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
SEPTEMBER 30, 2022 and DECEMBER 31, 2021
(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for the primary business purpose of servicing the demand for premium entertainment content and becoming a depository of unpublished intellectual properties for resale with focus on achieving profitability and sustaining business growth.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 April 7, 2021 acquisition of a super majority interest in the Company (as described in Note 7 below) by Phoenixus AG, a Swiss company (“Phoenixus”), the Company’s prior business model was abandoned.
Since April 2021, the Company’s business model is focused on developing and commercializing pharmaceutical therapeutics that treat rare and infectious diseases, specifically in populations that are neglected or face adherence challenges due to inconvenient dosing or delivery system, tolerability, or cost and accessibility of available therapeutic options. Under certain license and commercial agreements with CytoDyn, Inc. (“CytoDyn”) which were assigned to the Company in January 2022 (see Note 4 below), the Company’s primary asset is the commercial rights to leronlimab (also known as “PRO 140”) in all human immunodeficiency virus (“HIV”) indications within the United States. Leronlimab is the subject of a Biologics License Application (“BLA”) that was submitted by CytoDyn in part to the U.S. Food and Drug Administration (“FDA”) with an indication to treat Multi-Drug Resistant HIV infection ("MDR HIV"), with the potential for multiple additional therapeutic indications in HIV. On October 28, 2022, CytoDyn reported that it voluntarily withdrew its Leronlimab BLA submission for MDR HIV. CytoDyn reported that its decision to voluntarily withdraw the BLA was based on various factors, including system issues related to the quality of the data collection and monitoring of the pivotal clinical trials by the clinical research organization contracted to manage the trials. CytoDyn reported that it intends to continue studying leronlimab in other HIV-related indications, which the Company would, if approved by the FDA, have the right to commercialize in the United States. Additionally, the Company is also seeking to acquire or in-license other pharmaceutical products or product candidates, although no products have been identified to date.
On October 21, 2021, the Company submitted a Company Related Action Notification in accordance with Financial Industry Regulatory Authority (“FINRA”) Rule 6490 in connection with a proposed change of the Company’s name to “Rovida Therapeutics, Inc.,” the redomicile of the Company from Nevada to Delaware and a change in the Company’s ticker symbol (the “Corporate Actions”). The Corporate Actions were approved by the board of directors of the Company and by Phoenixus as the holder of majority of the outstanding shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”). The Company’s application for FINRA approval of the Corporate Actions was denied by FINRA’s Department of Market Operations due to Phoenixus’s former association with Martin Shkreli (“Shkreli") as disclosed in the Company’s 2021 Form 10-K. The Company appealed FINRA’s determination to a subcommittee of FINRA’s Uniform Practice Code Committee, and on July 28, 2022, the Company’s appeal was denied by such subcommittee. As a result, the Corporate Actions will not be implemented. However, the Company may revisit the Corporate Actions at such time as factual circumstances relating to Shkreli and Phoenixus merit.
Risks and Uncertainties
The Company is subject to certain risks common to other companies in the biotechnology industry including, but not limited to, the need to raise additional capital, FDA review and approval of the Company’s or its commercial partner’s products, market acceptance of the Company’s products, competition, healthcare reform, and compliance with government regulations. There is uncertainty as to whether the COVID-19 pandemic could disrupt the Company’s operations or impact government oversight or the regulatory review process. Currently, the Company is significantly dependent on its commercial agreements with CytoDyn, and the risk of this dependence was amplified by CytoDyn’s October 2022 decision to withdraw its BLA for MDR HIV.
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, 2021, contained in the Company’s annual report, as filed with the SEC on Form 10-K on April 15, 2022 (the “Form 10-K”). The December 31, 2021 balance sheet was derived from the audited financial statements of our 2021 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, 2021 financial statements included in our 2021 Form 10-K. The interim results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2022 or for any future periods.
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 September 30, 2022 and December 31, 2021. The Company had no potential dilutive issuances of shares of Common Stock during the quarter ended September 30, 2022.
Accounting Basis
The financial statements are prepared in accordance with U.S. GAAP. The Company has adopted a December 31 fiscal year-end.
Cash and Cash Equivalents
The Company considers cash and cash equivalents to include cash in banks and financial instruments which mature within six months of the date of purchase. The carrying amount of cash and cash equivalents approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Revenue Recognition
As of the date of this report, the Company has no revenue generating operations.
If and when revenue generation begins, the Company will perform the following five steps in accordance with FASB ASC 606, Revenue from Contracts with Customers: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies the performance obligation. Other factors that may affect revenue recognition such as potential rebates, chargebacks, discounts, distribution fees, allowances for patient assistance programs, etc. will be addressed when the Company begins to enter revenue generating agreements and appropriate U.S. GAAP concepts regarding them will be implemented and this policy will be expanded to describe additional considerations related to them.
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 nine months ended September 30, 2022 or the year ended December 31, 2021. 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 payables 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, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be recognized.
ASC 740 also classifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expenses. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. Through September 30, 2022, 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 these 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 September 30, 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
During the year ended December 31, 2021, in connection with the sale of a majority stake in the Company by Wookey Search Technologies Corporation (“Wookey”) to Phoenixus in April of 2021, and receipt by Wookey of the proceeds from the sale, Wookey Project Corp. and Wookey forgave the outstanding balances owed to them by the Company and the balance in Due to Related Party was eliminated with a corresponding amount recorded in Other Income for the forgiveness of debt. Vyera Pharmaceuticals, LLC (“Vyera”), has made payments between April of 2021 and the present and SevenScore Pharmaceuticals, LLC (“SevenScore”), each of which are subsidiaries Phoenixus, made payments from April of 2021 until June of 2022 on behalf of the Company, which have been recorded as accounts payable - related party.
On May 13, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SevenScore. On September 1, 2021, the Merger Agreement was terminated by mutual agreement of the Company and SevenScore. No fees or penalties were paid in connection with the termination of the Merger Agreement, and both parties provided releases of liability with respect to the termination of the Merger Agreement.
The Company is party to the following service agreements with Vyera (together, the “Shared Services Agreements”): (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, Regnum can receive and provide general and administrative support, and Regnum 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 September 30, 2022 and the year ended December 31, 2021, a total of $14,327 and $164,874, 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 $399,881 and $339,179 as of September 30, 2022 and December 31, 2021, respectively.
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 second and third quarters. 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.
There was no balance for Receivable from Related Party at December 31, 2021.
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 (see Note 9 below).
At September 30, 2022 and December 31, 2021, the balance of the 2021 Note, including accrued interest, was $1,544,137 and $1,510,479, respectively.
Other Commitments
On January 3, 2022, Regnum, CytoDyn, and SevenScore entered into an Assignment and Assumption Agreement (“Assignment”) of the Commercialization and License Agreement (the “License Agreement”) and a Supply Agreement (the “Supply Agreement”) executed between Vyera and CytoDyn on December 17, 2019. Through the Assignment, Regnum has the exclusive right to commercialize pharmaceutical preparations containing leronlimab (PRO 140) (the “Product”) for treatment of HIV in humans in the United States. In exchange for these agreements, SevenScore is entitled to receive 4,094,023 shares of Common Stock.
NOTE 5. INCOME TAXES
Income tax expense consists of the following:
| | September 30, | |
| | 2022 | | | 2021 | |
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:
| | September 30, | |
| | 2022 | | | 2021 | |
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 September 30, 2022, 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 October 7, 2022, the Company and Phonexius entered into Amendment No. 1 of the 2021 Note, extending the maturity date from October 7, 2022 to April 7, 2023. All other terms and conditions of the note remain in effect unchanged.
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.