodollar rate loans by 0.25% per annum, (ii) extend the maturity date to May 13, 2018, and (iii) modify the permitted acquisitions in certain respects.  On July 7, 2015, Quest entered into an Eighth Amendment to Loan Agreement with Regions.   The loan agreement was amended to, among other things, increase the aggregate revolving credit commitment to $15.0 million by exercising the $5.0 million accordion feature in the loan agreement.

Long-Term Debt and Capital Lease Obligations
Long-Term Debt and Capital Lease Obligations

6. Long-Term Debt and Capital Lease Obligations

At September 30, 2015 and December 31, 2014, total capital lease obligations outstanding consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

 

 

 

Capital lease obligations, imputed interest at 4.75% to 4.87%, with monthly payments of $5,507, through August 2018, secured by computer and telephone equipment

 

$

143,025

 

 

$

47,250

 

Total

 

 

143,025

 

 

 

47,250

 

Less: current maturities

 

 

(60,592

)

 

 

(22,853

)

Long-term portion

 

$

82,433

 

 

$

24,397

 

 

Our capital lease obligations are included within “Deferred revenue and other current liabilities” and “Other long-term liabilities” in our condensed consolidated balance sheets.  The amount of interest expense related to our capital leases for the three months ended September 30, 2015 and 2014 was $833 and $767, respectively.  The amount of interest expense related to our capital leases for the nine months ended September 30, 2015 and 2014 was $1,746 and $1,857, respectively.  

Convertible Secured Promissory Notes – Quest Acquisition – In connection with our acquisition of Quest from Quest Resource Group LLC (“QRG”) on July 16, 2013, we issued convertible secured promissory notes with a total principal amount of $22,000,000 to the owners of QRG who were related parties: the Chief Executive Officer of Quest and the former President of Quest. After the close of the transaction, the Chief Executive Officer of Quest became the President, Chief Executive Officer, and a member of the Board of Directors of our company until his resignation in October 2015, and the former President of Quest became a member of the Board of Directors of our company. The convertible secured promissory notes (collectively, the “Sellers Notes”) were each secured by a first-priority security interest in a 25% membership interest held by Earth911 in Quest (comprising a total of 50% of the membership interests of Quest), as set forth in security and membership interest pledge agreements, by and between Earth911 and the sellers. The Sellers Notes accrued interest at a rate of 7% per annum and were payable on a monthly basis on the 5th day of the month beginning on September 5, 2013. The principal amount was due and payable in one installment on July 16, 2016.

The Sellers Notes were convertible at any time, in the sole discretion of the holders, into shares of our common stock at a price of $2.00 per share. In addition, the Sellers Notes were convertible, in our sole discretion, into shares of our common stock at a price of $2.00 per share at any time after (i) the two year anniversary of the Notes, (ii) the principal amount of each Sellers Note had been paid down by $5,000,000 as a result of the first capital raise, (iii) our common stock trades on the Nasdaq Stock Market, the New York Stock Exchange, or NYSE MKT, and (iv) our common stock has traded at four times the $2.00 conversion price, as adjusted for any stock splits, reverse stock splits, or both. Based on our share price at the time we entered into the Sellers Notes agreement, we recognized a beneficial conversion feature (“BCF”) of $5,500,000 and discounted the Sellers Notes.

 

On September 24, 2014, we repaid $11,000,000 of the Sellers Notes using proceeds from our public offering. Additionally, the holders converted the remaining $11,000,000 of Sellers Notes, plus accrued interest through September 24, 2014 of $101,260, into 5,550,630 shares of our common stock. In accordance with FASB ASC Topic 740-20, Debt with Conversion and Other Options, for the portion of the Sellers Notes retired through conversion to our common stock, the remaining unamortized BCF of $1,658,531 at the time of conversion is reflected as “Interest expense” in our condensed consolidated statement of operations.  Additionally, for the portion of the Sellers Notes repaid in cash, we did not allocate the consideration paid to the BCF, as we determined the intrinsic value was zero as of the extinguishment date, and we recorded the $1,658,531 difference between the carrying amount of the remaining Sellers Notes and the consideration paid as “Loss on extinguishment of debt” in our condensed consolidated statement of operations. Therefore, as of December 31, 2014, the unamortized discount on the Sellers Notes was nil. The amount of interest expense related to the Sellers Notes for the nine months ended September 30, 2015 and 2014 was nil and $1,126,521, respectively. The amount of interest expense related to the amortization of the discount on the Sellers Notes for the nine months ended September 30, 2015 and 2014 was nil and $2,998,403, respectively.

 

Income Taxes
Income Taxes

7. Income Taxes

We compute income taxes using the asset and liability method in accordance with FASB ASC Topic 740, Income Taxes. Under the asset and liability method, we determine deferred income tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities and measure them using currently enacted tax rates and laws. We provide a valuation allowance for the amount of deferred tax assets that, based on available evidence, are more likely than not expected to be realized. Realization of our net operating loss carryforward was not reasonably assured as of September 30, 2015 and December 31, 2014, and we have recorded a valuation allowance of $8,400,000 and $9,108,000, respectively, against deferred tax assets in excess of deferred tax liabilities in the accompanying condensed consolidated financial statements. As of September 30, 2015 and December 31, 2014, we had federal income tax net operating loss carryforwards of approximately $12,000,000 and $14,800,000, respectively, which expire at various dates beginning in 2031.

 

Fair Value of Financial Instruments
Fair Value of Financial Instruments

8. Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, line of credit, capital lease obligations, and warrant liability. We do not believe that we are exposed to significant interest, currency, or credit risks arising from these financial instruments. With the exception of the warrant liability, the fair values of these financial instruments approximate their carrying values using Level 3 inputs, based on their short maturities or, for long-term portions of capital lease obligations and line of credit, based on borrowing rates currently available to us for loans with similar terms and maturities.

On May 7, 2014, we issued an aggregate of 200,000 warrants to purchase shares of our common stock to a consultant in exchange for services rendered during 2014.  Of these warrants, 100,000 vested immediately and resulted in no expense recorded for the three months ended September 30, 2015.  The remaining 100,000 warrants, which we had classified as a liability, vested on May 7, 2015, subject to performance conditions.  We measured the warrants at fair value by applying the Black-Scholes-Merton valuation model, which utilizes Level 3 inputs. As of May 7, 2015, the assumptions used in the Black-Scholes-Merton valuation for the 100,000 warrants that vested on May 7, 2015 were as follows: volatility of 88.5%; risk free interest rate of 0.63%; expected term of two years; and expected dividend yield of 0%. The grant date fair value of the warrant valuation described above was $0.35 per warrant. We based the risk free interest rate on U.S. Treasury rates with maturity dates approximating the expected term of the warrants. We determined the historical volatility using the historical changes in the market price of our common stock and applicable comparable companies.  We report the warrant liability in “Accounts payable and accrued liabilities” within our balance sheets.  Our warrant liability was nil and $34,857 at September 30, 2015 and December 31, 2014, respectively. Due to the decline in the fair value of these warrants, we recorded an increase of stock-based compensation expense of nil and $144 for the three and nine months ended September 30, 2015, respectively, related to these warrants. On the May 7, 2015 vesting date, we reclassified the $35,001 estimated fair value of the warrants to stockholders’ equity.

 

Stockholders' Equity
Stockholders' Equity

9. Stockholders’ Equity

Preferred StockOur authorized preferred stock includes 10,000,000 shares of preferred stock with a par value of $0.001, of which no shares have been issued or are outstanding.

Common Stock – Our authorized common stock includes 200,000,000 shares of common stock with a par value of $0.001, of which 111,714,938 and 111,601,304 shares were issued and outstanding as of September 30, 2015 and December 31, 2014, respectively.

 

During the nine months ended September 30, 2015, we issued shares of common stock as follows:

 

 

 

Common Stock

 

 

 

Shares

 

 

Amount

 

Shares issued for vested restricted stock units

 

 

56,500

 

 

$

 

Shares issued for Employee Stock Purchase Plan options

 

 

57,134

 

 

 

60,705

 

 

 

 

113,634

 

 

$

60,705

 

 

·

Shares Issued for Vested Restricted Stock Units

 

o

On March 5, 2015, we issued 56,500 shares to an employee for the restricted stock units that vested and were expensed during fiscal year 2014.  

 

·

Shares Issued for Employee Stock Purchase Plan Options

 

o

On May 15, 2015, we issued 57,134 shares to employees for the Employee Stock Purchase Plan options that vested and were exercised.  

Warrants – During the nine months ended September 30, 2015, we did not issue any warrants and no holders exercised warrants.  During the nine months ended September 30, 2014, we issued 12,291,000 warrants.  During the nine months ended September 30, 2015, a third party forfeited 1,200,000 contingent warrants, with no corresponding forfeitures or expirations during the nine months ended September 30, 2014.  Due to the uncertainty of attaining any of the performance conditions, we had not recognized any additional expense for the non-vested warrants.  As these warrants related to internally developed software, we did not capitalize any costs or recognize any expense for the nine months ended September 30, 2015. At September 30, 2015, we had outstanding exercisable warrants to purchase 11,791,000 shares of common stock.  

The following table summarizes the warrants issued and outstanding as of September 30, 2015:

 

Warrants Issued and Outstanding as of September 30, 2015

 

 

 

Date of

 

Exercise

 

 

Shares of

 

Description

 

Issuance

 

Expiration

 

Price

 

 

Common Stock

 

Exercisable warrants

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

04/18/2014

 

04/01/2017

 

$

2.00

 

 

 

1,441,000

 

Warrant

 

05/07/2014

 

05/07/2017

 

$

2.65

 

 

 

200,000

 

Warrant

 

05/28/2014

 

10/31/2016

 

$

4.31

 

 

 

450,000

 

Warrants

 

09/24/2014

 

09/24/2019

 

$

2.50

 

 

 

9,000,000

 

Warrants

 

10/20/2014

 

10/20/2019

 

$

2.50

 

 

 

700,000

 

Total exercisable warrants

 

 

 

 

 

 

 

 

 

 

11,791,000

 

Contingent warrants

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

05/28/2014

 

10/31/2018

 

$

4.31

 

 

 

1,200,000

 

Less warrants cancelled

 

 

 

 

 

 

 

 

 

 

(1,200,000

)

Total contingent warrants

 

 

 

 

 

 

 

 

 

 

 

Total warrants issued and outstanding

 

 

 

 

 

 

11,791,000

 

Restricted Stock Units – During April 2014, we granted restricted stock units representing 132,600 shares of common stock under our 2012 Incentive Compensation Plan. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on the revenue generated by new business activity of one of our subsidiaries. All payouts of restricted stock units that vest will be exercisable immediately and will be paid in the form of common stock. While we do not anticipate issuing dividends, the restricted stock unit awards will not participate in any dividends prior to vesting.

We determined the fair value of the restricted stock unit awards granted based on the market value of our common stock on the date of grant, which was $3.75 per share. Due to the uncertainty of attaining any of the remaining performance conditions, we recorded no additional stock-based compensation expense for the remaining performance conditions for the nine months ended September 30, 2015. We issued 56,500 shares during the nine months ended September 30, 2015 for the restricted stock units that vested during 2014.  As of September 30, 2015 and December 31, 2014, outstanding restricted stock units totaled 76,100 and 132,600, respectively.  

Employee Stock Purchase Plan – On September 17, 2014, our stockholders approved the Quest Resource Holding Corporation 2014 Employee Stock Purchase Plan (the “ESPP”). We recorded expense of $17,723 and $54,647 related to the ESPP during the three and nine months ended September 30, 2015, respectively, with no corresponding expense during the three and nine months ended September 30, 2014.  On May 15, 2015, we issued 57,134 shares to employees for the ESPP options that vested and were exercised.    

Stock Options – The following table summarizes the stock option activity for the nine month period ended September 30, 2015:

 

 

 

Stock Options

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Exercise

 

Average

 

 

 

Number

 

 

Price Per

 

Exercise Price

 

 

 

of Shares

 

 

Share

 

Per Share

 

Outstanding at December 31, 2014

 

 

5,006,532

 

 

$    1.45 — 3.75

 

$

2.66

 

Granted

 

 

155,625

 

 

$    0.93 — 1.46

 

$

1.23

 

Canceled/Forfeited

 

 

(759,418

)

 

$    1.28 — 2.10

 

$

2.04

 

Outstanding at September 30, 2015

 

 

4,402,739

 

 

$    0.93 — 3.75

 

$

2.64

 

 

Related Party Transactions
Related Party Transactions

10. Related Party Transactions

Acquisition of the Quest Interests – On July 16, 2013, we acquired all of the issued and outstanding membership interests of Quest held by QRG, comprising 50% of the membership interests of Quest (the “Quest Interests”). The purchase price for the Quest Interests consisted of 22,000,000 shares of our common stock issued at a fair market value of $2.50 per share based on the closing price of the stock on the date of the transaction and the Sellers Notes in the aggregate principal amount of $22,000,000. The total purchase price of $77,000,000 was paid to the owners of QRG who were related parties: the Chief Executive Officer of Quest and the former President of Quest until his resignation in October 2015, and the former President of Quest became a member of the Board of Directors of our company. After the close of the transaction, the Chief Executive Officer of Quest became the President, Chief Executive Officer, and member of the Board of Directors of our company. On September 24, 2014, we paid $11,000,000 to the holders of the Sellers’ Notes and such holders converted the remaining $11,000,000 of principal, plus accrued interest through September 24, 2014 of $101,260, into 5,550,630 shares of our common stock.  See Note 6 for a discussion of the conversion.

Summary of Significant Accounting Policies (Policies)

Principals of Presentation and Consolidation

The condensed consolidated financial statements included herein have been prepared by us without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.

The accompanying condensed consolidated financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our financial position at September 30, 2015 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2014 condensed consolidated balance sheet data from audited financial statements, but did not include all disclosures required by GAAP. As Quest, Earth911, and YouChange each operate as ecology based green service companies, we did not deem segment reporting necessary.

All intercompany accounts and transactions have been eliminated in consolidation. Interim results are subject to seasonal variations, and the results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year.

Revenue Recognition

We recognize revenue only when all of the following criteria have been met:

 

·

persuasive evidence of an arrangement exists;

 

·

delivery has occurred or services have been rendered;

 

·

the fee for the arrangement is fixed or determinable; and

 

·

collectability is reasonably assured.

Persuasive Evidence of an Arrangement Exists – We document all terms of an arrangement in a service agreement or quote signed or confirmed by the customer prior to recognizing revenue.

Delivery Has Occurred or Services Have Been Rendered – We perform all services or deliver all products prior to recognizing revenue. Services are deemed to be performed when the services are complete.

The Fee for the Arrangement is Fixed or Determinable – Prior to recognizing revenue, a customer’s fee is either fixed or determinable under the terms of the quote, service agreement, or accepted customer purchase order.

Collectability Is Reasonably Assured – We assess collectability on a customer by customer basis based on criteria outlined by management.

We provide businesses with management programs to reuse, recycle, and dispose of a wide variety of waste streams and recyclables generated by their business. We utilize third-party subcontractors to execute the collection, transport, and recycling or disposal of used motor oil, oil filters, scrap tires, cooking oil, and expired food products. We evaluate the criteria outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-45, Revenue Recognition—Principal Agent Considerations, in determining whether it is appropriate to record the gross amount of service revenue and related costs or the net amount earned as management fees. Generally, when we are primarily obligated in a transaction, have latitude in establishing prices and selecting suppliers, have credit risk, or have several but not all of these indicators, we record revenue gross and record amounts collected from customers for sales tax on a net basis. In situations in which we are not primarily obligated, we do not have credit risk, or we determine amounts earned using fixed percentage or fixed payment schedules, we record the net amounts as management fees earned. Currently, we have one contract accounted for as management fees.

Earth911 revenue primarily represents licensing fees that we recognize ratably over the term of the license. We derive some revenue from advertising contracts, which we recognize ratably over the term that the advertisement appears on our website.

Net Loss Per Share

We compute basic net loss per share by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. We have other potentially dilutive securities outstanding that are not shown in a diluted net loss per share calculation because their effect in both 2015 and 2014 would be anti-dilutive. These potentially dilutive securities include options, restricted stock units, and warrants and totaled 16,269,839 and 17,122,532 shares at September 30, 2015 and 2014, respectively.

The following table sets forth the anti-dilutive securities excluded from diluted loss per share:

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Anti-dilutive securities excluded from diluted loss per share:

 

 

 

 

 

 

 

 

Stock options

 

 

4,402,739

 

 

 

4,831,532

 

Restricted stock units

 

 

76,100

 

 

 

 

Warrants

 

 

11,791,000

 

 

 

12,291,000

 

 

 

 

16,269,839

 

 

 

17,122,532

 

 

Inventories

We record inventories within “Prepaid expenses and other current assets” in our condensed consolidated balance sheets.  As of September 30, 2015 and December 31, 2014, all inventories were finished goods with a balance of $13,377 and $30,759, respectively, and consisted of waste disposal equipment, with no reserve for inventory obsolescence at either date.

Summary of Significant Accounting Policies (Tables)
Schedule of Anti-dilutive Securities Excluded from Diluted Loss Per Share

The following table sets forth the anti-dilutive securities excluded from diluted loss per share:

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Anti-dilutive securities excluded from diluted loss per share:

 

 

 

 

 

 

 

 

Stock options

 

 

4,402,739

 

 

 

4,831,532

 

Restricted stock units

 

 

76,100

 

 

 

 

Warrants

 

 

11,791,000

 

 

 

12,291,000

 

 

 

 

16,269,839

 

 

 

17,122,532

 

 

Property and Equipment, Net, and Other Assets (Tables)
Components Property and Equipment, net, and other assets

At September 30, 2015 and December 31, 2014, property and equipment, net, and other assets consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $1,895,096

     and $1,692,835 as of September 30, 2015 and December 31, 2014,

     respectively

 

$

1,253,093

 

 

$

533,837

 

Security deposits and other assets

 

 

209,942

 

 

 

219,656

 

    Property and equipment, net, and other assets

 

$

1,463,035

 

 

$

753,493

 

 

Goodwill and Other Intangible Assets (Tables)

The components of goodwill and other intangible assets were as follows:

  

September 30, 2015 (Unaudited)

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

5 years

 

$

12,720,000

 

 

$

5,618,000

 

 

$

7,102,000

 

Trademarks

 

7 years

 

 

6,230,000

 

 

 

1,965,417

 

 

 

4,264,583

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Software

 

7 years

 

 

1,754,285

 

 

 

126,677

 

 

 

1,627,608

 

Customer lists

 

5 years

 

 

307,153

 

 

 

167,507

 

 

 

139,646

 

Total finite lived intangible assets

 

 

 

$

21,242,121

 

 

$

8,108,284

 

 

$

13,133,837

 

 

December 31, 2014

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

5 years

 

$

12,720,000

 

 

$

3,710,000

 

 

$

9,010,000

 

Trademarks

 

7 years

 

 

6,230,000

 

 

 

1,297,917

 

 

 

4,932,083

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Software

 

7 years

 

 

1,013,714

 

 

 

25,899

 

 

 

987,815

 

Customer lists

 

5 years

 

 

307,153

 

 

 

121,434

 

 

 

185,719

 

Total finite lived intangible assets

 

 

 

$

20,501,550

 

 

$

5,385,933

 

 

$

15,115,617

 

 

 

September 30, 2015 (Unaudited) and December 31, 2014

 

Estimated

Useful Life

 

Carrying

Amount

 

Indefinite lived intangible asset:

 

 

 

 

 

 

Goodwill

 

Indefinite

 

$

58,337,290

 

 

Long-Term Debt and Capital Lease Obligations (Tables)
Summary of Capital Lease Obligations

At September 30, 2015 and December 31, 2014, total capital lease obligations outstanding consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

 

 

 

Capital lease obligations, imputed interest at 4.75% to 4.87%, with monthly payments of $5,507, through August 2018, secured by computer and telephone equipment

 

$

143,025

 

 

$

47,250

 

Total

 

 

143,025

 

 

 

47,250

 

Less: current maturities

 

 

(60,592

)

 

 

(22,853

)

Long-term portion

 

$

82,433

 

 

$

24,397

 

 

Stockholders' Equity (Tables)

During the nine months ended September 30, 2015, we issued shares of common stock as follows:

 

 

 

Common Stock

 

 

 

Shares

 

 

Amount

 

Shares issued for vested restricted stock units

 

 

56,500

 

 

$

 

Shares issued for Employee Stock Purchase Plan options

 

 

57,134

 

 

 

60,705

 

 

 

 

113,634

 

 

$

60,705

 

 

The following table summarizes the warrants issued and outstanding as of September 30, 2015:

 

Warrants Issued and Outstanding as of September 30, 2015

 

 

 

Date of

 

Exercise

 

 

Shares of

 

Description

 

Issuance

 

Expiration

 

Price

 

 

Common Stock

 

Exercisable warrants

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

04/18/2014

 

04/01/2017

 

$

2.00

 

 

 

1,441,000

 

Warrant

 

05/07/2014

 

05/07/2017

 

$

2.65

 

 

 

200,000

 

Warrant

 

05/28/2014

 

10/31/2016

 

$

4.31

 

 

 

450,000

 

Warrants

 

09/24/2014

 

09/24/2019

 

$

2.50

 

 

 

9,000,000

 

Warrants

 

10/20/2014

 

10/20/2019

 

$

2.50

 

 

 

700,000

 

Total exercisable warrants

 

 

 

 

 

 

 

 

 

 

11,791,000

 

Contingent warrants

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

05/28/2014

 

10/31/2018

 

$

4.31

 

 

 

1,200,000

 

Less warrants cancelled

 

 

 

 

 

 

 

 

 

 

(1,200,000

)

Total contingent warrants

 

 

 

 

 

 

 

 

 

 

 

Total warrants issued and outstanding

 

 

 

 

 

 

11,791,000

 

 

Stock Options – The following table summarizes the stock option activity for the nine month period ended September 30, 2015:

 

 

 

Stock Options

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Exercise

 

Average

 

 

 

Number

 

 

Price Per

 

Exercise Price

 

 

 

of Shares

 

 

Share

 

Per Share

 

Outstanding at December 31, 2014

 

 

5,006,532

 

 

$    1.45 — 3.75

 

$

2.66

 

Granted

 

 

155,625

 

 

$    0.93 — 1.46

 

$

1.23

 

Canceled/Forfeited

 

 

(759,418

)

 

$    1.28 — 2.10

 

$

2.04

 

Outstanding at September 30, 2015

 

 

4,402,739

 

 

$    0.93 — 3.75

 

$

2.64

 

 

The Company, Description of Business, and Liquidity - Additional Information (Detail) (USD $)
9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Sep. 30, 2015
Revenue [Member]
Customer
Sep. 30, 2015
Revenue [Member]
Customer Accounted [Member]
Sep. 30, 2014
Revenue [Member]
Customer Accounted [Member]
Sep. 30, 2015
Revenue [Member]
Customer Accounted [Member]
Sep. 30, 2014
Revenue [Member]
Customer Accounted [Member]
Concentration Risk [Line Items]
 
 
 
 
 
 
 
Number of customer
 
 
 
 
 
 
Percentage of revenue
 
 
 
60.00% 
72.20% 
60.20% 
73.70% 
Working capital
$ 1,999,532 
$ 1,316,319 
 
 
 
 
 
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Accounting Policies [Abstract]
 
 
 
Potentially dilutive securities include options, restricted stock units, and warrants
16,269,839 
17,122,532 
 
Finished goods inventory
$ 13,377 
 
$ 30,759 
Reserve for inventory obsolescence
$ 0 
 
 
Summary of Significant Accounting Policies - Schedule of Anti-dilutive Securities Excluded from Diluted Loss Per Share (Detail)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
 
 
Anti-dilutive securities excluded from diluted loss per share
16,269,839 
17,122,532 
Stock options [Member]
 
 
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
 
 
Anti-dilutive securities excluded from diluted loss per share
4,402,739 
4,831,532 
Restricted Stock Units [Member]
 
 
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
 
 
Anti-dilutive securities excluded from diluted loss per share
76,100 
 
Warrant [Member]
 
 
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
 
 
Anti-dilutive securities excluded from diluted loss per share
11,791,000 
12,291,000 
Property and Equipment, Net, and Other Assets - Components of Property and Equipment,net,and other assets (Detail) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Property Plant And Equipment [Abstract]
 
 
Property and equipment, net of depreciation
$ 1,253,093 
$ 533,837 
Security deposits and other assets
209,942 
219,656 
Property and Equipment net and other assets
$ 1,463,035 
$ 753,493 
Property and Equipment, Net, and Other Assets - Components of Property and Equipment,net,and other assets ( Parenthetical) (Detail) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Property Plant And Equipment [Abstract]
 
 
Accumulated depreciation, Property and equipment
$ 1,895,096 
$ 1,692,835 
Property and Equipment, Net, and Other Assets - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Property Plant And Equipment [Abstract]
 
 
 
 
Depreciation
$ 71,844 
$ 81,038 
$ 218,225 
$ 223,499 
Goodwill and Other Intangible Assets - Schedule of Finite-Lived Intangible Assets (Detail) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Finite Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
$ 21,242,121 
$ 20,501,550 
Accumulated Amortization
8,108,284 
5,385,933 
Net
13,133,837 
15,115,617 
Customer relationships [Member]
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Estimated Useful Life
5 years 
5 years 
Gross Carrying Amount
12,720,000 
12,720,000 
Accumulated Amortization
5,618,000 
3,710,000 
Net
7,102,000 
9,010,000 
Trademarks [Member]
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Estimated Useful Life
7 years 
7 years 
Gross Carrying Amount
6,230,000 
6,230,000 
Accumulated Amortization
1,965,417 
1,297,917 
Net
4,264,583 
4,932,083 
Patents [Member]
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Estimated Useful Life
7 years 
7 years 
Gross Carrying Amount
230,683 
230,683 
Accumulated Amortization
230,683 
230,683 
Software [Member]
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Estimated Useful Life
7 years 
7 years 
Gross Carrying Amount
1,754,285 
1,013,714 
Accumulated Amortization
126,677 
25,899 
Net
1,627,608 
987,815 
Customer lists [Member]
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Estimated Useful Life
5 years 
5 years 
Gross Carrying Amount
307,153 
307,153 
Accumulated Amortization
167,507 
121,434 
Net
$ 139,646 
$ 185,719 
Goodwill and Other Intangible Assets - Schedule of Indefinite-Lived Intangible Assets (Detail) (USD $)
9 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
Goodwill Useful Life Description
Indefinite 
 
Goodwill
$ 58,337,290 
$ 58,337,290 
Goodwill and Other Intangible Assets - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Jun. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
 
 
Amortization of intangibles
$ 917,261 
$ 875,740 
$ 2,722,351 
$ 2,638,441 
Indefinite-lived intangible assets other than goodwill
 
 
 
Impairment of goodwill
$ 0 
 
 
 
Line of Credit - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Amendment
Sep. 30, 2014
Sep. 30, 2015
Seventh Amendment to Loan Agreement with Regions Bank [Member]
Jul. 7, 2015
Eighth Amendment To Loan Agreement with Regions [Member]
Sep. 30, 2015
Eurodollar [Member]
Seventh Amendment to Loan Agreement with Regions Bank [Member]
Sep. 30, 2015
Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”) [Member]
Sep. 30, 2014
Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”) [Member]
Sep. 30, 2015
Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”) [Member]
Sep. 30, 2014
Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”) [Member]
Sep. 30, 2015
Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”) [Member]
Base Rate [Member]
Sep. 30, 2015
Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”) [Member]
Eligible Accounts Receivable [Member]
Largest Customer [Member]
Sep. 30, 2015
Revolving Credit Note and Loan Agreement with Regions Bank (“Regions”) [Member]
Eligible Accounts Receivable [Member]
Other Customer [Member]
Line of Credit Facility [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit facility agreement date
 
 
 
 
 
 
 
 
 
Dec. 15, 2010 
 
 
 
 
Working capital from loan agreement with Regions Bank
 
 
 
 
 
$ 15,000,000 
 
$ 15,000,000 
 
$ 15,000,000 
 
 
 
 
Percentage of accounts receivable form Quest's customers
 
 
 
 
 
 
 
 
 
 
 
 
80.00% 
85.00% 
Interest on outstanding principal amount
 
 
 
 
 
 
 
2.46% 
 
2.46% 
 
 
 
 
Fluctuating interest rate based on base rate
 
 
 
 
 
 
 
 
 
 
 
1.50% 
 
 
Outstanding principal amount on line of credit facility
3,000,000 
 
3,000,000 
 
 
 
 
3,000,000 
 
3,000,000 
 
 
 
 
Amount available to be borrow under line of credit facility
 
 
 
 
 
 
 
12,000,000 
 
12,000,000 
 
 
 
 
Interest rate line of credit facility description
 
 
 
 
 
 
 
 
 
The base rate for any day is the greater of (a) the federal funds rate plus one-half of 1%, (b) Region’s published effective prime rate, or (c) the Eurodollar rate for such day based on an interest period of one month. 
 
 
 
 
Interest expense related to line of credit facility
72,758 
2,494,060 
163,591 
4,259,980 
 
 
 
65,026 
35,607 
153,555 
127,991 
 
 
 
Maturity date of loan agreement with Regions Bank
 
 
 
 
May 13, 2018 
 
 
 
 
May 13, 2018 
 
 
 
 
Number of amendments
 
 
 
 
 
 
 
 
 
 
 
 
 
Decrease in applicable margin rate of loans during the period
 
 
 
 
 
 
0.25% 
 
 
 
 
 
 
 
Line of credit, accordion feature
 
 
 
 
 
$ 5,000,000 
 
 
 
 
 
 
 
 
Long-Term Debt and Capital Lease Obligations - Summary of Capital Lease Obligations (Detail) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Leases [Abstract]
 
 
Capital lease obligations, imputed interest at 4.75% to 4.87%, with monthly payments of $5,507, through August 2018, secured by computer and telephone equipment
$ 143,025 
$ 47,250 
Total
143,025 
47,250 
Less: current maturities
(60,592)
(22,853)
Long-term portion
$ 82,433 
$ 24,397 
Long-Term Debt and Capital Lease Obligations - Summary of Capital Lease Obligations (Parenthetical) (Detail) (Capital lease obligations, imputed interest at 4.75% to 4.87% [Member], USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Capital lease obligations, imputed interest at 4.75% to 4.87% [Member]
 
 
Debt Instrument [Line Items]
 
 
Imputed interest rate for capital lease obligation, minimum
4.75% 
4.75% 
Imputed interest rate for capital lease obligation, maximum
4.87% 
4.87% 
Monthly installment capital lease obligation
$ 5,507 
$ 5,507 
Long-Term Debt and Capital Lease Obligations - Additional Information (Detail) (USD $)
0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended
Sep. 24, 2014
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Sep. 24, 2014
Chief Executive Officer of Quest and Former President of Quest [Member]
Sellers Notes [Member]
Sep. 30, 2015
Convertible Secured Promissory Notes [Member]
Dec. 31, 2014
Convertible Secured Promissory Notes [Member]
Jul. 16, 2013
Convertible Secured Promissory Notes [Member]
Jul. 16, 2013
Convertible Secured Promissory Notes [Member]
Chief Executive Officer of Quest and Former President of Quest [Member]
Long Term Debt And Equity Financings [Line Items]
 
 
 
 
 
 
 
 
 
 
Interest expense related to capital leases
 
$ 833 
$ 767 
$ 1,746 
$ 1,857 
 
 
 
 
 
Convertible secured promissory note principle amount payable
 
 
 
 
 
 
 
 
 
22,000,000 
Percentage of Security interest, secured
 
 
 
 
 
 
 
 
 
25.00% 
Percentage of ownership by officials before acquisition
 
 
 
 
 
 
 
 
 
50.00% 
Annual interest rate on convertible note
 
 
 
 
 
 
 
 
7.00% 
 
Notes accrue interest payable beginning
 
 
 
 
 
 
Sep. 05, 2013 
 
 
 
Notes accrue interest payable in one installment
 
 
 
 
 
 
Jul. 16, 2016 
 
 
 
Conversion price of notes to common stock