Quest Solution Reports First Quarter Fiscal 2018 Results

Eugene, Oregon, UNITED STATES

  • Revenue grew 5.1% to $15.2 million versus first quarter 2017

  • Revenue grew 18% sequentially compared to fourth quarter 2017

  • Shareholders' Equity improved by $14.9 million to a deficit of $0.3 million; $15.2 million at March 31, 2017

  • Adjusted EBITDA for first quarter 2018 increased 18% to $0.66 million

  • Company remains focused on driving turnaround of the business

EUGENE, Ore., May 22, 2018 (GLOBE NEWSWIRE) -- Quest Solution, Inc. (OTCQB:QUES), a specialty systems integrator focused on field and supply chain mobility announced its financial results for the quarter ended March 31, 2018.

Financial Results:

For the quarter ended March 31, 2018, Quest Solution (Quest) reported revenues of $15.2 million, compared to $14.3 million in the comparable 2017 period.  The Company achieved sequential revenue growth of 18% compared to the fourth quarter of 2017. Gross margin of 21% was consistent with the first quarter of 2017.   Total operating expenses for first quarter of 2018 increased to $3.8 million, primarily related to the Company’s adoption of an equity incentive plan, increases in sales commissions related to revenue growth, increased professional fees attributable to the turnaround process and the Debt elimination.  Net loss attributable to the common stockholders was $1 million, or a loss of $0.03 per share in the first quarter of 2018, compared to a net loss of $0.4 million, or a loss of $0.01 per share in the first quarter of 2017.  Adjusted EBITDA (EBITDA plus Stock Based Compensation and one-time fees mainly related to the turnaround process) for the first quarter of 2018 improved by 18% to $656,000 compared to $555,000 in the first quarter of 2017. Shareholders’ equity improved to a deficit of $0.3 million at March 31, 2018 as compared to a deficit of $1.2 million at December 31, 2017 and a deficit of $14.9 million at March 31, 2017.

Shai Lustgarten, CEO, commented, “Quest is now better positioned to execute our strategy, further improve our financial results and drive differentiation in the market place by adding state of the art technologies to our product offering. During the first quarter, we continued to make progress with our turnaround initiatives.  Revenue grew due to organic growth in our customer base.  Our sales team is focused on strengthening our existing customer relationships to generate new business as needs evolve and capturing new customers to drive incremental revenue growth in our multi Billion USD market place.

“Much of the increase in operating expenses that we saw in the quarter was related to non-cash equity compensation expense, increased sales commissions due to our reinvigorated sales and marketing effort, as well as some increased professional fees related to the turnaround and debt reduction agreements.  Importantly, we drove a 13% reduction in salary expense during the quarter, and we expect operating expenses to moderate as a percentage of sales as we continue to execute the turnaround."

Mr. Lustgarten continued, “We previously announced a $15 million reduction of our notes liability, which significantly enhanced our financial structure and provides a solid platform for the Company’s growth.  Quest serves blue chip customers operating in attractive, growth industries and we remain focused on exceeding the needs of our existing customers and cultivating new opportunities to increase our market share as we move through 2018.”

Please refer to the financial tables included below for a reconciliation of generally accepted accounting principles in the United States (“GAAP”) to non-GAAP financial results. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results.

About Quest Solution, Inc.
Quest Solution is a Specialty Systems Integrator focused on Field and Supply Chain Mobility. We are also a manufacturer and distributor of consumables (labels, tags, and ribbons), RFID solutions, and barcoding printers. Founded in 1994, Quest is headquartered in Eugene, Oregon, with offices in the United States.

Rated in the Top 1% of global solution providers, Quest specializes in the design, deployment and management of enterprise mobility solutions including Automatic Identification and Data Capture (AIDC), Mobile Cloud Analytics, RFID (Radio Frequency Identification), and proprietary Mobility software. Our mobility products and services offering is designed to identify, track, trace, share and connect data to enterprise systems such as CRM or ERP solutions. Our customers are leading Fortune 500 companies from several sectors including manufacturing, retail, distribution, food / beverage, transportation and logistics, health care and chemicals / gas / oil.

Information about Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Statements in this press release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This release contains “forward-looking statements” that include information relating to future events and future financial and operating performance. The words “may,” “would,” “will,” “expect,” “estimate,” “can,” “believe,” “potential” and similar expressions and variations thereof are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to: fluctuations in demand for Quest Solution, Inc.’s products, the introduction of new products, the Company’s ability to maintain customer and strategic business relationships, the impact of competitive products and pricing, growth in targeted markets, the adequacy of the Company’s liquidity and financial strength to support its growth, the Company’s ability to manage credit and debt structures from vendors, debt holders and secured lenders, the Company’s ability to successfully integrate its acquisitions, risks related to the sale of Quest Solution Canada Inc. to Viascan Group Inc. and other information that may be detailed from time-to-time in Quest Solution Inc.’s filings with the United States Securities and Exchange Commission. Examples of such forward looking statements in this release include, among others, statements regarding revenue growth, driving sales, operational and financial initiatives, cost reduction and profitability, and simplification of operations. For a more detailed description of the risk factors and uncertainties affecting Quest Solution, Inc. please refer to the Company’s recent Securities and Exchange Commission filings, which are available at Quest Solution, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by law.

Financial Tables Follow

  For the three months
ended March 31
  2018  2017 
Total Revenues $15,180,547  $14,437,556 
Cost of goods sold        
Cost of goods sold  12,014,454   11,445,609 
Total costs of goods sold  12,014,454   11,445,609 
Gross profit  3,166,093   2,991,947 
Operating expenses        
General and administrative  476,855   412,945 
Salary and employee benefits  2,602,565   1,945,883 
Depreciation and amortization  437,398   442,400 
Professional fees  292,862   103,277 
Total operating expenses  3,809,680   2,904,505 
Income (loss) from operations  (643,587)  87,442 
Other income (expenses):        
Interest expense  (294,765)  (355,658)
Other (expenses) income  2,544   (6,042)
Total other expenses  (292,221)  (361,700)
Net loss before Income Taxes  (935,808)  (274,258)
Provision for Income Taxes        
Current  (13,197)  (56,900)
Total Provision for Income Taxes  (13,197)  (56,900)
Net loss attributable to Quest Solution Inc. $(949,005) $(331,158)
Less: Preferred stock – Series C dividend  (48,124)  (46,507)
Net loss attributable to the common stockholders $(997,129) $(377,665)
Net loss per share - basic $(0.03) $(0.01)
Net loss per share from continuing operations - basic $(0.03) $(0.01)
Weighted average number of common shares outstanding - basic  37,125,286   35,141,560 

  As of 
  March 31, 2018  December 31, 2017 
Current assets        
Cash $244,596  $24,634 
Restricted Cash  381,494   684,610 
Accounts receivable, net  9,418,463   6,387,734 
Inventory, net  2,141,855   439,720 
Prepaid expenses  2,411,851   476,840 
Other current assets  30,251   126,187 
Total current assets  14,628,510   8,139,725 
Fixed assets, net  85,951   92,803 
Goodwill  10,114,164   10,114,164 
Trade name, net  2,215,231   2,359,481 
Customer Relationships, net  5,029,759   5,310,938 
Other assets  37,063   39,512 
Total assets $32,110,678  $26,056,623 
Current liabilities        
Accounts payable and accrued liabilities $18,226,932  $13,239,810 
Accrued interest on note payable  43,323   38,430 
Line of credit  4,832,353   3,667,417 
Accrued payroll and sales tax  2,790,539   1,531,233 
Deferred revenue, net  -   761,194 
Current portion of note payable  2,275,404   3,429,025 
Notes payable, related parties  106,500   106,500 
Other current liabilities  156,957   121,117 
Total current liabilities  28,432,008   22,894,726 
Long term liabilities        
Note payable, related party  3,222,900   3,222,900 
Accrued interest, related party  185,862   165,014 
Long term portion of note payable  130,294   130,294 
Deferred revenue, net  -   452,024 
Other long term liabilities  486,538   439,833 
Total liabilities  32,457,602   27,304,791 
Stockholders’ (deficit)      
Series A Preferred stock; $0.001 par value; 1,000,000 shares designated and 0 shares outstanding as of March 31, 2018 and December 31, 2017, respectively. -  - 
Series B Preferred stock; $0.001 par value; 1 share designated and 0 shares outstanding as of March 31, 2018 and December 31, 2017, respectively. -  - 
Series C Preferred stock; $0.001 par value; 15,000,000 shares designated, 3,143,530 shares outstanding as of March 31, 2018 and December 31, 2017, respectively, liquidation preference of $1.00 per share and a cumulative dividend of $0.06 per share.  4,829   4,829 
Common stock; $0.001 par value; 100,000,000 shares designated, 39,673,631 and 36,828,371 shares outstanding of March 31, 2018 and December 31, 2017, respectively.  39,673   36,828 
Common stock to be repurchased by the Company  (230,490)  (230,490)
Additional paid-in capital  35,177,970   34,495,659 
Accumulated (deficit)  (35,338,906)  (35,554,994)
Total stockholders’ (deficit)  (346,924)  (1,248,168)
Total liabilities and stockholders’ (deficit) $32,110,678  $26,056,623 

  Three months ended 
  March 31, 2018  March 31, 2017 
Operating income  $  (644  $  87 
Depreciation & amortization   437    442 
EBITDA   (204)   529 
Stock based compensation   681    26 
One-time turnaround expenses   179    - 
Adjusted EBITDA   $  656   $  555 

Investor Contact:

John Nesbett/Jen Belodeau
Institutional Marketing Services (IMS)