QWTR 10-Q
Quest Water Global, Inc. (QWTR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from ______________ to________________
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 11, 2022, the registrant’s outstanding common stock consisted of shares.
TABLE OF CONTENTS
| 2 |
Item 1. Financial Statements
Quest Water Global, Inc.
Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2021
(Expressed in US dollars)
(unaudited – prepared by management)
| 3 |
QUEST WATER GLOBAL, INC.
Condensed Consolidated Balance Sheets
(Expressed in US dollars)
(unaudited – prepared by management)
| September 30 2021 | December 31 2020 | |||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | ||||||||
| Unbilled costs | ||||||||
| Prepaid expenses | ||||||||
| Investment in related company (Note3) | ||||||||
| Total assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Convertible notes payable (Note 4) | ||||||||
| Due to related company (Note 3) | ||||||||
| Due to related parties (Note 4) | ||||||||
| Total liabilities | ||||||||
| Nature of operations and continuance of business (Note 1) | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred stock, shares authorized, $ par value, shares issued and outstanding | ||||||||
| Common stock, shares authorized, $ par value, issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Common stock issuable | ||||||||
| Deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | ||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-1 |
QUEST WATER GLOBAL, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in US dollars)
(unaudited – prepared by management)
| Three months ended September 30, 2021 | Three months ended September 30, 2020 | Nine months ended September 30, 2021 | Nine months ended September 30, 2020 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||
| Expenses | ||||||||||||||||
| Advertising and promotion | ||||||||||||||||
| Automotive | ||||||||||||||||
| Consulting fees | ||||||||||||||||
| Management fees (Note 4) | ||||||||||||||||
| Office and miscellaneous | ( | ) | ||||||||||||||
| Professional fees | ||||||||||||||||
| Rent (Note 4) | ||||||||||||||||
| Telephone | ||||||||||||||||
| Transfer agent and filing fees | ||||||||||||||||
| Travel | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss per share, basic and diluted | ||||||||||||||||
| Weighted average number of shares outstanding, basic and diluted | ||||||||||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-2 |
QUEST WATER GLOBAL, INC.
Condensed Consolidated Statements of Stockholders’ Deficit
(Expressed in US dollars)
(unaudited – prepared by management)
| Preferred stock | Common stock | Additional paid-in | Common stock | |||||||||||||||||||||||||||||
| Number | Amount
$ | Number | Amount
$ | capital
$ | issuable
$ | Deficit
$ | Total
$ | |||||||||||||||||||||||||
| Balance, December 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, December 31, 2019 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-3 |
QUEST WATER GLOBAL, INC.
Condensed Consolidated Statements of Cash Flows
(Expressed in US dollars)
(unaudited – prepared by management)
| Nine months ended September 30, 2021 | Nine months ended September 30, 2020 | |||||||
| $ | $ | |||||||
| Operating Activities: | ||||||||
| Net loss for the period | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Unbilled costs | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Due to related company | ( | ) | ||||||
| Due to related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | ||||||||
| Supplemental disclosures: | ||||||||
| Interest paid | ||||||||
| Income tax paid | ||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-4 |
QUEST WATER GLOBAL, INC.
Notes to the Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2021
(Expressed in US dollars)
(unaudited – prepared by management))
| 1. | Nature of Operations and Continuance of Business |
Quest Water Global, Inc. (the “Company”) was incorporated on February 25, 2010, under the laws of the State of Delaware. The Company is an innovative water technology company that provides solutions to water scarce regions. The Company’s operations to date have been limited primarily to capital formation, organization, and development of its business plan.
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company has not been significant, but management continues to monitor the situation.
These
consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its
assets and discharge its liabilities in the normal course of business. As at September 30, 2021, the Company has a working capital deficiency
of $
| 2. | Summary of Significant Accounting Policies |
| (a) | Basis of Presentation and Principles of Consolidation |
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States (“US GAAP”), and are expressed in US dollars. These 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.
| (b) | Interim Financial Statements |
The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes for the fiscal year ended December 31, 2020. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.
The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.
| (c) | 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.
| F-5 |
QUEST WATER GLOBAL, INC.
Notes to the Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2021
(Expressed in US dollars)
(unaudited – prepared by management))
| 2. | Summary of Significant Accounting Policies (continued) |
| (c) | Foreign Currency Translation (continued) |
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.
| (d) | Recent Accounting Pronouncements |
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 3. | Investment in and Due to Related Company |
The
Company invested $
As
at December 31, 2020, AQUAtap had issued a sales order and advanced $
| 4. | Convertible Notes Payable |
| (a) | On
May 9, 2012, the Company received proceeds of $ |
| (b) | On
July 30, 2012, the Company received proceeds of $ |
| 5. | Related Party Transactions |
| (a) | As
at September 30, 2021, a total of $ |
| (b) | As
at September 30, 2021, a total of $ |
| (c) | For
the nine months ended September 30, 2021, the Company incurred a total of $ |
| (d) | For
the nine months ended September 30, 2021, the Company incurred $ |
| 6. | Subsequent Events |
On November 15, 2021, the Company entered
into a memorandum of understanding (“MOU”) with Pathogen Detection Systems, Inc. (“PDSI”), an Ontario corporation
and the owner of TECTA solution, a United States Environmental Protection Agency approved microbiological water quality monitoring system.
Under the terms of the MOU, the two companies will work together with the goal of having PDSI become the exclusive microbiological monitoring
provider for all AQUAtap installations world-wide. At the same time, the Company agreed to purchase from PDSI, five TectraTM microbiological
test instruments for $
On December 31, 2021, the creditors owning the convertible notes described in Note 4 agreed to cancel the outstanding debt owing to them and fully and irrevocably discharged the Company from any and all obligations associated with these debts.
| F-6 |
PRESENTATION OF INFORMATION
As used in this quarterly report, the terms “we”, “us”, “our” and the “Company” mean Quest Water Global, Inc. and its consolidated subsidiaries, unless otherwise indicated.
This quarterly report includes our interim unaudited consolidated financial statements as at and for the period ended September 30, 2021. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”). All financial information in this quarterly report is presented in U.S. dollars, unless otherwise indicated, and should be read in conjunction with the financial statements and the notes thereto included in this quarterly report.
As disclosed in our current report on Form 8-K dated January 10, 2012, on January 6, 2012, we completed a share exchange with Quest Water Solutions, Inc. (“Quest NV”), a Nevada corporation that is now our wholly owned subsidiary and operating business (the “Share Exchange”). 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. Our consolidated financial statements are therefore, in substance, those of Quest NV.
FORWARD-LOOKING STATEMENTS
This quarterly report, any supplement to this quarterly report, and any documents incorporated by reference in this quarterly report, include “forward-looking statements”. To the extent that the information presented in this quarterly report discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”, “forecasts”, “expects”, “plans” and “proposes”. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
The forward-looking statements made in this quarterly report relate only to events or information as of the date on which the statements are made. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this quarterly report and the documents that we reference in this quarterly report and have filed as exhibits with the understanding that our actual future results may be materially different from what we expect. You should not rely upon forward-looking statements as predictions of future events.
| 4 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
| 5 |
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, that subsequently established a wholly owned subsidiary, AQUAtap Global Investments Inc., a British Columbia, Canada corporation, in November 2021. Through these entities, 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. The AQUAtap entities, together with their strategic global partners, plan 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.
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.
| 6 |
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 September 30, 2021
Revenue
We generated $790 in revenue during the three months ended September 30, 2021, whereas we did not generate any revenue during the same period in the prior year. The revenue was offset by $1,050 in cost of goods sold, for a gross margin of $(260). 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 September 30, 2021, we incurred $131,031 in total expenses, including $107,500 in management fees, $8,884 in professional fees, $6,487 in transfer agent and filing fees, $5,250 in rent, $2,307 in automotive expenses, $771 in consulting fees and $712 in telephone expenses, as offset by an $880 office and miscellaneous expense recovery. During the same period in the prior year, we incurred $116,006 in total expenses, including $102,500 in management fees, $5,640 office and miscellaneous expenses, $5,250 in rent, $1,611 in automotive expenses, $722 in telephone expenses $146 in transfer agent and filing fees and $137 in advertising and promotion expenses. Except for the minor increases in our professional fees and transfer agent and filing fees, our expenses were relatively consistent between the two periods.
Net Loss
During the three months ended September 30, 2021, we incurred a net loss of $131,291, whereas we incurred a net loss of $116,006 during the same period in the prior year. We did not experience any net loss per share during the three months ended September 30, 2021 or 2020.
| 7 |
For the Nine Months Ended September 30, 2021
Revenue
We generated $150,790 in revenue during the nine months ended September 30, 2021, whereas we did not generate any revenue during the same period in the prior year. Substantially 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 $113,774 in cost of goods sold, for a gross margin of $37,016. 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 nine months ended September 30, 2021, we incurred $368,214 in total expenses, including $322,500 in management fees, $15,750 in rent, $9,271 in professional fees, $7,119 in transfer agent and filing fees, $7,111 in automotive expenses, $3,342 in office and miscellaneous expenses, $2,350 in telephone expenses and $771 in consulting fees. During the same period in the prior year, we incurred $346,490 in total expenses, including $307,500 in management fees, $15,750 in rent, $6,034 in automotive expenses, $7,781 in office and miscellaneous expenses, $3,006 in travel expenses, $2,528 in professional fees, $1,995 in transfer agent and filing fees, $1,423 in telephone expenses and $473 in advertising and promotion expenses. Our expenses were therefore relatively consistent between the two periods.
Net Loss
During the nine months ended September 30, 2021, we incurred a net loss of $331,198, whereas we incurred a net loss of $346,490 during the same period in the prior year. We did not experience any net loss per share during the nine months ended September 30, 2021 or 2020
Liquidity and Capital Resources
As of September 30, 2021, we had $4,284 in cash, $19,045 in total assets, $3,758,574 in total liabilities and a working capital deficiency of $3,746,749. As of that date, we also had an accumulated deficit of $10,112,388.
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 nine months ended September 30, 2021, we spent $431 in net cash on operating activities, compared to $50,160 in net cash spending on operating activities during the same period in the prior year. The significant decrease in our net cash spending on operating activities during the nine months ended September 30, 2021 was primarily attributable to the decrease in our net loss as described above, as well as certain changes in our operating assets and liabilities, notably the “due to related company” and “unbilled costs” balances.
We did not spend or receive any cash in respect of investing activities or financing activities during the nine months ended September 30, 2021 or 2020.
During the nine months ended September 30, 2021, our cash decreased by $431 as a result of our operating activities, from $4,715 to $4,284. As of September 30, 2021, we did not have sufficient cash resources to meet our operating expenses for the next month based on our then-current burn rate.
| 8 |
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 WEPSTM technology, and we anticipate that we will require a minimum of $946,000 to pursue those plans.
As described above, we intend to meet the balance of our cash requirements for the next 12 months through advances from related parties as well as a combination of debt financing and equity financing through private placements as circumstances allow. We are not presently contacting broker/dealers in Canada and elsewhere regarding possible financing arrangements, but we intend to initiate such contact once the current cease trade order in effect against us in the Province of British Columbia, Canada has been revoked. Regardless, there is no assurance that we will be successful in completing any private placement or other financings. If we are unsuccessful in obtaining sufficient funds through our capital raising efforts, we may review other financing options.
During the next 12 months, we estimate that our planned expenditures will include the following:
| Description | Amount ($) | |||
| 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 September 30, 2021, we had a working capital deficiency of $3,746,749 and an accumulated deficit of $10,112,388. 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.
| 9 |
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, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
As of the end of the period covered by this report, management, with the participation of our Chief Executive and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, management concluded that our disclosure controls and procedures were not effective due to certain deficiencies in our internal control over financial reporting.
Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) during the period ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting us, our common stock, any of our subsidiaries or our officers or directors of those of our subsidiaries’ in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The following documents are filed as a part of this quarterly report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: March 11, 2022 | QUEST WATER GLOBAL, INC. | |
| By: | /s/ John Balanko | |
| John Balanko | ||
| Chairman, President, Chief Executive Officer, Director | ||
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