UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices and Zip Code)
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 1, 2023, there were
TABLE OF CONTENTS
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, |
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December 31, |
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2023 |
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2022 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, less allowance for doubtful accounts of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Goodwill |
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Intangible assets, net |
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Property and equipment, net, and other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Other current liabilities |
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Current portion of notes payable |
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Total current liabilities |
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Notes payable, net |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Revenue |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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Selling, general, and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating income (loss) |
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Interest expense |
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Loss before taxes |
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Income tax expense |
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Net loss |
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$ |
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$ |
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Net loss per share applicable to common shareholders |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average number of common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
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Additional |
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Total |
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Common Stock |
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Paid-in |
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Accumulated |
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Stockholders’ |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Equity |
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Balance, December 31 2022 |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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Stock option exercises |
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— |
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Net loss |
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— |
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— |
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— |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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Additional |
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Total |
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Common Stock |
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Paid-in |
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Accumulated |
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Stockholders’ |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Equity |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For the Three Months Ended March 31, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation |
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Amortization of intangibles |
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Amortization of debt issuance costs and discounts |
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Provision for doubtful accounts |
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Stock-based compensation |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Security deposits and other assets |
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Accounts payable and accrued liabilities |
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Other liabilities |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Purchase of intangible assets |
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Acquisition, net of cash acquired |
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— |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from credit facilities |
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Repayments of credit facilities |
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Proceeds from long-term debt |
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— |
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Repayments of long-term debt |
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Proceeds from stock option exercises |
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— |
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Debt issuance costs |
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— |
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Net cash provided by (used in) financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The Company and Description of Business
The accompanying condensed consolidated financial statements include the accounts of Quest Resource Holding Corporation (“QRHC”) and its subsidiaries, Quest Resource Management Group, LLC (“Quest”), Landfill Diversion Innovations, LLC (“LDI”), Youchange, Inc. (“Youchange”), Quest Vertigent Corporation (“QVC”), Quest Vertigent One, LLC (“QV One”), Quest Sustainability Services, Inc. (“QSS”), RWS Facility Services, LLC (“RWS”), Sustainable Solutions Group, LLC (“SSG”), and Sequoia Waste Management Solutions, LLC (“Sequoia”) (collectively, “we,” “us,” or “our company”).
Operations – We are a national provider of waste and recycling services to customers from across multiple industry sectors that are typically larger, multi-location businesses. We create customer-specific programs and perform the related services for the collection, processing, recycling, disposal, and tracking of waste streams and recyclables. In addition, we offer products such as antifreeze and windshield washer fluid and other minor ancillary services. We also provide information and data that tracks and reports the detailed transactional and environmental results of our services and provides actionable data to improve business operations. The data we generate also enables our customers to address their environmental and sustainability goals and responsibilities.
On February 10, 2022, we acquired an independent environmental services company that primarily services customers in the northeast region of the United States. See Note 3 for more information regarding the acquisitions.
2. Summary of Significant Accounting Policies
Principles 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, 2022. 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, 2023 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2022 condensed consolidated balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP. As QRHC, Quest, LDI, Youchange, QVC, QV One, QSS, RWS, SSG, and Sequoia each operate as environmental-based 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, 2023 are not necessarily indicative of the results to be expected for the full year.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board, (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326), which provides guidance on measuring credit losses on financial instruments, including trade receivables. The amended guidance replaces current incurred loss impairment methodology of recognizing credit losses when a loss is probable with a new forward-looking approach to estimate expected credit losses. We adopted the new standard on January 1, 2023. The adoption of the new standard did not have a material impact on our condensed consolidated financial statements as current processes for estimating expected credit losses for trade receivables generally align with the expected credit loss model.
There have been no other recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to us.
3. Acquisitions
On February 10, 2022, we acquired an independent environmental services company that primarily services customers in the northeast region of the United States for approximately $
4. Accounts receivable, net of allowance for doubtful accounts
Our receivables, which are recorded when billed or when services are performed, are claims against third parties that will generally be settled in cash. The carrying value of our receivables, net of the allowance for doubtful accounts, represents the estimated net
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realizable value. We estimate our allowance for doubtful accounts based on consideration of a number of factors, including the length of time trade accounts are past due, our previous loss history, the creditworthiness of individual customers, economic conditions affecting specific customer industries, and economic conditions in general. We write off past-due receivable balances after all reasonable collection efforts have been exhausted. We credit payments subsequently received on such receivables to bad debt expense in the period we receive the payment.
The following table reflects the activity in our allowance for doubtful accounts of trade receivables for the quarters ended March 31:
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Three Months Ended March 31, |
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2023 |
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2022 |
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(Unaudited) |
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Beginning balance |
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$ |
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$ |
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Bad debt expense |
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Uncollectible accounts written off, net |
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Ending balance |
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$ |
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$ |
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5. Property and Equipment, net, and Other Assets
At March 31, 2023 and December 31, 2022, 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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2022 |
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(Unaudited) |
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Property and equipment, net of accumulated depreciation of $ |
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$ |
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$ |
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Right-of-use operating lease asset |
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Security deposits and other assets |
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Property and equipment, net, and other assets |
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$ |
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$ |
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We compute depreciation using the straight-line method over the estimated useful lives of the property and equipment. Depreciation expense for the three months ended March 31, 2023 was $
We recorded right-of-use operating lease assets related to our office leases in accordance with ASC 842. Refer to Note 9, Leases for additional information.
6. Goodwill and Other Intangible Assets
The components of goodwill and other intangible assets were as follows:
March 31, 2023 (Unaudited) |
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Estimated |
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Gross Carrying |
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Accumulated |
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Net |
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Finite lived intangible assets: |
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Customer relationships |
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$ |
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$ |
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$ |
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Software |
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Trademarks |
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Non-compete agreements |
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Total finite lived intangible assets |
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$ |
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$ |
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$ |
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December 31, 2022 |
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Estimated |
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Gross Carrying |
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Accumulated |
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Net |
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Finite lived intangible assets: |
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Customer relationships |
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$ |
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$ |
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$ |
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Software |
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Trademarks |
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Non-compete agreements |
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Total finite lived intangible assets |
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$ |
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$ |
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$ |
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March 31, 2023 (Unaudited) and December 31, 2022 |
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Estimated |
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Carrying |
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Indefinite lived intangible asset: |
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Goodwill |
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$ |
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We compute amortization using the straight-line method over the useful lives of the finite lived intangible assets. Amortization expense related to finite lived intangible assets was $
We have
We performed our annual impairment analysis for goodwill and other intangible assets in the third quarter of 2022 with
7. Current Liabilities
The components of Accounts payable and accrued liabilities were as follows:
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March 31, |
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December 31, |
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2023 |
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2022 |
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(Unaudited) |
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Accounts payable |
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$ |
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$ |
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Accrued taxes |
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Employee compensation |
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Operating lease liability - current portion |
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Other |
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$ |
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$ |
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Refer to Note 9, Leases for additional disclosure related to the operating lease liability.
The components of Other current liabilities were as follows:
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March 31, |
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December 31, |
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2023 |
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2022 |
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(Unaudited) |
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Deferred consideration - earn-out |
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$ |
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Deferred revenue |
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$ |
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$ |
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We made a $
8. Notes Payable
Our debt obligations were as follows:
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Interest |
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March 31, |
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December 31, |
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Rate (1) |
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2023 |
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2022 |
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(Unaudited) |
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Monroe Term Loan (2) |
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$ |
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$ |
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Green Remedies Promissory Note (3) |
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PNC ABL Facility (4) |
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Total notes payable |
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Less: Current portion of long-term debt |
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( |
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( |
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Less: Unamortized debt issuance costs |
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( |
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( |
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Less: Unamortized OID |
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( |
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( |
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Less: Unamortized OID warrant |
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( |
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( |
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Notes payable, net |
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$ |
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$ |
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(1) Interest rates as of March 31, 2023 |
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(2) Bears interest at SOFR rate plus Applicable Margin ranging from |
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(3) Stated interest rate of |
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(4) Bears interest at a Base Rate, as defined in the PNC Loan Agreement (such agreement defined below), plus a margin of |
|
|
|
|
|
|
||||
8
We capitalize financing costs we incur related to implementing our debt arrangements. We record these debt issuance costs associated with our revolving credit facility and our term loan as a reduction of long-term debt, net and amortize them over the contractual life of the related debt arrangements.
|
|
|
|
March 31, |
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
(Unaudited) |
|
|
Debt issuance costs |
|
|
|
|
|
|
Balance at December 31, 2022 |
|
|
|
$ |
|
|
Less: Amortization expense |
|
|
|
|
( |
) |
Debt issuance costs, net of accumulated amortization |
|
|
|
$ |
|
|
Revolving Credit Facility
On August 5, 2020, QRHC and certain of its domestic subsidiaries entered into a Loan, Security and Guaranty Agreement (the “PNC Loan Agreement”), which was subsequently amended on October 19, 2020, December 7, 2021 and December 2, 2022, with BBVA USA (which was subsequently succeeded in interest by PNC Bank, National Association (“PNC”)), as a lender, and as administrative agent, collateral agent, and issuing bank, which provides for a credit facility (the “ABL Facility”) comprising the following:
As of March 31, 2023, the ABL Facility borrowing base availability was $
Monroe Term Loan
On October 19, 2020, QRHC and certain of its domestic subsidiaries entered into a Credit Agreement (the “Credit Agreement”), dated as of October 19, 2020, which was subsequently amended on September 3, 2021, December 1, 2021, December 7, 2021, August 9, 2022, and December 2, 2022, with Monroe Capital Management Advisors, LLC (“Monroe Capital”), as administrative agent for the lenders thereto. Among other things, the Credit Agreement provides for the following:
At the same time as the borrowing of the initial $
9
Green Remedies Promissory Note
On October 19, 2020, we issued an unsecured subordinated promissory note to Green Remedies in the aggregate principal amount of $
Interest Expense
The amount of interest expense related to borrowings for the three months ended March 31, 2023 and 2022 was $
9
Our leases are primarily related to office space and are classified as operating leases.
Lease Costs
For the three months ended March 31, 2023 and 2022 we recorded approximately $
Cash paid for operating leases approximated operating lease expense and non-cash right of use asset amortization for the three months ended March 31, 2023 and 2022. We did not obtain any new operating lease right-of-use assets in the three months ended March 31, 2023.
The future minimum lease payments required under our office leases as of March 31, 2023 are as follows:
|
|
Amount |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Total lease payments |
|
|
|
|
Less: Interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
Balance Sheet Classification
The table below presents the lease related assets and liabilities recorded on the balance sheet. Right-of-use assets and related liabilities related to finance leases at March 31, 2023 are de minimis.
|
March 31, |
|
|
December 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Operating leases: |
(Unaudited) |
|
|
|
|
||
Right-of-use operating lease asset: |
|
|
|
|
|
||
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Lease liabilities: |
|
|
|
|
|
||
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Total operating lease liabilities |
$ |
|
|
$ |
|
||
10. Revenue
Operating Revenues
We provide businesses with services to reuse, recycle, and dispose of a wide variety of waste streams and recyclables generated by their operations. Service revenues are primarily generated from fees charged for our collection, transfer, disposal and recycling services and from sales of commodities by our recycling operations. In addition, we have product sales and other revenue primarily from sales of products such as antifreeze and windshield washer fluid, as well as minor ancillary services.
10
Revenue Recognition
We recognize revenue as services are performed or products are delivered. For example, we recognize revenue as waste and recyclable material are collected or when products are delivered. We recognize revenue net of any contracted pricing discounts or rebate arrangements.
We generally recognize revenue for the gross amount of consideration received as we are generally the primary obligor (or principal) in our contracts with customers as we hold complete responsibility to the customer for contract fulfillment. Depending on the key terms of the arrangement, which may include situations in which we are not primarily obligated, we do not have credit risk, or we determine amounts earned using fixed percentage or fixed fee schedules, we may record the revenue net of certain cost amounts. We had certain management fee contracts accounted for under the net basis method with net revenue of $
Disaggregation of Revenue
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(Unaudited) |
|
|||||
Revenue Type: |
|
|
|
|
|
|
||
Services |
|
$ |
|
|
$ |
|
||
Product sales and other |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
Contract Balances
Our incremental direct costs of obtaining a customer contract are generally deferred and amortized to selling, general, and administrative expense or as a reduction to revenue (depending on the nature of the cost) over the estimated life of the customer contract. We classify our contract acquisition costs as current or noncurrent based on the timing of when we expect to recognize the amortization and are included in other assets.
As of March 31, 2023 and December 31, 2022, we had $
We bill certain customers in advance, and, accordingly, we defer recognition of related revenues as a contract liability until the services are provided and control is transferred to the customer. As of March 31, 2023 and December 31, 2022, we had $
11. Income Taxes
Our statutory income tax rate is anticipated to be approximately
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 to reduce the amount of deferred tax assets that, based on available evidence, is more likely than not to be realized. Realization of our net operating loss carryforward was not reasonably assured as of March 31, 2023 and December 31, 2022, and we had recorded a valuation allowance of $
12. Fair Value of Financial Instruments
Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, deferred revenue, and notes payable. We do not believe that we are exposed to significant currency or credit risks arising from these financial instruments. Our variable rate indebtedness subjects us to interest rate risk as all of the borrowings under the senior secured credit facilities bear interest at variable rates. The fair values of our financial instruments approximate their carrying values, based on their short maturities or, for notes payable, based on borrowing rates currently available to us for loans with similar terms and
11
maturities. Contingent liabilities are measured at fair value on a recurring basis. The fair value measurements are generally determined using unobservable inputs and are classified within Level 3 of the fair value hierarchy.
13. Stockholders’ Equity
Preferred Stock – Our authorized preferred stock consists of
Common Stock – Our authorized common stock consists of
Employee Stock Purchase Plan – On September 17, 2014, our stockholders approved our 2014 Employee Stock Purchase Plan (as amended, the “ESPP”). We recorded expense of $
Warrants –
Warrants Issued and Outstanding as of March 31, 2023 |
|
|||||||||||
|
|
Date of |
|
Exercise |
|
|
Shares of |
|
||||
Description |
|
Issuance |
|
Expiration |
|
|
|
|
Common Stock |
|
||
Exercisable Warrants |
|
|
|
$ |
|
|
|
|
||||
Exercisable Warrants |
|
|
|
$ |
|
|
|
|
||||
Total warrants issued and outstanding (Unaudited) |
|
|
|
|
|
|
||||||
Stock Options – We recorded stock option expense of $
|
|
Stock Options |
|
|||||||
|
|
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Exercise |
|
Average |
|
||
|
|
Number |
|
|
Price Per |
|
Exercise Price |
|
||
|
|
of Shares |
|
|
Share |
|
Per Share |
|
||
Outstanding at December 31, 2022 |
|
|
|
|
$ |
|
$ |
|
||
Exercised |
|
|
( |
) |
|
$ |
|
$ |
|
|
Cancelled/Forfeited |
|
|
( |
) |
|
$ |
|
$ |
|
|
Outstanding at March 31, 2023 |
|
|
|
|
$ |
|
$ |
|
||
Deferred Stock Units – Effective September 1, 2019, nonemployee directors can elect to receive all or a portion of their annual retainers in the form of deferred stock units (“DSUs”). The DSUs are recognized at their fair value on the date of grant. Each DSU represents the right to receive
During the three months ended March 31, 2022, we granted
14. Net Loss per Share
We compute basic net loss per share using the weighted average number of shares of common stock outstanding plus the number of common stock equivalents for DSUs during the period. We compute diluted net income per share using the weighted average number of shares of common stock outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods where losses are reported, the weighted average number of shares of common stock outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of outstanding stock options and warrants. Dilutive potential securities are excluded from the computation of earnings per share if their effect is antidilutive. The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method.
The computation of basic and diluted net loss per share attributable to common stockholders is as follows:
12
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
|
(Unaudited) |
|
|||||
Numerator: |
|
|
|
|
|
||
Net loss applicable to common stockholders |
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
||
Weighted average common shares outstanding, basic |
|
|
|
|
|
||
Effect of dilutive common shares |
|
— |
|
|
|
— |
|
Weighted average common shares outstanding, diluted |
|
|
|
|
|
||
Net loss per share: |
|
|
|
|
|
||
Basic |
$ |
( |
) |
|
$ |
( |
) |
Diluted |
$ |
( |
) |
|
$ |
( |
) |
Anti-dilutive securities excluded from diluted net loss per share: |
|
|
|
|
|
||
Stock options |
|
|
|
|
|
||
Warrants |
|
— |
|
|
|
— |
|
Total anti-dilutive securities excluded from net loss per share |
|
|
|
|
|
||
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in or incorporated by reference into this Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, and markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “will,” “would,” “should,” “could,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Form 10-Q include statements regarding the impact, if any, of the adoption of the ASU on our consolidated financial statements; the impact of the Coronavirus Disease 2019 (“COVID-19”) pandemic on our results of operations and any changes to inflation rates; exposure to significant interest, currency, or credit risks arising from our financial instruments; and sufficiency of our cash and cash equivalents, borrowing capacity, and cash generated from operations to fund our operations for the next 12 months. All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Form 10-Q reflect our views as of the date of this Form 10-Q about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements. A number of factors, including the impact of our business acquisitions in 2022 and 2021 on future results, the state of the U.S. economy in general, general economic conditions and the potential effect of inflationary pressures and increased interest rates on our cost of doing business, could cause actual results to differ materially from those indicated by the forward-looking statements and other risks detailed from time to time in our reports to the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”).
Overview
We were incorporated in Nevada in July 2002 under the name BlueStar Financial Group, Inc. On July 16, 2013, we acquired all of the issued and outstanding membership interests of Quest Resource Management Group, LLC, or “QRMG”, held by Quest Resource Group LLC, or “QRG”, comprising 50% of the membership interests of QRMG, or the QRMG Interests. Our wholly owned subsidiary, Quest Sustainability Services, Inc., or “QSSI” (formerly known as Earth911, Inc.), held the remaining 50% of the membership interests of QRMG for several years. Concurrently with our acquisition of the QRMG Interests, we assigned the QRMG Interests to QSSI so that QSSI now holds 100% of the issued and outstanding membership interests of QRMG. On October 28, 2013, we changed our name to Quest Resource Holding Corporation, or QRHC. On October 19, 2020, QRMG acquired substantially all of the assets used in the business of Green Remedies Waste and Recycling, Inc., a leading provider of independent environmental services, particularly in multi-family housing, located in Burlington, NC. On December 7, 2021, QSSI acquired all of the outstanding membership interests of RWS Facility Services, LLC (“RWS”), a full-service management company engaged in the brokering of recycling, waste and sustainability solutions, located in Chadds Ford, PA.
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on and relates primarily to the operations of QRHC and QRMG (collectively, “we,” “us,” “our,” or “our company”).
14
Three Months Ended March 31, 2023 and 2022 Operating Results
The following table summarizes our operating results for the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(Unaudited) |
|
|||||
Revenue |
|
$ |
74,113,703 |
|
|
$ |
71,522,168 |
|
Cost of revenue |
|
|
61,483,944 |
|
|
|
60,273,753 |
|
Gross profit |
|
|
12,629,759 |
|
|
|
11,248,415 |
|
Operating expenses: |
|
|
|
|
|
|
||
Selling, general, and administrative |
|
|
9,417,436 |
|
|
|
9,344,462 |
|
Depreciation and amortization |
|
|
2,424,844 |
|
|
|
2,364,862 |
|
Total operating expenses |
|
|
11,842,280 |
|
|
|
11,709,324 |
|
Operating income (loss) |
|
|
787,479 |
|
|
|
(460,909 |
) |
Interest expense |
|
|
(2,443,028 |
) |
|
|
(1,556,585 |
) |
Loss before taxes |
|
|
(1,655,549 |
) |
|
|
(2,017,494 |
) |
Income tax expense |
|
|
368,504 |
|
|
|
166,815 |
|
Net loss |
|
$ |
(2,024,053 |
) |
|
$ |
(2,184,309 |
) |
Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022
Global Economic Trends
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates and uncertainty about economic stability. For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets. Similarly, the current conflict between Ukraine and Russia has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets continue to deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by increasing our costs, including salary costs. Any significant increases in inflation and related increases in interest rates could have a material adverse effect on our business, results of operations and financial condition.
Revenue
For the three months ended March 31, 2023, revenue was $74.1 million, an increase of $2.6 million, or 3.6%, compared to $71.5 million for the three months ended March 31, 2022. The increase for the quarter was primarily due to increased demand including the impact of heightened customer production levels and increased services from certain new and continuing customers, partially offset by lower levels of services at certain other customers and lower values for commodities.
Cost of Revenue/Gross Profit
Cost of revenue increased $1.2 million to $61.5 million for the three months ended March 31, 2023 from $60.3 million for the three months ended March 31, 2022. The increase was primarily due to the same reasons impacting the increase in revenue.
Gross profit for the three months ended March 31, 2023 was $12.6 million, an increase of $1.4 million, compared to $11.2 million for the three months ended March 31, 2022. The gross profit margin was 17.0% for the three months ended March 31, 2023 compared to 15.7% for the same quarter of 2022. The changes in gross profit and gross profit margin percentage for the quarter were primarily due to the net effect of the impact of increased services from certain new and continuing customers, change in the mix of services and relative gross profit margins from new and acquired customer base, reduced operations at certain other customers, and reduced values for commodities.
Revenue, gross profit, and gross profit margins are affected period to period by the volumes of waste and recycling materials generated by our customers, the frequency and type of services provided, the price and mix of the services provided, commodity price changes for recycled materials, the cost and mix of subcontracted services provided in any one reporting period, and the timing of acquisitions and integration. Volumes of waste and recycling materials generated by our customers is impacted period to period based on several factors including their production or sales levels, demand of their product or services in the market, supply chain reliability, and labor force stability, among other business factors.
Operating Expenses
15
Operating expenses were $11.8 million and $11.7 million for the three months ended March 31, 2023 and 2022, respectively.
Selling, general, and administrative expenses were $9.4 million and $9.3 million for the three months ended March 31, 2023 and 2022, respectively, an increase of $72,974. The increase primarily relates to increases in labor related expenses mostly offset by reductions in professional fees.
Operating expenses for the three months ended March 31, 2023 and 2022 included depreciation and amortization of $2.4 million and $2.4 million, respectively, an increase of $59,982.
Interest expense was $2.4 million and $1.6 million for the three months ended March 31, 2023 and 2022, respectively, an increase of approximately $0.9 million, as a result of additional borrowing related primarily to the acquisition in 2022 and increases in base interest rates. We are amortizing debt issuance costs of $3.3 million and OID of $2.2 million to interest expense over the life of the related debt arrangements as discussed in Note 8 to our condensed consolidated financial statements.
Income Taxes
We recorded a provision for income tax of $368,504 and $166,815 for the three months ended March 31, 2023 and 2022, respectively. The provision for income tax is primarily attributable to state tax obligations based on current estimated state tax apportionments for states with no net operating loss carryforwards.
We recorded a full valuation allowance against all our deferred tax assets (“DTAs”) as of both March 31, 2023 and December 31, 2022. We intend on maintaining a full valuation allowance on our DTAs until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 to 24 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.
Net Loss
Net loss for the three months ended March 31, 2023 was $(2.0) million compared to net loss of $(2.2) million for the three months ended March 31, 2022. The explanations above detail the majority of the changes related to the change in net results.
Our operating results, including revenue, operating expenses, and operating margins, will vary from period to period depending on commodity prices of recycled materials, the volumes and mix of services provided, as well as customer mix during the reporting period, and the timing of acquisitions and integration.
Loss per Share
Net loss per basic and diluted share attributable to common stockholders was $(0.10) for the three months ended March 31, 2023 compared to net loss per basic and diluted share of $(0.11) for the three months ended March 31, 2022.
The basic and diluted weighted average number of shares of common stock outstanding were approximately 19.9 million and 19.2 million for the three months ended March 31, 2023 and 2022.
Adjusted EBITDA
For the three months ended March 31, 2023, Adjusted EBITDA, a non-GAAP financial measure, increased 6.7% to $4.0 million from $3.7 million for the three months ended March 31, 2022.
We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, and other adjustments, or “Adjusted EBITDA,” to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is also frequently used by analysts, investors and other interested parties to evaluate the market value of companies considered to be in similar businesses. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with GAAP. For the three months ended March 31, 2023, other adjustments included severance and project costs as well as certain administrative fees related to borrowings. For the three months ended March 31, 2022, other adjustments included recruiting costs and certain administrative costs related to borrowings.
16
The following table reflects the reconciliation of net loss to Adjusted EBITDA for the three months ended March 31, 2023 and 2022:
|
|
As Reported |
|
|||||
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(Unaudited) |
|
|||||
Net loss |
|
$ |
(2,024,053 |
) |
|
$ |
(2,184,309 |
) |
Depreciation and amortization |
|
|
2,508,967 |
|
|
|
2,437,209 |
|
Interest expense |
|
|
2,443,028 |
|
|
|
1,556,585 |
|
Stock-based compensation expense |
|
|
298,431 |
|
|
|
258,638 |
|
Acquisition, integration and related costs |
|
|
477,601 |
|
|
|
1,305,936 |
|
Other adjustments |
|
|
(85,593 |
) |
|
|
195,858 |
|
Income tax expense |
|
|
368,504 |
|
|
|
166,815 |
|
Adjusted EBITDA |
|
$ |
3,986,885 |
|
|
$ |
3,736,732 |
|
Adjusted Net Income and Adjusted Net Income per Diluted Share
Adjusted net income, a non-GAAP financial measure, was $0.6 million for the three months ended March 31, 2023, compared with $1.3 million for the three months ended March 31, 2022. We present adjusted net income and adjusted net income per diluted share, both non-GAAP financial measures, supplementally because they are widely used by investors as a valuation measure in the solid waste industry. Management uses adjusted net income and adjusted net income per diluted share as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We provide adjusted net income to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income has limitations due to the fact that it excludes items that have an impact on our financial condition and results of operations. Adjusted net income and adjusted net income per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate these non-GAAP financial measures differently. Our adjusted net income and adjusted net income per diluted share for the three months ended March 31, 2023 and 2022 are calculated as follows:
|
|
As Reported |
|
|||||
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(Unaudited) |
|
|||||
Reported net loss (a) |
|
$ |
(2,024,053 |
) |
|
$ |
(2,184,309 |
) |
Adjustments: |
|
|
|
|
|
|
||
Amortization of intangibles (b) |
|
|
2,221,669 |
|
|
|
2,174,455 |
|
Acquisition, integration and related costs (c) |
|
|
477,601 |
|
|
|
1,305,936 |
|
Other adjustments (d) |
|
|
(76,326 |
) |
|
|
— |
|
Adjusted net income |
|
$ |
598,891 |
|
|
$ |
1,296,082 |
|
|
|
|
|
|
|
|
||
Diluted earnings per share: |
|
|
|
|
|
|
||
Reported net loss |
|
$ |
(0.10 |
) |
|
$ |
(0.11 |
) |
Adjusted net income |
|
$ |
0.03 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
||
Diluted (e) |
|
|
22,158,132 |
|
|
|
21,715,982 |
|
|
|
|
|
|
|
|
||
(a) Applicable to common stockholders |
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(b) Reflects the elimination of the non-cash amortization of acquisition-related intangible assets |
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(c) Reflects the add back of acquisition/integration related transaction costs |
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(d) Reflects adjustments to earn-out fair value |
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(e) Reflects adjustment for dilution as adjusted net income is positive |
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Liquidity and Capital Resources
As of March 31, 2023 and December 31, 2022, we had $9.8 million and $9.6 million in cash and cash equivalents, respectively. Working capital was $18.1 million and $19.7 million as of March 31, 2023 and December 31, 2022, respectively.
We derive our primary sources of funds for conducting our business activities from operating revenues; borrowings under our credit facilities; and the placement of our equity securities to investors. We require working capital primarily to carry accounts receivable,
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service debt, purchase capital assets, fund operating expenses, address unanticipated competitive threats or technical problems, withstand adverse economic conditions, fund potential acquisition transactions, and pursue goals and strategies.
We believe our existing cash and cash equivalents of $9.8 million, our borrowing availability under our $25.0 million ABL Facility (as defined and discussed in Note 8 to our condensed consolidated financial statements), and cash expected to be generated from operations will be sufficient to fund our operations for the next 12 months and thereafter for the foreseeable future. Our known current- and long-term uses of cash include, among other possible demands, capital expenditures, lease payments and repayments to service debt and other long-term obligations. We have no agreements, commitments, or understandings with respect to any such placements of our securities and any such placements could be dilutive to our stockholders.
Cash Flows
The following discussion relates to the major components of our cash flows for the three months ended March 31, 2023 and 2022.
Cash Flows from Operating Activities
Net cash provided by operating activities was $3.0 million for the three months ended March 31, 2023 compared with net cash used in by operating activities of $(0.4) million for the three months ended March 31, 2022.
Net cash provided by operating activities for the three months ended March 31, 2023 related primarily to the net effect of the following:
Net cash used in operating activities for the three months ended March 31, 2022 related primarily to the net effect of the following:
Our business, including revenue, operating expenses, and operating margins, may vary depending on the blend of services we provide to our customers, the terms of customer contracts, commodity contracts, and our business volume levels. Fluctuations in net accounts receivable are generally attributable to a variety of factors including, but not limited to, the timing of cash receipts from customers, and the inception, increase, modification, or termination of customer relationships. Our operating activities may require additional cash in the future from our debt facilities and/or equity financings depending on the level of our operations.
Cash Flows from Investing Activities
Cash used in investing activities for the three months ended March 31, 2023 was $(0.2) million. Cash used in investing activities for the three months ended March 31, 2022 was $(3.5) million and primarily related to the $3.1 million net purchase of the assets of a northeast-based independent environmental services company on February 10, 2022. Other investing activities are primarily from purchases of property and equipment and intangible assets such as software development costs.
Cash Flows from Financing Activities
Net cash used in financing activities for the three months ended March 31, 2023 was $(2.5) million, primarily from net repayments of $(2.3) million on our ABL Facility. Net cash provided by financing activities for the three months ended March 31, 2022 was $3.3 million, primarily from borrowings of $3.5 million from the Credit Agreement with Monroe Capital used to finance the February 2022 acquisition of an independent environmental services company. See Note 8 to our condensed consolidated financial statements for a discussion of the ABL Facility and other notes payable.
We made an additional $5.0 million principal payment on our Monroe Capital credit facility in May 2023.
Inflation
Although the overall economy has experienced some inflationary pressures, we do not believe that inflation had a material impact on us during the three months ended March 31, 2023 and 2022. We believe that current inflationary increases in costs, such as fuel, labor, and certain capital items, can be addressed by our flexible pricing structures and cost recovery fees allowing us to recover certain of the cost of inflation from our customer base. Consistent with industry practice, many of our contracts allow us to pass
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through certain costs to our customers or adjust pricing. Although we believe that we should be able to offset many cost increases that result from inflation in the ordinary course of business, we may be required to absorb at least part of these costs increases due to competitive pressures or delays in timing of rate increases. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher rates of inflation and increases in interest rates.
Critical Accounting Estimates and Policies
Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of accounts receivable, goodwill and other intangible assets, stock-based compensation expense, deferred taxes and the fair value of assets and liabilities acquired in asset acquisitions. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated. For a discussion of our critical accounting policies, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report. Other than the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) as discussed in Note 2 to our condensed consolidated financial statements, there have been no significant changes in our critical accounting policies during the three months ended March 31, 2023.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet debt or similar obligations. We have no transactions or obligations with related parties that are not disclosed, consolidated into, or reflected in our reported results of operations or financial position. We do not guarantee any third-party debt.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our Company have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. We base the design of any system of controls in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are
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subject to risks. Over time, internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We may be subject to legal proceedings in the ordinary course of business. As of the date of this Quarterly Report on Form 10-Q, we are not aware of any legal proceedings to which we are a party that we believe could have a material adverse effect on us.
Item 1A. Risk Factors
The following risk factor supplements the risk factors described in Item 1A of our 2022 Annual Report and should be read in conjunction with the risk factors described in our 2022 Annual Report:
The instability of certain financial institutions may have adverse impacts on certain of our vendors and customers and/or on our ability to access our cash deposits and make borrowings, which could negatively impact our financial condition, results of operations and cash flows.
In 2023, there have been public reports of instability at certain financial institutions. Although we do not hold material deposits or investments at these financial institutions, and despite the steps taken to date by U.S. and foreign agencies and institutions to protect depositors, the follow-on effects of the events surrounding recent bank failures and pressure on other financial institutions are unknown, could include failures of other financial institutions to which we face direct or indirect exposure, and may lead to disruptions to the cash flows, operations and financial condition of our vendors, customers, and/or us. Additionally, tight credit conditions could generally result in economic slowdown and reduced demand for our services.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On May 12, 2023, we entered into a Severance and Change in Control Agreement with Brett W. Johnston, our Senior Vice President of Finance and Chief Financial Officer, effective as of the same date. If we terminate Mr. Johnston’s employment for any reason other than for good cause (as defined in the agreement) or if Mr. Johnston voluntarily terminates his employment with us for good reason (as defined in the agreement), the agreement provides that (a) we will pay Mr. Johnston his salary for a period of 12 months following the effective date of such termination and (b) we will pay Mr. Johnston, at the same time as cash incentive bonuses are paid to other executives, a portion of the cash incentive bonus deemed by our Compensation Committee in the exercise of its sole discretion, to be earned by Mr. Johnston pro rata for the period commencing on the first day of our fiscal year for which the cash incentive bonus is calculated and ending on the effective date of such termination. The agreement further provides that, in the event of a change in control of our company (as defined in the agreement), Mr. Johnston has the option to terminate his employment with us, unless (i) the provisions of the agreement remain in full force and effect as to Mr. Johnston and (ii) he suffers no reduction in his status, authority, or base salary following the change in control, provided that Mr. Johnston will be considered to suffer a reduction in his status, authority, or base salary, only if, after the change in control, (A) he is not the Senior Vice President of Finance and Chief Financial Officer of the company that succeeds to our business, (B) such company’s common stock is not listed on a national stock exchange (such as the New York Stock Exchange, the Nasdaq Stock Market, or the NYSE MKT), (C) such company in any material respect reduces Mr. Johnston’s status, authority, or base salary, or (D) as a result of the change in control, Mr. Johnston is required to relocate his principal place of business more than 50 miles from The Colony, Texas (or surrounding areas). If Mr. Johnston terminates his employment with us following a change in control or if we terminate his employment without good cause, in each case during the period commencing three months before and one year following the change in control, (A) we will pay Mr. Johnston’s base salary for a period of 12 months following the effective date of such termination, (B) we will pay Mr. Johnston an amount equal to the average of his cash bonus paid for each of the two fiscal years immediately preceding his termination; provided that in the event Mr. Johnston has not been employed by us for at least two fiscal years at the time of such termination, then the cash bonus shall be in an amount equal to Mr. Johnston’s target bonus for the fiscal year in which such termination occurred, (C) all unvested stock options held by Mr. Johnston in his capacity as an employee on the effective date of termination shall vest as of the effective date of the termination, and (D) all unvested restricted stock units granted after the date hereof held by Mr. Johnston in his capacity as an employee on the effective date of termination shall vest as of the effective date of the termination. The agreement also contains a provision that prohibits Mr. Johnston from competing with our company for a period of 12 months following the termination of his employment with our company for any reason. The agreement further contains a provision that prohibits Mr. Johnston from soliciting or hiring any of our employees for a period of 24 months following the termination of his employment with our company for any reason.
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Item 6. Exhibits
Exhibit No. |
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Exhibit |
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10.1 |
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31.1 |
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Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
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31.2 |
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Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
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32.1 |
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32.2 |
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101 |
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The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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QUEST RESOURCE HOLDING CORPORATION |
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Date: May 15, 2023 |
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By: |
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/s/ S. Ray Hatch |
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S. Ray Hatch |
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President and Chief Executive Officer |
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Date: May 15, 2023 |
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By: |
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/s/ Brett W. Johnston |
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Brett W. Johnston |
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Senior Vice President and Chief Financial Officer |
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