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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