QUEST RESOURCE HOLDING CORP, 10-Q filed on 5/17/2021
Quarterly Report
v3.21.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2021
May 03, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2021  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Trading Symbol QRHC  
Entity Registrant Name Quest Resource Holding Corporation  
Entity Central Index Key 0001442236  
Entity Current Reporting Status Yes  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   18,697,549
Entity File Number 001-36451  
Entity Tax Identification Number 51-0665952  
Entity Address, Address Line One 3481 Plano Parkway  
Entity Address, City or Town The Colony  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75056  
City Area Code 972  
Local Phone Number 464-0004  
Entity Interactive Data Current Yes  
Title of 12(b) Security Common stock  
Entity Incorporation, State or Country Code NV  
Security Exchange Name NASDAQ  
Document Quarterly Report true  
Document Transition Report false  
v3.21.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 10,754,183 $ 7,516,260
Accounts receivable, less allowance for doubtful accounts of $977,490 and $935,261 as of March 31, 2021 and December 31, 2020, respectively 20,722,591 17,420,889
Prepaid expenses and other current assets 1,184,198 1,069,238
Total current assets 32,660,972 26,006,387
Goodwill 66,310,385 66,310,385
Intangible assets, net 6,205,531 6,528,330
Property and equipment, net, and other assets 3,240,757 3,384,055
Total assets 108,417,645 102,229,157
Current liabilities:    
Accounts payable and accrued liabilities 20,303,449 15,246,839
Other current liabilities 1,583,620 1,392,579
Current portion of notes payable 624,383 624,383
Total current liabilities 22,511,452 17,263,801
Notes payable, net 14,300,300 14,948,625
Other long-term liabilities, net 1,853,182 1,973,759
Total liabilities 38,664,934 34,186,185
Commitments and contingencies
Stockholders’ equity:    
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2021 and December 31, 2020
Common stock, $0.001 par value, 200,000,000 shares authorized, 18,689,807 and 18,413,419 shares issued and outstanding as of March 31, 2021 and December 31, 2020 18,690 18,413
Additional paid-in capital 166,987,319 166,424,597
Accumulated deficit (97,253,298) (98,400,038)
Total stockholders’ equity 69,752,711 68,042,972
Total liabilities and stockholders’ equity $ 108,417,645 $ 102,229,157
v3.21.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts receivable $ 977,490 $ 935,261
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 18,689,807 18,413,419
Common stock, shares outstanding 18,689,807 18,413,419
v3.21.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Income Statement [Abstract]    
Revenue $ 35,101,991 $ 25,331,814
Cost of revenue 28,662,113 20,788,816
Gross profit 6,439,878 4,542,998
Operating expenses:    
Selling, general, and administrative 4,262,560 4,409,323
Depreciation and amortization 407,283 333,753
Total operating expenses 4,669,843 4,743,076
Operating income (loss) 1,770,035 (200,078)
Interest expense (561,462) (84,321)
Income (loss) before taxes 1,208,573 (284,399)
Income tax expense (benefit) 61,833 (52,732)
Net income (loss) 1,146,740 (231,667)
Net income (loss) applicable to common stockholders $ 1,146,740 $ (231,667)
Net income (loss) per share applicable to common stockholders    
Basic $ 0.06 $ (0.02)
Diluted $ 0.06 $ (0.02)
Weighted average number of common shares outstanding    
Basic 18,504,993 15,396,703
Diluted 19,412,685 15,396,703
v3.21.1
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($)
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Beginning Balance at Dec. 31, 2019 $ 61,644,052 $ 15,373 $ 160,858,072 $ (99,229,393)
Beginning Balance, Shares at Dec. 31, 2019   15,372,905    
Stock-based compensation 377,317   377,317  
Net income (loss) (231,667)     (231,667)
Ending Balance at Mar. 31, 2020 61,789,702 $ 15,373 161,235,389 (99,461,060)
Ending Balance, Shares at Mar. 31, 2020   15,372,905    
Beginning Balance at Dec. 31, 2020 68,042,972 $ 18,413 166,424,597 (98,400,038)
Beginning Balance, Shares at Dec. 31, 2020   18,413,419    
Stock-based compensation 309,610   309,610  
Stock option and warrant exercises 253,389 $ 277 253,112  
Stock option and warrant exercises, Shares   276,388    
Net income (loss) 1,146,740     1,146,740
Ending Balance at Mar. 31, 2021 $ 69,752,711 $ 18,690 $ 166,987,319 $ (97,253,298)
Ending Balance, Shares at Mar. 31, 2021   18,689,807    
v3.21.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash flows from operating activities:    
Net income (loss) $ 1,146,740 $ (231,667)
Changes in operating assets and liabilities:    
Accounts receivable (3,336,188) (1,316,640)
Prepaid expenses and other current assets (114,960) (264,243)
Security deposits and other assets (860) 13,005
Accounts payable and accrued liabilities 5,036,660 1,000,267
Other liabilities 191,041 2,967
Net cash provided by (used in) operating activities 3,953,811 (17,124)
Depreciation 110,136 50,220
Amortization of intangibles 365,524 297,351
Amortization of debt issuance costs and discounts 211,622 23,475
Provision for doubtful accounts 34,486 30,824
Stock-based compensation 309,610 377,317
Cash flows from investing activities:    
Purchase of property and equipment (115,886) (27,740)
Purchase of intangible assets (42,725) (11,198)
Net cash used in investing activities (158,611) (38,938)
Cash flows from financing activities:    
Proceeds from credit facilities 13,361,685 23,630,642
Repayments of credit facilities (14,036,808) (23,635,775)
Repayments of notes payable (135,543)  
Proceeds from stock option exercises 253,389  
Net cash used in financing activities (557,277) (5,133)
Net increase (decrease) in cash and cash equivalents 3,237,923 (61,195)
Cash and cash equivalents at beginning of period 7,516,260 3,411,108
Cash and cash equivalents at end of period 10,754,183 3,349,913
Supplemental cash flow information:    
Cash paid for interest 353,960 56,482
Cash paid for income taxes $ 4,000 $ 50,233
v3.21.1
The Company and Description of Business
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
The Company and Description of Business

1. The Company and Description of Business

The accompanying condensed consolidated financial statements include the accounts of Quest Resource Holding Corporation (“QRHC”) and its subsidiaries, Quest Resource Management Group, LLC (“Quest”), Landfill Diversion Innovations, LLC (“LDI”), Youchange, Inc. (“Youchange”), Quest Vertigent Corporation (“QVC”), Quest Vertigent One, LLC (“QV One”), and Quest Sustainability Services, Inc. (“QSS”) (collectively, “we,” “us,” “our,” or “our company”).  

Operations – We are a national provider of waste and recycling services to customers from across multiple industry sectors that are typically larger, multi-location businesses.  We create customer-specific programs and perform the related services for the collection, processing, recycling, disposal, and tracking of waste streams and recyclables.

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

On October 19, 2020, Quest acquired substantially all of the assets used in the business of Green Remedies Waste and Recycling, Inc. (“Green Remedies”), a leading provider of independent environmental services, particularly in multi-family housing, located in Burlington, NC. See Note 3 for more information regarding the acquisition.

v3.21.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Presentation and Consolidation

The condensed consolidated financial statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.

The accompanying condensed consolidated financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our financial position at March 31, 2021 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2020 condensed consolidated balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP. As QRHC, Quest, LDI, Youchange, QVC, QV One, and QSS each operate as environmental-based service companies, we did not deem segment reporting necessary.

All intercompany accounts and transactions have been eliminated in consolidation. Interim results are subject to seasonal variations, and the results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.

Recent Accounting Pronouncements

Adopted

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

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

Pending Adoption

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

There have been no other recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to us.

v3.21.1
Acquisition
3 Months Ended
Mar. 31, 2021
Business Combinations [Abstract]  
Acquisition

3.  Acquisition

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

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

Purchase price allocation:

 

 

 

 

Accounts receivable, net

 

 

1,331,190

 

Machinery and equipment

 

 

1,270,705

 

Intangible assets

 

 

5,890,000

 

Goodwill

 

 

8,101,895

 

Current liabilities

 

 

(527,907

)

 

 

$

16,065,883

 

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

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

Deferred consideration payable to the seller includes $2,684,250 payable in either cash or shares of our common stock at our option, and an earn-out not to exceed $2,250,000 over an earn-out period, as defined in the Asset Purchase Agreement.  We valued the earn-out liability at $440,000 using a Monte Carlo simulation (a Level 3 measurement under Accounting Standards Codification (“ASC”) 820, Fair Value Measurement).  The fair value estimate uses unobservable inputs that reflect our own assumptions as to the performance target benchmarks of the acquired business and discount rates used in the calculation.  As the earn-out liability is a contingent consideration arrangement, it is subject to periodic revaluation in accordance with ASC 820.  Changes in the estimated fair value of the contingent earn-out consideration would be reflected in our results of operations in the period in which they are identified.  We believe the estimated fair value of the earn-out, based on the evaluation of the performance of the acquired business is materially accurate as of March 31, 2021.

The following table presents unaudited pro forma information for the three months ended March 31, 2020 as if the Acquisition had occurred at the beginning of our 2020 fiscal year.  The unaudited pro forma information includes adjustments for amortization expense on definite lived intangible assets acquired, interest expense on debt incurred related to the Acquisition, and the related income tax effects.  

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

 

 

 

Three months ended

 

 

 

March 31, 2020

 

 

 

(unaudited)

 

Revenue

 

$

28,211,053

 

Net loss

 

$

(329,717

)

Loss per share - basic and diluted

 

$

(0.02

)

v3.21.1
Property and Equipment, Net, and Other Assets
3 Months Ended
Mar. 31, 2021
Property Plant And Equipment [Abstract]  
Property and Equipment, Net, and Other Assets

4. Property and Equipment, net, and Other Assets

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $2,305,334

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

     respectively

 

$

1,992,756

 

 

$

1,987,006

 

Right-of-use operating lease asset

 

 

953,852

 

 

 

1,103,761

 

Security deposits and other assets

 

 

294,149

 

 

 

293,288

 

    Property and equipment, net, and other assets

 

$

3,240,757

 

 

$

3,384,055

 

 

We compute depreciation using the straight-line method over the estimated useful lives of the property and equipment. Depreciation expense for the three months ended March 31, 2021 was $110,136, including $68,376 of depreciation expense reflected within “Cost of revenue” in our condensed consolidated statements of operations as it related to assets used in directly servicing customer contracts and was $50,220 for the three months ended March 31, 2020, including $13,818 of depreciation expense reflected within “Cost of revenue.”  

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

On February 20, 2018 (the “Closing Date”), we entered into an Asset Purchase Agreement with Earth Media Partners, LLC to sell certain assets of our wholly owned subsidiary, Earth911, Inc., in exchange for a 19% interest in Earth Media Partners, LLC, which was recorded as an investment in the amount of $246,585 as of the Closing Date, and a potential future earn-out amount of approximately $350,000.  The net assets sold related to the Earth911.com website business and consisted primarily of the website and its content and customers, deferred revenue, and accounts receivable as of the Closing Date.  Earth911, Inc. was subsequently renamed Quest Sustainability Services, Inc.  The carrying amount of our investment in Earth Media Partners, LLC is included in “Security deposits and other assets” and we have an accrued receivable in the amount of $273,165 and $259,017 related to the earn-out included in “Accounts receivable” as of March 31, 2021 and December 31, 2020, respectively.

v3.21.1
Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2021
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

5. Goodwill and Other Intangible Assets

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

  

March 31, 2021 (Unaudited)

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer lists

 

5 years

 

$

5,480,000

 

 

$

492,021

 

 

$

4,987,979

 

Software

 

7 years

 

 

2,179,498

 

 

 

1,361,939

 

 

 

817,559

 

Trademarks

 

7 years

 

 

426,288

 

 

 

26,295

 

 

 

399,993

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Total finite lived intangible assets

 

 

 

$

8,316,469

 

 

$

2,110,938

 

 

$

6,205,531

 

 

December 31, 2020

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer lists

 

5 years

 

$

5,480,000

 

 

$

218,022

 

 

$

5,261,978

 

Software

 

7 years

 

 

2,153,061

 

 

 

1,285,058

 

 

 

868,003

 

Trademarks

 

7 years

 

 

410,000

 

 

 

11,651

 

 

 

398,349

 

Patents

 

7 years

 

 

230,683

 

 

 

230,683

 

 

 

 

Total finite lived intangible assets

 

 

 

$

8,273,744

 

 

$

1,745,414

 

 

$

6,528,330

 

 

March 31, 2021 (Unaudited) and December 31, 2020

 

Estimated

Useful Life

 

Carrying

Amount

 

 

 

 

 

Indefinite lived intangible asset:

 

 

 

 

 

 

 

 

 

 

Goodwill

 

Indefinite

 

$

66,310,385

 

 

 

 

 

We compute amortization using the straight-line method over the useful lives of the finite lived intangible assets.  Amortization expense related to finite lived intangible assets was $365,524 and $297,351 for the three months ended March 31, 2021 and 2020, respectively.

We have no indefinite-lived intangible assets other than goodwill. $58.2 million of the goodwill is not deductible for tax purposes, while $8.1 million of goodwill added in the Acquisition is deductible over its tax-basis life.  

 

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

v3.21.1
Current Liabilities
3 Months Ended
Mar. 31, 2021
Current Liabilities Disclosure [Abstract]  
Current Liabilities

6.  Current Liabilities

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Accounts payable

 

$

17,107,950

 

 

$

12,511,678

 

Accrued taxes

 

 

887,682

 

 

 

837,443

 

Employee compensation

 

 

1,421,228

 

 

 

1,003,365

 

Operating lease liability - current portion

 

 

672,565

 

 

 

668,019

 

Other

 

 

214,024

 

 

 

226,334

 

 

 

$

20,303,449

 

 

$

15,246,839

 

 

Refer to Note 8, Leases for additional disclosure related to the operating lease liability.

The components of Other current liabilities were as follows:

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Deferred seller consideration, current

 

$

1,342,125

 

 

$

1,342,125

 

Deferred revenue

 

 

241,495

 

 

 

50,454

 

 

 

$

1,583,620

 

 

$

1,392,579

 

Refer to Note 3, Acquisition for additional disclosure related to the deferred seller consideration related to the Acquisition.

 

v3.21.1
Notes Payable and Other Long-Term Liabilities, Net
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Notes Payable and Other Long-Term Liabilities, Net

7. Notes Payable and Other Long-term Liabilities, net

Our debt obligations are as follows:

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

Interest Rate (1)

 

2021

 

 

2020

 

 

 

 

 

(Unaudited)

 

 

 

 

 

Monroe Term Loan (2)

 

9.75%

 

$

11,471,250

 

 

$

11,500,000

 

Green Remedies Promissory Note (3)

 

3.0%

 

 

2,577,457

 

 

 

2,684,250

 

BBVA ABL Facility (4)

 

3.0%

 

 

3,624,210

 

 

 

4,299,333

 

Total notes payable

 

 

 

 

17,672,917

 

 

 

18,483,583

 

Less: Current portion of long-term debt

 

 

 

 

(624,383

)

 

 

(624,383

)

Less: Unamortized debt issuance costs

 

 

 

 

(1,581,811

)

 

 

(1,670,529

)

Less: Unamortized OID

 

 

 

 

(468,631

)

 

 

(494,343

)

Less: Unamortized OID warrant

 

 

 

 

(697,792

)

 

 

(745,703

)

Notes payable, net

 

 

 

$

14,300,300

 

 

$

14,948,625

 

(1) Interest rates as of March 31, 2021

 

 

 

 

 

 

 

 

(2) Bears interest at LIBOR rate plus Applicable Margin ranging from 7.5%-10.5%

 

 

 

 

 

 

 

 

(3) Stated interest rate of 3.0%, discounted cash flow rate of 13%

 

 

 

 

 

 

 

 

(4) Bears interest at a Base rate, as defined, plus a margin of 0.75% to 1.25%

 

 

 

 

 

 

 

 

 

We capitalize financing costs we incur related to implementing our debt arrangements.  We record these debt issuance costs associated with our revolving credit facility and our term loan as a reduction of long-term debt, net and amortize them over the contractual life of the related debt arrangements.  The table below summarizes changes in debt issuance costs.

 

 

 

 

 

March 31,

 

 

 

 

 

2021

 

 

 

 

 

(Unaudited)

 

Debt issuance costs

 

 

 

 

 

 

Beginning balance

 

 

 

$

1,670,529

 

Less: Amortization expense

 

 

 

 

(88,718

)

Debt issuance costs, net of accumulated amortization

 

 

 

$

1,581,811

 

 

Revolving Credit Facility

On August 5, 2020 and then as amended on October 19, 2020, QRHC and certain of its domestic subsidiaries entered into a Loan, Security and Guaranty Agreement (the “BBVA Loan Agreement”) with BBVA USA, as a lender, and as administrative agent, collateral agent, and issuing bank, which provides for a credit facility (the “ABL Facility”) comprising the following:

 

An asset-based revolving credit facility in the maximum principal amount of $15.0 million with a sublimit for issuance of letters of credit of up to 10% of the maximum principal amount of the revolving credit facility. Each loan under the revolving credit facility bears interest, at the borrowers’ option, at either the Base Rate, plus the Applicable Margin, or the LIBOR Lending Rate for the Interest Period in effect, plus the Applicable Margin, in each case as defined in the BBVA Loan Agreement. The maturity date of the revolving credit facility is April 19, 2025. The revolving credit facility contains an accordion feature permitting the revolving credit facility to be increased by up to $10 million.

 

An equipment loan facility in the maximum principal amount of $2.0 million. Loans under the equipment loan facility may be requested at any time until August 5, 2023. Each loan under the equipment loan facility bears interest, at the borrowers’ option, at either the Base Rate, plus 1.75%, or the LIBOR Lending Rate for the Interest Period in effect, plus 2.75%. The maturity date of the equipment loan facility is April 19, 2025.

The BBVA Loan Agreement contains certain financial covenants, including a minimum fixed charge coverage ratio. In addition, the BBVA Loan Agreement contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matter customarily restricted in such agreements. The BBVA Loan Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, change of control, and failure of any guaranty or security document supporting the BBVA Loan Agreement to be in full force and effect. Upon the occurrence of an event of default, the outstanding obligations under the BBVA Loan Agreement may be accelerated and become immediately due and payable.

The ABL Facility bears interest, at our option, at either the Base Rate, as defined in the BBVA Loan Agreement, plus a margin ranging from 0.75% to 1.25% (3.0% as of March 31, 2021), or the LIBOR Lending Rate for the interest period in effect, plus a margin ranging from 1.75% to 2.25% (no borrowings as of March 31, 2021). 

As of March 31, 2021, the ABL Facility borrowing base availability was $15,000,000, of which $3,624,210 principal was outstanding.

LIBOR is expected to be discontinued after 2021.  The ABL Facility provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable.  However, there can be no assurances as to whether such replacement or alternative rate will be more or less favorable than LIBOR.  We intend to monitor the developments with respect to the potential phasing out of LIBOR after 2021 and will work with BBVA USA to ensure any transition away from LIBOR will have minimal impact on our financial condition.  We however can provide no assurances regarding the impact of the discontinuation of LIBOR on the interest rate that we would be required to pay or on our financial condition.

Monroe Term Loan

On October 19, 2020, QRHC and certain of its domestic subsidiaries entered into a Credit Agreement (the “Credit Agreement”), dated as of October 19, 2020, with Monroe Capital Management Advisors, LLC (“Monroe Capital”), as administrative agent for the lenders thereto.  Among other things, the Credit Agreement provides for the following:

 

A senior secured term loan facility in the principal amount of $11.5 million. The senior secured term loan at the LIBOR Rate for LIBOR Loans plus the Applicable Margin; provided, that if the provision of LIBOR Loans becomes unlawful or unavailable, then interest will be payable at a rate per annum equal to the Base Rate from time to time in effect plus the Applicable Margin for Base Rate Loans. The maturity date of the term loan facility is October 19, 2025 (the "Maturity Date").  The senior secured term loan will amortize in aggregate annual amounts equal to 1.00% of the original principal amount of the senior secured term loan facility with the balance payable on the Maturity Date.  Proceeds of the senior secured term loan were permitted to be used in connection with the Acquisition.

 

A delayed draw term loan facility in the maximum principal amount of $12.5 million. Loans under the delayed draw term loan facility may be requested at any time until October 19, 2021.  Pricing and maturity for the outstanding principal amount of the delayed draw term loan shall be the same as for the senior secured term loan.  Proceeds of the delayed draw term loan are to be used for Permitted Acquisitions (as defined in the Credit Agreement).

 

An accordion term loan facility in the maximum principal amount of $40.0 million.  Loans under the accordion loan facility may be requested at any time until the Maturity Date. Each accordion term loan shall be on the same terms as those applicable to the senior secured term loan.  Proceeds of accordion term loans are permitted to be used for Permitted Acquisitions.

The Credit Agreement contains certain financial covenants, including a minimum fixed charge coverage ratio and a senior net leverage ratio.  In addition, the Credit Agreement contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements.  The Credit Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, change of control, and failure of any guaranty or security document supporting the Credit Agreement to be in full force and effect. Upon the occurrence of an event of default, the outstanding obligations under the Credit Agreement may be accelerated and become immediately due and payable.

At the same time as the borrowing of the $11.5 million under the Credit Agreement, in a separate agreement, we issued Monroe Capital a warrant to purchase 500,000 shares of QRHC’s common stock exercisable immediately.  For the $12.5 million delayed draw term loan facility, we will issue a separate warrant to purchase 350,000 shares upon drawing on this facility or on October 19, 2021, whichever occurs first, or upon certain other events.  Both warrants have an exercise price of $1.50 per share and an expiration date of March 19, 2028.  We estimated the value of the 500,000-share warrant issued using the Black Scholes option pricing model and recorded a debt discount of approximately $766,000 which is being amortized over the term of the Credit Agreement.  We also executed a letter agreement that provides that the warrant holder will receive minimum net proceeds of $1 million less any net proceeds received from the sale of the warrant shares, which is conditional on the full exercise and sale of all the warrant shares at the same time and upon a date two years after the closing date of the agreement.

Green Remedies Promissory Note

On October 19, 2020, we issued an unsecured subordinated promissory note to the seller of Green Remedies in the aggregate principal amount of $2,684,250, payable commencing on January 1, 2021 in quarterly installments through October 1, 2025 and subject to an interest rate of 3.0% per annum.

Interest Expense

The amount of interest expense related to borrowings for the three months ended March 31, 2021 and 2020 was $348,307 and $60,845, respectively. Debt issuance costs of $1,757,856 are being amortized to interest expense over the lives of the related debt arrangements.  As of March 31, 2021, the unamortized portion of the debt issuance costs was $1,581,811.  The amount of interest expense related to the amortization of debt issuance costs for the three months ended March 31, 2021 and 2020 was $88,718 and $23,475, respectively.  Debt discount (“OID”) of $1,674,178 is being amortized to interest expense over the lives of the related debt and consideration arrangements.  As of March 31, 2021, the unamortized portion of OIDs was $1,473,239.  The amount of interest expense related to the amortization of OID costs for the three months ended March 31, 2021 and 2020 is $122,905 and nil, respectively.

Other long-term liabilities, net

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

2021

 

 

2020

 

 

 

 

 

(Unaudited)

 

 

 

 

 

Deferred seller consideration, net

 

 

 

$

1,035,309

 

 

$

986,028

 

Deferred consideration - earn-out

 

 

 

 

440,000

 

 

 

440,000

 

Operating lease liability

 

 

 

 

373,706

 

 

 

543,564

 

Other

 

 

 

 

4,167

 

 

 

4,167

 

 

 

 

 

$

1,853,182

 

 

$

1,973,759

 

 

We recorded deferred consideration in connection with the Acquisition as further described in Note 3.  At March 31, 2021 and December 31, 2020 the unamortized portion of OID on the deferred consideration was $306,816 and $356,097, respectively.  The non-current portion of deferred consideration payable to the seller is payable in either cash or shares of our common stock at our option.  The earn-out is not to exceed $2,250,000 over an earn-out period, as defined in the Asset Purchase Agreement.  We valued the earn-out liability at $440,000 using a Monte Carlo simulation.

v3.21.1
Leases
3 Months Ended
Mar. 31, 2021
Lessee Disclosure [Abstract]  
Leases

8. Leases

We lease corporate office space in The Colony, Texas under an 84-month, non-cancelable operating lease.  Upon the adoption of ASC 842 on January 1, 2019, we recorded approximately $2.0 million and $2.2 million to record the operating lease right-of-use asset and the related liabilities, respectively.  Our office lease had a remaining term of 1.5 years as of March 31, 2021, and we used an effective interest rate of 2.456%, which was our incremental borrowing rate in effect at the inception of the lease as our lease does not provide a readily determinable implicit rate.

In connection with our acquisition of the Green Remedies Assets, we entered into a lease for office space in Burlington, NC.  We recorded a right-of-use asset associated with this lease of approximately $80,000.  The lease expires in October 2023.  This office lease had a remaining term of 2.5 years as of March 31, 2021, and we used an effective interest rate of 9.50%, which was our incremental borrowing rate in effect at the inception of the lease as our lease does not provide a readily determinable implicit rate.  This lease may be terminated under certain conditions as defined in the lease agreement.  The lessor is a related party that is owned by the seller of Green Remedies and is employed by us.

The future minimum lease payments required under our office leases as of March 31, 2021 are as follows:    

 

 

Amount

 

2021

 

$

521,100

 

2022

 

 

528,750

 

2023

 

 

24,513

 

   Total lease payments

 

 

1,074,363

 

Less:  Interest

 

 

(28,092

)

    Present value of lease liabilities

 

$

1,046,271

 

 

Balance Sheet Classification

The table below presents the lease related assets and liabilities recorded on the balance sheet. Right-of-use assets and related liabilities related to finance leases at March 31, 2021 are de minimis.

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

Operating Leases:

(Unaudited)

 

 

 

 

 

Right-of-use operating lease asset:

 

 

 

 

 

 

 

   Property and equipment, net and other assets

$

953,852

 

 

$

1,103,761

 

 

 

 

 

 

 

 

 

Lease Liabilities:

 

 

 

 

 

 

 

   Accounts payable and accrued liabilities

$

672,565

 

 

$

668,019

 

   Other long-term liabilities

 

373,706

 

 

 

543,564

 

       Total operating lease liabilities

$

1,046,271

 

 

$

1,211,583

 

Lease Costs

For the three months ended March 31, 2021 and 2020, we recorded approximately $158,000 and $150,000, respectively, of fixed cost operating lease expense.  Our operating lease expense is offset by a minimum annual incentive received from a local Economic Development Council, which is accrued monthly and will continue over the term of the corporate office lease through August 2022.  This minimum annual incentive is $93,600 effective September 2020 through the remainder of the lease term.

Effective December 1, 2019, we subleased a portion of our corporate office space to a single tenant.  The sublease agreement is accounted for as an operating lease and we recognize sublease income as an offset to operating lease expense on a straight-line basis over the term of the sublease agreement through August 2022.  Sublease income, net of amortized leasing costs, for the three months ended March 31, 2021 was approximately $13,000.    

Cash paid for operating leases approximated operating lease expense and non-cash right of use asset amortization for the three months ended March 31, 2021 and 2020.  We did not obtain any new operating lease right-of-use assets in the three months ended March 31, 2021.

v3.21.1
Revenue
3 Months Ended
Mar. 31, 2021
Revenue From Contract With Customer [Abstract]  
Revenue

9. Revenue

Operating Revenues

We provide businesses with services to reuse, recycle, and dispose of a wide variety of waste streams and recyclables generated by their operations.  Service revenues are primarily generated from fees charged for our collection, transfer, disposal and recycling services and from sales of commodities by our recycling operations.  In addition, we have product sales and other revenue primarily from sales of products such as antifreeze and windshield washer fluid, as well as minor ancillary services.  

Revenue Recognition

We recognize revenue as services are performed or products are delivered.  For example, we recognize revenue as waste and recyclable material are collected or when products are delivered.  We recognize revenue net of any contracted pricing discounts or rebate arrangements.    

We generally recognize revenue for the gross amount of consideration received as we are generally the primary obligor (or principal) in our contracts with customers as we hold complete responsibility to the customer for contract fulfillment.  We record amounts collected from customers for sales tax on a net basis.

Disaggregation of Revenue

The following table presents our revenue disaggregated by source.  Two customers accounted for 46.9% of revenue for the three months ended March 31, 2021, and three customers accounted for 54.0% of revenue for the three months ended March 31, 2020.   We operate primarily in the United States, with minor services in Canada.

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

Revenue Type:

 

 

 

 

 

 

 

 

Services

 

$

32,704,583

 

 

$

22,755,451

 

Product sales and other

 

 

2,397,408

 

 

 

2,576,363

 

   Total revenue

 

$

35,101,991

 

 

$

25,331,814

 

Contract Balances

Our incremental direct costs of obtaining a customer contract are generally deferred and amortized to selling, general, and administrative expense or as a reduction to revenue (depending on the nature of the cost) over the estimated life of the customer contract.  We classify our contract acquisition costs as current or noncurrent based on the timing of when we expect to recognize the amortization and are included in other assets.

As of March 31, 2021 and December 31, 2020, we had $50,000 and $100,000, respectively, of deferred contract costs.  During the three months ended March 31, 2021 and 2020, we amortized $50,000 and $56,250, respectively, of deferred contract costs to selling, general, and administrative expense.

We bill certain customers in advance, and, accordingly, we defer recognition of related revenues as a contract liability until the services are provided and control is transferred to the customer.  As of March 31, 2021 and December 31, 2020, we had $241,495 and $50,454, respectively, of deferred revenue which was classified in “Other current liabilities.”

v3.21.1
Income Taxes
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

Our statutory income tax rate is anticipated to be 27%.  We had income tax expense of $61,833 and an income tax benefit of $52,732 for the three months ended March 31, 2021 and 2020, respectively, which was attributable to state tax obligations based on current estimated state tax apportionments for states with no net operating loss carryforwards, and the reserve against the benefit of the net operating losses at the federal level.

We compute income taxes using the asset and liability method in accordance with FASB ASC Topic 740, Income Taxes. Under the asset and liability method, we determine deferred income tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities and measure them using currently enacted tax rates and laws. We provide a valuation allowance to reduce the amount of deferred tax assets that, based on available evidence, is more likely than not to be realized. Realization of our net operating loss carryforward was not reasonably assured as of March 31, 2021 and December 31, 2020, and we had recorded a valuation allowance of $12,251,000 and $12,533,000, respectively, against deferred tax assets in excess of deferred tax liabilities in the accompanying condensed consolidated financial statements. As of March 31, 2021 and December 31, 2020, we had federal income tax net operating loss carryforwards of approximately $12,700,000 and $14,500,000, respectively, which expire at various dates ranging from 2032-2037.

 

v3.21.1
Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

11. Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, deferred revenue, and notes payable. We do not believe that we are exposed to significant interest, currency, or credit risks arising from these financial instruments.  The fair values of these financial instruments approximate their carrying values, based on their short maturities or, for notes payable, based on borrowing rates currently available to us for loans with similar terms and maturities.  Contingent liabilities are measured at fair value on a recurring basis.  The fair value measurements are generally determined using unobservable inputs and are classified within Level 3 of the fair value hierarchy.  See discussion of the contingent earn-out liability in Note 3, Acquisition.

 

v3.21.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Stockholders' Equity

12. Stockholders’ Equity

Preferred StockOur authorized preferred stock consists of 10,000,000 shares of preferred stock with a par value of $0.001, of which no shares have been issued or are outstanding.

Common Stock – Our authorized common stock consists of 200,000,000 shares of common stock with a par value of $0.001, of which 18,689,807 and 18,413,419 shares were issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.

Employee Stock Purchase Plan – On September 17, 2014, our stockholders approved our 2014 Employee Stock Purchase Plan (“ESPP”).  We recorded expense of $4,224 and $6,667 related to the ESPP for the three months ended March 31, 2021 and 2020, respectively.

Warrants

Warrant activity for the three months ended March 31, 2021 was as follows:

 

 

 

Warrants

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Number

 

 

Exercise Price

 

 

Exercise Price

 

 

 

of Shares

 

 

per Share

 

 

Per Share

 

Outstanding at December 31, 2020

 

 

1,021,060

 

 

$1.15  —  $3.88

 

 

$

1.56

 

Exercised

 

 

(181,834

)

 

$1.15  —  $3.88

 

 

$

1.23

 

Canceled/Forfeited

 

 

(339,226

)

 

$1.15  —  $3.88

 

 

$

1.83

 

Outstanding at March 31, 2021

 

 

500,000

 

 

 

$1.50

 

 

$

1.50

 

 

The following table summarizes the warrants issued and outstanding as of March 31, 2021:

 

 

 

 

Date of

 

 

 

 

Shares of

 

Description

 

Issuance

 

Expiration

 

Exercise Price

 

 

Common Stock

 

Exercisable Warrants

 

10/19/2020

 

03/19/2028

 

$

1.50

 

 

 

500,000

 

Stock Options – We recorded stock option expense of $216,958 and $294,661 for the three months ended March 31, 2021 and 2020, respectively.  The following table summarizes the stock option activity for the three months ended March 31, 2021:

 

 

 

Stock Options

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Exercise

 

Average

 

 

 

Number

 

 

Price Per

 

Exercise Price

 

 

 

of Shares

 

 

Share

 

Per Share

 

Outstanding at December 31, 2020

 

 

3,177,942

 

 

$1.17 — $23.20

 

$

2.78

 

Granted

 

 

193,000

 

 

$3.83  —   $3.01

 

$

3.82

 

Exercised

 

 

(94,554

)

 

$3.10  —  $1.48

 

$

2.68

 

Cancelled/Forfeited

 

 

(6,250

)

 

$5.44

 

$

5.44

 

Outstanding at March 31, 2021

 

 

3,270,138

 

 

$1.17 — $23.20

 

$

2.84

 

 

Deferred Stock Units – Effective September 1, 2019, nonemployee directors can elect to receive all or a portion of their annual retainers in the form of deferred stock units (“DSUs”).   The DSUs are recognized at their fair value on the date of grant.  Each DSU represents the right to receive one share of our common stock following the completion of a director’s service.  During the three months ended March 31, 2021, we granted 2,845 DSUs and recorded director compensation expense of $8,661 related to the grants.  In addition, during the three months ended March 31, 2021 we granted 13,333 DSUs to executive employees and recorded compensation expense of $79,768, which includes an accrual of anticipated bonus expense to be paid in DSUs for certain executive employees.  We had 89,409 and 73,231 DSUs outstanding at March 31, 2021 and December 31, 2020, respectively.

v3.21.1
Net Income (Loss) per Share
3 Months Ended
Mar. 31, 2021
Earnings Per Share [Abstract]  
Net Income (Loss) per Share

13. Net Income (Loss) per Share

We compute basic net income (loss) per share using the weighted average number of shares of common stock outstanding plus the number of common stock equivalents for DSUs during the period. We compute diluted net income (loss) per share using the weighted average number of shares of common stock outstanding during the period, adjusted for the dilutive effect of common stock equivalents.  In periods where losses are reported, the weighted average number of shares of common stock outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.  Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of outstanding stock options.  Dilutive potential securities are excluded from the computation of earnings per share if their effect is antidilutive.  The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method.  

The computation of basic and diluted net income (loss) per share attributable to common stockholders is as follows:

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(Unaudited)

 

Numerator:

 

 

 

 

 

 

 

Net income (loss) applicable to common stockholders

$

1,146,740

 

 

$

(231,667

)

Denominator:

 

 

 

 

 

 

 

     Weighted average common shares outstanding, basic

 

18,504,993

 

 

 

15,396,703

 

     Effect of dilutive common shares

 

907,692

 

 

 

 

     Weighted average common shares outstanding, diluted

 

19,412,685

 

 

 

15,396,703

 

Net income (loss) per share:

 

 

 

 

 

 

 

Basic

$

0.06

 

 

$

(0.02

)

Diluted

$

0.06

 

 

$

(0.02

)

Anti-dilutive securities excluded from diluted net income (loss) per share:

 

 

 

 

 

 

 

Stock options

 

984,768

 

 

 

2,936,635

 

Warrants

 

 

 

 

521,060

 

Total anti-dilutive securities excluded from net income (loss) per share

 

984,768

 

 

 

3,457,695

 

 

v3.21.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Principles of Presentation and Consolidation

Principles of Presentation and Consolidation

The condensed consolidated financial statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.

The accompanying condensed consolidated financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our financial position at March 31, 2021 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2020 condensed consolidated balance sheet data from audited financial statements; however, we did not include all disclosures required by GAAP. As QRHC, Quest, LDI, Youchange, QVC, QV One, and QSS each operate as environmental-based service companies, we did not deem segment reporting necessary.

All intercompany accounts and transactions have been eliminated in consolidation. Interim results are subject to seasonal variations, and the results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Adopted

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

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

Pending Adoption

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

There have been no other recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to us.

v3.21.1
Acquisition (Tables)
3 Months Ended
Mar. 31, 2021
Business Combinations [Abstract]  
Schedule of Purchase Price Allocation Amount of Assets Acquired and Liabilities Assumed

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

Purchase price allocation:

 

 

 

 

Accounts receivable, net

 

 

1,331,190

 

Machinery and equipment

 

 

1,270,705

 

Intangible assets

 

 

5,890,000

 

Goodwill

 

 

8,101,895

 

Current liabilities

 

 

(527,907

)

 

 

$

16,065,883

 

Schedule of Unaudited Pro Forma Information

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

 

 

 

Three months ended

 

 

 

March 31, 2020

 

 

 

(unaudited)

 

Revenue

 

$

28,211,053

 

Net loss

 

$

(329,717

)

Loss per share - basic and diluted

 

$

(0.02

)

v3.21.1
Property and Equipment, Net, and Other Assets (Tables)
3 Months Ended
Mar. 31, 2021
Property Plant And Equipment [Abstract]  
Components Property and Equipment, Net, and Other Assets

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $2,305,334

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

     respectively

 

$

1,992,756

 

 

$

1,987,006

 

Right-of-use operating lease asset

 

 

953,852

 

 

 

1,103,761

 

Security deposits and other assets

 

 

294,149

 

 

 

293,288

 

    Property and equipment, net, and other assets

 

$

3,240,757

 

 

$

3,384,055

 

v3.21.1
Goodwill and Other Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2021
Goodwill And Intangible Assets Disclosure [Abstract]  
Schedule of Finite-Lived Intangible Assets

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

  

March 31, 2021 (Unaudited)

 

Estimated

Useful Life

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Finite lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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