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.





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Results of Operations



Revenue

We did not generate any revenues during the years ended December 31, 2020 or 2019. 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, 2020, we incurred $459,270 in total expenses, including $410,000 in management fees, $21,000 in rent, $9,429 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, $2,391 in telephone expenses and $473 in advertising and promotion expenses.

During the prior year, we incurred $554,769 in total expenses, including $384,000 in management fees, $90,000 in consulting fees, $21,000 in rent, $14,076 in travel expenses, $11,358 in transfer agent and filing fees, $9,951 in professional fees, $9,430 in automotive expenses, $7,923 in office and miscellaneous expenses, $3,670 in advertising and promotion expenses, and $3,361 in telephone expenses.

The decrease of $95,499 or approximately 18% in our total expenses between 2019 and 2020 largely resulted from the decrease in consulting fees from year-to-year.





Net Loss

During the year ended December 31, 2020, we incurred a net loss of $459,270 (equal to our total expenses), whereas we incurred a net loss of $555,149 during the prior year. Our net loss per share during those two years was $0.01 for each year.

Liquidity and Capital Resources

As of December 31, 2020, we had $4,715 in cash, $124,659 in total assets, $3,532,990 in total liabilities and a working capital deficit of $3,415,561. As of December 31, 2020 we had an accumulated deficit of $9,781,190.

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, 2021.

During the year ended December 31, 2020, we used $535,731 in net cash on operating activities, compared to $623,645 in net cash use on operating activities during the prior year. The decrease of approximately 14% in our net cash spending on operating activities during the fiscal year ended December 31, 2020 was primarily attributable to the decrease in our net loss as described above.

During the year ended December 31, 2020 we did not use any net cash on investing activities, whereas we used $7,600 in net cash on investing activities during the prior year, all of which was in the form of an investment in AQUAtap Oasis Partnership S.A.R.L.





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We received $485,514 in cash from financing activities during the year ended December 31, 2020, substantially all of which was in the form of advances from related parties. During the year ended December 31, 2019, we received $686,177 in cash from financing activities, consisting of $200,000 in proceeds from the issuance of our common stock, $312,126 in advances from related parties, and $174,051 in advances from AQUAtap Oasis Partnership S.A.R.L.

During the year ended December 31, 2020, our cash decreased by $50,217 as a result of our operating and financing activities, from $54,932 to $4,715. As of December 31, 2020, 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.





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, 2020, we had a working capital deficit of $3,415,561 and an accumulated deficit of $9,781,190. 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, its wholly-owned subsidiary, Quest Water Solutions, Inc. ("Quest Nevada"), a company incorporated under the laws of the State of Nevada, Quest Nevada's wholly owned subsidiary, Quest Water Solutions Inc., a company incorporated under the laws of the province of British Columbia, Canada; and its wholly-owned 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 income.





Investments

The Company accounts for its investments in other entities by following ASC 323, Investments, "Equity Method and Joint Ventures" ("ASC-323") 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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