10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2019

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

For the transition period from            to           

Commission File Number: 000-09047

QUEST SOLUTION, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-3454263
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1865 West 2100 South

Salt Lake City, UT 84119
(Address of principal executive offices) (Zip Code)

(801) 244-9577

(Registrant’s telephone number, including area code)

Quest Solution, Inc.

860 Conger Street

Eugene, OR 87402

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Ticker symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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 [X] 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 [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	[X]
(Do not check if a 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 [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 79,196,228 shares of common stock, $0.001 par value, as of November 6, 2019.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	F-1
CONDENSED CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018, (AUDITED)	F-1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018, (UNAUDITED)	F-2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018, (UNAUDITED)	F-3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTMEBER 30, 2019 AND 2018, (UNAUDITED)	F-4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	F-5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	7
ITEM 4. CONTROLS AND PROCEDURES	7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.	8
ITEM 1A. RISK FACTORS.	8
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.	8
ITEM 4. MINE SAFETY DISCLOSURES.	8
ITEM 5. OTHER INFORMATION.	8
ITEM 6. EXHIBITS.	8
SIGNATURES	9

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUEST SOLUTION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)	As of
	September 30, 2019			December 31, 2018
	(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents	$	1,954		$	378
Accounts receivable, net		10,842			12,262
Inventory		2,015			1,803
Prepaid expenses		245			169
Other current assets		173			78
Total current assets		15,229			14,690
Property and equipment, net of accumulated depreciation of $2,470 and $2,037, respectively		338			389
Goodwill		13,921			13,921
Trade name, net of accumulated amortization of $2,759 and $2,585, respectively		1,544			1,805
Customer relationships, net of accumulated amortization of $5,827 and $5,076, respectively		6,387			7,514
Other intangibles, net of accumulated amortization of $109 and $33, respectively		1,170			1,267
Cash, restricted		533			532
Other assets		335			30
Total assets	$	39,457		$	40,148
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	21,095		$	17,484
Accrued interest and accrued liabilities, related party		-			-
Line of credit		517			4,534
Accrued payroll and sales tax		1,878			2,173
Notes payable, related parties – current portion		1,241			1,891
Notes payable – current portion		6,548			8,823
Other current liabilities		1,168			265
Total current liabilities		32,447			35,170
Long term liabilities
Notes payable, related party, less current portion		1,258			1,912
Accrued interest and accrued liabilities, related party		27			33
Notes payable, less current portion		137			130
Other long term liabilities		406			610
Total liabilities		34,275			37,855
Stockholders’ equity
Series A Preferred stock; $0.001 par value; 1,000,000 shares designated, 0 shares issued and outstanding		-			-
Series B Preferred stock; $0.001 par value; 1 share designated, 0 shares issued and outstanding		-			-
Series C Preferred stock; $0.001 par value; 15,000,000 shares designated, 4,828,530 and 4,828,530 shares issued and outstanding, respectively		5			5
Common stock; $0.001 par value; 200,000,000 shares authorized; 79,196,228 and 71,931,693 shares issued and outstanding, respectively.		79			72
Common stock; $0.001 par value; 11,084,657 shares to be received		-			(2,616	)
Common stock to be repurchased by the Company		-			(230	)
Additional paid-in capital		47,264			44,814
Accumulated (deficit)		(42,179	)		(39,753	)
Accumulated other comprehensive loss		13			1
Total stockholders’ equity		5,182			2,293
Total liabilities and stockholders’ equity	$	39,457		$	40,148

The accompanying unaudited notes to the financials should be read in conjunction with these condensed
consolidated financial statements.

F-1

QUEST SOLUTION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(In thousands, except share and per share data)	For the three months						For the nine months
	ending September 30,						ending September 30,
	2019			2018			2019			2018
Revenues
Total Revenues	$	13,097		$	13,444		$	45,843		$	42,369
Cost of goods sold
Cost of goods sold		9,601			10,745			34,123			33,688
Gross profit		3,496			2,699			11,720			8,681
Operating expenses
General and administrative		727			687			1,941			1,724
Salary and employee benefits		2,700			1,597			7,763			6,425
Depreciation and amortization		536			439			1,620			1,312
Professional fees		268			363			1,226			1,169
Total operating expenses		4,231			3,086			12,550			10,630
Loss from operations		(735	)		(387	)		(830	)		(1,949	)
Other income (expenses):
Interest expense		(618	)		(303	)		(1,769	)		(963	)
Other (expenses) income		(90	)		(226	)		(9	)		(1,381	)
Total other expenses		(708	)		(529	)		(1,778	)		(2,344	)
Net Loss Before Income Taxes		(1,443	)		(916	)		(2,608	)		(4,292	)
Provision for Income Taxes
Current		-			(16	)		-			(45	)
Total Provision for Income Taxes		-			(16	)		-			(45	)
Net Loss attributable to Quest Solution Inc.	$	(1,443	)	$	(932	)	$	(2,608	)	$	(4,337	)
Less: Preferred stock – Series C dividend		(48	)		(48	)		(141	)		(142	)
Net loss attributable to the common stockholders	$	(1,491	)	$	(980	)	$	(2,749	)	$	(4,479	)
Net (loss) per share - basic	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.11	)
Weighted average number of common shares outstanding - basic		77,583,183			48,709,773			77,312,948			42,592,783

The accompanying unaudited notes to the financials should be read in conjunction with these condensed
consolidated financial statements.

F-2

QUEST SOLUTION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Series C Preferred Stock				Common Stock				Additional Paid-in		Shares			Accumulated			Other Comprehensive		Total Stockholders’ Equity
(In thousands, except per share data)	Shares		Amount		Shares		Amount		Capital		Repurchased			Deficit			Income (Loss)		(Deficit)
Balance, June 30, 2018		4,829	$	5		48,433	$	48	$	38,279	$	(230	)	$	(37,841	)	$	-	$	261
Dividend on Class C Shares		-		-		-		-				-			(48	)		-		(48	)
ESPP Stock Issuance		-		-		12		-		2		-			-			-		2
Stock-based compensation – options and warrants		-		-		-		-		46		-			-			-		46
Debt Settlements						265		1		-		-			-			-		1
Accumulated other Comprehensive Loss		-		-		-		-		-		-						-		-
Net (loss) income		-		-		-		-		-		-			(932	)		-		(932	)
Balance, September 30, 2018		4,829	$	5		48,710	$	49	$	38,327	$	(230	)	$	(38,821	)	$	-	$	(670	)
Balance, June 30, 2019		4,829	$	5		77,009	$	77	$	46,446	$	-		$	(41,012	)	$	1	$	5,517
Dividend on Class C Shares		-		-		-		-				-			276			-		276
ESPP Stock Issuance		-		-		2		-		-		-			-			-		-
Stock-based compensation – options, warrants, issuances		-		-		1,550		1		669		-			-			-		670
Foreign currency translation		-		-		-		-		-		-			-			12		12
Conversion of debt		-		-		635		1		149		-			-			-		150
Net (loss) income		-		-		-		-		-		-			(1,443	)		-		(1,443	)
Balance, September 30, 2019		4,829	$	5		79,196	$	79	$	47,264	$	-		$	(42,179	)	$	13	$	5,182

	Series C Preferred Stock				Common Stock						Additional Paid-in			Shares			Accumulated			Other Comprehensive		Total Stockholders’ Equity
(In thousands, except per share data)	Shares		Amount		Shares			Amount			Capital			Repurchased			Deficit			Income (Loss)		(Deficit)
Balance, December 31, 2017		4,829	$	5		36,828		$	37		$	34,495		$	(230	)	$	(35,555	)	$	-	$	(1,248	)
ASC 606		-		-		-			-			-			-			1,213			-		1,213
Board Issuances		-		-		1,000			1			118			-			-			-		119
Dividend on Class C Shares		-		-		-			-			-			-			(143	)		-		(143	)
ESPP Stock Issuance		-		-		67			-			8			-			-			-		8
Stock-based compensation – options and warrants		-		-		-			-			796			-			-			-		796
Stock Based Compensation		-		-		1,800			2			207			-			-			-		209
Debt Settlements		-		-		9,015			9			2,703			-			-			-		2,712
Net (loss) income		-		-		-			-			-			-			(4,336	)		-		(4,336	)
Balance, September 30, 2018		4,829	$	5		48,710		$	49		$	38,327		$	(230	)	$	(38,821	)	$	-	$	(670	)
Balance, December 31, 2018		4,829	$	5		71,932		$	72		$	42,198		$	(230	)	$	(39,753	)	$	1	$	2,293
Dividend on Class C Shares		-		-		-			-			-			-			182			-		182
ESPP Stock Issuance		-		-		5			-			1			-			-			-		1
Stock-based compensation – options, warrants, issuances		-		-		1,550			1			1,092			-			-			-		1,093
Stock and warrant issuances, net of issuance costs		-		-		16,667			17			4,042			-			-			-		4,059
Purchase price adjustment – shares to be received		-		-		(11,085	)		(11	)		11			-			-			-		-
Stock redemption		-		-		(508	)		(1	)		(229	)		230			-			-		-
Accumulated other comprehensive income		-		-		-			-			-			-			-			12		12
Conversion of debt		-		-		635			1			149			-			-			-		150
Net (loss) income		-		-		-			-			-			-			(2,608	)				(2,608	)
Balance, September 30, 2019		4,829	$	5		79,196		$	79		$	47,264		$	-		$	(42,179	)	$	13	$	5,182

The accompanying unaudited notes to the financials should be read in conjunction with these condensed
consolidated financial statements.

F-3

QUEST SOLUTION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(UNAUDITED)

	For the nine months ended September 30
(In thousands)	2019			2018
Cash flows from continuing operating activities:
Net loss	$	(2,608	)	$	(4,337	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock based compensation		1,093			1,125
Topic 606 Cumulative Adjustment		-			1,213
Debt Settlement		-			1,264
Depreciation and amortization		1,620			1,312
Loss on fixed asset disposal		-			(36	)
Inventory write off		-			50
Changes in operating assets and liabilities:
(Increase) / decrease in accounts receivable		1,420			(4,282	)
(Increase) / decrease in prepaid expenses		(154	)		79
(Increase) / decrease in inventory		(234	)		(669	)
Increase in accounts payable and accrued liabilities		4,412			4,933
(Decrease) in accrued interest and accrued liabilities, related party		(6	)		(1	)
(Decrease) in deferred revenue, net		-			(1,204	)
Increase / (decrease) in accrued payroll and sales taxes payable		(295	)		850
(Increase) / decrease in other assets		57			119
Increase / (decrease) in other liabilities		(358	)		(153	)
Net cash provided by operating activities		4,947			263
Cash flows from investing activities:
(Increase) / decrease in restricted cash		-			-
(Purchase) / sale of property and equipment		(45	)		29
(Increase) / decrease in other assets		(225	)		-
Net cash (used in) provided by investing activities		(270	)		29
Cash flows from financing activities:
Net proceeds from common stock and warrant issuances		3,937			9
Proceeds from ESPP stock issuance		1			-
Proceeds from line of credit		7,053			969
Payments on line of credit		(11,070	)
Payment on notes/loans payable		(3,022	)		(1,391	)
Net cash used in financing activities		(3,101	)		(413	)
Net increase (decrease) in cash		1,576			31
Cash, beginning of period		378			25
Cash, end of period	$	1,954		$	56
Cash paid for interest	$	1,156		$	556
Cash paid for taxes	$	-		$	-
Supplementary for non-cash flow information:
Debt conversion	$	550		$	-
Stock based compensation	$	1,093		$	-
Change in terms of accounts payable	$	(801	)		(6,764	)
Stock issued for debt settlement	$	-		$	2,711
Shares to be repurchased	$	-		$	(230	)

The accompanying unaudited notes to the financials should be read in conjunction with these condensed
consolidated financial statements.

F-4

QUEST SOLUTION, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The interim consolidated financial statements of Quest Solution, Inc. include the combined accounts of Quest Marketing, Inc., an Oregon Corporation, Quest Exchange Ltd., a Canadian based holding company, HTS Image Processing, Inc. (“HTS”), a Delaware corporation, HTS (USA), Inc., a Delaware corporation and HTS Image Ltd. (“HTS Ltd.”) (f/k/a Teamtronics Ltd.), an Israeli corporation.

On December 31, 2016, the Company acquired one hundred percent (100%) of the shares of Bar Code Specialties, Inc. (“BCS”) and merged BCS into Quest Marketing to form one US legal entity as part of its streamlining efforts.

The interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2018 and notes thereto included in the Company’s Form 10-K filed with the SEC on June 5, 2019. The Company operates in one segment.

Operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Quest Solution, Inc. is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management who is responsible for the integrity and objectivity of the financial statements. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

F-5

RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Pronouncement in Fiscal 2019

In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842), Codification Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to provide additional guidance for the adoption of Topic 842. ASU 2018-10 clarifies certain provisions and correct unintended applications of the guidance such as the application of implicit rate, lessee reassessment of lease classification, and certain transition adjustments that should be recognized to earnings rather than to stockholders’ equity. ASU 2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic 842. In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases with terms greater than 12 months. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new lease standards”) are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted the standard on January 1, 2019 by applying the new lease requirements utilizing the Effective Date Method for all leases with terms greater than 12 months. We elected the package of practical expedients permitted under the transition guidance within the new standard, which included carrying forward historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The adoption of this standard resulted in the recognition of right-of-use assets of $238 thousand and additional lease liabilities of $238 thousand as of January 1, 2019. The adoption of the standard did not have a material impact on our operating results or cash flows.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The amendments in ASU 2018-09 affect a wide variety of Topics in the FASB Codification and apply to all reporting entities within the scope of the affected accounting guidance. The Company has evaluated ASU 2018-09 in its entirety and determined that the amendments related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, are the only provisions that currently apply to the Company. The amendments in ASU 2018-09 related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, clarify that an entity should recognize excess tax benefits related to stock compensation transactions in the period in which the amount of the deduction is determined. The amendments in ASU 2018-09 related to Topic 718-740 are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard did not have a current impact on the Company’s Condensed Consolidated Financial Statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date. The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard did not have a current impact on the Company’s Condensed Consolidated Financial Statements for the period ended September 30, 2019.

F-6

The Company has evaluated other recent pronouncements and believes that none of them will have a material effect on the Company’s financial statements.

GOODWILL AND INTANGIBLE ASSETS

Intangible assets are stated at cost, net of accumulated amortization. The assets are being amortized on the straight-line method over useful lives ranging from 3 to 11 years. Amortization expense for the nine months ended September 30, 2019 and September 30, 2018 was $1.5 million and $1.3 million, respectively.

F-7

NET LOSS PER COMMON SHARE

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share.” Basic net loss per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS for the nine months ended September 30, 2019 and 2018 were 77,312,948 and 42,592,783, respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are antidilutive.

Dilutive securities are excluded from the computation of diluted net loss per share because such securities have anti-dilutive impact due to losses reported.

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported, as of September 30:

	2019		2018
Options to purchase common stock		12,581,000		13,781,000
Convertible preferred stock		4,828,530		4,828,530
Warrants to purchase common stock		4,500,000		4,700,000
Common stock subject to repurchase		-		(507,079	)
Potential shares excluded from diluted net loss per share		21,909,530		22,802,451

FOREIGN CURRENCY TRANSLATION

The consolidated financial statements of the Company are presented in U.S. dollars. The functional currency for the Company and each of its subsidiaries (“Quest US entities”), except HTS Ltd., is U.S. dollars. The functional currency of HTS Ltd. is the Israeli Shekel. Transactions in currencies other than the functional currency are recorded using the appropriate exchange rate at the time of the transaction. For Quest US entities, continuing operations are conducted in U.S. dollars. The Company owns a non-operating subsidiary in Canada, from which it has no activity since October 1, 2016. For HTS Ltd., continuing operations are conducted in Israeli Shekel.

Reclassifications and adjustments — Certain prior year amounts in the condensed consolidated interim financial statements have been reclassified to conform with current year presentation. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss.

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of September 30, 2019, the Company had a working capital deficit of $17.2 million and an accumulated deficit of $42.2 million. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis. Management’s plan to eliminate the going concern situation includes, but is not limited to, the continuation of improving cash flow, maintaining moderate cost reductions (subsequent to aggressive cost reduction actions already taken in 2018 and in the first nine months of 2019), the creation of additional sales and profits across its product lines, and the obtaining of sufficient financing to restructure current debt in a manner more in line with the Company’s improving cash flow and cost reduction successes.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

F-8

NOTE 3 – CONCENTRATIONS

For the nine months ended September 30, 2019 and the year ended December 31, 2018, one customer accounted for 15.3% and 17.0% of the Company’s revenues, respectively. At September 30, 2019 and December 31, 2018, one customer accounted for 11.1% and 11.6% of the Company’s accounts receivable balance, respectively.

NOTE 4 – BUSINESS ACQUISITION

HTS Image Processing, Inc. acquisition

On October 5, 2018 (“Closing Date”), the Company entered into a Purchase Agreement with Walefar and Campbeltown (the “HTS Purchase Agreement”) (Walefar and Campbeltown are collectively referred to as the “Sellers”). Pursuant to the HTS Purchase Agreement, the Company purchased 100% of the capital stock of HTS Image Processing, Inc. and its wholly owned subsidiaries HTS (USA), Inc. and HTS Image Ltd. (f/k/a Teamtronics Ltd.) from the Sellers.

Pro forma results of operations

The following pro forma results of operations for the nine months ended September 30, 2018 have been prepared as though the business acquisition had occurred as of January 1, 2018. This pro forma financial information is not indicative of the results of operations that the Company would have attained had the acquisition occurred at the beginning of the periods presented, nor is the pro forma financial information indicative of the results of operations that may occur in the future:

(In thousands, except per share data)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Pro forma sales	$	15,114,596		$	47,785,551
Pro forma net income		(1,459,261	)		(4,955,288	)
Pro forma basic and diluted earnings per share		(0.03	)		(0.12	)

F-9

NOTE 5 – OTHER LIABILITIES

At September 30, 2019 and December 31, 2018, other liabilities consisted of the following:

(In thousands)	September 30, 2019			December 31, 2018
Lease liability	$	164		$	-
Other vendor payable		801			-
Dividend payable		297			478
Others		312			397
Total other liabilities		1,574			875
Less Current Portion		(1,168	)		(265	)
Total long term other liabilities	$	406		$	610

NOTE 6 – CREDIT FACILITIES AND LINE OF CREDIT

On July 1, 2016, the Company entered into a Factoring and Security Agreement (the “FASA”) with Action Capital Corporation (“Action”) to establish a sale of accounts facility, whereby the Company may obtain short-term financing by selling and assigning to Action acceptable accounts receivable. Pursuant to the FASA, the outstanding principal amount of advances made by Action to the Company at any time shall not exceed $5,000,000. Action will reserve and withhold an amount in a reserve account equal to 5% of the face amount of each account purchased under the FASA. The balance outstanding under the Action credit line at September 30, 2019 and December 31, 2018, in thousands, was $517 and $4,534 respectively, which includes accrued interest.

The per annum interest rate with respect to the daily average balance of unpaid advances outstanding under the FASA (computed on a monthly basis) will be equal to the “Prime Rate” of Wells Fargo Bank N.A. plus 2%, plus a monthly fee equal to 0.75% of such average outstanding balance. The Company shall also pay all other costs incurred by Action under the FASA, including all bank fees. The FASA will continue in full force and effect unless terminated by either party upon 30 days’ prior written notice. Performance of the Company’s obligations under the FASA is secured by a security interest in certain collateral of the Company. The FASA includes customary representations and warranties and default provisions for transactions of this type.

NOTE 7 – NOTES PAYABLE

Notes payable at September 30, 2019 and December 31, 2018, consists of the following:

(In thousands)	September 30, 2019			December 31, 2018
Supplier Note Payable	$	6,540		$	8,340
All Other		145			613
Total		6,685			8,953
Less current portion		(6,548	)		(8,823	)
Long Term Notes Payable	$	137		$	130

Future maturities of notes payable as of September 30, 2019 are as follows;

2019	$	6,543
2020		4
2021		138
2022		-
2023		-
Total	$	6,685

In connection with the acquisition of Bar Code Specialties, Inc. (“BCS”), a California corporation, the Company assumed a related party note payable to the former CTO of the RFID division of BCS. The note is payable in equal monthly installments of $5 thousand beginning October 31, 2014 and ended October 2018. The loan bears interest at 1.84% and is unsecured and subordinated to the Company’s bank debt. The balance on this loan at September 30, 2019 and December 31, 2018 was $130 thousand, all of which was classified as long-term. In July 2016, the holder of the note signed a subordination agreement with the Supplier of the Secured Promissory Note and Action Capital, whereby the noteholder agrees to subordinate its right to payment of capital and interest until the Supplier with the Secured Promissory Note is reimbursed in full, therefore, the note is classified as long-term.

On July 18, 2016, the Company and the Supplier entered into a certain Secured Promissory Note, with an effective date of July 1, 2016, in the principal amount of $12.5 million. The USD Note accrues interest at 12% per annum and is payable in six consecutive monthly installments of principal and accrued interest in a minimum principal amount of $250 thousand each, with any remaining principal and accrued interest due and payable on December 31, 2016.

● On September 7, 2018, the Company entered into a Sixth Amendment to the secured Promissory Note (the “Sixth Amendment”) extending the maturity date to January 31, 2019. The Sixth Amendment also increases the principal amount to $8.7 million, an increase of $6.8 million, by rolling the Company’s then existing and outstanding accounts payable into the note by the previously mentioned amount of increase. The Company will continue to make monthly payments in the amount of $300 thousand for the first three monthly payments, and also in the amount of $500 thousand for the last two monthly payments prior to the note’s maturity.

● On April 30, 2019, the Company entered into a Seventh Amendment to the secured Promissory Note (the “Seventh Amendment”) extending the maturity date to July 31, 2019. The Seventh Amendment also provides that the Company will continue to make monthly installments of principal and accrued interest in a minimum principal amount of $350 thousand each. The Company has made partial payments towards the required monthly installments under the terms of the Seventh Amendment. As has been the case with each previous amendment, the Company is in continual negotiations with the holder of the Secured Promissory Note to extend the maturity date and establish a new schedule of payments.

F-10

NOTE 8 –NOTES PAYABLE, RELATED PARTIES

Notes and loans payable, related parties consisted of the following:

(In thousands)	September 30, 2019		December 31, 2018
Note payable – debt restructure Marin	$	940	$	1,160
Note payable – debt restructure Thomet		600		713
Note payable – debt restructure Zicman		144		171
Convertible note payable – shareholders		150		700
Note payable – RWCC		665		1,059
Total notes payable, related parties		2,499		3,803
Less current portion		1,241		1,891
Long-term portion	$	1,258	$	1,912

Note payable – debt restructure Marin

On February 28, 2018, the Company finalized two settlement agreements with David and Kathy Marin (the “Marin Settlement Agreements”) which have an effective date of December 30, 2017. Pursuant to the first Marin Settlement Agreement (the “Marin Settlement Agreement I”), the Company and the Marins agreed to reduce the Company’s purchase price for all of the capital stock of Bar Code Specialties, Inc., which was acquired by the Company from the Marins in November 2014. In the 2014 acquisition, the Company had issued David Marin a promissory note for $11.0 million of which an aggregate of $10.7 million (the “Owed Amount”) was outstanding as of February 26, 2018 which includes accrued interest earned but not paid. Pursuant to the Marin Settlement Agreement I, the amount of the indebtedness owed to Marin was reduced by $9.5 million bringing the total amount owed to $1.2 million. Section 3.1 of the original note was amended to provide that the Company shall pay the Marins 60 monthly payments of $20 thousand each commencing the earlier of (i) October 26, 2018 and (ii) the date that the Company’s obligation to Scansource, Inc. is satisfied and all amounts currently in default under the credit agreement with Scansource (currently approximately $6.0 Million) is reduced to $2.0 million. As a result, the balance on this loan and related accrued interest at December 31, 2018 were all classified as long term, being due in 2023. As of September 30, 2019, the balance of this loan was $940 thousand.

F-11

Note payable – debt restructure Thomet

On February 28, 2018, the Company finalized a settlement agreement with Kurt Thomet whereby the Company settled its indebtedness to Mr. Thomet in the current amount of $5.4 million in full in exchange for 60 monthly payments of $13 thousand each commencing the earlier of (i) October 26, 2018 or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc. is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million. In addition, the Company issued Mr. Thomet an aggregate of 500,000 shares of restricted common stock and 1,000,000 shares of Series C Preferred Stock with the same rights and restrictions as described above in the description of the Marin Settlement II Agreement. The effective date of the agreement is December 30, 2017. As of September 30, 2019, the balance of this loan was $600 thousand and is due in 2023.

Note payable – debt restructure Zicman

On February 28, 2018, the Company finalized a settlement agreement with George Zicman whereby the Company settled its indebtedness to Mr. Zicman in the amount of $1.3 million in full in exchange for 60 monthly payments of $3 thousand each commencing the earlier of (i) October 26, 2018 or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc. is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million. In addition, the Company issued Mr. Zicman an aggregate of 100,000 shares of common stock and 600,000 shares of Series C Preferred Stock with the same rights and restrictions as described above in the description of the Marin Settlement Agreement II. The effective date of the agreement is December 30, 2017. As of September 30, 2019, the balance of this loan was $144 thousand.

Each of the Marins, Thomet and Zicman entered into a voting agreement with the Company whereby they agreed to vote any shares of common stock beneficially owned by them as directed by the Company’s CEO and also agreed to a leakout restriction whereby they each agreed not to sell more than 10% of the common stock beneficially owned during any 30-day period.

Convertible note payable - shareholders

On October 5, 2018, the Company entered into a purchase agreement with Walefar Investments, Ltd. (“Walefar”) and Campbeltown Consulting, Inc. (“Campbeltown”) (Walefar and Campbeltown are collectively referred to as the “Sellers”). Pursuant to the agreement, the Company purchased 100% of the capital stock of HTS Image Processing, Inc. (“HTS”) from the Sellers. As consideration, the Company (i) issued to the Sellers 22,452,954 shares of the Company’s common stock, having a value of $5.3 million based on the average closing price of the common stock for the 20 days’ preceding the agreement (the “Per Share Value”), (ii) cash in the amount of $300 thousand, and (iii) a 12 month convertible promissory note with a principal amount of $700 thousand and an interest rate of six percent (6%) per year. The note also provides the Sellers the right to convert all or any portion of the then outstanding and unpaid principal amount and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.236. The agreement constitutes a “related party transaction” because of Company director Shai Lustgarten’s position as Chief Executive Officer of HTS and stock ownership in HTS. Additionally, Campbeltown is a “related party” because Carlos Jaime Nissenson, the beneficial owner of Campbeltown, is a consultant to the Company, a principal stockholder of the Company, and father of Company director and newly appointed CFO Neev Nissenson. Carlos Jaime Nissenson was also a stockholder and director of HTS. Pursuant to the agreement, Shai Lustgarten received 11,226,477 shares of the Company’s common stock and Carlos Jaime Nissenson received 11,226,477 shares of the Company’s common stock.

F-12

On May 29, 2019, the Company, Campbeltown and Walefar entered into an Amendment to the HTS Purchase Agreement (the “Amendment”), which provided for an adjustment to the number of shares of common stock issued to Walefar and Campbeltown in the acquisition of HTS. Pursuant to the Amendment, Campbeltown and Walefar agreed to return for cancelation 5,542,328 and 5,542,329 shares of common stock, respectively. This Amendment reduced the amount of shares issued in the acquisition to 11,368,297 shares from 22,452,954 shares and the amount of share consideration to approximately $2.7 million from $5.3 million. This adjustment was made as a result of a correction in the calculation of working capital and other share give back provisions of the HTS Purchase Agreement. As a result of the Offering (see Note 9), $400 thousand of the notes outstanding were converted to common stock. As of September 30, 2019, the remaining principal amount of $150 thousand is owed to each Walefar and Campbeltown respectively ($300 thousand total) under the note issued to them as partial consideration in the sale of HTS to the Company on October 5, 2018.

On September 30, 2019, and in accordance with the terms of the Convertible Promissory Note, Walefar and Campbeltown each exercised the right to convert $75 thousand in unpaid principal balance into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.236. Accordingly, the Company issued 317,796 shares to each of Walefar and Campbeltown.

Note payable – RWCC

The company acquired the Note Payable – RWCC (“RWCC Note”)(f.k.a. Certus) with the acquisition of HTS. The RWCC Note was a non-interest-bearing note. The RWCC Note was historically discounted using an effective interest rate of 5.0%. The outstanding balance of $665 thousand is classified as short term and is due and payable in April 2020 with monthly payment of approximately $85,000 per month. The RWCC Note is classified as a related party note because the Chief Executive Officer of RWCC is the son of a significant shareholder of the Company and a sibling of a member of the Board of Directors.

Repayment of notes payable

The repayment of the notes payable, related parties at September 30, 2019 is as follows:

(In thousands)
2019	$	504
2020		843
2021		426
2022		426
Thereafter		300
Total	$	2,499

NOTE 9 – STOCKHOLDERS’ EQUITY

PRIVATE PLACEMENT

On April 4, 2019, the Company entered into a form of Securities Purchase Agreement (the “Securities Purchase Agreement”) with accredited investors. Pursuant to the Securities Purchase Agreement, on April 9, 2019 (the Closing Date”), the Company sold an aggregate gross proceeds of $5 million of units (the “Units”) before deducting placement agent fees, consultant and legal fees and other offering expenses (the “Offering”). The per Unit purchase price was $0.30.

Each Unit is comprised of one share of the Company’s common stock, $0.001 par value per share, and a warrant to purchase one share of common stock, and, as a result of the Offering, the Company issued 16,666,667 shares of common Stock (the “Shares”) and warrants (the “Warrants”) to purchase 16,666,667 shares of Common Stock (the “Warrant Shares”) at an exercise price equal to $0.35 per Warrant Share, which Warrants are exercisable for a period of five and one-half years from the issuance date.

Both Shai Lustgarten, the Company’s Chief Executive Officer, and Carlos J. Nissensohn, a consultant to and principal stockholder of the Company, participated in the Offering by converting $200 thousand each of unpaid principal, owed to them by the Company, in exchange for Shares and Warrants on the same terms as all other Purchasers.

ThinkEquity, a division of Fordham Financial Management, Inc. (the “Placement Agent”), acted as the sole placement agent for the Offering. In connection with the Offering, the Company entered into a Placement Agency Agreement with the Placement Agent, pursuant to which it paid the Placement Agent $400 thousand (eight percent of the gross proceeds) in commissions and reimbursed it for $160 thousand of expenses incurred in connection with the Offering plus other miscellaneous expenses. The Company also issued the Placement Agent a warrant (the “Placement Agent Warrant”) to purchase 1,166,667 shares of the Company’s common stock (the “Placement Agent Warrant Shares”) at an exercise price of $0.35 per share. The Placement Agent Warrant terminates five and one-half years from the Closing Date.

The Company paid additional legal and other fees directly related to the Offering. The cash fees paid were netted against the Offering proceeds, as follows:

(In thousands)
Total proceeds from issuance of Common Stock and Warrants	$	5,000
Conversion of notes payable – related parties		(400	)
Placement Agent commission and fees		(560	)
Legal and other fees		(103	)
Net cash received from private placement	$	3,937
Accrued private placement consulting fees		200
Placement fees prepaid in earlier period		(78	)
Equity issued net of non-cash placement fees	$	4,059

The fair value of the Warrants issued to the Placement Agent and Consultant are included in the Warrants Paid in Capital account in stockholder’s equity. In conjunction with the Securities Purchase Agreement, the Company accrued $200 thousand in private placement consulting fees. The company incurred $78 thousand of private placement fees prepaid in a prior period.

Allocation of Proceeds

The Company followed the relative fair value method - the instrument being analyzed is allocated a portion of the proceeds based on the proportion of its fair value to the sum of the fair values of all the instruments covered in the allocation – in allocating the Offering Proceeds between the Shares and the Warrants. As there is currently no independent market for the Warrants, the Company estimated their fair value using a Black Sholes model which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. The allocation is as follows:

			Percent of total
Estimated fair value of warrants	$	6,278,452		48.5	%
Value of common stock	$	6,666,667		51.5	%
Total estimated fair value	$	12,945,119		100.0	%
Pro rata fair value of warrants	$	2,425,027		48.5	%
Pro rata fair value of common stock	$	2,574,973		51.5	%
Total proceeds	$	5,000,000		100.0	%

PREFERRED STOCK

Series A

As of September 30, 2019, there were 1,000,000 Series A preferred shares designated and no Series A preferred shares outstanding. The board of directors of the Company (the “Board”) had previously set the voting rights for the preferred stock at 1 share of preferred to 250 common shares.

Series B

As of September 30, 2019, there was 1 preferred share designated and no preferred shares outstanding.

F-13

Series C

As of September 30, 2019, there were 15,000,000 Series C preferred share authorized and 4,828,530 Series C preferred shares outstanding. They have preferential rights above common shares and the Series B preferred shares and are entitled to receive a quarterly dividend at a rate of $0.06 per share per annum. As part of a debt settlement agreement effective December 30, 2017, 1,685,000 shares were issued with the quarterly dividend at a rate of $0.06 per share per annum were waived for a period of 24 months, with no dividends being accrued or paid. Each Series C preferred share outstanding is convertible into one (1) share of common stock of Quest Solution, Inc. During 2019, the Company reduced accrued dividends payable by $323 thousand.

COMMON STOCK

During the first nine months of 2019, the Company issued an aggregate of 4,012 shares of common stock to certain individuals as part of the Company’s Employee Stock Purchase Program for proceeds of $1 thousand.

On April 9, 2019, the Company issued an aggregate of 16,666,667 shares of common stock in connection with the Offering.

On August 27, 2019, the Company issued an aggregate of 1,550,000 shares of common stock to an employee and a consultant as part of the Company’s 2018 Equity Incentive Plan.

On September 30, 2019, and in accordance with the terms of the Convertible Promissory Note, Walefar and Campbeltown each exercised the right to convert $75 thousand in unpaid principal balance into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.236. Accordingly, The Company issued 365,592 shares to each Walefar and Campbeltown.

As of September 30, 2019, the Company had 79,196,228 common shares outstanding.

Warrants and Stock Options

Warrants - The following table summarizes information about warrants granted during the nine month periods ended September 30, 2019 and 2018:

	September 30, 2019				September 30, 2018
	Number of warrants		Weighted Average Exercise Price		Number of warrants			Weighted Average Exercise Price
Balance, beginning of period		5,500,000	$	0.23		4,900,000		$	0.23
Warrants granted		17,833,334		0.35		-			-
Warrants expired		-		-		(200,000	)		1.00
Warrants cancelled, forfeited		-		-		-			-
Warrants exercised		-		-		-			-
Balance, end of period		23,333,334	$	0.32		4,700,000		$	0.17
Exercisable warrants		23,333,334	$	0.32		4,700,000		$	0.17

F-14

Outstanding warrants as of September 30, 2019 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Warrants		Weighted Average Exercise Price		Exercisable Warrants		Weighted Average Exercise Price
$	0.11		1.84		1,500,000	$	0.11		1,500,000	$	0.11
$	0.20		1.25		3,000,000		0.20		3,000,000	$	0.20
$	0.28		0.74		200,000	$	0.28		200,000	$	0.28
$	0.50		2.03		500,000		0.50		500,000	$	0.50
$	0.60		1.03		300,000	$	0.60		300,000	$	0.60
$	0.35		5.02		17,833,334		0.35		17,833,334	$	0.35
$	0.11 to 0.60		4.18		23,333,334	$	0.32		23,333,334	$	0.32

Warrants outstanding at September 30, 2019 and 2018 have the following expiry date and exercise prices:

Expiry Date	Exercise Prices		September 30, 2019		September 30, 2018
June 26, 2020	$	0.28		200,000		200,000
October 10, 2020	$	0.60		300,000		-
December 30, 2020	$	0.20		3,000,000		3,000,000
August 2, 2021	$	0.11		1,500,000		1,500,000
October 10, 2021	$	0.50		500,000		-
October 6, 2024	$	0.35		17,833,334		-
				23,333,334		4,700,000

2014 Stock Option Plan

On November 17, 2014, the Board adopted a stock option plan (the “2014 Plan”) whereby the Board may grant to directors, officers, employees, or consultants of the Company options to acquire common shares. The Board has the authority to determine the terms, limits, restrictions and conditions of the grant of options, to interpret the plan and make all decisions relating thereto. The 2014 Plan was adopted in order to provide an inducement and serve as a long term incentive program. The maximum number of common shares that may be reserved for issuance was set at ten million (10,000,000).

The option exercise price is established by the Board and may not be lower than the market price of the common shares at the time of grant. The options may be exercised during the option period determined by the Board, which may vary, but will not exceed ten years from the date of the grant.

2018 Stock Option Plan

On March 8, 2018, the Company adopted a stock option plan (the “2018 Plan”) as an incentive, to retain in the employ of and as directors, officers, consultants, advisors and employees to the Company. On October 31, 2018, the Board amended the Plan to increase the amount of shares authorized for issuance thereunder from ten million (10,000,000) to sixteen million (16,000,000) shares of the Corporation’s common stock, par value $0.001 (the “Shares”). On January 23, 2019, the Company’s shareholders adopted and ratified the Plan.

As at September 30, 2019, the Company had issued options under the 2018 Plan allowing for the subscription of 14,390,000 shares of its common stock, with 60,000 shares remaining for issuance.

Stock Options - The following table summarizes information about stock options granted during the nine months ended September 30, 2019 and 2018:

	September 30, 2019				September 30, 2018
	Number of stock options		Weighted Average Exercise Price		Number of stock options		Weighted Average Exercise Price
Balance, beginning of period		20,121,000	$	0.19		16,317,000	$	0.17
Stock options granted		2,550,000		0.25		-
Stock options expired		-		-		36,000		0.33
Stock options cancelled, forfeited		-		-		-		-
Stock options exercised		-		-		-		-
Balance, end of period		22,671,000	$	0.20		16,218,000	$	0.17
Exercisable stock options		17,869,750	$	0.19		13,689,416	$	0.18

F-15

For the nine months ended September 30, 2019, the Company granted 2,550,000 stock options.

Outstanding stock options as of September 30, 2019 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Stock Options		Weighted Average Exercise Price		Exercisable Stock Options		Weighted Average Exercise Price
$	0.075 to 0.09		2.39		2,281,000	$	0.09		2,281,000	$	0.09
$	0.11		1.84		3,500,000	$	0.11		3,500,000	$	0.11
$	0.12		3.43		6,800,000	$	0.12		5,950,000	$	0.12
$	0.22		4.09		2,165,000	$	0.22		1,082,500	$	0.22
$	0.25		3.84		2,550,000	$	0.25		318,750	$	0.25
$	0.27		4.17		2,875,000	$	0.27		2,237,500	$	0.27
$	0.50		5.15		2,500,000	$	0.50		2,500,000	$	0.50
$	0.075 to 0.50		3.47		22,671,000	$	0.20		17,869,750	$	0.19

Stock options outstanding at September 30, 2019, and 2018 have the following expiration date and exercise prices:

Expiration Date	Exercise Prices		September 30, 2019		September 30, 2018
August 2, 2021	$	0.11		3,500,000		3,500,000
February 17, 2022	$	0.075		760,333		760,333
February 17, 2022	$	0.09		1,520,667		1,520,667
June 30, 2022	$	0.09		-		700,000
March 5, 2023	$	0.12		6,800,000		6,800,000
July 31, 2023	$	0.25		2,550,000		-
October 31, 2023	$	0.22		2,165,000		-
November 30, 2023	$	0.27		2,875,000		-
November 20, 2024	$	0.50		2,500,000		2,500,000
October 2, 2027	$	0.145		-		500,000
				22,671,000		16,281,000

Stock compensation expense is $1.1 million for the nine months ended September 30, 2019 and $1.1 million for the nine months ended September 30, 2018. The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

NOTE 10 – SALARY AND EMPLOYEE BENEFITS

Salary and employee benefits for the nine months ended September 30, 2019 and September 30, 2018 consists of the following:

(In thousands)	2019		2018
Stock compensation		1,093		1,125
Salaries (except R&D)		3,273		2,402
R&D salaries		714		-
Bonuses		95		429
Commissions		2,588		2,469
Total		7,763		6,425

NOTE 11 – LITIGATION

Our subsidiary, HTS (USA), Inc., is currently in litigation with Sagy Amit, a former employee, who claims that he is owed wages and commissions. The case is pending in the Superior Court of California, County of San Diego and discovery has commenced. The Company intends to vigorously contest the action. Management believes the outcome of the case will not have a material impact on the Company’s financial statements.

The company is not a party to any other pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

F-16

NOTE 12 – RELATED PARTY TRANSACTIONS

Related party transactions are discussed in Note 8.

NOTE 13 – LEASES

The Company accounts for leases in accordance with ASC Topic 842, “Leases,” which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet and expands disclosures about leasing arrangements for both lessees and lessors, among other items, for most lease arrangements.

In accordance with the adoption of ASC 842 on January 1, 2019, we recorded operating lease right-of-use (“ROU”) assets, which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation to make lease payments. Generally, we enter into operating lease agreements for facilities. Finance lease assets are recorded within property and equipment, net of accumulated depreciation. The amount of operating lease liabilities due within 12 months are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities in our consolidated balance sheet based on their contractual due dates. Finance lease liabilities are classified according to contractual due dates.

The operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease payments over the lease term. Most of our leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate which was between 13.16% and 15.06% for all operating leases. Our operating lease agreements may include options to extend the lease term or terminate it early. We have included options to extend in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options. The weighted average remaining lease terms and discount rates for our operating leases were approximately 2.15 years and 14.6% at September 30, 2019. We did not have finance leases at September 30, 2019. Operating lease expense is recognized as rent expense on a straight-line basis over the lease term. We evaluate ROU assets for impairment consistent with our property and equipment policy disclosure included in our 2018 Form 10-K.

As of September 30, 2019, operating lease ROU assets were $168 thousand and operating lease liabilities were $164 thousand, of which $70 thousand were classified as noncurrent.

Future minimum lease commitments at September 30, 2019 were as follows:

Year ending December 31,	Operating Leases
(In thousands)
2019 (excluding the nine months ended September 30, 2019)	$	36
2020		82
2021		36
2022 and thereafter		54
Total lease payments		208
Less imputed interest		(44	)
Total	$	164

Supplemental cash flow information related to leases was as follows:

(In thousands)	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - operating leases	$	92
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	17

F-17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. The reader should understand that several factors govern whether any forward-looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance of the Company. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development projects, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in any of the forward-looking statements contained herein will be realized. Based on actual experience and business development, the Company may alter its marketing, capital expenditure plans or other budgets, which may in turn affect the Company’s results of operations. In light of the significant uncertainties inherent in the forward-looking statements included therein, the inclusion of any such statement should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.

A complete discussion of these uncertainties are contained in our Annual Financial Statements included in the Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission on June 5, 2019.

Introduction

Quest is a national mobility systems integrator with a focus on design, delivery, deployment and support of fully integrated mobile solutions. The Company takes a consultative approach by offering end to end solutions that include hardware, software, communications and full lifecycle management services. The professionals simplify the integration process and deliver the solutions to our customers. Motorola, Intermec, Honeywell, Panasonic, AirWatch, Wavelink, SOTI and Zebra are major suppliers which Quest Solution uses in the solutions we provide to our customers.

The Company’s business strategy developed into leveraging management’s relationships in the business world for investments for the Company. The Company intends to continue with its acquisition of existing companies with revenues and positive cash flow.

3

On October 5, 2018, the Company entered into a purchase agreement with Walefar and Campbeltown (the “HTS Purchase Agreement”) (Walefar and Campbeltown are collectively referred to as the “Sellers”). Pursuant to the HTS Purchase Agreement, the Company purchased 100% of the capital stock of HTS Image Processing, Inc. (“HTS”) from the Sellers and consequently acquired HTS’s wholly owned subsidiaries HTS (USA), Inc. and HTS Image Ltd. (“HTS Ltd.”) (f/k/a Teamtronics Ltd.)

The following is a discussion of the Company’s financial condition, results of operations, financial resources, and working capital. This discussion and analysis should be read in conjunction with the Company’s financial statements contained in this Form 10-Q.

OVERVIEW

On February 28, 2018, the Company finalized settlement agreements with related parties which have an effective date of December 30, 2017. As part of the settlement agreements, the Company authorized the issuance of 600,000 shares of common stock valued at $59 thousand, 1,685,000 shares of Preferred Stock valued at $0.80 per share and issued 3,000,000 stock warrants with an exercise price of $0.20. The total net amount of debt extinguished in these transactions was $15.4 million.

The Company’s sales from continuing operations for the nine months ended September 30, 2019, were $32.7 million, an increase of approximately $3.8 million, or 13.1% over the nine months ended September 30, 2018.

4

The loss from continuing operations for the nine months ended September 30, 2019 was $2.6 million, a decrease of $1.7 million compared with the loss in the nine months ended September 30, 2018 of $4.3 million. Basic loss per share from continuing operations for the nine months ended September 30, 2019 was ($0.04) versus ($0.11) per share for the same time period in 2018.

GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of September 30, 2019, the Company had a working capital deficit of $17.2 million and an accumulated deficit of $42.2 million. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis. Management’s plan to eliminate the going concern situation includes, but is not limited to, the continuation of improving cash flow, maintaining moderate cost reductions (subsequent to aggressive cost reduction actions already taken in 2018 and continued in 2019), the creation of additional sales and profits across its product lines, and the obtaining of sufficient financing to restructure current debt in a manner more in line with the Company’s improving cash flow and cost reduction successes. The Company has also diversified its sourcing and procurement of materials and finished goods. The Company also completed a debt settlement with a related party in exchange for equity, eliminating future needs for cash in servicing debt.

With the acquisition of HTS in October 2018, the Company has in its portfolio of products a computer vision technology that is based on artificial intelligence and machine learning concepts. These solutions have a higher gross profit that will provide an increase in cash flow on a consolidated basis. The Company plans for these products to be a significant revenue source in 2019. Also with the acquisition of HTS, the Company acquired an operating facility with the ability for light manufacturing and assembling components. The Company can use HTS’s assembling facility to reduce the cost of goods and increase profit margins.

The matters that resulted in 2018, and a net loss for the nine months ended September 30, 2019, which create substantial doubt about the Company’s ability to continue as a going concern, have been somewhat mitigated by the successful debt reduction settlements entered into 2018. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Results of Operations

The following tables set forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance.

(In thousands, except per share data)	Nine months ended September 30						Variation
	2019			2018			$		%
Revenue	$	45,843		$	42,369			3,474		8.2
Cost of Goods sold		34,123			33,687			436		1.3
Gross Profit		11,720			8,682			3,038		35.0
Operating Expenses		12,550			10,630			1,920		18.1
Income (loss) from operations		(830	)		(1,948	)		1,118		(57.4	)
Net loss from continuing operations		(2,608	)		(4,337	)		1,729		(39.9	)
Net Loss per common Share	$	(0.04	)	$	(0.11	)		0.07		(63.6	)

(In thousands, except per share data)	Three months ended September 30						Variation
	2019			2018			$			%
Revenue	$	13,097		$	13,444			(347	)		(2.6	)
Cost of Goods sold		9,601			10,745			(1,114	)		(10.6	)
Gross Profit		3,496			2,699			797			29.5
Operating Expenses		4,231			3,086			1,145			37.1
Income (loss) from operations		(735	)		(387	)		(348	)		89.9
Net loss from continuing operations		(1,443	)		(932	)		(511	)		54.8
Net Loss per common Share	$	(0.02	)	$	(0.02	)		0.00			0.00

Revenues

For the nine months ended September 30, 2019 and 2018, the Company generated net revenues in the amount of $45.8 million and $42.4 million, respectively. For the three months ended September 30, 2019 and 2018, the Company generated net revenues in the amount of $13.1 million and $13.4 million, respectively. The 2019 increase between the nine-month periods was attributable to strong performance of our sales team, as well as the inclusion of revenues from our acquired subsidiary, HTS Image Processing, Inc. for the nine-month period ended September 30, 2019.

Cost of Goods Sold

For the nine months ended September 30, 2019 and 2018, the Company recognized a total of $34.1 million and $33.7 million, respectively, of cost of goods sold. For the nine months ended September 30, 2019 and 2018, cost of goods sold were 74.4% and 79.5% of net revenues, respectively. For the three months ended September 30, 2019 and 2018, the Company recognized a total of $9.6 million and $10.7 million, respectively, of cost of goods sold. For the three months ended September 30, 2019 and 2018, cost of goods sold were 73.3% and 79.9% of net revenues, respectively. Variation from prior years is difficult in an ever increasing competitive industry. Due to this, the Company is continually reevaluating its current product mix and supply channels to improve margins in 2019.

5

Operating expenses

Total operating expense for the nine months ended September 30, 2019 and 2018 recognized was $12.6 million and $10.6 million, respectively, representing an 18.1% increase. The increase is attributable to a corresponding increase in revenues as well as the inclusion of nine months of operating expenses from our acquired subsidiary, HTS Image Processing, Inc. Total operating expense for the three months ended September 30, 2019 and 2018 recognized was $4.2 million and $3.1 million, respectively, representing an increase of 37.1%.

General and Administrative – General and administrative expenses for the nine months ended September 30, 2019 and 2018 totaled $1.9 million and $1.7 million, respectively, representing a 12.7% increase. General and administrative expenses for the three months ended September 30, 2019 and 2018 totaled $727 thousand and $687 thousand, respectively, representing a 6.0% increase. The increase in the first nine months of 2019 is attributed to the inclusion of nine months of general and administrative expenses for HTS.

Salary and benefits – Salary and employee benefits for the nine months ended September 30, 2019 totaled $7.8 million, including $1.1 million from non-cash stock-based compensation, as compared to $6.4 million including $1.1 million from non-cash stock based compensation for the nine months ended September 30, 2018. Excluding stock-based compensation, salaries increased by $1.3 million in the first nine months of 2019 compared to the first nine months of 2018, which increase is primarily attributed to the addition of HTS salaries. Salary and employee benefits for the three months ended September 30, 2019 totaled $2.7 million, including $670 thousand from non-cash stock-based compensation, as compared to $1.6 million including no non-cash stock based compensation for the three months ended September 30, 2018. Excluding stock-based compensation, salaries increased by $481 thousand in the three months ended September 30, 2019 compared to the three months ended September 30, 2018, which increase is primarily attributed to the addition of HTS salaries.

Professional Fees – Professional fees for the nine months ended September 30, 2019 were $1.2 million as compared to $1.2 million for the nine months ended September 30, 2018, representing no change. Professional fees for the three months ended September 30, 2019 were $268 thousand as compared to $363 thousand for the three months ended September 30, 2018. The decrease is attributable to cost cutting measures.

Other income and expenses

Interest Expense - Interest expense for the nine months ended September 30, 2019 totaled $1.8 million, as compared to $963 thousand for the nine months ended September 30, 2018. Interest expense for the three months ended September 30, 2019 totaled $618 thousand, as compared to $303 thousand for the three months ended September 30, 2018. The increase is attributable to the addition of interest expense incurred by HTS as well as interest incurred in connection with the September 2018 amendment to the Scansource Note payable agreement in addition to interest expense incurred in connection with vendor interest agreements.

Net loss from continuing operations

The Company realized a net loss from continuing operations of $2.6 million for the nine months ended September 30, 2019, compared to a net loss of $4.3 million for the nine months ended September 30, 2018, a decrease of $1.7 million. The Company realized a net loss from continuing operations of $1.4 million for the three months ended September 30, 2019, compared to a net loss of $932 thousand for the three months ended September 30, 2018, an increase of $511 thousand. The decrease in net loss between the nine-month periods is mainly attributable to the Company’s improvement of its gross margin percentage as well as the addition of high margin sales activities of HTS. The increase in net loss between the three-month periods is primarily attributable to larger than usual amounts of non-recurring stock based compensation in the three months ended September 30, 2019.

6

Liquidity and capital resources

As of September 30, 2019, the Company had cash in the amount of $2.5 million of which $533 thousand is on deposit and restricted as collateral for a letter of credit and a corporate purchasing card, and a working capital deficit of $17.2 million, compared to cash in the amount of $910 thousand, of which $532 thousand was restricted, and a working capital deficit of $20.5 million as at December 31, 2018. In addition, the Company had a stockholder’s equity of $5.0 million at September 30, 2019 and $2.3 million as of December 31, 2018.

The Company’s accumulated deficit was $42.2 million and $39.8 million at September 30, 2019 and December 31, 2018, respectively.

The Company’s operations resulted in net cash provided of $4.9 million during the nine months ended September 30, 2019, compared to net cash provided of $263 thousand during the nine months ended September 30, 2018, an increase of $4.7 million. The changes in the non-cash working capital accounts are primarily attributable to a decrease in accounts receivable of $1.4 million during the nine months ended September 30, 2019, and an increase of $4.4 million in accounts payable during the nine months ended September 30, 2019.

Net cash used in investing activities was $270 thousand for the nine months ended September 30, 2019, compared to net cash provided of $29 thousand for the nine months ended September 30, 2018, a decrease of $299 thousand, primarily attributable to a large decrease in restricted cash during the nine months ended September 30, 2018.

The Company’s financing activities used net cash of $3.1 million during the nine months ended September 30, 2019, compared to net cash used of $29 thousand during the nine months ended September 30, 2018. For the nine months ended September 30, 2019, the Company paid down the Line of Credit with Action Capital by approximately $4.0 million.

Inflation

The Company’s results of operations have not been affected by inflation and management does not expect inflation to have a material impact on its operations in the future.

Off- Balance Sheet Arrangements

The Company currently does not have any off-balance sheet arrangements. 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e)) as of September 30, 2019, the end of the period covered by this Quarterly Report on Form 10-Q.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer, (Principal Financial and Accounting Officer) concluded that, as of September 30, 2019, our disclosure controls and procedures were ineffective as of the end of the period covered to ensure that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. This was due to the following material weaknesses which are indicative of many small companies with limited staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer, and Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosure.

During 2018, we identified material weaknesses in our internal control over financial reporting, which were disclosed in our annual report on Form 10-K filed with the SEC on June 5, 2019.

7

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter, (i.e., the three months ended September 30, 2019), that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Our subsidiary, HTS (USA), Inc., is currently in litigation with Sagy Amit, a former employee, who claims that he is owed wages and commissions. The case is pending in the Superior Court of California, County of San Diego and discovery has commenced. The Company intends to vigorously contest the action.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission this Form 10-Q, including exhibits. You may read and copy all or any portion of the registration statement or any reports, statements or other information in the files at SEC’s Public Reference Room located at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.

You can request copies of these documents upon payment of a duplicating fee by writing to the Commission. You may call the Commission at 1-800-SEC-0330 for further information on the operation of its public reference room. Our filings, including the registration statement, will also be available to you on the website maintained by the Commission at http://www.sec.gov.

We intend to furnish our stockholders with annual reports which will be filed electronically with the SEC containing consolidated financial statements audited by our independent auditors, and to make available to our stockholders quarterly reports for the first three quarters of each year containing unaudited interim consolidated financial statements.

Quest’s website is located at http://www.QuestSolution.com. The Company’s website and the information to be contained on that site, or connected to that site, is not part of or incorporated by reference into this filing.

ITEM 6. EXHIBITS

(a)	Exhibits.
31.1	Certification of our Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of our Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of our Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
32.2	Certification of our Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

8

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.

Date: November 8, 2019

QUEST SOLUTION, INC.
By:	/s/ Shai Lustgarten
	Shai Lustgarten
	President and Chief Executive Officer

9

EXHIBIT INDEX

31.1	Certification of our Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of our Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of our Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
32.2	Certification of our Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

10

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

I, Shai Lustgarten, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2019 of Quest Solution, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2019	/s/ Shai Lustgarten
	Shai Lustgarten,
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

I, Neev Nissenson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2019 of Quest Solution, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2019	/s/ Neev Nissenson
	Neev Nissenson
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(b) UNDER

THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 1350 OF

CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

Each of the undersigned, Shai Lustgarten and Neev Nissenson, certifies pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code, that (1) this quarterly report on Form 10-Q for the quarter ended September 30, 2019 of Quest Solution, Inc. (the “Company”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and (2) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2019

/s/ Shai Lustgarten

Shai Lustgarten,

Chief Executive Officer

/s/ Neev Nissenson

Neev Nissenson

Chief Financial Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Quest Solution, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Shai Lustgarten, Interim Chief Financial Officer of the Company, does certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2019	/s/ Neev Nissenson
	Neev Nissenson
	Chief Financial Officer

XML

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Pronouncement in Fiscal 2019

In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842), Codification Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to provide additional guidance for the adoption of Topic 842. ASU 2018-10 clarifies certain provisions and correct unintended applications of the guidance such as the application of implicit rate, lessee reassessment of lease classification, and certain transition adjustments that should be recognized to earnings rather than to stockholders’ equity. ASU 2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic 842. In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases with terms greater than 12 months. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new lease standards”) are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted the standard on January 1, 2019 by applying the new lease requirements utilizing the Effective Date Method for all leases with terms greater than 12 months. We elected the package of practical expedients permitted under the transition guidance within the new standard, which included carrying forward historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The adoption of this standard resulted in the recognition of right-of-use assets of $238 thousand and additional lease liabilities of $238 thousand as of January 1, 2019. The adoption of the standard did not have a material impact on our operating results or cash flows.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The amendments in ASU 2018-09 affect a wide variety of Topics in the FASB Codification and apply to all reporting entities within the scope of the affected accounting guidance. The Company has evaluated ASU 2018-09 in its entirety and determined that the amendments related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, are the only provisions that currently apply to the Company. The amendments in ASU 2018-09 related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, clarify that an entity should recognize excess tax benefits related to stock compensation transactions in the period in which the amount of the deduction is determined. The amendments in ASU 2018-09 related to Topic 718-740 are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard did not have a current impact on the Company’s Condensed Consolidated Financial Statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date. The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard did not have a current impact on the Company’s Condensed Consolidated Financial Statements for the period ended September 30, 2019.

The Company has evaluated other recent pronouncements and believes that none of them will have a material effect on the Company’s financial statements.

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

Intangible assets are stated at cost, net of accumulated amortization. The assets are being amortized on the straight-line method over useful lives ranging from 3 to 11 years. Amortization expense for the nine months ended September 30, 2019 and September 30, 2018 was $1.5 million and $1.3 million, respectively.

Net Loss Per Common Share

NET LOSS PER COMMON SHARE

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share.” Basic net loss per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS for the nine months ended September 30, 2019 and 2018 were 77,312,948 and 42,592,783, respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are antidilutive.

Dilutive securities are excluded from the computation of diluted net loss per share because such securities have anti-dilutive impact due to losses reported.

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported, as of September 30:

	2019		2018
Options to purchase common stock		12,581,000		13,781,000
Convertible preferred stock		4,828,530		4,828,530
Warrants to purchase common stock		4,500,000		4,700,000
Common stock subject to repurchase		-		(507,079	)
Potential shares excluded from diluted net loss per share		21,909,530		22,802,451

Foreign Currency Translation

FOREIGN CURRENCY TRANSLATION

The consolidated financial statements of the Company are presented in U.S. dollars. The functional currency for the Company and each of its subsidiaries (“Quest US entities”), except HTS Ltd., is U.S. dollars. The functional currency of HTS Ltd. is the Israeli Shekel. Transactions in currencies other than the functional currency are recorded using the appropriate exchange rate at the time of the transaction. For Quest US entities, continuing operations are conducted in U.S. dollars. The Company owns a non-operating subsidiary in Canada, from which it has no activity since October 1, 2016. For HTS Ltd., continuing operations are conducted in Israeli Shekel.

Reclassifications and Adjustments

Reclassifications and adjustments — Certain prior year amounts in the condensed consolidated interim financial statements have been reclassified to conform with current year presentation. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss.

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Notes Payable

Notes payable at September 30, 2019 and December 31, 2018, consists of the following:

(In thousands)	September 30, 2019			December 31, 2018
Supplier Note Payable	$	6,540		$	8,340
All Other		145			613
Total		6,685			8,953
Less current portion		(6,548	)		(8,823	)
Long Term Notes Payable	$	137		$	130

Schedule of Future Maturities of Note Payable

Future maturities of notes payable as of September 30, 2019 are as follows;

2019	$	6,543
2020		4
2021		138
2022		-
2023		-
Total	$	6,685

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of Future Minimum Lease Commitments

Future minimum lease commitments at September 30, 2019 were as follows:

Year ending December 31,	Operating Leases
(In thousands)
2019 (excluding the nine months ended September 30, 2019)	$	36
2020		82
2021		36
2022 and thereafter		54
Total lease payments		208
Less imputed interest		(44	)
Total	$	164

Schedule of Supplemental Cash Flow Information

Supplemental cash flow information related to leases was as follows:

(In thousands)	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - operating leases	$	92
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	17

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Stockholders' Equity - Schedule of Stock Options Granted (Details) - $ / shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Equity [Abstract]
Number of stock options balance, beginning of period	20,121,000	16,317,000
Number of stock options, granted	2,550,000
Number of stock options, expired		36,000
Number of stock options, cancelled, forfeited
Number of stock options, exercised
Number of stock options balance, end of period	22,671,000	16,281,000
Number of stock options, exercisable	17,869,750	13,689,416
Weighted average exercise price balance, beginning of period	$ 0.19	$ 0.17
Weighted average exercise price, stock options granted	0.25
Weighted average exercise price, stock options expired		0.33
Weighted average exercise price, stock options cancelled, forfeited
Weighted average exercise price, stock options exercised
Weighted average exercise price balance, end of period	0.20	0.17
Weighted average exercise price, exercisable	$ 0.19	$ 0.18

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Stockholders' Equity - Schedule of Allocation Proceeds of Shares and Warrants (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Pro rata fair value of common stock	$ 3,937,000	$ 9,000
Common Stock and Warrants [Member]
Estimated fair value of warrants	6,278,452
Value of common stock	6,666,667
Total estimated fair value	$ 12,945,119
Estimated fair value of warrants, percentage	48.50%
Value of common stock, percentage	51.50%
Total estimated fair value, percentage	100.00%
Pro rata fair value of warrants	$ 2,425,027
Pro rata fair value of common stock	2,574,973
Pro rata, total proceeds	$ 5,000,000
Pro rata fair value of warrants, percentage	48.50%
Pro rata fair value of common stock, percentage	51.50%
Pro rata, total proceeds	100.00%

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Notes Payable, Related Parties - Schedule of Notes Payable, Related Parties (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Total notes payable, related parties	$ 2,499	$ 3,803
Less current portion	1,241	1,891
Long-term portion	1,258	1,912
Note Payable - Debt Restructure Marin [Member]
Total notes payable, related parties	940	1,160
Note Payable - Debt Restructure Thomet [Member]
Total notes payable, related parties	600	713
Note Payable - Debt Restructure Zicman [Member]
Total notes payable, related parties	144	171
Convertible Note Payable - Shareholders [Member]
Total notes payable, related parties	150	700
Note Payable - RWCC [Member]
Total notes payable, related parties	$ 665	$ 1,059

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Stockholders' Equity - Schedule of Outstanding Stock Options (Details) - Stock Options [Member]	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Range of Exercise Prices, Lower Range Limit	$ 0.075
Range of Exercise Prices, Upper Range Limit	$ 0.50
Weighted Average residual life span (in years)	3 years 5 months 20 days
Outstanding Stock Options | shares	22,671,000
Weighted Average Exercise Price	$ 0.20
Exercisable Stock Options | shares	17,869,750
Weighted Average Exercise Price	$ 0.19
Exercise Price Range 1 [Member]
Range of Exercise Prices, Lower Range Limit	0.075
Range of Exercise Prices, Upper Range Limit	$ 0.09
Weighted Average residual life span (in years)	2 years 4 months 20 days
Outstanding Stock Options | shares	2,281,000
Weighted Average Exercise Price	$ 0.09
Exercisable Stock Options | shares	2,281,000
Weighted Average Exercise Price	$ 0.09
Exercise Price Range 2 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.11
Weighted Average residual life span (in years)	1 year 10 months 3 days
Outstanding Stock Options | shares	3,500,000
Weighted Average Exercise Price	$ 0.11
Exercisable Stock Options | shares	3,500,000
Weighted Average Exercise Price	$ 0.11
Exercise Price Range 3 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.12
Weighted Average residual life span (in years)	3 years 5 months 5 days
Outstanding Stock Options | shares	6,800,000
Weighted Average Exercise Price	$ 0.12
Exercisable Stock Options | shares	5,950,000
Weighted Average Exercise Price	$ 0.12
Exercise Price Range 4 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.22
Weighted Average residual life span (in years)	4 years 1 month 2 days
Outstanding Stock Options | shares	2,165,000
Weighted Average Exercise Price	$ 0.22
Exercisable Stock Options | shares	1,082,500
Weighted Average Exercise Price	$ 0.22
Exercise Price Range 5 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.25
Weighted Average residual life span (in years)	3 years 10 months 3 days
Outstanding Stock Options | shares	2,550,000
Weighted Average Exercise Price	$ 0.25
Exercisable Stock Options | shares	318,750
Weighted Average Exercise Price	$ 0.25
Exercise Price Range 6 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.27
Weighted Average residual life span (in years)	4 years 2 months 1 day
Outstanding Stock Options | shares	2,875,000
Weighted Average Exercise Price	$ 0.27
Exercisable Stock Options | shares	2,237,500
Weighted Average Exercise Price	$ 0.27
Exercise Price Range 7 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.50
Weighted Average residual life span (in years)	5 years 1 month 24 days
Outstanding Stock Options | shares	2,500,000
Weighted Average Exercise Price	$ 0.50
Exercisable Stock Options | shares	2,500,000
Weighted Average Exercise Price	$ 0.50

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Leases - Schedule of Future Minimum Lease Commitments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Leases [Abstract]
2019 (excluding the nine months ended September 30, 2019)	$ 36
2020	82
2021	36
2022 and thereafter	54
Total lease payments	208
Less imputed interest	(44)
Total	$ 164

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Going Concern

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of September 30, 2019, the Company had a working capital deficit of $17.2 million and an accumulated deficit of $42.2 million. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis. Management’s plan to eliminate the going concern situation includes, but is not limited to, the continuation of improving cash flow, maintaining moderate cost reductions (subsequent to aggressive cost reduction actions already taken in 2018 and in the first nine months of 2019), the creation of additional sales and profits across its product lines, and the obtaining of sufficient financing to restructure current debt in a manner more in line with the Company’s improving cash flow and cost reduction successes.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues
Total Revenues	$ 13,097	$ 13,444	$ 45,843	$ 42,369
Cost of goods sold
Cost of goods sold	9,601	10,745	34,123	33,688
Gross profit	3,496	2,699	11,720	8,681
Operating expenses
General and administrative	727	687	1,941	1,724
Salary and employee benefits	2,700	1,597	7,763	6,425
Depreciation and amortization	536	439	1,620	1,312
Professional fees	268	363	1,226	1,169
Total operating expenses	4,231	3,086	12,550	10,630
Loss from operations	(735)	(387)	(830)	(1,949)
Other income (expenses):
Interest expense	(618)	(303)	(1,769)	(963)
Other (expenses) income	(90)	(226)	(9)	(1,381)
Total other expenses	(708)	(529)	(1,778)	(2,344)
Net Loss Before Income Taxes	(1,443)	(916)	(2,608)	(4,292)
Provision for Income Taxes
Current		(16)		(45)
Total Provision for Income Taxes		(16)		(45)
Net Loss attributable to Quest Solution Inc.	(1,443)	(932)	(2,608)	(4,336)
Less: Preferred stock - Series C dividend	(48)	(48)	(141)	(142)
Net loss attributable to the common stockholders	$ (1,491)	$ (980)	$ (2,749)	$ (4,479)
Net (loss) per share - basic	$ (0.02)	$ (0.02)	$ (0.04)	$ (0.11)
Weighted average number of common shares outstanding - basic	77,583,183	48,709,773	77,312,948	42,592,783

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Notes Payable - Schedule of Future Maturities of Note Payable (Details) - Notes Payable [Member] $ in Thousands	Sep. 30, 2019 USD ($)
2019	$ 6,543
2020	4
2021	138
2022
2023
Total	$ 6,685

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Other Liabilities - Schedule of Other Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other Liabilities Disclosure [Abstract]
Lease liability	$ 164
Other vendor payable	801
Dividend payable	297	478
Others	312	397
Total other liabilities	1,574	875
Less Current Portion	(1,168)	(265)
Total long term other liabilities	$ 406	$ 610

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Going Concern (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Working capital deficit	$ (17,200)
Accumulated deficit	$ (42,179)	$ (39,753)

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Credit Facilities and Line of Credit

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Credit Facilities and Line of Credit

NOTE 6 – CREDIT FACILITIES AND LINE OF CREDIT

On July 1, 2016, the Company entered into a Factoring and Security Agreement (the “FASA”) with Action Capital Corporation (“Action”) to establish a sale of accounts facility, whereby the Company may obtain short-term financing by selling and assigning to Action acceptable accounts receivable. Pursuant to the FASA, the outstanding principal amount of advances made by Action to the Company at any time shall not exceed $5,000,000. Action will reserve and withhold an amount in a reserve account equal to 5% of the face amount of each account purchased under the FASA. The balance outstanding under the Action credit line at September 30, 2019 and December 31, 2018, in thousands, was $517 and $4,534 respectively, which includes accrued interest.

The per annum interest rate with respect to the daily average balance of unpaid advances outstanding under the FASA (computed on a monthly basis) will be equal to the “Prime Rate” of Wells Fargo Bank N.A. plus 2%, plus a monthly fee equal to 0.75% of such average outstanding balance. The Company shall also pay all other costs incurred by Action under the FASA, including all bank fees. The FASA will continue in full force and effect unless terminated by either party upon 30 days’ prior written notice. Performance of the Company’s obligations under the FASA is secured by a security interest in certain collateral of the Company. The FASA includes customary representations and warranties and default provisions for transactions of this type.

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Salary and Employee Benefits

9 Months Ended

Sep. 30, 2019

Retirement Benefits [Abstract]

Salary and Employee Benefits

NOTE 10 – SALARY AND EMPLOYEE BENEFITS

Salary and employee benefits for the nine months ended September 30, 2019 and September 30, 2018 consists of the following:

(In thousands)	2019		2018
Stock compensation		1,093		1,125
Salaries (except R&D)		3,273		2,402
R&D salaries		714		-
Bonuses		95		429
Commissions		2,588		2,469
Total		7,763		6,425

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 06, 2019
Document and Entity Information
Entity Registrant Name	Quest Solution, Inc.
Entity Central Index Key	0000278165
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Reporting Status Current	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		79,196,228
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Series C Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Shares Repurchased [Member]	Accumulated Deficit [Member]	Other Comprehensive Income (Loss) [Member]	Total
Beginning balance at Dec. 31, 2017	$ 5	$ 37	$ 34,495	$ (230)	$ (35,555)		$ (1,248)
Beginning balance, shares at Dec. 31, 2017	4,829,000	36,828,000
ASC 606					1,213		1,213
Board Issuances		$ 1	118				119
Board Issuances, shares		1,000,000
Dividend on Class C Shares					(143)		(143)
ESPP Stock Issuance			8				8
ESPP Stock Issuance, shares		67,000
Stock-based compensation - options warrants issuances			796				796
Stock Based Compensation		$ 2	207				209
Stock Based Compensation, shares		1,800,000
Debt Settlements		$ 9	2,703				2,712
Debt Settlements, shares		9,015,000
Net (loss) income					(4,336)		(4,336)
Ending balance at Sep. 30, 2018	$ 5	$ 49	38,327	(230)	(38,821)		(670)
Ending balance, shares at Sep. 30, 2018	4,829,000	48,710,000
Beginning balance at Jun. 30, 2018	$ 5	$ 48	38,279	(230)	(37,841)		261
Beginning balance, shares at Jun. 30, 2018	4,829,000	48,433,000
Dividend on Class C Shares					(48)		(48)
ESPP Stock Issuance			2				2
ESPP Stock Issuance, shares		12,000
Stock-based compensation - options warrants issuances			46				46
Stock Based Compensation
Debt Settlements		1					1
Debt Settlements, shares		265,000
Accumulated other Comprehensive Income (Loss)
Net (loss) income					(932)		(932)
Ending balance at Sep. 30, 2018	$ 5	$ 49	38,327	(230)	(38,821)		(670)
Ending balance, shares at Sep. 30, 2018	4,829,000	48,710,000
Beginning balance at Dec. 31, 2018	$ 5	$ 72	42,198	(230)	(39,753)	1	2,293
Beginning balance, shares at Dec. 31, 2018	4,829,000	71,932,000
Board Issuances							$ 1
Board Issuances, shares							4,012
Dividend on Class C Shares					182		$ 182
ESPP Stock Issuance			1				1
ESPP Stock Issuance, shares		5,000
Stock-based compensation - options warrants issuances		$ 1	1,092				1,093
Stock-based compensation - options warrants issuances, shares		1,550,000
Stock redemption		$ (1)	(229)	230
Stock redemption, shares		(508,000)
Stock and warrant issuances, net of issuance costs		$ 17	4,042				4,059
Stock and warrant issuances, net of issuance costs, shares		16,667,000
Purchase price adjustment - shares to be received		$ (11)	11
Purchase price adjustment - shares to be received, shares		(11,085,000)
Accumulated other Comprehensive Income (Loss)						12	12
Conversion of debt		$ 1	149				150
Conversion of debt, shares		635,000
Net (loss) income					(2,608)		(2,608)
Ending balance at Sep. 30, 2019	$ 5	$ 79	47,264		(42,179)	13	5,182
Ending balance, shares at Sep. 30, 2019	4,829,000	79,196,000
Beginning balance at Jun. 30, 2019	$ 5	$ 77	46,446		(41,012)	1	5,517
Beginning balance, shares at Jun. 30, 2019	4,829,000	77,009,000
Dividend on Class C Shares					276		276
ESPP Stock Issuance
ESPP Stock Issuance, shares		2,000
Stock-based compensation - options warrants issuances		$ 1	669				670
Stock-based compensation - options warrants issuances, shares		1,550,000
Foreign currency translation						12	12
Conversion of debt		$ 1	149				150
Conversion of debt, shares		635,000
Net (loss) income					(1,443)		(1,443)
Ending balance at Sep. 30, 2019	$ 5	$ 79	$ 47,264		$ (42,179)	$ 13	$ 5,182
Ending balance, shares at Sep. 30, 2019	4,829,000	79,196,000

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Stockholders' Equity - Schedule of Stock Options, Expiry Date and Exercise Prices (Details) - $ / shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Stock option exercise prices	$ 0.20	$ 0.17	$ 0.19	$ 0.17
Stock option outstanding	22,671,000	16,281,000	20,121,000	16,317,000
August 2, 2021 [Member]
Stock option expiration date	Aug. 02, 2021	Aug. 02, 2021
Stock option exercise prices	$ 0.11	$ 0.11
Stock option outstanding	3,500,000	3,500,000
February 17, 2022 [Member]
Stock option expiration date	Feb. 17, 2022	Feb. 17, 2022
Stock option exercise prices	$ 0.075	$ 0.075
Stock option outstanding	760,333	760,333
February 17, 2022 [Member]
Stock option expiration date	Feb. 17, 2022	Feb. 17, 2022
Stock option exercise prices	$ 0.09	$ 0.09
Stock option outstanding	1,520,667	1,520,667
June 30, 2022 [Member]
Stock option expiration date	Jun. 30, 2022	Jun. 30, 2022
Stock option exercise prices	$ 0.09	$ 0.09
Stock option outstanding		700,000
March 5, 2023 [Member]
Stock option expiration date	Mar. 05, 2023	Mar. 05, 2023
Stock option exercise prices	$ 0.12	$ 0.12
Stock option outstanding	6,800,000	6,800,000
July 31, 2023 [Member]
Stock option expiration date	Jul. 31, 2023	Jul. 31, 2023
Stock option exercise prices	$ 0.25	$ 0.25
Stock option outstanding	2,550,000
October 31, 2023 [Member]
Stock option expiration date	Oct. 31, 2023	Oct. 31, 2023
Stock option exercise prices	$ 0.22	$ 0.22
Stock option outstanding	2,165,000
November 30, 2023 [Member]
Stock option expiration date	Nov. 30, 2023	Nov. 30, 2023
Stock option exercise prices	$ 0.27	$ 0.27
Stock option outstanding	2,875,000
November 20, 2024 [Member]
Stock option expiration date	Nov. 20, 2024	Nov. 20, 2024
Stock option exercise prices	$ 0.50	$ 0.50
Stock option outstanding	2,500,000	2,500,000
October 2, 2027 [Member]
Stock option expiration date	Oct. 02, 2027	Oct. 02, 2027
Stock option exercise prices	$ 0.145	$ 0.145
Stock option outstanding		500,000

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Leases - Schedule of Supplemental Cash Flow Information (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Leases [Abstract]
Cash flows from operating activities - operating leases	$ 92
Right-of-use assets obtained in exchange for lease obligations: Operating leases	$ 17

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Concentrations

9 Months Ended

Sep. 30, 2019

Risks and Uncertainties [Abstract]

Concentrations

NOTE 3 – CONCENTRATIONS

For the nine months ended September 30, 2019 and the year ended December 31, 2018, one customer accounted for 15.3% and 17.0% of the Company’s revenues, respectively. At September 30, 2019 and December 31, 2018, one customer accounted for 11.1% and 11.6% of the Company’s accounts receivable balance, respectively.

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Business Acquisition - Schedule of Proforma Results of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Business Combinations [Abstract]
Pro forma sales	$ 15,114,596	$ 47,785,551
Pro forma net income	$ (1,459,261)	$ (4,955,288)
Pro forma basic and diluted earnings per share	$ (0.03)	$ (0.12)

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Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Anti Dilutive Securities Excludes from Computation (Details) - shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Potential shares excluded from diluted net loss per share	(21,909,530)	(22,802,451)
Options to Purchase Common Stock [Member]
Potential shares excluded from diluted net loss per share	(12,581,000)	(13,781,000)
Convertible Preferred Stock [Member]
Potential shares excluded from diluted net loss per share	(4,828,530)	(4,828,530)
Warrants to Purchase Common Stock [Member]
Potential shares excluded from diluted net loss per share	(4,500,000)	(4,700,000)
Common Stock Subject to Repurchase [Member]
Potential shares excluded from diluted net loss per share		(507,079)

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Notes Payable - Schedule of Notes Payable (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Total notes payable	$ 6,685	$ 8,953
Less: current portion	(6,548)	(8,823)
Long Term Notes Payable	137	130
Supplier Note Payable [Member]
Total notes payable	6,540	8,340
All Other [Member]
Total notes payable	$ 145	$ 613

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Notes Payable

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Notes Payable

NOTE 7 – NOTES PAYABLE

Notes payable at September 30, 2019 and December 31, 2018, consists of the following:

(In thousands)	September 30, 2019			December 31, 2018
Supplier Note Payable	$	6,540		$	8,340
All Other		145			613
Total		6,685			8,953
Less current portion		(6,548	)		(8,823	)
Long Term Notes Payable	$	137		$	130

Future maturities of notes payable as of September 30, 2019 are as follows;

2019	$	6,543
2020		4
2021		138
2022		-
2023		-
Total	$	6,685

In connection with the acquisition of Bar Code Specialties, Inc. (“BCS”), a California corporation, the Company assumed a related party note payable to the former CTO of the RFID division of BCS. The note is payable in equal monthly installments of $5 thousand beginning October 31, 2014 and ended October 2018. The loan bears interest at 1.84% and is unsecured and subordinated to the Company’s bank debt. The balance on this loan at September 30, 2019 and December 31, 2018 was $130 thousand, all of which was classified as long-term. In July 2016, the holder of the note signed a subordination agreement with the Supplier of the Secured Promissory Note and Action Capital, whereby the noteholder agrees to subordinate its right to payment of capital and interest until the Supplier with the Secured Promissory Note is reimbursed in full, therefore, the note is classified as long-term.

On July 18, 2016, the Company and the Supplier entered into a certain Secured Promissory Note, with an effective date of July 1, 2016, in the principal amount of $12.5 million. The USD Note accrues interest at 12% per annum and is payable in six consecutive monthly installments of principal and accrued interest in a minimum principal amount of $250 thousand each, with any remaining principal and accrued interest due and payable on December 31, 2016.

● On September 7, 2018, the Company entered into a Sixth Amendment to the secured Promissory Note (the “Sixth Amendment”) extending the maturity date to January 31, 2019. The Sixth Amendment also increases the principal amount to $8.7 million, an increase of $6.8 million, by rolling the Company’s then existing and outstanding accounts payable into the note by the previously mentioned amount of increase. The Company will continue to make monthly payments in the amount of $300 thousand for the first three monthly payments, and also in the amount of $500 thousand for the last two monthly payments prior to the note’s maturity.

● On April 30, 2019, the Company entered into a Seventh Amendment to the secured Promissory Note (the “Seventh Amendment”) extending the maturity date to July 31, 2019. The Seventh Amendment also provides that the Company will continue to make monthly installments of principal and accrued interest in a minimum principal amount of $350 thousand each. The Company has made partial payments towards the required monthly installments under the terms of the Seventh Amendment. As has been the case with each previous amendment, the Company is in continual negotiations with the holder of the Secured Promissory Note to extend the maturity date and establish a new schedule of payments.

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Litigation

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Litigation

NOTE 11 – LITIGATION

Our subsidiary, HTS (USA), Inc., is currently in litigation with Sagy Amit, a former employee, who claims that he is owed wages and commissions. The case is pending in the Superior Court of California, County of San Diego and discovery has commenced. The Company intends to vigorously contest the action. Management believes the outcome of the case will not have a material impact on the Company’s financial statements.

The company is not a party to any other pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

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Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jan. 02, 2019	Dec. 31, 2018	Dec. 31, 2016
Right-of-use assets	$ 168		$ 168
Lease liabilities	$ 164		164
Amortization expense			$ 1,500	$ 1,300
Weighted average number of common shares outstanding	77,583,183	48,709,773	77,312,948	42,592,783
Minimum [Member]
Finite-lived intangible asset, useful life			3 years
Maximum [Member]
Finite-lived intangible asset, useful life			11 years
Accounting Standards Update 2016-02 Leases (Topic 842) [Member]
Right-of-use assets					$ 238
Lease liabilities					$ 238
Bar Code Specialties Inc. [Member]
Percentage of shares acquired							100.00%

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Basis of Presentation and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of Anti Dilutive Securities Excludes from Computation

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported, as of September 30:

	2019		2018
Options to purchase common stock		12,581,000		13,781,000
Convertible preferred stock		4,828,530		4,828,530
Warrants to purchase common stock		4,500,000		4,700,000
Common stock subject to repurchase		-		(507,079	)
Potential shares excluded from diluted net loss per share		21,909,530		22,802,451

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Notes Payable, Related Parties (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Notes Payable, Related Parties

Notes and loans payable, related parties consisted of the following:

(In thousands)	September 30, 2019		December 31, 2018
Note payable – debt restructure Marin	$	940	$	1,160
Note payable – debt restructure Thomet		600		713
Note payable – debt restructure Zicman		144		171
Convertible note payable – shareholders		150		700
Note payable – RWCC		665		1,059
Total notes payable, related parties		2,499		3,803
Less current portion		1,241		1,891
Long-term portion	$	1,258	$	1,912

Schedule of Future Maturities of Notes Payable, Related Parties

The repayment of the notes payable, related parties at September 30, 2019 is as follows:

(In thousands)
2019	$	504
2020		843
2021		426
2022		426
Thereafter		300
Total	$	2,499

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Stockholders' Equity - Schedule of Offering Proceeds (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Net cash received from private placement	$ 3,937	$ 9
Private Placement [Member]
Total proceeds from issuance of Common Stock and Warrants	5,000
Conversion of notes payable - related parties	(400)
Placement Agent commission and fees	(560)
Legal and other fees	(103)
Net cash received from private placement	3,937
Accrued private placement consulting fees	200
Placement fees prepaid in earlier period	(78)
Equity issued net of non-cash placement fees	$ 4,059

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Notes Payable, Related Parties (Details Narrative) $ / shares in Units, $ in Thousands							9 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($) $ / shares shares	May 29, 2019 USD ($) shares	Apr. 09, 2019 shares	Oct. 05, 2018 USD ($) ft² $ / shares shares	Feb. 28, 2018 USD ($) shares	Feb. 28, 2018 USD ($)	Sep. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2018 USD ($) shares	Dec. 31, 2018 USD ($)	Dec. 31, 2014 USD ($)
Notes payable related party, balance	$ 2,499						$ 2,499		$ 3,803
Number of shares issued for common stock | shares			16,666,667				4,012
Number of common stock value issued							$ 1	$ 119
Debt instrument conversion of shares amount							$ 550
Common Stock [Member]
Number of shares issued for common stock | shares								1,000,000
Number of common stock value issued								$ 1
Series C Preferred Stock [Member]
Number of common stock value issued
Campbeltown Consulting, Inc [Member]
Debt owed amount				$ 150
Number of common stock value issued	$ 317,796
Debt convertible price per share | $ / shares	$ 0.236						$ 0.236
Debt instrument conversion of shares amount	$ 75
Walefar Investments, Ltd [Member]
Debt owed amount				$ 150
Number of common stock value issued	$ 317,796
Debt convertible price per share | $ / shares	$ 0.236						0.236
Debt instrument conversion of shares amount	$ 75
Convertible Promissory Note [Member] | Campbeltown Consulting, Inc [Member]
Number of shares issued for common stock | shares	365,592
Debt convertible price per share | $ / shares	$ 0.236						0.236
Debt instrument conversion of shares amount	$ 75
Convertible Promissory Note [Member] | Walefar Investments, Ltd [Member]
Number of shares issued for common stock | shares	365,592
Debt convertible price per share | $ / shares	$ 0.236						$ 0.236
Debt instrument conversion of shares amount	$ 75
Note Payable - RWCC [Member]
Debt monthly payment							$ 85
Debt due year							April 2020
Notes payable related party, balance	$ 665						$ 665		$ 1,059
Debt instruments interest rate	5.00%						5.00%
Shai Lustgarten [Member] | Common Stock [Member]
Number of shares issued for common stock | shares				11,226,477
Carlos Jaime Nissenson [Member] | Common Stock [Member]
Number of shares issued for common stock | shares				11,226,477
Marin Settlement Agreement I [Member] | David Marin [Member]
Debt instrument face amount										$ 11,000
Debt owed amount										1,200
Forgiveness of debt										$ 9,500
Debt instrument description										Section 3.1 of the original note was amended to provide that the Company shall pay the Marins 60 monthly payments of $20 thousand each commencing the earlier of (i) October 26, 2018 and (ii) the date that the Company's obligation to Scansource, Inc. is satisfied and all amounts currently in default under the credit agreement with Scansource (currently approximately $6.0 Million) is reduced to $2.0 million.
Number of monthly installments										60 monthly payments
Debt monthly payment										$ 20
Debt due year									Due in 2023
Notes payable related party, balance	$ 940						$ 940
Marin Settlement Agreement I [Member] | David Marin [Member] | Scansource, Inc [Member]
Debt instrument face amount					$ 6,000	$ 6,000
Reduction in debt default amount					$ 2,000
Marin Settlement Agreement I [Member] | David Marin [Member] | Owed Amount [Member]
Debt owed amount										$ 10,700
Settlement Agreement [Member] | Kurt Thomet [Member]
Debt instrument description					(i) October 26, 2018 or (ii) the date when the Company's obligation under its promissory note with Scansource, Inc. currently in the amount of $21,800,000 is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million.
Number of monthly installments					60 monthly payments
Debt monthly payment					$ 13
Debt due year							Due in 2023
Notes payable related party, balance	600						$ 600
Aggregate indebtness					$ 5,400	5,400
Number of restricted common stock shares | shares					500,000
Date of agreement					Dec. 30, 2017
Settlement Agreement [Member] | Kurt Thomet [Member] | Series C Preferred Stock [Member]
Number of shares issued for common stock | shares					1,000,000
Settlement Agreement [Member] | Kurt Thomet [Member] | Scansource, Inc [Member]
Debt instrument face amount					$ 6,000	6,000
Reduction in debt default amount						2,000
Settlement Agreement [Member] | George Zicman [Member]
Debt instrument description					(i) October 26, 2018 or (ii) the date when the Company's obligation under its promissory note with Scansource, Inc. currently in the amount of $2,800,000 is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million.
Number of monthly installments					60 monthly payments
Debt monthly payment					$ 3
Aggregate indebtness					$ 1,300	1,300
Number of shares issued for common stock | shares					100,000
Date of agreement					Dec. 30, 2017
Settlement Agreement [Member] | George Zicman [Member] | Scansource, Inc [Member]
Debt instrument face amount					$ 6,000	$ 6,000
Reduction in debt default amount					$ 2,000
Notes payable related party, balance	$ 144						$ 144
Settlement Agreement [Member] | Goerge Zicman [Member] | Series C Preferred Stock [Member]
Number of shares issued for common stock | shares					600,000
Voting Agreement [Member] | Marins, Kurt Thomet And Goerge Zicman [Member]
Beneficiary percentage of common stock							10.00%
Purchase Agreement [Member] | Common Stock [Member]
Debt instrument description				The common stock for the 20 days' preceding the agreement (the "Per Share Value"), (ii) cash in the amount of $300,000, and (iii) a 12 month convertible promissory note with a principal amount of $700,000 and an interest rate of six percent (6%) per year.
Number of shares issued for common stock | shares				22,452,954
Number of common stock value issued				$ 5,300
Debt instrument, convertible, consecutive trading days | ft²				20
Cash amount				$ 300
Debt instruments interest rate				6.00%
Purchase Agreement [Member] | HTS Image Processing, Inc [Member]
Purchased percentage of capital stock				100.00%
Purchase Agreement [Member] | Convertible Promissory Note [Member]
Debt instrument face amount				$ 700
Debt convertible price per share | $ / shares				$ 0.236
HTS Purchase Agreement [Member]
Debt instrument face amount				$ 300
Number of acquisition shares reduced | shares		11,368,297
Number of shares issued for acquisition, shares | shares		22,452,954
Number of shares issued for acquisition reduced		$ 2,700
Number of shares issued for acquisition		5,300
Debt instrument conversion of shares amount		$ 400
HTS Purchase Agreement [Member] | Campbeltown Consulting, Inc [Member]
Number of shares in cancelation | shares		5,542,328
HTS Purchase Agreement [Member] | Walefar Investments, Ltd [Member]
Number of shares in cancelation | shares		5,542,329

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Stockholders' Equity - Schedule of Warrants Outstanding, Expiry Date and Exercise Prices (Details) - $ / shares	Sep. 30, 2019	Sep. 30, 2018
Warrant outstanding	23,333,334	4,700,000
June 26, 2020 [Member]
Warrant expiry Date	Jun. 26, 2020	Jun. 26, 2020
Warrant exercise Prices	$ 0.28	$ 0.28
Warrant outstanding	200,000	200,000
October 10, 2020 [Member]
Warrant expiry Date	Oct. 10, 2020	Oct. 10, 2020
Warrant exercise Prices	$ 0.60	$ 0.60
Warrant outstanding	300,000
December 30, 2020 [Member]
Warrant expiry Date	Dec. 30, 2020	Dec. 30, 2020
Warrant exercise Prices	$ 0.20	$ 0.20
Warrant outstanding	3,000,000	3,000,000
August 2, 2021 [Member]
Warrant expiry Date	Aug. 02, 2021	Aug. 02, 2021
Warrant exercise Prices	$ 0.11	$ 0.11
Warrant outstanding	1,500,000	1,500,000
October 10, 2021 [Member]
Warrant expiry Date	Oct. 10, 2021	Oct. 10, 2021
Warrant exercise Prices	$ 0.50	$ 0.50
Warrant outstanding	500,000
October 6, 2024 [Member]
Warrant expiry Date	Oct. 06, 2024	Oct. 06, 2024
Warrant exercise Prices	$ 0.35	$ 0.35
Warrant outstanding	17,833,334

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Accumulated depreciation of fixed assets	$ 2,470	$ 2,037
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	79,196,228	71,931,693
Common stock, shares outstanding	79,196,228	71,931,693
Common stock, shares to be received	11,084,657	11,084,657
Series A Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares designated	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series B Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares designated	1	1
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series C Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares designated	15,000,000	15,000,000
Preferred stock, shares issued	4,828,530	4,828,530
Preferred stock, shares outstanding	4,828,530	4,828,530
Trade Names [Member]
Accumulated amortization	$ 2,759	$ 2,585
Customer Relationships [Member]
Accumulated amortization	5,827	5,076
Other Intangible Assets [Member]
Accumulated amortization	$ 109	$ 33

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Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The interim consolidated financial statements of Quest Solution, Inc. include the combined accounts of Quest Marketing, Inc., an Oregon Corporation, Quest Exchange Ltd., a Canadian based holding company, HTS Image Processing, Inc. (“HTS”), a Delaware corporation, HTS (USA), Inc., a Delaware corporation and HTS Image Ltd. (“HTS Ltd.”) (f/k/a Teamtronics Ltd.), an Israeli corporation.

On December 31, 2016, the Company acquired one hundred percent (100%) of the shares of Bar Code Specialties, Inc. (“BCS”) and merged BCS into Quest Marketing to form one US legal entity as part of its streamlining efforts.

The interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2018 and notes thereto included in the Company’s Form 10-K filed with the SEC on June 5, 2019. The Company operates in one segment.

Operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Quest Solution, Inc. is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management who is responsible for the integrity and objectivity of the financial statements. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Pronouncement in Fiscal 2019

In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842), Codification Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to provide additional guidance for the adoption of Topic 842. ASU 2018-10 clarifies certain provisions and correct unintended applications of the guidance such as the application of implicit rate, lessee reassessment of lease classification, and certain transition adjustments that should be recognized to earnings rather than to stockholders’ equity. ASU 2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic 842. In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases with terms greater than 12 months. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new lease standards”) are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted the standard on January 1, 2019 by applying the new lease requirements utilizing the Effective Date Method for all leases with terms greater than 12 months. We elected the package of practical expedients permitted under the transition guidance within the new standard, which included carrying forward historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The adoption of this standard resulted in the recognition of right-of-use assets of $238 thousand and additional lease liabilities of $238 thousand as of January 1, 2019. The adoption of the standard did not have a material impact on our operating results or cash flows.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The amendments in ASU 2018-09 affect a wide variety of Topics in the FASB Codification and apply to all reporting entities within the scope of the affected accounting guidance. The Company has evaluated ASU 2018-09 in its entirety and determined that the amendments related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, are the only provisions that currently apply to the Company. The amendments in ASU 2018-09 related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, clarify that an entity should recognize excess tax benefits related to stock compensation transactions in the period in which the amount of the deduction is determined. The amendments in ASU 2018-09 related to Topic 718-740 are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard did not have a current impact on the Company’s Condensed Consolidated Financial Statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date. The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard did not have a current impact on the Company’s Condensed Consolidated Financial Statements for the period ended September 30, 2019.

The Company has evaluated other recent pronouncements and believes that none of them will have a material effect on the Company’s financial statements.

GOODWILL AND INTANGIBLE ASSETS

Intangible assets are stated at cost, net of accumulated amortization. The assets are being amortized on the straight-line method over useful lives ranging from 3 to 11 years. Amortization expense for the nine months ended September 30, 2019 and September 30, 2018 was $1.5 million and $1.3 million, respectively.

NET LOSS PER COMMON SHARE

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share.” Basic net loss per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS for the nine months ended September 30, 2019 and 2018 were 77,312,948 and 42,592,783, respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are antidilutive.

Dilutive securities are excluded from the computation of diluted net loss per share because such securities have anti-dilutive impact due to losses reported.

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported, as of September 30:

	2019		2018
Options to purchase common stock		12,581,000		13,781,000
Convertible preferred stock		4,828,530		4,828,530
Warrants to purchase common stock		4,500,000		4,700,000
Common stock subject to repurchase		-		(507,079	)
Potential shares excluded from diluted net loss per share		21,909,530		22,802,451

FOREIGN CURRENCY TRANSLATION

The consolidated financial statements of the Company are presented in U.S. dollars. The functional currency for the Company and each of its subsidiaries (“Quest US entities”), except HTS Ltd., is U.S. dollars. The functional currency of HTS Ltd. is the Israeli Shekel. Transactions in currencies other than the functional currency are recorded using the appropriate exchange rate at the time of the transaction. For Quest US entities, continuing operations are conducted in U.S. dollars. The Company owns a non-operating subsidiary in Canada, from which it has no activity since October 1, 2016. For HTS Ltd., continuing operations are conducted in Israeli Shekel.

Reclassifications and adjustments — Certain prior year amounts in the condensed consolidated interim financial statements have been reclassified to conform with current year presentation. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss.

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Leases (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Weighted average remaining lease terms	2 years 1 month 24 days
Weighted average remaining discount rates	14.60%
Right-of-use assets	$ 168
Lease liabilities	164
Lease liabilities, noncurrent	$ 70
Minimum [Member]
Incremental borrowing rate	13.16%
Maximum [Member]
Incremental borrowing rate	15.06%

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Other Liabilities

9 Months Ended

Sep. 30, 2019

Other Liabilities Disclosure [Abstract]

Other Liabilities

NOTE 5 – OTHER LIABILITIES

At September 30, 2019 and December 31, 2018, other liabilities consisted of the following:

(In thousands)	September 30, 2019			December 31, 2018
Lease liability	$	164		$	-
Other vendor payable		801			-
Dividend payable		297			478
Others		312			397
Total other liabilities		1,574			875
Less Current Portion		(1,168	)		(265	)
Total long term other liabilities	$	406		$	610

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Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholders' Equity

NOTE 9 – STOCKHOLDERS’ EQUITY

PRIVATE PLACEMENT

On April 4, 2019, the Company entered into a form of Securities Purchase Agreement (the “Securities Purchase Agreement”) with accredited investors. Pursuant to the Securities Purchase Agreement, on April 9, 2019 (the Closing Date”), the Company sold an aggregate gross proceeds of $5 million of units (the “Units”) before deducting placement agent fees, consultant and legal fees and other offering expenses (the “Offering”). The per Unit purchase price was $0.30.

Each Unit is comprised of one share of the Company’s common stock, $0.001 par value per share, and a warrant to purchase one share of common stock, and, as a result of the Offering, the Company issued 16,666,667 shares of common Stock (the “Shares”) and warrants (the “Warrants”) to purchase 16,666,667 shares of Common Stock (the “Warrant Shares”) at an exercise price equal to $0.35 per Warrant Share, which Warrants are exercisable for a period of five and one-half years from the issuance date.

Both Shai Lustgarten, the Company’s Chief Executive Officer, and Carlos J. Nissensohn, a consultant to and principal stockholder of the Company, participated in the Offering by converting $200 thousand each of unpaid principal, owed to them by the Company, in exchange for Shares and Warrants on the same terms as all other Purchasers.

ThinkEquity, a division of Fordham Financial Management, Inc. (the “Placement Agent”), acted as the sole placement agent for the Offering. In connection with the Offering, the Company entered into a Placement Agency Agreement with the Placement Agent, pursuant to which it paid the Placement Agent $400 thousand (eight percent of the gross proceeds) in commissions and reimbursed it for $160 thousand of expenses incurred in connection with the Offering plus other miscellaneous expenses. The Company also issued the Placement Agent a warrant (the “Placement Agent Warrant”) to purchase 1,166,667 shares of the Company’s common stock (the “Placement Agent Warrant Shares”) at an exercise price of $0.35 per share. The Placement Agent Warrant terminates five and one-half years from the Closing Date.

The Company paid additional legal and other fees directly related to the Offering. The cash fees paid were netted against the Offering proceeds, as follows:

(In thousands)
Total proceeds from issuance of Common Stock and Warrants	$	5,000
Conversion of notes payable – related parties		(400	)
Placement Agent commission and fees		(560	)
Legal and other fees		(103	)
Net cash received from private placement	$	3,937
Accrued private placement consulting fees		200
Placement fees prepaid in earlier period		(78	)
Equity issued net of non-cash placement fees	$	4,059

The fair value of the Warrants issued to the Placement Agent and Consultant are included in the Warrants Paid in Capital account in stockholder’s equity. In conjunction with the Securities Purchase Agreement, the Company accrued $200 thousand in private placement consulting fees. The company incurred $78 thousand of private placement fees prepaid in a prior period.

Allocation of Proceeds

The Company followed the relative fair value method - the instrument being analyzed is allocated a portion of the proceeds based on the proportion of its fair value to the sum of the fair values of all the instruments covered in the allocation – in allocating the Offering Proceeds between the Shares and the Warrants. As there is currently no independent market for the Warrants, the Company estimated their fair value using a Black Sholes model which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. The allocation is as follows:

			Percent of total
Estimated fair value of warrants	$	6,278,452		48.5	%
Value of common stock	$	6,666,667		51.5	%
Total estimated fair value	$	12,945,119		100.0	%
Pro rata fair value of warrants	$	2,425,027		48.5	%
Pro rata fair value of common stock	$	2,574,973		51.5	%
Total proceeds	$	5,000,000		100.0	%

PREFERRED STOCK

Series A

As of September 30, 2019, there were 1,000,000 Series A preferred shares designated and no Series A preferred shares outstanding. The board of directors of the Company (the “Board”) had previously set the voting rights for the preferred stock at 1 share of preferred to 250 common shares.

Series B

As of September 30, 2019, there was 1 preferred share designated and no preferred shares outstanding.

Series C

As of September 30, 2019, there were 15,000,000 Series C preferred share authorized and 4,828,530 Series C preferred shares outstanding. They have preferential rights above common shares and the Series B preferred shares and are entitled to receive a quarterly dividend at a rate of $0.06 per share per annum. As part of a debt settlement agreement effective December 30, 2017, 1,685,000 shares were issued with the quarterly dividend at a rate of $0.06 per share per annum were waived for a period of 24 months, with no dividends being accrued or paid. Each Series C preferred share outstanding is convertible into one (1) share of common stock of Quest Solution, Inc. During 2019, the Company reduced accrued dividends payable by $323 thousand.

COMMON STOCK

During the first nine months of 2019, the Company issued an aggregate of 4,012 shares of common stock to certain individuals as part of the Company’s Employee Stock Purchase Program for proceeds of $1 thousand.

On April 9, 2019, the Company issued an aggregate of 16,666,667 shares of common stock in connection with the Offering.

On August 27, 2019, the Company issued an aggregate of 1,550,000 shares of common stock to an employee and a consultant as part of the Company’s 2018 Equity Incentive Plan.

On September 30, 2019, and in accordance with the terms of the Convertible Promissory Note, Walefar and Campbeltown each exercised the right to convert $75 thousand in unpaid principal balance into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.236. Accordingly, The Company issued 365,592 shares to each Walefar and Campbeltown.

As of September 30, 2019, the Company had 79,196,228 common shares outstanding.

Warrants and Stock Options

Warrants - The following table summarizes information about warrants granted during the nine month periods ended September 30, 2019 and 2018:

	September 30, 2019				September 30, 2018
	Number of warrants		Weighted Average Exercise Price		Number of warrants			Weighted Average Exercise Price
Balance, beginning of period		5,500,000	$	0.23		4,900,000		$	0.23
Warrants granted		17,833,334		0.35		-			-
Warrants expired		-		-		(200,000	)		1.00
Warrants cancelled, forfeited		-		-		-			-
Warrants exercised		-		-		-			-
Balance, end of period		23,333,334	$	0.32		4,700,000		$	0.17
Exercisable warrants		23,333,334	$	0.32		4,700,000		$	0.17

Outstanding warrants as of September 30, 2019 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Warrants		Weighted Average Exercise Price		Exercisable Warrants		Weighted Average Exercise Price
$	0.11		1.84		1,500,000	$	0.11		1,500,000	$	0.11
$	0.20		1.25		3,000,000		0.20		3,000,000	$	0.20
$	0.28		0.74		200,000	$	0.28		200,000	$	0.28
$	0.50		2.03		500,000		0.50		500,000	$	0.50
$	0.60		1.03		300,000	$	0.60		300,000	$	0.60
$	0.35		5.02		17,833,334		0.35		17,833,334	$	0.35
$	0.11 to 0.60		4.18		23,333,334	$	0.32		23,333,334	$	0.32

Warrants outstanding at September 30, 2019 and 2018 have the following expiry date and exercise prices:

Expiry Date	Exercise Prices		September 30, 2019		September 30, 2018
June 26, 2020	$	0.28		200,000		200,000
October 10, 2020	$	0.60		300,000		-
December 30, 2020	$	0.20		3,000,000		3,000,000
August 2, 2021	$	0.11		1,500,000		1,500,000
October 10, 2021	$	0.50		500,000		-
October 6, 2024	$	0.35		17,833,334		-
				23,333,334		4,700,000

2014 Stock Option Plan

On November 17, 2014, the Board adopted a stock option plan (the “2014 Plan”) whereby the Board may grant to directors, officers, employees, or consultants of the Company options to acquire common shares. The Board has the authority to determine the terms, limits, restrictions and conditions of the grant of options, to interpret the plan and make all decisions relating thereto. The 2014 Plan was adopted in order to provide an inducement and serve as a long term incentive program. The maximum number of common shares that may be reserved for issuance was set at ten million (10,000,000).

The option exercise price is established by the Board and may not be lower than the market price of the common shares at the time of grant. The options may be exercised during the option period determined by the Board, which may vary, but will not exceed ten years from the date of the grant.

2018 Stock Option Plan

On March 8, 2018, the Company adopted a stock option plan (the “2018 Plan”) as an incentive, to retain in the employ of and as directors, officers, consultants, advisors and employees to the Company. On October 31, 2018, the Board amended the Plan to increase the amount of shares authorized for issuance thereunder from ten million (10,000,000) to sixteen million (16,000,000) shares of the Corporation’s common stock, par value $0.001 (the “Shares”). On January 23, 2019, the Company’s shareholders adopted and ratified the Plan.

As at September 30, 2019, the Company had issued options under the 2018 Plan allowing for the subscription of 14,390,000 shares of its common stock, with 60,000 shares remaining for issuance.

Stock Options - The following table summarizes information about stock options granted during the nine months ended September 30, 2019 and 2018:

	September 30, 2019				September 30, 2018
	Number of stock options		Weighted Average Exercise Price		Number of stock options		Weighted Average Exercise Price
Balance, beginning of period		20,121,000	$	0.19		16,317,000	$	0.17
Stock options granted		2,550,000		0.25		-
Stock options expired		-		-		36,000		0.33
Stock options cancelled, forfeited		-		-		-		-
Stock options exercised		-		-		-		-
Balance, end of period		22,671,000	$	0.20		16,218,000	$	0.17
Exercisable stock options		17,869,750	$	0.19		13,689,416	$	0.18

For the nine months ended September 30, 2019, the Company granted 2,550,000 stock options.

Outstanding stock options as of September 30, 2019 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Stock Options		Weighted Average Exercise Price		Exercisable Stock Options		Weighted Average Exercise Price
$	0.075 to 0.09		2.39		2,281,000	$	0.09		2,281,000	$	0.09
$	0.11		1.84		3,500,000	$	0.11		3,500,000	$	0.11
$	0.12		3.43		6,800,000	$	0.12		5,950,000	$	0.12
$	0.22		4.09		2,165,000	$	0.22		1,082,500	$	0.22
$	0.25		3.84		2,550,000	$	0.25		318,750	$	0.25
$	0.27		4.17		2,875,000	$	0.27		2,237,500	$	0.27
$	0.50		5.15		2,500,000	$	0.50		2,500,000	$	0.50
$	0.075 to 0.50		3.47		22,671,000	$	0.20		17,869,750	$	0.19

Stock options outstanding at September 30, 2019, and 2018 have the following expiration date and exercise prices:

Expiration Date	Exercise Prices		September 30, 2019		September 30, 2018
August 2, 2021	$	0.11		3,500,000		3,500,000
February 17, 2022	$	0.075		760,333		760,333
February 17, 2022	$	0.09		1,520,667		1,520,667
June 30, 2022	$	0.09		-		700,000
March 5, 2023	$	0.12		6,800,000		6,800,000
July 31, 2023	$	0.25		2,550,000		-
October 31, 2023	$	0.22		2,165,000		-
November 30, 2023	$	0.27		2,875,000		-
November 20, 2024	$	0.50		2,500,000		2,500,000
October 2, 2027	$	0.145		-		500,000
				22,671,000		16,281,000

Stock compensation expense is $1.1 million for the nine months ended September 30, 2019 and $1.1 million for the nine months ended September 30, 2018. The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

NOTE 13 – LEASES

The Company accounts for leases in accordance with ASC Topic 842, “Leases,” which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet and expands disclosures about leasing arrangements for both lessees and lessors, among other items, for most lease arrangements.

In accordance with the adoption of ASC 842 on January 1, 2019, we recorded operating lease right-of-use (“ROU”) assets, which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation to make lease payments. Generally, we enter into operating lease agreements for facilities. Finance lease assets are recorded within property and equipment, net of accumulated depreciation. The amount of operating lease liabilities due within 12 months are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities in our consolidated balance sheet based on their contractual due dates. Finance lease liabilities are classified according to contractual due dates.

The operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease payments over the lease term. Most of our leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate which was between 13.16% and 15.06% for all operating leases. Our operating lease agreements may include options to extend the lease term or terminate it early. We have included options to extend in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options. The weighted average remaining lease terms and discount rates for our operating leases were approximately 2.15 years and 14.6% at September 30, 2019. We did not have finance leases at September 30, 2019. Operating lease expense is recognized as rent expense on a straight-line basis over the lease term. We evaluate ROU assets for impairment consistent with our property and equipment policy disclosure included in our 2018 Form 10-K.

As of September 30, 2019, operating lease ROU assets were $168 thousand and operating lease liabilities were $164 thousand, of which $70 thousand were classified as noncurrent.

Future minimum lease commitments at September 30, 2019 were as follows:

Year ending December 31,	Operating Leases
(In thousands)
2019 (excluding the nine months ended September 30, 2019)	$	36
2020		82
2021		36
2022 and thereafter		54
Total lease payments		208
Less imputed interest		(44	)
Total	$	164

Supplemental cash flow information related to leases was as follows:

(In thousands)	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - operating leases	$	92
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	17

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Credit Facilities and Line of Credit (Details Narrative) - USD ($) $ in Thousands	Jul. 01, 2016	Sep. 30, 2019	Dec. 31, 2018
Line of credit, balance		$ 517	$ 4,534
Factoring and Security Agreement [Member] | Action Capital Corporation [Member]
Line of credit maximum borrowing capacity	$ 5,000
Percentage of reserve account	5.00%
Percentage of average outstanding balance	0.75%
Factoring and Security Agreement [Member] | Action Capital Corporation [Member] | Prime Rate [Member]
Percentage of average outstanding balance	2.00%

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Concentrations (Details Narrative) - Revenue [Member] - One Customer [Member]	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Percentage of concentration risk	15.34%	17.00%
Accounts receivable percentage	11.10%	11.60%

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Other Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Other Liabilities Disclosure [Abstract]

Schedule of Other Liabilities

At September 30, 2019 and December 31, 2018, other liabilities consisted of the following:

(In thousands)	September 30, 2019			December 31, 2018
Lease liability	$	164		$	-
Other vendor payable		801			-
Dividend payable		297			478
Others		312			397
Total other liabilities		1,574			875
Less Current Portion		(1,168	)		(265	)
Total long term other liabilities	$	406		$	610

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Salary and Employee Benefits (Tables)

9 Months Ended

Sep. 30, 2019

Retirement Benefits [Abstract]

Schedule of Salary and Employee Benefits

Salary and employee benefits for the nine months ended September 30, 2019 and September 30, 2018 consists of the following:

(In thousands)	2019		2018
Stock compensation		1,093		1,125
Salaries (except R&D)		3,273		2,402
R&D salaries		714		-
Bonuses		95		429
Commissions		2,588		2,469
Total		7,763		6,425

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Stockholders' Equity - Schedule of Stock Options Warrants (Details) - $ / shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Equity [Abstract]
Number of warrants balance, beginning of period	5,500,000	4,900,000
Number of warrants, granted	17,833,334
Number of warrants, expired		(200,000)
Number of warrants, cancelled, forfeited
Number of warrants, exercised
Number of warrants, balance end of period	23,333,334	4,700,000
Number of warrants, exercisable	23,333,334	4,700,000
Weighted Average Exercise Price balance, beginning of period	$ 0.23	$ 0.23
Weighted Average Exercise Price, granted	0.35
Weighted Average Exercise Price, expired		1.00
Weighted Average Exercise Price, cancelled, forfeited
Weighted Average Exercise Price, exercised
Weighted Average Exercise Price balance, end of period	0.32	0.17
Weighted Average Exercise Price, exercisable	$ 0.32	$ 0.17

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Notes Payable, Related Parties - Schedule of Future Maturities of Notes Payable, Related Parties (Details) - Notes Payable, Related Parties [Member] $ in Thousands	Sep. 30, 2019 USD ($)
2019	$ 504
2020	843
2021	426
2022	426
Thereafter	300
Total	$ 2,499

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Business Acquisition (Tables)

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Schedule of Proforma Results of Operations

This pro forma financial information is not indicative of the results of operations that the Company would have attained had the acquisition occurred at the beginning of the periods presented, nor is the pro forma financial information indicative of the results of operations that may occur in the future:

(In thousands, except per share data)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Pro forma sales	$	15,114,596		$	47,785,551
Pro forma net income		(1,459,261	)		(4,955,288	)
Pro forma basic and diluted earnings per share		(0.03	)		(0.12	)

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of Offering Proceeds

The Company paid additional legal and other fees directly related to the Offering. The cash fees paid were netted against the Offering proceeds, as follows:

(In thousands)
Total proceeds from issuance of Common Stock and Warrants	$	5,000
Conversion of notes payable – related parties		(400	)
Placement Agent commission and fees		(560	)
Legal and other fees		(103	)
Net cash received from private placement	$	3,937
Accrued private placement consulting fees		200
Placement fees prepaid in earlier period		(78	)
Equity issued net of non-cash placement fees	$	4,059

Schedule of Allocation Proceeds of Shares and Warrants

The allocation is as follows:

			Percent of total
Estimated fair value of warrants	$	6,278,452		48.5	%
Value of common stock	$	6,666,667		51.5	%
Total estimated fair value	$	12,945,119		100.0	%
Pro rata fair value of warrants	$	2,425,027		48.5	%
Pro rata fair value of common stock	$	2,574,973		51.5	%
Total proceeds	$	5,000,000		100.0	%

Schedule of Stock Options Warrants

The following table summarizes information about warrants granted during the nine month periods ended September 30, 2019 and 2018:

	September 30, 2019				September 30, 2018
	Number of warrants		Weighted Average Exercise Price		Number of warrants			Weighted Average Exercise Price
Balance, beginning of period		5,500,000	$	0.23		4,900,000		$	0.23
Warrants granted		17,833,334		0.35		-			-
Warrants expired		-		-		(200,000	)		1.00
Warrants cancelled, forfeited		-		-		-			-
Warrants exercised		-		-		-			-
Balance, end of period		23,333,334	$	0.32		4,700,000		$	0.17
Exercisable warrants		23,333,334	$	0.32		4,700,000		$	0.17

Schedule of Outstanding Warrants

Outstanding warrants as of September 30, 2019 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Warrants		Weighted Average Exercise Price		Exercisable Warrants		Weighted Average Exercise Price
$	0.11		1.84		1,500,000	$	0.11		1,500,000	$	0.11
$	0.20		1.25		3,000,000		0.20		3,000,000	$	0.20
$	0.28		0.74		200,000	$	0.28		200,000	$	0.28
$	0.50		2.03		500,000		0.50		500,000	$	0.50
$	0.60		1.03		300,000	$	0.60		300,000	$	0.60
$	0.35		5.02		17,833,334		0.35		17,833,334	$	0.35
$	0.11 to 0.60		4.18		23,333,334	$	0.32		23,333,334	$	0.32

Schedule of Warrants Outstanding, Expiry Date and Exercise Prices

Warrants outstanding at September 30, 2019 and 2018 have the following expiry date and exercise prices:

Expiry Date	Exercise Prices		September 30, 2019		September 30, 2018
June 26, 2020	$	0.28		200,000		200,000
October 10, 2020	$	0.60		300,000		-
December 30, 2020	$	0.20		3,000,000		3,000,000
August 2, 2021	$	0.11		1,500,000		1,500,000
October 10, 2021	$	0.50		500,000		-
October 6, 2024	$	0.35		17,833,334		-
				23,333,334		4,700,000

Schedule of Stock Options Granted

The following table summarizes information about stock options granted during the nine months ended September 30, 2019 and 2018:

	September 30, 2019				September 30, 2018
	Number of stock options		Weighted Average Exercise Price		Number of stock options		Weighted Average Exercise Price
Balance, beginning of period		20,121,000	$	0.19		16,317,000	$	0.17
Stock options granted		2,550,000		0.25		-
Stock options expired		-		-		36,000		0.33
Stock options cancelled, forfeited		-		-		-		-
Stock options exercised		-		-		-		-
Balance, end of period		22,671,000	$	0.20		16,218,000	$	0.17
Exercisable stock options		17,869,750	$	0.19		13,689,416	$	0.18

Schedule of Outstanding Stock Options

Outstanding stock options as of September 30, 2019 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Stock Options		Weighted Average Exercise Price		Exercisable Stock Options		Weighted Average Exercise Price
$	0.075 to 0.09		2.39		2,281,000	$	0.09		2,281,000	$	0.09
$	0.11		1.84		3,500,000	$	0.11		3,500,000	$	0.11
$	0.12		3.43		6,800,000	$	0.12		5,950,000	$	0.12
$	0.22		4.09		2,165,000	$	0.22		1,082,500	$	0.22
$	0.25		3.84		2,550,000	$	0.25		318,750	$	0.25
$	0.27		4.17		2,875,000	$	0.27		2,237,500	$	0.27
$	0.50		5.15		2,500,000	$	0.50		2,500,000	$	0.50
$	0.075 to 0.50		3.47		22,671,000	$	0.20		17,869,750	$	0.19

Schedule of Stock Options, Expiry Date and Exercise Prices

Stock options outstanding at September 30, 2019, and 2018 have the following expiration date and exercise prices:

Expiration Date	Exercise Prices		September 30, 2019		September 30, 2018
August 2, 2021	$	0.11		3,500,000		3,500,000
February 17, 2022	$	0.075		760,333		760,333
February 17, 2022	$	0.09		1,520,667		1,520,667
June 30, 2022	$	0.09		-		700,000
March 5, 2023	$	0.12		6,800,000		6,800,000
July 31, 2023	$	0.25		2,550,000		-
October 31, 2023	$	0.22		2,165,000		-
November 30, 2023	$	0.27		2,875,000		-
November 20, 2024	$	0.50		2,500,000		2,500,000
October 2, 2027	$	0.145		-		500,000
				22,671,000		16,281,000

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Stockholders' Equity - Schedule of Outstanding Warrants (Details) - Warrant [Member]	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Range of Exercise Prices, Upper Range Limit	$ 0.11
Range of Exercise Prices, Lower Range Limit	$ 0.60
Weighted Average residual life span (in years)	4 years 2 months 5 days
Outstanding Warrants | shares	23,333,334
Weighted Average Exercise Price	$ 0.32
Exercisable Warrants | shares	23,333,334
Weighted Average Exercise Price	$ 0.32
Exercise Price Range 1 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.11
Weighted Average residual life span (in years)	1 year 10 months 3 days
Outstanding Warrants | shares	1,500,000
Weighted Average Exercise Price	$ 0.11
Exercisable Warrants | shares	1,500,000
Weighted Average Exercise Price	$ 0.11
Exercise Price Range 2 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.20
Weighted Average residual life span (in years)	1 year 2 months 30 days
Outstanding Warrants | shares	3,000,000
Weighted Average Exercise Price	$ 0.20
Exercisable Warrants | shares	3,000,000
Weighted Average Exercise Price	$ 0.20
Exercise Price Range 3 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.28
Weighted Average residual life span (in years)	8 months 26 days
Outstanding Warrants | shares	200,000
Weighted Average Exercise Price	$ 0.28
Exercisable Warrants | shares	200,000
Weighted Average Exercise Price	$ 0.28
Exercise Price Range 4 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.50
Weighted Average residual life span (in years)	2 years 11 days
Outstanding Warrants | shares	500,000
Weighted Average Exercise Price	$ 0.50
Exercisable Warrants | shares	500,000
Weighted Average Exercise Price	$ 0.50
Exercise Price Range 5 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.60
Weighted Average residual life span (in years)	1 year 11 days
Outstanding Warrants | shares	300,000
Weighted Average Exercise Price	$ 0.60
Exercisable Warrants | shares	300,000
Weighted Average Exercise Price	$ 0.60
Exercise Price Range 6 [Member]
Range of Exercise Prices, Upper Range Limit	$ 0.35
Weighted Average residual life span (in years)	5 years 7 days
Outstanding Warrants | shares	17,833,334
Weighted Average Exercise Price	$ 0.35
Exercisable Warrants | shares	17,833,334
Weighted Average Exercise Price	$ 0.35

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Stockholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands					9 Months Ended
	Sep. 30, 2019	Aug. 27, 2019	Apr. 09, 2019	Apr. 09, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Oct. 31, 2018	Dec. 30, 2017	Nov. 17, 2014
Common stock, par value	$ 0.001				$ 0.001		$ 0.001
Stock issued during the period, shares				16,666,667	4,012
Debt instrument conversion of shares amount					$ 550
Dividend paid	$ 297				297		$ 478
Stock issued during the period					$ 1	$ 119
Common stock, shares outstanding	79,196,228				79,196,228		71,931,693
Common stock, shares authorized	200,000,000				200,000,000		200,000,000
Common stock, shares issued	79,196,228				79,196,228		71,931,693
Exercise of stock option shares granted					2,550,000
Stock compensation expense					$ 1,100	$ 1,100
2014 Stock Option Plan [Member]
Maximum number of common shares reserved for issuance										10,000,000
2018 Stock Option Plan [Member]
Common stock shares subscribed	14,390,000				14,390,000
Common stock, shares issued	60,000				60,000
Walefar Investments, Ltd [Member]
Debt instrument conversion of shares amount	$ 75
Stock issued during the period	$ 317,796
Debt convertible price per share	$ 0.236				$ 0.236
Walefar Investments, Ltd [Member] | Convertible Promissory Note [Member]
Stock issued during the period, shares	365,592
Debt instrument conversion of shares amount	$ 75
Debt convertible price per share	$ 0.236				0.236
Campbeltown Consulting Inc [Member]
Debt instrument conversion of shares amount	$ 75
Stock issued during the period	$ 317,796
Debt convertible price per share	$ 0.236				0.236
Campbeltown Consulting Inc [Member] | Convertible Promissory Note [Member]
Stock issued during the period, shares	365,592
Debt instrument conversion of shares amount	$ 75
Debt convertible price per share	$ 0.236				$ 0.236
Common Stock [Member]
Stock issued during the period, shares						1,000,000
Stock issued during the period						$ 1
Common stock, shares outstanding	79,196,228				79,196,228
Warrants and Stock Options [Member]
Common stock, par value								$ 0.001
Minimum [Member] | Warrants and Stock Options [Member]
Common stock, shares authorized								10,000,000
Maximum [Member] | Warrants and Stock Options [Member]
Common stock, shares authorized								16,000,000
Employee and Consultant [Member] | 2018 Equity Incentive Plan [Member]
Stock issued during the period, shares		1,550,000
Securities Purchase Agreement [Member]
Gross proceeds from placement			$ 5,000
Purchase price per share			$ 0.30
Common stock, par value			$ 0.001	$ 0.001
Debt instrument description			Each Unit is comprised of one share of the Company's common stock, $0.001 par value per share, and a warrant to purchase one share of common stock, and, as a result of the Offering, the Company issued 16,666,667 shares of common Stock (the"Shares") and warrants (the "Warrants") to purchase 16,666,667 shares of Common Stock (the "Warrant Shares") at an exercise price equal to $0.35 per Warrant Share, which Warrants are exercisable for a period of five and one-half years from the issuance date.
Stock issued during the period, shares			16,666,667
Debt instrument conversion of shares amount			$ 200
Securities Purchase Agreement [Member] | Warrant [Member]
Number of warrants to purchase common stock			16,666,667	16,666,667
Warrant exercise price per share			$ 0.35	$ 0.35
Placement Agency Agreement [Member]
Paid the placement agent amount			$ 400
Commissions and reimbursed expenses			$ 160
Placement Agency Agreement [Member] | Warrant [Member]
Number of warrants to purchase common stock			1,166,667	1,166,667
Warrant exercise price per share			$ 0.35	$ 0.35
Warrant terminate description			The Placement Agent Warrant terminates five and one-half years from the Closing Date.
Accrued private placement consulting fees			$ 200
Placement fees prepaid in earlier period			$ 78
Settlement Agreement [Member]
Dividend rate per annum									$ 0.06
Debt settlement effective shares issued									1,685,000
Dividend paid
Board of Directors [Member]
Preferred stock voting rights					The board of directors had previously set the voting rights for the preferred stock at 1 share of preferred to 250 common shares.
Series A Preferred Stock [Member]
Preferred stock shares designated	1,000,000				1,000,000		1,000,000
Preferred stock shares outstanding	0				0		0
Series B Preferred Stock [Member]
Preferred stock shares designated	1				1		1
Preferred stock shares outstanding	0				0		0
Series C Preferred Stock [Member]
Preferred stock shares designated	15,000,000				15,000,000		15,000,000
Preferred stock shares outstanding	4,828,530				4,828,530		4,828,530
Dividend rate per annum	$ 0.06				$ 0.06
Preferred stock convertible description					Each Series C preferred share outstanding is convertible into one (1) share of common stock of Quest Solution, Inc.
Reduced accrued dividends payable					$ 323
Stock issued during the period

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Salary and Employee Benefits - Schedule of Salary and Employee Benefits (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Retirement Benefits [Abstract]
Stock compensation			$ 1,093	$ 1,125
Salaries (except R&D)			3,273	2,402
R&D salaries			714
Bonuses			95	429
Commissions			2,588	2,469
Total	$ 2,700	$ 1,597	$ 7,763	$ 6,425

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 1,954	$ 378
Accounts receivable, net	10,842	12,262
Inventory	2,015	1,803
Prepaid expenses	245	169
Other current assets	173	78
Total current assets	15,229	14,690
Property and equipment, net of accumulated depreciation of $2,470 and $2,037, respectively	338	389
Goodwill	13,921	13,921
Trade name, net of accumulated amortization of $2,759 and $2,585, respectively	1,544	1,805
Customer relationships, net of accumulated amortization of $5,827 and $5,076, respectively	6,387	7,514
Other intangibles, net of accumulated amortization of $109 and $33, respectively	1,170	1,267
Cash, restricted	533	532
Other assets	335	30
Total assets	39,457	40,148
Current liabilities
Accounts payable and accrued liabilities	21,095	17,484
Accrued interest and accrued liabilities, related party
Line of credit	517	4,534
Accrued payroll and sales tax	1,878	2,173
Notes payable, related parties - current portion	1,241	1,891
Notes payable - current portion	6,548	8,823
Other current liabilities	1,168	265
Total current liabilities	32,447	35,170
Long term liabilities
Notes payable, related party, less current portion	1,258	1,912
Accrued interest and accrued liabilities, related party	27	33
Notes payable, less current portion	137	130
Other long term liabilities	406	610
Total liabilities	34,275	37,855
Stockholders' equity
Common stock; $0.001 par value; 200,000,000 shares authorized; 79,196,228 and 71,931,693 shares issued and outstanding, respectively.	79	72
Common stock; $0.001 par value; 11,084,657 shares to be received		(2,616)
Common stock to be repurchased by the Company		(230)
Additional paid-in capital	47,264	44,814
Accumulated (deficit)	(42,179)	(39,753)
Accumulated other comprehensive loss	13	1
Total stockholders' equity	5,182	2,293
Total liabilities and stockholders' equity	39,457	40,148
Series A Preferred Stock [Member]
Stockholders' equity
Preferred stock, value
Series B Preferred Stock [Member]
Stockholders' equity
Preferred stock, value
Series C Preferred Stock [Member]
Stockholders' equity
Preferred stock, value	$ 5	$ 5

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Condensed Consolidated Statements of Cash Flow (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from continuing operating activities:
Net loss	$ (2,608)	$ (4,336)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock based compensation	1,093	1,125
Topic 606 Cumulative Adjustment		(1,213)
Debt Settlement		1,264
Depreciation and amortization	1,620	1,312
Loss on fixed asset disposal		(36)
Inventory write off		50
Changes in operating assets and liabilities:
(Increase) / decrease in accounts receivable	1,420	(4,282)
(Increase) / decrease in prepaid expenses	(154)	79
(Increase) / decrease in inventory	(234)	(669)
Increase in accounts payable and accrued liabilities	4,412	4,933
(Decrease) in accrued interest and accrued liabilities, related party	(6)	(1)
(Decrease) in deferred revenue, net		(1,204)
Increase / (decrease) in accrued payroll and sales taxes payable	(295)	850
(Increase) / decrease in other assets	57	119
Increase / (decrease) in other liabilities	(358)	(153)
Net cash provided by operating activities	4,947	263
Cash flows from investing activities:
(Increase) / decrease in restricted cash
(Purchase) / sale of property and equipment	(45)	29
(Increase) / decrease in other assets	(225)
Net cash (used in) provided by investing activities	(270)	29
Cash flows from financing activities:
Net proceeds from common stock and warrant issuances	3,937	9
Proceeds from ESPP stock issuance	1
Proceeds from line of credit	7,053	969
Payments on line of credit	(11,070)
Payment on notes/loans payable	(3,022)	(1,391)
Net cash used in financing activities	(3,101)	(413)
Net increase (decrease) in cash	1,576	31
Cash, beginning of period	378	25
Cash, end of period	1,954	56
Cash paid for interest	1,156	556
Cash paid for taxes
Supplementary for non-cash flow information:
Debt conversion	550
Stock based compensation	1,093
Change in terms of accounts payable	(801)	(6,764)
Stock issued for debt settlement		2,711
Shares to be repurchased		$ (230)

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 12 – RELATED PARTY TRANSACTIONS

Related party transactions are discussed in Note 8.

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Business Acquisition

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Business Acquisition

NOTE 4 – BUSINESS ACQUISITION

HTS Image Processing, Inc. acquisition

On October 5, 2018 (“Closing Date”), the Company entered into a Purchase Agreement with Walefar and Campbeltown (the “HTS Purchase Agreement”) (Walefar and Campbeltown are collectively referred to as the “Sellers”). Pursuant to the HTS Purchase Agreement, the Company purchased 100% of the capital stock of HTS Image Processing, Inc. and its wholly owned subsidiaries HTS (USA), Inc. and HTS Image Ltd. (f/k/a Teamtronics Ltd.) from the Sellers.

Pro forma results of operations

The following pro forma results of operations for the nine months ended September 30, 2018 have been prepared as though the business acquisition had occurred as of January 1, 2018. This pro forma financial information is not indicative of the results of operations that the Company would have attained had the acquisition occurred at the beginning of the periods presented, nor is the pro forma financial information indicative of the results of operations that may occur in the future:

(In thousands, except per share data)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Pro forma sales	$	15,114,596		$	47,785,551
Pro forma net income		(1,459,261	)		(4,955,288	)
Pro forma basic and diluted earnings per share		(0.03	)		(0.12	)

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Notes Payable, Related Parties

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Notes Payable, Related Parties

NOTE 8 –NOTES PAYABLE, RELATED PARTIES

Notes and loans payable, related parties consisted of the following:

(In thousands)	September 30, 2019		December 31, 2018
Note payable – debt restructure Marin	$	940	$	1,160
Note payable – debt restructure Thomet		600		713
Note payable – debt restructure Zicman		144		171
Convertible note payable – shareholders		150		700
Note payable – RWCC		665		1,059
Total notes payable, related parties		2,499		3,803
Less current portion		1,241		1,891
Long-term portion	$	1,258	$	1,912

Note payable – debt restructure Marin

On February 28, 2018, the Company finalized two settlement agreements with David and Kathy Marin (the “Marin Settlement Agreements”) which have an effective date of December 30, 2017. Pursuant to the first Marin Settlement Agreement (the “Marin Settlement Agreement I”), the Company and the Marins agreed to reduce the Company’s purchase price for all of the capital stock of Bar Code Specialties, Inc., which was acquired by the Company from the Marins in November 2014. In the 2014 acquisition, the Company had issued David Marin a promissory note for $11.0 million of which an aggregate of $10.7 million (the “Owed Amount”) was outstanding as of February 26, 2018 which includes accrued interest earned but not paid. Pursuant to the Marin Settlement Agreement I, the amount of the indebtedness owed to Marin was reduced by $9.5 million bringing the total amount owed to $1.2 million. Section 3.1 of the original note was amended to provide that the Company shall pay the Marins 60 monthly payments of $20 thousand each commencing the earlier of (i) October 26, 2018 and (ii) the date that the Company’s obligation to Scansource, Inc. is satisfied and all amounts currently in default under the credit agreement with Scansource (currently approximately $6.0 Million) is reduced to $2.0 million. As a result, the balance on this loan and related accrued interest at December 31, 2018 were all classified as long term, being due in 2023. As of September 30, 2019, the balance of this loan was $940 thousand.

Note payable – debt restructure Thomet

On February 28, 2018, the Company finalized a settlement agreement with Kurt Thomet whereby the Company settled its indebtedness to Mr. Thomet in the current amount of $5.4 million in full in exchange for 60 monthly payments of $13 thousand each commencing the earlier of (i) October 26, 2018 or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc. is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million. In addition, the Company issued Mr. Thomet an aggregate of 500,000 shares of restricted common stock and 1,000,000 shares of Series C Preferred Stock with the same rights and restrictions as described above in the description of the Marin Settlement II Agreement. The effective date of the agreement is December 30, 2017. As of September 30, 2019, the balance of this loan was $600 thousand and is due in 2023.

Note payable – debt restructure Zicman

On February 28, 2018, the Company finalized a settlement agreement with George Zicman whereby the Company settled its indebtedness to Mr. Zicman in the amount of $1.3 million in full in exchange for 60 monthly payments of $3 thousand each commencing the earlier of (i) October 26, 2018 or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc. is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million. In addition, the Company issued Mr. Zicman an aggregate of 100,000 shares of common stock and 600,000 shares of Series C Preferred Stock with the same rights and restrictions as described above in the description of the Marin Settlement Agreement II. The effective date of the agreement is December 30, 2017. As of September 30, 2019, the balance of this loan was $144 thousand.

Each of the Marins, Thomet and Zicman entered into a voting agreement with the Company whereby they agreed to vote any shares of common stock beneficially owned by them as directed by the Company’s CEO and also agreed to a leakout restriction whereby they each agreed not to sell more than 10% of the common stock beneficially owned during any 30-day period.

Convertible note payable - shareholders

On October 5, 2018, the Company entered into a purchase agreement with Walefar Investments, Ltd. (“Walefar”) and Campbeltown Consulting, Inc. (“Campbeltown”) (Walefar and Campbeltown are collectively referred to as the “Sellers”). Pursuant to the agreement, the Company purchased 100% of the capital stock of HTS Image Processing, Inc. (“HTS”) from the Sellers. As consideration, the Company (i) issued to the Sellers 22,452,954 shares of the Company’s common stock, having a value of $5.3 million based on the average closing price of the common stock for the 20 days’ preceding the agreement (the “Per Share Value”), (ii) cash in the amount of $300 thousand, and (iii) a 12 month convertible promissory note with a principal amount of $700 thousand and an interest rate of six percent (6%) per year. The note also provides the Sellers the right to convert all or any portion of the then outstanding and unpaid principal amount and interest into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.236. The agreement constitutes a “related party transaction” because of Company director Shai Lustgarten’s position as Chief Executive Officer of HTS and stock ownership in HTS. Additionally, Campbeltown is a “related party” because Carlos Jaime Nissenson, the beneficial owner of Campbeltown, is a consultant to the Company, a principal stockholder of the Company, and father of Company director and newly appointed CFO Neev Nissenson. Carlos Jaime Nissenson was also a stockholder and director of HTS. Pursuant to the agreement, Shai Lustgarten received 11,226,477 shares of the Company’s common stock and Carlos Jaime Nissenson received 11,226,477 shares of the Company’s common stock.

On May 29, 2019, the Company, Campbeltown and Walefar entered into an Amendment to the HTS Purchase Agreement (the “Amendment”), which provided for an adjustment to the number of shares of common stock issued to Walefar and Campbeltown in the acquisition of HTS. Pursuant to the Amendment, Campbeltown and Walefar agreed to return for cancelation 5,542,328 and 5,542,329 shares of common stock, respectively. This Amendment reduced the amount of shares issued in the acquisition to 11,368,297 shares from 22,452,954 shares and the amount of share consideration to approximately $2.7 million from $5.3 million. This adjustment was made as a result of a correction in the calculation of working capital and other share give back provisions of the HTS Purchase Agreement. As a result of the Offering (see Note 9), $400 thousand of the notes outstanding were converted to common stock. As of September 30, 2019, the remaining principal amount of $150 thousand is owed to each Walefar and Campbeltown respectively ($300 thousand total) under the note issued to them as partial consideration in the sale of HTS to the Company on October 5, 2018.

On September 30, 2019, and in accordance with the terms of the Convertible Promissory Note, Walefar and Campbeltown each exercised the right to convert $75 thousand in unpaid principal balance into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.236. Accordingly, the Company issued 317,796 shares to each of Walefar and Campbeltown.

Note payable – RWCC

The company acquired the Note Payable – RWCC (“RWCC Note”)(f.k.a. Certus) with the acquisition of HTS. The RWCC Note was a non-interest-bearing note. The RWCC Note was historically discounted using an effective interest rate of 5.0%. The outstanding balance of $665 thousand is classified as short term and is due and payable in April 2020 with monthly payment of approximately $85,000 per month. The RWCC Note is classified as a related party note because the Chief Executive Officer of RWCC is the son of a significant shareholder of the Company and a sibling of a member of the Board of Directors.

Repayment of notes payable

The repayment of the notes payable, related parties at September 30, 2019 is as follows:

(In thousands)
2019	$	504
2020		843
2021		426
2022		426
Thereafter		300
Total	$	2,499

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Notes Payable (Details Narrative) - USD ($) $ in Thousands				49 Months Ended
	Apr. 30, 2019	Sep. 07, 2018	Jul. 18, 2016	Oct. 31, 2018	Sep. 30, 2019	Dec. 31, 2018
Notes payable					$ 6,685	$ 8,953
Secured Promissory Note [Member]
Monthly installments			$ 250
Debt instruments interest rate			12.00%
Debt instrument face amount			$ 12,500
Accrued interest			$ 250
Debt instrument due date			Dec. 31, 2016
Sixth Amendment Agreement [Member] | Secured Promissory Note [Member]
Debt instrument face amount		$ 8,700
Debt instrument due date		Jan. 31, 2019
Debt instrument, increase, accrued interest		$ 6,800
Seventh Amendment Agreement [Member] | Secured Promissory Note [Member]
Monthly installments	$ 350
Debt instrument due date	Jul. 31, 2019
BCS Acquisition [Member]
Monthly installments				$ 5
Debt instruments interest rate				1.84%
Notes payable					$ 130	$ 130
First Three Monthly Payments [Member] | Sixth Amendment Agreement [Member] | Secured Promissory Note [Member]
Monthly installments		300
Last Two Monthly Payments [Member] | Sixth Amendment Agreement [Member] | Secured Promissory Note [Member]
Monthly installments		$ 500

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Business Acquisition (Details Narrative)	Oct. 05, 2018
HTS Purchase Agreement [Member]
Percentage of shares acquired	100.00%