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, 2020

 

[  ] 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   45-4232089

(State or other Jurisdiction of Incorporation or Organization)

 

(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   None

(Title of Each Class)

 

(Name of Each Exchange on Which Registered)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol   Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share   QURT   OTC

 

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 April 15, 2021, based upon the last sale price of the common stock of such date: $8,001,996.

 

The number of shares of the registrant’s common stock issued and outstanding as of April 15, 2021 was 15,659,483.

 

 

 

 

 

 

table of contents

 

PART I  
Item 1. Description of Business. 4
Item 1A. Risk Factors 9
Item 1B. Unresolved Staff Comments 9
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Mine Safety Disclosures 9
PART II  
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 9
Item 6. Selected Financial Data 10
Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 10
For the Year Ended December 31, 2020 compared to the year ended December 31, 2019 12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 14
Item 8. Financial Statements and Supplementary Data 14
INDEX TO FINANCIAL STATEMENTS F-1
Part I – FINANCIAL INFORMATION  
Balance Sheets F-4
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. 15
Item 9A. Controls and Procedures. 15
Item 9B. Other Information. 16
PART III  
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  
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.

 

3
 

 

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.

 

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 2021 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 2019 or 2020.

 

4
 

 

During April 2020, we acquired Quarta-Rad USA, Inc., a Delaware corporation, as a wholly owned subsidiary. There was no consideration paid for the shares. The purpose of the acquisition is to separate the sales of certain products in separate entities. There was no activity, assets or liabilities in the subsidiary through December 31, 2020.

 

During December 2020, we acquired Sellavir, Inc, a Delaware corporation, under common control, as a wholly owned subsidiary We acquired the company in exchange for 333,333 shares of our common stock. The value of the stock on the date of issue was approximately $170,000. Sellavir is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis through advanced and proprietary technologies.

 

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. The Company paid $41,822 during 2020 towards the estimated liability, a remainder of $58,178 is included in accounts payable and accrued expenses, as of December 31, 2020.

 

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

 

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.

 

5
 

 

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.

 

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 measures 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.

 

6
 

 

Sellavir Consulting:

 

We expanded our operations through the acquisition of Sellavir Inc in December 2020. Sellavir is an AI company that leverages its knowledge in neural networks to provide customized AI and development services to our clients. Our services are focused on offering customized solutions for image processing. Our current business model relies on identifying the specific customer needs and developing a software solution to address them. We currently do not have any clients in the US, and our sole revenue stream is from our Japanese reseller. We rely on their sales staff for the identification of new opportunities in the Japanese market. Quarta-Rad has acquired the company to:

 

- leverage Sellavir capabilities to combine it with its Radex series to offer AI-enhanced radiation detection capabilities

- expand its scope outside the radiation measurement

 

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.

 

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.

 

7
 

 

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.

 

Through Sellavir, we are in the process of obtaining patents.

 

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.

 

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.

 

8
 

 

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 began 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 2020, 2019 and 2018, we spent approximately $-0-, $72,000 and $95,000, 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.

 

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  
2020   First Quarter     1.95       0.48  
    Second Quarter     0.48       0.48  
    Third Quarter     3.10       0.48  
    Fourth Quarter     3.20       0.51  

 

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  

 

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Common Stock Currently Outstanding

 

As of April 15, 2021, we have 15,659,483 shares of our common stock outstanding.

 

Holders

 

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

 

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.

 

10
 

 

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, 2020 and 2019 and our results of operations for the year ended December 31, 2020 and December 31, 2019. 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.

 

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.

 

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

 

In 2019, we generated $875,345 in sales and incurred a net loss of $(142,060). In 2020, we generated $858,015 in sales, and incurred net income from operations of $24,688. 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, 2020, we had $108,126 in cash on hand in our corporate bank account and liabilities of $315,225, which consisted of $167,324 in related party payables and $147,901 in accounts payable and accrued expenses. During March 2021, we received $332,533 in repayment from the outstanding officer advance acquired in the Sellavir acquisition. 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 and have resumed UK sales.

 

During December 2020, Quarta-Rad acquired Sellavir, Inc, a Delaware corporation, under common control, as a wholly owned subsidiary We acquired the company in exchange for 333,333 shares of our common stock. The value of the stock on the date of issue was approximately $170,000. Sellavir is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis through advanced and proprietary technologies. Quarta-Rad has acquired the company to leverage Sellavir capabilities to combine it with its Radex series to offer AI-enhanced radiation detection capabilities and expand its scope outside the radiation measurement.

  

The Company has two operating segments through the operations of Quarta-Rad and Sellavir noted above. Results of operations of Sellavir were included for the period December 16, 2020 through December 31, 2020.

 

Revenues for the year ended December 31, 2020 were $858,015 comprised of $843,015 from Quarta-Rad and $15,000 from Sellavir.

 

Operating expenses for the year ended December 31, 2020 were $188,187, comprised of $182,501 from Quarta-Rad and $5,686 from Sellavir.

 

Income tax benefit for the year ended December 31, 2020 was $50,768, comprised of $52,724 income tax benefit from Quarta-Rad and $1,956 income tax expense from Sellavir.

 

Net Income for the year ended December 31, 2020 was $75,456, comprised of $66,142 from Quarta-Rad and $9,314 from Sellavir.

 

11
 

 

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, 2020 and 2019.

 

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, 2020 and 2019, respectively, together with notes thereto, which are included in this Annual Report on Form 10-K.

 

For the Year Ended December 31, 2020 compared to the Year Ended December 31, 2019

 

Revenues. Our net revenues decreased $17,330, or 1.98%, to $858,015 for the year ended December 31, 2020 compared with $875,345 for comparable period in 2019.

 

The decrease was due to a reduction in the sale of our RD1503 model, partially offset by the revenue from Sellavir. We attribute the decrease to a nominal decrease in demand.

 

Cost of Goods Sold. Our Cost of Goods Sold decreased $2,050, or 0.32%, to $645,140 for the year ended December 31, 2020 compared to $647,190 for the comparable period in 2019. The decrease is due to the decrease in sales.

 

Operating Expenses. For the year ended December 31, 2020, our total operating expenses decreased $182,028, or 49.17%, to $188,187 compared to $370,215 for the comparable period in 2019. 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, decreased $95,316, or 55.15%, to $77,505 for the year ended December 31, 2020 from $172,821 for the comparable period in 2019. The decrease is primarily attributable to the Company’s reserve for a potential liability in connection with a tax examination by certain European taxing authorities in 2019.
     
  ● Professional and consulting fees decreased $14,712, or 11.73%, for the year ended December 31, 2020 to $110,682 from $125,394 for the comparable period in 2019. The decrease is due to a reduction in accounting and legal fees for certain projects.
     
  ● Research and development cost decreased $72,000 to $-0- for the year ended December 31, 2020 compared to $72,000 for the comparable period in 2019. The decrease is attributable to the Company’s reduction of research contract costs to develop and maintain new and existing devices.

 

Income Tax Benefit. Our income tax benefit increased $50,768 to $50,768 for the year ended December 31, 2020 compared to $-0- for the comparable period in 2019. The increase is related to the income tax benefit received from the reversal of a prior valuation allowance as a result of the Sellavir acquisition.

 

Net Income. Our net income increased by $217,156 to $75,456 for the year ended December 31, 2020 from a net loss of ($142,060) for the year ended December 31, 2019. The increase is primarily attributable to the reduction in operating expenses and the acquisition of Sellavir and the increase in income tax benefit.

 

12
 

 

Liquidity and Capital Resources. During the year ended December 31, 2020, 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 $633,404 and $244,937 as of December 31, 2020 and December 31, 2019, respectively, consisting of $108,126 and $41,962, respectively, in cash. Our advances to officers were $332,553 and $-0- as of December 31, 2020 and December 31, 2019, respectively. Our working capital surplus/(deficit) was $314,209 and $(29,840) as of December 31, 2020 and December 31, 2019, respectively.

 

Our total liabilities were $315,225 and $274,777 as of December 31, 2020 and December 31, 2019, respectively.

 

Our stockholders’ equity/(deficit) was $318,179 and $(29,840) as of December 31, 2020 and 2019, respectively and our accumulated deficit was $21,114 and $96,570 as of December 31, 2020 and 2019, respectively.

 

We had $36,499 in cash provided by and $45,048 in cash used in operating activities for the year ended December 31, 2020 and 2019, respectively.

 

We had $29,665 in cash provided by and $-0- cash provided by investing activities for year ended December 31, 2020 and 2019, respectively.

 

We had no cash provided by financing activities for the year ended December 31, 2020 and 2019, respectively.

 

The Company had no formal long-term lines of credit or other bank financing arrangements as of March 31, 2021.

 

The Company has no current plans for the purchase or sale of any plant or equipment.

 

The Company has no current plans to make any changes in the number of employees.

 

13
 

 

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, 2020 and 2019, 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-$100,000). 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. We intend to market our services through Sellavir to obtain new clients and opportunities.

 

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.

 

14
 

 

INDEX TO FINANCIAL STATEMENTS

 

1. Report of Independent Registered Public Accounting Firm F-2
2. Consolidated Balance Sheets F-4
3. Consolidated Statements of Operations F-5
4. Consolidated Statements of Changes in Stockholder’s Equity (Deficit) F-6
5. Consolidated Statements of Cash Flows F-7

 

F-1
 

 

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 consolidated balance sheets of Quarta-Rad, Inc. (the “Company”) as of December 31, 2020 and the related consolidated statements of operations, stockholders’ equity/deficit and cash flows for the year ended December 31, 2020 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, 2020 and the results of its operations and its cash flows for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

 

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 audit. 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 audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.

 

Emphasis of a Matter

 

As discussed in Note 8 to the financial statements in 2020, 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.

 

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

/s/ Macias Gini & O’Connell LLP

We have served as the Company’s auditor since 2021

Irvine, CA

April 15, 2021

 

F-2
 

 

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 the related statements of operations, stockholders’ equity/deficit and cash flows for the year 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 the results of its operations and its cash flows for the year ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

 

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 audit. 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 audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.

 

Emphasis of a Matter

 

As discussed in Note 8 to the financial statements in 2019, 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-3
 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

    December 31, 2020     December 31, 2019  
ASSETS
Current Assets                
Cash   $ 108,126     $ 41,962  
Accounts receivable     48,490       127,518  
Inventory     89,497       75,457  

Deferred tax asset

   

50,768

      -  
Due from officer     332,553       -  
Total Current Assets     629,434       244,937  
                 
Fixed Assets, Net     3,970       -  
                 
TOTAL ASSETS   $ 633,404     $ 244,937  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 77,241     $ 126,469  

Income taxes payable

    70,660        -   
Related party payable     167,324       148,308  
Total Liabilities     315,225       274,777  
               
Common Stock: authorized 50,000,000 common shares, $0.0001 par value 15,659,483 and 15,326,150 were issued and outstanding on December 31, 2020 and December 31, 2019, respectively     1,866       1,533  

Additional paid-in capital

    337,427       65,197  
Accumulated deficit     (21,114 )     (96,570 )
Total Stockholders’ Equity/(Deficit)     318,179       (29,840 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)   $ 633,404     $ 244,937  

 

F-4
 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the year ended December 31, 2020    

For the year ended

December 31, 2019

 
             
Sales -Quarta Rad, Inc., net   $ 843,015     $ 875,345  
Sales - Sellavir, Inc., net – related party     15,000       -  
                 
Total sales, net     858,015       875,345  
                 
Cost of goods sold - Quarta Rad, Inc.     645,140       647,190  
                 
Gross profit     212,875       228,155  
                 
Expenses:                
General & administrative     14,383       125,197  
Advertising     63,122       47,624  
Professional and consulting fees     110,682       125,394  
Research and development     -       72,000  
Operating expenses     188,187       370,215  
                 
Net income (loss) from operations    

24,688

     

(142,060

)
                 
Income tax benefit    

(50,768

)     -  
                 
Net income/(loss)   $ 75,456     $ (142,060 )
                 
Loss per share - basic and diluted   $ -     $ (0.01 )
Weighted average shares - basic and diluted     15,339,849       15,326,150  

 

F-5
 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)

 

For the Years Ended December 31, 2020 and 2019

 

                      Total  
    Common Stock     Additional     Retained Earnings/     Stockholders’  
    Shares     Amount     Paid-In Capital     (Accumulated Deficit)     Equity/(Deficit)  
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 )
Common stock issued for common control acquisition of Sellavir at carry-over basis     333,333       333       272,230       -       272,563  
Net Income     -       -       -       75,456       75,456  
Balance, December 31, 2020     15,659,483     $ 1,866     $ 337,427     $ (21,114 )   $ 318,179  

 

F-6
 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the year ended December 31, 2020     For the year ended December 31, 2019  
             
OPERATING ACTIVITIES:                
Net income/(loss)   $ 75,456     $ (142,060 )
                 
Adjustments to reconcile net income/(loss) to net cash (used in) provided by operating activities:                
Depreciation     35       -  
Income tax benefit    

(50,768

)     -  
Changes in operating assets and liabilities:                
Accounts receivable     79,028       (43,545 )
Inventory     (14,040 )     9,906  
Prepaid expenses     -       18,150  
Accounts payable and accrued expenses     (57,228 )     114,042  
Deferred revenue     (15,000 )     -  
Related party payable     19,016       (1,541 )
Net cashed provided by (used in) operating activities     36,499       (45,048 )
                 
INVESTING ACTIVITIES:                
Cash from acquisition     29,665       -  
Net cashed provided by investing activities     29,665       -  
                 
Net change in cash     66,164       (45,048 )
Cash, beginning of period     41,962       87,010  
Cash, end of period   $ 108,126     $ 41,962  
                 
Non-cash Investing and Financing Transactions:                
Common stock issued for the common control acquisition of Sellavir at carry-over basis   $ 272,563     $ -  
                 
Supplemental cash flow information:                
                 
Cash paid on interest   $ -     $ -  
                 
Cash paid for income taxes   $ -     $ -  

 

F-7
 

 

QUARTA-RAD, INC.

Notes to the Financial Statements

December 31, 2020 and 2019

 

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.

 

During April 2020, the Company acquired Quarta-Rad USA, Inc., a Delaware corporation, as a wholly owned subsidiary. There was no consideration paid for the shares. The purpose of the acquisition is to separate the sales of certain products in separate entities. There was no activity, assets or liabilities in the subsidiary through December 31, 2020.

 

During December 2020, the Company acquired Sellavir, Inc., a Delaware. corporation, as a wholly owned subsidiary, as discussed in Note 7. Sellavir is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis through advanced and proprietary technologies.

 

NOTE 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.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts Quarta-Rad, Inc. and its wholly-owned subsidiaries Quarta-Rad USA, Inc. and Sellavir, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

 

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, 2020 and 2019.

 

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.

 

F-8
 

 

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, 2020 and 2019 amounted to $63,122 and $47,624, respectively.

 

Property and Equipment

 

Property and equipment are stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the related assets, which is five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or their related lease terms. Repairs and maintenance costs are charged to expense when incurred.

 

Long-Lived Assets

 

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were incurred during the years ended December 31, 2020 and 2019. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

 

Income Taxes

 

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.

 

F-9
 

 

As of December 31, 2020, we have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We have identified the U.S. federal and Delaware as our “major” tax jurisdictions. Generally, we remain subject to Internal Revenue Service examination of our 2017 through 2020 tax returns. However, we have certain tax attribute carry forwards, which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.

 

We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax position have been recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.

 

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.

 

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, 2020 and 2019.

 

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.

 

F-10
 

 

Revenue Recognition

 

We adopted FASB Accounting Standards Codification ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The guidance sets forth a five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services.

 

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

 

Revenue is measured based on consideration specified in a contract with a customer. A contract with a customer exists when we enter into an enforceable contract with a customer. The contract is based on either the acceptance of standard terms and conditions on the websites for e-commerce customers and via telephone with our third-party call center for our print media and direct mail customers, or the execution of terms and conditions contracts with retailers and wholesalers. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid prior to shipment via credit card or check when our products are sold direct to consumers or approximately 30 days from the time control is transferred when sold to wholesalers, distributors and retailers. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining to the customer.

 

A performance obligation is a promise in a contract to transfer a distinct product to the customer. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. We have concluded the sale of goods and related shipping and handling are accounted for as the single performance obligation.

 

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods to the customer. We issue refunds to e-commerce and print media customers, upon request, within 30 days of delivery. We estimate the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. For retailers, distributors and wholesalers, we do not offer a right of return or refund and revenue is recognized at the time products are shipped to customers. In all cases, judgment is required in estimating these reserves. Actual claims for returns could be materially different from the estimates. There was no reserve for sales returns and allowances, at December 31, 2020 and December 31, 2019, 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.

 

We recognize consulting revenue over times as services are performed.

 

F-11
 

 

Recent Accounting Pronouncements

 

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12 Simplifying the Accounting for Income Taxes. Effective for public entities for fiscal years beginning after December 15, 2020. The ASU is intended to simplify aspects of accounting for income taxes, including deferred taxes on investments, and calculation of taxes in interim periods. The adoption of this guidance by the Company did not have a material impact on its financial statements and related disclosures.

 

NOTE 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, 2020 and 2019 are summarized below:

 

    2020     2019  
Current:            
Federal   $ -     $ -  
State     -       -  
Total current     -       -  
                 
Deferred:                
Federal     5,184       (29,833 )
State     -       -  
Change in valuation allowance     (55,952 )     29,833  
Total deferred    

(50,768

)     -  
Income tax provision (benefit)   $

(50,768

)    $ -  

 

At December 31, 2020, the Company had federal net operating loss carry forwards of approximately $210,000 which may be offset against future taxable income through 2037. No net deferred tax assets are recorded at December 31, 2020 or 2019, 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, 2020 and 2019, deferred tax assets (liabilities) consist of the following:

 

    2020     2019  
             
Net operating loss carry-forwards   $ 50,768     $ 55,952  
Other     -       -  
Total deferred tax assets     50,768       55,952  
Less: valuation allowance     -       (55,952 )
                 
Net deferred tax assets   $

50,768

    $ -  

 

During the year ended December 31, 2020, the Company eliminated its valuation allowance due to the Sellavir acquisition and projected profit, where the Company expects to utilize its net operations carryforwards. The change in valuation allowance for the year ended December 31, 2020 of approximately $56,000 was to account for the elimination of the valuation allowance. The change in the valuation allowance during the year ended December 31, 2019 was an approximate $30,000 increase, respectively, and a full valuation allowance had been recorded. 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.

 

F-12
 

 

A reconciliation of the statutory federal income tax rate for the year ended December 31, 2020 and 2019 to the effective tax rate is as follows:

 

    2020     2019  
Expected federal tax     21.00 %     21.00 %
Change in Valuation allowance     (227.00 )%     (21.00 )%
                 
Total    

(206.00

)%     - %

 

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, 2020 and 2019. 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 2020 and 2019. 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.

 

NOTE 4–DUE FROM OFFICER

 

Sellavir had advanced its Officer and sole Shareholder $332,553 during 2019 and 2020 and was included in the Sellavir acquisition discussed in Note 7. The full amount was paid to the Company in March 2021.

 

NOTE 5–PROPERTY AND EQUIPMENT

 

Property and Equipment at December 31, 2020 and 2019 consisted of:

 

    2020     2019  
Computer Equipment   $ 4,005     $ -  
Accumulated Depreciation     (35 )     -  
Net Property & Equipment   $ 3,970     $ -  

 

The Company recognized $35 in depreciation expense for the year ended December 31, 2020.

 

NOTE 6–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.

 

During 2020, the Company issued 333,333 shares of common stock in connection with the Sellavir acquisition discussed in Note 7.

 

F-13
 

 

NOTE 7–SELLAVIR, INC. ACQUISITION

 

During December 2020, the Company acquired the common controlled entity, Sellavir, Inc. Sellavir is a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis through advanced and proprietary technologies. Sellavir was owned 100% by Quarta-Rad’s majority shareholder. 333,333 shares of common stock in Quarta-Rad were exchanged for 100% of the outstanding shares of Sellavir.

 

Under an acquisition of common control, the purchase is recorded at historical cost. The fair value of the common stock issued was approximately $170,000. The excess carry-over basis of the net assets acquired was treated as a capital contribution and included in additional paid-in capital.

 

The balance sheet of Sellavir on date of acquistion consisted of:

 

Assets:      
Cash   $ 29,665  
Due from Officer     332,553  
Fixed Assets, net     4,005  
Total Assets   $ 366,223  
         
Liabilities & Equity:        
Accrued Expenses   $ 78,660  
Deferred Revenue     15,000  
Net Equity   $ 272,563  

 

F-14
 

 

Pro-forma Statement of Operations including full year Sellavir (unaudited):

 

      For the year ended December 31, 2020  
         
Sales -Quarta Rad, Inc., net   $ 843,015  
Sales - Sellavir, Inc., net     440,000  
         
Total sales, net     1,283,015  
         
Cost of goods sold - Quarta Rad, Inc.     645,140  
         
Gross profit     637,875  
         
Expenses:        
General & administrative     16,684  
Advertising     63,122  
Professional and consulting fees     196,906  
Operating Expenses     276,712  
         
Net income from operations     361,163  
         
Other expense - income taxes     19,892
         
Net income   $ 341,271  
         
Loss per share - basic and diluted   $ 0.02  
         
Weighted average shares - basic and diluted     15,659,483   

 

NOTE 8–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 $584,550 and $518,750 for 2020 and 2019, respectively. The Company owes the Russian affiliate $126,390 and such amount is included in related party payables in the accompanying balance sheet at December 31, 2020 and 2019. 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, 2020 is $126,390.

 

F-15
 

 

Since inception, the Company has not compensated its CEO, who is the majority shareholder, and, as of December 31, 2020 and 2019, is due $40,935 and $21,918, respectively, for expenses paid on behalf of the Company.

 

During the period December 16, 2020 to December 31, 2020, the Company, through Sellavir, Inc. recognized $15,000 in services to a company owned by our majority shareholder.

 

NOTE 9– COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

The Company is currently undergoing a multi-year VAT tax examination by certain European tax authorities. As of December 31, 2020, the outcome of these examinations is uncertain and the Company is disputing any amounts due. The estimated liabilities on the VAT tax exposure could anywhere from $0 to $125,000 based on estimates and information provided to management. The Company believes its exposure is limited to $100,000, which was accrued in 2019. The Company paid $41,822 during 2020 towards the estimated liability, a remainder of $58,178 is included in accounts payable and accrued expenses, as of December 31, 2020. 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-16
 

 

NOTE 10–SUBSEQUENT EVENTS

 

The Company has performed an evaluation of events occurring subsequent to December 31, 2020 through April 15, 2021. Based on its evaluation, other than the note below, there is nothing to be disclosed herein.

 

The Due from officer amount of $332,553 was repaid in March 2021.

 

NOTE 11 - COVID-19

 

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity. However, if the pandemic continues, it may have an adverse effect on the Company’s results of future operations, financial position, and liquidity.

 

The uncertainty as to the future impact on the Company of the recent COVID-19 outbreak has been considered as part of the Company’s adoption of the going concern basis. Thus far, we have not observed a material impact on our sales during 2020 and early 2021.

 

F-17
 

 

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, 2020 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, 2020 and 2019.

 

(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 as such term as defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

 

As of December 31, 2020, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, 2020, our internal control over financial reporting was not effective as of December 31, 2020 and identified the material weaknesses described below.

 

Description of Material Weaknesses and Management’s Remediation Initiatives

 

The following material weaknesses in our internal control over financial reporting were identified by management as of December 31, 2020:

 

Ineffective control environment. The Company did not maintain an effective control environment, which is the foundation necessary for effective internal control over financial reporting. Specifically, the Company (i) did not maintain a functioning independent audit committee; (ii) did not have its Board of Directors review and approve significant transactions; (iii) had an insufficient number of personnel appropriately qualified to perform control design, execution and monitoring activities; (iv) had an insufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience and ongoing training in the application of U.S. GAAP and SEC disclosure requirements commensurate with the Company’s financial reporting requirements; (v) had inadequate segregation of duties consistent with control objectives; and (vi) lack of written documentation of the Company’s key internal control policies and procedures over financial reporting. The Company is required under Section 404 of the Sarbanes-Oxley Act to have written documentation of key internal controls over financial reporting. The Company did not formally document policies and controls to enable management and other personnel to understand and carry out their internal control responsibilities including the lack of closing checklists, budget-to-actual analyses, balance sheet variation analysis, and pro-forma financial statements. Additionally, the Company did not have an adequate process in place to complete its testing and assessment of the design and operating effectiveness of internal control over financial reporting in a timely manner;

 

15
 

 

Ineffective controls over financial statement close and reporting process. The Company did not maintain effective controls over its financial statement close and reporting process. Specifically, the Company: (i) had insufficient preparation and review procedures for disclosures accompanying the Company’s financial statements; and (ii) did not provide reasonable assurance that accounts were complete and accurate and agreed to detailed support and that reconciliations of accounts were properly performed, reviewed and approved; and

 

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. We do not have sufficient segregation of duties within accounting functions. During the year ended December 31, 2020, we had limited personnel that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. Due to the fact that these duties were often performed by the same person, this creates a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

 

As of the date of this report, our remediation efforts continue related to each of the material weaknesses that we have identified in our internal control over financial reporting, and additional time and resources will be required in order to fully address these material weaknesses. We have not been able to complete all actions necessary and test the remediated controls in a manner that would enable us to conclude that such controls are effective. We are committed to implementing the necessary controls to remediate the material weaknesses described below as our resources permit. These material weaknesses will not be considered remediated until (1) the new processes are designed, appropriately controlled and implemented for a sufficient period of time and (2) we have sufficient evidence that the new processes and related controls are operating effectively.

 

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.

 

(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, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

Not applicable.

 

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   46   Chairman, Chief Executive Officer, Principal Executive Officer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Secretary
         
Alexey Golovanov   42   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.

 

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, 2022. 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, 2020 and 2019, 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                                                                        
      2020       -       -       -       -       -       -       -       -  
      2019       -       -       -       -       -       -       -       -  
                                                                         
2Alexey Golovanov, President                                                                        
                                                                         
      2020       -       -       -       -       -       -       -       -  
      2019       -       -       -       -       -       -       -       -  

 

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, 2020 and 2019.

 

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, 2020, 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 April 15, 2021, we had 15,659,483 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     12,268,103       78.34 %
Common Stock   Alexey Golovanov     3,000,000       19.16 %
    All Officers and Directors as a Group (2 persons)     15,268,103       97.50 %

 

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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, 2020 and 2019, we purchased $584,550 and $518,750, respectively, of inventory from Quarta-Rad Russia and, as of December 31, 2020 and 2019, we owed Quarta-Rad Russia $126,390 and $89,625 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, 2020 and 2019 relates to the development contract.

 

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, 2020 and 2019:

 

    2020     2019  
             
Audit Fees   $ 40,000     $ 32,450  
Audit Related Fees     -       -  
Tax Fees     Nil       Nil  
All Other Fees     Nil       Nil  
Total Fees   $ 40,000     $ 32,450  

 

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, 2020 and 2019, 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 Macias, Gini & O’Donnell, LLP, and believes that the provision of services for activities unrelated to the audit was compatible with maintaining MGO’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: April 15, 2021 /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: April 15, 2021 /s/ Victor Shvetsky
  Victor Shvetsky

 

 

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

 

Dated: April 15, 2021 /s/ Alexey Golovanov
  Alexey Golovanov
  President and Director

 

22

 

 

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