Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statements
This Form 10-Q may contain "forward-looking statements," as that term is used in federal securities laws, about Regnum Corp.'s financial condition, results of operations and business. These statements include, among others:
|
o
|
statements concerning the potential benefits that Regnum Corp. (“Regnum”, “we”. “our”, “us”, the “Company”, “management”) may experience from its business activities and certain transactions it contemplates or has completed; and
|
|
o
|
statements of Regnum’s expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," "opines," or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause Regnum’s actual results to be materially different from any future results expressed or implied by Regnum in those statements. The most important facts that could prevent Regnum from achieving its stated goals include, but are not limited to, the following:
|
|
|
(a)
|
volatility or decline of Regnum’s stock price;
|
|
|
|
|
|
|
(b)
|
potential fluctuation of quarterly results;
|
|
|
|
|
|
|
(c)
|
failure of Regnum to earn revenues or profits;
|
|
|
|
|
|
|
(d)
|
inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans;
|
|
|
|
|
|
|
(e)
|
decline in demand for Regnum’s products and services;
|
|
|
|
|
|
|
(f)
|
rapid adverse changes in markets;
|
|
|
|
|
|
|
(g)
|
litigation with or legal claims and allegations by outside parties against Regnum, including but not limited to challenges to Regnum’s intellectual property rights;
|
|
|
|
|
|
|
(h)
|
insufficient revenues to cover operating costs;
|
There is no assurance that Regnum will be profitable, Regnum may not be able to successfully develop, manage or market its products and services, Regnum may not be able to attract or retain qualified executives and personnel, Regnum may not be able to obtain customers for its products or services, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in Regnum’s businesses.
Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Regnum cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that Regnum or persons acting on its behalf may issue. Regnum does not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.
Current Overview
We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:
|
|
1.
|
The last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,070,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,070,000) or more;
|
|
|
|
|
|
|
2.
|
The last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;
|
|
|
|
|
|
|
3.
|
The date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or
|
|
|
|
|
|
|
4.
|
The date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 46, Code of Federal Regulations, or any successor thereto.
|
As an emerging growth company, we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment and the effectiveness of the internal control structure and procedures for financial reporting.
As an emerging growth company, we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934, which require the shareholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
Regnum Corp. was organized on March 31, 2016 under the laws of the State of Nevada. We were formed for a primary business purpose of servicing the increasing demand for premium entertainment content and becoming a depository of unpublished intellectual properties for resale with focus on achieving profitability and sustaining business growth. Our business model is based on acquiring unproduced and unpublished quality intellectual properties at a discount from studios, agencies and production companies for subsequent recycling or production in wide variety of media with the intent to resell back to the entertainment community for a profit. Regnum believes such an approach gives the Company an advantage over bigger studios that are competing for fresh scripts from writers who are in demand.
Since its inception, Regnum has acquired three bundles of various scripts and manuscripts from an independent production company and a producer at a deep discount for a total amount of $2,300 total, 21 of which were recycled and subsequently optioned off/sold for a total of $44,800. We will continue to follow our business plan to service the increasing demand for premium entertainment content by acquiring unproduced and unpublished quality intellectual properties at a discount for subsequent recycling and reselling back to the entertainment community for a profit, and hope to realize revenue in the future, however, we can provide no guarantees that we will be successful.
Currently, Regnum has secured all the resources and skills needed to acquire, recycle and market our products by utilizing our sole officer and director’s skills and experience in the fields of advertising and marketing, as well as entertainment. It is anticipated that, as the Company grows and develops over the next twelve months, its management team will be expanded from its current one member to consist of additional members who have expertise in the film and television entertainment industry, as well as entrepreneurial experience. The main goal of the Company is to become a self-sustained and profitable operational entity with the aim of future business growth. To generate revenues, Regnum will strategize to implement a viable business model, select a target market, develop marketing and future growth strategies and address competition. It is essential for our success to take up an appropriate niche in the entertainment market and fill the unsatisfied demand.
The Company is quoted on the OTC Markets under the symbol “RGMP.”
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon 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 us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.
Certain of our accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require us to apply significant judgment in their application. As a result, these policies are subject to an inherent degree of uncertainty. In applying these policies, we use our judgment in making certain assumption and estimates. Our critical accounting policies are outlined in Note 1 in the Notes to the Financial Statements
Results of Operations for the Three Months Ended September 30, 2019 compared to the Three Months ended September 30, 2018.
We had $2,500 in revenues for the three months ended September 30, 2019 and $3,500 for the three months ended September 30, 2018. Our revenue change is a result of the normal timing of the completion of scripts, with less scripts completed in the third quarter of 2019 versus the third quarter of 2018. We anticipate a continued trend of intellectual properties sales revenue as we continue to acquire and recycle them for resale. Our operating expenses for the three months ended September 30, 2019 were $2,412, which consisted of amortization of intangible assets of $167, legal and professional fees of $1,500 and general and administrative expenses of $745. For the three months ended September 30, 2018, our operating expenses were $3,251 which consisted of amortization of intangible assets of $115, legal and professional fees of $1,000 and general and administrative expenses of $2,136. Our operating expenses are primarily due to normal business operations. Our net income for the three months ended September 30, 2019 was $88 Our net income for the three months ended September 30, 2018 was $147. The decrease in net income is primarily due to the decrease in sales.
Results of Operations for the Nine Months Ended September 30, 2019 compared to the Nine Months ended September 30, 2018.
We had $5,300 in revenues for the nine months ended September 30, 2019 and $17,000 for the nine months ended September 30, 2018. Our revenue change is a result of the normal timing of the completion of scripts, with less scripts completed in the nine-month period ended September 30, 2019 versus the nine-month period ended September 30, 2018. We anticipate a continued trend of intellectual properties sales revenue as we continue to acquire and recycle them for resale. Our operating expenses for the nine months ended September 30, 2019 were $36,244, which consisted of amortization of intangible assets of $281, legal and professional fees of $33,225 and general and administrative expenses of $2,738. For the nine months ended September 30, 2018, our operating expenses were $13,574 which consisted amortization of intangible assets of $486, legal and professional fees of $7,350 and general and administrative expenses of $5,738. Our operating expenses are primarily due to normal business operations and increased due to professional fees incurred in listing the Company’s stock. Our net income (loss) for the nine months ended September 30, 2019 was ($30,944). Our net income for the nine months ended September 30, 2018 was $2,190. The decrease in net income (loss) is primarily due to the decrease in sales of recycled intellectual properties and professional fees incurred in listing the Company’s stock.
Liquidity and Capital Resources
The Company's cash position was $13,322 at September 30, 2019, compared to $47,295 at December 31, 2018. As of September 30, 2019, the Company had current assets of $13,322 and current liabilities of $1,325 compared to $47,295 and $3,635, respectively, as of December 31, 2018. This resulted in a working capital of $11,997 at September 30, 2019 and $43,660 at December 31, 2018.
Net cash used in operating activities amounted to ($32,973) and $3,912 for the nine months ended September 30, 2019 and 2018, respectively. This is primarily due to a net income (loss) of ($30,944) and $2,190 respectively.
Net cash used in investing activities amounted to $1,000 and $800 for the nine months ended September 30, 2019 and 2018.
Net cash provided by financing activities amounted to $0 and $29,500 for the nine months ended September 30, 2019 and 2018, respectively.
The Company does not have sufficient capital to meet its current cash needs, which include the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended. The Company intends to seek additional capital through the resale of the acquired intellectual properties. Financing options may be available to the Company either via a private placement or through the public sale of stock. There is no assurance, however, that the available funds will be available or adequate. Its need for additional financing is likely to persist.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information we are required to disclose is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Commission. Tiffani Jones, our President and our Principal Accounting Officer, is responsible for establishing and maintaining our disclosure controls and procedures.
Under the supervision and with the participation of our management, including the President and Principal Accounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the President and Principal Accounting Officer has concluded that, as of September 30, 2019, these disclosure controls and procedures were not effective in ensuring that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our President and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
|
¨
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
|
|
¨
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
|
|
¨
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.
|
Changes in Internal Controls over Financial Reporting
There were no additional changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations over Internal Controls
Regnum’s management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Regnum have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Our disclosure controls and procedures are designed to provide reasonable assurance of that our reports will be accurate. Our President and Principal Accounting Officer concludes that our disclosure controls and procedures were effective at that reasonable assurance level, as of the end of the period covered by this Form 10-Q. Our future reports shall also indicate that our disclosure controls and procedures are designed for this reason and shall indicate the related conclusion by the President and Principal Accounting Officer as to their effectiveness.