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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 provide businesses with one-stop management programs to reuse, recycle, and dispose of a wide variety of waste streams and recyclables generated by their businesses. Our comprehensive reuse, recycling, and proper disposal management programs are designed to enable regional and national customers to have a single point of contact for managing a variety of waste streams and recyclables. This business generates substantially all of our revenue. We also operate environmentally based social media and online data platforms that contain information and instructions necessary to empower consumers and consumer product companies to recycle or properly dispose of household products and materials. Our directory of local recycling and proper disposal options empowers consumers directly and enables consumer product companies to empower their customers by giving them the guidance necessary for the proper recycling or disposal of a wide range of household products and materials, including the “why, where, and how” of recycling. Two customers accounted for 55.3% and 61.5% of revenue for the three months ended March 31, 2016 and 2015, respectively. Our principal offices are located in The Colony, Texas.
Liquidity – As of March 31, 2016 and December 31, 2015, our working capital balance was $3,443,448 and $2,059,248, respectively.
|
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, 2015. 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 March 31, 2016 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2015 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 months ended March 31, 2016 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 developed by us.
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. We 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 with revenue of $87,689 and nil for the three months ended March 31, 2016 and 2015, respectively. Our gross billings on this management fee contract were $1,121,643 and nil for the three months ended March 31, 2016 and 2015, respectively.
We recognize licensing fees 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 2016 and 2015 would be anti-dilutive. These potentially dilutive securities include stock options, restricted stock units, and warrants and related to 22,823,106 and 16,832,380 shares at March 31, 2016 and 2015, respectively.
The following table sets forth the anti-dilutive securities excluded from diluted loss per share:
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March 31, |
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|||||
|
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2016 |
|
|
2015 |
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||
|
|
(Unaudited) |
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|
(Unaudited) |
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||
Anti-dilutive securities excluded from diluted loss per share: |
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|
|
|
|
|
|
|
Stock options |
|
|
6,863,656 |
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|
|
4,965,280 |
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Restricted stock units |
|
|
— |
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|
|
76,100 |
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Warrants |
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|
15,959,450 |
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|
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11,791,000 |
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Total anti-dilutive securities excluded from diluted loss per share |
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22,823,106 |
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16,832,380 |
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Inventories
We record inventories within “Prepaid expenses and other current assets” in our condensed consolidated balance sheets. As of March 31, 2016 and December 31, 2015, all inventories were waste disposal equipment with balances of $12,593 and $54,473, respectively, with no reserve for inventory obsolescence at either date.
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3. Property and Equipment, Net, and Other Assets
At March 31, 2016 and December 31, 2015, property and equipment, net, and other assets consisted of the following:
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March 31, |
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December 31, |
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2016 |
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2015 |
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||
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(Unaudited) |
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Property and equipment, net of accumulated depreciation of $2,082,454 and $1,973,538 as of March 31, 2016 and December 31, 2015, respectively |
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$ |
1,383,462 |
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$ |
1,308,236 |
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Security deposits and other assets |
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266,213 |
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|
|
300,396 |
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Property and equipment, net, and other assets |
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$ |
1,649,675 |
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$ |
1,608,632 |
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We compute depreciation using the straight-line method over the estimated useful lives of the property and equipment. The depreciation expense for the three months ended March 31, 2016 was $108,916, inclusive of $9,417 of depreciation expense reflected within “Cost of revenue” in our consolidated statement of operations as it related to assets used in directly servicing customer contracts. The depreciation expense for the three months ended March 31, 2015 was $76,046, with no depreciation expense recorded to “Cost of revenue.” At March 31, 2016, our capital lease assets were $413,502, net of $75,325 of accumulated depreciation. At December 31, 2015, our capital lease assets were $426,757, net of $34,041 of accumulated depreciation.
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4. Goodwill and Other Intangible Assets
The components of goodwill and other intangible assets were as follows:
March 31, 2016 (Unaudited) |
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Estimated Useful Life |
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Gross Carrying Amount |
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Accumulated Amortization |
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Net |
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Finite lived intangible assets: |
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|
|
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Customer relationships |
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5 years |
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$ |
12,720,000 |
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|
$ |
6,890,000 |
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$ |
5,830,000 |
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Trademarks |
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7 years |
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|
6,273,885 |
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2,410,797 |
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|
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3,863,088 |
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Patents |
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7 years |
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|
230,683 |
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|
|
230,683 |
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|
|
— |
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Software |
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7 years |
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|
1,417,602 |
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|
|
149,609 |
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|
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1,267,993 |
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Customer lists |
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5 years |
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307,153 |
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|
|
198,222 |
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|
|
108,931 |
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Total finite lived intangible assets |
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|
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$ |
20,949,323 |
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$ |
9,879,311 |
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$ |
11,070,012 |
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December 31, 2015 |
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Estimated Useful Life |
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Gross Carrying Amount |
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Accumulated Amortization |
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Net |
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|||
Finite lived intangible assets: |
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|
|
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Customer relationships |
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5 years |
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$ |
12,720,000 |
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|
$ |
6,254,000 |
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$ |
6,466,000 |
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Trademarks |
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7 years |
|
|
6,239,950 |
|
|
|
2,188,129 |
|
|
|
4,051,821 |
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Patents |
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7 years |
|
|
230,683 |
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|
|
230,683 |
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|
|
— |
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Software |
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7 years |
|
|
1,290,468 |
|
|
|
104,570 |
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|
|
1,185,898 |
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Customer lists |
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5 years |
|
|
307,153 |
|
|
|
182,864 |
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|
|
124,289 |
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Total finite lived intangible assets |
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|
|
$ |
20,788,254 |
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$ |
8,960,246 |
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$ |
11,828,008 |
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March 31, 2016 (Unaudited) and December 31, 2015 |
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Estimated Useful Life |
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Carrying Amount |
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||
Indefinite lived intangible asset: |
|
|
|
|
|
|
|
Goodwill |
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Indefinite |
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$ |
58,337,290 |
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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 $919,065 and $903,091 for the three months ended March 31, 2016 and 2015, respectively. We have no indefinite-lived intangible assets other than goodwill. The goodwill is not deductible for tax purposes.
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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 of 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% (2.69% as of March 31, 2016). 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 $3,500,000 outstanding and $9,124,343 available to be borrowed as of March 31, 2016. The amount of interest expense related to the Regions line of credit for the three months ended March 31, 2016 and 2015 was $49,782 and $35,050, respectively. As of March 31, 2016, we were in compliance with the financial covenants.
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6. Capital Lease Obligations
At March 31, 2016 and December 31, 2015, total capital lease obligations outstanding consisted of the following:
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March 31, |
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December 31, |
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||
|
|
2016 |
|
|
2015 |
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||
|
|
(Unaudited) |
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|
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|
|
Capital lease obligations, imputed interest at 2.65% to 9.39%, with monthly payments of $11,022, through August 2018, secured by computer and telephone equipment |
|
$ |
394,551 |
|
|
$ |
402,170 |
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Total |
|
|
394,551 |
|
|
|
402,170 |
|
Less: current maturities |
|
|
(115,069 |
) |
|
|
(112,125 |
) |
Long-term portion |
|
$ |
279,482 |
|
|
$ |
290,045 |
|
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 March 31, 2016 and 2015 was $3,965 and $487, respectively.
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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 to be realized. Realization of our net operating loss carryforward was not reasonably assured as of March 31, 2016 and December 31, 2015, and we have recorded a valuation allowance of $13,199,000 and $12,313,000, respectively, against deferred tax assets in excess of deferred tax liabilities in the accompanying condensed consolidated financial statements. As of March 31, 2016 and December 31, 2015, we had federal income tax net operating loss carryforwards of approximately $15,000,000 and $14,500,000, respectively, which expire at various dates beginning in 2031.
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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 warrants to purchase an aggregate of 200,000 shares of our common stock to a consultant in exchange for services rendered during 2014. Of these warrants, 100,000 shares underlying the warrants vested immediately and resulted in no expense recorded for the three months ended March 31, 2016 and 2015. The remaining 100,000 shares underlying the 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 March 31, 2015, the assumptions used in the Black-Scholes-Merton valuation for the warrants to purchase 100,000 shares were as follows: volatility of 81.1%; risk free interest rate of 0.59%; expected term of 2.1 years; and expected dividend yield of 0%. The grant date fair value of the warrant valuation described above was $0.32 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. Our warrant liability was nil at March 31, 2016 and December 31, 2015, respectively. Due to the decline in the fair value of these warrants, we recorded a decrease of stock-based compensation expense of nil and $5,936 for the three months ended March 31, 2016 and 2015, respectively, related to these warrants.
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9. Stockholders’ Equity
Preferred Stock – Our 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 118,678,225 and 111,788,225 shares were issued and outstanding as of March 31, 2016 and December 31, 2015, respectively.
During the three months ended March 31, 2016, we issued shares of common stock as follows:
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Common Stock |
|
|||||
|
|
Shares |
|
|
Amount |
|
||
Sale of common stock and warrants, net of issuance costs of $452,300 |
|
|
6,890,000 |
|
|
$ |
2,889,350 |
|
|
|
|
6,890,000 |
|
|
$ |
2,889,350 |
|
|
· |
Sale of Common Stock and Warrants – |
|
o |
On March 30, 2016, we issued 6,890,000 shares of our common stock, together with warrants to purchase 3,445,000 shares of our common stock, at a price per share and warrant of $0.485. We also issued the underwriters warrants to purchase 723,450 shares of our common stock. The warrants may be exercised for a period of five years at an initial exercise price of $0.485 per share, subject to adjustment for certain dilutive events. We also granted the underwriters a 30-day option to acquire up to 1,033,500 additional shares of common stock and/or additional warrants to purchase up to 516,750 shares of common stock solely to cover over-allotments, with the underwriters receiving additional warrants to purchase 108,518 shares of our common stock if they exercised the over-allotment option. The underwriters did not exercise the over-allotment option. |
Warrants – During the three months ended March 31, 2016, we issued warrants to purchase 4,168,450 shares and no holders exercised warrants. During the three months ended March 31, 2015, we did not issue any warrants and a third party forfeited 1,200,000 contingent warrants. 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 three months ended March 31, 2015. At March 31, 2016, we had outstanding exercisable warrants to purchase 15,959,450 shares of common stock.
The following table summarizes the warrants issued and outstanding as of March 31, 2016:
Warrants Issued and Outstanding as of March 31, 2016 |
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|||||||||||
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Date of |
|
Exercise |
|
|
Shares of |
|
||||
Description |
|
Issuance |
|
Expiration |
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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 |
|
Warrants |
|
3/30/2016 |
|
03/30/2021 |
|
$ |
0.485 |
|
|
|
4,168,450 |
|
Total warrants issued and outstanding |
|
|
|
|
|
|
15,959,450 |
|
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 $9,206 and $9,726 related to the ESPP during the three months ended March 31, 2016 and 2015, respectively.
Stock Options – The following table summarizes the stock option activity for the three month period ended March 31, 2016:
|
|
Stock Options |
|
|||||||
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
Exercise |
|
Average |
|
|
|
|
Number |
|
|
Price Per |
|
Exercise Price |
|
||
|
|
of Shares |
|
|
Share |
|
Per Share |
|
||
Outstanding at December 31, 2015 |
|
|
5,943,908 |
|
|
$ 0.78 — 3.75 |
|
$ |
2.04 |
|
Granted |
|
|
2,166,000 |
|
|
$ 0.55 — 0.68 |
|
$ |
0.68 |
|
Canceled/Forfeited |
|
|
(1,246,252 |
) |
|
$ 0.79 — 3.75 |
|
$ |
1.64 |
|
Outstanding at March 31, 2016 |
|
|
6,863,656 |
|
|
$ 0.55 — 3.75 |
|
$ |
1.60 |
|
For the three months ended March 31, 2016 and 2015, we recorded $21,809 and nil, respectively, of stock-based compensation within “Selling, general, and administrative expenses” in our condensed consolidated statements of operations for services provided by a consultant.
|
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, 2015. 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 March 31, 2016 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2015 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 months ended March 31, 2016 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 developed by us.
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. We 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 with revenue of $87,689 and nil for the three months ended March 31, 2016 and 2015, respectively. Our gross billings on this management fee contract were $1,121,643 and nil for the three months ended March 31, 2016 and 2015, respectively.
We recognize licensing fees 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 2016 and 2015 would be anti-dilutive. These potentially dilutive securities include stock options, restricted stock units, and warrants and related to 22,823,106 and 16,832,380 shares at March 31, 2016 and 2015, respectively.
The following table sets forth the anti-dilutive securities excluded from diluted loss per share:
|
|
March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||
Anti-dilutive securities excluded from diluted loss per share: |
|
|
|
|
|
|
|
|
Stock options |
|
|
6,863,656 |
|
|
|
4,965,280 |
|
Restricted stock units |
|
|
— |
|
|
|
76,100 |
|
Warrants |
|
|
15,959,450 |
|
|
|
11,791,000 |
|
Total anti-dilutive securities excluded from diluted loss per share |
|
|
22,823,106 |
|
|
|
16,832,380 |
|
Inventories
We record inventories within “Prepaid expenses and other current assets” in our condensed consolidated balance sheets. As of March 31, 2016 and December 31, 2015, all inventories were waste disposal equipment with balances of $12,593 and $54,473, respectively, with no reserve for inventory obsolescence at either date.
|
The following table sets forth the anti-dilutive securities excluded from diluted loss per share:
|
|
March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||
Anti-dilutive securities excluded from diluted loss per share: |
|
|
|
|
|
|
|
|
Stock options |
|
|
6,863,656 |
|
|
|
4,965,280 |
|
Restricted stock units |
|
|
— |
|
|
|
76,100 |
|
Warrants |
|
|
15,959,450 |
|
|
|
11,791,000 |
|
Total anti-dilutive securities excluded from diluted loss per share |
|
|
22,823,106 |
|
|
|
16,832,380 |
|
|
At March 31, 2016 and December 31, 2015, property and equipment, net, and other assets consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
|
|
(Unaudited) |
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation of $2,082,454 and $1,973,538 as of March 31, 2016 and December 31, 2015, respectively |
|
$ |
1,383,462 |
|
|
$ |
1,308,236 |
|
Security deposits and other assets |
|
|
266,213 |
|
|
|
300,396 |
|
Property and equipment, net, and other assets |
|
$ |
1,649,675 |
|
|
$ |
1,608,632 |
|
|
The components of goodwill and other intangible assets were as follows:
March 31, 2016 (Unaudited) |
|
Estimated Useful Life |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net |
|
|||
Finite lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
5 years |
|
$ |
12,720,000 |
|
|
$ |
6,890,000 |
|
|
$ |
5,830,000 |
|
Trademarks |
|
7 years |
|
|
6,273,885 |
|
|
|
2,410,797 |
|
|
|
3,863,088 |
|
Patents |
|
7 years |
|
|
230,683 |
|
|
|
230,683 |
|
|
|
— |
|
Software |
|
7 years |
|
|
1,417,602 |
|
|
|
149,609 |
|
|
|
1,267,993 |
|
Customer lists |
|
5 years |
|
|
307,153 |
|
|
|
198,222 |
|
|
|
108,931 |
|
Total finite lived intangible assets |
|
|
|
$ |
20,949,323 |
|
|
$ |
9,879,311 |
|
|
$ |
11,070,012 |
|
December 31, 2015 |
|
Estimated Useful Life |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net |
|
|||
Finite lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
5 years |
|
$ |
12,720,000 |
|
|
$ |
6,254,000 |
|
|
$ |
6,466,000 |
|
Trademarks |
|
7 years |
|
|
6,239,950 |
|
|
|
2,188,129 |
|
|
|
4,051,821 |
|
Patents |
|
7 years |
|
|
230,683 |
|
|
|
230,683 |
|
|
|
— |
|
Software |
|
7 years |
|
|
1,290,468 |
|
|
|
104,570 |
|
|
|
1,185,898 |
|
Customer lists |
|
5 years |
|
|
307,153 |
|
|
|
182,864 |
|
|
|
124,289 |
|
Total finite lived intangible assets |
|
|
|
$ |
20,788,254 |
|
|
$ |
8,960,246 |
|
|
$ |
11,828,008 |
|
March 31, 2016 (Unaudited) and December 31, 2015 |
|
Estimated Useful Life |
|
Carrying Amount |
|
||
Indefinite lived intangible asset: |
|
|
|
|
|
|
|
Goodwill |
|
Indefinite |
|
$ |
58,337,290 |
|
|
At March 31, 2016 and December 31, 2015, total capital lease obligations outstanding consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
|
|
(Unaudited) |
|
|
|
|
|
|
Capital lease obligations, imputed interest at 2.65% to 9.39%, with monthly payments of $11,022, through August 2018, secured by computer and telephone equipment |
|
$ |
394,551 |
|
|
$ |
402,170 |
|
Total |
|
|
394,551 |
|
|
|
402,170 |
|
Less: current maturities |
|
|
(115,069 |
) |
|
|
(112,125 |
) |
Long-term portion |
|
$ |
279,482 |
|
|
$ |
290,045 |
|
|
During the three months ended March 31, 2016, we issued shares of common stock as follows:
|
|
Common Stock |
|
|||||
|
|
Shares |
|
|
Amount |
|
||
Sale of common stock and warrants, net of issuance costs of $452,300 |
|
|
6,890,000 |
|
|
$ |
2,889,350 |
|
|
|
|
6,890,000 |
|
|
$ |
2,889,350 |
|
The following table summarizes the warrants issued and outstanding as of March 31, 2016:
Warrants Issued and Outstanding as of March 31, 2016 |
|
|||||||||||
|
|
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 |
|
Warrants |
|
3/30/2016 |
|
03/30/2021 |
|
$ |
0.485 |
|
|
|
4,168,450 |
|
Total warrants issued and outstanding |
|
|
|
|
|
|
15,959,450 |
|
Stock Options – The following table summarizes the stock option activity for the three month period ended March 31, 2016:
|
|
Stock Options |
|
|||||||
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
Exercise |
|
Average |
|
|
|
|
Number |
|
|
Price Per |
|
Exercise Price |
|
||
|
|
of Shares |
|
|
Share |
|
Per Share |
|
||
Outstanding at December 31, 2015 |
|
|
5,943,908 |
|
|
$ 0.78 — 3.75 |
|
$ |
2.04 |
|
Granted |
|
|
2,166,000 |
|
|
$ 0.55 — 0.68 |
|
$ |
0.68 |
|
Canceled/Forfeited |
|
|
(1,246,252 |
) |
|
$ 0.79 — 3.75 |
|
$ |
1.64 |
|
Outstanding at March 31, 2016 |
|
|
6,863,656 |
|
|
$ 0.55 — 3.75 |
|
$ |
1.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|