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EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATION - I-WELLNESS MARKETING GROUP INC. | f10q043015_ex32z1.htm |
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATION - I-WELLNESS MARKETING GROUP INC. | f10q043015_ex31z1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X . | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934 |
| For the quarter period ended April 30, 2015 |
. | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934 |
| For the transition period form to |
|
|
| Commission File number 333-172825 |
MONARCHY VENTURES, 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) |
702-722-1003 |
(Registrants telephone number) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. Yes X . No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of large accelerated filer, accelerated filer and small reporting company Rule 12b-2 of the Exchange Act.
Large accelerated filer . |
| Accelerated filer . |
Non-accelerated filer . (Do not check if a small reporting company) |
| Small reporting company X . |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes . No X .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PROCEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after the distribution of securities subsequent to the distribution of securities under a plan confirmed by a court. Yes . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of June18, 2015: 56,937,187
2
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONARCHY VENTURES, INC.
CONSOLIDATED BALANCE SHEETS
| April 30, 2015 | October 31, 2014 | ||
| (Unaudited) |
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| |
ASSETS |
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Current Assets |
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|
Cash | $ | 17,934 | $ | 22,173 |
Inventory |
| 6,189 |
| 6,652 |
Prepaid expense |
| 3,637 |
| 5,297 |
Total current assets |
| 15,036 |
| 34,122 |
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|
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|
Non-current Assets |
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|
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Property and equipment |
| 185,500 |
| 211,597 |
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TOTAL ASSETS | $ | 213,260 | $ | 245,719 |
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LIABILITIES AND STOCKHOLDERS DEFICIENCY |
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Current Liabilities |
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Bank indebtedness | $ | 12,724 | $ | 21,239 |
Accounts payable and accrued liabilities |
| 280,234 |
| 253,641 |
Convertible notes payable |
| 297,498 |
| 347,775 |
Current portion of deferred lease incentive |
| 1,555 |
| 1,671 |
Due to related parties |
| 494,539 |
| 515,669 |
Total current liabilities |
| 1,086,550 |
| 1,139,995 |
Long Term Liabilities |
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|
Deferred lease incentive |
| 9,587 |
| 11,139 |
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TOTAL LIABILITIES |
| 1,096,137 |
| 1,151,134 |
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STOCKHOLDERS DEFICIENCY |
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Common stock |
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300,000,000 shares authorized, at $0.001 par value; |
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56,937,187 shares issued and outstanding as at April 30, 2015 (30,437,187as at October 31, 2014) |
| 56,937 |
| 30,437 |
Additional paid-in capital |
| 62,223 |
| - |
Accumulated other comprehensive income |
| 46,153 |
| 24,451 |
Accumulated deficit |
| (1,048,190) |
| (960,303) |
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Total stockholders deficiency |
| (882,877) |
| (905,415) |
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TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY | $ | 213,260 | $ | 245,719 |
The accompanying notes are an integral part of these interim consolidated financial statements.
3
MONARCHY VENTURES, INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| Three Months Ended April 30, |
| Six Months Ended April 30, | ||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
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REVENUE |
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Net sales | $ | 99,095 | $ | 89,316 | $ | 193,717 | $ | 178,156 |
Cost of goods sold |
| (64,499) |
| (64,301) |
| (125,260) |
| (123,696) |
Gross Profit |
| 34,596 |
| 25,015 |
| 68,457 |
| 54,460 |
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EXPENSES |
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Depreciation |
| 7,041 |
| 10,003 |
| 13,441 |
| 20,342 |
General and administrative |
| 11,817 |
| 11,981 |
| 27,180 |
| 22,966 |
Interest on debt |
| 22,929 |
| - |
| 26,834 |
| - |
Management wages |
| 7,206 |
| 8,144 |
| 14,927 |
| 17,942 |
Market certification fees |
| 10,000 |
| - |
| 10,000 |
| - |
Professional fees |
| 44,365 |
| - |
| 45,399 |
| 4,496 |
Rent |
| 9,087 |
| 15,947 |
| 18,763 |
| 30,426 |
TOTAL OPERATING EXPENSES |
| 112,445 |
| 46,076 |
| 156,344 |
| 96,172 |
NET LOSS |
| (77,849) |
| (21,061) |
| (87,887) |
| (41,712) |
OTHER COMPREHENSIVE INCOME (LOSS) |
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Foreign exchange translation gain (loss) |
| (13,161) |
| - |
| 21,702 |
| - |
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COMPREHENSIVE LOSS | $ | (91,010) | $ | (21,061) | $ | (66,185) | $ | (41,712) |
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NET LOSS PER COMMON SHARE |
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Basic and diluted | $ | (0.00) | $ | (0.10) | $ | (0.00) | $ | (0.22) |
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WEIGHTED AVERAGE OUTSTANDING SHARES |
| 52,723,704 |
| 220,467 |
| 49,948,237 |
| 192,106 |
The accompanying notes are an integral part of these interim consolidated financial statements.
4
MONARCHY VENTURES, INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Six Months Ended | ||
|
| April 30, 2015 |
| April 30, 2014 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss | $ | (87,887) | $ | (41,712) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
| 13,441 |
| 20,342 |
Amortization of deferred lease incentive |
| (780) |
| (867) |
Non-cash interest expense |
| 19,223 |
| - |
Changes in operating assets and liabilities: |
|
|
|
|
Prepaid expense |
| 1,660 |
| - |
Accounts payable and accrued expenses |
| 23,237 |
| 5,596 |
Inventory |
| 463 |
| - |
Net cash used in operating activities |
| (30,643) |
| (16,642) |
|
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|
CASH FLOWS FROM INVESTING ACTIVITIES |
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Property and equipment |
| (2,008) |
| (9,373) |
Net cash used in investing activities |
| (2,008) |
| (9,373) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
|
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Bank indebtedness |
| (7,072) |
| - |
Advances for convertible debt |
| 19,223 |
| - |
Advances from related parties |
| 11,972 |
| 26,070 |
Net cash provided by financing activities |
| 24,123 |
| 26,070 |
Effect of foreign exchange |
| 4,289 |
| (292) |
Net decrease in cash |
| (4,239) |
| (237) |
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CASH, BEGINNING OF PERIOD |
| 22,173 |
| 6,058 |
CASH, END OF PERIOD | $ | 17,934 | $ | 5,821 |
The accompanying notes are an integral part of these interim consolidated financial statements.
5
MONARCHY VENTURES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2015
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The Company, Monarchy Ventures, Inc. (formerly Monarchy Resources, Inc.), was incorporated under the laws of the State of Nevada on June 16, 2010.
On October 20, 2014 the Company completed the acquisition of The Spud Shack Fry Company Ltd. (Spud Shack), a restaurant located in British Columbia, Canada.
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Annual Report on Form 10-K of the Company for the year ended October 31, 2014. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended April 30, 2015 are not necessarily indicative of the results that may be expected for the year ending October 31, 2015. For further information, these unaudited financial statements and the related notes should be read in conjunction with the Companys audited financial statements for the year ended October 31, 2014, included in the Companys report on Form 10-K.
2. RELATED PARTIES
As of April 30, 2015, amounts of $494,539 were owing to related parties (October 31, 2014: $515,669). These amounts are unsecured, and have no fixed interest or repayment terms.
During the six months ended April 30, 2015 and April 30, 2014, $14,927 and $17,942, respectively, was incurred as remuneration to a shareholder of the company who serves as the manager of the restaurant operation.
3. PROPERTY AND EQUIPMENT
April 30, 2015 | Cost | Accumulated | Net Book Value |
Computer equipment | $ 5,816 | $ (4,633) | $ 1,183 |
Furniture and fixtures | 98,395 | (41,345) | 57,050 |
Leasehold improvements | 163,774 | (36,507) | 127,267 |
| $ 267,985 | $ (82,485) | $ 185,500 |
October 31, 2014 | Cost | Accumulated Depreciation | Net Book Value |
Computer equipment | $ 6,250 | $ (4,497) | $ 1,753 |
Furniture and fixtures | 103,605 | (37,744) | 65,861 |
Leasehold improvements | 176,020 | (32,037) | 143,983 |
| $ 285,875 | $ (74,278) | $ 211,597 |
4. LEASE INCENTIVE
In February 2013, the Company received CAD$18,840 from the landlord for tenant improvement reimbursements which has been recorded as a lease incentive. It has been amortized on a straight line basis over the lease term of 10 years. Each years portion of the lease incentive has been offset against the rent expense.
6
5. COMMITMENT
The Company is committed until May 31, 2022 for payments totaling CAD$219,486 for premises under lease. The minimum lease payments over the next five years are as follows:
2015 | CAD$ 23,550 |
2016 | 47,100 |
2017 | 47,100 |
2018 | 50,868 |
2019 | 50,868 |
| CAD$ 219,486 |
6. CONVERTIBLE PROMISSORY NOTES
The Company has issued convertible promissory notes as follows.
Date of Promissory Note |
| Principal |
| Term of Promissory Note |
| Interest Rate of Promissory Note |
| Conversion Rate |
|
|
|
| Balance Remaining on Note |
August 1, 2013 |
| $ 75,000 |
| Due on demand |
| 5% |
| $ 0.01 |
|
|
|
| $ 75,000 |
April 27, 2014 |
| 124,500 |
| Due on demand |
| 5% |
| 0.001 |
|
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|
| 60,000 |
May 1, 2014 |
| 45,705 |
| Due on demand |
| 5% |
| 0.001 |
|
|
|
| 45,705 |
May 1, 2014 |
| 32,570 |
| Due on demand |
| 5% |
| 0.001 |
|
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|
| 32,570 |
June 1, 2014 |
| 40,000 |
| Due on demand |
| 5% |
| 0.001 |
|
|
|
| 35,000 |
July 23, 2014 |
| 30,000 |
| Due on demand |
| 5% |
| 0.001 |
|
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|
| 30,000 |
January 2, 2015 |
| 19,223 |
| Due on demand |
| 5% |
| 0.001 |
|
|
|
| 19,223 |
|
| $ 366,998 |
|
|
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| $ 297,498 |
During the period ended April 30, 2015 the Company issued a convertible promissory note for up to $25,000, of which $19,223 of the proceeds have been received. The Company determined that the note had a beneficial conversion feature, therefore, the Company recorded the conversion benefit of $19,223 to interest expense as of April 30, 2015.
The amount of accrued interest payable on the unconverted balance of these notes was $20,727 as of April 30, 2015 (October 31, 2014: $13,316) and is included in accounts payable and accrued liabilities.
If the balance outstanding was converted into common shares, the amount of shares to be issued would be 304,998,000 common shares.
7
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information contained in the financial statements of Monarchy Ventures, Inc. (Monarchy or the Company) and the notes which form an integral part of the financial statements which are attached hereto.
The financial statements mentioned above have been prepared in conformity with accounting principles generally accepted in the United States of America and are stated in United States dollars.
We have a limited operating history and have not yet generated or realized any profits from our activities. We have commenced mining operation in Mexico through our investment in New World Metals SAPI but we have yet to undertake any exploration activity on our Philippine property, La Carlota. Our restaurant operation is likewise relatively new and has net to generate any profits.
As of April 30, 2015, we had a working capital deficit of $1,058,790, an improvement over the working capital deficit of $1,105,873 at October 31, 2014. This improvement resulted primarily from issuing shares to settle a portion of the outstanding debt.
For the 6 months ending April 30, 2015 we had a net loss from operations of $(87,887) compared to a net loss from operations of $(41,712) for the same period in 2014. In spite of a 25% increase in total revenue and a decrease in most expense categorizes, we incurred additional professional fees and market certification fees resulting from our transition to a public company which contributed to these additional losses. Foreign exchange translation gains contributed $21,702 to our comprehensive income for the 6 months ending April 30, 2015.
Foreign Currency and Exchange Rates
Our Company conducts activities in Mexico and the Canada and will pay its expenses in the local currency. Any currency fluctuation in an adverse way will increase our costs and affect our ability to generate profits from our activities.
Requirements for Cash over the next twelve months
Management has estimated that the need for funds over the next twelve months is as follows:
Expense |
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Ref. |
| Estimated Amount | ||||
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Accounting and audit |
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| (i) |
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| $ | 20,000 |
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Edgarizing and XBRL filings |
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| (ii) |
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| 5,000 |
|
Development costs New World Metals |
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| (iii) |
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| 250,000 |
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Accounts payable and accrued expenses |
|
| (iv) |
|
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| 280,234 |
|
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| 555,234 |
|
Less: cash on hand as at April 30, 2015 |
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| 5,210 |
|
Estimate of additional cash requirements over the next twelve months |
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| $ | 550,024 |
|
(i) Accounting and audit
Relates to fees in connection with the preparation of quarterly and annual financial statements and recent filings on Forms 10-K and 10-Q
(ii) Edgarizing
With the requirement to do an XBRL filing both annually and quarterly the edgarizing cost are projected to increase over previous years.
(iii) Development Costs - Mexico
8
Subject to raising additional third party financing, we intend to invest $250,000 into our mining projects over the next twelve months.
(iv) Accounts payable these funds are required to keep our trade payables and other current liabilities current
Despite the commitment of our director to advance us funds over the next twelve months, our future financial success will be dependent on our ability to obtain third party financing in the form of debt and equity and ultimately on the ability of the restaurant in Canada and the mines in Mexico to generate profits. As of the date of this Form 10-Q, we have not generated sufficient revenues, and have experienced negative cash flow from operations. We may look to secure additional funds through future debt and equity financings. These sources of financing may not be available or may not be available on reasonable terms.
Critical Accounting Policies and Estimates
In presenting our financial statements in conformity with U.S. generally accepting accounting principals, 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 prospectus.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with generally 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.
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.
Recent Accounting Pronouncements
The Company does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.
9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Accounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of April 30, 2015 (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.
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, including our Principal Executive Officer and Principal Accounting Officer, 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, we believe that our financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended April 30, 2015 fairly present our financial condition, results of operations and cash flows in all material respects
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the quarter ended April 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings to which Monarchy or its subsidiaries are party nor are any material legal proceedings contemplated.
ITEM 1A. RISK FACTORS
Not required for a smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There has been no change in our securities since the quarter ended January 31, 2015 except as follows:
On April 21, 2015, the Company issued 5,000,000 shares in satisfaction of $5,000 in debt.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURE
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:
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·
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.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MONARCHY VENTURES INC. |
| (Registrant) |
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Date: June 18, 2015 | /s/ Timothy Ferguson |
| TIMOTHY FERGUSON Chief Executive Officer, President and Director |
12