Executive Summary / Key Takeaways

• Strategic Transformation Underway: Quarta-Rad, Inc. (QURT) is undergoing a profound strategic pivot, shifting from its legacy radiation detection business to focus on AI-driven call center software through its Sellavir subsidiary. This transformation aims to transition the company from an import-heavy revenue model to one where AI services generate the majority of total sales.
• Sellavir's Explosive Growth: The AI segment, Sellavir, has demonstrated significant early traction, generating $95,000 in revenue for the first six months of 2025, a substantial increase from zero in the prior year. This growth, driven by its CenterEye call center software, is actively offsetting the sharp decline in the traditional Quarta-Rad segment.
• Legacy Business in Decline: The original Quarta-Rad segment, focused on Geiger counters, experienced an 89.79% revenue decrease in the first half of 2025, largely due to geopolitical challenges impacting supply chains and EU sales restrictions. This segment continues to incur significant losses.
• Financial Headwinds and Risks: Despite Sellavir's promising start, QURT faces substantial financial challenges, including recurring operating losses, a working capital deficit of $214,295 as of June 30, 2025, and an explicit "going concern" doubt. The success of CenterEye is not guaranteed, and the company acknowledges material weaknesses in its internal controls.
• High-Risk, High-Reward AI Play: QURT represents a high-risk, high-reward investment proposition. Its future hinges on the successful development, market acceptance, and scaling of its AI-driven CenterEye platform, which promises a recurring subscription revenue model, against a backdrop of intense competition and ongoing financial pressures.

A Strategic Metamorphosis in Motion

Quarta-Rad, Inc., founded in 1990 and incorporated in Delaware in 2011, has historically been a distributor of detection devices, primarily Geiger counters, to consumers and contractors across North America and Europe. For decades, its business model revolved around sourcing products from related parties and selling them through online platforms and resellers. This traditional segment, while serving a niche market, has recently faced severe headwinds.

A pivotal moment arrived in December 2020 with the acquisition of Sellavir, Inc., an AI company. This strategic move signaled a profound shift, aiming to transform Quarta-Rad from an "import heavy revenue entity to AI services revenue becoming the majority of total sales." The company is now actively expanding its Artificial Intelligence business through the development of new services and software, particularly focusing on the call center industry. This strategic pivot is a direct response to both the constraints impacting the legacy Quarta-Rad segment and the burgeoning opportunities in AI.

Sellavir's core differentiated technology lies in its AI and advanced analytics capabilities, specifically applied to its CenterEye call center software platform. CenterEye is designed to "simplify the use of complex cloud-based call center platforms" and "enhance call center efficiency and customer engagement through innovative AI-driven solutions." While specific quantitative performance metrics for CenterEye's technology are not publicly detailed, its stated benefits include providing real-time insights, performance metrics, and customer engagement tools. The strategic intent behind this technology is to capitalize on the industry's evolving landscape, particularly the shift from traditional on-premise solutions to cloud-hosted platforms, which presents a unique opportunity for AI-driven products. For investors, this technological focus is critical; it underpins the company's competitive moat by aiming for ease of use and advanced functionality in a rapidly growing market, potentially leading to higher adoption rates and a predictable, recurring revenue stream through its monthly subscription model.

In the broader competitive landscape, Quarta-Rad's traditional business operates in a market with larger, more diversified players like Thermo Fisher Scientific (TMO), Teledyne Technologies (TDY), Mirion Technologies (MIR), and Honeywell International (HON). These competitors often boast extensive R&D capabilities, global scale, and established relationships in professional and industrial markets. Quarta-Rad, with its focus on consumer-grade, user-friendly devices like the RADEX series, carved out a niche through direct-to-consumer sales and independent distributors. This agile market positioning allowed it to compete effectively in accessible, entry-level segments. However, its smaller scale and reliance on specific suppliers made it vulnerable to external shocks.

The pivot to AI, through Sellavir, positions QURT in a different, yet equally competitive, arena. Here, it aims to differentiate CenterEye through its focus on simplifying complex cloud-based platforms and leveraging advanced AI for operational efficiency. While larger tech companies and established call center solution providers also integrate AI, Sellavir's strategy emphasizes a specialized, user-friendly approach that could appeal to a distinct segment of the market. The industry trend towards AI and data center growth, as well as the increasing demand for monitoring in infrastructure, could indirectly benefit QURT by increasing the overall market for sophisticated detection and monitoring tools, even as its direct AI competitors are more focused on software solutions.

The Dual-Track Performance: Legacy Decline, AI Ascent

The company's recent financial performance vividly illustrates this strategic transition, showcasing a stark divergence between its two operating segments. For the six months ended June 30, 2025, consolidated net revenues increased by a significant 96.17% to $100,217, compared to $51,086 in the prior year. This growth, however, was entirely attributable to the nascent Sellavir segment.

The traditional Quarta-Rad segment experienced a dramatic decline, with net revenues plummeting by 89.79% to just $5,217 for the first half of 2025, down from $51,086 in the same period of 2024. This reduction was primarily due to decreased sales of its RD1503 model, exacerbated by geopolitical events. The Russian invasion of Ukraine and subsequent sanctions severely impacted the company's ability to purchase inventory from its long-standing Russian supplier, leading to a shift to a new supplier in Kazakhstan. Further restrictions in the EU diminished its sales capabilities in that market. Consequently, the Quarta-Rad segment's net loss increased by 25.35% to $97,861 for the six months ended June 30, 2025, reflecting the severe impact of reduced sales on profitability.

In stark contrast, the Sellavir segment, which had no revenue in the first half of 2024, recognized $95,000 in revenue for the six months ended June 30, 2025. This surge is directly linked to the commencement of revenue recognition from its call center software in September 2024. Despite a substantial increase in operating expenses, primarily due to $92,761 in stock-based compensation for the period, Sellavir's net loss decreased by 31.98% to $51,643, driven by the strong revenue growth. This indicates improving operational leverage as the AI business scales.

Consolidated gross profit for the six months ended June 30, 2025, was $36,368, up from $22,413 in the prior year, reflecting Sellavir's contribution. However, consolidated operating expenses rose by 33.93% to $212,833, largely due to Sellavir's stock-based compensation. The overall consolidated net loss for the first half of 2025 decreased by 2.92% to $149,504, primarily due to the increase in Sellavir's sales and a decrease in realized and unrealized losses. This suggests that Sellavir's growth is beginning to mitigate the losses from the legacy business.

From a liquidity perspective, QURT faces significant challenges. As of June 30, 2025, the company reported a working capital deficit of $214,295 and used $33,458 in cash for operating activities during the first six months of the year. Operations are currently funded by the majority shareholder, and the company has no formal long-term lines of credit or other bank financing arrangements. A notable related party transaction in May 2025 involved the assignment of a $164,375 note receivable and accrued interest to the CEO and majority shareholder to satisfy outstanding obligations, including accrued salary. These financial conditions, coupled with recurring losses, raise substantial doubt about the company's ability to continue as a going concern.

Strategic Outlook & Growth Catalysts

Quarta-Rad's future is firmly anchored in the success of Sellavir's AI initiatives. The company's management explicitly states its intention to "transforming our company from an import heavy revenue entity to AI services revenue becoming the majority of total sales." This strategic shift is not merely aspirational; it is backed by concrete plans and initial market traction.

Sellavir's CenterEye software, designed to simplify complex cloud-based call center platforms, is expected to be offered as a monthly subscription service. This model is crucial for establishing a "steady and predictable stream of revenue," a significant improvement over the volatile product sales of the legacy business. The company is actively pursuing sales opportunities for CenterEye in the U.S., Japan, and other international markets, with "Recent traction in Japan" indicating early market acceptance and potential for broader expansion.

Over the next twelve months, QURT plans targeted investments to bolster its AI segment. This includes continued investment in CenterEye's software development to add new features, improve user experience, and ensure scalability. Marketing efforts are slated for an estimated $25,000-$75,000 to generate leads and develop promotional materials for industry professionals. Additionally, approximately $20,000 is allocated for partnerships and client acquisition, aiming to secure pilot projects and initial deployments. These investments are critical for enhancing CenterEye's competitive position against established call center solutions and other AI entrants, leveraging its user-friendly and advanced AI capabilities as key differentiators.

The company is also "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." This suggests a potential future restructuring that could further streamline its focus or unlock value from its distinct business units. While management does not anticipate hiring additional full or part-time employees over the next three months, relying on existing officers, directors, and independent contractors, the success of these strategic initiatives will likely dictate future resource allocation.

Risks and Challenges

Despite the promising pivot to AI, QURT faces significant risks that warrant close investor attention. Foremost among these is the explicit "substantial doubt about its ability to continue as a going concern" due to recurring operating losses and current financial conditions. The company's reliance on shareholder funding and the absence of formal long-term financing arrangements highlight its precarious liquidity position.

A critical risk for the investment thesis is the market acceptance of CenterEye. As management acknowledges, "There is no guarantee that CenterEye will achieve market acceptance. Failure to gain traction could adversely affect our financial condition and results of operations." The call center AI market is highly competitive, with larger, well-resourced technology companies and established software providers vying for market share. QURT's ability to differentiate CenterEye and secure significant client adoption will be paramount.

Operational challenges also persist. The company's disclosure controls and procedures were deemed ineffective as of June 30, 2025, due to material weaknesses such as inadequate segregation of duties, insufficient technical accounting knowledge, and a lack of comprehensive internal controls. While management believes these weaknesses did not result in a material misstatement of financial statements and plans remediation through enhanced training and external consultation, these issues signal potential governance and operational fragilities. Furthermore, the legacy Quarta-Rad segment remains exposed to geopolitical risks and supply chain disruptions, which could continue to hinder its performance. Related party transactions, while providing some operational funding and debt resolution, also introduce potential conflicts of interest or dependencies that investors should monitor.

Conclusion

Quarta-Rad, Inc. stands at a critical juncture, attempting a bold and necessary strategic pivot from its declining legacy radiation detection business to the high-growth, AI-driven call center software market. The early revenue traction from Sellavir's CenterEye platform, particularly in Japan, offers a glimpse into a potentially transformative future, promising a more predictable, subscription-based revenue model. This shift, underpinned by Sellavir's AI and advanced analytics, represents QURT's primary avenue for long-term value creation and competitive differentiation.

However, the path forward is fraught with significant financial and operational hurdles. The substantial doubt about its going concern status, coupled with the inherent risks of new product market acceptance and acknowledged internal control weaknesses, underscores the high-risk nature of this investment. For QURT to truly unlock its potential, successful execution of its AI strategy, aggressive market penetration with CenterEye, and a robust remediation of its financial and operational controls are paramount. Investors must weigh the compelling narrative of an AI-driven rebirth against the very real challenges of a company in deep transition, where the success of its technological leadership in a competitive landscape will ultimately determine its fate.