As Of               Filer                 Filing    For·On·As Docs:Size

 3/12/20  Charmt, Inc.                      10-K       12/31/19   41:1.2M

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x    Noo   

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 3,345,000 common shares issued and outstanding as of March 6, 2020.

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CHARMT, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
PART I
Item 1.	Description of Business.	4
Item 1A.	Risk Factors.	7
Item 1B.	Unresolved Staff Comments.	7
Item 2	Properties.	7
Item 3.	Legal proceedings.	7
Item 4.	Mine Safety Disclosures.	7
PART II
Item 5.	Market for Common Equity and Related Stockholder Matters.	7
Item 6.	Selected Financial Data.	8
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	9
Item 8.	Financial Statements and Supplementary Data.	9
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.	19
Item 9A (T).	Controls and Procedures	19
Item 9B.	Other Information.	21
PART III
Item 10	Directors, Executive Officers, Promoters and Control Persons of the Company.	21
Item 11.	Executive Compensation.	22
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	22
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	23
Item 14.	Principal Accounting Fees and Services.	23
PART IV
Item 15.	Exhibits	23
Signatures

 

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PART I

Item 1. Description of Business

Forward-looking statements

Statements made in this Form 10-K that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Financial information contained in this report and in our unaudited financial statements is stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

DESCRIPTION OF BUSINESS

Charmt intends to develop and publish mobile applications on the iOS, Google Play, Amazon and Ethereum platforms. The Company also plans to maintain a portfolio of its products and track the user download statistics. Charmt intends to generate revenues through the sale of branded advertisements and via consumer transactions, including in-app purchases. Founded in 2018, Charmt is headquartered in Tallinn. The management of the Company plans to distribute the application all over the world using various platforms.

 

Mobile App Market

 

The proliferation of easy-to-use touch-based smartphones and tablets has created a market with unique characteristics and explosive growth for mobile apps. Portability enables using wherever and whenever the user has spare time, and many apps are specifically tailored to provide short use sessions for such occasions. Compared to PC application, the mobile apps market has low barriers to entry. Whereas many successful PC apps have budgets for production and marketing in the tens of millions and often take years to develop, mobile apps can be created in a matter of weeks. Currently, there are over 800,000 mobile apps in Apple’s App Store.

 

Within the global app economy, Charmt currently expects to participate in the sub-sectors of 1) app store transactions relating to mobile apps and 2) mobile in-app advertising. The market for app store transactions relating to mobile apps is expected to grow from $50 billion in 2016 to $105 billion in 2021, representing a CAGR of 16%. At the same time, the mobile in-app advertising market is expected to nearly triple in size from $72 billion in 2018 to $201 billion in 2021, representing a CAGR of 23%.

 

Revenue Model

 

The mobile app industry today relies primarily on a revenue model known as “free-to-use”, which means that the apps are free to download and play. Unlike traditional PC-based apps which are sold for a fixed retail price, the revenues from free mobile apps are generated through a combination of in-app purchases (wherein the user purchases additional premium content, functionality or in-app currency with which they can improve or extend the app experience), and advertisements served within the app.

 

In order for our revenue model to be successful, it requires that a app has a large base of non-paying users and an adequately sized subset of recurring paying users.

As a result, the tracking and optimization of measures such as MAUs (Monthly Active Users), DAUs (Daily Active Users), ABPU (Average Bookings Per User), User Retention Rates, and User LTVs (Life Time Values) are essential to the successful management of mobile apps. Ongoing investments in marketing, product development, and live ops are therefore important to acquire, accumulate and maintain an audience of loyal, paying users.

 

 

 

 

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Industry Value Chain

 

The components in the mobile app value chain from app development to user can be broken down into four distinct segments: developers, publishers, distributors and the owners of the IP. These functions are in some cases split up between different companies and in some cases, some of the functions are performed by the same company.

 

Developers

 

App developers are the creators of apps, and it is often they who come up with the app concept, as well as technically write the code and develop the app. There are app development teams ranging from a few people to several hundred developers. There are both internal app development teams, where the publisher employs the app developers, as well as external app development teams who are independent of the publisher. It has also become increasingly common to outsource a growing number of content-creation functions to external studios. There are outsourcing studios that specialize in specific parts of the creative process, e.g. producing the artwork in an app. It is also quite common that the app development companies keep the core of production and creativity in the company and then outsource some of the more specific development to other companies with specific skills.

 

Publishers

 

The publisher’s role is to commercialize the app ideas and take overall responsibility for the product by partially or wholly funding its development, monitoring the development process, testing, adapting and controlling the quality of the app. Once the product is finalized, the publisher distributes and markets the app to distributors. Publishers can own the whole or parts of the development project, or alternatively, only act as publisher to a third party that owns the IP rights.

 

Distribution Platforms

 

Mobile apps are primarily distributed via large application stores such as Google Play, Amazon and Apple App Store. According to App Annie, global app store downloads will grow from 111.5 billion in 2018 to 284.3 billion in 2020. Developers either approach application stores directly or via a publisher, if they are cooperating with one. The major distribution platforms offer a 70 per cent revenue share to developers for distributing their applications through their application stores.

IP Owners

 

Another important part in the app market’s value chain is the owner of the brand (the IP owner) upon which the app is based. The IP owner controls which app projects, based on their brand, are to be made. Who the IP owner is depends – it could either be a app development studio that has developed its own IP, a publisher which owns a portfolio of brands, or for example the copyright owner of a movie or book title on which an app is to be based.

Products

 

The Company is currently developing a new kind of messenger. Charmt’s app is intended to be a unique product with high production value and high revenue potential. It is going to be developed and published on both original and licensed IP. This title requires significant development investment and has, in the opinion of management, the potential to become well-known and a long-lasting, successful mobile app franchise.

 

Voice-changing messenger

 

Charmt’s first product is our investment in the vast market of applications for communication and amusement. It is intended to provide the fun of changing your voice while speaking with other people along with full functionality of similar messaging apps. As of this date, we have developed the system requirements specification that describes the entire potential and unique features of the messenger.

A user will be able to download our app and easily create an account linking his/her phone number. Security of the personal data use is provided by text message authorization. Charmt automatically synchronizes contacts from your cell phone memory and a user can see if any of them launched the app already. If not, he/she can invite other people to the app using the link sent by a regular text message. Our potential users will be able to call any of their contacts via audio or video connection and use the sound filter to alter their voice.

The management of the company considers our product to be unique and combine entertainment and convenience for everyday use. Expected users can either utilize Charmt as a regular messenger that enables people to exchange messages and numerous types of files or use it as a means of having fun changing their voices to be completely unrecognizable when communicating.

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As of December 31, 2019, the voice-changing application has not been developed yet. The management of the Company considers using blockchain technology for developing the intended product due to its growing popularity with messaging applications. It provides encrypted P2P-connection(‘peer-to-peer’) which enables exceptional level of security without any access to users’ personal data by any third-parties. Apart from blockchain technologies, we also consider using crypto-collectibles or regular types of cryptocurrency in order to allow people to make in-app purchases. Our intended in-app purchases are planned to consist of various options for changing the sound of user’s voices.

Strategy

 

The Company’s current strategy is devoted to focusing on seeking investment and management resources to use in our app development business. We believe the potential size, quality and sustainability of revenues and earnings from the app development business can be significantly greater than that of our existing competitors’ businesses. Our goal in terms of our app development is to create franchise-type titles that will have product lifespans of at least five to ten years. In order to accomplish this, we believe that we need to achieve user LTVs that exceeds user acquisition cost, at scale.

Competition

 

The mobile app and app industry is characterized by fierce competition, is growing rapidly, evolving constantly, and the possibility for innovative companies to succeed within it is significant. The mobile app and app industry is, in all respects, global and Charmt has competitors around the world. Approximately two dozen public companies around the world have significant portions of their business in mobile app content creation including:

 

	●	United States - Activision-Blizzard, Zynga, Glu Mobile, Charmt, TakeTwo and EA;
	●	Japan - DeNa, Gree, Nexon, and Gung-Ho in Japan;
	●	Korea - Appvil, Kakao, NetMarble and Com2Us;
	●	China - Tencent, Netease, Boyaa, Forapp, AppOne Holdings, OurPalm, IGG, and ZQ Apps; and
	●	Europe – Rovio, G5 Entertainment, Apploft, Ubisoft, Modern Tines Group, and Next Apps.

  

Major privately held mobile app companies also include companies such as Niantic, Jam City and Scopely. Despite this seemingly large number of significant users in the market, there are a large number of smaller developers with one or two apps and the market remains very fragmented. The competition for users’ time and spending is decided primarily through factors such as app quality, brand recognition, and marketing & distribution channel power. Having users in one app also opens up the possibility of cross-promotion, which has also shown to be very important. We believe that, while it is still early for the mobile app industry, the market has begun to show signs of maturing and we believe that significant consolidation is likely to occur over the next five years.

Marketing 

 

We plan to acquire most of our users through unpaid channels. We are aiming to build a large community of users through cross promotion, editorial featuring, the viral and sharing features provided by social networks, and app store optimization strategies. We are committed to connecting with our users and we plan to leverage various forms of social media, including Facebook, Twitter, YouTube, Instagram and Discord to communicate with them. We also want to use traditional advertising activities, primarily mobile advertising spending on Facebook, Apple and Google.

Government Regulation

 

We are subject to various federal, state and international laws and regulations that affect companies conducting business on the Internet and mobile platforms, and working with virtual currencies and storing information on the blockchain including those relating to privacy, use and protection of user and employee personal information and data (including the collection of data from minors), the Internet, behavioral tracking, mobile applications, content, advertising and marketing activities (including sweepstakes, contests and giveaways), and anti-corruption. Additional laws in all of these areas are likely to be passed in the future, which could result in significant limitations on or changes to the ways in which we can collect, use, host, store or transmit the personal information and data of our customers or employees, communicate with our users, and deliver products and services, and may significantly increase our compliance costs. As our business expands to include new uses or collection of data that are subject to privacy or security regulations, our compliance requirements and costs will increase and we may be subject to increased regulatory scrutiny.

  

Employees

 

As of the date, we have no employees other than our sole director, Mr. Gediminas Knyzelis. The Company plans to rely extensively

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on third-party consultants and vendors for certain development and marketing activities.

 

Properties

 

We are currently renting an office at Hobujaama 4, Tallinn 10151 Estonia. The said premises are our headquarters.

Item 1A.  Risk Factors

 

Not applicable to smaller reporting companies.

 

Item 1B. Unresolved Staff Comments

Not applicable to smaller reporting companies.

Item 2.  Description of Property

We do not own any real estate or other properties.  

Item 3.  Legal Proceedings

We know of no legal proceedings to which we are a party or to which any of our property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against us.

Item 4.  Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters      

Market Information

There is no public market for our common shares at this time.  Our common shares are not quoted at this time.  Trading in stocks quoted on over-the-counter (“OTC”) markets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects.  We cannot assure you that there will be a market in the future for our common stock.

 

OTC securities are not listed or traded on the floor of an organized national or regional stock exchange.  Instead, OTC securities transactions are conducted through a telephone and computer network connecting dealers in stocks.  OTC issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

As of December 31, 2019, no shares of our common stock have traded.

Number of Holders

As of December 31, 2019, the 3,000,000 issued and outstanding shares of common stock were held by our sole director, Gediminas Knyzelis.

Dividends

 

No cash dividends were paid on our shares of common stock during the fiscal year ended December 31, 2019. 

Recent Sales of Unregistered Securities

The Company has 75,000,000, $0.001 par value shares of common stock authorized.

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On August 2, 2018 the Company issued 3,000,000 shares of common stock to a director for cash proceeds of $3,000 at $0.001 per share par value. Par value was used because company has just begun and has no value beyond par value at this stage.

Purchase of our Equity Securities by Officers and Directors

On August 2, 2018, the Company offered and sold 3,000,000 restricted shares of common stock to our president and director, Gediminas Knyzelis, for a purchase price of $0.001 per share, for aggregate offering proceeds of $3,000, pursuant to Section 4(2) of the Securities Act of 1933 as he is a sophisticated investor and is in possession of all material information relating to us. Further, no commissions were paid to anyone in connection with the sale of these shares and general solicitation was not made to anyone.

Other Stockholder Matters

None.

Item 6. Selected Financial Data                                       

Not applicable to smaller reporting companies.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.  Our actual results could differ materially from those discussed in the forward-looking statements.   Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Results of Operations for the year ended December 31, 2019 and for the period from inception on August 2, 2018 to December 31, 2018:

Revenue and cost of revenue

The Company did not have any revenues or costs of revenue for the period from inception on August 2, 2018 to December 31, 2019.

Operating expenses

Total operating expenses for the year ended December 31, 2019 and for the period from inception on August 2, 2018 to December 31, 2018 were $11,575 and $1,832. The operating expenses for the year ended December 31, 2019 included $210 in bank charges; $461 in legal fees; $650 in business licenses and permits; $8,750 in audit fees; $577 in professional fees; $902 in rent expense; and $25 in foreign exchange loss. The operating expenses for the period from inception on August 2, 2018 to December 31, 2018 included $28 of bank charges; $1,200 in legal fees; $150 in professional fees; and $454 in rent expense.

Net Income/Loss

The net loss for the year ended December 31, 2019 and for the period from inception on August 2, 2018 to December 31, 2018 was $11,575 and $1,832 respectively.

Liquidity and Capital Resources and Cash Requirements

At December 31, 2019, the Company had cash of $70 ($100 as of December 31, 2018).  

For the year ended December 31, 2019, the Company used $10,342 of cash in operating activities.

For the year ended December 31, 2019, the Company generated $10,312 of cash in financing activities.

For the period from inception on August 2, 2018 to December 31, 2018, the Company used $1,654 of cash in operating activities.  

For the period from inception on August 2, 2018 to December 31, 2018, the Company generated $1,754 of cash in financing activities.

We cannot guarantee that we will manage to sell all the shares required. We will attempt to raise the necessary funds to proceed with all phases of our plan of operation.  

 

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As of the date of this report, the current funds available to the Company will not be sufficient to continue maintaining a reporting status. The Company’s sole director, Gediminas Knyzelis, has concluded a verbal agreement with Charmt Inc. in order to fund completion of the registration process and to maintain the reporting status with SEC.

  

Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company’s success over the next year and in future years. Additionally, the Company will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company’s management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement is business plan and impede the speed of its operations.

Limited operating history; need for additional capital

There is no historical financial information about us upon which to base an evaluation of our performance. We are in a start-up stage of operations and have generated no revenues since inception. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.

Off-Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk   

Not applicable to smaller reporting companies.

Item 8. Financial Statements and Supplementary Data   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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CHARMT INC.  

FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2019 AND FOR THE PERIOD FROM INCEPTION ON AUGUST 2, 2018 TO DECEMBER 31, 2018

 

 

 

Table of Contents

		Page
Report of Independent Registered Public Accounting Firm		11
Balance Sheets as of December 31, 2019 and 2018		12
Statements of Operations for the year ended December 31, 2019 and for the period from inception on August 2, 2018 to December 31, 2018		13
Statements of Changes in Stockholder’s Equity for the year ended December 31, 2019 and for the period from inception on August 2, 2018 to December 31, 2018		14
Statements of Cash Flows for the year ended December 31, 2019 and for the period from inception on August 2, 2018 to December 31, 2018		15
Notes to Financial Statements		16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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