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EX-32.1 - CEO CERTIFICATION - Monarchy Resources, Inc.ex321_ceocert.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

    

For the fiscal year ended October 31, 2013

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____                           COMMISSION FILE NUMBER 333-172825

 

MONARCHY RESOURCES, INC.

 (Exact name of registrant as specified in its charter)

 

     
NEVADA   46-0525633
State or other jurisdiction of incorporation or organization   (I.R.S. Employer Identification No.)
     

 

Calle urique número 5,

Colonia Fuentes de Bellavista, c.p. 33880

Hidalgo del Parral, Chihuahua, Mexico

 

   
(Address of principal executive offices)   (Zip Code)
     
Registrant's telephone number, including area code   (702) 722-1003
     
     
Securities registered pursuant to Section 12(b) of the Act:     NONE.
Securities registered pursuant to Section 12(g) of the Act:   Common Stock, $0.001 Par Value Per Share.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.  [  ] Yes   [X] No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  [  ] Yes   [X] No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. [X]  Yes    [  ] No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

   
Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:  $5,051,200 as of April 30, 2013, at a price of $0.08 per share.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  As of February 13, 2014, the Registrant had 66,140,000 shares of common stock outstanding.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MONARCHY RESOURCES, INC.

 

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED OCTOBER 31, 2013

 

Contents

 

PART I   2
ITEM 1. BUSINESS OVERVIEW   2
ITEM 1A. RISK FACTORS   4
ITEM 2. PROPERTIES   7
ITEM 3. LEGAL PROCEEDINGS   13
ITEM 4. MINE SAFETY DISCLOSURES   13
PART II   14
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES   14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS   14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.   20
ITEM 9A. CONTROLS AND PROCEDURES   20
ITEM 9B. OTHER INFORMATION   21
PART III   22
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   22
ITEM 11. EXECUTIVE COMPENSATION   24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   25
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS’ INDEPENDENCE   30
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES   30
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES   31
ITEM 16. SIGNATURES   44
     

 

 

PART I

In this Form 10-K, “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Form 10-K, including statements regarding our future financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “might,” “objective,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described under the section titled “Risk Factors” and elsewhere in this Form 10-K, regarding, among other things:

 

     
  our initial attempt at exploring a mineral claim which might not have any reserves thereon;
     
  our ability to successfully identify any future mineral properties of merit;
     
  our ability to attract personnel who have experience in the mining industry;
     
  our ability to complete in the mining industry with both big and small mining companies;
     
  our ability to raise additional capital to finance our exploration programs; and
     
  our ability to manage our future growth.

 

These risks are not exhaustive. Other sections of this Form 10-K may include additional factors that could adversely impact our business and financial performance. These statements reflect our current views with respect to future events and are based on assumptions and subject to risk and uncertainties. Moreover, we operate in a very competitive and rapidly-changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-K to conform these statements to actual results or to changes in our expectations.

 

As used in this Annual Report, the terms “we,” “us,” “our,” “Monarchy,” and the “Company” mean Monarchy Resources, Inc., unless otherwise indicated.  All dollar amounts in this Annual Report are expressed in U.S. dollars, unless otherwise indicated.

 

ITEM 1. BUSINESS OVERVIEW

 

Our principal office is located at Calle urique número 5, Colonia Fuentes de Bellavista, c.p. 33880 Hidalgo del Parral, Chihuahua, Mexico and our telephone number is (702) 722-1003.

 

 

We were incorporated in the State of Nevada on June 16, 2010 under the name “Monarchy Resources, Inc.   in order to seek out and acquire mineral properties. With strong gold prices at the present time they were interested in acquiring a property whereby gold might be discovered on it in sufficient quantities to warrant a production decision being made in the future.

 

We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups Act.

 

We shall continue to be deemed an emerging growth company until the earliest of:

 

(A) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (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 1,000,000) or more;

 

(B) 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 registration statement under this title;

 

(C) 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

 

(D) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, 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 on the effectiveness of the internal control structure and procedures for financial reporting.

 

As an emerging growth company we are exempt from Section 14A and B of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.

 

We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act.

 

Prior to incorporation on June 16, 2010, we entered into an assignment agreement with Rodelio Mining Ltd., an unrelated third party company, to acquire La Carlota for the sum of $5,000.  At the time of entering into the assignment agreement, our previous President, Guilfred Casimiro, believed that the Company had already been incorporated on the laws of the State of Nevada.  As a result, the assignment agreement constitutes a “pre-incorporation contract” and was subsequently ratified, including all other prior acts and actions, by our board of directors.

 

Subsequent to incorporation, our two directors and officers purchased “seed stock” in the Company and engaged a consulting geologist, Angela Ventura, to prepare a geological report on the La Carlota Property.  Mr. Ventura’s geological report dated June 28, 2010 recommends a two phase program which is set out in detail in the section below titled “Properties”.  We do not have an ore body on La Carlota and the chances of us ever having an ore body are remote.

 

On May 14, 2013, the Company entered into a Share Purchase Agreement (the “SPA”) with the owners of New World Metals S.A.P.I. de C.V. (“New World”) Under the terms of the SPA, the Company issued 10,000,000 shares of the Company’s common stock to the owners of New World in exchange for 28% of the issued and outstanding shares of New World. New World is a mining operator in the Chihuahua region of Mexico which owns three working mines; Morelos, La Luna, and Peneto. The shares of the Company were valued at $.285, which was the price of the shares sold to a third party under a stock subscription agreement in May 2013. The Company is accounting for this investment using the equity method.

 

 

 

On July 4, 2013, the Company entered into an agreement to increase its ownership in New World by 17%, to 45%, by issuing 5,000,000 shares and agreeing to pay $750,000 to three separate owners of New World. The shares of the Company were valued at $.285, which was the price of the shares sold to a third party under a stock subscription agreement in May 2013. The Company is accounting for this investment using the equity method. The Company’s share of the losses of New World for the period ended October 31, 2013 was $65,167.

 

On October 31, 2013, the Company assessed its investment in New World and the related loan receivable it had with New World. As the Company could not project any future cash flows from New World, it determined the investment and loan receivable were impaired. Therefore, the Company recorded an impairment loss on the investment of $4,959,833 and an impairment loss on the loan receivable of $60,000.

 

Our company is considered an exploration company. It has spent sufficient funds on the three working mines; Morelos, La Luna, and Peneto since its acquisition. It has not yet undertaken sufficient exploration work on our mineral claim, La Carlota.  Three of our claims are located in Mexico, our other claim, La Carlota, is located in the Philippines.   We are currently mining the Mexican Claims and hope that the mining becomes profitable, we are also hopeful that our future exploration programs on the La Carlota claim will identify mineralization which eventually can be put into commercial production.  It must be borne in mind that very few mineral claims explored are ever able to go into commercial production.   This might be the case with La Carlota.   Nevertheless, we would like to be able to generate revenue from La Carlota by selling the mineral we locate on the claim.

 

ITEM 1A. RISK FACTORS.

 

 Investing in our common stock involves a high degree of risk. Before you invest in our common stock, you should be aware that our business faces numerous financial and market risks, including those described below, as well as general economic and business risks. The following discussion provides information concerning the material risks and uncertainties that we have identified and believe may adversely affect our business, financial condition and results of operations. Before you decide whether to invest in our common stock, you should carefully consider these risks and uncertainties, together with all of the other information included in this Form 10-K.

 

Risks Associated with our Company and our Industry

 

We are governed by only one person, Jose Perez, which may lead to faulty corporate governance.

 

We have one directors and one executive officers who make all the decisions regarding corporate governance.  This includes their (executive) compensation, accounting overview, related party transactions and so on.  They will also have full control over matters that require Board of Directors approval. This may introduce conflicts of interest and prevent the segregation of executive duties from those that require Board of Directors’ approval.  This may lead to ineffective disclosure and accounting controls.  Non-compliance with laws and regulations may result in fines and penalties.  They would have the ability to take any action as they themselves review them and approve them.  They would exercise control over all matters requiring shareholder approval including significant corporate transactions.  We have not implemented various corporate governance measures nor have we adopted any independent committees as we presently do not have any independent directors.  

 

Our directors and officers are not residents of the United States making the enforcement of liabilities against them difficult.

 

Our director and executive officer resides outside the United States.  If a shareholder had a desire to sue them for damages, the shareholder would have to serve a summons and complaint.  Even if personal service is accomplished and a judgment is entered against our directors in the United States, the shareholder would then have to locate the assets of our directors, and register the judgment in Mexico where the assets are located.

 

Our executive officers have other business interests which may limit the amount of time they can devote to our Company and create conflicts of interest.

 

 

 

Our executive officers have other business interests in that Jose Perez, our President, is unable to work full time for our Company.  This might eventually led to business failure.  He plans to devote only 40 hours per month at this time to our affairs which may lead to sporadic exploration activities and periodic interruptions of business operations.  Unforeseen events may cause this amount of time to become even less.  Our officer may also have conflicts of interest as a result of these relationships with the companies they currently work for.

 

We must attract and maintain key personnel or our business will fail.

 

Success depends on the acquisition of key personnel.  We will have to compete with other companies both within and outside the mining industry to recruit and retain competent employees.  If we cannot maintain qualified employees to meet the needs of our anticipated growth, this could have a material adverse effect on our business and financial condition.

 

We are recently incorporated, have a lack an operating history and have yet to make any revenues.  If we cannot generate any profits, you may lose your entire investment.

 

We are a recently incorporated company and have yet to generate any revenues. No profits have been made to date and if we fail to make any then we may fail as a business and an investment in our common stock will be worth nothing.  We have no operating history and thus no way for you to measure progress or potential future success.  Success has yet to be proved. Currently, there are no operations in place to produce revenue.  We are pre-exploration and have yet to find or produce sellable product. Financial losses should be expected to continue in the near future and at least until such time that we enter the production stage.  As a new business we face all the risks of a ‘start-up’ venture including unforeseen costs, expenses, problems, and management limitations and difficulties.   There is no guarantee, unfortunately, that we may ever be able to turn a profit or locate additional opportunities, hire additional management and other personnel.  

 

We need to acquire additional financing or our company will fail.

 

We must obtain additional capital or our business will fail. In order to explore the claim and eventually establish operations, we must secure more funds. Currently, we have very limited resources and have already accumulated a net loss. Without operations, we will make no money which may result in complete loss of your investment.  Financing is also needed to bring product to market.  Financing may be subject to numerous factors including investor sentiment, acceptance of mining claims and so on.  We are committed to raising $750,000 to fund the Mexican operations.  We may also have to borrow large sums of money that require substantial capital and interest payments. We also must perform mineral explorations on La Carlota Gold Claim to determine if any ore reserves are present.

 

The probability of a mineral claim having profitable reserves is very rare and our claim, even with large investments, may never generate a profit.

 

We are dependent upon our mining property for success.  All anticipated future revenues would come directly from our three small Mexican mines and our Philippine claim, La Carlota.  Should we fail to extract and sell gold from this property, our business will fail.  Mineral deposit estimates are imprecise and subject to error, and resource calculations when made may prove unreliable.  Assumptions made regarding the supporting data may prove inaccurate and unforeseen events may lead to further inaccuracies.  Sample variability, mining and processing adjustments, environmental changes, metal price fluctuations, and law and regulation changes are all factors that could lead to deviances from the original estimations. No assurances can be given that any mineral deposit estimate will ever be reclassified as a reserve.  We have no known ore reserves.  Despite future investment in exploration activities, there is no guarantee we will locate a commercially viable ore reserve.  Most exploration projects do no result in discovery of commercially mineable deposits. With little capital available, we will have to limit our exploration which decreases the chances of finding a commercially viable ore body. Even if gold/and or silver is identified, La Carlota may not be put into production due to high extraction costs, low gold prices, or inadequate amount and reduced recovery rates.  If the exploration activities do not suggest a commercially successful prospect then we may altogether abandon plans to develop the property.

 

 

 

The exploration and prospecting of minerals is speculative and extremely competitive which may make success difficult.

 

We face strong competition from other mining companies for the acquisition of new properties.  New properties increase the probability of discovering a profitable reserve.  Most companies have greater financial and managerial resources than we do and can acquire and explore attractive new mining properties.  We will face similar difficulties raising new capital to expand operations against the larger, better capitalized competitors. Limited supply and unforeseen demand from larger, more competitive companies may make secure all necessary equipment and materials difficult and may result in periodic interruptions or even business failure. Success depends on a combination of many factors including but not limited to: the quality of management, technical (geological) expertise, quality of land available for exploration and the capital available for exploration.

 

International operations in Mexico and the Philippines are subject to inherent risks.

 

Political instability, uncertainty of the economic climate, currency fluctuations, exchange controls and taxation laws may be significant in our business dealing in Mexico and the Philippines. Access to all of the equipment, supplies and materials necessary to begin exploration may not be available and may delay our exploration activities in the Philippines.  We have not yet attempted to locate or negotiate with any suppliers of products, equipment or materials but plan to do so when exploration begins.  Exchange rate changes between the Mexican and Philippine currencies and the U.S. Dollar may also adversely affect our successful operations.

 

Our future operations may be adversely affected by future governmental and environmental regulations and permitting.

 

Environmental regulations may negatively affect the progression of operations and these regulations may become stricter in the future. In Mexico and in the Philippines, all mining is regulated by Federal and State/Provincial level government agencies. Obtaining licenses and permits from these agencies as well as an environmental impact study for each mining property must be completed before starting mining activities. These are expensive and affect the timing of operations.  Pollution can be anticipated with mining activities.  If we are unable to comply with current or future regulations, this may expose us to fines, penalties and litigation that could cause our business to fail.

 

We are vulnerable to the change of the world gold supply, demand and prices.

 

Gold prices change on a world market beyond our control.  A drop in price would adversely affect our ability to generate a profit.  All our revenues would be derived from the sale of gold and possibly other precious metals.  Changes in the price of gold thus may affect profitability and impede us from being able to afford to continue operations.  Gold prices historically have fluctuated widely; price tends to be linked to a number of factors beyond our control such as: various macroeconomic factors (terrorism, political and regional events that may include such, confidence in the global monetary system, rate of inflation expectations, interest rates, US dollar and certain other currency strength); speculative or hedging activities; forward sales by producers, speculators and other holders; central bank lending; sales and purchases of gold; industrial and jewelry demand; and the current supply and demand.  These things are impossible for us to predict.  Per ounce, gold has been $384 (1995), $279 (2000), $420 (2005), $1,120 (2010), $1,834 (2011), $1,755 (2012), $1,200 (2013) London PM Fix Price for instance. This volatility may favor operations now but should the price drop unexpectedly some or all exploration activities may become economically unfeasible in the future.

 

We are subject to inherent mining hazards and risks that may result in future financial obligations.

 

Risks and hazards associated with the mining industry may adversely affect our operations such as, but not limited to,: political and country risks, industrial accidents, labor disputes, inability to retain necessary personnel or equipment, environmental hazards, unexpected geologic formations, cave-ins, landslides, flooding and monsoons, fires, explosions, power outages, processing problems.  Personal injury and death could result as well as property damage, delays in mining, environmental damage, legal liability and monetary loss.  We may not be able to obtain insurance to cover these risks at economically reasonable premiums.  We do not carry any sort of insurance and may have difficulties obtaining such once operations start as insurance is generally sparse and cost prohibitive.

 

 

 

Risks related to our stock

 

We may not be able to raise additional capital through future offers of our shares but in doing so will dilute the shares presently issued and outstanding.

 

Raising additional capital through future offerings of common stock may be necessary for our company to continue going, but there is no guarantee that this will be possible.  Doing so will, however, dilute percentage of our Company’s shares presently held by our shareholders. Financing may be achieved by issuing more shares which will increase the number of common shares outstanding.  This will decrease the percentage interest held by each of our shareholders.  As the total number of outstanding common shares increases, the equity attached to any individual share will decrease causing a dilution of shareholders’ ownership over the company.  With little other access to funds currently, we may have to rely on this method substantially to raise additional capital.  

 

There is no market for our common stock meaning that you may not be able to resell your shares.

 

Our common stock currently has no market limiting our future shareholders’ ability to resell their shares or use them as collateral. Thus, a shareholder must sell their shares privately which may prove very difficult.  The shares are not currently listed on any exchange or quotation system.  Private sales are more difficult and often give lower than anticipated prices.

 

Should a public market develop for our stock, future sales of shares may negatively affect their market price.

 

Even if a market develops, the shares may be sparsely traded and have wide share price fluctuations.  If we succeed in receiving a quotation, the liquidity of the stock may be low despite there being a market making it difficult to get a return on the investment.  In addition the price also depends on potential investor’s feelings regarding the results of our operations, the competition of other companies’ shares, mineral prices, our ability to generate future revenues, and market perception about future mineral exploration.

 

Because our stock is a “penny stock”, trading of it may be restricted and limit a shareholder’s ability to buy and sell shares.

 

As our stock is a penny stock, there are restrictions imposed by the United States Securities and Exchange Commission’s (“SEC”) penny stock regulations and the FINRA’s sales practice requirements.  This might limit a shareholder’s ability to buy and sell their shares as broker-dealers may be less likely to engage in transactions of our common shares.  A penny stock generally includes any non-NASDAQ equity security that has a market price of less than $5.00 per share.  Our common stock is expected to trade well below that mark.  Rules 15g-1 through 15g-9 under the Exchange Act impose sale practice and disclosure requirements on certain brokers-dealers who engage in certain transactions involving a “penny stock”.

 

We have not paid nor anticipate paying cash dividends on our common stock.

 

Cash dividends are not currently paid on our common stock shares nor are they expected to be paid in the near future.  We intend to retain our cash for the continued development of our business.  Thus, you will not be able to derive any dividend income and your return on investment will solely be based on your ability to sell your shares in a secondary market.

 

ITEM 2.

 

PROPERTIES.

 

1.Mexico:

 

In Mexico, we have interests in three mineral claims through New World Metals SAPI. New World owns three working mines; Morelos, La Luna, and Peneto located in Chihuahua, Mexico. The Company is a 45% shareholder in New World.

 

 

Morelos Mine:

 

In 2013, major repairs and upgrades have been carried out to the mining structure at the Morelos Mine. Current assays at this new level show 1 gram of Gold and 200 grams of Silver per ton. The Morelos mine is 21 hectares and has gold and silver as its main minerals with assays averaging 2 grams of gold and 600 grams of silver per ton. Currently there is a stockpile of 4,500 tons of ore ready to process. Production is currently 30 tons per day. The Morelos mine has over 1,000,000 tons of proven and probable resources and an additional 550,000 tons of inferred resources.

 

Additional Mine details:

Name of Property Morelos
Location Inde, Durango; Mexico
Description / History This mine was in full production in the 1950′s. During the 1970′s it produced high grade mineral (15 kgs. of forth level Silver)
Acreage 21 Hectares
Minerals Types Gold & Silver
Stock Pile Size 6,000 tons
How many Assays Multiple
Avg. Assay Results 600 Gr Silver 2 Gr Gold per ton
Processing tons 40 Tons per day. New World Forecast to 100 Tons per day

 

La Luna Mine

 

In 2013 the La Luna Mine has been pumped free of water to the lower levels, and the shaft has been lowered an additional 7 meters. Most recent assays at these levels show 1.5 grams of Gold and 600 grams of Silver. The La Luna mine is 30 hectares and has gold and silver as its main minerals with assays averaging 2.5 grams of gold and 600 grams of silver per ton. Currently there is a stockpile of 3000 tons of ore ready to process. Production is currently 25 tons per day. The La Luna mine has just over 300,000 tons of indicated resources and an additional 413,480 tons of inferred resources.

 

Additional Mine details:

 

Name of Property La Luna
Location Matamoros, Chihuahua
Description / History This mine was in operation in the 1970′s, but only the north zone was mined and only to the third level.
Acreage 30 hectares

 

 

Minerals Types Gold and Silver
Stock Pile Size 2,500 tons
How many Assays Multiple
Avg. Assay Results 600 Grams Silver; 2.5 Grams Gold. The main vein shows 13 kilos Silver and 25 Grams Gold
Processing tons per day 30 Tons per day
Is the mine producing In production. A forth level is being developed to increase production to 100 tons per day.

 

Peneto Mine

 

The Peneto mine has gold and silver as its main minerals with assays averaging 11 grams of gold and 170 grams of silver per ton. Currently there is a stockpile of 500 tons of ore ready to process. Production will start at 15 to 20 tons a day. The Peneto mine has 160,000 tons of indicated resources and an additional 138,000 tons of inferred resources. In 2013, at the Peneto Mine, the shaft was deepened an additional 8 meters, and assays have been ordered on these recent samples.

 

Additional Mine details:

Name of Property Peneto
Location Santa Barbara, Chihuahua
Description / History Mine in production since 1990, but only explored to the forth level
Minerals Types Gold & Silver
Stock Pile Size 500 Tons
Avg Assay Results 11 Grams Gold, 170 Grams Silver
Processing tons per day 15 Tons per day

 

During the 6 months ended October 31, 2013, New World has spent $141,641 on exploration activities. Our share of this loss was $54,989 which has been recorded in the records as an equity loss in the investment in New World.

 

In the Philippines we have a single mineral claim, La Carlota. The title indicates that the Company owns the property outright.

  

2.Philippines

 

The La Carlota Gold Claim was acquired on June 30, 2010. The Company has a Gold Claim on a 97.3 Hectare area. can be identified in the Philippines by the following information:

 

Property Name:  La Carlota Gold Mine
Certificate Number:  PCLC1028858
Title Number:  CA188042
Registration Received:  June 11, 2010; Entered on June 14, 2010
Title Granted On:  June 30, 2010
Parcel Identifier:  058-735-651
8 Unit Claim Block:  97.3 Hectares

 

 

 

Our mining geologist, Angelo Ventura, recommended a two phase exploration program of this property but as of the date of this Form 10-K work has been undertaken on the La Carlota.

 

The Budget

       

 

Phase I  (Completed)

 

Philippine

Currency

 

United States

Currency

       
Geological mapping including air photo   315,268   $7,198 
Geophysical surveying   291,500    6,655 
           
Total Phase I   606,768    13,853 

 

Phase II

          
           
Geochemical surveying with surface mapping including grab and soil samples   1,192,961    27,237 
           
Total Phases I and II   1,799,729   $41,090 

 

The above conversion rate has been done at PHP 43.8 to US $1.00. (July 11. 2011 rate at PHP 42.62 to US $1.00)

 

Phase I was commenced in July 2011 and the report issued by Jonathan Malig was dated December 13, 2011.

 

Exploration Results from Phase I

 

The Company undertook Phase I exploration program during the fall of 2011 engaging the services of Jonathan Malig, Professional Geologist, who was available to complete the work for the Company.  In his report entitled “Independent Geological Mapping of the La Carlota Property” he indicated the Company “commenced grass root exploration and geological mapping of the La Carlota Gold Claim.  Since the initial discovery, the Company has escalated activity and sampling program, including some 1.1 km of manual costean sampling.   Gold, silver and base metal mineralization occurs in anastomosing quartz + pyrite + sulphide veins within intensely fractured then silicified east-west trending sub vertical structures, and in sheeted quartz + pyrite + base metal veins parallel to schistosity. Results to-date indicates background gold mineralization up to 0.5g/t Au, with grade consistently increasing in the vicinity of these sub vertical structure zones. Works completed so far have outlined mineralization within an envelope approximately 1.5 km long x 0.6 km wide.

 

The mineralized zone remains open in all directions. Initial geological observation suggests that mineralization exists north and east of the identified mineralization window, and additional sampling in the expanded area is underway. In addition to geochemical sampling, first-pass ground magnetic surveys have been conducted on the La Carlota prospect concurrently with the costean sampling program. Seven north-south lines were completed totaling approximately 7 line kilometers across the La Carlota target area.  The initial interpretation of the total magnetic intensity (TMI) signature suggests three main interest areas being;

 

1. a zone of magnetic high covering the northern portion of the survey area. This area is yet to be tested and is considered highly prospective;

 

2. a northeast-southwest trending zone of magnetic low occupying the southern portion, coinciding with the La Carlota Gold prospect area defined to date;

 

3. a circular magnetic high south of La Carlota prospect.

 

The TMI results strongly correlate with surface geological and geochemical observations to date further supporting the interpreted broad scale epithermal gold, base metal system and potential for a porphyry style system within the area.

 

 

The circular magnetic high immediately south of La Carlota Prospect (marked SN 15149 on the magnetic intensity diagram above) has returned coincidental elevated, gold, silver, copper, and zinc from rock chip outcrop samples. Further work is underway to advance definition of the mineralization. Initial rock-chip sample assays include:

 

·36.7 g/t Au, 22.4 g/t Ag, 3.04 % Cu & 10.1 % Zn in outcrop sample 15152
·19.1 g/t Au, 19.7 g/t Ag, 3.92 % Cu & 1.95 % Zn in outcrop sample 15150
·11.9 g/t Au, 15 g/t Ag, 1.3 % Cu & 9.75 % Zn in outcrop sample 15149
·3.75 g/t Au, 8 g/t Ag, 0.84 % Cu & 4.07 % Zn in outcrop sample 15151

 

Further gold results from La Carlota

 

Highlights:

 

1.Multiple intersections of broad mineralization identified in costean samples up to 34m @ 3.29 g/t Au, 39.17 g/t Ag.

 

2.Numerous meter scale interval samples above 10 g/t au, with best results of 1m @ 70 g/t Au, 22.5 g/t Ag

 

3.New high grade copper zone identified with best outcrop rock chip samples of 36.7 g/t Au, 22.4 g/t Ag, 3.04 % Cu & 10.1 % Zn, and 19.1 g/t Au, 19.7 g/t Ag, 3.92 % Cu & 1.95 % Zn

 

Monarchy Resources is undertaking intense costean and grid based soil sampling programs in the area. Latest results received include broad zones of gold and silver mineralization, with intervals of very high grade ore.

 

Best continuous costean sample results include:

 

·34m @ 3.29 g/t Au, 39.17 g/t Ag from costean KSTC 30, including 8m @ 6.39 g/t Au & 57.24 g/t Ag  6m @ 4.86 g/t Au &84.83 g/t Ag
·21m @ 2.17 g/t Au, 4.34 Ag from costean KSTC37, including  4m @ 5.11 g/t Au, 2.95 g/t Ag
·7m @ 3.04 g/t Au, 2.54g/t Ag from costean KSTC 25
·11m @ 2.45 g/t Au, 8.92 g/t Ag from costean KSTC 42, including 3m @ 7.8 g/t Au, 23.37 g/t Ag
·12m @ 2.75 g/t Au, 4.8 g/t Ag from costean KSTC 42, including 3m @ 7.53 g/t Au, 12.73 g/t Ag
·7m @ 2.17 g/t Au, 18.72 g/t Ag from costean KSTC 36
·7m @ 2.43 g/t Au, 0.67 g/t Ag from costean KSTC 38

 

Additional bonanza high-grade veins existed within the broader zones and include:

 

·1m @ 70 g/t Au, 22.5 g/t Ag from costean KSTC 33
·1m @ 54 g/t Au, 66.1 g/t Ag from costean KSTC 29

 

RECOMMENDATION & CONCLUSION

 

Based on the results of the exploration and the geological mapping done to date, an extensive diamond drilling program is recommended as it is clearly evident that significant mineralization exists on the property.

 

The soil sampling results (which are shown below) also suggest that an extensive diamond drilling program is merited and that significant mineralization exists on the property.

 

The soil sampling, highlights are as follows: 

·3,5km soil anomaly co-incident with hard rock artisanal gold working
·Four prospects defined, with three currently being explored
·Granite-hosted quartz vein and stock work deposit
·Visible gold identified in 25 holes
·Artisanal workings define a 16km-long mineralised corridor

 

·Systematic soil and stream sampling over majority of license completed
·IP resistivity / radiometric survey completed
·12 trenches complete

 

Monarchy’s Main Product

 

Since our investment in New World in May 2013, Monarchy has put its exploration in La Carlota on hold. Through its investment in New World, the Company is extracting ore and continuing to assay its raw ore.

 

Exploration Facilities

 

In Mexico, the Company has plans to process its raw ore on site and is currently studying the feasibility and raising the funds to build a small flotation system.

 

Other Mineral Properties

 

We has not yet considered any other mineral properties until such time as we have at least raised additional funds to fully develop the Mexican claims.

 

Employees

 

As of February 6, 2014, our Company did not have any employees either part time or full time other than its director and officer.  Meanwhile, its investment New World has over 10 full time employees in Mexico at its three mine sites.

 

We are not a party to any employment contracts or collective bargaining agreements.   Mexico has a relatively large pool of people experienced in exploration of mineral properties; being mainly geologist and mining consultants.  In addition, there is no lack of worker and consultants initially on a part time basis.

 

Competition

 

In Mexico and the Philippines, there are numerous mining and exploration companies, both big and small.   Every mining company is constantly seeking mineral properties of merit and most of them will have the funds to acquire and explore these properties.  Our Company does not have the funds at this time to compete with these mining companies and it might never have the funds to compete.

 

The exploration business is highly competitive and highly fragmented, dominated by both large and small mining companies.   Success will largely depend on our Company’s ability to attract talent from the mining industry in the Mexico and the Philippines.  

 

Even though we have three small mines in Mexico there is no guarantee that we will be able to extract the gold and silver from our raw ore, without having sufficient funds to acquire the necessary facilities. Even though we have the rights to the La Carlota there is no guarantee we will be able to raise sufficient funds in the future to adequately explore the claim.   We might have to seek out a joint venture partner thereby losing percentage interest in La Carlota.   In the event we are unable to pay our proportional share of the exploration costs we might be forced to dilute our interest in La Carlota.

 

If we are successful in discovering an ore body we might not be able to find facilities to mill and smelt the ore at a reasonable rate and hence might not be able to commence commercial production.   At this time the Company does not have any contractual agreements with a refining company and there is the distinct possibility it might never have.  There is no assurance that the Company’s mineral expansion plans will ever be realized.

 

Risk Inherent in Mexico and La Carlota

 

Monarchy and its management are aware of the following risks:

 

 

1.The full extent of the known body of commercial ore located in the three Mexican Claims is not known. La Carlota does not contain a known body of commercial ore and, therefore, any program conducted on La Carlota would be exploratory search for ore.

 

2.There is no certainty that any expenditures made in processing the raw ore to metal or concentrate will be able to do so commercially. Also there is no certainty exploration of La Carlota will result in the discovery of commercial quantities of ore.   Most exploration projects do not result in the discovery of commercially mineable deposits of ore.

 

3.Resource exploration and development is a speculative business in that our company might not be able to raise any funding subsequent to the raising of funds from our director.

 

4.Failure to discover a mineral deposit at all is as bad as finding a mineral deposit which, though present, is insufficient in size or grade to return a profit from production.   The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond Monarchy’s control and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exploring of minerals, and environmental protection.

 

5.Mining operations generally involve a high degree of risk.   Hazards such as unusual or unexpected formations and other conditions are involved.   Our Company may be subject to liability for pollution, cave-ins or hazards against which it cannot insure or which it may not elect to ensure.   The payment of such liabilities may have a material, adverse effect on our financial position.

 

6.La Carlota has never been surveyed and, accordingly, the precise location of the boundaries of the property and ownership of mineral rights on specific tracts of land comprising the claim might be in doubt.

 

ITEM 3.

 

LEGAL PROCEEDINGS.

 

We are not a party to any other legal proceedings and, to our knowledge; no other legal proceedings are pending, threatened or contemplated.

 

ITEM 4.

 

MINE SAFETY DISCLOSURES.

 

The Securities and Exchange Commission (SEC) approved amendments to its rules on December 21, 2011 to implement the mine safety disclosure requirements contained in Section 1503 of the Dodd-Frank Act. Section 1503 requires SEC registrants that are operators of coal or other mines to include in their periodic and current reports disclosures regarding certain safety violations, orders and regulatory actions. Based on Item 104 of Regulation S-K the Company is able to report the following, for the time period covered by the report:

 

    • no violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under Section 104 of the Federal Mine Safety and Health Act of 1977 (Mine Safety Act) for which the operator received a citation from the Mine Safety and Health Administration (MSHA);
    • no orders issued under Section 104(b) of the Mine Safety Act;
    • no citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under Section 104(d) of the Mine Safety Act;
    • no flagrant violations under Section 110(b)(2) of the Mine Safety Act;
 

 

    • no imminent danger orders issued under Section 107(a) of the Mine Safety Act; and
    • no proposed assessments (regardless of whether the assessment is being challenged or appealed) from the MSHA under the Mine Safety Act.

 PART II

 

ITEM 5.

 

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

MARKET INFORMATION

 

Our shares of common stock are quoted on the OTC under the symbol “MONK”.

 

HOLDERS OF OUR COMMON STOCK

 

As of February 13, 2013, there were 39 registered holders of record of our common stock.

 

DIVIDENDS

 

There are no restrictions in our Articles of Incorporation or Bylaws that would prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

 

1.We would not be able to pay our debts as they become due in the usual course of business; or

 

2.Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.

 

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

None.

 

ITEM 7.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.

 

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in the Form 10-K. 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. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-K, particularly in the sections titled “Risk Factors” and “Forward-Looking Statements.”

 

 

We are a start-up, pre-exploration mining stage company. We have a limited operating history and have not yet generated or realized any revenues from our activities. We have commenced mining through our investment in New World Metals SAPI. We have yet to undertake any exploration activity on our Philippine property, La Carlota. As our property is in the early stage of exploration and there is no reasonable likelihood that revenue can be derived from the property in the foreseeable future.

 

Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our operations. This is because we have not generated any revenues and no revenues are anticipated until we begin removing and selling minerals, if ever. Accordingly, we must raise cash from sources other than the sale of minerals found on La Carlota or from the sale of our investment in New World. That cash must be raised from other sources. Our only other source for cash at this time is investment by others in the Company. We must raise cash to implement our planned exploration program and stay in business. 

 

Since most of business activity is related to our Investment in New World Metals SAPI and its three small active mines, our focus has been primarily to raise additional funds for further development of the Mexican properties. As of October 31, 2013, we had negative working capital of 762,825(2012 - $14,786).

 

Despite the commitment of our officer and director to advance us funds over the next twelve months, unless we raise additional funds, we will be faced with a working capital deficiency by no later than the end of the next twelve months. In order to maintain our 45% interest in New World Minerals SAPI, we must raise an additional $750,000 by the summer of 2014. Our future financial success will be dependent on the success of the mines in Mexico.

 

Our Company has no current plans, proposals or arrangement, written or otherwise, to seek a business combination with another entity.

 

Liquidity and Capital Resources

 

Our capital commitments for the next twelve months consist of expenses of general and administration and of raising additional funds for New World. :

 

Estimated expenses  Amount  Purpose
Accounting  $10,000   Preparation of various quarterly and year-end financial statements
Independent accountants   20,000   Review of various quarterly financial statements and examination of the year-end financial statements
Investment in New World   750,000   As per Angelo Ventura’s geological report – Phase II
Filing fees   350   To maintain Company in good standing in the State of Nevada
Office and miscellaneous   1,000   Office supplies, delivery and photocopy charges
Transfer agent’s fees   1,000   Annual fee and miscellaneous expenses
Estimated expenses  $782,350    

 

We recognize that additional capital will be required during the next twelve months. Should we be unable to raise additional capital from other sources such as bank financing with guarantees from our directors or a private placement of our common shares from Treasury, our directors and officers are committed to advance Monarchy whatever funds are required to enable the Company to meet its cash needs over the coming year in addition to the amount indicated in the following sentence.   Our previous directors advanced the funds to complete Phase I of our exploration program in the amount of approximately $14,000 and an additional $20,000 for working capital purposes.   No written agreement has been entered into between the directors and the Company regarding the above noted amount of $40,326 and any future advances.  This advance of $40,326 is on a demand basis and bears no interest similar to any future advances.   The loan is not convertible into shares of our Company.   These funds were advanced to the Company prior to October 31, 2013.

 

 

If we fail to raise the $750,000 for New World we may attempt to interest other companies to undertake additional work in the Mexican mines and/or work on La Carlota through joint venture arrangement or even the sale of part of La Carlota. Neither of these avenues has been pursued as of the date of this Form 10-K.

 

Limited Operating History; Need for Additional Capital 

 

There is no historical financial information about us upon which to base an evaluation of our performance as an exploration corporation. We are a pre-exploration stage company and have not generated any revenues from our exploration activities. Further, we have not generated any revenues since our formation on June 16, 2010.  We cannot guarantee we will be successful in our exploration activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services.

 

It must be borne in mind that to become profitable and competitive, we must invest in exploration activities on La Carlota, which could be substantial, before we can produce of any minerals we discover on our claim.   There may be no minerals of commercial value on our claim.   We will have to either have our directors and officers provide us with working capital or else find other forms of equity financing.  We can never be assured that any financing will be available as we require it and, if available, will be on the terms acceptable to us.   Without any financing we will not be able to proceed with the future exploration of La Carlota.

 

Overview

 

Our financial statements contained herein have been prepared on a going concern basis, which assumes that we will be able to realize our assets and discharge our obligations in the normal course of business. We incurred a net loss, for the period from the inception of our business on June16, 2010 to October 31, 2013, of $5,567,725. We did not earn any revenues during the aforementioned period.

 

Our financial statements included in this Form 10-K have been prepared without any adjustments that would be necessary if we become unable to continue as a going concern and are therefore required to realize upon our assets and discharge our liabilities in other than the normal course of operations.

 

We are presently in the pre-exploration stage and there is no assurance that a commercially viable mineral deposit, a reserve, exits on La Carlota until further exploration work is done and a comprehensive evaluation concludes economic and legal feasibility.

 

Products and Gold

 

New World has mined gold and silver raw ore in its three small Mexican Mines. In order to mill, float, smelt and refine this ore, we must invest in additional equipment. Until New World receives the necessary financing of $750,000 New World will be unable to either process its raw ore or to expand mining operations. No third party calculation of the gold in place at the three Mexican Claims have been made.

 

We do not have any gold as of yet on La Carlota since we have not done any exploration work to support a calculation as to the ounces of gold which might be on the claim.   To our knowledge we do not know, and may never know, if there is gold on the claim unless our future exploration work verifies this fact.   At the present time we do not have any products for sale.

 

Other Minerals

 

At the present time we are not aware of other minerals on La Carlota since no exploration has been done to date. We are aware of Gold and Silver in New World’s three mines

 

 

Employees

 

Other than our directors and officers we do not have any employees.   It is our intention to use the service of our geologist, Angelo Ventura, during the exploration program and he will be responsible for hiring additional personnel to assist in the exploration.  

 

Competitive Factors

 

We are a small pre-exploration company with limited personnel and funds.   There are many other exploration companies who have more personnel at their disposal and funds on hand to undertake substantially exploration work on claims they own.   In the market place for workers they will have advantage over us because they can offer higher salaries and longer periods of employment. This puts our Company as a disadvantage in seeking workers for future exploration work on the Carlota.

 

Foreign Currency

 

Our Company will be conducting exploration activities in the Mexico and the Republic of the Philippines and will pay its expenses in Pesos and in PHP dollars.  Any currency fluctuation in an adverse way will increase the cost of our exploration program on La Carlota and our investment in New World.

 

Regulation of Mining Activity

 

Mining Laws

 

Government and environmental regulations exist in the Philippines and Mexico and our exploration and mining plans are subject to these various federal, state and local laws.  The rules are dynamic and are generally becoming more demanding.  Our plans aim to safeguard public and environmental health.  We are currently in compliance with all material mining, health, safety, and environmental statutes of the Mexico and the Republic of the Philippines.

 

Legislation

 

Changes to current federal, state and local laws in the jurisdiction in which we operate may require additional costs and financing.  These changes are unpredictable and the additional requirements may render certain exploration activities uneconomical and lead to business failure.

 

Our Planned Exploration Program

 

Mexico:

 

One of the Company’s goals since acquiring an interest in our Mexican mining projects is to build our own processing facility. In 2013 we placed a deposit on a 100 ton per day processing facility. The Company is looking at completing this acquisition and setting it up through 2014 to enable the company to begin processing its own ore.

There is currently 9,000 tons of stockpiled ore at its three Mexican mine locations. The Company is seeking to increase its production over the course of the coming year so as to have an ample supply for when the Company is in a position to begin processing ore. We are currently producing at all three mines at a total combined rate of 90 tons per day. The Company believes we can significantly increase this rate of production in 2014.

Over the next twelve months on the three Mexican mining claims our obligation is $750,000.  This estimated figure represents the cost to our Company of financing the purchase and installation of the processing plant, continuing to finance the stockpiling of ore, and if required finance the cost of obtaining 43-101 mining reports on the properties, as well as to cover our ongoing overhead and expenses related to this project.

 

 

Philippines:

 

We have yet to determine whether we will be conducting exploration activities on La Carlota in 2014 to determine what amounts of minerals exist on the claim and if they can be viable extracted in commercial quantities and subsequently sold.   For the time being, our exploration activities are designed to efficiently explore and evaluate our interests in our three Mexican claims.

 

When we choose to do further exploration on the La Carlota claim our estimated exploration costs will be $27,237. This estimated figure represents the cost to our Company of doing the exploration work on Phase II.

 

Results of Operations – October 31, 2013 compared to October 31, 2012.

 

  October 31, 2013  October 31, 2012  Description
Accounting and audit  $13,160   $9,860   Increase is related to an increase in audit and accounting fees.
Filing fees   23,320    2,0553   Increase due acquisition of New World
Legal   44,975    —     Increase due to acquisition of New World
Office   216    599   na
Transfer agent’s fees   —      1,698   na
Director Fees   107,250       Issuance of 1 million shares at $0.285 to new president and sole director
Impairment loss on receivable        60,000   Due to no projected cash flows from New World, the Company recorded this impairment loss.
Impairment loss on investment   4,959,833        Due to no projected cash flows from New World, the Company recorded this impairment loss.
Consulting   64,925       Consulting fees for working with New World
Total Operating Expenses  $5,273,679   $14,212    

 

Other Expenses

  October 31, 2013   
Loss on Equity Method Investment   65, 167   This is the share of the Company’s losses incurred in New World since time of acquisition
Interest Expense   184,093   Included in Interest Expense is the amount of $175,000 which is the amortized discount related to the convertible notes. The balance of $9,093 is interest incurred on the promissory notes to October 31, 2013

 

Balance Sheet as of October 31, 2013

 

Total cash as of October 31, 2013, was $99,970 ($21,083 – 2012).

 

We also have prepaid expenses of $180,500 which is comprised mostly of the prepaid director fees paid to the President on his contract.

 

Liabilities have grown to $1,043,295 from $40,619. Convertible promissory notes of $175,000 and a Note Payable of $750,000 represent the majority of the liabilities. The Note Payable was converted to 20,000,000 shares of common stock during January 2014.

 

 

The Company currently has a working capital deficit of $762,825 (2012 - $14,786)

 

Trends

 

From our date of inception we have been a pre-exploration company which has produced no revenue and maybe will not be able to produce revenue.  To the knowledge of management we are unaware of any trends or past and future events which will have a material effect upon our Company, its income and business, both in the long and short term.   Please refer to our assessment of Risk Factors as noted on page 6.

 

Critical Accounting Policies and Estimates

 

In presenting our financial statements in conformity with U.S. generally accepting accounting principles, or GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures.

 

Some of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base these estimates and assumptions on historical experience or on various other factors that we believe to be reasonable and appropriate under the circumstances. On an ongoing basis, we reconsider and evaluate our estimates and assumptions. Actual results may differ significantly from these estimates.

 

We believe that the critical accounting policies listed below involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our financial statements. In addition, we believe that a discussion of these policies is necessary to understand and evaluate the financial statements contained in this Form 10-K.

 

Estimates and Assumptions

 

Management uses estimates and assumptions in preparing financial statements in accordance with general accepted accounting principles.  Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.   Actual results could vary from the estimates that were assumed in preparing these financial statements.

 

Mineral claim acquisition and exploration costs

 

The cost of acquiring mineral properties or claims is initially capitalized and then tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Mineral exploration costs are expensed as incurred.

 

Investments

 

Investments in companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors, including, among others, ownership level. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the Company’s Statements of Operations and the Company’s carrying value in an equity method investee company is reflected in the Company’s Balance Sheets. The Company evaluates these investments for other-than-temporary declines in value each quarterly period. Any impairment found to be other than temporary would be recorded through a charge to earnings.

 

Recent Accounting Pronouncements

 

The Company does not expect the adoption of any recent accounting pronouncements to have a materially impact on its financial statements.

 

 

ITEM 8.

 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

The financial statements attached to this Form 10-K for the year ended October 31, 2013 have been audited by our independent accountants, Sadler Gibb & Associates, LLC,

 

ITEM 9.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

ITEM 9A.

 

CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of October 31, 2013 (the “Evaluation Date”). Based on that evaluation, the Principal Executive Officer and Principal Accounting Officer have concluded that these disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.

 

Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.

 

Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified below, we believe that our financial statements contained in our Annual Report on Form 10-K for the fiscal year ended October 31, 2013 fairly present our financial condition, results of operations and cash flows in all material respects.

 

Management’s Report on Internal Control over Financial Reporting

 

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process, under the supervision of the management, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with United States Generally Accepted Accounting Principles (GAAP). Internal control over financial reporting 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 Company's assets;

 

-Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
 

 

-Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

 

The Company's management conducted an assessment of the effectiveness of the Company's internal control over financial reporting as of October 31, 2013, based on criteria established in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). As a result of this assessment, management identified a material weakness in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

 

The material weaknesses identified are described below.

 

1.Certain entity level controls establishing a “tone at the top” were considered material weaknesses.  As of October 31, 2013, the Company did not have a separate audit committee or a policy on fraud.  A whistleblower policy is not necessary given the small size of the organization.

 

2.Due to the significant number and magnitude of out-of-period adjustments identified during the year- end closing process, management has concluded that the controls over the period-end financial reporting process were not operating effectively. A material weakness in the period-end financial reporting process could result in us not being able to meet our regulatory filing deadlines and, if not remediated, has the potential to cause a material misstatement or to miss a filing deadline in the future. Management override of existing controls is possible given the small size of the organization and lack of personnel.

 

3.There is no system in place to review and monitor internal control over financial reporting. The Company maintains an insufficient complement of personnel to carry out ongoing monitoring responsibilities and ensure effective internal control over financial reporting.

 

As a result of the material weakness in internal control over financial reporting described above, the Company's management has concluded that, as of October 31, 2013, the Company's internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by COSO.

 

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report.

 

Changes in Internal Controls

 

There were no changes in our internal control over financial reporting during the fiscal year ended October 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.

 

OTHER INFORMATION.

 

None.

 

PART III

 

ITEM 10.

 

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

Each of our Directors serves until his successor is elected and qualified. Each of our officers is elected by the Board of Directors to a term of one (1) year and serves until his successor is duly elected and qualified, or until he is removed from office. The Board of Directors has no nominating or compensation committees.

 

Our officers and directors and their respective ages and positions as of October 31, 2013 were as follows:

 

     
Name and address Age Position(s)

Jose Perez (1)

Calle urique número 5, Colonia Fuentes de Bellavista, c.p. 33880

Hidalgo del Parral, Chihuahua, Mexico

 

 39  Chief Executive Officer, President and Director
     

Guilfred Colcol Casimiro (1)

243 C Teresa Street

Mesa, Manila, Philippines

43

Chief Executive Officer, President and Director

Resigned June 27, 2013

     

Marc Andrew Mercado (1)

1978 – 8 F, Malate

Manila, Philippines

30

Chief Financial Officer, Chief Accounting Officer,

Secretary Treasurer and Director Resigned June 27, 2013

 

   
(1)Member of the audit committee

 

Jose Perez was appointed to the Board of Directors on August 23, 2013 and on the same day by a Resolution of the Board of Directors was appointed as Chief Executive Officer, President, and Chief Financial Officer.

 

Steven Staehr was appointed to the Board of Directors on June 27, 2013 and on the same day by a Resolution of the Board of Directors was appointed as Chief Executive Officer and President. Mr. Staehr resigned on August 23, 2013.

 

Guilfred Colcol Casimiro was appointed to the Board of Directors on June 10, 2010 and on the same day by a Resolution of the Board of Directors was appointed as Chief Executive Officer and President. Mr. Casimiro resigned on June 27, 2013.

 

Marc Andrew Mercado was appointed to the Board of Directors on June 10, 2010 and on the same day by a Resolution of the Board of Directors was appointed Chief Financial Officer, Chief Accounting Officer and Secretary Treasurer. Mr. Mercado resigned on June 27, 2013.

 

A description of the work experience of our directors and officers is as follows.

 

Jose Perez

Jose Perez aged 39, over the last several years has consulted to various reporting and non-reporting companies in the mining, oil & gas, technology and energy efficiency sectors. Providing guidance on corporate finance, business development, marketing and investor outreach programs. Mr. Perez has a Bachelor of Commerce Degree from

 

McGill University, where he specialized in Finance and International Business. He is currently consulting to a number of Mexican based operations. Mr. Perez is fluent in English, French and Spanish

 

Family Relationships

 

Our President and our Chief Financial Officer and Secretary Treasurer are one person, Jose Perez.

 

Term of Office

 

Members of our Board of Directors are appointed to hold office until the next annual meeting of our stockholders or until his successor is elected and qualified, or until they resign or are removed in accordance with the provisions of the Nevada Revised Statutes.   Our officers are appointed by our Board of Directors and hold office until removed by the Board.

 

Involvement in Certain Legal Proceedings

 

To the knowledge of our Company, during the past ten years, none of our directors or executive officers:

 

   
(1) has filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by the court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filings;
(2) was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offences);
(3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting, the following activities:
   
(i)acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company, or engaging in or continuing any conduct or practice in connection with such activity;
   
 (ii)engaging in any type of business practice; or
   
(iii)engaging in any activities in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
   
(5) was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated.
(6) was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgement in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

 

Board of Directors Audit Committee

 

Below is a description of the Audit Committee of the Board of Directors. The Charter of the Audit Committee of the Board of Directors sets forth the responsibilities of the Audit Committee. The primary function of the Audit Committee is to oversee and monitor the Company’s accounting and reporting processes and the audits of the Company’s financial statements.

 

 

Our audit committee is comprised of Jose Perez, our President and Chairman of the Audit Committee, who is not independent. Jose Perez can be considered an “audit committee financial expert” as defined in Item 407 of Regulation S-K. The Company does not presently have, among its officers and directors, a person meeting these qualifications and given our financial conditions, does not anticipate in seeking an audit committee financial expert in the near future. However Jose Perez, Chairman of the Audit Committee, is considering engaged the services of an independent Chartered Accountant as a consultant to provide advice to the Audit Committee as and when the Committee meets to review the Company’s financial statements.

 

Apart from the Audit Committee, the Company has no other Board committees.

 

Since inception on June 16, 2010, our Board has not yet had the opportunity to meet but is planning to do so in the immediate future.

 

Conflicts of Interest

 

None of our officers and directors is a director or officer of any other company involved in the mining industry. However there can be no assurance such involvement will not occur in the future. Such present and potential future, involvement could create a conflict of interest.

 

To ensure that potential conflicts of interest are avoided or declared to our Company and its shareholders and to comply with the requirements of the Sarbanes Oxley Act of 2002, the Board of Directors adopted, on July 23, 2010, a Code of Business Conduct and Ethics.  Monarchy’s Code of Business Conduct and Ethics embodies our commitment to such ethical principles and sets forth the responsibilities of Monarchy and its officers and directors to its shareholders, employees, customers, lenders and other stakeholders. Our Code of Business Conduct and Ethics addresses general business ethical principles and other relevant issues.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our securities (“Reporting Persons”), to file reports of ownership and changes in ownership with the SEC.  Reporting Persons are required by SEC regulations to furnish us with copies of all forms they file pursuant to Section 16(a).  Based solely on our review of the copies of such forms received by us, we believe that, during the last fiscal year, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act:

       

 

Name and Principal Position

Number of Late Insider Reports Transactions Not Timely Reported Known Failures to File a Required Form

Jose Perez

CEO, President, CFO and Sec-Treas

None None None

Guilfred Colcol Casimiro

CEO and President

None None None

Mark Andrew Mercado

CFO and Secretary Treasurer

One One None

 

 

 ITEM 11.

 

EXECUTIVE COMPENSATION.

 

Summary Compensation Table

 

We paid Jose Perez $1,000 and 1,000,000 shares as compensation to for the year ended October 31, 2013.

 

 

 

Outstanding Equity Awards

 

Since incorporation on June 16, 2010, we have not granted any stock options or stock appreciation rights to our executive officers or directors.

 

Compensation of Directors and Officers

 

We have no standard arrangement to compensate directors for their services in their capacity as directors. There is no compensation arrangement, either written or unwritten, to compensate our officers and directors.  Directors are not paid for meetings attended.   All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.

 

ITEM 12.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of October 31, 2013 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities of our shares of common stock, (ii) our executive officers and directors, and (iii) our named executive officers as defined in Item 402(m)(2) of Regulation S-K. Unless otherwise indicated, the stockholder listed possess sole voting and investment power with respect to the shares shown.

 

       

 

 

Title of Class

 

 

Name and Address of Beneficial Ownership

Amount and Nature of Beneficial

Ownership

Percentage of

Common Stock

(i)

       
Common Stock

Jose Perez

 

1,000,000 (Direct) 1.5%
       
Common Stock All Directors and Officers as a Group (1 people) 1,000,000 (Direct) 1.5%

 

A beneficial owners of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares.  Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided.  In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.  As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on October 31, 2013.  As of October 31, 2013, there were, 46,140,000 shares of our common stock issued and outstanding.

 

Holders of Common shares

 

As of the date of this Form 10-K the Company had 39 of shareholders including the officers and directors.  The number of shares held by the officers and directors are xx common shares.

 

 

 

Market Information

 

Monarchy’s stock is not presently traded or quoted on any public market and therefore there is no established market price for the shares. Subsequent to the Effective Date of Monarchy’s registration statement under the Securities Act of 1933, it is anticipated one or more broker dealers may make a market in its securities over-the-counter, with quotations carried on the “OTC Bulletin Board”.    At the present time, there is no established market for the shares of Monarchy. There is no assurance an application to the FINRA will be approved. Although the OTCBB does not have any listing requirements per se, to be eligible for quotation on the OTCBB, issuers must remain current in their filings with the SEC; being as a minimum Forms 10-Q and 10-K.  Market makers will not be permitted to begin quotation of a security whose issuer does not meet these filing requirements. Securities already quoted on the OTCBB that become delinquent in their required filings will be moved following a 30 or 60 day grace period if they do not make their filing during that time. If our common stock is not quoted on the OTCBB, there will be no market for trading in our common stock.

 

Monarchy’s symbol for the OTCBB is MONK.

 

There are no common shares subject to outstanding options, warrants or securities convertible into common equity of Monarchy. The number of shares presently subject to Rule 144 is 39,140,000 shares. The share certificate has the appropriate legend affixed thereto. Presently, under Rule 144, the number of shares which could be sold, if an application is made, is Nil shares.  There are no shares being offered pursuant to an employee benefit plan or dividend reinvestment plan. In addition, there are no outstanding options or warrants to purchase common shares or shares convertible into common shares of Monarchy.

 

Dividend Policy

 

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our Board of Directors

 

Equity Compensation Plans

 

There are no securities authorized for issuance under equity compensation plans or individual compensation arrangements.

 

Penny Stock Rule

 

Monarchy’s common stock is considered to be a “penny stock” because it meets one or more of the definitions in SEC Rule 3a51-1:

 

     
(i)   It has a price less than five dollars per share;
     
(ii)   It is not traded on a recognized national exchange;
     
(iii)   It is not quoted on a FINRA automated quotation system (NASDAQ), or even if so, has a price of less than five dollars per share; or
     
(iv)   It is issued by a company with net tangible assets of less than $2,000,000, if in business more than three years continuously, or $5,000,000, if the business is less than three years continuously or with average revenues of less than $6,000,000 for the past three years.

 

 

 

A broker-dealer will have to undertake certain administrative functions required when dealing win a penny stock transaction.  Disclosure forms detailing the level of risk in acquiring Monarchy’s shares will have to be sent to an interested investor, current bid and offer quotations will have to be provided with an indication as to what compensation the broker-dealer and the salesperson will be receiving from this transaction and a monthly statement showing the closing month price of the shares being held by the investor.  In addition, the broker-dealer will have to receive from the investor a written agreement consenting to the transaction.  This additional administrative work might make the broker-dealer reluctant to participate in the purchase and sale of Monarchy’s shares. 

 

From Monarchy’s point of view, being subject to the Penny Stock Rule could make it extremely difficult for it to attract new investors for future capital requirements since many financial institutions are restricted under their by-laws from investing in shares under a certain dollar amount. Ordinary investors might not be willing to subscribe to shares in the capital stock of Monarchy due to the uncertainty as to whether the share price will ever be able to be high enough that the Penny Stock Rule is no longer a concern.

 

In addition, the stock market in general, and the market prices for thinly traded companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These wide fluctuations may adversely affect the trading price of our shares regardless of our future performance and that of Monarchy. In the past, following periods of volatility in the market price of a security, securities class action litigation has often been instituted against such company. Such litigation, if instituted, whether successful or not, could result in substantial costs and a diversion of management’s attention and resources, which would have a material adverse effect on our business, results of operations and financial conditions.

 

Any new investor purchasing shares in our Company might consider whether they will be able to sell their shares at a given price since if no broker-dealer becomes involved with Monarchy and Monarchy is unable to raise future investment capital the price per share may deteriorate to a point that an investor’s entire investment could be lost.

 

Outstanding Stock Opinion, Purchase Warrants and Convertible Securities

 

Monarch has not issued any stock options to either of its two directors and officers nor has it attached share purchase warrants to the share issued and outstanding.   There are no convertible securities as of the date of this Form 10-K.  Monarchy has not registered any shares for sale by security holders under the Securities Act other than as disclosed in this Form 10-K.

 

Our authorized capital consists of 300,000,000 shares of common stock, par value $0.001 per share, of which 66,140,000 shares are presently issued.

 

The holders of our common stock are entitled to receive dividends as may be declared by our Board of Directors; are entitled to share ratably in all of our assets available for distribution upon winding up of the affairs our Company; and are entitled to one non-cumulative vote per share on all matters on which shareholders may vote at all Meetings of the shareholders.

 

The shareholders are not entitled to preference as to dividends or interest; pre-emptive rights to purchase in new issues of shares; preference upon liquidation; or any other special rights or preferences.

 

There are no restrictions on dividends under any loan or other financing arrangements.

 

Non-Cumulative Voting.

 

The holders of our shares of common stock do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of Directors, can elect all of the Directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any of our Directors.

 

Employment Agreements

 

 

 

We have no employment agreements with any of our executive officers.

 

Equity Compensation Plans, Stock Options, Bonus Plans

 

No such plans or options exist.  None have been approved or are anticipated.  No Compensation Committee exists either.

 

Pension Benefits

 

We do not maintain any defined benefit pension plans.

 

Nonqualified Deferred Compensation

 

We do not maintain any nonqualified deferred compensation plans.

 

Change in Control of Our Company

 

We do not know of any arrangements which might result in a change in control.

 

Registered Agent

 

We are required by Section 78.090 of the Nevada Revised Statutes (the “NRS”) to maintain a registered agent in the State of Nevada.  Our registered agent for this purpose is American Corporate Enterprises, 123 W Nye Lane, Suite 129, Carson City, NV 89703.  All legal process and any demand or notice authorized by law to be served upon us may be served upon our registered agent in the State of Nevada in the manner provided in NRS 14.020(2).

 

Transfer Agent

 

We have engaged the service of Pacific Stock Transfer, located in Las Vegas, Nevada, to act as transfer and registrar.

 

Debt Securities and Other Securities

 

There are no debt securities outstanding or other securities.

 

Rule 144 Share Restrictions 

 

Under Rule 144, an individual who is not an affiliate of our Company and has not been an affiliate at any time during the three months preceding a sale and has been the beneficial owner of our shares for at least six months would be entitled to sell them without restriction.   This is subject to the continued availability of current public information about us for the first year which can be eliminated after a one-year hold.

 

1.Whereas an individual who is deemed to be an affiliate and has beneficially owned shares in our Company for at least six months clan sell their shares in a given three month period as follows::
a.One percent of the number of shares of our Company's common stock then outstanding, which the case of our current directors and officers, will equal approximately 50,000 shares as of the date of this Form 10-K; or
b.The average weekly trading volume of our company's common stock during the four calendar weeks preceding the filing of a notice on form 144 with respect to the sale.
2.Under Rule 405 of the Securities Act, a reporting or non-reporting shell company cannot sell shares under Rule 144, unless the company: (i) has ceased to be a shell company; (ii) is subject to the Exchange Act reporting obligations; (iii) has filed all required Exchange Act reports during the preceding twelve months; (iv) and at least one year has elapsed from the time the company filed with the SEC, current Form 10 type information reflecting its status as an entity that is not a shell company.
 

 

 

ANTI-TAKEOVER PROVISION

 

In accordance with the laws of the State of Nevada and the Securities Regulation Act.

 

The Chapter 78 of Nevada Revised Statutes contains a provision governing "acquisition of controlling interest."  This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested shareholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition act provides that a person or entity acquires "control shares" whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges: 20 to 33 1/3%; 33 1/3 to 50%; or more than 50%.  

 

A "control share acquisition" is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares.  The shareholders or board of directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the articles of incorporation or bylaws of the corporation.  Our articles of incorporation and bylaws do not exempt our common stock from the control share acquisition act.

 

The control share acquisition act is applicable only to shares of "Issuing Corporations" as defined by the Nevada law.  An Issuing Corporation is a Nevada corporation, which: has 200 or more shareholders, with at least 100 of such shareholders being both shareholders of record and residents of Nevada; and does business in Nevada directly or through an affiliated corporation.

 

At this time, we do not have 100 shareholders of record resident of Nevada.  Therefore, the provisions of the control share acquisition act do not apply to acquisitions of our shares and will not until such time as these requirements have been met.  At such time as they may apply, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of us, regardless of whether such acquisition may be in the interest of our shareholders.

 

The Nevada "Combination with Interested Shareholders Statute" may also have an effect of delaying or making it more difficult to effect a change in control of us.  This statute prevents an "interested shareholder" and a resident domestic Nevada corporation from entering into a "combination," unless certain conditions are met.  The statute defines "combination" to include any merger or consolidation with an "interested shareholder," or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an "interested shareholder" having: an aggregate market value equal to 5 percent or more of the aggregate market value of the assets of the corporation; an aggregate market value equal to 5 percent or more of the aggregate market value of all outstanding shares of the corporation; or representing 10 percent or more of the earning power or net income of the corporation.

 

CORPORATE GOVERNANCE

 

Director Independence

 

Josez Perez is not independent within the meaning of Section 5605 of NASDAQ.

 

Board Committees

 

The Audit Committee

 

We have an Audit Committee whose members consist of Jose Perez who is not independent.  Further, Jose Perez can be considered an “audit committee financial expert” as defined in Item 401 of Regulation S-K.  It is our intention to seek a financial expert but with limited funds to date we might not be able to in the near future.

 

 

 

Apart from the Audit Committee, we have no other Board Committees.  Since inception, our Board has conducted its business entirely by consent resolutions.

 

ITEM 13.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS’ INDEPENDENCE

 

Except as described below, none of the following parties have, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that have or will materially affect us, other than as noted in this section:

 

1.Any of our directors or officers;
2.Any person proposed as a nominee for election as a director;
3.Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
4.Any of our promoters; and
5.Any member of the immediate family (including spouse, parents, children, step-parents, step-children, siblings and in-laws) of any of the foregoing persons.

 

Directors’ Independence

 

Under NASDAQ Rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation.  As Jose Perez is our executive officers and directors, we have determined that Jose Perez is not an independent director as defined under NASDAQ Rule 4200(a)(15).

 

The Company does not have any promoters involved with it.

 

ITEM 14.

 

PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The aggregate fees billed for the two most recently completed fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal periods were as follows:

 

  Year Ended October 31, 2013  Year Ended October 31, 2012
Audit Fees  $19,950   $6,400 
Audit-Related Fees   $Nil    $Nil 
Tax Fees   $Nil    $Nil 
All Other Fees   $Nil    $Nil 
Total  $19,950   $6,400 

 

 

 

ITEM 15.

 

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

The following exhibits are either provided with this Annual Report or are incorporated herein by reference:

 

   
Exhibit Number

 

Description of Exhibits

3 Corporate Charter (1)
3.1 Articles of Incorporation.(1)
3.2 Bylaws, as amended. (1)
10.1 Assignment Agreement dated June 10, 2010 between Rodelio Mining Ltd. and Monarchy Resources, Inc. (1)
14.1 Code of Ethics (1)
31.1 Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (*)
31.3 Certification of Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(*)
32.1 Certification of Chief Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*)
32.2 Certification of Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*)
101 INS XBRL Instant Document (*)
101 SCH XBRL Taxonomy Extension Schema Document (*)
101 CAL XBRL Taxonomy Extension Calculation Linkbase Document (*)
101 LAB XRBL Taxonomy Label Linkbase Document (*)
101 PRE XBRL Taxonomy Extension Presentation Linkbase Document (*)
101 DEF XBRL Taxonomy Extension Definition Linkbase Document (*)

 

(1) Previously filed as an exhibit to our Registration Statement on Form S-1 originally filed with the SEC on March 15, 2011, as amended July 28, 2011, September 28, 2011, November 16, 2011 and February 24, 2012 and declared effective March 12, 2012.

 

(*)

Filed herein

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL STATEMENTS SCHEDULES

 

   
1.

Report of Sadler, Gibb & Associates, LLC.

   
2. Balance Sheets as at October 31, 2013 and 2012;
   
3. Statements of Operations for the years ended October 31, 2013 and 2012, and for the period from June 16, 2010 (date of inception) to October 31, 2013;
   
4. Statement of Stockholders’ Deficiency for the period from June 16, 2010 (date of inception) October 31,2013;
   
5. Statements of Cash Flows for the years ended October 31, 2013 and 2012 and for the period from June 16, 2010 (date of inception) to October 31, 2013
   
6. Notes to Financial Statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors

Monarchy Resources, Inc.

 

We have audited the accompanying balance sheets of Monarchy Resources, Inc. (the Company) as of October 31, 2013 and 2012 and the related statements of operations, stockholders’ (deficit) and cash flows for the years then ended and for the cumulative period from June 6, 2010 (date of inception) through October 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.  

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Monarchy Resources, Inc. as of October 31, 2013 and 2012, and the results of their operations and cash flows for the years then ended and for the cumulative period from June 6, 2010 (date of inception) through October 31, 2013, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the Company will need additional working capital to accomplish its intended purpose and to service its debt, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 9. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ Sadler, Gibb & Associates, LLC

 

Salt Lake City, UT

February 13, 2014

 

 

 

 

MONARCHY RESOURCES, INC.

(Pre-Exploration Stage Company)

BALANCE SHEETS

October 31, 2013

  October 31, 2013   October 31,
2012
 
ASSETS          
 
CURRENT ASSETS
          
Cash  $99,970   $21,083 
Prepaid expense   180,500    4,750 
           
Total Current Assets   280,470    25,833 
           
           
TOTAL ASSETS  $280,470   $25,833 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
           
CURRENT LIABILITIES          
           
           Accounts payable and accrued expenses  $77,969   $5,916 
           Advances from related parties   40,326    34,703 
           Convertible notes payable   175,000    —   
           Notes payable   750,000    —   
           
                  Total current liabilities   1,043,295    40,619 
           
TOTAL LIABILITIES   1,043,295    40,619 
           
STOCKHOLDERS’ DEFICIENCY          
           
Common stock          
300,000,000 shares authorized, at $0.001 par value;          
46,140,000 shares issued and outstanding as at October 31, 2013 (30,000,000 as at October 31, 2012)   46,140    30,000 
Additional paid in capital   4,758,760    —   
Deficit accumulated during the pre-exploration stage   (5,567,725)   (44,786)
           
Total Stockholders’ Deficiency   (762,825)   (14,786)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY  $280,470   $25,833 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

MONARCHY RESOURCES, INC.

(Pre-Exploration Stage Company)

 

STATEMENTS OF OPERATIONS

 

 

Year

ended

October 31, 2013

  Year ended October 31, 2012  From June 16, 2010 (date of inception) to October 31, 2013
REVENUE  $—     $—     $—   
                
                
EXPENSES               
Exploration costs   —      —      14,000 
Impairment loss on mineral claim acquisition   —      —      5,000 
Impairment loss on receivable   60,000    —      60,000 
Impairment loss on investment   4,959,833    —      4,959,833 
General and administrative   253,846    14,212    279,632 
                
TOTAL OPERATING EXPENSES   (5,273,679)   (14,212)   (5,318,465)
                
OTHER INCOME (EXPENSE):               
   Loss on Equity Method Investment   (65,167)   —      (65,167)
   Interest Expense   (184,093)   —      (184,093)
TOTAL OTHER INCOME (EXPENSE)   (249,260)   (249,260)     
                
                
NET LOSS  $(5,522,939)  $(14,212)  $(5,567,725)
                

NET LOSS PER COMMON

SHARE

               
                
Basic and diluted  $0.15   $(0.00)     
                

WEIGHTED AVERAGE

OUTSTANDING SHARES

               
                
Basic and diluted   36,445,123    30,000,000      

 

The accompanying notes are an integral part of these financial statements.

 

 

 

 

MONARCHY RESOURCES, INC.
(Pre-Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
 
For the period June 16, 2010 (date of inception) to October 31, 2013
                
   Common Stock           
   Number    Par Value    Additional Paid in Capital    Accumulated Deficit    Total 
Balance June 10, 2010   —     $—     $—     $—     $—   
Issuance of common shares for cash   30,000,000    30,000    —      —      30,000 
Net Loss for period ended October 31, 2010   —      —      —      (6,014)   (6,014)
Balance as of October 31, 2010   30,000,000    30,000    —      (6,014)   23,986 
Net loss for the year ended October 31, 2011   —      —      —      (24,560)   (24,560)
Balance as of October 31, 2011   30,000,000    30,000    —      (30,574)   (574)
Net loss for the year ended October 31, 2012   —      —      —      (14,212)   (14,212)
Balance as of October 31, 2012   30,000,000    30,000    —      (44,786)   (14,786)
Issuance of common shares for cash   140,000    140    39,760    —      39,900 
Issuance of common shares for investment   15,000,000    15,000    4,260,000    —      4,275,000 
Issuance of common shares for services   1,000,000    1,000    284,000    285,000      
Beneficial conversion features from convertible debt   175,000    175,000                
Net loss for the year ended October 31, 2013   —      —      —      (5,522,939)   (5,522,939)
Balance as of October 31, 2013   46,140,000   $46,140   $4,758,760   $(5,567,725)  $(762,825)
 
The accompanying notes are an integral part of these financial statements.

 

 

 

 

 

 

 

 

 

MONARCHY RESOURCES, INC.

(Pre-Exploration Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

 

For the years ended October 31, 2013 and 2012 and for the period June 16, 2010 (date of inception) to October 31, 2013

 

 

 

 

Year

ended

October 31, 2013

  Year ended October 31, 2012  From June 16, 2010 (date of inception) to October 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net loss  $(5,522,939)  $(14,212)  $(5,567,725)
Adjustments to reconcile net loss to net cash used
in operating activities:
               
Loss on equity method investment   65,167    —      65,167 
Expenses paid by third party   15,000    —      15,000 
Debt discount amortization   175,000    175,000      
Impairment loss on mineral claim   —      —      5,000 
Impairment loss on investment   4,959,833    4,959,333      
Impairment loss on advance receivable   60,000    —      60,000 
Changes in operating assets and liabilities:               
  Prepaid expense   109,250    (4,750)   (1,750)
  Advance receivable   (60,000)   —      1,757 
  Accounts payable and accrued expenses   72,053    3,564    68,876 
Net cash used in operating activities   (126,636)   (15,398)   (165,256)
                
CASH FLOWS FROM INVESTING ACTIVITIES               
Acquisition of mineral claim   —      —      (5,000)
Net cash used in investing activities   —      —      (5,000)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
Stock issued for cash   39,900    69,900      
Advances from related parties   20,623    20,395    55,326 
Proceeds from promissory notes   160,000    —      160,000 
Payments to related parties   (15,000)   —      (15,000)
Net cash provided by financing activities   205,523    20,395    270,226 
                
Net (decrease) increase in cash   78,887    4,998   $99,970 
                
Cash at beginning of period   21,083    16,086    —   
                
CASH AT END OF PERIOD  $99,970   $21,084   $99,970 
                
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
                
Note payable issued for investment  $750,000   $750,000      
Common stock issued for prepaid expense  $285,000   $285,000      
Common stock issued for investment  $4,275,000   $4,275,000      

 

 

The accompanying notes are an integral part of these financial statements

 

 

MONARCHY RESOURCES, INC.

(Pre-Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

October 31, 2013

 

1.ORGANIZATION

 

The Company, Monarchy Resources, Inc., was incorporated under the laws of the State of Nevada on June 16, 2010 with authorized capital stock of 300,000,000 shares at $0.001 par value.  

The Company was organized for the purpose of acquiring and developing mineral properties.  At the report date mineral claims, with unknown reserves, had been acquired.  The Company has not established the existence of a commercially minable ore deposit and therefore has not reached the exploration stage and is considered to be in the pre-exploration stage.  

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting Method

The Company recognizes income and expenses based on the accrual method of accounting.

Dividend Policy

The Company has not yet adopted a policy regarding payment of dividends.

Basic and Diluted Net Loss Per Share

Basic net loss per share amounts are computed based on the weighted average number of shares actually outstanding.   Diluted net loss per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of the common share rights unless the exercise becomes anti-dilutive and then the basic and diluted per share amounts are the same. As of October 31, 2013 and 2012, the Company had 17,500,000 (from convertible debt) and 0 potential common shares.

Income Taxes

The Company utilizes the liability method of accounting for income taxes.  Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.

 

 

Year Ended

 

Estimated NOL

Carry-Forward

 

 

 

NOL

Expires

 

Estimated Tax

Benefit from

NOL

 

 

 

Valuation

Allowance

 

 

 

Net Tax Benefit

 2010   $6,014    2030   $2,045   $(2,045)   —   
 2011    24,560    2031    8,350    (8,350)   —   
 2012    14,212    2032    4,832    (4,832)   —   
 2013    503,106    2033    171,056    (171,056)   —   
     $547,892      $1,486,283   $(1,486,283)  $—   

 

The total valuation allowance as of October 31, 2013 was $186,283, which increased by $171,056 for the year ended October 31, 2013. The NOL for the year ended October 31, 2013 ($503,106) equals the net loss for the year ($5,522,939) less permanent differences related to the impairment losses on the New World investment ($4,959,833) and the loan receivable ($60,000).

As of October 31, 2013 and 2012, the Company has no unrecognized income tax benefits. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or penalties have been recorded during the years ended October 31, 2013, and 2012 and no interest or penalties have been accrued as of October 31, 2013 and 2012. As of October 30, 2013 and 2012, the Company did not have any amounts recorded pertaining to uncertain tax positions.

The tax years from 2010 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.

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.

Foreign Currency Translations

The books of the Company are maintained in United States dollars and this is the Company’s functional and reporting currency. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statement of Operations:

Monetary items are recorded at the rate of exchange prevailing as at the balance sheet date;

Non-Monetary items including equity are recorded at the historical rate of exchange; and

Revenues and expenses are recorded at the period average in which the transaction occurred.

Investments

Investments in companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors, including, among others, ownership level. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the Company’s Statements of Operations and the Company’s carrying value in an equity method investee company is reflected in the Company’s Balance Sheets. The Company evaluates these investments for other-than-temporary declines in value each quarterly period. Any impairment found to be other than temporary would be recorded through a charge to earnings. As of October 31, 2013 and 2012, the Company recorded impairment losses on the New World investment of $4,959,833 and $0, respectively.

Revenue Recognition

Revenue from the sale of minerals will be recognized when a contract is in place and minerals are delivered to the customer.

Mineral claim acquisition and exploration costs

The cost of acquiring mineral properties or claims is initially capitalized and then tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Mineral exploration costs are expensed as incurred.

 

 

Advertising and Market Development

The company expenses advertising and market development costs as incurred.

Financial Instruments

The carrying amounts of financial instruments are considered by management to be their fair value due to their short term maturities.

Estimates and Assumptions

Management uses estimates and assumptions in preparing financial statements in accordance with general accepted accounting principles.  Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.   Actual results could vary from the estimates that were assumed in preparing these financial statements.

Statement of Cash Flows

For the purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.

Environmental Requirements

At the report date environmental requirements related to the mineral claim acquired are unknown and therefore any estimate of any future cost cannot be made.

Recent Accounting Pronouncements

The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

3.ACQUISITION OF MINERAL CLAIM

 

On June 21, 2010, the Company acquired the La Carlota Gold Claim located in the Republic of Philippines from Rodelio Mining Ltd., an unrelated company, for the consideration of $5,000. The La Carlota Gold Claim is located 30 kilometres northwest of the city of La Carlota in the Philippines. Under Philippine’s law, the claim remains in good standing as long as the Company has an interest in it. There are no annual maintenance fees or minimum exploration work required on the Claim.

The acquisition costs have been impaired and expensed because there has been limited exploration activity and there has been no reserve established and we cannot currently project any future cash flows or salvage value.

4.INVESTMENT IN NEW WORLD METALS S.A. de C.V.

 

On May 14, 2013, the Company entered into a Share Purchase Agreement (the “SPA”) with the owners of New World Metals S.A.P.I. de C.V. (“New World”) Under the terms of the SPA, the Company issued 10,000,000 shares of the Company’s common stock to the owners of New World in exchange for 28% of the issued and outstanding shares of New World. New World is a mining operator in the Chihuahua region of Mexico which owns three working mines; Morelos, La Luna, and Peneto. The shares of the Company were valued at $.285, which was the price of the shares sold to a third party under a stock subscription agreement in May 2013. The Company is accounting for this investment using the equity method.

On July 4, 2013, the Company entered into an agreement to increase its ownership in New World by 17%, to 45%, by issuing 5,000,000 shares and agreeing to pay $750,000 to three separate owners of New World. The shares of the Company were valued at $.285, which was the price of the shares sold to a third party under a stock subscription agreement in May 2013. The Company is accounting for this investment using the equity method. The Company’s share of the losses of New World for the period ended October 31, 2013 was $65,167.

 

5.IMPAIRMENT LOSSES

On October 31, 2013, the Company assessed its investment in New World and the related loan receivable it had with New World. As the Company could not project any future cash flows from New World, it determined the investment and loan receivable were impaired. Therefore, the Company recorded an impairment loss on the investment of $4,959,833 and an impairment loss on the loan receivable of $60,000.

6.SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

For the year ended October 31, 2013, related parties made advances of $20,623 to the Company, and received payments from the Company of $15,000.

The two previous Directors have acquired 12.5% of the common stock issued and have made advances to the Company of $40,326, as of October 31, 2013. The advances are non-interest bearing, unsecured and payable on demand.

On August 23, 2013, the Company recorded prepaid expense of $286,000 for 1,000,000 shares issued to its President (valued at $.285 per share), and the payment of $1,000 in cash, for a six month service contract. $107,250 of this amount was amortized to general and administrative expense for the year ended October 31, 2013.

7.CAPITAL STOCK

On July 24, 2010, Company completed a private placement consisting of 30,000,000 common shares at $0.001 per share sold to directors and officers for a total consideration of $30,000.

Under an effective registration statement, the directors and officers sold 25,000,000 common shares to other investors in May 2012.

On June 19, 2013 the Company issued 10,000,000 shares and on July 4, 2013, the Company issued 5,000,000 shares to acquire 45% of the issued and outstanding shares of New World (see Note 4).

On August 23, 2013, the Company recorded prepaid expense of $286,000 for 1,000,000 shares issued to its President (valued at $.285 per share), and the payment of $1,000 in cash, for a six month service contract. $107,250 of this amount was amortized to general and administrative expense for the year ended October 31, 2013.

On October 24, 2013, the Company issued 140,000 shares for cash of $39,900.

8.PROMISSORY NOTES

The Company has entered into three promissory notes during the year ended October 31, 2013:

Date of Promissory Note  Amount of Promissory Note  Term of Promissory Note  Interest Rate of Promissory Note  Conversion Rate
July 4, 2013  $750,000   July 31, 2014   3%   N/A 
August 1, 2013  $75,000   Demand   5%  $0.01 
September 1, 2013  $100,000   Demand   5%  $0.01 
   $175,000            

 

 

The Company assessed the conversion options and determined the August 1 and September 1 promissory notes had benficial conversion features with intrinsic values in excess of the principal balance. Therefore, the Company recorded debt discounts of $175,000. In addition, as these promissory notes are payable on demand, the debt discounts were fully amortized to interest expense as of October 31, 2013.

If converted into common shares, the amount of shares to be issued would be 17,500,000 common shares. The amount of accrued interest payable of these notes was $9,093 as of October 31, 2013.

9.GOING CONCERN

The Company will need additional working capital to accomplish its intended purpose of exploring its mining claim, which raises substantial doubt about its ability to continue as a going concern. Management of the Company has developed a strategy, which it believes will accomplish this objective through Director Advances, additional equity funding, and long term financing, which will enable the Company to operate for the coming year.

10.SUBSEQUENT EVENTS

On January 15, 2014, the Company issued 20,000,000 shares in satisfaction of the $750,000 promissory note with New World.

On November 20, 2013 the Company received $50,000 under a promissory note agreement. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITEM 16.

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

MONARCHY RESOURCES, INC.

(Registrant)

 

By:   JOSE PEREZ

Chief Executive Officer,

President and Director

Chief Accounting Officer,

Chief Financial Officer and Director

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dated indicated.

 

By:   JOSE PEREZ

Chief Executive Officer,

President and Director

Chief Accounting Officer,

Chief Financial Officer and Director

 

Date: February 13, 2013