10-Q 1 form10-q.htm
false --12-31 Q1 false 0001549631 0001549631 2024-01-01 2024-03-31 0001549631 2024-05-15 0001549631 2024-03-31 0001549631 2023-12-31 0001549631 us-gaap:RelatedPartyMember 2024-03-31 0001549631 us-gaap:RelatedPartyMember 2023-12-31 0001549631 QURT:QuartaRadIncMember 2024-01-01 2024-03-31 0001549631 QURT:QuartaRadIncMember 2023-01-01 2023-03-31 0001549631 QURT:SellavirIncMember 2024-01-01 2024-03-31 0001549631 QURT:SellavirIncMember 2023-01-01 2023-03-31 0001549631 2023-01-01 2023-03-31 0001549631 us-gaap:CommonStockMember 2023-12-31 0001549631 us-gaap:AdditionalPaidInCapitalMember 2023-12-31 0001549631 us-gaap:RetainedEarningsMember 2023-12-31 0001549631 us-gaap:CommonStockMember 2022-12-31 0001549631 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001549631 us-gaap:RetainedEarningsMember 2022-12-31 0001549631 2022-12-31 0001549631 us-gaap:CommonStockMember 2024-01-01 2024-03-31 0001549631 us-gaap:AdditionalPaidInCapitalMember 2024-01-01 2024-03-31 0001549631 us-gaap:RetainedEarningsMember 2024-01-01 2024-03-31 0001549631 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001549631 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001549631 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001549631 us-gaap:CommonStockMember 2024-03-31 0001549631 us-gaap:AdditionalPaidInCapitalMember 2024-03-31 0001549631 us-gaap:RetainedEarningsMember 2024-03-31 0001549631 us-gaap:CommonStockMember 2023-03-31 0001549631 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001549631 us-gaap:RetainedEarningsMember 2023-03-31 0001549631 2023-03-31 0001549631 us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember QURT:OneSellingPlatformDistributorMember 2024-01-01 2024-03-31 0001549631 us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember QURT:TwoSellingPlatformDistributorMember 2023-01-01 2023-12-31 0001549631 us-gaap:CostOfGoodsTotalMember us-gaap:SupplierConcentrationRiskMember QURT:ThirdPartyMember 2023-01-01 2023-12-31 0001549631 2023-01-01 2023-12-31 0001549631 us-gaap:FairValueInputsLevel1Member 2024-03-31 0001549631 us-gaap:FairValueInputsLevel2Member 2024-03-31 0001549631 us-gaap:FairValueInputsLevel3Member 2024-03-31 0001549631 us-gaap:FairValueInputsLevel1Member 2023-12-31 0001549631 us-gaap:FairValueInputsLevel2Member 2023-12-31 0001549631 us-gaap:FairValueInputsLevel3Member 2023-12-31 0001549631 QURT:ThaiCorporationMember QURT:SellavirIncMember 2023-03-31 0001549631 QURT:ThaiCorporationMember QURT:SellavirIncMember 2023-03-01 2023-03-31 0001549631 QURT:ThaiCorporationMember QURT:SellavirIncMember 2024-01-01 2024-01-31 0001549631 QURT:ThaiCorporationMember QURT:SellavirIncMember 2024-03-31 0001549631 QURT:ThaiCorporationMember QURT:SellavirIncMember 2023-12-31 0001549631 QURT:ThaiCorporationMember QURT:SellavirIncMember 2024-01-01 2024-03-31 0001549631 QURT:ThaiCorporationMember QURT:SellavirIncMember 2023-01-01 2023-12-31 0001549631 QURT:ThaiCorporationMember 2023-05-31 0001549631 QURT:ThaiCorporationMember 2024-01-01 2024-01-31 0001549631 QURT:ThaiCorporationMember 2023-05-01 2023-05-31 0001549631 QURT:ThaiCorporationMember 2024-03-31 0001549631 QURT:ThaiCorporationMember 2023-12-31 0001549631 QURT:NotesReceivableOneMember 2024-03-31 0001549631 QURT:NotesReceivableTwoMember 2024-03-31 0001549631 2022-07-01 2023-03-31 0001549631 QURT:QuartaRadLtdMember us-gaap:SoftwareDevelopmentMember 2017-07-31 0001549631 QURT:QuartaRadLtdMember 2024-03-31 0001549631 QURT:QuartaRadLtdMember 2023-12-31 0001549631 QURT:StarSystemsCorporationMember 2024-03-31 0001549631 QURT:StarSystemsCorporationMember 2023-12-31 0001549631 us-gaap:MajorityShareholderMember srt:ChiefExecutiveOfficerMember 2024-01-01 2024-03-31 0001549631 us-gaap:MajorityShareholderMember srt:ChiefExecutiveOfficerMember 2023-01-01 2023-03-31 0001549631 us-gaap:MajorityShareholderMember srt:ChiefExecutiveOfficerMember 2024-03-31 0001549631 us-gaap:MajorityShareholderMember srt:ChiefExecutiveOfficerMember 2023-12-31 0001549631 QURT:QuartaRadLtdMember 2024-01-01 2024-03-31 0001549631 QURT:SellavirIncMember 2024-01-01 2024-03-31 0001549631 QURT:QuartaRadLtdMember 2023-01-01 2023-03-31 0001549631 QURT:SellavirIncMember 2023-01-01 2023-03-31 0001549631 QURT:QuartaRadLtdMember 2024-03-31 0001549631 QURT:QuartaRadLtdMember 2023-12-31 0001549631 QURT:SellavirIncMember 2024-03-31 0001549631 QURT:SellavirIncMember 2023-12-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure QURT:Segment QURT:Integer iso4217:THB

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

quarterly REPORT under SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2024

 

or

 

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: (302) 575-0877

 

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 whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§230.405 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 ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated file,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

Yes ☐ No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 15, 2024, the number of shares outstanding of the issuer’s sole class of common stock, $0.0001 par value per share, is 15,674,483.

 

 

 

 

 

 

table of contents

 

Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed and Consolidated Balance Sheets 3
Condensed and Consolidated Statements of Operations 4
Condensed and Consolidated Statements of Stockholders’ Equity/Deficit 5
Condensed and Consolidated Statements of Cash Flows 6
Notes to the Condensed and Consolidated Unaudited Financial Statements 7
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 20
PART II — OTHER INFORMATION 21
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 21
Signatures 22

 

2

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONDENSED AND CONSOLIDATED BALANCE SHEETS

(unaudited)

 

   March 31, 2024   December 31, 2023 
   As of 
   March 31, 2024   December 31, 2023 
ASSETS          
Current Assets          
Cash  $50,068   $72,625 
Accounts receivable   7,373    7,289 
Marketable securities, trading   36,503    52,148 
Notes receivable - related party - current portion   -    80,813 
Inventory   23,558    30,398 
Total Current Assets   117,502    243,273 
           
Fixed Assets, Net   1,370    1,570 
           
Other Assets          
Notes receivable - related party, net of current portion and discount of $12,858 and $13,630 on March 31, 2024 and December 31, 2023, respectively.   409,489    341,557 
Interest receivable - related party   43,604    44,172 
Trade receivable   29,529    28,673 
Deferred tax asset   34,976    24,069 
Total Other Assets   517,598    438,471 
           
TOTAL ASSETS  $636,470   $683,314 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current Liabilities          
Accounts payable and accrued expenses  $115,729   $105,244 
Payable - related parties   218,799    184,477 
Total Liabilities   334,528    289,721 
           
Commitments and Contingencies   -    - 
           
Stockholders’ Equity          
Common Stock: authorized 50,000,000 common shares, $0.0001 par value 15,674,483 and 15,674,483 were issued and outstanding on March 31, 2024 and December 31, 2023, respectively   1,568    1,568 
Additional paid-in capital   346,726    346,726 
Retained earnings/(accumulated deficit)   (46,352)   45,299 
Total Stockholders’ Equity   301,942    393,593 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $636,470   $683,314 

 

See accompanying notes to unaudited condensed and consolidated financial statements

 

3

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

  

For the Three

Months Ended

March 31, 2024

  

For the Three

Months Ended

March 31, 2023

 
         
Sales -Quarta Rad, Inc., net  $22,042   $136,979 
Sales - Sellavir, Inc., net - related party   -    62,000 
           
Total sales, net   22,042    198,979 
           
Cost of goods sold - Quarta-Rad, Inc.   10,249    100,565 
Cost of goods sold - Sellavir Inc.    -    22,731 
           
Gross profit   11,793   75,683 
           
Expenses:          
General and administrative   45,842    12,418 
Advertising   -    17,093 
Professional and consulting fees   28,509    33,400 
Operating expenses   74,351    62,911 
           
Net income/(loss) from operations   (62,558)   12,772 
Other income - interest and dividends   1    294 
Other expense - foreign currency translation loss   (13,683)   - 
Other income - interest - related party   11,703    - 
Other expense - loss on loan modification   

(11,469

)   

-

 
Other income - unrealized gain/(loss) on investments   (15,645)   54,471 
Other income - realized loss on investments   -    (25,040)
Net income/(loss) before provision for income taxes   (91,651)   42,497 
           
Income tax expense/(benefit)   -    8,924 
           
Net income/(loss)  $(91,651)  $33,573 
           
Income/(loss) per share - basic and diluted  $(0.01)  $- 
Weighted average shares - basic and diluted   15,674,483    15,674,483 

 

See accompanying notes to unaudited condensed and consolidated financial statements

 

4

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONDENSED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2024

(Unaudited)

 

   Shares   Amount   Capital   Earnings   Equity 
   Common Stock  

Additional

Paid-In

   Retained  

Total

Stockholders’

 
   Shares   Amount   Capital   Earnings/(Accumlated Deficit)   Equity 
Balance, December 31, 2023   15,674,483   $1,568   $346,726   $45,299   $393,593 
Net loss   -    -    -    (91,651)   (91,651)
Balance, March 31, 2024   15,674,483   $1,568   $346,726   $(46,352)  $301,942 

 

CONDENSED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2023

(Unaudited)

 

   Common Stock  

Additional

Paid-In

   Retained  

Total

Stockholders’

 
   Shares   Amount   Capital   Earnings   Equity 
Balance, December 31, 2022   15,674,483   $1,568   $346,726   $807   $349,101 
Net income   -    -    -    33,573    33,573 
Balance, March 31, 2023   15,674,483   $1,568   $346,726   $34,380   $382,674 

 

See accompanying notes to unaudited condensed and consolidated financial statements

 

5

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

 

  

For the Three

Months Ended

March 31, 2024

  

For the Three

Months Ended

March 31, 2023

 
         
OPERATING ACTIVITIES:          
Net income/(loss)  $(91,651)  $33,573 
           
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Depreciation   200    200 
Foreign currency translation loss   13,683    - 
Amortization of discount   (802)   - 
Net realized loss on investments   -    25,040 
Net unrealized (gain)/loss on investments   15,645    (54,471)
Income tax expense/(benefit)   -    8,924 
Changes in operating assets and liabilities:          
Accounts receivable   (84)   37,444 
Inventory   6,840    75,340 
Trade receivables   (856)   - 
Accrued interest receivable - related party   568    - 
Accounts payable and accrued expenses   10,485    32,958 
Deferred revenue - related party   -    (62,000)
Deferred taxes   (10,907)   - 
Related party payable   34,322    - 
Net cashed provided/(used) by operating activities   (22,557)   97,008 
           
INVESTING ACTIVITIES:          
Sale of marketable securities, trading   -    72,004 
Issuance of notes payable - related party   -    (245,000)
Purchase of marketable securities, trading   -    (57,921)
Net cash used in Investing Activities   -    (230,917)
           
Net change in cash   (22,557)   (133,909)
Cash, beginning of period   72,625    293,878 
Cash, end of period  $50,068   $159,969 
           
Supplemental cash flow information:          
           
Cash paid for interest  $-   $- 
           
Cash paid for income taxes  $

10,907

   $- 

 

See accompanying notes to unaudited condensed and consolidated financial statements

 

6

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

Notes to the (unaudited) Condensed and Consolidated Financial Statements

 

NOTE 1 - BASIS OF PRESENTATION

 

The condensed and consolidated balance sheet of Quarta-Rad, Inc. and Subsidiaries (the “Company”) as of March 31, 2024, and the statements of operations and changes in stockholders’ equity for the three months ended March 31, 2024, and 2023, and the cash flows for three months ended March 31, 2024, and 2023 have not been audited. However, in the opinion of management, such information includes all adjustments (consisting of normal recurring adjustments), which are necessary to accurately reflect the financial position of the Company as of March 31, 2024, the results of operations and cash flows for the periods ended March 31, 2024, and 2023.

 

The condensed and consolidated balance sheet as of December 31. 2023 has been derived from audited financial statements. Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted, although management believes that the disclosures are adequate to make the information presented not misleading. Interim period results are not necessarily indicative of the results to be achieved for an entire year. These condensed and consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31. 2023.

 

NOTE 2 - NATURE OF BUSINESS

 

The Company distributes detection devices, including but not limited to Geiger counters, to homeowners and interested customers in North America and Europe. The Company targets homebuilders and home renovation contractors. As noted in RISKS AND UNCERTAINTIES, the Company has encountered certain restrictions in securing inventory and has secured a new supplier.

 

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 using artificial intelligence (“AI”).

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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.

 

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 related party revenue,and notes receivable. 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.

 

7

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

Notes to the (unaudited) Condensed and Consolidated Financial Statements

 

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 expenses for the three ended March 31, 2024, and 2023, amounted to $-0- and $17,093, respectively.

 

Notes Receivable – related party

 

Notes Receivable – related party consists of loan agreements entered into by Sellavir discussed in Note 4. Amounts payable marked to value in functional currency at the balance sheet date where the Company records foreign translation gain or loss. The Company’s functional currency is the United States Dollar.

 

Concentration of Credit Risk

 

Credit is extended to online platforms and suppliers based on an evaluation of their financial condition, and collateral is generally not required. The Company performs ongoing credit evaluations of its customers and provides an allowance for doubtful accounts as appropriate.

 

One selling platform/distributor accounted for 92% of accounts receivable at March 31, 2024 and two selling platforms/distributors accounted for 88% of accounts receivable at December 31. 2023.

 

Quarta Rad purchased 100% of its inventory through a third party in 2023.

 

Earnings per Share

 

The Company’s basic earnings per share are calculated by dividing its net income available to common stockholders by the weighted average number of common shares outstanding for the period. The Company’s dilutive earnings per share is calculated by dividing its net income available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There were no potentially dilutive instruments outstanding during the periods ended March 31, 2024, and 2023.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825, “Financial Instruments” include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments, except marketable securities are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at March 31, 2024 and December 31. 2023. Marketable securities are level one assets recorded at fair value.

 

FASB ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

  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.

 

8

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

Notes to the (unaudited) Condensed and Consolidated Financial Statements

 

The Company’s investment securities consist of common and options. Substantially all the Company’s investments are Level 1. The fair market value is based on quoted prices in active markets for identical assets. Financial assets are measured at fair value on a recurring basis. The following table provides information at March 31, 2024 about the Company’s financial assets measured at fair value on a recurring basis.

 

Values on March 31, 2024:

 

   Level 1   Level 2   Level 3   Total 
Assets at fair value:                
Marketable Securities  $36,503   $-   $-   $36,503 
                     
Total assets at fair value, March 31, 2024  $36,503   $   -   $   -   $36,503 

 

Values on December 31. 2023:

 

   Level 1   Level 2   Level 3   Total 
Assets at fair value:                
Marketable Securities  $52,148   $-   $-   $52,148 
                     
Total assets at fair value, December 31. 2023  $52,148   $   -   $   -   $52,148 

 

Revenue Recognition

 

The Company follows guidance from FASB Accounting Standards Codification ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The guidance sets forth a five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance.

 

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

 

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

 

9

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

Notes to the (unaudited) Condensed and Consolidated Financial Statements

 

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

 

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods to the customer. We issue refunds to e-commerce and print media customers, upon request, within 30 days of delivery. We estimate the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. For retailers, distributors and wholesalers, we do not offer a right of return or refund and revenue is recognized at the time products are shipped to customers. In all cases, judgment is required in estimating these reserves. Actual claims for returns could be materially different from the estimates. There was no reserve for sales returns and allowances, at March 31, 2024 and December 31. 2023, respectively.

 

We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when a product is shipped. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfilment cost and are included in cost of product sales.

 

We recognize consulting revenue over time as services are performed.

 

Risks and Uncertainties

 

RUSSIAN INVASION OF UKRAINE

 

In February 2022, Russia invaded the nation of Ukraine and certain sanctions and banking restrictions were levied upon Russia. As a result, the Company’s ability to purchase inventory from Russia has been impacted.

 

The Company is actively monitoring the situation and working closely with their suppliers and logistics companies to mitigate the impact. During October 2022 the Company has encountered additional restrictions in the EU and believes their ability to continue to sell in the EU will be diminished. The Company has found another factory to supply inventory in Kazakhstan, which received a shipment of 200 units at the end of 2023. The units were partially sold during the first quarter of 2024.

 

10

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

Notes to the (unaudited) Condensed and Consolidated Financial Statements

 

The Company is continuing to expand its Artificial Intelligence business through development of new services and software, and consulting on strategies and implementation, and are in the process of transforming our company from an import heavy revenue entity to AI services revenue becoming the majority of total sales. Due to the constraints with the Quarta Rad related income, additional focus and resources will be utilized by Sellavir Beginning in 2024, Sellavir will strategically focus on harnessing its advanced AI capabilities and extensive experience to innovate within the call center industry. The industry’s evolving landscape, particularly the shift from traditional on-premise solutions to cloud-hosted platforms, presents a unique opportunity for Sellavir to introduce a suite of AI-driven products.

 

NOTE 4–NOTE RECEIVABLE – RELATED PARTY

 

During March 2023, Sellavir entered into a loan agreement with a related Thai Corporation. for the purchase of land and to ultimately build a structure. The Company’s CEO and majority shareholder became the CEO and a minority shareholder in the Thai entity in May 2023. The Thai Corporation will repay Sellavir $9,000,000 Thai Bhat, valued at $261,038, at the time of the loan, which includes a premium of $16,038 plus interest a rate of 15% per annum. In January 2024, the note was amended to reduce the interest rate to 10% and for Sellavir to receive 3% of the selling price of the secured property. The Company recorded a loss of $8,188 in connection with this loan modification. The Company marked the note to Thai Bhat, valued at $247,317 and $261,072 recording a loss on foreign currency translation of $13,683 and $36 at March 31, 2024 and December 31, 2023, respectively. The amount of unamortized premium at March 31, 2024 and December 31, 2023 is $12,858 and $13,362, respectively. Payments are deferred until April 1, 2024, with quarterly principal payments due through April 1, 2029. Interest is payable at the end of the loan. The Company will amortize the premium over the life of the loan. Payments are payable in Thai Baht. The loan is secured by land located in Thailand.

 

The Company issued an additional loan to the Thai Corporation in May 2023 for $175,000, at the rate of 15% per annum. In January 2024, the note was amended to reduce the interest rate to 10% and for Sellvir to receive 3% of the selling price of the secured property. The Company recorded a loss of $3,281 in connection with this loan modification. Payments are deferred until April 1, 2024, with quarterly principal payments due through April 2029. Interest is payable at the end of the loan. The loan is secured by land located in Thailand.

 

During January 2024, both notes were amended to provide a one year extension for all payment due dates.

 

Accrued interest at March 31, 2024 and December 31, 2023 for both loans is $43,604 and $44,172, respectively, included as a long-term asset, interest receivable – related party.

 

Principal amounts to be received for the two notes are as follows:

 

   $261,038 Note   $175,000 Note   Total 
2025  $46,366   $31,875   $78,241 
2026  $61,830    42,500    104,330 
2027   61,830    42,500    104,330 
2028   61,830    42,500    104,330 
2029   15,491    15,625    31,116 
Totals  $247,347   $175,000   $422,347 

 

11

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

Notes to the (unaudited) Condensed and Consolidated Financial Statements

 

NOTE 5–PROPERTY AND EQUIPMENT

 

Property and Equipment at March 31, 2024 and December 31. 2023 consisted of:

 

   March 31,   December 31, 
   2024   2023 
Computer Equipment  $4,005   $4,005 
Accumulated Depreciation   (2,635)   (2,435)
Net Property & Equipment  $1,370   $1,570 

 

The Company recognized $200, and $200 in depreciation expense in each period for the three ended March 31, 2024 and 2023, respectively.

 

NOTE 6–RELATED PARTY TRANSACTIONS

 

During July 2017, the Company entered into an agreement with Quarta Rad, LTD (“QRR”), a company in Russia, which is owned by the Company’s minority shareholder to develop and update software for a new device for $180,000. The development contract ended December 31, 2019. The amount due in connection with this agreement as of March 31, 2024, and December 31. 2023, is $91,850 and $91,850, respectively. The balances are due on demand and do not incur interest.

 

In May 2022, the Company began using Star Systems Corporation (“STAR”:), a Japanese entity owned by the Company’s majority shareholder, as an intermediary to purchase inventory from QRR. The Company owes Star $42,502 and $42,502 on March 31, 2024 and December 31, 2023, for purchasers and inventory and upgrades from 2022. The balances are due on demand and do not incur interest.

 

In April 2021, the Company began compensating its CEO, who is the majority shareholder. The Company expensed $8,000 and $8,000 for the three months ended March 31,, 2024, and 2023, respectively. As of March 31, 2024 and December 31, 2023 the Company has accrued $96,000 and $88,000, respectively for this compensation, included within accounts payable and accrued expenses on the accompanying balance sheets.

 

From time to time the CEO advanced funds for operations. As of March 31, 2024 and December 31, 2023, is due $73,221 and $38,899, respectively, for expenses paid on behalf of the Company. The balances are due on demand and do not accrue interest.

 

Sellavir recognized $-0- and $62,000 of revenue for the three months ended March 31, 2024, and 2023, respectively m un services to STAR to develop software.

 

NOTE 7–SEGMENTS

 

The Company has two operating segments through the operations of Quarta-Rad and Sellavir. The Company evaluates the performance of its segments based on revenues, operating income(loss) and net income(loss).

 

12

 

 

QUARTA-RAD, INC. AND SUBSIDIARIES

 

Notes to the (unaudited) Condensed and Consolidated Financial Statements

 

Segment information for the three months and nine months ended September 2024 and 2023 is as follows:

 

   Quarta-Rad   Sellavir   Consolidated 
For the three months ended March 31, 2024
   Quarta-Rad   Sellavir   Consolidated 
Revenues  $22,042    -   $22,042 
Loss from operations   (37,164)   (25,394)   (62,558)
Net loss  $(29,360)   (62,291)  $(91,651)

 

   Quarta-Rad   Sellavir   Consolidated 
For the three months ended March 31, 2023
   Quarta-Rad   Sellavir   Consolidated 
Revenues  $136,979   $62,000   $198,979 
Income/(loss) from operations   (25,249)   38,021    12,772 
Net income/(loss)  $(19,943)  $53,516   $33,573 

 

Total Assets  As of March 31, 2024   As of December 31, 2023 
Quarta-Rad  $138,903   $151,789 
Sellavir   497,567    531,525 
Total Assets  $636,470   $683,314 

 

NOTE 8– COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

Legal

 

In the normal course of business, the Company may become involved in various legal proceedings. The Company knows of no pending or threatened legal proceeding to which the Company is or will be a party that, if successful, might result in material adverse change in the Company’s business, properties or financial condition.

 

NOTE 9–SUBSEQUENT EVENTS

 

The Company has performed an evaluation of events occurring subsequent to March 31, 2024 through May 15, 2024. Based on its evaluation, other than the note below there is nothing to be disclosed herein.

 

During April 2024, a minority shareholder sold and board member, sold their entire interest and resigned from the board.

 

The notes receivable in NOTE 4 were amended to extend the payment dates one year, including the payment due April 1, 2024.

 

13

 

 

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

 

The following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying unaudited condensed financial statements and notes to help provide an understanding of our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited condensed financial statements.

 

In this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our” refer to Quarta-Rad, Inc., a Delaware corporation, unless the context requires otherwise.

 

We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three and nine months ended March 31, 2024 and 2023. You should refer to the Financial Statements and related Notes in conjunction with this discussion.

 

Results of Operations

 

General

 

We were incorporated under the laws of the State of Delaware on November 29, 2011 with fiscal year end in December 31. We were formed to distribute and sell detection devices to homeowners and interested consumers in North America. Initially, our business plan was to sell products on consignment from Star Systems Japan, a corporation owned by our majority shareholder. We purchased these products from Quarta-Rad, Ltd., a company owned by our minority shareholder. We also targeted direct-to-consumer sales since we believe we can distribute these products through the Internet. We have never been party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.

 

During April 2020, we acquired Quarta-Rad USA, Inc., a Delaware corporation, as a wholly owned subsidiary. There was no consideration paid for the shares. The purpose of the acquisition is to separate the sales of certain products in separate entities. There was no activity, assets or liabilities in the subsidiary through March 31, 2024.

 

During December 2020, we acquired Sellavir, Inc. Sellavir is an AI company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis through advanced and proprietary technologies.

 

As of the date of this Form 10-Q, we continue to expand our operations and expect to increase our revenues with additional working capital. Our chief executive officer and director, Victor Shvetsky, and our director and president, Alexey Golovanov, are our only employees. Mr. Shvetsky and Mr. Golovanov will devote at least ten hours per week to us but may increase the number of hours as necessary through March 31, 2024. In April 2024, Mr. Golovanov resigned from the Company . Beginning in 2013, we began purchasing the products from Quarta-Rad, Ltd., our related party supplier and it shipped the products to us. We then shipped the products to a third-party online retailer, to hold for Internet sales and sales to our third-party resellers.

 

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

 

We continue to focus our business operations on the development of our distribution agreements and reseller network as well as continue to advertise on the Internet. We plan to continue to utilize our website to promote the products to home renovation contractors and other purchasers of detection devices. We are promoting the detection products by advertising our website and marketing to independent distributors and others interested in detection devices. We purchase the products from QRR, which is owned by our minority shareholder and is the original manufacturer for RADEX product line. Under an oral agreement with QRR, we have the exclusive distribution rights for sale of QRR products in Europe, the US, and Asia (excluding China) for a period of 10 years. We sell the products we purchase from QRR directly to third party buyers and to resellers. The purchase terms require us to prepay for the products we purchase at a price that is set forth in each purchase order. 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.

 

14

 

 

We have secured another factory in Kazakhstan to supply inventory. A test batch of inventory was purchased in December 2023 and partially sold during the first three months of 2024.

 

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

- recognizing the potential in the call center industry and leveraging Sellavir's, we are set to launch a new product specifically designed to simplify the use of complex cloud-based call center platforms. This product will be offered as a monthly subscription service, which is anticipated to provide a steady and predictable stream of revenue.

 

Critical Accounting Policy and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our condensed financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the condensed financial statements included in this Quarterly Report on Form 10-Q.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three months ended March 31, 2024, and 2023, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

 

The Company has two operating segments through the operations of Quarta-Rad and Sellavir. Net loss for the three months ended March 31, 2024, is comprised of:

 

   Quarta Rad   Sellavir   Total 
Sales  $22,042    -   $22,042 
Cost of Good Sold   10,249    -    10,249 
Gross Profit   11,793    -    11,793 
                
Expenses:               
General & administrative   21,948    23,894    45,842 
Advertising   -    -    - 
Professional and consulting fees   27,009    1,500    28,509 
Operating expenses   48,957    25,394    74,351 
                
Net loss from operations   (37,164)   (25,394)   (62,558)
                
Interest and dividends   -    1    1 
Other expense - foreign currency translation loss        (13,683)   (13,683)
Other income - interest - related party   -    11,703    11,703 
Other expense - loss on loan modification        (11,469)   (11,469)
Unrealized gain/(loss) on investments   -    (15,645)   (15,645)
                
Net loss  $(29,360)  $(62,291)  $(91,651)

 

15

 

 

The Company has two operating segments through the operations of Quarta-Rad and Sellavir. Net income for the three months ended March 31, 2023, is comprised of:

 

   Quarta Rad   Sellavir   Total 
Sales  $136,979   $62,000   $198,979 
Cost of Good Sold   100,565    22,731    123,296 
Gross Profit   36,414    39,269    75,683 
                
Expenses:               
General & administrative   12,165    253    12,418 
Advertising   17,093    -    17,093 
Professional and consulting fees   32,400    1,000    33,400 
Operating expenses   61,658    1,253    62,911 
                
Net income (loss) from operations   (25,244)   38,016    12,772 
                
Interest and dividends   -    294    294 
Unrealized gain/(loss) on investments   -    54,471    54,471 
Realized gain/(loss) on investments        (25,040)   (25,040)
Income tax expense   5,301    (14,225)   (8,924)
                
Net income/(loss)  $(19,943)  $53,516   $33,573 

 

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the three months ended March 31, 2024 and 2023, respectively, together with notes thereto.

 

Consolidated Totals:

 

Three months ended March 31, 2024 compared with the three months ended March 31, 2023

 

Revenues. Our net revenues decreased $176,937, or 88.92% to $22,042 for the three months ended March 31, 2024, compared with $198,979 for the three months ended March 31, 2023. The reduction was primarily attributable to the sales of our RD1503 model and reduction in recognized Sellavir revenue.

 

Cost of Goods Sold. Our Cost of Goods Sold decreased $113,047 or 91.69% to $10,249 for the three months ended March 31, 2024 compared to $123,296 for the comparable period in 2023. The decrease was a result of Quarta Rad direct costs due to reduced revenue.

 

Operating Expenses. For the three months ended March 31, 2024, our total operating expenses increased $11,440 to $74,351 compared to $62,911 for the three months ended March 31, 2023. The increase is primarily attributable to increased professional fees and outside services.

 

Net Income. Our net loss increased $125,224 to a net loss of ($91,651) for the three months ended March 31, 2024 compared to net income of $33,573 for the three months ended March 31, 2023. The increase was primarily due to a decrease in sales.

 

16

 

 

QUARTA-RAD

 

Three months ended March 31, 2024, compared with the three months ended March 31, 2023

 

Revenues. Our net revenues decreased $114,937, or 83.91% to $22,042 for the three months ended March 31, 2024, compared with $136,979 for the three months ended March 31, 2023. The reduction was primarily attributable to the sales of our RD1503 model.

 

Cost of Goods Sold. Our Cost of Goods Sold decreased $90,316 or 89.81% to $10,249 for the three months ended March 31, 2024, compared to $100,565 for the comparable period in 2023. The decrease was a result of decreased sales.

 

Operating Expenses. For the three months ended March 31, 2024, our total operating expenses decreased $12,701 or 20.6% to $48,957 compared to $61,658 for the three months ended March 31, 2023. The decrease is primarily attributable to a reduction in advertising expense.

 

Net Loss. Our net loss increased $9,417 or 47.22% to a net loss of ($29,360) for the three months ended March 31, 2024, compared to a net loss of ($19,943) for the three months ended March 31, 2023. The increase was primarily due to a reduction in sales.

 

SELLAVIR

 

Three months ended March 31, 2024, compared with the three months ended March 31, 2023

 

Revenues. Our net recognized revenue decreased $62,000 to $-0- for the three months ended March 31, 2024 compared with $62,000 for the three months ended March 31, 2023. The decrease is due to timing or revenue recognized.

 

Cost of Goods Sold. Our Cost of Goods Sold decreased $22,731 or 100.00% to $-0- for the three months ended March 31, 2024, compared to $22,731 for the comparable period in 2022. The decrease was primarily due to the classification of contractor costs.

 

Operating Expenses. For the three months ended March 31, 2024, our total operating expenses increased $24,141 or 1,926.66% to. $25,394 compared to $1,253 for the three months ended March 31, 2023. The increase was primarily attributable to the classification of contractor costs.

 

Net Income. Our net loss increased $115,807 to ($62,291) for the three months ended March 31, 2024, compared to net income of $53,516 for the three months ended March 31, 2023. The increase was primarily due to a reduction in sales and unrealized gain on investments.

 

Liquidity and Capital Resources. During the three months ended March 31, 2024, we used cash for operating expenses from cash on hand and the sale of products on the Internet and from independent, third-party resellers and from consulting revenue from Sellavir.

 

Our total assets were $636,470 and $683,314 as of March 31, 2024, and December 31, 2023, respectively, consisting of $50,068 and $72,625, respectively, in cash. Our working capital deficit was ($217,026) and ($46,448) as of March 31, 2024 and December 31, 2023, respectively.

 

We had $22,557 used by and $97,008 in cash provided by operating activities for the three months ended March 31, 2024 and 2023, respectively.

 

17

 

 

We had $-0- and $230,917 cash used by investing activities for the three months ended March 31, 2024 and 2023, respectively. During March and May 2023 Sellavir entered into loan agreements with a related Thai Corporation. The investment includes a premium of $16,038 plus interest rate of 15% per annum. The loan is secured by land located in Thailand.

 

We had no cash provided by financing activities for the three months ended March 31, 2024 and 2023, respectively.

 

The Company had no formal long-term lines of credit or other bank financing arrangements as of March 31, 2024.

 

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

 

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

 

Impact of Inflation

 

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

 

Capital Expenditures

 

The Company expended no amounts on capital expenditures for the nine months ended March 31, 2024.

 

Plan of Operation

 

Our business strategy is to continue to market our website (www.quartarad.com). We have used our website to market products for sale to consumers as well to third party distributors. We will continue to strengthen our presence on e-commerce sites. We are also focusing on expanding our reseller network by targeting large consumer retail chains.

 

The number of detection devices which we will be able to sell will depend upon the success of our marketing efforts through our website and the distributors that we will enter into agreement with to sell the products.

 

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

 

We intend to implement the following tasks within the next twelve months:

 

Inventory: We intend to purchase inventory to increase our sales. We believe that these funds will be initially sufficient for us to increase our inventory from Quarta-Rad, Ltd. The amount needed for inventory purchases is directly related to the demand for sales of our product.

 

Marketing: (Estimated cost $25,000-$75,000). In addition to the website modification costs, we intend to increase our marketing efforts on the Internet to generate leads and sales. We will also utilize funds to develop marketing brochures and materials to market the products to industry professionals such as home renovation contractors.

 

Secure Distribution Agreements: (Estimated cost $10,000). We plan to seek and secure distribution agreements for the sale of our detection devices.

 

Our management does not anticipate the need to hire additional full or part- time employees over the next three (3) months, as the services provided by our officers and directors and our independent contractor appear sufficient at this time. We believe that our operations are currently on a small scale that is manageable by these two individuals as well as our independent contractor. Our management’s responsibilities are mainly administrative at this stage. While we believe that the addition of employees is not required over the next three (3) months, the professionals we plan to utilize will be considered independent contractors. We do not intend to enter into any employment agreements with any of these professionals. Thus, these persons are not intended to be employees of our company.

 

We currently do not own any equipment that we would seek to sell in the near future; we do not have any off-balance sheet arrangements; and we have not paid for expenses on behalf of our directors.

 

18

 

 

Off-Balance Sheet Arrangements

 

None.

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Reform Act”). The Reform Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, other than statements of historical fact that we make in this Quarterly Report on Form 10-Q, are forward-looking. The words “anticipates,” “believes,” “expects,” “intends,” “will continue,” “estimates,” “plans,” “projects,” the negative of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean the statement is not forward-looking.

 

Forward-looking statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities and Exchange Commission, including on Forms 8-K and 10-K.

 

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all those risks, nor can we assess the impact of all those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to update publicly any of them considering new information or future events.

 

Critical Accounting Policies

 

Our condensed financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, and Note 1 to the Condensed and Consolidated Financial Statements in this Form 10-Q.

 

Accounts Receivable Accounts Receivable and related party notes receivable amounts from sales to various suppliers and online platforms and loans. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectable amounts through a charge to bad debt expense and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. A reserve for sales returns and allowances is considered immaterial and, as a result, there was no reserve for sales returns and allowances, at March 31, 2024 and December 31, 2023, respectively.

 

19

 

 

Item 3. 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 4. Controls and Procedures

 

Disclosure of controls and procedures.

 

The Company is responsible for establishing and maintaining adequate internal control over financial reporting in accordance with the Rule 13a-15 of the Securities Exchange Act of 1934. The Company’s officer, its president, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2024 based on the criteria establish in Internal Control Integrated Framework issued by the 2013 Committee of Sponsoring Organizations of the Treadway Commission. Based on the foregoing evaluation, we have concluded that our disclosure controls and procedures were not effective as of March 31, 2024 and that they do not allow for information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive and Principal Accounting & Financial Officers as appropriate to allow timely decisions regarding required disclosure.

 

The material weaknesses relate to the following:

 

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

 

Plan for Remediation of Material Weaknesses

 

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate this deficiency as resources to do so become available. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2022 assessment of the effectiveness of our internal control over financial reporting.

 

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

 

Management believes that the aforementioned material weaknesses did not impact our financial reporting or result in a material misstatement of our condensed financial statements.

 

Changes in internal controls over financial reporting.

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

20

 

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

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 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

  (a) The following exhibits are filed with this quarterly report on Form 10-Q or are incorporated herein by reference:

 

Exhibit    
Number   Description
     
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*.

 

* Filed herewith.

 

21

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  QUARTA-RAD, INC.
   
May 15, 2024 /s/ Victor Shvetsky
  Victor Shvetsky
  Chairman and Chief Executive Officer (Principal Executive
  Officer) and Chief Financial Officer (Principal Accounting and Financial Officer)

 

22