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EX-32 - EXHIBIT 32 SECTION 906 CERTIFICATION - I-WELLNESS MARKETING GROUP INC.f10q123115_ex32.htm
EX-31 - EXHIBIT 31 SECTION 302 CERTIFICATION - I-WELLNESS MARKETING GROUP INC.f10q123115_ex31.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 SECURITIES EXCHANGE ACT OF 1934

 

 

 For the quarter ended December 31, 2015

 

Commission File number 333-172825

 

I-WELLNESS MARKETING GROUP 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

(Registrant’s telephone number)

 

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 PROCEEDING 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 issuer’s classes of common stock, as of February 26, 2016: 66,937,187





 

 

 

Page

Number

PART 1.

FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

Financial Statements

3

 

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

8

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk.

9

 

 

 

ITEM 4.

Controls and Procedures.

9

 

 

 

PART 2.

OTHER INFORMATION

 

 

 

 

ITEM 1.

Legal Proceedings

10

 

 

 

ITEM 1A.

Risk Factors

10

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

10

 

 

 

ITEM 3.

Defaults Upon Senior Securities

10

 

 

 

ITEM 4.

Mine Safety Disclosures

10

 

 

 

ITEM 5.

Other Information

10

 

 

 

ITEM 6.

Exhibits

11

 

 

 

 

 

 

 

 

 

 

 

 

 



2




PART 1 – FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


I-WELLNESS MARKETING GROUP INC.

(Formerly Monarchy Ventures Inc.)


CONSOLIDATED BALANCE SHEETS


 

 

December 31, 2015

 

June 30, 2015

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

 Current Assets

 

 

 

 

 Cash or cash equivalents

$

18,063

$

20,043

 Inventory

 

4,536

 

5,033

 Total current assets

 

22,599

 

25,076

 

 

 

 

 

Non-current Assets

 

 

 

 

Deposits

 

2,988

 

3,315

Property and equipment

 

148,216

 

176,184

Total non-current assets

 

151,204

 

179,499

 

 

 

 

 

TOTAL ASSETS

$

173,803

$

204,575

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

 

 

 

 

Current Liabilities

 

 

 

 

Bank indebtedness

$

13,242

$

16,629

Accounts payable

 

167,135

 

160,745

Accrued liabilities

 

1,788

 

1,985

Convertible notes payable

 

388,660

 

388,892

Due to related parties

 

449,358

 

493,283

Current portion of deferred lease incentive

 

1,361

 

1,510

Total current liabilities

 

1,021,544

 

1,063,044


Long Term Liabilities 

 

 

 

 

Deferred lease incentive

 

7,487

 

9,062

 

 

 

 

 

TOTAL LIABILITIES

 

1,029,031

 

1,072,106

 

 

 

 

 

STOCKHOLDERS’ DEFICIENCY

 

 

 

 

Common stock

  300,000,000 shares authorized, at $0.001 par value;

  66,937,845 shares issued and outstanding at December 31, 2015

  (56,937,845 at June 30, 2015)

 

66,938

 

56,937

Additional paid-in capital

 

76,728

 

67,018

Accumulated other comprehensive income

 

85,148

 

54,982

Accumulated deficit

 

(1,084,042)

 

(1,046,468)

 

 

 

 

 

Total stockholders’ deficiency

 

(855,228)

 

(867,531)

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

$

173,803

$

204,575



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



3




I-WELLNESS MARKETING GROUP INC.

(Formerly Monarchy Ventures Inc.)


CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



 

 

For the three months ended

 

For the six months ended

 

 

December 31

 

December 31

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 REVENUE

$

105,608

$

99,186

$

204,337

$

182,695

 COST OF GOODS SOLD

 

(74,696)

 

(69,565)

 

(140,695)

 

(128,253)

GROSS MARGIN

 

30,912

 

29,621

 

63,642

 

54,442

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

Depreciation

 

746

 

7,521

 

11,064

 

15,366

General and administrative

 

26,671

 

17,506

 

49,013

 

32,136

Management wages

 

7,867

 

9,248

 

14,757

 

17,545

Professional fees

 

6,543

 

4,692

 

9,768

 

7,020

Rent

 

7,623

 

9,794

 

16,615

 

25,862

TOTAL OPERATING EXPENSES

 

49,450

 

48,761

 

101,217

 

97,929

NET LOSS

 

(18,538)

 

(19,141)

 

(37,575)

 

(43,487)

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

Foreign exchange translation gain

 

9,208

 

351

 

30,167

 

1,713

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

$

(9,330)

$

(18,790)

$

(7,408)

$

(41,774)

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE

$

-

$

-

$

-

$

-

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE OUTSTANDING SHARES – basic and diluted

 

66,937,845

 

30,437,843

 

65,035,671

 

30,437,843

 











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




4




I-WELLNESS MARKETING GROUP INC.

(Formerly Monarchy Ventures Inc.)


CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)


 

 

Six months ended

 

 

December 31, 2015

 

December 31, 2014

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

$

(37,575)

$

(43,487)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Depreciation

 

11,064

 

15,366

Professional fees

 

9,768

 

-

Amortization of deferred lease incentive

 

(713)

 

(565)

Changes in operating assets and liabilities:

 

 

 

 

Prepaid expenses

 

-

 

938

Accounts payable and accrued expenses

 

9,514

 

8,055

Net cash used in operating activities

 

(7,941)

 

(19,693)

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Property and equipment

 

-

 

(2,751)

Net cash used in investing activities

 

-

 

(2,751)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Bank borrowings

 

(1,827)

 

(195)

Advances for convertible debt

 

9,768

 

-

Advances from related parties

 

-

 

19,970

Net cash provided by financing activities

 

7,941

 

19,775


Effect of foreign exchange

 

(1,980)

 

801


Net decrease in cash

 

(1,980)

 

(2,669)

 

 

 

 

 

CASH, BEGINNING OF PERIOD

 

20,043

 

23,418

CASH, END OF PERIOD

$

18,063

$

21,550

 






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




5




I-WELLNESS MARKETING GROUP INC.

(Formerly Monarchy Ventures Inc.)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015

(Unaudited)


1. ORGANIZATION AND BASIS OF PRESENTATION

 

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.


On December 21, 2015, the Company entered into an exclusive marketing agreement and was granted the exclusive worldwide marketing rights to a health and fitness application called 60K which is currently under development for iPhone, Android, tablets and desktop computers. Pursuant to the exclusive marketing agreement the Company will provide $100,000 in initial financing to complete the application as well as for marketing the release of a prototype. The Company will retain 30% of all revenue generated by the application.


In January 2016, the Company merged with its wholly owned subsidiary, I-Wellness Marketing Group Inc. which is a Nevada corporation incorporated during the six months ended December 31, 2015.


In February 9, 2016, the Company changed its name from Monarchy Ventures Inc. to I-Wellness Marketing Group Inc.


While the Company is attempting to generate sufficient revenues, the Company’s cash position may not be enough to support the Company’s daily operations. Management intends to raise additional funds by way of increasing revenue, and 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 Company’s ability to further implement its business plan and generate sufficient revenues.


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 Form 10-K of the Company for the period ended June 30, 2015. 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 December 31, 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 Company’s audited financial statements for period ended June 30, 2015 included in the Company’s transition report on Form 10-K.

 

2. RELATED PARTIES

 

As of December 31, 2015, amounts of $449,358 were owing to related parties (June 30, 2015: $493,283). These amounts are unsecured, and have no fixed interest or repayment terms.

 

During the six months ended December 31, 2015 and 2014, $14,757 and $17,545, respectively, was incurred as remuneration to a shareholder of the Company who serves as the manager of the restaurant operation.




6




3. PROPERTY AND EQUIPMENT


December 31, 2015

Cost

Accumulated
Depreciation

Net Book Value
December 31, 2015

Computer equipment

$ 5,092

$ 4,436

$ 656

Furniture and fixtures

86,436

42,876

43,560

Leasehold improvements

143,392

39,392

104,000

 

$ 234,920

$ 86,704

$ 148,216

 

 

 

 

June 30, 2015

Cost

Accumulated

Depreciation

Net Book Value
June 30, 2015

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 year’s portion of the lease incentive has been offset against the rent expense.


5. COMMITMENT


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. CONVERTIBLE PROMISSORY NOTES

 

As at December 31, 2015, the Company has $388,660 (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 are convertible at $0.001.


During the six months ended December 31, 2015, $9,768 of convertible notes issued were issued with beneficial conversion features with intrinsic values in excess of the principal balance. As a result, the Company recorded a debt discount of $9,768. In addition, as these promissory notes are payable on demand, the debt discounts were fully amortized to interest expense during the period.


During the six months ended December 31, 2015, $10,000 was converted into $10,000,000 common shares.

 

7. SUBSEQUENT EVENT


On February 26, 2016, the Company received CAD $1,846 in convertible debt financing.





7




ITEM 2. MANAGEMENT’S 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 I-Wellness Marketing Group Inc. (“I-Wellness” 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 December 31, 2015, we had a working capital deficit of $998,945, an improvement over the working capital deficit of $1,037,967 at June 30, 2015. This improvement resulted primarily from fluctuations in the USD/CAD exchange rate. We also settled a portion of convertible debt by converting the debt to shares.

 

For the 6 months ending December 31, 2015 we had a net loss from operations of $37,574 compared to a net loss of $43,486 from operations for the 6 months ending December 31, 2014. This improvement resulted from increased sales and a reduction of some operating expenses. Our comprehensive income for the 6 months ending December 31, 2015 was a net profit of $30,167 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.


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.



8



 

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 Company’s disclosure controls and procedures as of December 31, 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 Commission’s 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 Company’s 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.

 

Management’s 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 Company’s internal control over financial reporting is a process affected by the Company’s management 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 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.

 

The Company’s management assessed the effectiveness of its internal control over financial reporting as of December 31, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission’s 2013 Internal Control—Integrated Framework. Based on its assessment, management identified deficiencies in both the design and operating effectiveness of the Company’s 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.



9




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 December 31, 2015.

 

PART 2 – 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 December 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:


 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



10




ITEM 6. EXHIBITS

 

The following exhibits are included as part of this report:

 

 

 

 3

 

Corporate Charter*

 

 

 

3(i)

 

Articles of Incorporation*

 

 

 

3(ii)

 

By-laws*

 

 

 

10.1

 

Transfer Agent and Registrar Agreement*

 

 

 

10.2

 

Share Exchange Agreement dated May 14, 2013 (incorporated by reference to the Form 8 filed on May 14, 2013.

 

 

 

10.3

 

Share Exchange Agreement dated July 9, 2013 (incorporated by reference to the Form 8 filed on July 9, 2013)

 

 

 

31

 

Certification of Principal Executive Officer and Principal Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32

 

Certification of Principal Executive Officer and Principal Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


* Incorporated by reference to our Registration Statement on Form S-1 filed on March 15, 2011




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.


 

I-WELLNESS MARKETING GROUP INC.

 

 

 

 

Date: March 17, 2016

/s/ Timothy Ferguson

 

Timothy Ferguson

Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director





11