QUEST WATER GLOBAL, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following discussion and analysis of our results of operations and financial condition are drawn from our audited consolidated financial statements and accompanying notes included elsewhere in this annual report and from Section 1 and Presentation of information” which appears at the beginning of this annual report.



Overview


We provide sustainable and environmentally friendly solutions to water-scarce regions. Our goal is to solve the vital problem of water quality and water supply by providing an alternative and sustainable source of pure water at the lowest possible environmental cost for areas of the world that need it, while by becoming a leading company in the supply of decentralized and turnkey solutions using alternative energy for the purification, desalination and distribution of drinking water.

We have developed an exclusive AQUAtap™ community water purification and distribution system consisting of a self-contained water purification system using either a reverse osmosis membrane or an ultrafiltration membrane, powered by photovoltaic solar panels and housed in modified shipping containers. Each unit is energy self-sufficient with minimal operation and maintenance costs. We believe this product represents the first truly eco-friendly solution to drinking water shortages because it is self-contained, decentralized and sustainable, and because each unit is capable of converting brackish, sea or contaminated surface water into drinking water. high quality at a rate of up to 100,000 liters per day.

In addition to solar powered water purification systems, we have also developed a technology known as WEPSTM which produces potable water from the humidity in the atmosphere. WEPSTM technology works by converting moisture into water, otherwise known as atmospheric water extraction.



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Results of Operations



Revenue


We have not generated any income during the years ended December 31, 2020 or 2019. We expect to incur substantial losses for the foreseeable future and our ability to generate income over the next 12 months remains uncertain.



Expenses


During the year ended December 31, 2020we hired $459,270 in total expenses, including $410,000 in management fees, $21,000 for rent, $9,429 in office and miscellaneous expenses, $7,593 in car expenses, $3,006 in our travel expenses, $2,850 in transfer agent and depository fees, $2,528 in professional fees,
$2,391 in telephone charges and $473 in advertising and promotion expenses.

In the past fiscal year, we engaged $554,769 in total expenses, including
$384,000 in management fees, $90,000 in consulting fees, $21,000 for rent,
$14,076 in travel expenses, $11,358 in transfer agent and depository fees, $9,951 in professional fees, $9,430 in car expenses, $7,923 in office and miscellaneous expenses, $3,670 advertising and promotion costs, and $3,361
in telephone charges.

The decrease in $95,499 or approximately 18% of our total expenses between 2019 and 2020 largely result from declining consulting fees year over year.



Net Loss


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

Cash and capital resources

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

To date, we have experienced negative operating cash flow and are dependent on the sale of our common stock and capital contributions to fund our operations. We expect this situation to continue for the foreseeable future and expect us to experience negative cash flow in the year ended. December 31, 2021.

During the year ended December 31, 2020We used $535,731 net operating cash, compared to $623,645 net cash used in operating activities in the prior year. The decrease of approximately 14% in our net cash expenses related to operating activities during the year ended December 31, 2020 was primarily due to our lower net loss, as described above.

During the year ended December 31, 2020 we did not use net cash on investing activities, while we used $7,600 net cash from investing activities in the prior year, all of which was in the form of an investment in AQUAtap Oasis Partnership SARL



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

During the year ended December 31, 2020our cash has decreased by $50,217 as a result of our operating and financing activities, $54,932 for $4,715. From
December 31, 2020, we did not have enough cash to meet our operating expenses for even a month based on our then-prevailing consumption 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 and distribution systems as well as using our WEPSTM technology, and we anticipate that we will need a minimum of
$946,000 to pursue these 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 and equity financing through private placements, if circumstances permit. We do not currently contact brokers/dealers in Canada
and elsewhere regarding potential 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. In any event, there can be no assurance that we will be successful in completing any private placement or other financings. If we are unable to raise sufficient funds through our capital raising efforts, we may consider 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 that we will continue to realize our assets and discharge our liabilities in the normal course of our business. Like a December 31, 2020we had a working capital deficit of $3,415,561 and a cumulative deficit of $9,781,190. Our continuation as a going concern depends on the continued financial support of our creditors, our ability to obtain the equity financing necessary to continue our operations and, ultimately, the execution of profitable operations. These factors raise substantial doubts about our ability to continue our business. Our financial statements do not include any adjustments to the recoverability and classification of the amounts of assets recognized and the classification of liabilities that may be necessary if we are unable to continue our business.



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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 our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or our capital resources that is material to investors.



Critical Accounting Policies


We have identified certain accounting policies, described below, that are important to the representation of our current financial condition and results of operations.

Basis of presentation and consolidation

Our consolidated financial statements and accompanying notes are presented in accordance with generally accepted accounting principles. 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 corporation incorporated under the laws of state of nevadathe wholly owned subsidiary of Quest Nevada, Quest Water Solutions Inc.a corporation 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 state of nevada. All inter-company balances and transactions have been eliminated on consolidation.



Foreign Currency Translation


The Company’s functional currency is the US dollar. Foreign currency transactions are translated into the currency of measurement at the exchange rates prevailing on the date of the transaction. Monetary items on the balance sheet expressed in foreign currencies are converted into US dollars at the exchange rates in effect on the balance sheet date. The resulting exchange gains and losses are recognized in profit or loss.

The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to convert the accounts of its integrated operations into US dollars. Monetary assets and liabilities are translated at the exchange rates prevailing on 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 depreciation, which is translated on the same basis as the related asset. The resulting exchange gains or losses are recognized in profit or loss.



Investments


The Company accounts for its investments in other entities by following ASC 323, Investments,”Equity method and joint ventures“(“ASC-323”) under which interests of 20% or more but less than control are accounted for using the equity method. Under this method, carrying cost is initially recognized at cost and then increased or decreased by recognizing its percentage of a gain or loss in its income statement and a charge or credit corresponding to the carrying amount of the asset.

If the Company exercises significant influence, the investment could be accounted for as a variable interest entity, which would require consolidation and accounting for a non-controlling interest.

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