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

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





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In this Annual Report on Form 10-K, "Company," "the Company," "us," and "our" refer to Quarta-Rad, Inc., a Delaware corporation, unless the context requires otherwise.

We intend the following discussion to assist in the understanding of our financial position as of December 31, 2020 and 2019 and our results of operations for the year ended December 31, 2020 and December 31, 2019. You should refer to the Financial Statements and related Notes in conjunction with this discussion.





Results of Operations



General

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

As of the date of this Form 10-K, we continue to expand our operations and expect to increase our revenues with additional working capital by increasing our advertising and marketing. Our chief executive officer and director, Victor Shvetsky, and our director and president, Alexey Golovanov, are our only employees. Mr. Shvetsky and Mr. Golovanov will devote at least ten hours per week to us but may increase the number of hours as necessary. In 2012, Messrs. Shvetsky and Golovanov's companies have been the source of commissionable consignment sales and we did not carry any inventory. In 2013, we discontinued selling the products on consignment from our majority shareholder's company for a commission or consignment fee and began purchasing inventory directly from Quarta-Rad, Ltd (Russia) ("QRR") to sell on the Internet to direct consumers and to third party resellers. In 2012, when a reseller placed an order from us we purchased the product from our related party supplier and have it ship the product directly to the reseller. Beginning in 2013, we began purchasing the products from Quarta-Rad, Ltd., our related party supplier and it shipped the products to us. We then shipped the products to a third party online retailer, to hold for Internet sales and sales to our third party resellers.

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

In 2019, we generated $875,345 in sales and incurred a net loss of $(142,060). In 2020, we generated $858,015 in sales, and incurred net income from operations of $24,688. We anticipate that we will be able to increase our revenues. We believe that we have sufficient working capital to continue our operations for the next 12 months; however, we believe that we need to seek additional financing to expand our sales. As of December 31, 2020, we had $108,126 in cash on hand in our corporate bank account and liabilities of $315,225, which consisted of $167,324 in related party payables and $147,901 in accounts payable and accrued expenses. During March 2021, we received $332,533 in repayment from the outstanding officer advance acquired in the Sellavir acquisition. We currently have two officers and directors. These individuals allocate time and personal resources to us on a part-time basis and devote approximately 10 hours per week to us. Our sales are to independent, third parties. Since May 2012, we have utilized the services of an independent contractor to assist us in selling the products. He is paid on a commission only basis.

In 2018, we continued to focus our business operations on the development of our distribution agreements and reseller network as well as continue to advertise on the Internet. We plan to continue to utilize our website to promote the products to home renovation contractors and other purchasers of detection devices. We are promoting the detection products by advertising our website and marketing to independent distributors and others interested in detection devices. We purchase the products from QRR, which is owned by our minority shareholder and is the original manufacturer for RADEX product line. Under an oral agreement with QRR, we have the exclusive distribution rights for sale of QRR products in Europe, the US, and Asia (excluding China) for a period of 10 years which expires in 2027. We sell the products we purchase from QRR directly to third party buyers and to resellers. The purchase terms require us to prepay for the products we purchase at a price that is set forth in each purchase order. The product pricing has been discounted pursuant to a discount agreement. We have extended this agreement thru 2027. During 2019, our ability to sell through our distributor in the UK was suspended due to an ongoing UK VAT examination, we are currently testing new partners for EU distribution and have resumed UK sales.

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

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

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

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

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

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





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

Inventories are stated at the lower of cost or market (net realizable value). We periodically review the value of items in inventory and provide write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Our inventory consists entirely of finished goods available for sale. We analyze our accounts receivable to determine if a reserve for non-collectible receivables is necessary. There is no allowance recorded at December 31, 2020 and 2019.

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended December 31, 2020 and 2019, respectively, together with notes thereto, which are included in this Annual Report on Form 10-K.

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

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

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

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

Operating Expenses. For the year ended December 31, 2020, our total operating expenses decreased $182,028, or 49.17%, to $188,187 compared to $370,215 for the comparable period in 2019. Operating expenses were comprised of general and administrative expenses, professional and consulting fees and research and development costs. The components of operating expenses are discussed below.





  ? General and administrative expenses, including advertising, decreased $95,316,
    or 55.15%, to $77,505 for the year ended December 31, 2020 from $172,821 for
    the comparable period in 2019. The decrease is primarily attributable to the
    Company's reserve for a potential liability in connection with a tax
    examination by certain European taxing authorities in 2019.

  ? Professional and consulting fees decreased $14,712, or 11.73%, for the year
    ended December 31, 2020 to $110,682 from $125,394 for the comparable period in
    2019. The decrease is due to a reduction in accounting and legal fees for
    certain projects.

  ? Research and development cost decreased $72,000 to $-0- for the year ended
    December 31, 2020 compared to $72,000 for the comparable period in 2019. The
    decrease is attributable to the Company's reduction of research contract costs
    to develop and maintain new and existing devices.

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

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





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Liquidity and Capital Resources. During the year ended December 31, 2020, we used cash for operating expenses from cash on hand and the sale of products on the Internet and from independent third-party resellers.

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

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

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

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

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

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

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

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

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





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Income Tax Expense (Benefit)

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





Impact of Inflation

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





Capital Expenditures

The Company expended no amounts on capital expenditures for the years ended December 31, 2020 and 2019, respectively.





Plan of Operation

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

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

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

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

Marketing: (Estimated cost $25,000-$100,000). In addition to the website development costs, we intend to increase our marketing efforts on the Internet to generate leads and sales. We will also utilize funds to develop marketing brochures and materials to market the products to industry professionals such as home renovation contractors. We intend to market our services through Sellavir to obtain new clients and opportunities.

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

Our management does not anticipate the need to hire additional full or part- time employees over the next six (6) months, as the services provided by our officers and directors and our independent contractor appear sufficient at this time. We believe that our operations are currently on a small scale that is manageable by these two individuals as well as our independent contractor. Our management's responsibilities are mainly administrative at this early stage. While we believe that the addition of employees is not required over the next six (6) months, the professionals we plan to utilize will be considered independent contractors. We do not intend to enter into any employment agreements with any of these professionals. Thus, these persons are not intended to be employees of our company.

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

Off-Balance Sheet Arrangements





None.

Recent Accounting Pronouncements

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

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