0001564590-21-044615.txt : 20210816 0001564590-21-044615.hdr.sgml : 20210816 20210816160152 ACCESSION NUMBER: 0001564590-21-044615 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 78 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210816 DATE AS OF CHANGE: 20210816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Quest Resource Holding Corp CENTRAL INDEX KEY: 0001442236 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 510665952 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36451 FILM NUMBER: 211177707 BUSINESS ADDRESS: STREET 1: 3481 PLANO PARKWAY CITY: THE COLONY STATE: TX ZIP: 75056 BUSINESS PHONE: 972-464-0004 MAIL ADDRESS: STREET 1: 3481 PLANO PARKWAY CITY: THE COLONY STATE: TX ZIP: 75056 FORMER COMPANY: FORMER CONFORMED NAME: Infinity Resources Holdings Corp. DATE OF NAME CHANGE: 20121030 FORMER COMPANY: FORMER CONFORMED NAME: YouChange Holdings Corp DATE OF NAME CHANGE: 20100824 FORMER COMPANY: FORMER CONFORMED NAME: BlueStar Financial Group, Inc. DATE OF NAME CHANGE: 20080806 10-Q 1 qrhc-10q_20210630.htm 10-Q qrhc-10q_20210630.htm
false 2021 Q2 0001442236 --12-31 true false false true false 2032 2037 2021 2037 2032 qrhc:PropertyPlantAndEquipmentNetIncludingDepositsAssetsNoncurrent qrhc:PropertyPlantAndEquipmentNetIncludingDepositsAssetsNoncurrent us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent us-gaap:OtherLiabilitiesNoncurrent us-gaap:OtherLiabilitiesNoncurrent 1.15 3.88 1.15 3.88 1.15 3.88 1.50 1.17 23.20 3.01 3.48 1.48 3.10 1.48 5.44 1.17 23.20 0001442236 2021-01-01 2021-06-30 xbrli:shares 0001442236 2021-08-02 iso4217:USD 0001442236 2021-06-30 0001442236 2020-12-31 iso4217:USD xbrli:shares 0001442236 2021-04-01 2021-06-30 0001442236 2020-04-01 2020-06-30 0001442236 2020-01-01 2020-06-30 0001442236 us-gaap:CommonStockMember 2020-12-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001442236 2021-01-01 2021-03-31 0001442236 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001442236 us-gaap:CommonStockMember 2021-03-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001442236 2021-03-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001442236 us-gaap:CommonStockMember 2021-04-01 2021-06-30 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-01 2021-06-30 0001442236 us-gaap:CommonStockMember 2021-06-30 0001442236 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001442236 us-gaap:CommonStockMember 2019-12-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001442236 2019-12-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001442236 2020-01-01 2020-03-31 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001442236 us-gaap:CommonStockMember 2020-03-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001442236 2020-03-31 0001442236 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001442236 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0001442236 us-gaap:CommonStockMember 2020-06-30 0001442236 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001442236 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001442236 2020-06-30 0001442236 us-gaap:WarrantMember 2021-01-01 2021-06-30 0001442236 qrhc:GreenRemediesWasteAndRecyclingIncMember 2020-10-19 2020-10-19 0001442236 qrhc:GreenRemediesWasteAndRecyclingLLCMember 2020-10-19 2020-10-19 0001442236 qrhc:GreenRemediesWasteAndRecyclingLLCMember 2020-10-19 0001442236 qrhc:GreenRemediesWasteAndRecyclingLLCMember qrhc:DeferredSellerConsiderationMember qrhc:CashOrSharesOfCommonStockMember 2021-01-01 2021-06-30 0001442236 qrhc:GreenRemediesWasteAndRecyclingLLCMember qrhc:AssetPurchaseAgreementMember srt:MaximumMember 2021-01-01 2021-06-30 0001442236 qrhc:GreenRemediesWasteAndRecyclingLLCMember 2021-06-30 0001442236 us-gaap:ServiceMember 2021-04-01 2021-06-30 0001442236 us-gaap:ServiceMember 2021-01-01 2021-06-30 0001442236 us-gaap:ServiceMember 2020-04-01 2020-06-30 0001442236 us-gaap:ServiceMember 2020-01-01 2020-06-30 0001442236 qrhc:AssetPurchaseAgreementMember qrhc:EarthMediaPartnersLLCMember qrhc:WhollyOwnedSubsidiaryAndEarth911IncMember us-gaap:DisposalGroupNotDiscontinuedOperationsMember 2018-02-20 xbrli:pure 0001442236 qrhc:AssetPurchaseAgreementMember qrhc:EarthMediaPartnersLLCMember 2018-02-20 0001442236 qrhc:AssetPurchaseAgreementMember qrhc:EarthMediaPartnersLLCMember 2021-06-30 0001442236 qrhc:AssetPurchaseAgreementMember qrhc:EarthMediaPartnersLLCMember 2020-12-31 0001442236 us-gaap:CustomerListsMember 2021-01-01 2021-06-30 0001442236 us-gaap:ComputerSoftwareIntangibleAssetMember 2021-01-01 2021-06-30 0001442236 us-gaap:TrademarksMember 2021-01-01 2021-06-30 0001442236 us-gaap:NoncompeteAgreementsMember 2021-01-01 2021-06-30 0001442236 us-gaap:PatentsMember 2021-01-01 2021-06-30 0001442236 us-gaap:CustomerListsMember 2021-06-30 0001442236 us-gaap:ComputerSoftwareIntangibleAssetMember 2021-06-30 0001442236 us-gaap:TrademarksMember 2021-06-30 0001442236 us-gaap:NoncompeteAgreementsMember 2021-06-30 0001442236 us-gaap:PatentsMember 2021-06-30 0001442236 us-gaap:CustomerListsMember 2020-01-01 2020-12-31 0001442236 us-gaap:ComputerSoftwareIntangibleAssetMember 2020-01-01 2020-12-31 0001442236 us-gaap:TrademarksMember 2020-01-01 2020-12-31 0001442236 us-gaap:PatentsMember 2020-01-01 2020-12-31 0001442236 us-gaap:CustomerListsMember 2020-12-31 0001442236 us-gaap:ComputerSoftwareIntangibleAssetMember 2020-12-31 0001442236 us-gaap:TrademarksMember 2020-12-31 0001442236 us-gaap:PatentsMember 2020-12-31 0001442236 2020-07-01 2020-09-30 0001442236 qrhc:MonroeTermLoanMember 2021-01-01 2021-06-30 0001442236 qrhc:GreenRemediesPromissoryNoteMember 2021-01-01 2021-06-30 0001442236 qrhc:BBVAABLFacilityMember 2021-01-01 2021-06-30 0001442236 qrhc:MonroeTermLoanMember 2021-06-30 0001442236 qrhc:MonroeTermLoanMember 2020-12-31 0001442236 qrhc:GreenRemediesPromissoryNoteMember 2021-06-30 0001442236 qrhc:GreenRemediesPromissoryNoteMember 2020-12-31 0001442236 qrhc:BBVAABLFacilityMember 2021-06-30 0001442236 qrhc:BBVAABLFacilityMember 2020-12-31 0001442236 srt:MinimumMember qrhc:MonroeTermLoanMember 2021-01-01 2021-06-30 0001442236 srt:MaximumMember qrhc:MonroeTermLoanMember 2021-01-01 2021-06-30 0001442236 qrhc:GreenRemediesPromissoryNoteMember us-gaap:LondonInterbankOfferedRateLIBORMember 2021-06-30 0001442236 srt:MinimumMember qrhc:BBVAABLFacilityMember us-gaap:BaseRateMember 2021-01-01 2021-06-30 0001442236 srt:MaximumMember qrhc:BBVAABLFacilityMember us-gaap:BaseRateMember 2021-01-01 2021-06-30 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember 2020-08-05 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember 2020-08-05 2020-08-05 0001442236 qrhc:EquipmentLoanFacilityMember 2020-08-05 0001442236 qrhc:EquipmentLoanFacilityMember us-gaap:BaseRateMember 2020-08-05 0001442236 qrhc:EquipmentLoanFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-08-05 0001442236 qrhc:EquipmentLoanFacilityMember 2020-08-05 2020-08-05 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember us-gaap:BaseRateMember srt:MinimumMember 2020-08-05 2020-08-05 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember us-gaap:BaseRateMember srt:MaximumMember 2020-08-05 2020-08-05 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember us-gaap:BaseRateMember 2021-06-30 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MinimumMember 2020-08-05 2020-08-05 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MaximumMember 2020-08-05 2020-08-05 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2021-06-30 0001442236 qrhc:AssetBasedRevolvingCreditFacilityMember 2021-06-30 0001442236 qrhc:SeniorSecuredTermLoanMember qrhc:MonroeCapitalCreditAgreementMember 2020-10-19 0001442236 qrhc:SeniorSecuredTermLoanMember qrhc:MonroeCapitalCreditAgreementMember 2020-10-19 2020-10-19 0001442236 qrhc:DelayedDrawTermLoanFacilityMember qrhc:MonroeCapitalCreditAgreementMember srt:MaximumMember 2020-10-19 0001442236 srt:MaximumMember qrhc:MonroeCapitalCreditAgreementMember qrhc:AccordionTermLoanFacilityMember 2020-10-19 0001442236 qrhc:MonroeCapitalCreditAgreementMember qrhc:EquityOfferingMember 2020-10-19 2020-10-19 0001442236 qrhc:MonroeCapitalCreditAgreementMember qrhc:EquityOfferingMember 2020-10-19 0001442236 qrhc:MonroeCapitalCreditAgreementMember 2020-10-19 2020-10-19 0001442236 2020-10-19 0001442236 qrhc:OIDMember 2021-01-01 2021-06-30 0001442236 qrhc:OIDMember 2021-06-30 0001442236 qrhc:OIDMember 2020-12-31 0001442236 stpr:TX 2021-01-01 2021-06-30 0001442236 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0001442236 stpr:TX 2021-06-30 0001442236 stpr:NC qrhc:GreenRemediesWasteAndRecyclingLLCMember 2021-06-30 0001442236 stpr:NC qrhc:GreenRemediesWasteAndRecyclingLLCMember 2021-01-01 2021-06-30 0001442236 srt:ScenarioForecastMember 2020-09-01 2022-08-31 qrhc:Customer 0001442236 qrhc:ServicesMember 2021-04-01 2021-06-30 0001442236 qrhc:ServicesMember 2020-04-01 2020-06-30 0001442236 qrhc:ServicesMember 2021-01-01 2021-06-30 0001442236 qrhc:ServicesMember 2020-01-01 2020-06-30 0001442236 qrhc:ProductSalesAndOtherMember 2021-04-01 2021-06-30 0001442236 qrhc:ProductSalesAndOtherMember 2020-04-01 2020-06-30 0001442236 qrhc:ProductSalesAndOtherMember 2021-01-01 2021-06-30 0001442236 qrhc:ProductSalesAndOtherMember 2020-01-01 2020-06-30 0001442236 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-04-01 2021-06-30 0001442236 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-01-01 2021-06-30 0001442236 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-04-01 2020-06-30 0001442236 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-01-01 2020-06-30 0001442236 us-gaap:StateAndLocalJurisdictionMember 2021-06-30 0001442236 us-gaap:StateAndLocalJurisdictionMember 2020-06-30 0001442236 2021-05-14 2021-05-14 0001442236 us-gaap:WarrantMember 2020-12-31 0001442236 us-gaap:WarrantMember 2021-06-30 0001442236 qrhc:WarrantsRangeOneOutstandingMember us-gaap:WarrantMember 2021-01-01 2021-06-30 0001442236 qrhc:WarrantsRangeTwoExercisedMember us-gaap:WarrantMember 2021-01-01 2021-06-30 0001442236 qrhc:WarrantsRangeThreeCanceledForfeitedMember us-gaap:WarrantMember 2021-01-01 2021-06-30 0001442236 qrhc:WarrantsRangeFourOutstandingMember us-gaap:WarrantMember 2021-01-01 2021-06-30 0001442236 qrhc:ExercisableWarrantsMember qrhc:WarrantsOneMember 2021-01-01 2021-06-30 0001442236 qrhc:ExercisableWarrantsMember qrhc:WarrantsOneMember 2021-06-30 0001442236 qrhc:RangeOneOutstandingMember 2021-01-01 2021-06-30 0001442236 qrhc:RangeTwoGrantedMember 2021-01-01 2021-06-30 0001442236 qrhc:RangeThreeExercisedMember 2021-01-01 2021-06-30 0001442236 qrhc:RangeFourCanceledForfeitedMember 2021-01-01 2021-06-30 0001442236 qrhc:RangeFourOutstandingMember 2021-01-01 2021-06-30 0001442236 qrhc:DeferredStockUnitsMember 2019-09-01 0001442236 qrhc:DeferredStockUnitsMember 2021-01-01 2021-06-30 0001442236 qrhc:DeferredStockUnitsMember 2020-01-01 2020-06-30 0001442236 qrhc:DeferredStockUnitsMember srt:DirectorMember 2021-01-01 2021-06-30 0001442236 qrhc:DeferredStockUnitsMember srt:DirectorMember 2020-01-01 2020-06-30 0001442236 qrhc:DeferredStockUnitsMember qrhc:ExecutiveEmployeesMember 2021-01-01 2021-06-30 0001442236 qrhc:DeferredStockUnitsMember qrhc:ExecutiveEmployeesMember 2020-01-01 2020-06-30 0001442236 qrhc:DeferredStockUnitsMember 2021-06-30 0001442236 qrhc:DeferredStockUnitsMember 2020-12-31 0001442236 us-gaap:EmployeeStockOptionMember 2021-04-01 2021-06-30 0001442236 us-gaap:EmployeeStockOptionMember 2020-04-01 2020-06-30 0001442236 us-gaap:EmployeeStockOptionMember 2021-01-01 2021-06-30 0001442236 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-06-30 0001442236 us-gaap:WarrantMember 2020-04-01 2020-06-30 0001442236 us-gaap:WarrantMember 2020-01-01 2020-06-30

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

Commission file number: 001-36451

 

Quest Resource Holding Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Nevada

 

51-0665952

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

3481 Plano Parkway

The Colony, Texas 75056

(Address of Principal Executive Offices and Zip Code)

(972) 464-0004

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol

 

Name of each exchange on which registered

Common stock

 

QRHC

 

NASDAQ

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.    Yes      No  

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).    Yes      No  

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

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

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      No  

As of August 2, 2021, there were outstanding 18,801,026 shares of the registrant’s common stock, $0.001 par value, outstanding.


 

 

TABLE OF CONTENTS

 

 

 

 

1

 


 

PART I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements (Unaudited)

QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,047,848

 

 

$

7,516,260

 

Accounts receivable, less allowance for doubtful accounts of $975,929 and $935,261 as of June 30, 2021 and December 31, 2020, respectively

 

 

23,850,987

 

 

 

17,420,889

 

Prepaid expenses and other current assets

 

 

1,501,348

 

 

 

1,069,238

 

Total current assets

 

 

35,400,183

 

 

 

26,006,387

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

66,794,747

 

 

 

66,310,385

 

Intangible assets, net

 

 

7,711,041

 

 

 

6,528,330

 

Property and equipment, net, and other assets

 

 

3,019,236

 

 

 

3,384,055

 

Total assets

 

$

112,925,207

 

 

$

102,229,157

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

23,117,957

 

 

$

15,246,839

 

Other current liabilities

 

 

1,595,971

 

 

 

1,392,579

 

Current portion of notes payable

 

 

651,800

 

 

 

624,383

 

Total current liabilities

 

 

25,365,728

 

 

 

17,263,801

 

 

 

 

 

 

 

 

 

 

Notes payable, net

 

 

14,789,518

 

 

 

14,948,625

 

Other long-term liabilities, net

 

 

1,731,443

 

 

 

1,973,759

 

Total liabilities

 

 

41,886,689

 

 

 

34,186,185

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value, 200,000,000 shares authorized, 18,739,653 and 18,413,419 shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

 

18,740

 

 

 

18,413

 

Additional paid-in capital

 

 

167,573,770

 

 

 

166,424,597

 

Accumulated deficit

 

 

(96,553,992

)

 

 

(98,400,038

)

Total stockholders’ equity

 

 

71,038,518

 

 

 

68,042,972

 

Total liabilities and stockholders’ equity

 

$

112,925,207

 

 

$

102,229,157

 

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)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

36,858,083

 

 

$

21,969,241

 

 

$

71,960,074

 

 

$

47,301,055

 

Cost of revenue

 

 

30,047,604

 

 

 

17,594,606

 

 

 

58,709,717

 

 

 

38,383,422

 

Gross profit

 

 

6,810,479

 

 

 

4,374,635

 

 

 

13,250,357

 

 

 

8,917,633

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

 

5,060,231

 

 

 

3,977,853

 

 

 

9,322,791

 

 

 

8,387,176

 

Depreciation and amortization

 

 

408,652

 

 

 

334,137

 

 

 

815,935

 

 

 

667,890

 

Total operating expenses

 

 

5,468,883

 

 

 

4,311,990

 

 

 

10,138,726

 

 

 

9,055,066

 

Operating income (loss)

 

 

1,341,596

 

 

 

62,645

 

 

 

3,111,631

 

 

 

(137,433

)

Other income

 

 

 

 

 

1,258,068

 

 

 

 

 

 

1,258,068

 

Interest expense

 

 

(549,677

)

 

 

(87,224

)

 

 

(1,111,139

)

 

 

(171,545

)

Income before taxes

 

 

791,919

 

 

 

1,233,489

 

 

 

2,000,492

 

 

 

949,090

 

Income tax expense (benefit)

 

 

92,613

 

 

 

24,486

 

 

 

154,446

 

 

 

(28,246

)

Net income

 

$

699,306

 

 

$

1,209,003

 

 

$

1,846,046

 

 

$

977,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income applicable to common stockholders

 

$

699,306

 

 

$

1,209,003

 

 

$

1,846,046

 

 

$

977,336

 

Net income per share applicable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

0.08

 

 

$

0.10

 

 

$

0.06

 

Diluted

 

$

0.03

 

 

$

0.08

 

 

$

0.09

 

 

$

0.06

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

18,823,273

 

 

 

15,464,604

 

 

 

18,665,010

 

 

 

15,430,653

 

Diluted

 

 

20,500,624

 

 

 

15,467,818

 

 

 

20,044,660

 

 

 

15,440,903

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2020

 

 

18,413,419

 

 

$

18,413

 

 

$

166,424,597

 

 

$

(98,400,038

)

 

$

68,042,972

 

Stock-based compensation

 

 

 

 

 

 

 

 

309,610

 

 

 

 

 

 

309,610

 

Stock option and warrant exercises

 

 

276,388

 

 

 

277

 

 

 

253,112

 

 

 

 

 

 

253,389

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,146,740

 

 

 

1,146,740

 

Balance, March 31, 2021

 

 

18,689,807

 

 

 

18,690

 

 

 

166,987,319

 

 

 

(97,253,298

)

 

 

69,752,711

 

Stock-based compensation

 

 

 

 

 

 

 

 

506,391

 

 

 

 

 

 

506,391

 

Release of deferred stock units

 

 

7,742

 

 

 

8

 

 

 

(8

)

 

 

 

 

 

 

Stock option and warrant exercises

 

 

19,167

 

 

 

19

 

 

 

41,103

 

 

 

 

 

 

41,122

 

Shares issued for Employee Stock Purchase Plan options

 

 

22,937

 

 

 

23

 

 

 

38,965

 

 

 

 

 

 

38,988

 

Net income

 

 

 

 

 

 

 

 

 

 

 

699,306

 

 

 

699,306

 

Balance, June 30, 2021

 

 

18,739,653

 

 

$

18,740

 

 

$

167,573,770

 

 

$

(96,553,992

)

 

$

71,038,518

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2019

 

 

15,372,905

 

 

$

15,373

 

 

$

160,858,072

 

 

$

(99,229,393

)

 

$

61,644,052

 

Stock-based compensation

 

 

 

 

 

 

 

 

377,317

 

 

 

 

 

 

377,317

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(231,667

)

 

 

(231,667

)

Balance, March 31, 2020

 

 

15,372,905

 

 

 

15,373

 

 

 

161,235,389

 

 

 

(99,461,060

)

 

 

61,789,702

 

Stock-based compensation

 

 

 

 

 

 

 

 

400,361

 

 

 

 

 

 

400,361

 

Shares issued for Employee Stock Purchase Plan options

 

 

30,206

 

 

 

30

 

 

 

30,010

 

 

 

 

 

 

30,040

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,209,003

 

 

 

1,209,003

 

Balance, June 30, 2020

 

 

15,403,111

 

 

$

15,403

 

 

$

161,665,760

 

 

$

(98,252,057

)

 

$

63,429,106

 

 

 

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)

 

 

For the Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

1,846,046

 

 

$

977,336

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

225,598

 

 

 

101,067

 

Amortization of intangibles

 

 

731,129

 

 

 

595,097

 

Amortization of debt issuance costs and discounts

 

 

413,597

 

 

 

46,951

 

Provision for doubtful accounts

 

 

40,620

 

 

 

61,416

 

Stock-based compensation

 

 

816,001

 

 

 

777,678

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(6,384,432

)

 

 

(104,043

)

Prepaid expenses and other current assets

 

 

(432,110

)

 

 

(312,637

)

Security deposits and other assets

 

 

(6,982

)

 

 

(39,014

)

Accounts payable and accrued liabilities

 

 

7,730,509

 

 

 

(721,471

)

Other liabilities

 

 

203,391

 

 

 

151,289

 

Net cash provided by operating activities

 

 

5,183,367

 

 

 

1,533,669

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(154,737

)

 

 

(201,063

)

Purchase of intangible assets

 

 

(63,840

)

 

 

(20,998

)

Acquisition, net of cash acquired

 

 

(2,319,977

)

 

 

 

Net cash used in investing activities

 

 

(2,538,554

)

 

 

(222,061

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from credit facilities

 

 

29,293,503

 

 

 

46,332,534

 

Repayments of credit facilities

 

 

(29,441,722

)

 

 

(47,121,600

)

Repayments of notes payable

 

 

(298,505

)

 

 

 

Proceeds from stock option exercises

 

 

294,511

 

 

 

 

Proceeds from shares issued for Employee Stock Purchase Plan

 

 

38,988

 

 

 

30,040

 

Net cash used in financing activities

 

 

(113,225

)

 

 

(759,026

)

Net increase in cash and cash equivalents

 

 

2,531,588

 

 

 

552,582

 

Cash and cash equivalents at beginning of period

 

 

7,516,260

 

 

 

3,411,108

 

Cash and cash equivalents at end of period

 

$

10,047,848

 

 

$

3,963,690

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

716,366

 

 

$

126,066

 

Cash paid for income taxes

 

 

238,547

 

 

 

146,483

 

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”), and Quest Sustainability Services, Inc. (“QSS”) (collectively, “we,” “us,” “our,” 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 March 2020, the World Health Organization categorized Coronavirus Disease 2019 (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.  The waste management and recycling services we provide are currently designated an essential critical infrastructure business under the President’s COVID-19 guidance, the continued operation of which is vital for national public health, safety and national economic security.  The extent of the impact of the COVID-19 outbreak on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, its impact on our customers and subcontractors, and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time.

On October 19, 2020, Quest acquired substantially all of the assets used in the business of Green Remedies Waste and Recycling, Inc. (“Green Remedies”), a leading provider of independent environmental services, particularly in multi-family housing, located in Burlington, NC. On June 30, 2021, Quest acquired substantially all of the assets used in the business of an Atlanta-based independent environmental services company.  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, 2020. 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 June 30, 2021 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2020 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, and QSS 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 six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year.

Recent Accounting Pronouncements

Adopted

On January 1, 2021, we adopted Accounting Standards Update (“ASU”) 2019-12, Income Taxes – (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions and amending guidance to improve consistent application of accounting over income taxes.  The adoption of the standard did not have a material effect on our consolidated financial statements.

In March 2020, the Financial Accounting Standards Board (the “FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848):  Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  This standard provides operational guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting due to the cessation of the London Interbank Offered Rate (“LIBOR”).  The amendments are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.  The expedients and exceptions provided by the amendments generally do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.  As further discussed in Note 7, our ABL facility

6

 


 

provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable.   As such, we do not expect the transition away from LIBOR to have a material impact on our consolidated financial statements.

Pending Adoption

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which provides guidance on measuring credit losses on financial instruments.  The amended guidance replaces current incurred loss impairment methodology of recognizing credit losses when a loss is probable with a methodology that reflects expected credit losses and requires a broader range of reasonable and supportable information to assess credit loss estimates.  ASU 2016-13 is effective for us on January 1, 2023.  We are assessing the provisions of this amended guidance; however, the adoption of the standard is not expected to have a material effect on our consolidated financial statements.

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 October 19, 2020, we acquired substantially all of the assets of Green Remedies (the “Green Remedies Assets”) pursuant to the Asset Purchase Agreement (the “Asset Purchase Agreement”), dated as of October 19, 2020, among the Company, Green Remedies and Alan Allred (the “Acquisition”). Green Remedies is a leading provider of independent environmental services, particularly in the multi-family housing market, and is located in Burlington, NC.  The Acquisition strengthens our presence across key markets, particularly in multi-family housing.  The total purchase price for the Green Remedies Assets was approximately $16.1 million at close, which includes an earn out estimate tied to future performance over the next three years.  We funded the Acquisition primarily with funds pursuant to the Monroe Capital term note, as further discussed in Note 7, which is secured by a first priority lien on substantially all of QRHC’s tangible and intangible assets.

The following table sets forth the purchase price allocation amount of assets acquired and liabilities assumed as of the acquisition date:

Purchase price allocation:

 

 

 

 

Accounts receivable, net

 

$

1,331,190

 

Machinery and equipment

 

 

1,270,705

 

Intangible assets

 

 

5,890,000

 

Goodwill

 

 

8,101,895

 

Current liabilities

 

 

(527,907

)

 

 

$

16,065,883

 

The purchase price was allocated based on an estimate of the fair value of assets acquired and liabilities assumed as of the acquisition date.

Goodwill represents the amount by which the purchase price exceeds the estimated fair value of the net assets acquired and primarily reflects future synergies.  The goodwill related to the Green Remedies Assets is deductible for income tax purposes.

Deferred consideration payable to the seller includes $2,684,250 payable in either cash or shares of our common stock at our option, and an earn-out not to exceed $2,250,000 over an earn-out period, as defined in the Asset Purchase Agreement.  We valued the earn-out liability at $440,000 using a Monte Carlo simulation (a Level 3 measurement under Accounting Standards Codification (“ASC”) 820, Fair Value Measurement).  The fair value estimate uses unobservable inputs that reflect our own assumptions as to the performance target benchmarks of the acquired business and discount rates used in the calculation.  As the earn-out liability is a contingent consideration arrangement, it is subject to periodic revaluation in accordance with ASC 820.  Changes in the estimated fair value of the contingent earn-out consideration would be reflected in our results of operations in the period in which they are identified.  We believe the estimated fair value of the earn-out, based on the evaluation of the performance of the acquired business is materially accurate as of June 30, 2021.

The following table presents unaudited pro forma information for the three and six months ended June 30, 2020 as if the Acquisition had occurred at the beginning of our 2020 fiscal year.  The unaudited pro forma information includes adjustments for amortization expense on definite lived intangible assets acquired, interest expense on debt incurred related to the Acquisition, and the related income tax effects.  

The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Acquisition had been effected on the dates previously set forth, nor is it indicative of the future operating results or financial position in combination.

 

7

 


 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30, 2020

 

 

June 30, 2020

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenue

 

$

25,007,661

 

 

$

53,218,714

 

Net income

 

$

1,243,016

 

 

$

913,299

 

Income per share - basic and diluted

 

$

0.08

 

 

$

0.06

 

On June 30, 2021, we acquired substantially all of the assets of an Atlanta-based independent environmental services company.  The acquisition did not have a material impact on our financial position or results of operations.  

4. Property and Equipment, net, and Other Assets

At June 30, 2021 and December 31, 2020, property and equipment, net, and other assets consisted of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $2,420,796

     and $2,195,198 as of June 30, 2021 and December 31, 2020,

     respectively

 

$

1,916,145

 

 

$

1,987,006

 

Right-of-use operating lease asset

 

 

802,821

 

 

 

1,103,761

 

Security deposits and other assets

 

 

300,270

 

 

 

293,288

 

    Property and equipment, net, and other assets

 

$

3,019,236

 

 

$

3,384,055

 

 

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 June 30, 2021 was $115,463, including $72,416 of depreciation expense reflected within “Cost of revenue” in our condensed consolidated statements of operations as it related to assets used in directly servicing customer contracts and was $225,598 for the six months ended June 30, 2021, including $140,792 of depreciation expense reflected within “Cost of revenue.”  Depreciation expense for the three months ended June 30, 2020 was $50,846, including $14,455 of depreciation expense reflected within “Cost of revenue,” and was $101,067 for the six months ended June 30, 2020, including $28,273 reflected within “Cost of revenue.”

We recorded right-of-use operating lease assets related to our corporate office lease and the office lease space in Burlington, NC in accordance with ASC 842.  Refer to Note 8, Leases for additional information.

On February 20, 2018 (the “Closing Date”), we entered into an Asset Purchase Agreement with Earth Media Partners, LLC to sell certain assets of our wholly owned subsidiary, Earth911, Inc., in exchange for a 19% interest in Earth Media Partners, LLC, which was recorded as an investment in the amount of $246,585 as of the Closing Date, and a potential future earn-out amount of approximately $350,000.  The net assets sold related to the Earth911.com website business and consisted primarily of the website and its content and customers, deferred revenue, and accounts receivable as of the Closing Date.  Earth911, Inc. was subsequently renamed Quest Sustainability Services, Inc.  The carrying amount of our investment in Earth Media Partners, LLC is included in “Security deposits and other assets” and we have an accrued receivable in the amount of $310,363 and $259,017 related to the earn-out included in “Accounts receivable” as of June 30, 2021 and December 31, 2020, respectively.

5. Goodwill and Other Intangible Assets

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

  

June 30, 2021 (Unaudited)

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer lists

 

5 years

 

$

7,190,000

 

 

$

766,021

 

 

$

6,423,979

 

Software

 

7 years

 

 

2,200,368

 

 

 

1,438,507

 

 

 

761,861

 

Trademarks

 

7 years

 

 

426,533

 

 

 

41,332

 

 

 

385,201

 

Non-compete agreement

 

3 years

 

 

140,000

 

 

 

 

 

 

140,000

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Total finite lived intangible assets

 

 

 

$

10,187,584

 

 

$

2,476,543

 

 

$

7,711,041

 

8

 


 

 

 

December 31, 2020

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer lists

 

5 years

 

$

5,480,000

 

 

$

218,022

 

 

$

5,261,978

 

Software

 

7 years

 

 

2,153,061

 

 

 

1,285,058

 

 

 

868,003

 

Trademarks

 

7 years

 

 

410,000

 

 

 

11,651

 

 

 

398,349

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Total finite lived intangible assets

 

 

 

$

8,273,744

 

 

$

1,745,414

 

 

$

6,528,330

 

 

 

 

 

 

Carrying

Amount

 

Changes in goodwill:

 

 

 

 

 

 

Goodwill balance at December 31, 2020

 

 

 

$

66,310,385

 

Addition related to acquisition

 

 

 

 

484,362

 

Goodwill balance at June 30, 2021

 

 

 

$

66,794,747

 

 

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 $365,605 and $297,746 for the three months ended June 30, 2021 and 2020, respectively.  Amortization expense related to finite lived intangible assets was $731,129 and $595,097 for the six months ended June 30, 2021 and 2020, respectively.

We have no indefinite-lived intangible assets other than goodwill. $58.2 million of the goodwill is not deductible for tax purposes, while $8.6 million of goodwill is deductible over its tax-basis life.  

 

We performed our annual impairment analysis for goodwill and other intangible assets in the third quarter of 2020 with no impairment recorded.

6.  Current Liabilities

The components of Accounts payable and accrued liabilities were as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Accounts payable

 

$

20,105,708

 

 

$

12,511,678

 

Accrued taxes

 

 

1,050,798

 

 

 

837,443

 

Employee compensation