The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023 and DECEMBER 31, 2022
(Unaudited)
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Nature of Business
Regnum Corp. (the “Company” or “Regnum,” “we,” “us,” “our” and similar terminology) was incorporated on March 31, 2016, under the laws of the State of Nevada. The Company was originally formed for the primary business purpose of servicing the demand for premium entertainment content and becoming a depository of unpublished intellectual properties for resale with focus on achieving profitability and sustaining business growth. Following the acquisition by Phoenixus AG, a Swiss holding company (“Phoenixus”) of approximately 99% of the shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) on April 7, 2021, the Company’s prior business model was abandoned and the Company is currently focused on developing and commercializing therapeutics that treat rare and infectious diseases, specifically in populations that are neglected or face adherence challenges.
The Company submitted a Company Related Action Notification, in accordance with Financial Industry Regulatory Authority (“FINRA”) Rule 6490 (the “Corporate Action Notice”) on October 20, 2021, in connection with a proposed change of the Company’s name to “Rovida Therapeutics, Inc.” and change the Company’s trading symbol, as well as to redomicile of the Company from the state of Nevada to the state of Delaware (the “Corporate Actions”). The Corporate Actions were approved by the board of directors of the Company on October 21, 2021, and were approved by consent of Phoenixus as majority stockholder on October 21, 2021. While the Corporate Actions were denied by FINRA in April 2022 (and subsequently denied on appeal in August 2022) due to Phoenixus’s former association with Martin Shkreli (“Shkreli"), the Company may revisit the Corporate Actions at such time as factual circumstances relating to Shkreli and Phoenixus merit.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying unaudited condensed interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2022, contained in the Company’s annual report, as filed with the SEC on Form 10-K on April 17, 2023 (the “2022 Form 10-K”). The December 31, 2022 balance sheet was derived from the audited financial statements of our 2022 Form 10-K. In the opinion of management all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial position and the results of operations for the interim periods presented, have been reflected herein.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2022 financial statements included in our 2022 Form 10-K. The interim results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2023 or for any future periods.
Accounting Basis
The basis is accounting principles generally accepted in the United States of America. The Company has adopted a December 31 fiscal year-end.
Going concern
The Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters include seeking equity or debt financing (including indebtedness from the Company’s controlling shareholder Phoenixus) and continuing to operate in a cost efficient manner in order to preserve existing cash resources.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Basic Income/(Loss) per Share of Common Stock
Basic income per share of Common Stock is calculated by dividing the Company’s net income/(loss) applicable to shareholders of Common Stock by the weighted average number of shares of Common Stock during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to shareholders of Common Stock by the diluted weighted average number of shares of Common Stock outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are 80,000,000 shares of Common Stock authorized, and there were 22,950,000 shares of Common Stock outstanding as of March 31, 2023. The Company had no potential dilutive issuances of shares of Common Stock during the quarter ended March 31, 2023.
Revenue Recognition
Revenues from the sale of intellectual property are recognized when persuasive evidence of an arrangement exists, the intellectual property has been delivered or is made available for delivery, the customer can begin the use of the intellectual property, the fee is fixed or determinable and collectability is reasonably assured, which is generally upon execution of a purchase agreement and delivery of the intellectual property.
Impairment of Long-Lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.
Fair Value of Financial Instruments
The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments. There have been no transfers between fair value levels during the three months ended March 31, 2023 or the year ended December 31, 2022. Financial instruments are measured at amortized cost or at fair value. Financial instruments measured at amortized cost consist of accounts payable, accrued liabilities and income taxes payable wherein the carrying value approximates fair value due to its short-term nature. Other financial instruments measured at amortized cost include notes payable wherein the carrying value at the effective interest rate approximates fair value as the interest rate approximates a market rate for similar instruments offered to the Company.
Income Taxes
The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse.
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
If applicable, the Company would classify interest and penalties related to uncertain tax positions in income tax expense. Through March 31, 2023, there has been no interest expense or penalties related to unrecognized tax benefits.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” which supersedes the most current revenue recognition requirements. This ASU requires entities to recognize revenue in a way that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. The Company adopted the pronouncement under the modified retrospective method of transition in the first quarter of 2018. The adoption of the new standard did not have a material effect on the overall timing or amount of revenue recognized.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The adoption of this ASU during the year ended December 31, 2020 had no material impact on the company’s financial statements.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the adoption date and impact, if any, adoption will have on its balance sheets and results of operations.
Management has considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3. STOCKHOLDERS’ EQUITY
As of March 31, 2023 and December 31, 2022 the Company had 80,000,000 authorized shares of Common Stock, of which 22,950,000 shares are issued and outstanding at such date.
NOTE 4. RELATED PARTY TRANSACTIONS
Accounts Payable
The Company is party to the following service agreements (together, the “Shared Services Agreements”) with Vyera Pharmaceuticals, LLC, a subsidiary of Phoenixus and thus a related parted of the Company (“Vyera”): (i) a Management and Business Consulting Agreement, wherein Vyera is the service provider; (ii) a Shared Services Agreement; and (iii) a Research and Development Services Agreement. Through these agreements, the Company can receive and provide general and administrative support, and the Company is able to receive management level business strategy consulting and research and development services. Services are invoiced to each party at an arm’s length markup.
During the quarter ended March 31, 2023 and the year ended December 31, 2022, a total of $28,224 and $225,936, respectively, were incurred by the Company to Vyera under these service agreements and recorded in accounts payable – related party.
The accounts payable-related party balance was $208,029 and $293,938 as of March 31, 2023 and December 31, 2022, respectively.
Accounts Receivable
Commencing in April of 2022, the Company began making payments directly to its Chief Executive Officer, whereas such payments had previously been made by Vyera. Under the Shared Services Agreements, the Company billed Vyera for services provided during the remainder of 2022. The resulting amount which was receivable from Vyera was offset against the amount payable to Vyera reducing the balance of Receivable from Related party to zero as of September 30, 2022 and has remained zero from that time to the present.
There was no balance for Receivable from Related Party as of March 31, 2023 or December 31, 2022.
Notes Payable
On October 8, 2021, the Company issued a convertible promissory note (the “2021 Note”) in the principal amount of $1,500,000 in connection with a loan received from its principal shareholder, Phoenixus, to support clinical development and general expenses. The 2021 Note bears interest at the rate of 3% per annum, payable on maturity or conversion and matures 365 days following the date of issue, unless earlier repurchased or converted. Phoenixus has an option to convert the principal and interest into shares of Common Stock at $0.40 per share, upon Regnum completing an equity financing of at least an additional $5,000,000 in the aggregate. On October 7, 2022, the Company and Phoenixus entered into an Amendment No. 1 to the 2021 Note extending the maturity date from October 7, 2022 to April 7, 2023.
At March 31, 2023 and December 31, 2022, the balance of the 2021 Note, including accrued interest, was $1,566,575 and $1,555,479, respectively. While the April 7, 2023 maturity date of the note has passed, Phoenixus has not demanded payment nor called an event of default under the note. As of the date of this Report, the parties continue to discuss this matter towards a mutually agreeable resolution.
NOTE 5. INCOME TAXES
Income tax expense consists of the following:
| | March 31, | |
| | 2023 | | | 2022 | |
Federal | | $ | - | | | $ | - | |
State | | | - | | | | - | |
Total | | $ | - | | | $ | - | |
Income tax expense differed from the amounts computed by applying the U.S. federal statutory tax rate applicable to the Company’s level of pretax income as a result of the following:
| | March 31, | |
| | 2023 | | | 2022 | |
Federal tax at statutory rate | | $ | - | | | $ | - | |
State taxes, net of federal benefit | | | - | | | | - | |
Net operating loss carryforward | | | - | | | | - | |
Total | | $ | - | | | $ | - | |
NOTE 6. CONCENTRATION
The Company currently relies on CytoDyn, its commercial partner, for development, manufacture, and supply of all commercial grade quantities of the Product.
NOTE 7. CHANGE IN CONTROL OF THE COMPANY
On April 7, 2021, Wookey, the previous majority shareholder of the Company, entered into a stock purchase agreement for the sale of 20,000,000 shares of Common Stock to Phoenixus, an accredited investor. Phoenixus also acquired an additional 2,680,000 shares of Common Stock from three minority shareholders. In connection with the sale of such shares, an aggregate of 1,000,000 shares of Common Stock held by Gary Allen (a former director of the Company) were returned to the Company for cancellation.
As a result of the acquisition of 22,680,000 shares of Common Stock, and the cancellation of 1,000,000 shares, Phoenixus holds approximately 99% of the issued and outstanding shares of Common Stock, and as such it is able to unilaterally control the election of the Company’s board of directors, all matters upon which shareholder approval is required and, ultimately, the direction of the Company.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Contingencies
The Company’s operations are subject to a variety of local, state, and federal regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations.
Litigation and Claims
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of March 31, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
NOTE 9. SUBSEQUENT EVENTS
On May 9, 2023, Phoenixus and its subsidiaries Vyera, Oakrum Pharma, LLC, SevenScore Pharmaceuticals, LLC, Dermelix Biotherapeutics, LLC, and Orpha Labs AG filed petitions for relief under subchapter V of chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (such petitions, collectively, the “Phoenixus Bankruptcy”). The Company is presently evaluating the potential impact of the Phoenixus Bankruptcy on the Company, including the potential impact on the Shared Services Agreements and the 2021 Note. The Phoenixus Bankruptcy may also require or otherwise eventuate in a future sale of a portion or all of the Common Stock held by Phoenixus. However, given that filings for the Phoenixus Bankruptcy were only recently made, the potential impact of the Phoenixus Bankruptcy on the Company is uncertain.
The Company has evaluated events and transactions through the date of this filing to assess the need for potential recognition or disclosure. Based upon this review, the Company did not identify any other subsequent events that require adjustment or disclosure in the financial statements.