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EXCEL - IDEA: XBRL DOCUMENT - CH REAL ESTATE II, INC.Financial_Report.xls
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATIONS - CH REAL ESTATE II, INC.f10q063014_ex31z1.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATIONS - CH REAL ESTATE II, INC.f10q063014_ex31z2.htm
EX-32.2 - EXHIBIT 32.2 SECTION 906 CERTIFICATIONS - CH REAL ESTATE II, INC.f10q063014_ex32z2.htm
EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATIONS - CH REAL ESTATE II, INC.f10q063014_ex32z1.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 quarterly period ended June 30, 2014


      .

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 333-179424


CH REAL ESTATE II, INC.

(Exact name of registrant as specified in its charter)


Utah

 

90-1030909

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)


175 South Main Street, Suite 1500

Salt Lake City, UT 84111

(Address of principal executive offices, including zip code)


(801) 739-8234

(Registrant’s telephone number, including area code)


n/a

(Former name, former address and former fiscal year, if changed since last report)


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. Yes      . No  X .


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). Yes  X . No      .


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 .


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes      . No  X .


Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 15, 2014, the issuer had 10,000,000 outstanding shares of common stock, no par value.




CH REAL ESTATE II, INC.

FORM 10-Q


For the Quarterly Period Ended June 30, 2014


INDEX


 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements (unaudited)

3

 

Condensed Balance Sheets

3

 

Condensed Statements of Operations

4

 

Condensed Statements of Cash Flows

5

 

Notes to Condensed Financial Statements

6

 

 

 

Item 2

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

9

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

12

 

 

 

Item 4

Controls and Procedures

12

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 5

Legal Proceedings

12

 

 

 

Item 6

Exhibits

13

 

 

Signatures

14





2



PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


CH REAL ESTATE II, INC.

CONDENSED BALANCE SHEETS


 

 

 

 

June 30,

 

December 31,

 

 

 

 

2014

 

2013

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash

 

$

32,677

 

$

10,755

 

Prepaid expenses

 

 

5,000

 

 

-

 

Construction in process

 

 

329,910

 

 

200,284

 

Interest receivable

 

 

-

 

 

12,474

 

Loan receivable

 

 

-

 

 

102,900

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

367,587

 

 

326,413

 

 

 

 

 

 

 

 

 

Total assets

 

$

367,587

 

$

326,413

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

-

 

$

18,721

 

Payables, related parties

 

 

344,248

 

 

266,238

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

344,248

 

 

284,959

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

344,248

 

 

284,959

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

Common stock, 100,000,000 shares authorized, no par value, 10,000,000shares issued and outstanding, respectively

 

 

82,500

 

 

82,500

 

Accumulated deficit

 

 

(59,161)

 

 

(41,046)

 

 

 

 

 

 

 

 

 

 

 

Total shareholders' equity

 

 

23,339

 

 

41,454

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

367,587

 

$

326,413


See the accompanying notes to the unaudited financial statements.



3



CH REAL ESTATE II, INC.

CONDENSED STATEMENTS OF OPERATIONS


 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

 

 

June 30,

 

June 30,

 

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of property

 

$

-

 

$

-

 

$

226,046

 

$

-

Extension income

 

 

4,356

 

 

-

 

 

7,860

 

 

-

Interest income

 

 

719

 

 

3,848

 

 

4,483

 

 

5,375

Total revenue

 

 

5,075

 

 

3,848

 

 

238,389

 

 

5,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basis and costs of property

 

 

-

 

 

-

 

 

209,084

 

 

-

Total basis and costs of property

 

 

-

 

 

-

 

 

209,084

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

26,006

 

 

2,063

 

 

42,737

 

 

3,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

26,006

 

 

2,063

 

 

42,737

 

 

3,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(20,931)

 

 

1,785

 

 

(13,432)

 

 

1,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

(2,706)

 

 

(710)

 

 

(4,857)

 

 

(1,555)

 

Income tax benefit (expense)

 

 

-

 

 

-

 

 

-

 

 

-

 

Other income

 

 

50

 

 

-

 

 

174

 

 

-

Total other income (expense), net

 

 

(2,656)

 

 

(710)

 

 

(4,683)

 

 

(1,555)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(23,587)

 

$

1,075

 

$

(18,115)

 

$

(67)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

 

(0.00)

 

 

0.00

 

 

(0.00)

 

 

(0.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic and diluted

 

 

10,000,000

 

 

10,000,000

 

 

10,000,000

 

 

10,000,000


See the accompanying notes to the unaudited financial statements.



4



CH REAL ESTATE II, INC.

CONDENSED STATEMENTS OF CASH FLOWS


 

 

 

 

 

For the Six Months Ended

 

 

 

 

 

June 30,

 

 

 

 

 

2014

 

2013

 

 

 

 

 

(unaudited)

 

(unaudited)

Cash flows used in operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(18,115)

 

$

(67)

 

Adjustments to reconcile net income (loss) to net cash used in operations:

 

 

 

 

 

 

 

 

Accrued interest expense related party

 

 

4,862

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Additions to (Repayment of) Related party advances

 

 

-

 

 

(5,375)

 

 

 

Interest receivable

 

 

115,374

 

 

(4,694)

 

 

 

Prepaid expenses

 

 

(5,000)

 

 

-

 

 

 

Construction in process

 

 

(129,626)

 

 

-

 

 

 

Deferred revenue

 

 

-

 

 

(681)

 

 

 

Accounts payable and accrued expenses

 

 

(18,721)

 

 

500

 

 

 

Net cash provided by (used in) operating activities

 

 

(51,226)

 

 

(10,317)

 

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Additions to related party advances

 

 

141,636

 

 

1,559

 

Repayment of related party advances

 

 

(68,488)

 

 

(40,608)

 

 

 

Net cash provided by financing activities

 

 

73,148

 

 

(39,049)

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

21,922

 

 

(49,366)

 

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

10,755

 

 

62,004

 

 

 

 

 

 

 

 

 

 

Cash at end of period

 

$

32,677

 

$

12,638

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

$

3,607

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for taxes

 

$

-

 

$

-


See the accompanying notes to the unaudited financial statements.



5



CH REAL ESTATE II, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2014


Note 1:

The Company


The Company and Nature of Business


CH Real Estate II, Inc. (the "Company") was incorporated in the State of Utah on April 14, 2011, as the successor to operations as CH Real Estate, which was organized in the State of Utah on June 29, 2010. CH Real Estate II, Inc. is a real estate investment and development company.


Investment: The Company purchases Notes and Deeds of Trust from unrelated third parties. The Company typically receives 15% to 18% return on these investments.


Development: The Company engages in purchasing properties for the purpose of keeping them as rental properties, and/or remodeling them and selling them at a profit.


Extension Income: The Company purchases Notes and Deeds of Trust from unrelated third parties. At times, these third parties request to extend the Notes on these properties. The Company charges an extension fee to extend the note.


Basis of Presentation


The condensed interim financial information of the Company as of June 30, 2014 and for the three and six month periods ended June 30, 2014 and 2013 is unaudited, and the balance sheet as of December 31, 2013 is derived from audited financial statements. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements. Accordingly, they omit or condense footnotes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles. In the opinion of management, all adjustments that are necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results that can be expected for the entire year ending December 31, 2014. The unaudited financial statements should be read in conjunction with the Company’s annual financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In particular, the Company’s significant accounting policies were presented as Note 2 to the financial statements in that Annual Report.


Recently Accounting Guidance Adopted


There are no recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.


Going Concern


The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. As of June 30, 2014, the Company had an accumulated deficit of $59,161. This condition, in addition to operating losses in prior years, raise substantial doubt about the Company's ability to continue as a going concern.


In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations and the ability to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. The Company intends to continue to serve its customers as remodeler, landlord, and financing provider. There is no assurance that we will be successful in achieving any or all of these objectives.



6



Note 2:

Loans Receivable and Interest Income


On March 11, 2013, the Company used $102,900 of its cash funds to purchase a Note and Deed of Trust from an unrelated third party, DoHardMoney.com. The Note and Deed of Trust related to a residential property in Hickorywood, Virginia, and the borrower was obligated to repay the $102,900 in principal, plus fifteen percent (15%) interest per annum, within 150 days. The borrower has extended the note by paying an extension fee of $1,050. At December 31, 2013 the Company had accrued interest income of $12,474 related to this note. On March 3, 2014 the Company received payment of $6,431 toward this note and on April 11, 2014 the Company received full payment of this note and accrued interest for the total amount of $117,782.


Note 3:

Construction in Progress


The Company engages in purchasing properties for the purpose of keeping them as rental properties, and/or remodeling them and selling them at a profit. Construction in progress consists of properties the companies has purchased which our currently being renovated. In August 2013, the Company purchased a property in Salt Lake City for $157,687. The Company has spent $42,596 as of December 31, 2013 in remodeling costs for this property. On January 15, 2014 this property was sold for $226,046.


In February 2014, the Company purchased a property in Salt Lake City for $259,910. The Company has spent $70,000 in remodeling costs for this property as of June 30, 2014.


Note 4:

Income Taxes


As of June 30, 2014, the Company had federal and state net operating loss carryforwards of approximately $59,161. The provision (benefit) for income taxes for the period ended June 30, 2014 was offset by a full valuation allowance. As of December 31, 2013, the Company’s net operating loss carryforward was $41,046. The federal and state net operating loss carryforwards will expire at various dates beginning in 2031, if not utilized. The Company’s deferred tax assets as of June 30, 2014 and December 31, 2013 were $22,481 and $15,581, respectively. The potential income tax benefit of these losses have been offset by a full valuation allowance.


Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.


The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the year ending December 31, 2011 through 2013. The Company recognizes interest and penalties related to income taxes in income tax expense. The Company had incurred no penalties and interest for the periods ended June 30, 2014 and December 31, 2013.


Note 5:

Related Party Transactions


At inception, the Company issued 9,600,000 shares of restricted common stock to the majority shareholder for initial funding, in the amount of $2,500.


The Company does not have employment contracts with its sole officer and director, who is the majority shareholder. The sole officer and director of the Company is involved in other business activities and may, in the future, become involved in additional business opportunities that become available. A conflict may arise in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.


We depend on our sole officer and director, to provide the Company with the necessary funds to implement our business plan, as necessary. The Company does not have a funding commitment or any written agreement for our future required cash needs.


The majority shareholder has advanced funds, as necessary. These advances are considered temporary in nature and are payable on demand. There is no formal document describing the terms of this arrangement (maturity date and interest rates). As of June 30, 2014 and December 31, 2013, the loan balance was $330,740 and $257,590, respectively. The Company currently is accruing interest on the loan balance at a rate of 3% per annum. The total accrued interest is $13,508 and $8,648 as of June 30, 2014 and December 31, 2013, respectively.



7



The Company does not own or lease property or lease office space. The office space used by the Company was arranged by the sole officer and director of the Company to use at no charge.


The above amount is not necessarily indicative of the amount that would have been incurred had a comparable transaction been entered into with independent parties.


Note 6:

Equity


The Company has been authorized to issue 100,000,000 common shares, no par value. Common shares are entitled to one vote per share.


At June 30, 2014, there were 10,000,000 shares outstanding. There were no common stock transactions during the periods presented.


The Company has no options or warrants issued or outstanding and no preferred shares have been issued.


Note 7:

Subsequent Events


None




8



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Results of Operations


Overview of Earnings for the three month periods ended June 30, 2014 and June 30, 2013


The Company had revenues of $5,075 and $3,848 for the three month periods ended June 30, 2014 and 2013, respectively. The increase in revenue for the three month periods ended June 30, 2014 compared to the three month period ended June 30, 2013 related to increased interest income related to the Company’s not receivable. The Company incurred operating expenses of $26,006 and $2,063 for the three month periods ended June 30, 2014 and 2013, respectively. The increase in operating expenses in 2014 primarily relates to increased professional fees related to the Company’s public filings. The Company had had net interest expense of $2,706 and $710 for the three month periods ended June 30, 2014 and 2013 respectively. Interest expense increased primarily due to increase related party payables during the year.


Overview of Earnings for the six month periods ended June 30, 2014 and June 30, 2013


The Company had revenues of $238,389 and $5,375 for the six month periods ended June 30, 2014 and 2013, respectively. The increase in revenue for the six months ended 2014 compared to six month period ended June 30, 2013 related to the sale of the property in Salt Lake City (note 3). The Company incurred operating expense of $42,737 and $3,887 during the six month periods ended June 30, 2014 and 2013, respectively. The increase in operating expenses in 2014 primarily relates to increased professional fees related to the Company’s public filings. The Company had net interest expense of $4,857 and $1,555 for the six month periods ended June 30, 2014 and 2013, respectively. Interest expense increased primarily due to increase related party payables during the year.


Plan of Operations


Although the Company intends to primarily engage in the purchase, improvement, and disposition of real property, it may also purchase hard money loans with maturity dates of less than a year that are secured by real property and earn above-market interest (in excess of twelve percent (12%) per annum). The Company generally does not perform a formal appraisal of the value of the security, and the Company identifies such Notes via referral from DoHardMoney.com, a company in the business of making hard money loans secured by real estate and managed by an individual that has been our Chief Executive Officer’s real estate agent for several years. DoHardMoney.com has their own underwriting standards, with the results reviewed by the Company upon referral of the loan. DoHardMoney.com’s underwriting procedure typically includes the following:


·

The loan to after-repair-value of property should be around 65%

·

Three qualified realtors informally value the property

·

Borrower Background Check for criminal record

·

Verify down payment source if applicable

·

Receive borrower’s loan application short form

·

Review borrower credit scores and history

·

Review borrower’s purchase contract for property

·

Verify borrower’s company information and verification

·

Review borrower’s submitted contractor bids for property rehabilitation/repair

·

Review Title Report and insurance

·

Review 24 month chain of title

·

Review hazard insurance


The Company does not perform any additional due diligence with respect to loan referrals from DoHardMoney.com other than a review of DoHardMoney.com’s underwriting results, and the Company makes its decision to purchase a Note referred by DoHardMoney.com based on that review.



9



The Company intends to use its cash flows from operations to partially retire liabilities, beginning with outstanding interest on its related party debt and then principal on that debt, as well as to purchase additional properties. As management expects that the Company will make further purchases of real property during the next year, it expects that the Company’s current cash funds and cash flow from operations will only fund its operations for the next six months. The Company intends to seek additional capital from its founder and raise additional capital through private equity financing and/or debt financing if possible.


During our startup phase of operations, we will seek to initially raise approximately $115,000 in additional capital by offering our common stock to business associates through private sales exempt from registration, and the capital raise thereby will be used to acquire additional properties, depending upon management’s analysis of the amount by which the subject properties are determined to be priced below their intrinsic values, and/or retire existing debt with the founder if we are unable to locate any such properties. If appropriate “undervalued” properties are located, we anticipate that we will be able to purchase two such properties using all $115,000 in startup capital. Our ability to do so within the projected 18-month startup phase is wholly dependent upon the real estate market and our identification of properties priced enough below their intrinsic values to justify the expenses associated with purchasing, maintaining, repairing/improving, and selling such properties. If the Company is unable to generate capital to fund operations or raise additional capital through the sale of equity, but it does locate properties that it determines offer an attractive risk-reward ratio, it will be forced to borrow funds from its founder or from outside sources on terms it considers less attractive. The startup phase of our operations will be complete when we have generated $50,000 in net profits from our operations.


During our second phase of operations, or our repayment and growth phase, we will need approximately $250,000 in available cash funds, which will be used first to retire existing debt and then to purchase additional properties as available funds permit. We anticipate generating such funds through our startup operations and through additional equity and/or debt raises. Assuming we have $50,000 in available cash funds generated during our startup phase, and have retired existing debt, we anticipate that we will be able to purchase two additional properties. We hope to earn enough from the disposition of these properties to enable us to hire a full-time real estate investor, who will assist us in locating more properties that meet our investment profile.


Our third and final phase will target debt-free growth and will be funded exclusively through cash flow from existing operations or through one or more public or private equity offerings. During this last phase, we will increase our inventory of properties and staff used to locate, improve and market those properties and will expand into other markets outside of Utah.


During the next twelve months, the Company anticipates that it will incur minimal operating expenses aside from the accounting and EDGAR filing expenses associated with being a public company. At the present time, we have not made any arrangements to raise additional cash. We may seek to obtain the funds we need through a public offering, private placement of securities or loans. Other than as described in this paragraph, we have no other financing plans at this time.


Liquidity and Capital Resources


As of June 30, 2014, the Company had cash and cash equivalents of $32,677, with which to continue its operations. Cash flows from operations used $51,226 and $10,317 for the six month periods ended June 30, 2014 and 2013. The Company’s management believes that it is in position to fund its operation for the near term. The Company intends to seek financing via private equity investment and debt financing if necessary. Such equity investment would necessarily require the issuance of additional capital stock. We have not identified any potential lenders other than our founder who has loaned us funds in the past. We believe we can currently satisfy our cash requirements for the next twelve months with our current cash and expected revenues. Additionally, we may secure additional funds, for our growth, through our private placement of common stock. Management plans to increase the number of properties for the purpose of achieving a stream of revenue through rental properties. We believe that this plan will sustain future operational growth.


Completion of our plan of operation is subject to attaining adequate and continued revenue. We cannot assure investors that adequate rents and proceeds from out real estate transactions will be generated. In the absence of our anticipated rents and proceeds from sales, we believe that we will be able to proceed with our plan of operations. Even without significant revenues within the next twelve months, based on our current cash position, we anticipate being able to continue with our present activities. Although we believe we currently are adequately financed, we may require additional financing for sales and marketing objectives to achieve our goal of sustained profit, revenue and growth.



10



In the event we are not successful in reaching our sustained revenue targets, we anticipate that depending on market conditions and our plan of operations, we could incur operating losses in the future. We base this expectation, in part, on the fact that we may not be able to generate enough gross profit from our property transactions to cover our operating expenses. Consequently, there remains the possibility that the Company may not continue to operate as a going concern in the long term. As described in our market risks, we are subject to many factors. Some of which involve factors outside of management’s controls, including interest rates, our ability to attain adequate financing for our property purchases, our ability to hire and retain skills necessary for the repairs of our assets, as well as other factors. Additionally, we benefit from the current market conditions of a high inventory of real estate properties and few buyers, resulting in what we believe is a below normal market price. We do expect market conditions to change, which will affect our profitability as the market becomes more competitive.


We have been funded solely by our majority shareholder for our initial purchase. These funds were necessary for our purchase. We do not have any agreement or written commitment for continued support in our efforts to grow our business plan.


Management believes that current revenue generated and recent investment commitment provides the opportunity for the Company to continue as a going concern and fund the strategic plan.


Subsequent Events


None


Emerging Growth Company


We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.


Critical Accounting Policies


Our financial statements are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.


The Company’s significant accounting policies were presented as Note 2 to the consolidated financial statements in our Annual Report. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.



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Off Balance Sheet Arrangements


We have no off-balance sheet arrangements.


Recent Accounting Pronouncements


From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


As the Company is a “smaller reporting company,” this item is not applicable.


ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the period ended June 30, 2014 covered by this Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.


Changes in Internal Control over Financial Reporting


There was no change in our internal control over financial reporting that occurred in the second quarter of 2014 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.


PART II – OTHER INFORMATION


ITEM 5. LEGAL PROCEEDING


None.



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ITEM 6. LEGAL EXHIBITS


The following exhibits are filed as a part of this report:


Number

 

Description

 

 

 

3.1

 

Articles of Organization (incorporated by reference to our Form S-1 Registration Statement filed on February 8, 2012)

 

 

 

3.2

 

Articles of Incorporation  (incorporated by reference to our Form S-1 Registration Statement filed on February 8, 2012)

 

 

 

3.3

 

Bylaws (incorporated by reference to our Form S-1 Registration Statement filed on February 8, 2012)

 

 

 

5.1

 

Opinion of Vincent & Rees, L.C. (incorporated by reference to our Form S-1 Registration Statement filed on February 8, 2012)

10.1

 

Share Exchange Agreement (incorporated by reference to our Form S-1/A Registration Statement amendment filed November 29, 2012)

 

 

 

10.2

 

Promissory Note (incorporated by reference to our Form S-1/A Registration Statement amendment filed November 29, 2012)

10.3

 

Assignment of Promissory Note (incorporated by reference to our Form S-1/A Registration Statement amendment filed November 29, 2012)

31.1

 

Certification of Principal Executive Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

31.2

 

Certification of Principal Financial Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63

 

 

 

32.2

 

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document





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SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.



 

CH Real Estate II, Inc.

 

 

 

 

 

 

Date: August 18, 2014

 

 

 

By:

/s/ Curt Hansen

 

 

Curt Hansen

 

 

Chief Executive Officer



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 dates indicated.


August 18, 2014

/s/ Curt Hansen

 

Curt Hansen, Chief Executive Officer, Principal Financial Officer, Principle Accounting Officer, and Chairman of the Board of Directors

 

 

 

 

August 18, 2014

/s/ Mike Hansen

 

Mike Hansen, Member of the Board of Directors




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