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EX-31 - EXHIBIT 31 SECTION 302 CERTIFICATION - I-WELLNESS MARKETING GROUP INC. | f10q093015_ex31.htm |
EX-32 - EXHIBIT 32 SECTION 906 CERTIFICATION - I-WELLNESS MARKETING GROUP INC. | f10q093015_ex32.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 ended September 30, 2015
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.) |
3651 Lindell Road, Suite D612 Las Vegas, NV 89103 |
(Address of principal executive offices) |
702-318-7545 |
(Registrants telephone number) |
Calle urique número 5, Colonia Fuentes de Bellavista, c.p. 33880 Hidalgo del Parral, Chihuahua, Mexico |
(Former address, 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 . N/A X .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of November 25, 2015: 66,937,187
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PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONARCHY VENTURES, INC.
CONSOLIDATED BALANCE SHEETS
|
| September 30, 2015 |
| June 30, 2015 |
|
| (Unaudited) |
|
|
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash or cash equivalents | $ | 18,665 | $ | 20,043 |
Inventory |
| 4,688 |
| 5,033 |
Total current assets |
| 23,353 |
| 25,076 |
|
|
|
|
|
Non-current Assets |
|
|
|
|
Deposits |
| 3,087 |
| 3,315 |
Property and equipment, net |
| 153,904 |
| 176,184 |
Total non-current assets |
| 156,991 |
| 179,499 |
|
|
|
|
|
TOTAL ASSETS | $ | 180,344 | $ | 204,575 |
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|
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LIABILITIES AND STOCKHOLDERS DEFICIENCY |
|
|
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Current Liabilities |
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Bank indebtedness | $ | 10,748 | $ | 16,629 |
Accounts payable |
| 166,663 |
| 160,745 |
Accrued liabilities |
| 1,848 |
| 1,985 |
Convertible notes payable |
| 382,117 |
| 388,892 |
Due to related parties |
| 462,724 |
| 493,283 |
Current portion of deferred lease incentive |
| 1,407 |
| 1,510 |
Total current liabilities |
| 1,025,507 |
| 1,063,044 |
Long Term Liabilities |
|
|
|
|
Deferred lease incentive |
| 8,088 |
| 9,062 |
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|
|
|
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TOTAL LIABILITIES |
| 1,033,595 |
| 1,072,106 |
|
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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; 66,937,845 shares issued and outstanding at September 30, 2015 (56,937,845 at June 30, 2015) |
| 66,938 |
| 56,937 |
Additional paid-in capital |
| 70,191 |
| 67,018 |
Accumulated other comprehensive income |
| 75,941 |
| 54,982 |
Accumulated deficit |
| (1,066,321) |
| (1,046,468) |
|
|
|
|
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Total stockholders deficiency |
| (853,251) |
| (867,531) |
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TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY | $ | 180,344 | $ | 204,575 |
The accompanying notes are an integral part of these consolidated financial statements.
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MONARCHY VENTURES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| For the three months ended | ||
|
| September 30, 2015 |
| September 30, 2014 |
|
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|
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REVENUE | $ | 98,623 | $ | 83,060 |
COST OF GOODS SOLD |
| (65,887) |
| (58,376) |
GROSS MARGIN |
| 32,736 |
| 24,684 |
|
|
|
|
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EXPENSES |
|
|
|
|
Depreciation |
| 10,411 |
| 14,264 |
General and administrative |
| 23,432 |
| 14,607 |
Management wages |
| 6,878 |
| 8,266 |
Professional fees |
| 3,225 |
| 2,273 |
Rent |
| 8,643 |
| 16,186 |
TOTAL OPERATING EXPENSES |
| 52,589 |
| 55,596 |
NET LOSS FROM OPERATIONS |
| (19,853) |
| (30,912) |
OTHER COMPREHENSIVE INCOME |
|
|
|
|
Foreign exchange translation gain |
| 20,959 |
| 13,769 |
|
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COMPREHENSIVE INCOME (LOSS) | $ | 1,106 | $ | (17,143) |
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NET LOSS PER COMMON SHARE |
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Basic and diluted | $ | 0.000 | $ | (0.001) |
WEIGHTED AVERAGE OUTSTANDING SHARES Basic and diluted |
| 58,568,280 |
| 30,437,843 |
The accompanying notes are an integral part of these consolidated financial statements.
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MONARCHY VENTURES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Three months ended | ||
|
| September 30, 2015 |
| September 30, 2014 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss | $ | (19,853) | $ | (30,912) |
Adjustments to reconcile net loss to net cash used |
|
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Depreciation |
| 10,411 |
| 14,264 |
Non-cash interest expense |
| 3,225 |
| - |
Amortization of deferred lease incentive |
| (360) |
| - |
Changes in operating assets and liabilities: |
|
|
|
|
Accounts payable and accrued expenses |
| 8,201 |
| 5,261 |
Net cash provided by (used in) operating activities |
| 1,624 |
| (11,387) |
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|
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CASH FLOWS FROM INVESTING ACTIVITIES |
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|
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Property and equipment |
| - |
| (1,287) |
Net cash provided by (used in) investing activities |
| - |
| (1,287) |
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
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Bank borrowings (repayments) |
| (4,849) |
| (1,104) |
Advances for convertible debt |
| 3,225 |
| - |
Advances from related parties |
| - |
| 13,777 |
Net cash provided by (used in) financing activities |
| (1,624) |
| 12,673 |
Effect of foreign exchange |
| (1,378) |
| (1,112) |
Net decrease in cash |
| (1,378) |
| (1,113) |
|
|
|
|
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CASH, BEGINNING OF PERIOD |
| 20,043 |
| 23,418 |
CASH, END OF PERIOD | $ | 18,665 | $ | 22,305 |
The accompanying notes are an integral part of these consolidated financial statements.
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MONARCHY VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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.
These consolidated financial statements are presented on the basis that the Company will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
At September 30, 2015, the Company has a working capital deficit, stockholders deficit and operating losses for past two years. These circumstances raise substantial doubt about the Companys ability to continue as a going concern.
While the Company is attempting to generate sufficient revenues, the Companys cash position may not be enough to support the Companys daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Companys ability to further implement its business plan and generate sufficient revenues.
These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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 Transition Report on Form 10-K of the Company for the 8 months ended June 30, 2015. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Included in the statements is convertible debt of $161,599 and interest of $10,204 which the lender is demanding repayment but the Company is disputing. Operating results for the three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending June 30, 2016. For further information, these unaudited financial statements and the related notes should be read in conjunction with the Companys audited financial statements for the 8 months ended June 30, 2015 included in the Companys transition report on Form 10-KT.
2. RELATED PARTIES
As of September 30, 2015, amounts of $462,724 were owing to related parties (June 30, 2015: $493,283). These amounts are unsecured, and have no fixed interest or repayment terms.
During the three months ended September 30, 2015 and 2014, $6,878 and $8,266, respectively, was incurred as remuneration to a shareholder of the Company who serves as the manager of the restaurant operation.
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3. PROPERTY AND EQUIPMENT
September 30, 2015 | Cost | Accumulated | Net Book Value |
Computer equipment | $ 5,262 | $ 4,456 | $ 806 |
Furniture and fixtures | 89,320 | 41,806 | 47,514 |
Leasehold improvements | 148,175 | 42,591 | 105,584 |
| $ 242,757 | $ 88,853 | $ 153,904 |
June 30, 2015 | Cost | Accumulated Depreciation | Net Book Value |
Computer equipment | $ 5,650 | $ 4,646 | $ 1,004 |
Furniture and fixtures | 95,912 | 42,206 | 53,706 |
Leasehold improvements | 159,110 | 37,636 | 121,474 |
| $ 260,672 | $ 84,488 | $ 176,184 |
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.
5. COMMITMENT
The Company is committed until May 31, 2022 for payments totaling CAD$219,486 for premises under lease. The minimum lease payments over the next five years are as follows:
2016 | CAD$ 23,550 |
2017 | 47,100 |
2018 | 47,100 |
2019 | 50,868 |
2020 | 50,868 |
| CAD$ 219,486 |
6. CAPITAL STOCK
In September 2015, the Company issued 10,000,000 shares in satisfaction of $10,000 in debt.
7. CONVERTIBLE PROMISSORY NOTES
As at September 30, 2015, the Company has $382,117 (June 30, 2015 - $388,892) in convertible promissory notes that are due on demand, bear interest at 5% and are unsecured. $75,000 of these promissory notes are convertible at $0.01, while the remaining $307,117 are convertible at $0.001. If the balance outstanding were converted into common shares, the amount of shares to be issued would be 314,617,000 common shares.
During the period ended September 30, 2015, $3,225 of convertible notes were issued which had beneficial conversion features with intrinsic values in excess of the principal balance. As a result, the Company recorded debt discounts of $3,225. In addition, as these promissory notes are payable on demand, the debt discounts were fully amortized to interest expense during the period.
During the period ended September 30, 2015, $10,000 of debt was converted into $10,000,000 common shares.
8. SUBSEQUENT EVENTS
On October 30, 2015, the Company received $5,733 in convertible debt financing.
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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 consolidated financial statements of Monarchy Ventures, Inc. (Monarchy or the Company) and the notes which form an integral part of the consolidated 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 yet to generate any profits.
As of September 30, 2015, we had a working capital deficit of $1,002,154 which is only slight improvement over the working capital deficit of $1,037,967 at June 30, 2015. This improvement resulted primarily a reduction in bank indebtedness, dues to related parties, and accounts payable as well as fluctuations in the USD/CAD exchange rate. We also settled a portion of the convertible debt by converting the debt to shares.
For the 3 months ending September 30, 2015 we had a net loss from operations of $19,853 compared to a net loss of $30,912 from operations for the 3 months ending September 30, 2014. This improvement resulted from increased sales and an overall reduction in operating expenses. Our comprehensive income for the 3 months ending September 30, 2015 was a net profit of $1,106 as a result of foreign exchange translation gains.
Foreign Currency and Exchange Rates
Our Company has assets in Mexico and Canada and, when applicable, will pay 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
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 debt or equity financing and ultimately on the ability of the restaurant in Canada 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 not be able to secure other sources of financing or any available sources may not be on favourable 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 consolidated financial statements contained in this quarterly report on Form 10-Q.
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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.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures
Our principal executive officer, who is also our principal financial officer, has evaluated the Companys disclosure controls and procedures as of September 30, 2015. Based on this evaluation, we have concluded that because of the material weakness in our internal control over financial reporting discussed below, the disclosure controls and procedures were not effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 are accumulated and communicated to Companys management as appropriate to allow timely decisions regarding required disclosure.
Notwithstanding the material weakness discussed below, our management has concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Managements annual report on internal control over financial reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f). The Companys internal control over financial reporting is a process affected by the Companys management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Companys financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
In designing and evaluating our internal controls and procedures, our management recognized that internal controls and procedures, no matter how well conceived and operated, can provide only a reasonable, not absolute, assurance that the objectives of the internal controls and procedures are met.
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The Companys management assessed the effectiveness of its internal control over financial reporting as of September 30, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commissions 2013 Internal ControlIntegrated Framework. Based on its assessment, management identified deficiencies in both the design and operating effectiveness of the Companys internal control over financial reporting, which when aggregated, represent a material weakness in internal control. The most significant of these are: (1) lack of segregation of duties; (2) lack of accounting expertise; and (3) lack of timely closing of books; (4) inability to get accounting information and schedules to our auditors in a timely manner.
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 our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified above result from insufficient qualified personnel in our finance department. This results in an inability to provide effective oversight and review of financial transactions with regard to accumulating and compiling financial data in the preparation of financial statements. The lack of sufficient personnel also results in a lack of segregation of duties and the accounting technical expertise necessary for an effective system of internal control. As soon as our finances allow, we plan on hiring additional finance staff and, where necessary, utilizing competent outside consultants to provide a layer of review and technical expertise that is currently lacking in our internal controls over financial reporting.
As a result of these material weaknesses, management concluded that the Company did not maintain effective control over financial reporting as of September 30, 2015.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 7, 2015, we received a letter from an attorney demanding repayment of $171,803 of principal and accrued interest on funds allegedly advanced to the company by his client. Although this historical debt was recorded on our consolidated financial statements and confirmed by our auditors, there are some discrepancies in the documents provided by the attorney in support of the demand for repayment. We have requested further evidence of the advances so that we can make a determination as to the validity of the debt and what terms and conditions may apply. As of the date of this report, we have not received a response.
ITEM 1A. RISK FACTORS
Not required for a smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In September 2015, the Company issued 10,000,000 shares in satisfaction of $10,000 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
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. |
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Date: November 26, 2015 | /s/ Timothy Ferguson |
| Timothy Ferguson Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director |
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