Monarch America, Inc.

Marijuana is a Schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal laws. As of the date of this filing, medical marijuana use has been legalized by 23 states and the District of Columbia, and the recreational use of marijuana has been legalized by 4 states. Despite the favorable strides made in state-level legislation, marijuana is still a federally illegal substance for both use and possession in accordance with the U.S. Controlled Substances Act. The Obama administration represents that it is inefficient for law enforcement agencies to prosecute individuals in possession or under the influence of marijuana when they would be otherwise abiding by state or locally-designated laws. There is no guarantee that the current administration will not change its stated policy regarding the low-priority enforcement of federal laws, or that any future administration would not change this policy and decide to enforce the federal laws vigorously. Any such change in the federal government's enforcement of current federal laws could cause significant financial damage to the Company.

Unaudited pro forma results of operations for the three and nine months ended September 30, 2015 as if the Companies had been combined as of January 1, 2014, follow. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated or which may result in the future.

The Company evaluated the modification pursuant to ASC 470-60 "Troubled Debt Restructuring by Debtors", and ASC 470-50 "Modification and Extinguishment" and determined that a concession was not granted and the guidance contained in ASC 470-60 does not apply. The Company determined that the modification was substantial, and the modification has been treated as a debt extinguishment in accordance with ASC 470-50. As a result, the Company recorded a loss on extinguishment of debt of $345,938.

During the third quarter, the Company became the exclusive consultant to the Flandreau Santee Sioux Tribe for a recreational marijuana grow facility and consumption lounge in South Dakota. As of the date of this filing, construction of the facility was completed and cultivation had begun. However, certain actions recently taken by the Attorney General of South Dakota, the Flandreau Tribe voluntarily destroyed the crop, cultivation has been halted until the Flandreau tribe and Monarch can perform a risk assessment and determine how to proceed.

The repositioning of Lingas Resources into what is now Monarch America has required substantial capital throughout fiscal year 2014 and into 2015 in order to ramp up operations and change the Company's industry from rare earth mining and discovery to marijuana cultivation. The transition has been made further difficult by governmental red tape and bureaucracy, demonstrated by Monarch's consulting client at the Custer warehouse, Green Sky, being unable to obtain a license to grow cannabis at the facility, which has led to Monarch not being able to collect management and consulting fees from Green Sky, as no cannabis has been cultivated. As of the date of this filing, Monarch is aggressively working towards selling its tenant improvements at the Custer facility. The successful execution of these efforts will provide Monarch sufficient working capital to honor its obligations through the end of the year; however other arrangements will still need to be made in satisfying the long term debt that will come due throughout 2016. Management is in negotiations with a party interested in acquiring the tenant improvements in the Custer warehouse. The potential purchaser has deposited $50,000 into an escrow account to go towards the purchase price as a showing of intent to proceed.