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: September 30, 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: 732-887-8511
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 November 14, 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
QUARTA-RAD, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(unaudited)
| | | | | | | | |
| | As of | |
| | September 30, 2024 | | | December 31, 2023 | |
ASSETS | | | | | | | | |
Current Assets | | | | | | | | |
Cash | | $ | 50,281 | | | $ | 72,625 | |
Accounts receivable | | | 7,468 | | | | 7,289 | |
Accounts receivable - related party | | | 10,000 | | | | - | |
Accounts receivable | | | 10,000 | | | | - | |
Marketable securities, trading | | | 1 | | | | 52,148 | |
Notes receivable - related party - current portion | | | 73,411 | | | | 80,813 | |
Inventory | | | 4,732 | | | | 30,398 | |
Total Current Assets | | | 145,893 | | | | 243,273 | |
| | | | | | | | |
Fixed Assets, Net | | | 970 | | | | 1,570 | |
| | | | | | | | |
Other Assets | | | | | | | | |
Notes receivable - related party, net of current portion and discount of $11,224 and $13,360 at September 30, 2024 and December 31, 2023, respectively | | | 343,033 | | | | 341,557 | |
Interest receivable - related party | | | 65,406 | | | | 44,172 | |
Trade receivable | | | 31,241 | | | | 28,673 | |
Deferred tax asset | | | 34,976 | | | | 24,069 | |
Total Other Assets | | | 474,656 | | | | 438,471 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 621,519 | | | $ | 683,314 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | |
Current Liabilities | | | | | | | | |
Accounts payable and accrued expenses | | $ | 124,800 | | | $ | 105,244 | |
Payable - related parties | | | 259,730 | | | | 184,477 | |
Total Liabilities | | | 384,530 | | | | 289,721 | |
| | | | | | | | |
Commitments and Contingencies - Note 8 | | | - | | | | - | |
| | | | | | | | |
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 September 30, 2024 and December 31, 2023, respectively | | | 1,568 | | | | 1,568 | |
Additional paid-in capital | | | 346,726 | | | | 346,726 | |
Retained earnings/(accumulated deficit) | | | (111,305 | ) | | | 45,299 | |
Total Stockholders’ Equity | | | 236,989 | | | | 393,593 | |
| | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 621,519 | | | $ | 683,314 | |
See accompanying notes to unaudited condensed and consolidated financial statements
QUARTA-RAD, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | For the three months ended September 30, 2024 | | | For the three months ended September 30, 2023 | | | For the nine months ended September 30, 2024 | | | For the nine months ended September 30, 2023 | |
| | | | | | | | | | | | |
Sales -Quarta Rad, Inc., net | | $ | 8,697 | | | $ | 61,683 | | | $ | 59,783 | | | $ | 260,744 | |
Sales - Sellavir, Inc., net - related party | | | 10,000 | | | | - | | | | 10,000 | | | | 102,000 | |
| | | | | | | | | | | | | | | | |
Total sales, net | | | 18,697 | | | | 61,683 | | | | 69,783 | | | | 362,744 | |
| | | | | | | | | | | | | | | | |
Cost of goods sold - Quarta-Rad, Inc. | | | 5,194 | | | | 38,154 | | | | 33,867 | | | | 169,975 | |
Cost of goods sold - Sellavir Inc. | | | 4,000 | | | | 20,599 | | | | 4,000 | | | | 61,565 | |
Cost of goods sold | | | 4,000 | | | | 20,599 | | | | 4,000 | | | | 61,565 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 13,503 | | | | 2,930 | | | | 31,916 | | | | 131,204 | |
| | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | |
General and administrative | | | 24,168 | | | | 12,065 | | | | 123,735 | | | | 38,469 | |
Advertising | | | - | | | | 15,744 | | | | - | | | | 49,321 | |
Professional and consulting fees | | | 34,156 | | | | 25,770 | | | | 93,502 | | | | 100,671 | |
Operating expenses | | | 58,324 | | | | 53,579 | | | | 217,237 | | | | 188,461 | |
| | | | | | | | | | | | | | | | |
Net loss from operations | | | (48,821 | ) | | | (50,649 | ) | | | (185,321 | ) | | | (57,257 | ) |
Other income - interest and dividends | | | 34 | | | | 1 | | | | 36 | | | | 302 | |
Other income/(expense) - foreign currency translation gain/(loss) | | | 33,300 | | | | (18,036 | ) | | | 17,190 | | | | (18,036 | ) |
Other income - interest - related party | | | 11,703 | | | | 13,965 | | | | 35,109 | | | | 27,744 | |
Other expense - loss on loan modification | | | - | | | | - | | | | (11,469 | ) | | | - | |
Other income - unrealized gain/(loss) on investments | | | 111,736 | | | | (2,166 | ) | | | 98,412 | | | | 19,614 | |
Other income - realized loss on investments | | | (110,561 | ) | | | - | | | | (110,561 | ) | | | (3,529 | ) |
| | | | | | | | | | | | | | | | |
Income tax benefit | | | - | | | | (11,946 | ) | | | - | | | | (6,544 | ) |
| | | | | | | | | | | | | | | | |
Net loss | | $ | (2,609 | ) | | $ | (44,939 | ) | | $ | (156,604 | ) | | $ | (24,618 | ) |
| | | | | | | | | | | | | | | | |
Income/(loss) per share - basic and diluted | | $ | - | | | $ | - | | | $ | (0.01 | ) | | $ | - | |
| | | | | | | | | | | | | | | | |
Weighted average shares - basic and diluted | | | 15,674,483 | | | | 15,674,483 | | | | 15,674,483 | | | | 15,674,483 | |
See accompanying notes to unaudited condensed and consolidated financial statements
QUARTA-RAD, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the nine months ended September 30, 2024
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Retained Earnings/ | | | Total | |
| | Common Stock | | | Additional | | | (Accumulated | | | Stockholders’ | |
| | Shares | | | Amount | | | Paid-In Capital | | | Deficit) | | | Equity | |
Balance, December 31, 2023 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | 45,299 | | | $ | 393,593 | |
Net loss | | | - | | | | - | | | | - | | | | (156,604 | ) | | | (156,604 | ) |
Balance, September 30, 2024 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | (111,305 | ) | | $ | 236,989 | |
CONDENSED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the nine months ended September 30, 2023
(Unaudited)
| | | | | | | | | | | | | | Total | |
| | Common Stock | | | Additional | | | Retained | | | Stockholders’ | |
| | Shares | | | Amount | | | Paid-In Capital | | | Earnings | | | Equity | |
Balance, December 31, 2022 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | 807 | | | $ | 349,101 | |
Net loss | | | - | | | | - | | | | - | | | | (24,618 | ) | | | (24,618 | ) |
Balance, September 30, 2023 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | (23,811 | ) | | $ | 324,483 | |
See accompanying notes to unaudited condensed and consolidated financial statements
QUARTA-RAD, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three Months Ended September 30, 2024
(Unaudited)
| | | | | | | | | | | | | | Total | |
| | Common Stock | | | Additional | | | Accumulated | | | Stockholders’ | |
| | Shares | | | Amount | | | Paid-In Capital | | | Deficit | | | Equity | |
Balance, June 30, 2024 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | (108,696 | ) | | $ | 239,598 | |
Net loss | | | - | | | | - | | | | - | | | | (2,609 | ) | | | (2,609 | ) |
Balance, September 30, 2024 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | (111,305 | ) | | $ | 236,989 | |
CONDENSED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three Months Ended September 30, 2023
(Unaudited)
| | | | | | | | | | | Retained Earnings/ | | | Total | |
| | Common Stock | | | Additional | | | (Accumulated | | | Stockholders’ | |
| | Shares | | | Amount | | | Paid-In Capital | | | Deficit) | | | Equity | |
Balance, June 30, 2023 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | 21,128 | | | $ | 369,422 | |
Balance | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | 21,128 | | | $ | 369,422 | |
Net loss | | | - | | | | - | | | | - | | | | (44,939 | ) | | | (44,939 | ) |
Balance, September 30, 2023 | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | (23,811 | ) | | $ | 324,483 | |
Balance | | | 15,674,483 | | | $ | 1,568 | | | $ | 346,726 | | | $ | (23,811 | ) | | $ | 324,483 | |
See accompanying notes to unaudited condensed and consolidated financial statements
QUARTA-RAD, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
| | For the nine months ended September 30, 2024 | | | For the nine months ended September 30, 2023 | |
| | | | | | |
OPERATING ACTIVITIES: | | | | | | | | |
Net loss | | $ | (156,604 | ) | | $ | (24,618 | ) |
| | | | | | | | |
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | | | | | | | |
Depreciation | | | 600 | | | | 600 | |
Foreign currency translation (income)/loss | | | (17,190 | ) | | | 18,036 | |
Loss on loan modification | | | 11,469 | | | | - | |
Amortization of note premium | | | (2,406 | ) | | | - | |
Net realized loss on investments | | | 110,561 | | | | 3,529 | |
Net unrealized (gain) on investments | | | (98,412 | ) | | | (19,614 | ) |
Income tax benefit | | | - | | | | (6,544 | ) |
Deferred income tax | | | (10,907 | ) | | | | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | (179 | ) | | | 46,571 | |
Accounts receivable – related party | | | (10,000 | ) | | | - | |
Inventory | | | 25,666 | | | | 132,602 | |
Trade receivables | | | (2,568 | ) | | | - | |
Accrued interest receivable - related party | | | (32,703 | ) | | | (32,744 | ) |
Accounts payable and accrued expenses | | | 19,556 | | | | 37,241 | |
Deferred revenue - related party | | | - | | | | (102,000 | ) |
Related party payable | | | 75,253 | | | | 71,658 | |
Net cashed provided/(used) by operating activities | | | (87,864 | ) | | | 124,717 | |
| | | | | | | | |
INVESTING ACTIVITIES: | | | | | | | | |
Sale of marketable securities, trading | | | 39,998 | | | | 201,894 | |
Issuance of notes receivable - related party | | | - | | | | (415,000 | ) |
Payments on notes receivable, related party | | | 25,522 | | | | | |
Cash from acquisition | | | - | | | | - | |
Net cash provided/(used) in Investing Activities | | | 65,520 | | | | (271,027 | ) |
| | | | | | | | |
Net change in cash | | | (22,344 | ) | | | (146,310 | ) |
Cash, beginning of period | | | 72,625 | | | | 293,878 | |
Cash, end of period | | $ | 50,281 | | | $ | 147,568 | |
| | | | | | | | |
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
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 September30, 2024, and the statements of operations and changes in stockholders’ equity for the three and nine months ended September 30, 2024, and 2023, and the cash flows for three and nine months ended September 30, 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 September 30, 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.
The Company has experienced recurring operating losses, primarily due to limited revenues. The Company’s current financial conditions and recurring losses raise substantial doubt about its ability to continue as a going concern.
The current shareholder is currently funding operations. During October 2024, subsequent to the balance sheet date, the Company is exploring plans to distribute the current operations in a spin-off.
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 has started a video analytics company whose platform empowers organizations to decode videos to develop creative marketing strategies and analysis and call center management solutions through advanced and proprietary technologies using artificial intelligence (“AI”).
Sellavir is now focused on developing CenterEye, a call center software platform that leverages AI and advanced analytics to improve call center operations.
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.
QUARTA-RAD, INC. AND SUBSIDIARIES
Notes to the (unaudited) Condensed and Consolidated Financial Statements
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.
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 and nine ended September 30, 2024, and 2023, amounted to $-0-, $-0-, $15,744 and $49,321, 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.
Two selling platforms/distributors accounted for 96% of accounts receivable at September 30, 2024 and 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 September 30, 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 September 30, 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. |
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 September 30, 2024 about the Company’s financial assets measured at fair value on a recurring basis.
Values on September 30, 2024:
SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets at fair value: | | | | | | | | | | | | | | | | |
Marketable Securities | | $ | 1 | | | $ | - | | | $ | - | | | $ | 1 | |
| | | | | | | | | | | | | | | | |
Total assets at fair value, September 30, 2024 | | $ | 1 | | | $ | - | | | $ | - | | | $ | 1 | |
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.
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 September 30, 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.
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.
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, second and third quarters of 2024.
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.
The success of call center product, CenterEye, depends on our ability to develop features that meet client needs, keep up with technological advancements, and address any software bugs or security vulnerabilities promptly. There is no guarantee that CenterEye will achieve market acceptance. Failure to gain traction could adversely affect our financial condition and results of operations.
QUARTA-RAD, INC. AND SUBSIDIARIES
Notes to the (unaudited) Condensed and Consolidated Financial Statements
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. As of 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 $278,226 and $261,072 recording a gain /(loss)on foreign currency translation of $17,154 and ($36) at September 30, 2024 and December 31, 2023, respectively. The amount of unamortized premium at September 30, 2024 and December 31, 2023 is $12,830 and $13,362, respectively. Payments are deferred until April 1, 2025, for the initial payment, with quarterly principal payments starting April 1, 2025 are 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. Sellavir received a $14,897 principal payment in April 2024 in connection with this loan.
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% effective January 2024 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, 2025, for the initial payment, with quarterly principal payments starting April 1, 2025 are due through April 1, 2029. Interest is payable at the end of the loan.. The loan is secured by land located in Thailand. . Sellavir received a $10,625 principal payment in April 2024 in connection with this loan.
During January 2024, both notes were amended to provide a one year extension for all payment due dates.
Accrued interest at September 30, 2024 and December 31, 2023 for both loans is $65,406 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:
SCHEDULE OF PRINCIPAL AMOUNT OF NOTES RECEIVABLES
| | | $261,038 Note | | | $175,000 Note | | | Total | |
2025 | | | $ | 49,379 | | | $ | 21,250 | | | $ | 70,629 | |
2026 | | | | 65,839 | | | | 42,500 | | | | 108,339 | |
2027 | | | | 65,839 | | | | 42,500 | | | | 108,339 | |
2028 | | | | 65,839 | | | | 42,500 | | | | 108,339 | |
2029 | | | | 16,397 | | | | 15,625 | | | | 32,022 | |
Totals | | | $ | 263,293 | | | $ | 164,375 | | | $ | 427,668 | |
QUARTA-RAD, INC. AND SUBSIDIARIES
Notes to the (unaudited) Condensed and Consolidated Financial Statements
NOTE 5–PROPERTY AND EQUIPMENT
Property and Equipment at September 30, 2024 and December 31. 2023 consisted of:
SCHEDULE OF PROPERTY AND EQUIPMENT
| | September 30, | | | December 31, | |
| | 2024 | | | 2023 | |
Computer Equipment | | $ | 4,005 | | | $ | 4,005 | |
Accumulated Depreciation | | | (3,035 | ) | | | (2,435 | ) |
Net Property & Equipment | | $ | 970 | | | $ | 1,570 | |
The Company recognized $200, $600, $200, and $600 in depreciation expense in each period for the three and nine months ended September 30, 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 September 30, 2024, and December 31. 2023, is $91,850 and $91,850, respectively. The balances are due on demand and do not incur interest. In April 2024, the minority shareholder sold their total shares and is no longer affiliated with the Company.
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 September 30, 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, $24,000, $8,000 and $24,000 for the three and nine months ended September 30,, 2024, and 2023, respectively. As of September 30, 2024 and December 31, 2023 the Company has accrued $112,000 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 September 30, 2024 and December 31, 2023, is due $125,378 and $56,125, respectively, for expenses paid on behalf of the Company. The balances are due on demand and do not accrue interest.
Sellavir recognized $10,000, $10,000, $0 and $102,000 of revenue for the three and nine months ended September 30, 2024, and 2023, respectively. Revenue for the three months ended September 30, 2024 is in connection with a licensing agreement. The services prior are related to services to STAR to develop software. The license agreement relates to software customization for several of Star’s clients to improve their call center platforms.
QUARTA-RAD, INC. AND SUBSIDIARIES
Notes to the (unaudited) Condensed and Consolidated Financial Statements
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).
Segment information for the three and nine months ended September 2024 and 2023 is as follows:
SCHEDULE OF SEGMENT INFORMATION
| | | | | | | | | | | | |
For the nine months ended September 30, 2024 |
| | Quarta-Rad | | | Sellavir | | | Consolidated | |
Revenues | | $ | 59,783 | | | | 10,000 | | | $ | 69,783 | |
Loss from operations | | | (108,517 | ) | | | (76,804 | ) | | | (185,321 | ) |
Net loss | | $ | (108,517 | ) | | | (48,087 | ) | | $ | (156,604 | ) |
| | | | | | | | | | | | |
For the three months ended September 30, 2024 |
| | Quarta-Rad | | | Sellavir | | | Consolidated | |
Revenues | | $ | 8,697 | | | | 10,000 | | | $ | 18,697 | |
Loss from operations | | | (30,445 | ) | | | (18,376 | ) | | | (48,821 | ) |
Net income/(loss) | | $ | (30,445 | ) | | | 27,836 | | | $ | (2,609 | ) |
| | | | | | | | | | | | |
For the nine months ended September 30, 2023 |
| | Quarta-Rad | | | Sellavir | | | Consolidated | |
Revenues | | $ | 260,744 | | | $ | 102,000 | | | $ | 362,744 | |
Income/(loss) from operations | | | (89,899 | ) | | | 32,642 | | | | (57,257 | ) |
Net income/(loss) | | $ | (71,020 | ) | | $ | 46,402 | | | $ | (24,618 | ) |
| | | | | | | | | | | | |
For the three months ended September 30, 2023 |
| | Quarta-Rad | | | Sellavir | | | Consolidated | |
Revenues | | $ | 61,683 | | | $ | - | | | $ | 61,683 | |
Loss from operations | | | (26,741 | ) | | | (23,908 | ) | | | (50,649 | ) |
Income/(loss) from operations | | | (26,741 | ) | | | (23,908 | ) | | | (50,649 | ) |
Net loss | | $ | (21,125 | ) | | $ | (23,814 | ) | | $ | (44,939 | ) |
Net income/(loss) | | $ | (21,125 | ) | | $ | (23,814 | ) | | $ | (44,939 | ) |
Total Assets | | As of September 30, 2024 | | | As of December 31, 2023 | |
Quarta-Rad | | $ | 85,728 | | | $ | 151,789 | |
Sellavir | | | 535,791 | | | | 531,525 | |
Total Assets | | $ | 621,519 | | | $ | 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 September 30, 2024 through November 14, 2024. Based on its evaluation, other than the note below there is nothing to be disclosed herein. During October 2024, subsequent to the balance sheet date, the Company is exploring plans to distribute the current operations in a spin-off.
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 September 30, 2024 and 2022. 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.
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
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. Sellavir is set to launch a new product specifically designed to simplify the use of complex cloud-based call center platforms.
Prior to April 2024, our chief executive officer and director, Victor Shvetsky, and our director and president, Alexey Golovanov, were our only employees. In April 2024, Mr. Golovanov resigned from the Company.
We were formed to distribute and sell detection devices, including Geiger counters, but we are currently expanding our focus to the development and marketing of our call center software, CenterEye. CenterEye is designed to enhance call center operations through advanced analytics and AI technologies. We are actively developing this software and pursuing sales opportunities in the U.S., Japan, and other international markets. Recent traction in Japan indicates growing interest in our product.
During October 2024, the Company is exploring plans to potentially distribute its current operations of both Quarta-Rad and Sellavir and use the company to support operations in alternate services lines.
Our administrative office is located at 1201 N. Orange St., Suite 700, Wilmington, DE 19801, which is a virtual office.
Our business strategy is expanding to the development and marketing of CenterEye, our proprietary call center software. We aim to enhance call center efficiency and customer engagement through innovative AI-driven solutions. While we maintain our online presence, our primary efforts are directed toward software development, marketing, and establishing partnerships with call centers and businesses requiring advanced customer service solutions.
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/ Sellavir began recognizing revenue in September 2024 in connection with the call center software.
Critical Accounting Policy and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our condensed financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the condensed financial statements included in this Quarterly Report on Form 10-Q.
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three and nine months ended September 30, 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 income for the nine months ended September 30, 2024, is comprised of:
| | Quarta Rad | | | Sellavir | | | Total | |
Sales | | $ | 59,783 | | | $ | 10,000 | | | $ | 69,783 | |
Cost of Good Sold | | | 33,867 | | | | 4,000 | | | | 37,867 | |
Gross Profit | | | 25,916 | | | | 6,000 | | | | 31,916 | |
| | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | |
General & administrative | | | 43,431 | | | | 80,304 | | | | 123,735 | |
Advertising | | | - | | | | - | | | | - | |
Professional and consulting fees | | | 91,002 | | | | 2,500 | | | | 93,502 | |
Operating expenses | | | 134,433 | | | | 82,804 | | | | 217,237 | |
| | | | | | | | | | | | |
Net loss from operations | | | (108,517 | ) | | | (76,804 | ) | | | (185,321 | ) |
| | | | | | | | | | | | |
Interest and dividends | | | - | | | | 36 | | | | 36 | |
Other expense - foreign currency translation loss | | | 17,190 | | | | 17,190 | | | | | |
Other income - interest - related party | | | - | | | | 35,109 | | | | 35,109 | |
Other expense - loss on loan modification | | | | | | | (11,469 | ) | | | (11,469 | ) |
Unrealized gain/(loss) on investments | | | - | | | | 98,412 | | | | 98,412 | |
Realized gain/(loss) on investments | | | - | | | | (110,561 | ) | | | (110,561 | ) |
Interest expense | | | | | | | - | | | | - | |
Income tax benefit | | | | | | | | | | | - | |
| | | | | | | | | | | | |
Net loss | | $ | (108,517 | ) | | $ | (48,087 | ) | | $ | (156,604 | ) |
The Company has two operating segments through the operations of Quarta-Rad and Sellavir. Net income for the three months ended September 30, 2023, is comprised of:
| | Quarta Rad | | | Sellavir | | | Total | |
Sales | | $ | 260,744 | | | $ | 102,000 | | | $ | 362,744 | |
Cost of Good Sold | | | 169,975 | | | | 61,565 | | | | 231,540 | |
Gross Profit | | | 90,769 | | | | 40,435 | | | | 131,204 | |
| | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | |
General & administrative | | | 35,676 | | | | 2,793 | | | | 38,469 | |
Advertising | | | 49,321 | | | | - | | | | 49,321 | |
Professional and consulting fees | | | 95,671 | | | | 5,000 | | | | 100,671 | |
Operating expenses | | | 180,668 | | | | 7,793 | | | | 188,461 | |
| | | | | | | | | | | | |
Net income (loss) from operations | | | (89,899 | ) | | | 32,642 | | | | (57,257 | ) |
| | | | | | | | | | | | |
Interest and dividends | | | - | | | | 302 | | | | 302 | |
Other expense - foreign currency translation loss | | | (18,036 | ) | | | (18,036 | ) | | | | |
Other income - interest - related party | | | - | | | | 27,744 | | | | 27,744 | |
Unrealized gain/(loss) on investments | | | - | | | | 19,614 | | | | 19,614 | |
Realized gain/(loss) on investments | | | | | | | (3,529 | ) | | | (3,529 | ) |
Interest expense | | | | | | | - | | | | - | |
Income tax benefit (/expense) | | | 18,879 | | | | (12,335 | ) | | | 6,544 | |
| | | | | | | | | | | | |
Net income/(loss) | | $ | (71,020 | ) | | $ | 46,402 | | | $ | (24,618 | ) |
Management’s Plan to Address Going Concern Considerations
The Company has experienced recurring operating losses, primarily due to limited revenues. The Company’s current financial conditions and recurring losses raise substantial doubt about its ability to continue as a going concern.
Management intends to maintain adequate working capital and adhere to prudent financial forecasting.
Consolidated Totals:
Nine months ended September 30, 2024 compared with the nine months ended September 30, 2023
Revenues. Our net revenues decreased $292,961, or 80.76% to $69,783 for the nine months ended September 30, 2024, compared with $362,744 for the nine months ended September 30, 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 $193,673, or 83.6% to $37,867 for the nine months ended September 30, 2024, compared with $231,540 for the comparable period in 2023. The decrease was a result of Quarta Rad direct costs due to reduced revenue.
Operating Expenses. For the nine months ended September 30, 2024, our total operating expenses increased $28,776, or 15.27% to $217,237, compared to $188,461 for the nine months ended September 30, 2023. The increase is primarily attributable to the classification of Sellavir’s contractor costs.
Net Loss. Our net loss increased $131,986, or 536.14% to $156,604 for the nine months ended September 30, 2024, compared to a net loss of $31,162 for the nine months ended September 30, 2023. The increase was primarily due to reduced sales and realized loss on investments.
QUARTA-RAD
Nine months ended September 30, 2024, compared with the nine months ended September 30, 2023
Revenues. Our net revenues decreased $200,961, or 77.07% to $59,783 for the nine months ended September 30, 2024, compared with $260,744 for the nine months ended September 30, 2023. The reduction was primarily attributable to the sales of our RD1503 model.
Cost of Goods Sold. Our Cost of Goods Sold decreased $136,108 or 77.07% to $33,867. for the nine months ended September 30, 2024, compared to $169,975 for the comparable period in 2023. The decrease was a result of decreased sales.
Operating Expenses. For the nine months ended September 30, 2024, our total operating expenses decreased $46,235, or 25.59% to $134,433, compared to $180,668 for the nine months ended September 30, 2023. The decrease is primarily attributable to the Company’s reduced professional fees and advertising expenses.
Net Loss. Our net loss increased $37,497, or 52.80%% to $108,517 for the nine months ended September 30, 2024, compared to a net loss of $71,020 for the nine months ended September 30, 2023. The increase was primarily due to reduced sales.
SELLAVIR
Nine months ended September 30, 2024, compared with the nine months ended September 30, 2023
Revenues. Our net recognized revenue decreased $92,000, or 90.20%, to $10,000 for the nine months ended September 30, 2024 compared with $62,000- for the nine months ended September 30, 2023. The decrease is due to timing or revenue recognized.
Cost of Goods Sold. Our Cost of Goods Sold decreased $57,565 or 93.50% to $4,000 for the nine months ended September 30, 2024, compared to $61,565 for the comparable period in 2023. The decrease was primarily due to the classification of contractor costs and reduction in revenue.
Operating Expenses. For the nine months ended September 30, 2024, our total operating expenses increased $75,011 or 952.54% to $82.804 compared to $7,793 for the nine months ended September 30, 2023. The increase was primarily due to the classification of contractor costs.
Net Loss. Our net loss increased $94,489 to $48,087 for the nine months ended September 30, 2024, compared to net income of $46,402 for the nine months ended September 30, 2023. The increase was primarily due to a reduction in sales.
Three months ended September 30, 2024 compared with the three months ended September 30, 2023
Revenues. Our net revenues decreased $52,986, or 85.90% to $8,697 for the three months ended September 30, 2024, compared with $61,683 for the three months ended September 30, 2023. The reduction was primarily attributable to the sales of our RD1503 model.
Cost of Goods Sold. Our Cost of Goods Sold decreased $49,559 or 91.16% to $9,194 for the three months ended September 30, 2024 compared to $58,753for the comparable period in 2023. The decrease was a result of Quarta Rad direct costs due to reduced revenue and classification of Sellavir contractor costs.
Operating Expenses. For the three months ended September 30, 2024, our total operating expenses increased $4,745 or 8.86% to $58,324 compared to $53,579 for the three months ended September 30, 2023. The increase is primarily attributable to Sellavir’s classification of contractor costs.
Net Loss. Our net loss decreased $42,330 or 94.19% to $2,609 for the three months ended September 30, 2024 compared to $44,939 for the three months ended September 30, 2023. The decrease was primarily due to a decrease in advertising and an increase in foreign currency translation gain.
QUARTA-RAD
Three months ended September 30, 2024, compared with the three months ended September 30, 2023
Revenues. Our net revenues decreased $52,986, or 85.90% to $8,697 for the three months ended September 30, 2024, compared with $61,683 for the three months ended September 30, 2023. The reduction was primarily attributable to the sales of our RD1503 model.
Cost of Goods Sold. Our Cost of Goods Sold decreased $32,960 or 86.39% to $5,194 for the three months ended September 30, 2024, compared to $38,154 for the comparable period in 2023. The decrease was a result of decreased sales.
Operating Expenses. For the three months ended September 30, 2024, our total operating expenses decreased $16,332 or 32.47% to $33,948 compared to $50,270 for the three months ended September 30, 2023. The decrease is primarily attributable to the decrease in advertising.
Net Loss. Our net loss increased $9,320 or 44.12% to $30,445 for the three months ended September 30, 2024, compared to a net loss of $21,125 for the three months ended September 30, 2023. The increase was primarily due to a decrease in sales.
SELLAVIR
Three months ended September 30, 2024, compared with the three months ended September 30, 2023
Revenues. Our net recognized revenue increased $10,000 to $10,000 for the three months ended September 30, 2024 compared with $-0- for the three months ended September 30, 2023. The increase is due to timing or revenue recognized.
Cost of Goods Sold. Our Cost of Goods Sold decreased $16,599 or 80.58% to $4,000 for the three months ended September 30, 2024, compared to $20,599 for the comparable period in 2023. The decrease was primarily due to the classification of contractor costs.
Operating Expenses. For the three months ended September 30, 2024, our total operating expenses increased $21,067 or 636.66% to $24,376 compared to $3,309 for the three months ended September 30, 2023. The increase was primarily due to the classification of contractor costs.
Net Loss. Our net income increased $51,650 to $27,836 for the three months ended September 30, 2024, compared to a net loss of ($23,814) for the three months ended September 30, 2023. The increase was primarily due to a gain on foreign currency translation and increased sales.
Liquidity and Capital Resources. During the three months ended September 30, 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 $621,519 and $683,145 as of September 30, 2024, and December 31, 2023, respectively, consisting of $50,281 and $72,625, respectively, in cash. Our working capital deficit was ($238,637) and ($46,448) as of September 30, 2024 and December 31, 2023, respectively.
We had $87,864 used by and $124,717 in cash provided by operating activities for the nine months ended September 30, 2024 and 2023, respectively.
We had $65,520 in cash provided by and $271,027 cash used by investing activities for the three months ended September 30, 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, adjusted to 10% in January 2024. The loan is secured by land located in Thailand.
We had $-0- and $-0- in cash provided by financing activities for the nine months ended September 30, 2024 and 2023, respectively.
The Company had no formal long-term lines of credit or other bank financing arrangements as of September 30, 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 September 30, 2024.
Plan of Operation
Our business strategy is to expand from Geiger counter sales to the development and marketing of CenterEye, our proprietary call center software. We aim to enhance call center efficiency and customer engagement through innovative AI-driven solutions. While we maintain our online presence, our primary efforts are directed toward software development, marketing, and establishing partnerships with call centers and businesses requiring advanced customer service solutions.
While we continue to market our website (www.quartarad.com) we have also started to focus on Sellavir website sellavir.com as part of our business strategy.
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 was 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. Sellavir’s platform empowers organizations to decode videos to develop creative marketing strategies and analysis and call center management solutions through advanced and proprietary technologies using artificial intelligence (“AI”). Sellavir, Inc., our wholly-owned subsidiary, is now focused on developing CenterEye, a call center software platform that leverages AI and advanced analytics to improve call center operations. CenterEye provides real-time insights, performance metrics, and customer engagement tools that enable organizations to enhance efficiency and customer satisfaction. We are starting to see traction in Japan and are expanding our marketing efforts to the U.S. and other international markets.
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.
Software Development: We will continue to invest in the development and enhancement of CenterEye to meet the evolving needs of the call center industry. This includes adding new features, improving user experience, and ensuring scalability.
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.
Partnerships and Client Acquisition: (Estimated cost $20,000). We aim to establish partnerships with call center operators and technology resellers. Efforts will be made to secure pilot projects and initial deployments to showcase the effectiveness of CenterEye.
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.
The current majority shareholder is currently funding operations. During October 2024, the Company is exploring plans to potentially distribute its current operations of both Quarta-Rad and Sellavir and use the company to support operations in alternate services lines.
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 September 30, 2024 and December 31, 2023, respectively.
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 September 30, 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 September 30, 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. |
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| ● | Our accounting staff does not have sufficient technical accounting knowledge relating to accounting for income taxes and complex US GAAP matters. |
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| ● | The Company has not performed a risk assessment and mapped our process to control objectives. |
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| ● | The Company has not implemented comprehensive entity-level internal controls. |
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| ● | 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.
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: |
* Filed herewith.
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. |
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November 14, 2024 | /s/ Victor Shvetsky |
| Victor Shvetsky |
| Chairman and Chief Executive Officer (Principal Executive |
| Officer) and Chief Financial Officer (Principal Accounting and Financial Officer) |