Item
1. Financial Statements
QUARTA-RAD,
INC. AND SUBSIDIARIES
CONDENSED
AND CONSOLIDATED BALANCE SHEETS
QUARTA-RAD,
INC. AND SUBSIDIARIES
CONDENSED
AND CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
QUARTA-RAD,
INC. AND SUBSIDIARIES
CONDENSED
AND CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Six
Months Ended June 30, 2020
(Unaudited)
CONDENSED
AND CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Three
Months Ended June 30, 2020
(Unaudited)
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|
|
|
|
|
|
|
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Total
|
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|
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Common Stock
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|
|
Additional
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|
|
Accumulated
|
|
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Stockholders’
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|
|
|
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Shares
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|
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Amount
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Paid-In Capital
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|
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Deficit
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|
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Deficit
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Balance, March 31, 2020
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|
|
15,326,150
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|
|
$
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1,533
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|
|
$
|
65,197
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|
|
$
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(100,062
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)
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$
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(33,332
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)
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Net income
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|
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-
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|
|
|
-
|
|
|
|
-
|
|
|
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4,632
|
|
|
|
4,632
|
|
|
Balance, June 30, 2020
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15,326,150
|
|
|
$
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1,533
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|
|
$
|
65,197
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|
|
$
|
(95,430
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)
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|
$
|
(28,700
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)
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QUARTA-RAD,
INC. AND SUBSIDIARIES
CONDENSED
AND CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Six
Months Ended June 30, 2021
(Unaudited)
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Total
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Common Stock
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Additional
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Retained Earnings/
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Stockholders’
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Shares
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Amount
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Paid-In Capital
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|
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(Accumulated Deficit)
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|
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Equity
|
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Balance, December 31, 2020
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|
|
15,659,483
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|
|
$
|
1,866
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|
|
$
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337,427
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|
|
$
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(21,114
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)
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|
$
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318,179
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|
|
Net income
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|
|
-
|
|
|
|
-
|
|
|
|
-
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|
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93,526
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|
|
|
93,526
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|
Balance, June 30, 2021
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|
15,659,483
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|
|
$
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1,866
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|
|
$
|
337,427
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|
|
$
|
72,412
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|
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$
|
411,705
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CONDENSED
AND CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Three
Months Ended June 30, 2021
(Unaudited)
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Total
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Common Stock
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Additional
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Retained
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Stockholders’
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|
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Shares
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Amount
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Paid-In Capital
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Earnings
|
|
|
Equity
|
|
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Balance, March 31, 2021
|
|
|
15,659,483
|
|
|
$
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1,866
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|
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$
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337,427
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|
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$
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31,335
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|
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$
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370,628
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Net income
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|
-
|
|
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-
|
|
|
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-
|
|
|
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41,077
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|
|
|
41,077
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|
|
Balance, June 30, 2021
|
|
|
15,659,483
|
|
|
$
|
1,866
|
|
|
$
|
337,427
|
|
|
$
|
72,412
|
|
|
$
|
411,705
|
|
QUARTA-RAD,
INC. AND SUBSIDIARIES
CONDENSED
AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
QUARTA-RAD,
INC. AND SUBSIDIARIES
Notes
to the Condensed and Consolidated Unaudited Financial Statements
NOTE
1 - BASIS OF PRESENTATION
The
condensed and consolidated and condensed balance sheet of Quarta-Rad, Inc. and Subsidiaries (the “Company”) as of June 30,
2021, and the statements of operations and changes in stockholders’ equity/deficit for the three months and six months ended June
30, 2021 and 2020, and the cash flows for the six months ended June 30, 2021 and 2020 have not been audited. However,
in the opinion of management, such information includes all adjustments (consisting of normal recurring adjustments), which are necessary
to accurately reflect the financial position of the Company as of June 30, 2021, the results of operations and cash flows for the periods
ended June 30, 2021 and 2020.
The
condensed and consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements. Certain information
and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) have been omitted, although management believes that the disclosures are adequate to make
the information presented not misleading. Interim period results are not necessarily indicative of the results to be achieved for an
entire year. These consolidated and condensed financial statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2020.
During
April 2020 the Company acquired Quarta-Rad USA, Inc., a Delaware corporation, as a wholly owned subsidiary. There was no consideration
paid for the shares. The purpose of the acquisition is to separate the sales of certain products in separate entities. There was no activity,
assets or liabilities in the subsidiary through June 30, 2021.
During
December 2020, the Company acquired the common controlled entity, Sellavir, Inc., a Delaware Corporation. Sellavir was owned 100% by
Quarta-Rad’s majority shareholder. 333,333 shares of common stock in Quarta-Rad were exchanged for 100% of the outstanding shares
of Sellavir.
Under
an acquisition of common control, the purchase is recorded at historical cost. The fair value of the common stock issued was approximately
$170,000. The excess carry-over basis of the net assets acquired was treated as a capital contribution and included in additional paid-in
capital.
NOTE
2 - NATURE OF BUSINESS
The
Company distributes detection devices, including but not limited to Geiger counters, to homeowners and interested customers in North
America and Europe. The Company targets homebuilders and home renovation contractors.
Sellavir
is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis
through advanced and proprietary technologies.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Advertising
The
Company expenses advertising costs, consisting primarily of placement in multiple publications, along with design and printing costs
of sales materials, when incurred. Advertising expense for the three months and six months ended June 30, 2021 and 2020, amounted to
$20,425, $36,485, $14,217 and $21,087, respectively.
Inventory
Inventories
are stated at the lower of cost or net realizable value. The Company periodically reviews the value of items in inventory and
provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged
to cost of goods sold. The Company’s inventory consists of finished goods available for sale. There were no write-offs for the
three months and six months ended June 30, 2021 or 2020.
Marketable
Securities
Our
investment securities consist of available-for-sale instruments which include $80,909 of tradable equities. Substantially all of our
available-for-sale securities are Level 1. Realized gains and losses on these securities are included in other income in the consolidated
statements of operations. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in other income. Unrealized
losses that are considered other than temporary are recorded in other income with the corresponding reduction to the carrying basis of
the investment.
Principles
of Consolidation
The
consolidated financial statements include the accounts Quarta-Rad, Inc. and its wholly-owned subsidiaries Quarta-Rad USA, Inc. and Sellavir,
Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the related
assets, which is five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or their related lease
terms. Repairs and maintenance costs are charged to expense when incurred.
Long-Lived
Assets
The
Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition
is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset.
No impairment charges were incurred during the three months and six months ended June 30, 2021 and 2020. There can be no assurance, however,
that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of
long-lived assets in the future.
Income
Taxes
The
Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income
Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current
year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s
financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation
allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence,
it is more likely than not that some portion or all of the deferred tax assets will not be realized.
ASC
740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or
expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may
be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical
merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than
50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information.
A liability (including interest and penalties, if applicable) is established to the extent a current benefit has been recognized on a
tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties,
if any, are included as components of income tax expense and income taxes payable.
As
of June 30, 2021, we have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income
tax returns, as well as all open tax years in these jurisdictions. We have identified the U.S. federal and Delaware as our “major”
tax jurisdictions. Generally, we remain subject to Internal Revenue Service examination of our 2017 through 2020 tax returns. However,
we have certain tax attribute carry forwards, which will remain subject to review and adjustment by the relevant tax authorities until
the statute of limitations closes with respect to the year in which such attributes are utilized.
We
believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will
result in a material change to our financial position. Therefore, no reserves for uncertain income tax position have been recorded pursuant
to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Related interest and penalties,
if any, are included as components of income tax expense and income taxes payable.
Earnings
per Share
The
Company’s basic earnings per share are calculated by dividing its net income available to common stockholders by the weighted average
number of common shares outstanding for the period. The Company’s dilutive earnings per share is calculated by dividing its net
income available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted
average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There
were no potentially dilutive instruments outstanding at June 30, 2021.
Fair
Value of Financial Instruments
The
Company’s financial instruments as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 825, “Financial Instruments” include cash, trade accounts receivable, and accounts payable and
accrued expenses. All instruments, except marketable securities, are accounted for on a historical cost basis, which, due to the
short maturity of these financial instruments, approximates fair value at June 30, 2021 and December 31, 2020. Marketable securities
are level one assets recorded at fair value.
FASB
ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value
in accordance with U.S. GAAP, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value as follows:
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●
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Level
1.
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Observable
inputs such as quoted prices in active markets;
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●
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Level
2.
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Inputs,
other than the quoted prices in active markets, that are observable either directly or indirectly; and
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●
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Level
3.
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Unobservable
inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
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Use
of Estimates in Preparation of Financial Statements
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,
and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include
reserves for accounts receivable and inventory, and the European VAT exposure accrual (Note 6).
Revenue
Recognition
The
Company follows guidance from FASB Accounting Standards Codification ASC Topic 606, Revenue from Contracts with Customers (“ASC
606”). The guidance sets forth a five-step revenue recognition model which replaces the prior revenue recognition guidance
in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically
existed in U.S. GAAP. The underlying principle of the standard is that a business or other organization will recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods
or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed
completely in the prior accounting guidance.
Our
principal activities from which we generate our revenue are product sales and consulting services.
Revenue
is measured based on consideration specified in a contract with a customer. A contract with a customer exists when we enter into an enforceable
contract with a customer. The contract is based on either the acceptance of standard terms and conditions on the websites for e-commerce
customers and via telephone with our third-party call center for our print media and direct mail customers, or the execution of terms
and conditions contracts with retailers and wholesalers. These contracts define each party’s rights, payment terms and other contractual
terms and conditions of the sale. Consideration is typically paid prior to shipment via credit card or check when our products are sold
direct to consumers or approximately 30 days from the time control is transferred when sold to wholesalers, distributors and retailers.
We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including
the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining
to the customer.
A
performance obligation is a promise in a contract to transfer a distinct product to the customer, which for us is transfer of devices
to our customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer
that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately
identifiable from other promises in the contract. We have concluded the sale of goods and related shipping and handling are accounted
for as the single performance obligation.
The
transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer
receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which we will be
entitled to receive in exchange for transferring goods to the customer. We issue refunds to e-commerce and print media customers, upon
request, within 30 days of delivery. We estimate the amount of potential refunds at each reporting period using a portfolio approach
of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. For
retailers, distributors and wholesalers, we do not offer a right of return or refund and revenue is recognized at the time products are
shipped to customers. In all cases, judgment is required in estimating these reserves. Actual claims for returns could be materially
different from the estimates. There was no reserve for sales returns and allowances, at June 30, 2021 and December 31, 2020, respectively.
We
recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product
is shipped. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction,
that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after
control over a product has transferred to a customer are accounted for as a fulfilment cost and are included in cost of product sales.
We
recognize consulting revenue over times as services are performed.
Recent
Accounting Pronouncements
In
December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12 Simplifying the Accounting
for Income Taxes. Effective for public entities for fiscal years beginning after December 15, 2020. The ASU is intended to simplify
aspects of accounting for income taxes, including deferred taxes on investments, and calculation of taxes in interim periods. The adoption
of this guidance by the Company did not have a material impact on its financial statements and related disclosures.
NOTE
4–PROPERTY AND EQUIPMENT
Property
and Equipment at June 30, 2021 and December 2020 consisted of:
SCHEDULE OF PROPERTY AND EQUIPMENT
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|
June 30,
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|
December 31,
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|
|
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2021
|
|
|
2020
|
|
|
Computer Equipment
|
|
$
|
4,005
|
|
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$
|
4,005
|
|
|
Accumulated Depreciation
|
|
|
(435
|
)
|
|
|
(35
|
)
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|
Net Property & Equipment
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|
$
|
3,570
|
|
|
$
|
3,970
|
|
The
Company recognized $200,
$400, $-0-
and $-0-
in depreciation expense for the three months and six months ended June 30, 2021 and 2020, respectively.
NOTE
5–RELATED PARTY TRANSACTIONS
The
Company sells radiation monitors and to date has purchased all of its inventory from a company in Russia, which is owned by a minority
shareholder of the Company. Total inventory purchased was $324,590 and $295,035 for the six months ended June 30, 2021 and 2020, respectively.
During
July 2017, the Company entered into an agreement with the Russian Affiliate to develop and update software for a new device for $180,000.
The development contract ended December 31, 2019. The amount due in connection with this agreement as of June 30, 2021 and December 31,
2020 is $126,390.
In
April 2021, the Company began compensating its CEO, who is the majority shareholder. As of June 30, 2021, the Company has accrued $8,000
for this compensation, and as of June 30, 2021 and December 31, 2020, is due $37,403 and $40,935, respectively, for expenses paid by
the shareholder on behalf of the Company, included in related party payables.
Sellavir
had advanced its Officer and sole Shareholder $332,553 during 2019 and 2020 and was included in the December 2020 Sellavir acquisition.
The full amount was paid to the Company in March 2021 through transfer of marketable securities at fair value.
Sellavir
had $90,000 and $180,000 of revenue for the three months and six months ended June 30, 2021, respectively from a related entity wholly
owned by the majority shareholder of the Company.
NOTE
6– COMMITMENTS AND CONTINGENCIES
Contingencies
The
Company is currently undergoing a multi-year VAT tax examination by certain European tax authorities. As of June 30, 2021, the outcome
of these examinations is uncertain, and the Company is disputing any amounts due. The estimated liabilities on the VAT tax exposure could
anywhere from $0 to $125,000 based on estimates and information provided to management. The Company believes its exposure is limited
to $100,000, which was accrued in 2019. The Company paid $41,822 during 2020 and $35,680 during 2021 towards the estimated liability,
a remainder of $22,498 and $58,178 is included in accounts payable and accrued expenses as of June 30, 2021 and December 31, 2020, respectively.
Actual results from this matter could differ from this estimate.
Legal
In
the normal course of business, the Company may become involved in various legal proceedings. The Company knows of no pending or threatened
legal proceeding to which the Company is or will be a party that, if successful, might result in material adverse change in the Company’s
business, properties or financial condition.
NOTE
7–SUBSEQUENT EVENTS
The
Company has performed an evaluation of events occurring subsequent to June 30, 2021 through August 13, 2021. Based on its evaluation,
other than the note below, there is nothing to be disclosed herein.
NOTE
8 - COVID-19
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus
(the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of
origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global
situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19
outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its
results of operations, financial condition, or liquidity. However, if the pandemic continues, it may have an adverse effect on the Company’s
results of future operations, financial position, and liquidity.
The
uncertainty as to the future impact on the Company of the recent COVID-19 outbreak has been considered as part of the Company’s
adoption of the going concern basis. Thus far, we have not observed a material impact on our sales in the first four months of the year
against the same period in the previous year.
Item
2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations
The
following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement
to the accompanying unaudited condensed financial statements and notes to help provide an understanding of our financial condition, results
of operations and cash flows during the periods included in the accompanying unaudited condensed financial statements.
In
this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our” refer to
Quarta-Rad, Inc., a Delaware corporation, unless the context requires otherwise.
We
intend the following discussion to assist in the understanding of our financial position and our results of operations for the three
and six months ended June 30, 2021 and 2020. You should refer to the Financial Statements and related Notes in conjunction with this
discussion.
Results
of Operations
General
We
were incorporated under the laws of the State of Delaware on November 29, 2011 with fiscal year end in December 31. We were formed to
distribute and sell detection devices to homeowners and interested consumers in North America. Initially, our business plan was to sell
products on consignment from Star Systems Japan, a corporation owned by our majority shareholder. We purchased these products from Quarta-Rad,
Ltd., a company owned by our minority shareholder. We also targeted direct-to-consumer sales since we believe we can distribute these
products through the Internet. We have never been party to any bankruptcy, receivership or similar proceeding, nor have we undergone
any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of
business.
During
April 2020, we acquired Quarta-Rad USA, Inc., a Delaware corporation, as a wholly owned subsidiary. There was no consideration paid for
the shares. The purpose of the acquisition is to separate the sales of certain products in separate entities. There was no activity,
assets or liabilities in the subsidiary through June 30, 2021.
During
December 2020, we acquired Sellavir, Inc, a Delaware corporation, under common control, as a wholly owned subsidiary. We acquired the
company in exchange for 333,333 shares of our common stock. The value of the stock on the date of issue was approximately $170,000. Sellavir
is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis
through advanced and proprietary technologies.
As
of the date of this Form 10-Q, we continue to expand our operations and expect to increase our revenues with additional working capital.
Our chief executive officer and director, Victor Shvetsky, and our director and president, Alexey Golovanov, are our only employees.
Mr. Shvetsky and Mr. Golovanov will devote at least ten hours per week to us but may increase the number of hours as necessary. Beginning
in 2013, we began purchasing the products from Quarta-Rad, Ltd., our related party supplier and it shipped the products to us. We then
shipped the products to a third-party online retailer, to hold for Internet sales and sales to our third-party resellers.
Our
administrative office is located at 1201 N. Orange St., Suite 700, Wilmington, DE 19801, which is a virtual office.
We
continue to focus our business operations on the development of our distribution agreements and reseller network as well as continue
to advertise on the Internet. We plan to continue to utilize our website to promote the products to home renovation contractors and other
purchasers of detection devices. We are promoting the detection products by advertising our website and marketing to independent distributors
and others interested in detection devices. We purchase the products from QRR, which is owned by our minority shareholder and is the
original manufacturer for RADEX product line. Under an oral agreement with QRR, we have the exclusive distribution rights for sale of
QRR products in Europe, the US, and Asia (excluding China) for a period of 10 years. We sell the products we purchase from QRR directly
to third party buyers and to resellers. The purchase terms require us to prepay for the products we purchase at a price that is set forth
in each purchase order. In October 2018, our United Kingdom retail platform was suspended due to certain UK restrictions. We are in the
process of becoming compliant in order to lift these restrictions and exploring and testing new partners for EU distribution. We initially
reserved $100,000 on our balance sheet as accrued expenses in connection with this matter. The Company paid $41,822 during 2020 towards
the estimated liability, and $35,679 in April 2021. A remainder of $22,498 is included in accounts payable and accrued expenses as of
June 30, 2021.
Sellavir
Consulting:
We
expanded our operations through the acquisition of Sellavir Inc. in December 2020. Sellavir is an AI company that leverages its knowledge
in neural networks to provide customized AI and development services to our clients. Our services are focused on offering customized
solutions for image processing. Our current business model relies on identifying the specific customer needs and developing a software
solution to address them. We currently do not have any clients in the US, and our sole revenue stream is from our Japanese reseller.
We rely on their sales staff for the identification of new opportunities in the Japanese market. Quarta-Rad has acquired the company
to:
-
leverage Sellavir capabilities to combine it with its Radex series to offer AI-enhanced radiation detection capabilities
-
expand its scope outside the radiation measurement
Critical
Accounting Policy and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations
section discusses our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these condensed financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts
of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including
those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its
estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting
estimates inherent in the preparation of our condensed financial statements include estimates as to the appropriate carrying value of
certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described
at relevant sections in this discussion and analysis and in the notes to the condensed financial statements included in this Quarterly
Report on Form 10-Q.
The
following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial
statements for the three and six months ended June 30, 2021 and 2020, together with notes thereto, which are included in this Quarterly
Report on Form 10-Q.
The
Company has two operating segments through the operations of Quarta-Rad and Sellavir. Net income for the six months ended June 30, 2021
is comprised of:
|
|
|
Quarta Rad
|
|
|
Sellavir
|
|
|
Total
|
|
|
Sales
|
|
|
515,852
|
|
|
|
180,000
|
|
|
|
695,852
|
|
|
Cost of Good Sold
|
|
|
385,483
|
|
|
|
-
|
|
|
|
385,483
|
|
|
Gross Profit
|
|
|
130,369
|
|
|
|
180,000
|
|
|
|
310,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General & administrative
|
|
|
16,286
|
|
|
|
2,083
|
|
|
|
18,369
|
|
|
Advertising
|
|
|
30,485
|
|
|
|
6,000
|
|
|
|
36,485
|
|
|
Professional and consulting fees
|
|
|
89,788
|
|
|
|
46,512
|
|
|
|
136,300
|
|
|
Operating expenses
|
|
|
136,559
|
|
|
|
54,595
|
|
|
|
191,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from operations
|
|
|
(6,190
|
)
|
|
|
125,405
|
|
|
|
119,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividends
|
|
|
-
|
|
|
|
2
|
|
|
|
2
|
|
|
Unrealized gain on investments
|
|
|
-
|
|
|
|
36,791
|
|
|
|
36,791
|
|
|
Realized loss on investments
|
|
|
-
|
|
|
|
(37,621
|
)
|
|
|
(37,621
|
)
|
|
Income tax expense
|
|
|
1,300
|
|
|
|
(26,161
|
)
|
|
|
(24,861
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
(4,890
|
)
|
|
|
98,416
|
|
|
|
93,526
|
|
The
Company has two operating segments through the operations of Quarta-Rad and Sellavir. Net income for the three months ended June 30,
2021 is comprised of:
|
|
|
Quarta Rad
|
|
|
Sellavir
|
|
|
Total
|
|
|
Sales
|
|
|
271,173
|
|
|
|
90,000
|
|
|
|
361,173
|
|
|
Cost of Good Sold
|
|
|
195,155
|
|
|
|
-
|
|
|
|
195,155
|
|
|
Gross Profit
|
|
|
76,018
|
|
|
|
90,000
|
|
|
|
166,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General & administrative
|
|
|
12,585
|
|
|
|
756
|
|
|
|
13,341
|
|
|
Advertising
|
|
|
14,425
|
|
|
|
6,000
|
|
|
|
20,425
|
|
|
Professional and consulting fees
|
|
|
50,248
|
|
|
|
25,706
|
|
|
|
75,954
|
|
|
Operating expenses
|
|
|
77,258
|
|
|
|
32,462
|
|
|
|
109,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from operations
|
|
|
(1,240
|
)
|
|
|
57,538
|
|
|
|
56,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividends
|
|
|
-
|
|
|
|
2
|
|
|
|
2
|
|
|
Unrealized gain on investments
|
|
|
-
|
|
|
|
33,317
|
|
|
|
33,317
|
|
|
Realized loss on investments
|
|
|
-
|
|
|
|
(37,621
|
)
|
|
|
(37,621
|
)
|
|
Income tax expense
|
|
|
260
|
|
|
|
(11,179
|
)
|
|
|
(10,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
(980
|
)
|
|
|
42,057
|
|
|
|
41,077
|
|
Consolidated
Totals:
Three
months ended June 30, 2021 compared with the three months ended June 30, 2020
Revenues. Our
net revenues increased $129,182, or 55.68% to $361,173 for the three months ended June 30, 2021 compared with $231,991 for the three
months ended June 30, 2020. The increase was due to an increase in the demand of our RD1503 model and revenue from Sellavir.
Cost
of Goods Sold. Our Cost of Goods Sold increased $12,118 or 6.62% to $195,155 for the three months ended June 30, 2021 compared
to $183,037 for the comparable period in 2020. The increase is due to the increase in sales during the quarter.
Operating
Expenses. For the three months ended June 30, 2021, our total operating expenses increased $65,398 or 147.55% to $109,760
compared to $44,322 for the three months ended June 30, 2020. The increase is primarily attributable to the Company’s increase
professional fees and advertising.
Net
Income. Our net income increased $36,445 or 786.81% to $41,077 for the three months ended June 30, 2021 compared to
a net income of $4,632 for the three months ended June 30, 2020. The increase was primarily due to an increase in sales and acquisition
of Sellavir.
Six
months ended June 30, 2021 compared with the six months ended June 30, 2020
Revenues.
Our net revenues increased $283,264, or 68.66% to $695,852 for the six months ended June 30, 2021 compared with $412,588 for
the six months ended June 30, 2020. The increase was due to an increase in the demand of our RD1503 model and revenue from Sellavir.
Cost
of Goods Sold. Our Cost of Goods Sold increased $61,480 or 18.98% to $385,483 for the six months ended June 30, 2021 compared to
$324,003 for the comparable period in 2020. The increase is due to the increase in sales during the quarter.
Operating
Expenses. For the six months ended June 30, 2021, our total operating expenses increased $103,709 or 118.60% to $191,154
compared to $87,445 for the six months ended June 30, 2020. The increase is primarily attributable to the Company’s increase
professional fees and advertising.
Net
Income. Our net income increased $92,386 or 8,104.04% to $93,526 for the six months ended June 30, 2021 compared to a net
income of $1,140 for the six months ended June 30, 2020. The increase was primarily due to an increase in sales and acquisition of Sellavir.
QUARTA-RAD
Three
months ended June 30, 2021 compared with the three months ended June 30, 2020
Revenues.
Our net revenues increased $39,182 or 16.89% to $271,173 for the three months ended June 30, 2021 compared with $231,991 for the
three months ended June 30, 2020. The increase was due to an increase in the demand of our RD1503 model.
Cost
of Goods Sold. Our Cost of Goods Sold increased $12,118 or 6.62% to $195,155 for the three months ended June 30, 2021 compared
to $183,037 for the comparable period in 2020. The increase is due to the increase in sales during the quarter.
Operating
Expenses. For the three months ended June 30, 2021, our total operating expenses increased $32,936 or 74.31% to $77,258 compared
to $44,322 for the three months ended June 30, 2020. The increase is primarily attributable to the Company’s increase
professional fees and general and administrative expenses.
Net
Loss. Our net loss increased $5,612 to $980 for the three months ended June 30, 2021 compared to a net income of $4,632 for the
three months ended June 30, 2020. The increase was primarily due to an increase in operating expenses.
Six
months ended June 30, 2021 compared with the six months ended June 30, 2020
Revenues. Our
net revenues increased $103,264 or 25.03% to $515,852 for the six months ended June 30, 2021 compared with $412,588 for the six
months ended June 30, 2020. The increase was due to an increase in the demand of our RD1503 model.
Cost
of Goods Sold. Our Cost of Goods Sold increased $61,480 or 18.98% to $385,483 for the six months ended June 30, 2021 compared to
$324,003 for the comparable period in 2020. The increase is due to the increase in sales during the quarter.
Operating
Expenses. For the six months ended June 30, 2021, our total operating expenses increased $49,114 or 56.17% to $136,559 compared
to $87,445 for the six months ended June 30, 2020. The increase is primarily attributable to the Company’s increase
professional fees and advertising.
Net
Loss. Our net loss increased $6,030 to $4,890 for the six months ended June 30, 2021 compared to a net income of $1,140 for the
six months ended June 30, 2020. The increase was primarily due to an increase in operating expenses.
SELLAVIR
Three
months ended June 30, 2021 compared with the three months ended June 30, 2020
Revenues. Our
net revenues were $90,000 for the three months ended June 30, 2021 compared with $-0- for the three months ended June 30, 2020. The
increase was due to the acquisition of Sellavir in December 2020.
Operating
Expenses. For the three months ended June 30, 2021, our total operating expenses were $32,462 compared to $-0- for the three
months ended June 30, 2020. The increase was due to the acquisition of Sellavir in December 2020.
Net
Income. Our net income was $42,057 for the three months ended June 30, 2021 compared to $-0-for the three months ended June 30,
2020. The increase was due to the acquisition of Sellavir in December 2020.
Six
months ended June 30, 2021 compared with the six months ended June 30, 2020
Revenues. Our
net revenues were $180,000 for the six months ended June 30, 2021 compared with $-0- for the six months ended June 30, 2020. The
increase was due to the acquisition of Sellavir in December 2020.
Operating
Expenses. For the six months ended June 30, 2021, our total operating expenses were $54,595 compared to $-0- for the six months
ended June 30, 2020. The increase was due to the acquisition of Sellavir in December 2020.
Net
Income. Our net income was $98,416 for the six months ended June 30, 2021 compared to $-0-for the six months ended June 30,
2020. The increase was due to the acquisition of Sellavir in December 2020.
Liquidity
and Capital Resources. During the three months ended June 30, 2021, we used cash for operating expenses from cash on hand and
the sale of products on the Internet and from independent, third party resellers and from consulting revenue from
Sellavir.
Our
total assets were $646,489 and $633,404 as of June 30, 2021 and December 31, 2020, respectively, consisting of $372,474 and
$108,126, respectively, in cash. Our working capital was $408,135 and $314,209 as of June 30, 2021 and December 31, 2020,
respectively.
We
had $13,534 and $16,541 in cash provided by operating activities for the six months ended June 30, 2021 and 2020, respectively.
We
had $250,814 and $-0- in cash provided by investing activities for net sale of marketable securities for the six months ended
June 30, 2021 and 2020, respectively.
We
had no cash provided by financing activities for the six months ended June 30, 2021 and 2020, respectively.
The
Company had no formal long-term lines of credit or other bank financing arrangements as of June 30, 2021.
The
Company has no current plans for the purchase or sale of any plant or equipment.
The
Company has no current plans to make any changes in the number of employees.
Impact
of Inflation
The
Company believes that inflation has had a negligible effect on operations over the past quarter.
Capital
Expenditures
The
Company expended no amounts on capital expenditures for the six months ended June 30, 2021.
Plan
of Operation
Our
business strategy is to continue to market our website (www.quartarad.com). We have used our website to market products for sale
to consumers as well to third party distributors. We will continue to strengthen our presence on e-commerce sites. We are also focusing
on expanding our reseller network by targeting large consumer retail chains.
The
number of detection devices, which we will be able to sell will depend upon the success of our marketing efforts through our website
and the distributors that we will enter into agreement with to sell the products.
During
December 2020, Quarta-Rad acquired Sellavir, Inc, a Delaware corporation, under common control, as a wholly owned subsidiary. We acquired
the company in exchange for 333,333 shares of our common stock. The value of the stock on the date of issue was approximately $170,000.
Sellavir is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies
and analysis through advanced and proprietary technologies. Quarta-Rad has acquired the company to leverage Sellavir capabilities to
combine it with its Radex series to offer AI-enhanced radiation detection capabilities and expand its scope outside of radiation measurement.
We
intend to implement the following tasks within the next twelve months:
Inventory:
We
intend to purchase inventory to increase our sales. We believe that these funds will be initially sufficient for us to increase our inventory
from Quarta-Rad, Ltd. The amount needed for inventory purchases is directly related to the demand for sales of our product.
Marketing:
(Estimated cost $25,000-$75,000). In addition to the website modification costs, we intend to increase our marketing efforts on the Internet
to generate leads and sales. We will also utilize funds to develop marketing brochures and materials to market the products to industry
professionals such as home renovation contractors.
Secure
Distribution Agreements: (Estimated cost $10,000). We plan to seek and secure distribution agreements for the sale of our detection
devices.
Our
management does not anticipate the need to hire additional full or part- time employees over the next three (3) months, as the services
provided by our officers and directors and our independent contractor appear sufficient at this time. We believe that our operations
are currently on a small scale that is manageable by these two individuals as well as our independent contractor. Our management’s
responsibilities are mainly administrative at this stage. While we believe that the addition of employees is not required over the next
three (3) months, the professionals we plan to utilize will be considered independent contractors. We do not intend to enter into any
employment agreements with any of these professionals. Thus, these persons are not intended to be employees of our company.
We
currently do not own any equipment that we would seek to sell in the near future; we do not have any off-balance sheet arrangements;
and we have not paid for expenses on behalf of our directors.
Off-Balance
Sheet Arrangements
None.
Forward
Looking Statements
This
Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of the Securities Exchange Act
of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Reform Act”). The Reform
Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves
so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors
that could cause actual results to differ from the projected results. All statements, other than statements of historical fact that we
make in this Quarterly Report on Form 10-Q are forward-looking. The words “anticipates,” “believes,” “expects,”
“intends,” “will continue,” “estimates,” “plans,” “projects,” the negative
of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does
not mean the statement is not forward-looking.
Forward-looking
statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results,
performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s
beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important
factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities
and Exchange Commission, including on Forms 8-K and 10-K.
We
operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict
all those risks, nor can we assess the impact of all those risks on our business or the extent to which any factor may cause actual results
to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable.
However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking
statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to
update publicly any of them considering new information or future events.
Critical
Accounting Policies
Our
condensed financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial
statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues
and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed financial statements. The estimates
are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and
results could differ from these estimates made by management. Certain accounting policies that require significant management estimates
and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year
ended December 31, 2020 and Note 1 to the Condensed and Consolidated Financial Statements in this Form 10-Q.