Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report. These factors include:
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the need for additional funding;
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our lack of a significant operating history;
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the fact that our majority stockholder has significant control over our voting stock;
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the loss of key personnel or failure to attract, integrate and retain additional personnel;
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corporate governance risks;
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economic downturns;
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the level of competition in our industry and our ability to compete;
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our ability to respond to changes in our industry;
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our ability to protect our intellectual property and not infringe on others’ intellectual property;
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our ability to scale our business;
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our ability to maintain supplier relationships;
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our ability to obtain and retain customers;
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our ability to execute our business strategy in a very competitive environment;
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changes in laws and regulations;
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the market for our common stock;
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our ability to effectively manage our growth;
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dilution to existing stockholders;
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costs and expenses associated with being a public company;
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economic downturns both in the United States and globally;
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risk of increased regulation of our operations; and
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other risk factors included in, or incorporation by reference in, “Risk Factors” below.
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You should read the matters described and incorporated by reference in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information - Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on April 14, 2020 (the “Annual Report”).
Certain capitalized terms used below and not otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included in “Part I. Financial Statements – Item 1. Financial Statements”, in this Quarterly Report on Form 10-Q.
In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding the industries in which we operate in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.
Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “Regnum”, and “Regnum Corp.” refer specifically to Regnum Corp.
In addition, unless the context otherwise requires and for the purposes of this Report only:
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“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
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“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and
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“Securities Act” refers to the Securities Act of 1933, as amended.
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Where You Can Find Other Information
We file annual, quarterly, and current reports and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC like us at http://www.sec.gov. Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report. The Company is working on updating its website.
Current Overview
Regnum Corp. was organized on March 31, 2016 under the laws of the State of Nevada. We were formed for the primary business purpose of servicing the increasing demand for premium entertainment content and becoming a depository of unpublished intellectual properties for resale with a 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 a wide variety of media, with the intent to resell such works back to the entertainment community for a profit.
Recent Transactions and Changes of Control
On February 5, 2020, Ocean Ave Holdings, LLC (“Ocean”) which is owned and controlled by Ms. Tiffani Jones, the former sole director and officer of the Company, sold 20,000,000 shares of restricted common stock of the Company in consideration for $345,000, to Tri Capital Energy Corporation (“Tri Capital”), pursuant to an Agreement for the Purchase of Common Stock. The shares which were sold represented 87% of the Company’s then outstanding shares, which resulted in a change of control of the Company.
Tri Capital is controlled by Gary Allen and Mark Gustavson, its directors and its Chief Executive Officer and Chief Financial Officer, respectively.
Subsequently, on February 26, 2020, Tri Capital sold all 20,000,000 shares of the restricted common stock of the Company which it acquired pursuant to the February 5, 2020 Agreement for the Purchase of Common Stock, to Wookey Search Technologies Corporation (“Wookey”), pursuant to a Stock Purchase Agreement. Consideration for the acquisition of the shares was $50,000 in cash and a promissory note (secured by the 20 million shares of the Company purchased pursuant to the agreement) in the amount of $400,000. A $200,000 principal payment is due under the note on the earlier of (a) March 15, 2020; and (b) two business days after either the Company or Wookey has raised $1 million, subject to a thirty day extension as part of the first extension option discussed below (which amount has not been paid to date, but which due date has been mutually extended by the parties) and the note is due and payable on the earlier of April 1, 2020 (which date may be extended for up to two 30 day periods in the event an extension fee of $10,000 is paid for each extension) and two business days after either the Company or Wookey has raised $2 million. Subsequent to entering into the note, the parties mutually verbally agreed that Wookey would pay an extension fee of $20,000 to Tri Capital on or before April 6, 2020, in consideration for an extension of the due date of the note to May 1, 2020, which amount has not been paid to date. The note contains standard and customary events of default. Upon the occurrence of an event of default under the note, Tri Capital can exercise its rights under a pledge agreement entered into between Tri Capital and Wookey and re-take control and ownership of the 20 million shares of the Company, and therefore take back control of the Company.
Additionally, the parties entered into a Voting Agreement whereby Wookey provided voting control over the 20 million shares of Company common stock. Such Voting Agreement terminates automatically upon the payment in full of the $400,000 promissory note. As such, Tri Capital continues to exercise voting control over the Company. Additionally, Mark Gustavson, the 46% owner of Tri Capital provided Mr. Allen a voting agreement to vote his ownership in Tri Capital until such time as the $400,000 promissory note has been fully paid.
Wookey is controlled by Mark Gustavson, its Chief Executive Officer, director and holder of approximately 53% of its outstanding voting securities.
On February 12, 2020, Ms. Tiffani Jones, the former sole director and officer of the Company, who resigned from such positions as described below, entered into a Consulting Agreement with the Company (the “Consulting Agreement”), whereby Ms. Jones agreed to perform consulting services on a part-time basis for thirty days (beginning February 12, 2020) for $3,750, plus the reimbursement of certain travel expenses. The agreement can be extended for up to two additional thirty-day periods for $3,750 each with the mutual consent of the parties. The agreement can be terminated by the Company at any time. The agreement contains customary confidentiality, liability limitation and similar provisions. The agreement expired on March 13, 2020.
On February 27, 2020, Ms. Jones took action to increase the number of the Company’s directors from one to three pursuant to Section 2.03 of the Company’s bylaws. After taking action to increase the number of the Company’s board of directors (the “Board”), Ms. Jones appointed Gary Allen and Mark Gustavson to the Board, pursuant to the power provided to her as the then sole director pursuant to the Company’s bylaws. Following the increase in the number of the directors and the appointments of Mr. Allen and Mr. Gustavson, Ms. Jones resigned as a director of the Company. Her resignation was not the result of a disagreement with the Company.
Also on February 27, 2020, Ms. Jones resigned as the Company’s Chief Executive Officer, President, Treasurer, and Secretary and Mark Gustavson was appointed to serve as the Company’s Chief Executive Officer and Secretary, and Robert J. Stubblefield was appointed to serve as the Company’s Chief Financial Officer and Treasurer to fill the vacancies resulting from Ms. Jones resignation. Her resignation was not the result of a disagreement with the Company.
Mr. Allen is the Chief Executive Officer and director of Tri Capital. Mr. Gustavson is the Chief Financial Officer and director of Tri Capital and the sole director and Chief Executive Officer of Wookey. Mr. Gustavson holds 3,750,000 shares or approximately 46% of the outstanding shares of common stock of Tri Capital and 12 million shares, or approximately 53% of the outstanding common stock of Wookey. Tri Capital holds 600,000 shares, or approximately 2% of the outstanding common stock of Wookey.
On March 29, 2020, Mr. Ross Meador was appointed as the Vice President and General Counsel of the Company. Mr. Meador holds 750,000 shares or approximately 3% of the outstanding common stock of Wookey and serves as the Vice President and General Counsel of Wookey.
Effective on March 27, 2020, Mr. Allen resigned as a member of the Board of Directors of the Company, leaving Mr. Gustavson as the sole member of the Board of Directors.
On March 27, 2020, the Company agreed to issue 1 million shares of restricted common stock to Gary Allen (who served as a member of the Board of Directors of the Company from February 27, 2020 to March 27, 2020) in consideration for services rendered by Mr. Allen to the Company.
Plan of Operations
Since inception, we have acquired three bundles of various scripts and manuscripts from an independent production company and a producer at a deep discount for a total of $2,300, 21 of which were recycled and subsequently optioned off/sold for a total of $44,800.
We had no cash, no current assets and no liabilities as of March 31, 2020. We will need to raise additional funding in order to continue our operations and to pay the costs associated with being a public company, for the next 12 months, which funding may not be available on favorable terms, if at all.
The Company anticipates that in the near future, it will continue pursuing its business of procuring unproduced and unpublished quality intellectual properties at a discount from independent writers, filmmakers, studios, agencies and production companies for subsequent reworking and/or production in a wide variety of media with intent to resell back to the entertainment community for profit.
Separately, as discussed above, on February 26, 2020, Wookey acquired 20,000,000 shares of the restricted common stock of the Company, which represented 87% of the Company’s outstanding shares and resulted in a change of control of the Company. Wookey, through its wholly-owned subsidiary Wookey Project Corp, is engaged in the operation of a virtual reality platform known as Sansar, which is focused on hosting live musical performances online using virtual reality technology. The Company anticipates that it will enter into a transaction with Wookey in the future, the result of which will be that the business of the Company will change to that of Wookey, provided that no definitive agreements or understandings have been entered into or agreed to, to date. Whether or not a transaction with Wookey closes, the Company intends to pursue the acquisition and development of intellectual properties in a wide variety of media.
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 assumptions and estimates. Our critical accounting policies are outlined in Note 1 to the notes to the unaudited condensed financial statements included herein.
Results of Operations for the Three Months Ended March 31, 2020 compared to the Three Months ended March 31, 2019.
We had no revenues for the three months ended March 31, 2020, and $1,800 of revenues for the three months ended March 31, 2019. The decrease in revenue was primarily the result of a change in management and control of the Company, as discussed above, accompanied by less focus on sales activities during the first quarter of 2020. We hope to continue to generate revenue in the future relating to intellectual property sales as we continue to acquire and recycle IP for resale.
Our operating expenses for the three months ended March 31, 2020 were $67,044, compared to $25,410 for the comparable period of 2019. Our 2020 operating expenses consisted of general and administrative expenses of $60,167 and legal and professional expenses of $6,877. The legal and professional expenses consisted of a $6,877 payment made to the Company’s former officer and director for consulting services, and the general and administrative expenses included 1,000,000 shares of common stock (valued at $59,600) which were issued as payment for services rendered to our former director as discussed above.
For the three months ended March 31, 2019, our operating expenses were $25,410, which consisted of amortization of intangible assets of $57, legal and professional fees of $24,621 and general and administrative expenses of $732.
We had a net loss for the three months ended March 31, 2020 of $67,044, compared to a net loss of $23,610 for the three months ended March 31, 2019. The increase in net loss is primarily due to the increase in operating expenses associated with the shares of common stock issued to a former board member during the current period.
Liquidity and Capital Resources
The Company had no cash or current assets as of March 31, 2020, compared to $7,444 of cash as of December 31, 2019. As of March 31, 2020, the Company had total assets of $1,036 and total liabilities of $-0-, compared to $8,480 and $-0-, respectively, as of December 31, 2019. This resulted in no working capital at March 31, 2020 and $7,444 of working capital at December 31, 2019.
Net cash used in operating activities amounted to $7,444 and $26,962 for the three months ended March 31, 2020 and 2019, respectively. This is primarily due to a net loss of $67,044 and $23,610, respectively for such periods.
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 Exchange Act. 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. The need for additional financing is likely to persist.
Additionally, as discussed above, the Company anticipates that it will enter into a transaction with Wookey in the future, the result of which will be that the business of the Company will change to that of Wookey, provided that no definitive agreements or understandings have been entered into or agreed to, to date. Whether or not a transaction with Wookey closes, the Company intends to pursue the acquisition and development of intellectual properties in a wide variety of media.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.