QUARTA-RAD,
INC.
CONDENSED
BALANCE SHEETS
|
|
|
As
of
|
|
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
54,228
|
|
|
$
|
87,010
|
|
|
Accounts
receivable
|
|
|
85,307
|
|
|
|
83,973
|
|
|
Inventory
|
|
|
77,247
|
|
|
|
85,363
|
|
|
Prepaid
expenses
|
|
|
-
|
|
|
|
18,150
|
|
|
Total
Current Assets
|
|
|
216,782
|
|
|
|
274,496
|
|
|
TOTAL
ASSETS
|
|
$
|
216,782
|
|
|
$
|
274,496
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
12,031
|
|
|
$
|
12,427
|
|
|
Related
party payable
|
|
|
144,082
|
|
|
|
149,849
|
|
|
Total
Liabilities
|
|
|
156,113
|
|
|
|
162,276
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock: authorized 50,000,000 common shares, $0.0001 par value 15,326,150 and 15,326,150 were issued and outstanding on March
31, 2019 and December 31, 2018, respectively
|
|
|
1,533
|
|
|
|
1,533
|
|
|
Additional
Paid-in Capital
|
|
|
65,197
|
|
|
|
65,197
|
|
|
(Accumulated
Deficit)
Retained Earnings
|
|
|
(6,061
|
)
|
|
|
45,490
|
|
|
Total
Stockholders’ Equity
|
|
|
60,669
|
|
|
|
112,220
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
216,782
|
|
|
$
|
274,496
|
|
The
accompanying notes are an integral part of these unaudited condensed financial statements.
QUARTA-RAD,
INC.
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
For
the three months ended
March 31, 2019
|
|
|
For
the three months ended
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
Sales, net
|
|
$
|
194,822
|
|
|
$
|
260,277
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
|
170,141
|
|
|
|
201,166
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
24,681
|
|
|
|
59,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
General & administrative
|
|
|
15,070
|
|
|
|
42,649
|
|
|
Advertising
|
|
|
14,912
|
|
|
|
12,012
|
|
|
Professional and
consulting fees
|
|
|
28,250
|
|
|
|
34,325
|
|
|
Research
and development
|
|
|
18,000
|
|
|
|
23,769
|
|
|
Operating Expenses
|
|
|
76,232
|
|
|
|
112,755
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(51,551
|
)
|
|
$
|
(53,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
- basic and diluted
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Weighted average shares - basic
and diluted
|
|
|
15,326,150
|
|
|
|
15,326,150
|
|
The
accompanying notes are an integral part of these unaudited condensed financial statements.
QUARTA-RAD,
INC.
Statement
of Changes in Stockholders’ Equity
Three Months Ended March 31, 2019
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Earnings
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
(Accumulated
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Equity
|
|
|
Balance, December 31, 2018
|
|
|
15,326,150
|
|
|
$
|
1,533
|
|
|
$
|
65,197
|
|
|
$
|
45,490
|
|
|
$
|
112,220
|
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(51,551
|
)
|
|
|
(51,551
|
)
|
|
Balance, March 31, 2019
|
|
|
15,326,150
|
|
|
$
|
1,533
|
|
|
$
|
65,197
|
|
|
$
|
(6,061
|
)
|
|
$
|
60,669
|
|
Statement of Changes in Stockholders’
Equity
Three Months Ended March 31, 2018
(Unaudited)
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Captial
|
|
|
Earngings
|
|
|
Equity
|
|
|
Balance, December 31, 2017
|
|
|
15,326,150
|
|
|
$
|
1,533
|
|
|
$
|
65,197
|
|
|
$
|
143,545
|
|
|
$
|
210,275
|
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(53,644
|
)
|
|
|
(53,644
|
)
|
|
Balance, March 31, 2018
|
|
|
15,326,150
|
|
|
$
|
1,533
|
|
|
$
|
65,197
|
|
|
$
|
89,901
|
|
|
$
|
156,631
|
|
The
accompanying notes are an integral part of these unaudited condensed financial statements.
QUARTA-RAD,
INC.
CONDENSED
STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
For
the three months ended
March 31, 2019
|
|
|
For
the three months ended
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(51,551
|
)
|
|
$
|
(53,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash provided by/ (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,333
|
)
|
|
|
13,873
|
|
|
Inventory
|
|
|
8,116
|
|
|
|
32,935
|
|
|
Prepaid expenses
|
|
|
18,150
|
|
|
|
-
|
|
|
Accounts payable
|
|
|
(397
|
)
|
|
|
10,431
|
|
|
Related
party payable
|
|
|
(5,767
|
)
|
|
|
22,236
|
|
|
Net
cashed provided by/ (used in) operating activities
|
|
|
(32,782
|
)
|
|
|
25,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(32,782
|
)
|
|
|
25,831
|
|
|
Cash, beginning
of period
|
|
|
87,010
|
|
|
|
77,879
|
|
|
Cash, end of
period
|
|
$
|
54,228
|
|
|
$
|
103,710
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid on interest
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these unaudited condensed financial statements.
QUARTA-RAD,
INC.
Notes
to the Unaudited Condensed Financial Statements
NOTE
1 - BASIS OF PRESENTATION
The
condensed balance sheet of Quarta-Rad, Inc. (the “Company”) as of March 31, 2019, and the condensed statements of
operations and the cash flows for the three months ended March 31, 2019 and 2018, have not been audited. However, in the opinion
of management, such information includes all adjustments (consisting of normal recurring adjustments), which are necessary to
properly reflect the financial position of the Company as of March 31, 2019, the results of operations and cash flows for the
periods ended March 31, 2019 and 2018.
The
condensed balance sheet as of December 31, 2018 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 condensed or 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 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, 2018.
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, Europe, and Asia. The Company targets homebuilders and home renovation contractors.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassification
Certain prior period amounts
were reclassified to conform to current period presentation, none of which changed Stockholders’ Equity, or Net loss. Items
previously reported as other expenses for the quarter ended March 31, 2018, are included as general and administrative expenses.
Advertising
The
Company expenses advertising costs, consisting primarily of placement in multiple publications, along with design and printing
costs of sales materials, when incurred. Advertising expense for the three months ended March 31, 2019 and 2018, amounted to $14,912
and $12,012, respectively.
Inventory
Inventories
are stated at the lower of cost or market (net realizable value). The Company periodically reviews the value of items in
inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs
are charged to cost of goods sold. The Company’s inventory consists of finished goods available for sale.
Earnings
per Share
The
Company’s basic earnings per share are calculated by dividing its net income available to common stockholders by the weighted
average number of common shares outstanding for the period. The Company’s dilutive earnings per share is calculated by dividing
its net income available to common shareholders by the diluted weighted average number of shares outstanding during the period.
The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially
dilutive debt or equity. There were no potentially dilutive instruments outstanding at March 31, 2019.
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 are accounted for on a historical cost basis, which, due to the short maturity
of these financial instruments, approximates fair value at March 31, 2019 and December 31, 2018.
FASB
ASC 820
“Fair Value Measurements and Disclosures”
defines fair value, establishes a framework for measuring
fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
|
●
|
Level
1. Observable inputs such as quoted prices in active markets;
|
|
|
|
|
|
|
●
|
Level
2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
|
|
|
|
●
|
Level
3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own
assumptions.
|
Revenue
Recognition
On
January 1, 2018, we adopted FASB Accounting Standards Codification ASC Topic 606,
Revenue from Contracts with Customers
(“ASC
606”)
.
The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition
guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have
historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects
to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional
guidance for transactions that were not addressed completely in the prior accounting guidance.
We
reviewed all contracts at the date of initial application and elected to use the modified retrospective transition method, where
the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018.
Therefore, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 605,
Revenue Recognition
,
(“ASC 605”). The adoption of the new revenue recognition guidance was immaterial to our condensed consolidated financial
statements and no adjustments were required.
Our
principal activities from which we generate our revenue are product sales.
Revenue
is measured based on consideration specified in a contract with a customer. A contract with a customer exists when we enter into
an enforceable contract with a customer. The contract is based on either the acceptance of standard terms and conditions on the
websites for e-commerce customers and via telephone with our third-party call center for our print media and direct mail customers,
or the execution of terms and conditions contracts with retailers and wholesalers. These contracts define each party’s rights,
payment terms and other contractual terms and conditions of the sale. Consideration is typically paid prior to shipment via credit
card or check when our products are sold direct to consumers or approximately 30 days from the time control is transferred when
sold to wholesalers, distributors and retailers. We apply judgment in determining the customer’s ability and intention to
pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances,
published credit and financial information pertaining to the customer.
A
performance obligation is a promise in a contract to transfer a distinct product to the customer, which for us is transfer of
over-the-counter drug and consumer care products 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, 2019 and December 31, 2018, respectively.
We
recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer
when product is shipped. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing
transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with
outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included
in cost of product sales.
Recent
Accounting Pronouncements
In
June 2018, the FASB issued ASU 2018-07
Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based
Payment Accounting.
This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making
the guidance consistent with the accounting for employee share-based compensation. It is effective for annual reporting periods,
and interim periods within those years, beginning after December 15, 2018.
The
adoption of this guidance by the Company did not have a material impact on our condensed financial statements and related disclosures.
In
February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02,
Income Statement
Reporting, Comprehensive Income (Topic 220)
. Effective for all entities for fiscal years beginning after December 15, 2018,
and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption
in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been
issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for
issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or
periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.
The adoption of this guidance by the Company did not have a material impact on our condensed financial statements and related
disclosures.
In
February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02,
Leases (Topic 842)
. Under the new
guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the
commencement date. A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured
on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control
the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted
improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASC 606,
Revenue from
Contracts with Customers
. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because
lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet
financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases)
must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the consolidated financial statements. The modified retrospective approach would not require any
transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective
transition approach. The adoption of this guidance by the Company did not have a material impact on our condensed financial
statements and related disclosures.
NOTE
4–RELATED PARTY TRANSACTIONS
The
Company sells radiation monitors and to date has purchased all of its inventory from a company in Russia, which is owned by a
minority shareholder of the Company. Total inventory purchased was $110,130 and $111,500 for the three months ended March
31, 2019 and March 31, 2018, respectively.
During
July 2017, the Company entered into an agreement with the Russian Affiliate to develop and update software for a new device for
$180,000. The development contract goes through December 31, 2019. The amount due in connection with services performed through
March 31, 2019 is $63,076 and $45,076 at December 31, 2018.
The
Company owes the Russian affiliate, in total, $95,275 and $89,625 and such amount is included in related party payables
in the accompanying balance sheet at March 31, 2019 and December 31, 2018, respectively. The related payable balance is related
to inventory purchased in the first quarter of 2019 and research and development services including the July 2017 contract noted
above.
Since
inception, the Company has not compensated its CEO, who is the majority shareholder, and, as of March 31, 2019 and December 31,
2018, is due $48,807 and $60,224, respectively, for expenses paid by the shareholder on behalf of the Company.
NOTE
5– COMMITMENTS AND CONTINGENCIES
Contingencies
The Company is currently
undergoing multi-year VAT tax examination by certain European tax authorities. As of March 31, 2019, the outcome of these examination
is uncertain and the Company is disputing any amounts due. The estimated liabilities on the VAT tax exposure could be anywhere
from $0 to $300,000 based on estimates and information available to management.
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
6–GOING CONCERN
The
Company’s financial statements are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of business. While the Company has established sources
of capital to cover its operating costs, it incurred a loss for the first quarter of 2019 and cannot support a salary for its
CEO, which causes substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as
a going concern is dependent on the Company obtaining adequate capital to implement its business plan. If the Company is unable
to obtain adequate capital, it could be forced to cease operations.
Management
intends to focus on raising funds and potential acquisitions going forward. The Company cannot provide any assurance or guarantee
that it will be able to raise funds. Potential investors must be aware if it is unable to raise funds through the sale of its
common stock and generate sufficient revenues, any investment made into the Company could be lost in its entirety.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
7–SUBSEQUENT EVENTS
The
Company has performed an evaluation of events occurring subsequent to March 31, 2019 through May 15, 2019. Based on its evaluation,
there is nothing to be disclosed herein.
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 months ended March 31, 2019 and 2018. You should refer to the Financial Statements and related Notes in conjunction with
this discussion.
Results
of Operations
General
We
were incorporated under the laws of the State of Delaware on November 29, 2011 with fiscal year end in December 31. We were formed
to distribute and sell detection devices to homeowners and interested consumers in North America. Initially, our business plan
was to sell products on consignment from Star Systems Japan, a corporation owned by our majority shareholder. We purchased these
products from Quarta-Rad, Ltd., a company owned by our minority shareholder. We also targeted direct-to-consumer sales since we
believe we can distribute these products through the Internet. We have never been party to any bankruptcy, receivership or similar
proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount
of assets not in the ordinary course of business.
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. 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. In October 2018, our United Kingdom retail platform
was suspended due to certain UK restrictions. We are in the process of becoming compliant in order to lift these restrictions
and exploring and testing new partners for EU distribution.
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, 2019 and 2018, together with notes thereto, which are included in this Quarterly
Report on Form 10-Q.
Three
months ended March 31, 2019 compared with the three months ended March 31, 2018
Revenues.
Our net revenues decreased $65,455, or 25.15% to $194,822 for the three months ended March 31, 2019 compared with $260,277
for the three months ended March 31, 2018. The decrease was due to a reduction in the sale of our RD1503 model. We attribute the
decrease to a decrease in demand due to an increase in sales price and our interruption of retail sales to the EU.
Cost
of Goods Sold.
Our Cost of Goods Sold decreased $31,025 or 15.42% to $170,141 for the three months ended March 31, 2019 compared
to $201,166 for the comparable period in 2018. The decrease is due to an overall decrease in sales.
Operating
Expenses.
For the three
months ended March 31, 2019, our total operating expenses decreased $36,523 or 32.39%, to $76,232, compared to $112,755 for the
three months ended March 31, 2018. The decrease is primarily attributable to the Company’s decrease in professional
fees and sales tax payments in prior years.
Net
Income.
Our net loss decreased $2,093, or 3.9% to a net loss of $51,551 for the three months ended March 31, 2019 compared
to a net loss of $53,644 for the comparable period in 2018.
Liquidity
and Capital Resources
. During the three months ended March 31, 2019, we used cash for operating expenses from cash on hand
and the sale of products on the Internet and from independent, third party resellers.
Our
total assets were $216,782 and $274,496 as of March 31, 2019 and December 31, 2018, respectively, consisting of $54,228 and $87,010,
respectively, in cash. Our working capital surplus was $60,669 and $112,220 as of March 31, 2019 and December 31, 2018, respectively.
We
had $32,782 in cash used and $25,831 in cash provided by operating activities for the three months ended March 31, 2019 and 2018,
respectively.
We
had no cash provided by investing activities for the three months ended March 31, 2019 and 2018, respectively.
We
had no cash provided by financing activities for the three months ended March 31, 2019 and 2018, respectively.
We
do not have sufficient funds for pursuing our plan of operation, which includes acquisitions, but we are in the process of trying
to procure funds sufficient to fund our plan. There can be no assurance that we will be able to procure funds sufficient for such
purpose. If operating difficulties or other factors (many of which are beyond our control) delay our realization of revenues or
cash flows from operations, we may be limited in our ability to pursue our business plan. Moreover, if our resources from obtaining
additional capital or cash flows from operations, once we commence them, do not satisfy our operational needs or if unexpected
expenses arise due to unanticipated pressures or if we decide to expand our business plan beyond its currently anticipated level
or otherwise, we will require additional financing to fund our operations, in addition to anticipated cash generated from our
operations. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available
or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities,
develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In a worst-case
scenario, we might not be able to fund our operations or to remain in business, which could result in a total loss of our stockholders’
investment. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership
of our stockholders would be reduced, and these newly issued securities might have rights, preferences or privileges senior to
those of existing stockholders.
The
Company had no formal long-term lines of credit or other bank financing arrangements as of March 31, 2019.
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 three months ended March 31, 2019.
Plan
of Operation
Our
business strategy is to continue to market our website (
www.quartarad.com
). We have used our website to market products
for sale to consumers as well to third party distributors. We will continue to strengthen our presence on e-commerce sites. We
are also focusing on expanding our reseller network by targeting large consumer retail chains.
The
number of detection devices, which we will be able to sell will depend upon the success of our marketing efforts through our website
and the distributors that we will enter into agreement with to sell the products.
We
intend to implement the following tasks within the next twelve months:
Inventory
:
We
intend to purchase inventory to increase our sales. We believe that these funds will be initially sufficient for us to increase
our inventory from Quarta-Rad, Ltd. The amount needed for inventory purchases is directly related to the demand for sales of our
product.
Marketing
:
(Estimated cost $25,000-$75,000). In addition to the website 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 (9) 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 (9) 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.
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, 2018 and Note 1 to the Condensed Financial Statements in this
Form 10-Q.