The following discussion and analysis of our results of operations and financial
condition has been derived from and should be read in conjunction with our
audited consolidated financial statements and the related notes thereto that
appear elsewhere in this annual report, as well as Item 1 and the “Presentation
of Information” section that appears at the beginning of this annual report.
Overview
We provide sustainable and environmentally sound solutions to water scarce
regions. Our goal is to address the vital issue of water quality and water
supply by providing an alternative, sustainable source of pure water at the
smallest possible environmental cost to global areas in need, while becoming a
leading company in providing decentralized, turn-key solutions using alternative
energy for the purification, desalination and distribution of clean drinking
water.
We have developed a proprietary AQUAtap™ Community Water Purification and
Distribution System consisting of a self-contained water purification system
using either a reverse osmosis membrane or ultrafiltration membrane, powered by
photovoltaic solar panels and hosted in modified shipping containers. Each unit
is energy self-sufficient with minimal operational and maintenance costs. We
believe that this product represents the first truly environmentally sound
solution to drinking water shortages as it is autonomous, decentralized and
sustainable, and because each unit is capable of converting brackish, sea or
contaminated surface water into high quality drinking water at a rate of up to
100,000 litres per day.
In addition to the solar-powered water purification systems, we have also
developed a technology known as WEPSTM that produces potable water from humidity
in the atmosphere. WEPSTM technology works by converting humidity into water,
otherwise known as atmospheric water extraction.
Results of Operations
Revenue
We generated $150,000 in revenue during the year ended December 31, 2021,
whereas we did not generate any revenue during the same period in the prior
year. All of the revenue was attributable to a sales order and advance payment
from AQUAtap Oasis Partnership S.A.R.L., and was offset by $112,764 in cost of
goods sold, for a gross profit of $37,236. Notwithstanding the foregoing, we
anticipate that we will incur substantial losses for the foreseeable future and
our ability to generate any revenues in the next 12 months continues to be
uncertain.
Expenses
During the year ended December 31, 2021, we incurred $524,586 in total expenses,
including $430,000 in management fees, $46,777 in professional fees, $21,000 in
rent, $8,824 in automotive expenses, $7,933 in office and miscellaneous
expenses, $7,120 in transfer agent and filing fees and $2,932 in telephone
expenses.
During the prior year, we incurred $459,270 in total expenses, including
$410,000 in management fees, $21,000 in rent, $9,902 in office and miscellaneous
expenses, $7,593 in automotive expenses, $3,006 in our travel expenses, $2,850
in transfer agent and filing fees, $2,528 in professional fees and $2,391 in
telephone expenses.
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The increase of $65,316 or approximately 14% in our total expenses between 2020
and 2021 largely resulted from the increase in our professional fees from
year-to-year.
Other Income
During the year ended December 31, 2021, certain creditors owning an aggregate
of $175,000 in convertible notes we previously issued agreed to cancel the notes
for nominal consideration, resulting in the forgiveness of debt in an identical
amount. In addition, we reversed an aggregate of $50,306 in previously recorded
accounts payable that we determined were uncollectable by the applicable
creditors.
Net Loss
During the year ended December 31, 2021, we incurred a net loss of $262,044,
whereas we incurred a net loss of $459,270 (equal to our total expenses) during
the prior year. Our net loss per share during those two years was Nil and $0.01,
respectively.
Liquidity and Capital Resources
As of December 31, 2021, we had $4,227 in cash, $11,447 in total assets,
$3,681,822 in total liabilities and a working capital deficit of $3,677,595. As
of December 31, 2021 we had an accumulated deficit of $10,003,209.
To date, we have experienced negative cash flows from operations and we have
been dependent on sales of our common stock and capital contributions to fund
our operations. We expect this situation to continue for the foreseeable future,
and we anticipate that we will experience negative cash flows during the year
ended December 31, 2022.
During the year ended December 31, 2021, we used $528,441 in net cash on
operating activities, compared to $535,731 in net cash use on operating
activities during the prior year. Our net cash spending on operating activities
during the two fiscal years was therefore reasonably consistent.
We did not use any net cash on investing activities during the years ended
December 31, 2021 or 2020.
We received $527,953 in net cash from financing activities during the year ended
December 31, 2021, all of which was in the form of advances from related
parties. During the year ended December 31, 2020, we received $485,514 in net
cash from financing activities, substantially all of which was in the form of
advances from related parties.
During the year ended December 31, 2021, our cash decreased by $488 as a result
of our operating and financing activities, from $4,715 to $4,227. As of December
31, 2021, we did not have sufficient cash resources to meet our operating
expenses for even one month based on our then-current burn rate. However, we
have continued to rely on advances from related parties to continue operating
and expect to do so for the foreseeable future.
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Plan of Operations
Our plan of operations over the next 12 months is to continue to address water
quality and supply issues in the DRC through the installation of our AQUAtapTM
Community Water Purification & Distribution systems as well as the employment of
our WEPSTMtechnology, and we anticipate that we will require a minimum of
$946,000 to pursue those plans.
As described above, we intend to meet the balance of our cash requirements for
the next 12 months through advances from related parties as well as a
combination of debt financing and equity financing through private placements as
circumstances allow. We are not presently contacting broker/dealers in Canada
and elsewhere regarding possible financing arrangements, but we intend to
initiate such contact once the current cease trade order in effect against us in
the Province of British Columbia, Canada has been revoked. Regardless, there is
no assurance that we will be successful in completing any private placement or
other financings. If we are unsuccessful in obtaining sufficient funds through
our capital raising efforts, we may review other financing options.
During the next 12 months, we estimate that our planned expenditures will
include the following:
Amount
Description ($)
Equipment purchases 250,000
Management fees 430,000
Consulting fees 120,000
Professional fees 50,000
Rent 21,000
Advertising and promotion expenses 15,000
Travel and automotive expenses 30,000
Other general and administrative expenses 30,000
Total 946,000
Going Concern
Our financial statements have been prepared on a going concern basis, which
implies we will continue to realize our assets and discharge our liabilities in
the normal course of business. As at December 31, 2021, we had a working capital
deficit of $3,677,595 and an accumulated deficit of $10,003,209. Our
continuation as a going concern is dependent upon the continued financial
support from our creditors, our ability to obtain necessary equity financing to
continue operations, and ultimately on the attainment of profitable operations.
These factors raise substantial doubt regarding our ability to continue as a
going concern. Our financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should we be unable to continue as a
going concern.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
We have identified certain accounting policies, described below, that are
important to the portrayal of our current financial condition and results of
operations.
Basis of Presentation and Consolidation
Our consolidated financial statements and related notes are presented in
accordance with accounting principles generally accepted in the United States
and are expressed in US dollars. Our consolidated financial statements include
the accounts of the Company; the Company’s wholly-owned subsidiaries Quest Water
Solutions, Inc., a company incorporated under the laws of the State of Nevada
(“Quest Nevada”), and AQUAtap Global, Inc., a company incorporated under the
laws of the State of Wyoming (“AQUAtap WY”); Quest Nevada’s wholly-owned
subsidiary, Quest Water Solutions Inc., a company incorporated under the laws of
the Province of British Columbia, Canada (“Quest BC”); AQUAtap WY’s wholly-owned
subsidiary, AQUAtap Global Investments Inc., a company incorporated under the
laws of the Province of British Columbia, Canada; and Quest BC’s wholly-owned
inactive subsidiary, Heliosource, Inc., a company incorporated under the laws of
the State of Nevada. All inter-company balances and transactions have been
eliminated on consolidation.
Foreign Currency Translation
The Company’s functional currency is US dollars. Transactions in foreign
currencies are translated into the currency of measurement at the exchange rates
in effect on the transaction date. Monetary balance sheet items expressed in
foreign currencies are translated into US dollars at the exchange rates in
effect at the balance sheet date. The resulting exchange gains and losses are
recognized in income.
The Company’s integrated foreign subsidiaries are financially or operationally
dependent on the Company. The Company uses the temporal method to translate the
accounts of its integrated operations into US dollars. Monetary assets and
liabilities are translated at the exchange rates in effect at the balance sheet
date. Non-monetary assets and liabilities are translated at historical rates.
Revenues and expenses are translated at average rates for the period, except for
amortization, which is translated on the same basis as the related asset. The
resulting exchange gains or losses are recognized in the consolidated statement
of operations.
Investments
The Company accounts for its investments in other entities by following ASC 323,
Investments, “Equity Method and Joint Ventures” whereby equity investments of
20% or greater but less than control are accounted for using the equity method.
Under this method, the carrying cost is initially recorded at cost and then
increased or decreased by recording its percentage of gain or loss in its
statement of operations and a corresponding charge or credit to the carrying
value of the asset.
Should the Company exercise significant influence, the investment might be
accounted for as a variable interest entity which would require consolidation
and recognition of a non-controlling interest.
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