UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT under SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2019

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______ to ______

 

Commission File No. 000-55964

 

Quarta-Rad, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

(State or other Jurisdiction of

Incorporation or Organization)

 

45-4232089

(I.R.S. Employer

Identification No.)

 

1201 N. Orange St., Suite 700, Wilmington, DE 19801

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (310) 308-7887

 

Common Stock, $0.0001 par value per share

(Title of Each Class)

 

None

(Name of Each Exchange on Which Registered)

 

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.0001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [  ]   No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [  ]   No  [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 [X]  No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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). Yes [X]   No [ ] [check “yes” if statement is accurate.]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S−K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10−K or any amendment to this Form 10−K. [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a small.  See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] (Do not
check if smaller reporting company) 		Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [   ]   No [X]

 

The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 30, 2020, based upon the last sale price of the common stock of such date: $7,347,356.

 

The number of shares of the registrant’s common stock issued and outstanding as of March 30, 2020 was 15,326,150.

 

 

 

 

 

table of contents

 

PART I 3
Item 1. Description of Business. 3
Item 1A. Risk Factors 8
Item 1B. Unresolved Staff Comments 8
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Mine Safety Disclosures 8
PART II 8
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 8
Item 6. Selected Financial Data 9
Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 9
For the Year Ended December 31, 2019 compared to the year ended December 31, 2018 11
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 13
Item 8. Financial Statements and Supplementary Data 13
Part I – FINANCIAL INFORMATION 17
Balance Sheets F-2
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. 14
Item 9A. Controls and Procedures. 14
Item 9B. Other Information. 15
PART III 16
Item 10. Directors, Executive Officers and Corporate Governance. 16
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 19
Item 13. Certain Relationships and Related Transactions, and Director Independence. 20
Item 14. Principal Accountant Fees and Services. 20
PART IV 21
Item 15. Exhibits, Financial Statement Schedules. 21
Signatures 22

 

2

 

 

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

The information contained in this Report includes some statements that are not purely historical and that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking.

 

Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis of management’s views and assumptions as of the time the statements are made, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished.

 

In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements: technological advances, impact of competition, dependence on key personnel and the need to attract new management, effectiveness of cost and marketing efforts, acceptances of products, ability to expand markets and the availability of capital or other funding on terms satisfactory to us. We disclaim any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

 

For a discussion of the risks, uncertainties, and assumptions that could affect our future events, developments or results, you should carefully review the “Risk Factors” set forth under “Item 1. Description of Business” below. Considering these risks, uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn to be materially different from those we discuss or imply.

 

PART I

 

Item 1. Description of Business.

 

Organization

 

We were incorporated in the State of Delaware as a for-profit company on November 29, 2011, under the name Quatra-Rad, Inc. and our incorporator adopted our bylaws and appointed our two directors. On February 29, 2012, we amended our Certificate of Incorporation to change our name to Quarta-Rad, Inc. On July 16, 2012, we amended and restated its Certificate of Incorporation to increase its authorized shares of common stock to 50,000,000, $0.0001 par value from 1,500, no par value and effected a 10,000 to 1 forward split. On February 4, 2015, we filed a Certificate of Correction to our Certificate of Amendment to Certificate of Incorporation to correct it for inadvertently excluding the 10,000 to 1 forward stock split, which our shareholders and directors approved on June 29, 2012. From November 29, 2011 (inception) through May 2012, we had limited operations. Commencing in May 2012, we began sales and implemented our business plan to distribute detection devices, including but not limited to Geiger counters, to homeowners and interested customers in North America by selling them on consignment on behalf of a related party owned by our majority shareholder and which are purchased from a company owned by our minority shareholder. We also purchase the products directly from the company owned by our minority shareholder and sell them to independent third party resellers. A Geiger counter is an instrument used for measuring ionizing radiation. It detects radiation such as Beta particles, Gamma rays and X-rays using the ionization produced in a Geiger–Müller tube, which gives its name to the instrument. We do not currently manufacture any of the products that we sell. We intend to continue to target homebuilders and home renovation contractors for the sale of products and resellers that market to these customers. Our business activities are now focused on expanding our Internet sales. We have established a fiscal year end of December 31. Initially we sold the products on consignment on behalf of Star Systems Corporation, a Japanese company owned by Victor Shvetsky, our majority shareholder, and purchase products from Quarta-Rad, Ltd., a Russian company owned by Alexey Golovanov, our minority shareholder, which we sell to independent third party resellers. Commencing in 2013, we began selling the products directly to third parties through Internet sales.

 

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On November 29, 2011, we issued 1,500 pre-split shares of our no par value common stock, valued at $1 per share, to our 2 founders, which includes 1,200 pre-split common shares to our chief executive officer, Victor Shvetsky and 300 pre-split common shares to our president, Alexey Golovanov in exchange for organizational services incurred in our formation valued at $1,200 and $300, respectively. We believe that our present capital is sufficient to cover our monthly burn rate for the next 12 months. However, we believe that we will require between $70,000 to $400,000 in cash in 2020 to accomplish the goals set out in our plan of operation (See Item 7). To the extent we are unable to accomplish our goals with the proceeds from the issuance of our common stock, then we intend to use our existing cash or raise additional capital from investors through the sale of our common stock or from loans or advances from our majority shareholder. Our majority shareholder has orally agreed to advance us the funds without interest and has agreed to defer repayment until we are able to repay him. In the fourth quarter of 2016, we raised $65,230 from 34 investors through the issuance of our common stock pursuant to our registration statement. No additional funds were raised in 2018 or 2019.

 

Our principal business, executive and registered statutory office is located at 1201 N. Orange St., Suite 700, Wilmington, DE 19801-1186 and our telephone number is (302) 887-9916 and email contact is info@quartarad.com. Our URL address is www.quartarad.com.

 

Business

 

We commenced operations in May 2012, by selling products on consignment from a company owned by our majority shareholder. In 2012, we purchased products from a company owned by our minority shareholder and sold them to a company owned by our majority shareholder and to third party resellers. We believe the terms of those sales were arms-length. In 2012, we began use of the Internet as well as the services of an independent sales representative to market the products to homeowners and interested customers in North America and the majority of our sales were from unrelated third parties. We market the products to homebuilders and home renovation contractors. We have had limited operations and have limited financial resources. In 2011, our operations were devoted primarily to start-up, development and operational activities as well as related party and third party sales, which included:

 

1. Formation of the Company;
2. Development of our business plan;
3. Evaluating various detection devices;
4. Research on marketing channels/strategies for our detection devices and the industry;
5. Secured our website domain www.quartarad.com and beginning the development of our initial online website; and
6. Research on future products to distribute.
7. Consignment sales on behalf of a related party.
8. Sales to third party resellers.

 

In May 2012, we commenced our business operations by selling products on consignment from a related party company and developing our distribution network. In June 2012, we began to utilize our website to market the products we sell on consignment to our potential customers. We also began implementing our business plan by promoting these products for sale on various websites. We also engaged independent, third party distributors to sell the products. In 2013, increased our Internet presence and increased our sales whereby the majority of our sales were from unrelated third parties. From 2014 to the present, we have continued to sell the products through the Internet to unrelated third parties. 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 have reserved $100,000 on our balance sheet as accrued expenses in connection with this matter.

 

We believe that our principal source of revenue will continue to come from Internet sales and sales to resellers of the following products:

 

Radiation Detection Equipment

 

RADEX RD1503 – basic model of a hand-held radiation detector for the consumer market.

 

RADEX RD1706 – enhanced model of a hand-held radiation detector; additional radiation counter provides for a more accurate results (confirmed by JQA – Japan Quality Assurance organization), vibration alarm and several additional functions improve on the RD1503 design specifications.

 

RADEX RD1008 – high-end radiation detection device that provides readings for Gamma- and Beta- radiation values separately. Equivalent devices from other manufacturers cost 5-10 times more.

 

RADEX RD1212 – new model of hand-held radiation detector for the consumer market. It includes all the functionality of RD1503 model as well as ability to store measured values in memory for later transfer to PC. This device comes with newly developed software, RadexRead, developed by Quarta-Rad Inc to further enhances the RADEX family of Geiger counters by combining the power of PC and Internet, allowing the user to visualize and share their measurements with other RADEX consumers.

 

RADEX RD1212-BT – upgraded version of RD1212 with Bluetooth, now capable of linking to smartphones or tablets to transfer data in real time. Also measures atmospheric pressure and air temperature. Special Android/iOS application for smartphones can be used alongside with this product.

 

RADEX RD ONE – compact personal radiation detector, smaller and less expensive than any of the other models. Besides the size, the device has additional features such as: counts accumulative dose, can display measurements in CPMs and links via USB cord to PC for data transfer and analysis. Other standard features include audio/vibration alarm and adjustable alarm thresholds like on all other models. New analytical software was created to chart and analyze received data.

 

4

 

 

Radon Detection Equipment

 

RADEX M107 – simple Radon gas detector that provides visual/audio alarm when a certain (or legal) threshold is reached.

 

EMI Detection Equipment

 

RADEX EMI50 – hand-held device that provides real-time measuring of Electric Field Strength (in kiloVolt/meter) and Electro Magnetic Field (in microTesla).

 

Light and brightness Detection Equipment

 

RADEX Lupin – Light Meter, Pulse meter and Lucimeter. A hand-held device that measure illumination, brightness and flicker ratio of LED screens, any type of light bulbs or monitors at work or at home. RadexLight Software allows PC connection and data transfer. Spectral sensitivity is identical to a human eye, which separates this model from the competition.

 

Although we have commenced our marketing sales campaign with our own resources and are selling products through online retailers and through resellers, we believe that we need additional capital to increase our sales and expand our marketing program. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to cost effectively purchase and sell the products and market them through the Internet and through distributors. We intend to rely on our Chairman and President’s relationships in the industry to supply us with products and introduce us to resellers. We also intend to market our website to the home renovation industry to solicit orders for the sale of products. There can be no guarantee or assurance that our Chairman or President and/or our website will enable us to purchase products on attractive terms that will allow us to resale them to independent third party distributors.

 

No assurance can be given that the products we purchase will be sold to resellers and, if sold to them, will return an investment or make a profit. To achieve the goal of purchasing products on favorable terms, we plan to be selective in our choice of suppliers and work with our shareholders’ companies as well as other cost-effective suppliers.

 

Major advantages that can be capitalized on immediately are:

 

  ● existing brand recognition of RADEX name;
  ● existing product line up that can be sold now;
  ● access to device library that are in the prototyping stage for a quicker push into production and sales phases;
  ● access to Quarta-Rad, Ltd. engineers and its proprietary tech library that would allow for quick prototyping and manufacture of devices based on reports from the field sales-force; and
  ● Exclusive distribution rights for the RADEX brand in the United States, Canada and the European Union

 

Quarta-Rad, Ltd.’s proprietary tech library is combination of source code, database, firmware and hardware used for measuring and displaying radiation measurements. The source code is for the: (i) RD1212 web program; (ii) RD1212 BT application for Android and iPhone; (iii) Web RadexRead; and (iv) database of radiation measurements. The Web RadexRead and database of radiation measurements are owned, managed, and controlled by us. Quarta-Rad, Ltd. owns and controls the firmware source code used by all Radex series as well as the hardware design. Victor Shvetsky, our CEO, is in charge of developing and maintaining any technical libraries we own. Quarta-Rad, Ltd. owns any technical library components.

 

Financing Strategy

 

Our ability to increase our inventory will depend on additional outside financing, advances from our majority shareholder and reinvesting our profits.  Primary responsibility for the overall inventory planning and management will rest with our management. For each detection device product, we plan to purchase, management will need to assess the market and our financing needs to acquire product at cost-effective prices. All decisions will be subject to budgetary restrictions and our business control. We cannot provide any guarantee that we will be able to ever purchase product on cost-effect terms or employ independent distributors to effectively sell the products.

 

Once we determine our inventory needs, there are various methods of obtaining the funds needed to complete the purchase of the detection devices. Examples of financing alternatives include the assignment of our rights to purchase order financing. Alternatively, we may form a limited liability company or partnership where we will be the managing member or the general partner and raise funds to finance inventory. We may also obtain favorable pre-sales commitments from various customers such as home restoration contractors, distributors and developers. These various techniques, which are commonly used in the industry, can be combined to finance our inventory without a major bank financing.

 

5

 

 

Distribution Arrangements

 

Effective distribution is critical to the economic success of the detection devices, particularly when made by a small company without sufficient marketing resources. We have negotiated a few independent distribution agreements.

 

We intend to continue to distribute the products in the United States through existing independent distributors and the Internet. Our primary emphasis will be on marketing to homebuilders, home renovation contractors and general contractors. In addition, we intend to also target direct consumers via the Internet through online retailers and through national and regional retailers.

 

To the extent that we may engage in distribution of the products in foreign markets, we will be subject to all of the additional risks of doing business abroad including, but not limited to, government censorship, currency fluctuations, exchange controls, greater risk of “piracy” copying, and licensing or qualification fees.

 

It is not possible to predict, with certainty, the nature of the distribution arrangements, if any, that we may secure for the detection devices we sell.

 

We believe that the catastrophic events such as the March 11, 2011 nuclear accident in Japan will drive consumers and the market to radiation detection devices and other detection devices will either be in demand from the construction community and will be cost effective for the consumer and the industry professional.

 

We believe that effective Internet advertising along with participation in trade shows is the quickest and most cost effective method to let consumers know about the products. Additionally, large resellers and distributors will require promotional packages that we will need to develop and produce.

 

Competition

 

The detection device industry is highly competitive. We compete with a variety of companies, many of which have greater financial and other resources than us, or are subsidiaries or divisions of larger organizations. In particular, the industry is characterized by a small number of large, dominant organizations that perform this service, such as United Technologies Corporation, Radiation Alert, Osun Technologies, Lutron, General Tools, Mazur Instruments, First Alert, Inc./BRK Brands, Inc., which is wholly owned by Sunbeam Corporation, as well as many companies that have greater financial and other resources than us.

 

The major competitive factors in our business are the timeliness and quality of customer service, the quality of finished products and price. Our ability to compete effectively in providing customer service and quality finished products depends primarily on our manufacturers’ standards and the level of training of our future staff, the utilization of computer software and equipment and the ability to deliver the Products we sell. We believe we will compete effectively in all of these areas.

 

Many of our competitors have substantially greater financial, technical, managerial, marketing and other resources than we do and they may compete more effectively than we can. If our competitors offer detection devices at lower prices than we do, we may have to lower the prices we charge, which will adversely affect our results of operations.  Furthermore, many of our competitors are able to obtain more experienced employees than we can.

 

Intellectual Property Rights

 

We do not currently have any intellectual property rights. In the summer of 2013, Victor Shvetsky, our majority shareholder and director developed a software program called RadexRead, which Quarta-Rad, Ltd is using in the manufacture of its RD1212 products that we purchase as party of our inventory. We are not incurring any additional costs or benefits from Mr. Shvetsky’ s ownership of this software and, there are no current plans for Mr. Shvetsky to sell the software to the Company or contribute it for additional shares of our common stock.

 

Status Of Any Publicity Announced New Products And Services

 

In late 2013, we began distributing a new product named RD1212, which we believe has a sleek new design. It has the ability to store measurements in internal memory and transfer this data to a personal computer (“PC”). The RadexRead software utilized in this device allows users to view values retrieved from the Geiger counter, map them on Google Maps, and share their data with other Radex users.

 

6

 

 

We estimate that the cost for us to purchase software from an independent party that performs the same functions as RadexRead would be approximately $30,000. This software allows us to retrieve data from the RD1212 device to a Windows PC, analyze it, and geo-tag the values and place them on Google Map. The software offers an interactive view of the world map with readings other Radex RD1212 users can, at their option, submit.

 

We believe RadexRead brings numerous advantages to us over our competition, specifically:

 

  ● RadexRead distinguishes the products we sell from other Geiger counters in its price range by providing free visualization software;
  ● RadexRead, to the best of our knowledge, is the only software for Geiger counters in the RD1212 price range that allows users to mark radiation values collected by Geiger counters and place them on a map;
  ● RadexRead is the only software in this Geiger counter class that allows users to share their data with each other over the Internet;
  ● RadexRead is designed for use by users with little or no scientific background, making it simple and fun to collect, visualize and share radiation measurements with the community; and
  ● RadexRead allows us to further increase its visibility through collaboration with Safecast, a worldwide volunteer organization that collects radiation data. RadexRead gives user an option of saving data online and submit its radiation and geographical data shared with other users to Safecast monitoring network.

 

We believe RadexRead has increased RADEX’s appeal over our competition and helped RD1212 become one of our top selling Geiger counters, despite the product’s manufacturer’s suggested retail price being almost forty percent higher than the previous top-selling device, the low-cost RD1503.

 

Our Website

 

Our website is located at www.quartarad.com and provides a description of our company, the products we sell and our contact information including our address, telephone number and e-mail address.

 

Trademarks And Patents

 

We do not have any registered trademarks or patents.

 

Need for any Government Approval of Principal Products or Services

 

We are also subject to federal, state and local laws and regulations generally applied to businesses, such as payroll taxes on the state and federal levels. Sales of the products we sell on consignment or sell to independent, third party distributors and services we may provide internationally are subject to U.S. and local government regulations and procurement policies and practices including regulations relating to import-export control. Violations of export control rules could result in suspension of our ability to export items from one or more businesses or the entire corporation. Depending on the scope of the suspension, this could have a material effect on our ability to perform certain international contracts. We believe that we are in conformity with all applicable laws in the states we conduct business and the United States.

 

Research and Development

 

From our inception through September 30, 2014, we have not spent any money on research and development activities. In the fourth quarter of 2014, we have begun spending money on research and development for a new software program that we may license to others and $155,000 to our related party supplier for the development of a new product for us to sell. In 2018, 2018 and 2017, we spent approximately $72,000, $95,000 and $59,000, respectively, on research and development with our related party. We have paid an independent contractor to improve and upgrade our website and Victor Shvetsky, our majority shareholder and director, has developed, at no cost to us, a software program called RadexRead, which we allow Quarta-Rad, Ltd. to use in the manufacture of the RD1212 products we purchase from them. We also entered into an agreement with our related party developer for $180,000 to develop software for the device RADEX AQ.

 

Employees

 

Presently, we do not have any employees other than our officers and directors who devote their time as needed to our business and expect to devote 10 hours per week.

 

7

 

 

Item 1A. Risk Factors

 

Not required to disclose since we are a “smaller reporting” company.

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

We hold no real property. We do not presently own any interests in real estate. Our executive, administrative and operating offices are located at 1201 N. Orange St., Suite 700, Wilmington, DE 19801. We do not have a written lease with the landlord and rent space on a month-to-month basis at the rate of $30 per month.

 

Item 3. Legal Proceedings

 

We are not involved in any legal proceedings nor are we aware of any pending or threatened litigation against us. None of our officers or director is a party to any legal proceeding or litigation. None of our officers or director has been convicted of a felony or misdemeanor relating to securities or performance in corporate office.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Beginning in February 2018, our common stock is traded on the OTC Bulletin Board under the symbol “QURT.” The following table sets forth the high and low bid information of our common stock on the OTC Bulletin Board for each quarter during the last two fiscal years, as reported by the OTC Bulletin Board. This information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

Year   Period        
          High Bid     Low Bid  
2019   First Quarter       2.00       2.00  
    Second Quarter       2.00       2.00  
    Third Quarter       2.00       1.95  
    Fourth Quarter       1.95       1.95  

 

Year   Period        
            High Bid     Low Bid  
2018   February and March       2.15       1.50  
    Second Quarter       1.75       1.50  
    Third Quarter       2.00       2.00  
    Fourth Quarter       2.00       2.00  

 

Common Stock Currently Outstanding

 

As of March 30, 2020, we have 15,326,150 shares of our common stock outstanding.

 

Holders

 

As of the date of this Report, we had 36 stockholders of record of our common stock.

 

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Dividends

 

We have not declared any cash dividends on our common stock since our Date of Incorporation and do not anticipate paying any dividends in the foreseeable future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as our Director deems relevant.

 

Transfer Agent

 

Globex Stock Transfer, LLC, is our independent stock transfer agent.

 

Recent Sales of Unregistered Securities

 

None.

 

Additional Information

 

Copies of our annual reports on Form 10−K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, are available free of charge on the Internet at www.sec.gov. All statements made in any of our filings, including all forward-looking statements, are made as of the date of the document, in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

 

Item 6. Selected Financial Data

 

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

 

This Annual Report on Form 10−K contains forward-looking statements. Our actual results could differ materially from those set forth because of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this Report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” in Item 1 above.

 

The following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying 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 financial statements.

 

In this Annual Report on Form 10-K, “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 as of December 31, 2019 and 2018 and our results of operations for the year ended December 31, 2019 and December 31, 2018. 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.

 

9

 

 

As of the date of this Form 10-K, we continue to expand our operations and expect to increase our revenues with additional working capital by increasing our advertising and marketing. 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. In 2012, Messrs. Shvetsky and Golovanov’s companies have been the source of commissionable consignment sales and we did not carry any inventory. In 2013, we discontinued selling the products on consignment from our majority shareholder’s company for a commission or consignment fee and began purchasing inventory directly from Quarta-Rad, Ltd (Russia) (“QRR”) to sell on the Internet to direct consumers and to third party resellers. In 2012, when a reseller placed an order from us we purchased the product from our related party supplier and have it ship the product directly to the reseller. 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.

 

We have raised $65,230 in funds pursuant to our registration statement.

 

Our administrative office is located at 1201 N. Orange St., Suite 700, Wilmington, DE 19801, which is a virtual office.

 

In 2018, we generated $908,355 in sales and incurred a net loss of $(98,055). In 2019, we generated $875,345 in sales and incurred a net loss of $(142,060). We anticipate that we will be able to increase our revenues. We believe that we have sufficient working capital to continue our operations for the next 12 months; however, we believe that we need to seek additional financing to expand our sales. As of December 31, 2019, we had $41,962 in cash on hand in our corporate bank account and liabilities of $274,777, which consisted of $148,308 in related party payables and $126,469 in accounts payable and accrued expenses. We currently have two officers and directors. These individuals allocate time and personal resources to us on a part-time basis and devote approximately 10 hours per week to us. Our sales are to independent, third parties. Since May 2012, we have utilized the services of an independent contractor to assist us in selling the products. He is paid on a commission only basis.

 

In 2018, we continued 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 which expires in 2027. 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. The product pricing has been discounted pursuant to a discount agreement. We have extended this agreement thru 2027. During 2019, our ability to sell through our distributor in the UK was suspended due to an ongoing UK VAT examination, we are currently testing new partners for EU distribution.

 

Critical Accounting Policy and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the 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. 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 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 financial statements included in this Annual Report on Form 10-K.

 

Inventories are stated at the lower of cost or market (net realizable value). We periodically review the value of items in inventory and provide 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. Our inventory consists entirely of finished goods available for sale. We analyze our accounts receivable to determine if a reserve for non-collectible receivables is necessary. There is no allowance recorded at December 31, 2019 and 2018.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended December 31, 2019 and 2018, respectively, together with notes thereto, which are included in this Annual Report on Form 10-K.

 

10

 

 

For the Year Ended December 31, 2019 compared to the year ended December 31, 2018

 

Revenues. Our net revenues decreased $33,010, or 3,63%, to $875,345 for the year ended December 31, 2019 compared with $908,355 for comparable period in 2018.

 

The decrease was due to a reduction in the sale of our RD1503 model. We attribute the decrease to a decrease in demand due to an increase in sales price and a period of interrupted sales to EU during early 2019.

 

Cost of Goods Sold. Our Cost of Goods Sold decreased $27,321, or 4.05% to $647,190 for the year ended December 31, 2019 compared to $674,511 for the comparable period in 2018. The decrease is due to an overall decrease in sales.

 

Operating Expenses. For the year ended December 31, 2019, our total operating expenses increased $38,316 or 11.54%, to $370,215 compared to $331,899 for the comparable period in 2018. Operating expenses were comprised of general and administrative expenses, professional and consulting fees and research and development costs. The components of operating expenses are discussed below.

 

● General and administrative expenses, including advertising, increased $68,349 or 65.42%, to $172,821 for the year ended December 31, 2019 from $104,472 for the comparable period in 2018. The increase is primarily attributable to the Company’s reserve for a potential liability in connection with a tax examination by certain European taxing authorities.

 

● Professional and consulting fees decreased $6,957 or 5.26% for the year ended December 31, 2019 to $125,394 from $132,351 for the comparable period in 2018. The decrease is due to a reduction in accounting and legal fees for certain projects.

 

● Research and development cost decreased $23,076 to $72,000 for the year ended December 31, 2019 compared to $95,076 for the comparable period in 2018. The decrease is attributable to the Company’s reduction of research contract costs to develop and maintain new and existing devices.

 

Net Loss. Our net loss increased by $44,005 to a net loss of ($142,060) for the year ended December 31, 2019 compared to a net loss of ($98,055) for the comparable period in 2018. The increase is primarily attributable to the Company’s reserve for a potential liability in connection with a tax examination by certain European taxing authorities.

 

Liquidity and Capital Resources. During the year ended December 31, 2019, we used cash for operating expenses from cash on hand and the sale of products on the Internet and from independent third-party resellers.

 

Our total assets were $244,937 and $274,496 as of December 31, 2019 and December 31, 2018, respectively, consisting of $41,962 and $87,010, respectively, in cash. Our working capital surplus/(deficit) was $(29,840) and $112,220 as of December 31, 2019 and December 31, 2018, respectively.

 

Our total liabilities were $274,777 and $162,276 as of December 31, 2019 and December 31, 2018, respectively.

 

Our stockholders’ equity/(deficit) was $(29,840) and $112,220 as of December 31, 2019 and 2018, respectively and our retained earnings/(accumulated deficit) was $(96,570) and $45,490 as of December 31, 2019 and 2018, respectively.

 

We had $45,048 in cash used by and $9,131 in cash provided by operating activities for the year ended December 31, 2019 and 2018, respectively.

 

We had no cash provided by investing activities for year ended December 31, 2019 and 2018, respectively.

 

We had no cash provided by financing activities for the year ended December 31, 2019 and 2018, respectively.

 

We do not have sufficient funds for pursuing our plan of operation, but we are in the process of trying to procure funds sufficient to fund our operations until we are able to finance our operations through cash flow. There can be no assurance that we will be able to procure funds sufficient for such purpose. If operating difficulties or other factors (many of which are beyond our control) delay our realization of revenues or cash flows from operations, we may be limited in our ability to pursue our business plan. Moreover, if our resources from obtaining additional capital or cash flows from operations, once we commence them, do not satisfy our operational needs or if unexpected expenses arise due to unanticipated pressures or if we decide to expand our business plan beyond its currently anticipated level or otherwise, we will require additional financing to fund our operations, in addition to anticipated cash generated from our operations. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In a worst-case scenario, we might not be able to fund our operations or to remain in business, which could result in a total loss of our stockholders’ investment. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.

 

11

 

 

The Company had no formal long-term lines of credit or other bank financing arrangements as of March 30, 2020.

 

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.

 

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. While the Company has established a source of revenues to cover its operating costs it incurred a loss in 2019 and cannot support a salary for its CEO, which causes substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to implement its business plan. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

Management intends to focus on raising funds going forward. The Company cannot provide any assurance or guarantee that it will be able to raise funds. Potential investors must be aware if it is unable to raise funds through the sale of its common stock and generate sufficient revenues, any investment made into the Company would be lost in its entirety.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Income Tax Expense (Benefit)

 

The Company has a prospective income tax benefit resulting from a net operating loss carry forward and startup costs that may offset any future operating profit.

 

Impact of Inflation

 

The Company believes that inflation has had a negligible effect on operations over the past year.

 

Capital Expenditures

 

The Company expended no amounts on capital expenditures for the years ended December 31, 2019 and 2018, respectively.

 

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.

 

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 development 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.

 

12

 

 

If we are able to successfully complete the above goals within the estimated timeframes set forth and are able to raise additional proceeds that may be needed to secure inventory and marketing funds, those funds would be allocated as follows:

 

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 six (6) 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 early stage.  While we believe that the addition of employees is not required over the next six (6) 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 plants or 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.

 

Recent Accounting Pronouncements

 

We have adopted all recently issued accounting pronouncements. The adoption of the new accounting pronouncements is not anticipated to have a material effect on our operations. 

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

 

Item 8. Financial Statements and Supplementary Data

 

Our audited financial statements are set forth in this Annual Report beginning on page F-1.

 

13

 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Quarta-Rad, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Quarta-Rad, Inc. (the “Company”) as of December 31, 2019 and 2018, and the related statements of operations, stockholders’ equity/deificit and cash flows for each of the two years ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company has incurred a loss from operations in 2019 and cannot support a salary for its CEO, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 6. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Emphasis of a Matter

 

As discussed in Note 5 to the financial statements, in 2019 and 2018, the Company purchased all of its products from a related party supplier. The Company’s financial position and results of operations, as reflected in the accompanying financial statements, might be different if these purchase transactions were among wholly unrelated parties.

 

/s/ Hall & Company

 

We have served as the Company’s auditor since 2015

 

Irvine, CA

March 30, 2020

 

F-1
 

 

QUARTA-RAD, INC.

 

BALANCE SHEETS

 

    December 31, 2019     December 31, 2018  
ASSETS                
Current Assets                
Cash   $ 41,962     $ 87,010  
Accounts receivable     127,518       83,973  
Inventory     75,457       85,363  
Prepaid expenses     -       18,150  
Total Current Assets     244,937       274,496  
TOTAL ASSETS   $ 244,937     $ 274,496  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 126,469     $ 12,427  
Related party payable     148,308       149,849  
Total Liabilities     274,777       162,276  
                 
Common Stock: authorized 50,000,000 common shares, $0.0001 par value 15,326,150 were issued and outstanding on December 31, 2019 and December 31, 2018     1,533       1,533  
Additional Paid-in Capital     65,197       65,197  
Retained Earnings/(Accumulated Deficit)     (96,570 )     45,490  
Total Stockholders’ Equity/(Deficit)     (29,840 )     112,220  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)   $ 244,937     $ 274,496  

 

The accompanying notes are an integral part of these financial statements.

 

F-2
 

 

QUARTA-RAD, INC.

 

STATEMENTS OF OPERATIONS

 

    For the year ended December 31, 2019     For the year ended December 31, 2018  
             
Sales, net   $ 875,345     $ 908,355  
                 
Cost of goods sold     647,190       674,511  
                 
Gross profit     228,155       233,844  
                 
Expenses:                
General & administrative     125,197       57,498  
Advertising     47,624       46,974  
Professional and consulting fees     125,394       132,351  
Research and development     72,000       95,076  
Operating Expenses     370,215       331,899  
                 
Net loss   $ (142,060 )   $ (98,055 )
                 
Loss per share - basic and diluted   $ (0.01 )   $ (0.01 )
Weighted average shares - basic and diluted     15,326,150       15,326,150  

 

The accompanying notes are an integral part of these financial statements.

 

F-3
 

 

QUARTA-RAD, INC.

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/DEFICIT

For the Years Ended December 31, 2019 and 2018

 

    Common Stock     Additional Paid-In     Retained Earnings/ (Accumulated     Total
Stockholders’ Equity/ 		 
    Shares     Amount     Capital     Deficit)     (Deficit)  
Balance, December 31, 2017     15,326,150     $ 1,533     $ 65,197     $ 143,545     $ 210,275  
Net Loss     -       -       -       (98,055 )     (98,055 )
Balance, December 31, 2018     15,326,150     $ 1,533     $ 65,197     $ 45,490     $ 112,220  
Net Loss     -       -       -       (142,060 )     (142,060 )
Balance, December 31, 2019     15,326,150     $ 1,533     $ 65,197     $ (96,570 )   $ (29,840 )

 

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

QUARTA-RAD, INC.

 

STATEMENTS OF CASH FLOWS

 

    For the year ended December 31, 2019     For the year ended December 31, 2018  
             
OPERATING ACTIVITIES:                
Net loss   $ (142,060 )   $ (98,055 )
                 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
Changes in operating assets and liabilities:                
Accounts receivable     (43,545 )     (46,087 )
Inventory     9,906       78,777  
Prepaid expenses     18,150       (18,150 )
Accounts payable and accrued expenses     114,042       (12,536 )
Related party payable     (1,541 )     105,182  
Net cashed (used in) provided by operating activities     (45,048 )     9,131  
                 
Net change in cash     (45,048 )     9,131  
Cash, beginning of period     87,010       77,879  
Cash, end of period   $ 41,962     $ 87,010  
                 
Supplemental cash flow information:                
                 
Cash paid on interest   $ -       -  
                 
Cash paid for income taxes   $ -       -  

 

F-5
 

 

QUARTA-RAD, INC.

Notes to the Financial Statements

December 31, 2019 and 2018

 

NOTE 1 - NATURE OF BUSINESS

 

Quarta-Rad, Inc. (the “Company”) was incorporated under the laws of the state of Delaware on November 29, 2011, under the name Quatra-Rad, Inc. and amended its Certificate of Incorporation on February 29, 2012 to change its name to Quarta-Rad, Inc. On July 2, 2012, the Company amended and restated its Certificate of Incorporation to increase its authorized shares of common stock to 50,000,000, $0.0001 par value from 1,500, no par value and effected a 10,000 to 1 forward split. The Company distributes detection devices, including but not limited to Geiger counters, to homeowners and interested customers in North America, Europe, and Asia. The Company targets homebuilders and home renovation contractors.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in United States (US) dollar. The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 fiscal year end.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. The Company does not have any cash equivalents as of December 31, 2019 and 2018.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods.

 

Significant estimates made by management include, among others, provisions for the valuation of accounts receivable, accrual of European VAT reserve, and the recoverability of inventory. The Company bases its estimates on historical experience, knowledge of current conditions and belief of what could occur in the future considering available information. The Company reviews its estimates on an on-going basis. The actual results experienced by the Company may differ materially and adversely from its estimates. To the extent there are material differences between the estimates and actual results, future results of operations will be affected.

 

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 years ended December 31, 2019 and 2018 amounted to $47,624 and $46,974, respectively.

 

F-6
 

 

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 December 31, 2019, 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 2014 through 2019 Delaware 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.

 

Inventory Accounting Policy

 

Inventories are stated at the lower of cost or market (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 entirely of finished goods available for sale.

 

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.

 

F-7
 

 

Fair Value of Financial Instruments

 

The Company’s financial instruments as defined by ASC 825, “Financial Instruments” include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2019 and 2018.

 

FASB ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, 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:

 

  ● Level 1. Observable inputs such as quoted prices in active markets;
       
  ● Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
       
  ● Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

 

Revenue Recognition

 

On January 1, 2018, we adopted FASB Accounting Standards Codification ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The new guidance sets forth a new 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 new 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.

 

We reviewed all contracts at the date of initial application and elected to use the modified retrospective transition method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018. The adoption of the new revenue recognition guidance was immaterial to our consolidated statements of operations, balance sheet, and cash flows as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and December 31, 2018 and no adjustments were required.

 

Our principal activities from which we generate our revenue are product sales.

 

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. 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.

 

F-8
 

 

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 December 31, 2019 and December 31, 2018, 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 fulfillment cost and are included in cost of product sales.

 

Recent Accounting Pronouncements

 

In June 2018, the FASB issued ASU 2018-07 Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The adoption of this guidance by the Company did not have a material impact on our condensed financial statements and related disclosures.

 

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Income Statement Reporting, Comprehensive Income (Topic 220). Effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not been issued, and (2) for all other entities for reporting period s for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this guidance by the Company did not have a material impact on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company has evaluated the impact of adopting this ASU on its financial statements and has determined the ASU does not have a material impact on its financial position since it does not have any leases.

 

F-9
 

 

NOTE 3–INCOME TAXES

 

The Company is subject to taxation in the United States and California. The benefit from income taxes for the years ended December 31, 2019 and 2018 are summarized below:

 

    2019     2018  
Current:                
Federal   $ -     $ -  
State     -       -  
Total current     -       -  
                 
Deferred:                
Federal     (29,833 )     (20,592 )
State     -       -  
Change in valuation allowance     29,833       20,592  
Total deferred     -       -  
Income tax provision (benefit)   $ -     $ -  

 

At December 31, 2019, the Company had federal net operating loss carry forwards of approximately $106,000 which may be offset against future taxable income through 2037. No net deferred tax assets are recorded at December 31, 2019 or 2018, as all deferred tax assets and liabilities have been fully offset by a valuation allowance due to the uncertainty of future utilization.

 

At December 31, 2019 and 2018, deferred tax assets consist of the following:

 

    2019     2018  
             
Net operating loss carry-forwards   $ 55,952     $ 26,119  
Other     -       -  
Total deferred tax assets     55,952       26,119  
Less: valuation allowance     (55,952 )     (26,119 )
                 
Net deferred tax assets   $ -     $ -  

 

The change in the valuation allowance during the years ended December 31, 2019 and 2018 was an approximate $30,000 increase and an approximate $21,000 increase, respectively, and a full valuation allowance has been recorded since, in the judgement of management, these net deferred tax assets are not more likely than not to be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income during periods in which those temporary differences and carryforwards become deductible or are utilized.

 

A reconciliation of the statutory federal income tax rate for the year ended December 31, 2019 and 2018 to the effective tax rate is as follows:

 

    2019      2018  
Expected federal tax     21.00 %     21.00 %
Valuation allowance     (21.00 )%     (21.00 )%
                 
Total     - %     - %

 

The Company follows ASC 740-10, Uncertainty in Income Taxes. The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense. The Company does not have any unrecognized tax benefits or a liability for uncertain tax positions at December 31, 2019 and 2018. The Company does not expect to have any unrecognized tax benefits within the next twelve months. The Company recognizes accrued interest and penalties associated with uncertain tax positions, if any, as part of income tax expense. There were no tax related interest and penalties recorded for 2019 and 2018. Since the Company incurred net operating losses in every tax year since inception, all of its income tax returns are subject to examination and adjustments by the IRS for at least three years following the year in which the tax attributes are utilized.

 

F-10
 

 

NOTE 4–STOCKHOLDERS’ EQUITY

 

The Company was formed with one class of no par value common stock and was authorized to issue 50,000,000 common shares, as amended. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they chose to do so, elect all of the directors of the Company.

 

NOTE 5–RELATED PARTY TRANSACTIONS

 

The Company sells radiation monitors and to date has purchased all of it inventory from a company in Russia, which is owned by the Company’s minority shareholder. Total inventory purchased was $518,750 and $452,091 for 2019 and 2018, respectively. The Company owes the Russian affiliate $126,390 and $89,625 and such amount is included in related party payables in the accompanying balance sheet at December 31, 2019 and 2018, respectively. The related payable balance is related to a research and development contract entered into by the parties noted below and inventory purchases.

 

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 goes through December 31, 2019. The amount due in connection with this agreement as of December 31, 2019 is $117,076.

 

Since inception, the Company has not compensated its CEO, who is the majority shareholder, and, as of December 31, 2019 and 2018, is due $21,918 and $60,225, respectively, for expenses paid on behalf 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 December 31, 2019, 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 and has accrued $100,000, which is included in accounts payable and accrued expenses, as of December 31, 2019. 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.

 

F-11
 

 

Going Concern

 

The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. While the Company has established sources of capital to cover its operating costs, it incurred a loss in 2019 and cannot support a salary for its CEO, which causes substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to implement its business plan. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

Management intends to focus on raising funds going forward. The Company cannot provide any assurance or guarantee that it will be able to raise funds. Potential investors must be aware if it is unable to raise funds through the sale of its common stock and generate sufficient revenues, any investment made into the Company could be lost in its entirety.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 7–SUBSEQUENT EVENTS

 

The Company has performed an evaluation of events occurring subsequent to December 31, 2019 through March 30, 2020. 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 for fiscal year 2020. However, if the pandemic continues, it may have an adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2020.

 

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 two months of the year against the same period in the previous year.

 

F-12
 

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.

 

None.

 

Item 9A. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures.

 

Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order to allow timely consideration regarding required disclosures.

 

The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including our chief executive officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of December 31, 2019 were not effective in timely alerting them to material information which is required to be included in our periodic reports filed with the SEC as of the end of the period covering this report and to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no material changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the years ended December 31, 2019 and 2018.

 

(b) Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management’s assessment of the effectiveness of the small business issuer’s internal control over financial reporting is as of the year ended December 31, 2019. We believe that internal control over financial reporting is not effective. We have identified current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations. We do not have adequate segregation of duties in the handling of our financial reporting. This is caused by a very limited number of personnel.

 

14
 

 

Material weaknesses identified:

 

● The Company does not have adequate segregation of duties in the handling of their financial reporting. This is caused by a very limited number of personnel.
● Our company’s accounting staff does not have sufficient technical accounting knowledge relating to accounting for income taxes and complex US GAAP matters.
● The Company has not performed a risk assessment and mapped our processes to control objectives;
● The Company has not implemented comprehensive entity-level internal controls;
● The Company has not implemented adequate system and manual controls.

 

Plan for Remediation of Material Weaknesses

 

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate this deficiency as resources to do so become available.  We intend to consider the results of our remediation efforts and related testing as part of our year-end 2020 assessment of the effectiveness of our internal control over financial reporting.

 

Such remediation would entail enhancing the training and oversight of the accounting personnel responsible for non-routine transactions involving complex accounting matters and engaging the services of an independent consultant with sufficient expertise in income tax and complex US GAAP matters to assist us in the preparation of our financial statements.

 

(c) Changes in internal controls.

 

There was no change in our internal control over financial reporting that occurred during the fourth quarter of our fiscal year ended December 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

Not applicable.

 

15
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Our director serves until his successor is elected and qualified. Our director elects our officers to a term of one (1) year and they serve until their successors are duly elected and qualified, or until they are removed from office. The board of directors has no nominating or compensation committees.

 

The name, address, age, and position of our present officers and director is set forth below:

 

Name   Age  

Title(s)

Victor Shvetsky   45   Chairman, Chief Executive Officer, Principal Executive Officer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Secretary
         
Alexey Golovanov   41   President and Director

 

The persons named above have held their offices/positions since November 29, 2011, and we expect them to hold their offices/positions at least until the next annual meeting of our shareholders.

 

Mr. Victor Shvetsky, Chairman, President, Chief Executive Officer, Chief Financial Officer

 

Victor Shvetsky is our Chairman, Chief Executive Officer, Chief Financial Officer and Secretary and has served in that capacity since November 29, 2011. Mr. Shvetsky is also the Chairman and Chief Executive Officer of Star Systems Corporation, which is a Japanese corporation he founded in 1998 and headquartered in Tokyo, Japan. Star Systems in engaged in the distribution and resale of various consumer products and provides IT services to customers in Japan. Since its inception, Mr. Shvetsky has grown Star Systems from inception to $6,000,000 (US) in revenues and believes he has established it as one of the leading distributers of Geiger counters in Japan having sold over 15,000 units in 2011. Mr. Shvetsky has established distribution channels for detection products with retailers, including department stores and specialty shops, as well as developing an online marketing presence through online retailers. Mr. Shvetsky has over 16 years’ experience in sales, marketing, product development and branding as well as corporate compliance in the executive office including overseeing his company’s accounting, compliance and finance departments.

 

16
 

 

Mr. Alexey Golovanov, President and Director

 

Alexey Golovanov is our President and Director and has served in this capacity since November 29, 2011. From July 2007 to the present, Mr. Golovanov has held several positions at Quarta-Rad, Ltd, a Russian Federation corporation that designs, manufactures and sells various detection devices around the world. Most recently, Mr. Golovanov is the Managing Director of Quarta-Rad, Ltd. and oversees the company’s product designs and product introductions in the various consumer markets in Russia and Europe. Mr. Golovanov has also overseen all of Quarta-Rad, Ltd.’s R&D activities, which led to the development of the RADEX and SINMOR model lines of detection devices. Mr. Golovanov has extensive experience in developing supply channels to procure the various components necessary for the production of cost-effective detection products, which allows the products to be distributed at competitive prices.

 

Possible Potential Conflicts

 

The OTCBB does not currently have any director independence requirements.

 

No member of management will be required by us to work on a full time basis. Accordingly, certain conflicts of interest may arise between us and our officer and director in that he may have other business interests in the future to which he devotes his attention, and he may be expected to continue to do so although management time must also be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through his exercise of such judgment as is consistent with each officer’s understanding of his fiduciary duties to us. In the course of other business activities, they may become aware of business opportunities that may be appropriate for presentation to us, as well as the other entities with which they are affiliated. As such, there may be conflicts of interest in determining to which entity a particular business opportunity should be presented.

 

In an effort to resolve such potential conflicts of interest, our officers and sole director have orally agreed that any opportunities that they are aware of independently or directly through their association with us (as opposed to disclosure to them of such business opportunities by management or consultants associated with other entities) would be presented by them solely to us.

 

We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective.

 

Currently we have two officers and directors and will seek to add additional officer(s) and/or director(s) as and when the proper personnel are located and terms of employment are mutually negotiated and agreed, and we have sufficient capital resources and cash flow to make such offers.

 

We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective.

 

Code of Business Conduct and Ethics

 

In November 30, 2011, we adopted a Code of Ethics and Business Conduct which is applicable to our future employees and which also includes a Code of Ethics for our chief executive and principal financial officers and any persons performing similar functions. A code of ethics is a written standard designed to deter wrongdoing and to promote:

 

● honest and ethical conduct,

 

● full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements,

 

● compliance with applicable laws, rules and regulations,

 

● the prompt reporting violation of the code, and

 

● accountability for adherence to the code.

 

A copy of our Code of Business Conduct and Ethics has been filed with the Securities and Exchange Commission as Exhibit 14.1 to our registration statement of which this prospectus is a part.

 

Board of Directors

 

Our directors hold office until the completion of their term of office, which is not longer than one year, or until a successor(s) have been elected. Our directors’ term of office expires on March 31, 2020. All officers are appointed annually by the board of directors and, subject to existing employment agreements (of which there are currently none), serve at the discretion of the board. Currently, directors receive no compensation for their role as directors but may receive compensation for their role as officers.

 

17
 

 

Involvement in Certain Legal Proceedings

 

During the past ten years, no present director, executive officer or person nominated to become a director or an executive officer of us:

 

(1) had a petition under the federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 

(2) was convicted in a criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

(3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any of the following activities:

 

i. acting as a futures commission merchant, introducing broker, commodity trading advisor commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

ii. engaging in any type of business practice; or

 

iii. engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; or

 

  (4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of an federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3) (i), above, or to be associated with persons engaged in any such activity; or
     
  (5) was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and for which the judgment has not been reversed, suspended or vacated.

 

Committees of the Board of Directors

 

Concurrent with having sufficient members and resources, our board of directors will establish an audit committee and a compensation committee. We believe that we will need a minimum of five directors to have effective committee systems. The audit committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate the system of internal controls. The compensation committee will manage any stock option plan we may establish and review and recommend compensation arrangements for the officers. No final determination has yet been made as to the memberships of these committees or when we will have sufficient members to establish committees. See “Executive Compensation” hereinafter.

 

We will reimburse all directors for any expenses incurred in attending directors’ meetings provided that we have the resources to pay these fees. We will consider applying for officers and directors’ liability insurance at such time when we have the resources to do so.

 

18
 

 

Item 11. Executive Compensation

 

Summary Executive Compensation Table

 

The following table shows, for the years ended December 31, 2019 and 2018, compensation awarded to or paid to, or earned by, our Chief Executive Officer (the “Named Executive Officer”).

 

                                              Non-Equity       Nonqualified                  
Name                                             Incentive       Deferred                  
and                             Stock       Option       Plan       Compensation       All Other          
principal             Salary       Bonus       Awards       Awards       Compensation       Earnings       Compensation          
position     Year       ($)       ($)       ($)       ($)       ($)       ($)       ($)       Total  ($)  
(a)     (b)       (c)       (d)       (e)       (f)       (g)       (h)       (i)       (j)  
1Victor Shvetsky CEO, CFO                                                                        
and Director                                                                        
      2019       -       -       -       -       -       -       -       -  
      2018       -       -       -       -       -       -       -       -  
                                                                         
2Alexey Golovanov, President                                                                        
                                                                         
      2019       -       -       -       -       -       -       -       -  
      2018       -       -       -       -       -       -       -       -  

 

We have no formal employment arrangement with Mr. Shvetsky or Mr. Golovanov at this time. Mr. Shvetsky’s and Mr. Golovanov’s compensation has not been fixed or based on any percentage calculations. Mr. Shvetsky will make all decisions determining the amount and timing of their compensation and, for the immediate future, will not receive any compensation. Mr. Shvetsky’s compensation amounts will be formalized if and when his annual compensation exceeds $50,000.

 

Grants of Plan-Based Awards Table

 

We currently do not have any equity compensation plans. Therefore, none of our named executive officers received any grants of stock, option awards or other plan-based awards for the years ended December 31, 2019 and 2018.

 

Outstanding Equity Awards at Fiscal Year-End Table

 

None. We do not have any equity award compensation plans.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth, as of December 31, 2019, the total number of shares owned beneficially by our officers and directors, and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The shareholders listed below have direct ownership of their shares and possess sole voting and dispositive power with respect to the shares. As of March 30, 2020, we had 15,326,150 shares of common stock outstanding, which are held by 36 shareholders. There are not any pending or anticipated arrangements that may cause a change in control.

 

Title of Class   Name and Address of Beneficial Owner(1)   Amount and Nature of Beneficial Owner     Percent of Class  
Common Stock   Victor Shvetsky     12,000,000       78.3 %
Common Stock   Alexey Golovanov     3,000,000       19.6 %
    All Officers and Directors as a Group (2 persons)     15,000,000       97.9 %

 

19
 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Our promoters are Mr. Shvetsky, our chairman, chief executive officer, chief financial officer and secretary, and Mr. Golovanov, our president.

 

Our office and mailing address is 1201 N. Orange St., Suite 700, Wilmington, DE 19801.

 

On November 29, 2011, we issued 12,000,000 post-split shares of our common stock to Victor Shvetsky, our chief executive officer, chief financial officer, secretary and director and 3,000,000 post-split shares of our common stock to Alexey Golovanov, our president. These shares were issued in exchange for services valued at $1,200 and $300, respectively or $1.00 per share.

 

Our officers and sole director are required to commit time to our affairs and, accordingly, may have conflicts of interest in allocating management time among various business activities. In the course of other business activities, they may become aware of business opportunities that may be appropriate for presentation to us, as well as the other entities with which they are affiliated. As such, there may be conflicts of interest in determining to which entity a particular business opportunity should be presented.

 

In an effort to resolve such potential conflicts of interest, our officers and directors have orally agreed that any opportunities that they are aware of independently or directly through their association with us (as opposed to disclosure to them of such business opportunities by management or consultants associated with other entities) would be presented by them solely to us.

 

We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective.

 

Mr. Golovanov, our president, owns Quarta-Rad, Ltd. (“Quarta-Rad Russia”), which is part of the International Scientific and Technical Park of Moscow Engineering and Physical Institute (“MIFI”) and which is a developer and manufacturer of radiometric, acoustical and pyrometric devices, radiation detecting indicators, Radon detecting indicators and acoustical leak detectors that are used by fuel-energy enterprises of Moscow and other cities of the Russian Federation. In 2011 and 2012, we acted as a consignment agent and purchased products from Quarta-Rad Russia pursuant to a written agreement and sold the merchandise to Star Systems Japan Corporation, a company owned by our majority shareholder, Victor Shvetsky. For the years ended December 31, 2019 and 2018, we purchased $518,750 and $452,901, respectively, of inventory from Quarta-Rad Russia and, as of December 31, 2019 and 2018, we owed Quarta-Rad Russia $126,390 and $89,625, respectively, in related party payables. In 2017, we entered into an agreement with our related party developer for $180,000 to develop software for the device RADEX AQ. . The amount above due at December 31,2019 and 2018 relates to the development contract and certain inventory purchased in 2019 and 2018, respectively.

 

We believe that each reported transaction and relationship is on terms that are at least as fair to us as would be expected if those transactions were negotiated with third parties.

 

There have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.

 

With regard to any future related party transaction, we plan to fully disclose any and all related party transactions, including, but not limited to, the following:

 

● disclose such transactions in prospectuses where required;
● disclose in any and all filings with the Securities and Exchange Commission, where required;
● obtain disinterested directors’ consent; and
● obtain shareholder consent where required.

 

Item 14. Principal Accountant Fees and Services.

 

The following table sets forth the aggregate fees billed or expected to be billed to our company for professional services rendered by our independent registered public accounting firms, for the fiscal years ended December 31, 2019 and 2018:

 

    2019     2018  
             
Audit Fees   $ 32,450     $ 37,000  
Audit Related Fees     -       -  
Tax Fees     Nil       Nil  
All Other Fees     Nil       Nil  
Total Fees   $ 32,450     $ 37,000  

 

Audit Fees. Consist of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim financial statements included in quarterly reports, services performed in connection with regular filings with the Securities and Exchange Commission and other services that are normally provided for the fiscal years ended December 31, 2019 and 2018, in connection with statutory and regulatory filings or engagements.

 

Audit Related Fees. None.

 

Tax Fees. Consist of fees billed for the preparation of corporate tax returns.

 

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Registered Public Accounting Firm

 

Our board of directors pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by our board of directors before the respective services were rendered.

 

Our Director has considered the nature and amount of fees billed or expected to be billed by Hall & Company, Certified Public Accountants and Consultants, Inc., and believes that the provision of services for activities unrelated to the audit was compatible with maintaining Hall’s independence.

 

20
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

EXHIBITS

 

The following exhibits are filed as part of this Report, pursuant to Item 601 of Regulation S-K.

 

Exhibit Number  

Description of Exhibits

3.1*   Certificate of Incorporation
3.1a*   Certificate of Amendment to Certificate of Incorporation
3.1b*   Certificate of Amendment to Certificate of Incorporation
3.1c*   Certificate of Correction to Certificate of Amendment of Certificate of Incorporation
3.2*   Bylaws
14.1*   Code of Ethics
31.1**   Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*.
31.2**   Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*.
32.1**   Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*.
32.2**   Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*.
   

_______________________________

 

101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Extension Schema
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase
101.DEF*   XBRL Taxonomy Extension Definition Linkbase
101.LAB*   XBRL Taxonomy Extension Label Linkbase
101.PRE*  

XBRL Taxonomy Presentation Linkbase

 

*   Previously filed.
**   Filed herewith.

 

21
 

 

SignatureS

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

  QUARTA-RAD, INC.
   
Dated: March 30, 2020 /s/ Victor Shvetsky
  Victor Shvetsky
  Chairman and Chief Executive Officer (Principal Executive Officer) and
  Chief Financial Officer (Principal Accounting and Financial Officer)

 

In accordance with the Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Dated: March 30, 2020 /s/ Victor Shvetsky

 

 

Victor Shvetsky
Chairman and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer) and Director

   
  /s/ Alexey Golovanov
 

Alexey Golovanov

President and Director

 

22

 

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