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
interim unaudited consolidated financial statements and the related notes
thereto that appear elsewhere in this quarterly report, as well as the
"Presentation of Information" section that appears at the beginning of this
quarterly report.
Overview
We are an innovative water technology company that provides sustainable and
environmentally sound solutions to water-scarce regions. We use proven
technologies to create economically viable products that address the critical
shortage of clean drinking water in both domestic and foreign emerging markets.
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.
To date, we have focused our activities on the formation of safe water
partnerships and the sale and installation of our products, with emphasis on our
AQUAtapTM Community Water Purification & Distribution systems throughout North
America, Latin America, the Caribbean and Africa, with specific attention to the
Democratic Republic of the Congo (the "DRC") and Angola.
Corporate History and Background
We were incorporated under the laws of Delaware on February 25, 2010. From our
inception until the closing of the Share Exchange, we sought to provide dental
and other medical professionals with turn-key marketing solutions to generate
referrals from existing clients and new business from the general public through
our wholly owned subsidiary RPM Dental Systems, LLC ("RPM Kentucky"). RPM
Kentucky was formed on September 15, 2009, under the laws of the Commonwealth of
Kentucky, and we acquired RPM Kentucky on March 23, 2010.
Prior to the Share Exchange, we had minimal revenue and our operations were
limited to capital formation, organization and development of our business plan.
As a result of the Share Exchange, we ceased our prior operations and, through
Quest NV, we now operate as an innovative water technology company that provides
sustainable and environmentally sound solutions to water-scarce regions.
Quest NV was incorporated under the laws of Nevada on October 20, 2008 and
commenced operations on February 20, 2009. Its operations to date have consisted
of business formation, strategic development, marketing, technologies
development, negotiations with technologies companies and capital raising
activities. Prior to 2021, Quest NV had not generated any revenues since its
inception.
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Acquisition of Quest NV
On January 6, 2012, we completed the Share Exchange whereby we acquired all of
the issued and outstanding capital stock of Quest NV in exchange for 2,568,493
shares of our common stock (on a pre-forward split basis), or approximately
62.74% of our issued and outstanding common stock as of the consummation of the
Share Exchange. Subsequent to the Share Exchange, we completed a 20 for 1
forward split of our common stock (the "Forward Split") that became effective on
March 1, 2012. Pursuant to the Forward Split, the 2,568,493 shares described
above increased to 51,369,860 shares.
As a result of the Share Exchange, Quest NV became our wholly owned subsidiary
and John Balanko and Peter Miele became our principal stockholders. The Share
Exchange was treated as a recapitalization effected through a share exchange,
with Quest NV as the accounting acquirer and the Company as the accounting
acquiree.
In connection with and effective upon the closing of the Share Exchange, Josh
Morita, our former President, Chief Executive Officer, director and principal
stockholder, and Dr. Laura Sloan, our former director, resigned as members of
our Board of Directors and Mr. Morita resigned as our sole officer. Also
effective upon the closing of the Share Exchange, John Balanko and Peter Miele
were appointed to fill the vacancies on our Board of Directors created by the
resignations of Mr. Morita and Ms. Sloan. In addition, our Board of Directors
appointed Mr. Balanko as our President and Chief Executive Officer and Mr. Miele
as our Vice President and Secretary, all effective upon the closing of the Share
Exchange. On April 13, 2012, we also appointed Mr. Miele as our Chief Financial
Officer.
As a result of our acquisition of Quest NV, Quest NV became our wholly owned
subsidiary and we assumed the business and operations of Quest NV. We then
changed our name from RPM Dental, Inc. to Quest Water Global, Inc. to more
accurately reflect our new business operations.
AQUAtap Entities
In July 2021, we incorporated a new operating subsidiary, AQUAtap Global, Inc.,
a Wyoming corporation ("AQUAtap Global"). Through this entity, we expect to
coordinate, facilitate and manage our current, planned and future safe water
partnerships throughout Africa, Latin America and the Caribbean that provide
clean water initiatives for underserved communities. AQUAtap Global, together
with its strategic global partners, plans to establish subordinate partnerships
in various countries and engage experienced local individuals and organizations
for operational expertise. We anticipate that this will enable the subordinate
partnerships to enter into public-private partnerships (commonly known as PPPs)
with NGOs, strategic investors and various levels of government.
Quest Water Solutions Inc., a British Columbia, Canada corporation and wholly
owned subsidiary of Quest NV ("Quest BC"), will remain as the technology
provider to our safe water initiatives. Quest BC is responsible for designing,
engineering and manufacturing our range of products, and it also sells these
water technology products directly to end users through our corporate sales &
marketing divisions and through global distributors and agents.
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Business 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 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
For the Three Months Ended June 30, 2022
Revenue
We did not generate any revenue during the three months ended June 30, 2022, or
the same period in the prior year. 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 three months ended June 30, 2022, we incurred $142,721 in total
expenses, including $112,500 in management fees, $13,375 in professional fees,
$6,198 in transfer agent and filing fees, $5,539 in rent, $2,670 in automotive
expenses, $1,563 in office and miscellaneous expenses and $876 in telephone
expenses. During the same period in the prior year, we incurred $117,354 in
total expenses, including $107,500 in management fees, $5,250 in rent, $1,743 in
automotive expenses, $1,397 in office and miscellaneous expenses, $833 in
telephone expenses and $244 in transfer agent and filing fees. Except for minor
changes in our rent and transfer agent and filing fees, our expenses were
relatively consistent between the two periods.
Net Loss
During the three months ended June 30, 2022, we incurred a net loss of $142,721,
whereas we incurred a net loss of $117,354 during the same period in the prior
year. Our net loss per share during the three months ended June 30, 2022 and
2021 was $0.002 and $0.001, respectively.
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For the Six Months Ended June 30, 2022
Revenue
We did not generate any revenue during the six months ended June 30, 2022,
whereas we generated $150,000 in 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 $112,724 in cost of
goods sold, for a gross margin of $37,276. As described above, 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 six months ended June 30, 2022, we incurred $287,356 in total
expenses, including $225,000 in management fees, $27,156 in professional fees,
$14,004 in transfer agent and filing fees, $10,789 in rent, $5,315 in automotive
expenses, $3,253 in office and miscellaneous expenses and $1,839 in telephone
expenses. During the same period in the prior year, we incurred $237,183 in
total expenses, including $215,000 in management fees, $10,500 in rent, $4,804
in automotive expenses, $4,222 in office and miscellaneous expenses, $1,638 in
telephone expenses, $632 in transfer agent and filing fees and $387 in
professional fees. Other than the increases in our professional fees and
transfer agent and filing fees, both of which were associated with the
revocation application in respect of the cease trade order previously in effect
against us in the Province of British Columbia, Canada, our expenses were
relatively consistent between the two periods.
Net Loss
During the six months ended June 30, 2022, we incurred a net loss of $287,356
and a net loss per share of $0.003, whereas we incurred a net loss of $199,907
and a net loss per share of $0.002 during the same period in the prior year.
Liquidity and Capital Resources
As of June 30, 2022 we had $110 in cash, $14,546 in total assets, $3,972,277 in
total liabilities and a working capital deficiency of $3,966,368. As of that
date, we also had an accumulated deficit of $10,290,565.
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 six months ended June 30, 2022, we spent $2,617 in net cash on
operating activities, whereas we spent $114 in net cash spending on operating
activities during the same period in the prior year. Although our net loss in
the current period increased as described above, it was offset by certain
changes in our operating assets and liabilities, notably the "due to related
company" and "unbilled costs" balances.
We spent $1,500 in net cash during the six months ended June 30, 2022, all of
which was attributable to equipment purchases. We did not spend or receive any
cash in respect of investing activities during the same period in the prior
year.
We did not spend or receive any cash in respect of financing activities during
the six months ended June 30, 2022 or 2021.
During the six months ended June 30, 2022, our cash decreased by $4,117 as a
result of our operating activities, from $4,227 to $110. As of June 30, 2022, we
did not have sufficient cash resources to meet our operating expenses for the
next month based on our then-current burn rate.
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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
$946,000 to pursue those plans.
As described above, we intend to meet the balance of our cash requirements for
the next 12 months through advances from related parties as well as a
combination of debt financing and equity financing through private placements as
circumstances allow. On July 13, 2022, the British Columbia Securities
Commission revoked the cease trade order previously in effect against us in the
Province of British Columbia, Canada, and we are presently in the process of
contacting broker/dealers in Canada and elsewhere regarding possible financing
arrangements. There is no assurance that we will be successful in completing any
private placement or other financings. If we are unsuccessful in obtaining
sufficient funds through our capital raising efforts, we may review other
financing options.
During the next 12 months, we estimate that our planned expenditures will
include the following:
Amount
Description ($)
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 June 30, 2022, we had a working capital
deficiency of $3,966,368 and an accumulated deficit of $10,290,565. 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
The Company's 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; and Quest Nevada's wholly owned
subsidiary, Quest Water Solutions Inc., a company incorporated under the laws of
the province of British Columbia, Canada. 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.
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