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.





9

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, 2021 and 2020 and our results of operations for the year ended December 31, 2021 and December 31, 2020. 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 2020, we generated $858,015 in sales and incurred a net profit of $75,456 In 2021, we generated $1,245,981 in sales, and incurred a net profit of $7,343. 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, 2021, we had $260,200 in cash on hand in our corporate bank account and liabilities of $247,079, which consisted of $167,758 in related party payables and $79,321 in accounts payable and accrued expenses 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 2011, Quarta-Rad we acquired Sellavir, Inc, a Delaware corporation, under common control, as a wholly owned subsidiary We acquired the company in exchange for 333,333 shares on 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.





10

The Company has two operating segments through the operations of Quarta-Rad and Sellavir. Net income for the year ended December 31, 2021 is comprised of:

FOR YEAR ENDED DECEMBER 31, 2021





                                     Quarta Rad      Sellavir         Total
Sales                                    993,481       252,500       1,245,981
Cost of Good Sold                        751,775        11,123         762,898
Gross Profit                             241,706       241,377         483,083

Expenses:
General & administrative                  35,217         3,314          38,531
Advertising                               70,798         7,530          78,328

Professional and consulting fees 133,498 111,912 245,410 Operating expenses

                       239,513       122,756         362,269

Net income (loss) from operations 2,193 118,621 120,814



Interest and dividends                         -            10              10
Unrealized loss on investments                 -       (68,433 )       (68,433 )
Realized loss on investments                   -       (39,636 )       (39,636 )
Interest expense                                           (75 )           (75 )
Income tax expense                          (461 )      (4,876 )        (5,337 )
Net Income                                 1,732         5,611           7,343

Revenues for the year ended December 31, 2021 were $1,245,981 comprised of 993,481 from Quarta-Rad and $252,500 from Sellavir.

Operating expenses for the year ended December 31, 2021 were $362,269, comprised of $239,513 from Quarta-Rad and $122,756 from Sellavir.

Income tax expense for the year ended December 31, 2021 was $5,337, comprised of $461 income tax expense from Quarta-Rad and $4,876 income tax expense from Sellavir.

Net Income for the year ended December 31, 2021 was $7,343, comprised of $1,732 from Quarta-Rad and $5,611 from Sellavir.

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.





11

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, 2021 and 2020.

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, 2021 and 2020, respectively, together with notes thereto, which are included in this Annual Report on Form 10-K.

For the Year Ended December 31, 2021 compared to the Year Ended December 31, 2020

Revenues. Our net revenues increased $387,966, or 45.22%, to $1,245,981 for the year ended December 31, 2021 compared with $858,105 for comparable period in 2020. The increase was due to an increase in the sale of our RD1503 model, and by full year revenue from Sellavir. We attribute the increase to an increase in demand.

Cost of Goods Sold. Our Cost of Goods Sold increased $117,758, or 18.25% to $762,898 for the year ended December 31, 2021 compared to $645,140 for the comparable period in 2020. The increase is due to the increase in sales.

Operating Expenses. For the year ended December 31, 2021, our total operating expenses increased $174,082 or 92.50%, to $362,269 compared to $188,187 for the comparable period in 2020. 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, increased $39,354
    or 50.78%, to $116,859 for the year ended December 31, 2021 from $77,505 for
    the comparable period in 2020. The increase is primarily attributable to a
    full year of Sellavir expenses.

  ? Professional and consulting fees increased $134,728 or 121.73% for the year
    ended December 31, 2021 to $245,410 from $110,682 for the comparable period in
    2020. The increase is primarily due to a full year of the utilization of
    consultants for Sellavir.

Net Income. Our net income decreased by $68,113 to $7,343 or 90.27% for the year ended December 31, 2021 compared to $75,456 for the year ended December 31, 2020. The decrease is primarily attributable to an income tax benefit recognized in 2020.

QUARTA-RAD

For the Year Ended December 31, 2021 compared to the Year Ended December 31, 2020

Revenues Our net revenues increased $150,466, or 17.85%, to $993,481 for the year ended December 31, 2021 compared with $843,105 for comparable period in 2020. The increase was due to an increase in the sale of our RD1503 model. We attribute the increase to an increase in demand.

Operating Expenses. For the year ended December 31, 2021, our total operating expenses increased $57,012 or 31.24%, to $239,513 compared to $182,501 for the comparable period in 2020. The increase was attributable to an increase in professional fees and general and administrative expenses.

Net Income. Our net income decreased by $66,366 to $1,732 or 97.46% for the year ended December 31, 2021 compared to $68,098 for the year ended December 31, 2020. The decrease is primarily attributable to an income tax benefit recognized in 2020.





SELLAVIR

For the Year Ended December 31, 2021 compared to the Year Ended December 31, 2020

Sellevir operations for 2020 consist of the period from December 16 .2020 to December 31, 2020.

Revenues Our net revenues increased $237,500, or 1,583.33%, to $252,500 for the year ended December 31, 2021 compared with $15,000 for comparable period in 2020. The increase was due to a full year of Sellavir operations.





12

Operating Expenses. For the year ended December 31, 2021, our total operating expenses increased $117,070 or 2,058.92%, to $122,756 compared to $5,686 for the comparable period in 2020. The increase was attributable to an increase in professional fees and general and administrative expenses for a full year of Sellavir.

Cost of Goods Sold. Our Cost of Goods Sold increased $11,123 for the year ended December 31, 2021 compared to $-0- for the comparable period in 2020. The increase is due to direct project costs.

Net Income. Our net income decreased $1,747, or 23.00%to $5,611 for the year ended December 31, 2021 compared to $7,358 for the year ended December 31, 2020. The increase is primarily attributable to a full year of operations.

Liquidity and Capital Resources. During the year ended December 31, 2021, 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 $581,602 and $633,404 as of December 31, 2021 and December 31, 2020, respectively, consisting of $260,200 and $108,126, respectively, in cash. Our working capital surplus was $291,782 and $263,411 as of December 31, 2021 and December 31, 2020, respectively.

Our total liabilities were $247,079 and $315,225 as of December 31, 2021 and December 31, 2020, respectively.

Our stockholders' equity was $334,523 and $318,179 as of December 31, 2021 and 2020, respectively and our accumulated deficit was $13,771 and $21,114 as of December 31, 2021 and 2020, respectively.

We had $54,400 and $36,499 in cash provided by operating activities for the year ended December 31, 2021 and 2020, respectively.

We had $97,674 and $29,665 in cash provided by investing activities for year ended December 31, 2021 and 2020, respectively.

We had no cash provided by financing activities for the year ended December 31, 2021 and 2020, respectively.

We do not have sufficient funds for pursuing our plan of operation, but we are in the process of trying to procure funds sufficient to fund our operations until we are able to finance our operations through cash flow. 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, 2022.

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.

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America 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 a source of revenues to cover its operating costs it incurred a small profit in 2021 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 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 would be lost in its entirety.





13

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.

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. The Company has deferred tax assets of $39,571.





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, 2021 and 2020, 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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