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EX-32.1 - EX-32.1 - CH REAL ESTATE II, INC.ex-32_1.htm
EX-31.1 - EX-31.1 - CH REAL ESTATE II, INC.ex-31_1.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the quarterly period ended June 30, 2015
 
 
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.)
 
2851B1/2 Road
Grand Junction, CO 81503
(Address of principal executive offices, including zip code)
 
(970) 924-6935
(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

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
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  o
Accelerated filer  ¨
Non-accelerated filer  o
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

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

As of March 7, 2016, 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, 2015
 
INDEX
 
 
 
Page
 
 
 
 
 
 
 
 
Item 1
3
 
3
 
4
 
5
 
6
 
 
 
Item 2
9
 
 
 
Item 3
13
 
 
 
Item 4
13
     
 
 
     
Item 5
13
     
Item 6
13
 
 
14
 
 
 
PART I – FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS

CH REAL ESTATE II, INC.
CONDENSED BALANCE SHEETS
 
   
June 30,
   
December 31,
 
   
2015
   
2014
 
   
(unaudited)
     
         
ASSETS
       
         
Current assets
       
Cash
 
$
84,936
   
$
10,583
 
Accounts Receivable
         
$
357,751
 
Loan receivable
   
75,000
     
-
 
                 
Total current assets
   
159,936
     
368,334
 
                 
Total assets
 
$
159,936
   
$
368,334
 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
                 
Current liabilities
               
Payables, related parties
 
$
151,226
   
$
349,252
 
                 
Total current liabilities
   
151,226
     
349,252
 
                 
Total liabilities
   
151,226
     
349,252
 
                 
Commitments and contingencies
               
                 
Shareholders' equity
               
               
Common stock, 100,000,000 shares authorized, no par value, 10,000,000 shares issued and outstanding, respectively
   
82,500
     
82,500
 
Accumulated deficit
   
(73,790
)
   
(63,418
)
                 
Total shareholders' equity
   
8,710
     
19,082
 
                 
Total liabilities and shareholders' equity
 
$
159,936
   
$
368,334
 
 
See the accompanying notes to the unaudited financial statements.
CH REAL ESTATE II, INC.
CONDENSED STATEMENTS OF OPERATIONS
   
For the Three Months Ended
   
For the Six Months Ended
 
   
June 30,
   
June 30,
 
   
2015
   
2014
   
2015
   
2014
 
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
 
                 
Sale of property
 
$
-
   
$
-
   
$
-
   
$
226,046
 
Extension income
   
-
     
4,356
     
-
     
7,860
 
Interest income
   
-
     
719
     
-
     
4,483
 
Total revenue
   
-
     
5,075
     
-
     
238,389
 
                                 
Basis and costs of property
   
-
     
-
     
-
     
209,084
 
Total basis and costs of property
   
-
     
-
     
-
     
209,084
 
                                 
Operating expenses
                               
General and administrative expenses
   
283
     
26,006
     
7,148
     
42,737
 
                                 
Total operating expenses
   
283
     
26,006
     
7,148
     
42,737
 
                                 
Income (loss) from operations
   
(283
)
   
(20,931
)
   
(7,148
)
   
(13,432
)
                                 
Other income (expense)
                               
Interest income (expense), net
   
(976
)
   
(2,706
)
   
(3,224
)
   
(4,857
)
Other income
   
-
     
50
     
-
     
174
 
Total other income (expense), net
   
(976
)
   
(2,656
)
   
(3,224
)
   
(4,683
)
                                 
Net income (loss)
 
$
(1,259
)
 
$
(23,587
)
 
$
(10,372
)
 
$
(18,115
)
                                 
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.
CH REAL ESTATE II, INC.
CONDENSED STATEMENTS OF CASH FLOWS
   
For the Six Months Ended
 
   
June 30,
 
   
2015
   
2014
 
   
(unaudited)
   
(unaudited)
 
Cash flows used in operating activities:
       
Net income (loss)
 
$
(10,372
)
 
$
(18,115
)
Adjustments to reconcile net income (loss) to net cash used in operations:
               
Accrued interest expense related party
   
3,223
     
4,862
 
                 
Changes in operating assets and liabilities:
               
Accounts receivable, net
   
357,751
     
-
 
Loans receivable, net
   
(75,000
)
   
-
 
Interest receivable
   
-
     
115,374
 
Prepaid expenses
   
-
     
(5,000
)
Construction in process
   
-
     
(129,626
)
Accounts payable and accrued expenses
   
-
     
(18,721
)
Net cash provided by (used in) operating activities
   
275,602
     
(51,226
)
                 
Cash flows used in investing activities:
               
Net cash used in investing activities
   
-
     
-
 
                 
Cash flows from financing activities:
               
Additions to related party advances
   
3,224
     
141,636
 
Repayment of related party advances
   
(204,473
)
   
(68,488
)
Net cash provided by financing activities
   
(201,249
)
   
73,148
 
                 
Net increase (decrease) in cash
   
74,353
     
21,922
 
                 
Cash at beginning of period
   
10,583
     
10,755
 
                 
Cash at end of period
 
$
84,936
   
$
32,677
 
                 
Supplemental disclosure of cash flow information:
               
                 
Cash paid for interest
 
$
-
   
$
-
 
                 
Cash paid for taxes
 
$
-
   
$
-
 
 
See the accompanying notes to the unaudited financial statements.
CH REAL ESTATE II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2015
 
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, so-called hard money loans, secured by the property against which the loans are made. 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, 2015 and for the three and six month periods ended June 30, 2015 and 2014 is unaudited, and the balance sheet as of December 31, 2014 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, 2015 are not necessarily indicative of the results that can be expected for the entire year ending December 31, 2015. 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, 2014.  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, 2015, the Company had an accumulated deficit of $73,790. 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.
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.
Note 2:   Loans Receivable and Interest Income
On June 30, 2015, monies totaling $75,000 were used to purchase a majority interest in a Note and Trust Deed from an unrelated third party, DoHardMoney.com.  The Note and Deed of Trust related to a residential property in Elkhart, IN, and the borrower is obligated to repay the $75,000 in principal, plus interest at 15% per annum, within 150 days.
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. The Company did not purchase or renovate any properties during the six months ended June 30, 2015.
Note 4:  Income Taxes
As of June 30, 2015, the Company had federal and state net operating loss carryforwards of approximately $79,790.  The provision (benefit) for income taxes for the period ended June 30, 2015 was offset by a full valuation allowance.  As of December 31, 2014, the Company’s net operating loss carryforward was $63,418.  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, 2015 and December 31, 2014 were $32,468 and $27,965 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, 2012 through 2014.  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, 2015 and December 31, 2014.
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, 2015 and December 31, 2014, the loan balance was $129,492 and $330,741, respectively.   The Company currently is accruing interest on the loan balance at a rate of 3% per annum. The total accrued interest is $21,735 and $18,511 as of June 30, 2015 and December 31, 2014, respectively.
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, 2015, 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
On October 30, 2015, the Company used $35,000 of its cash funds to purchase a Note and Deed of Trust from DoHardMoney.com. The Note and Deed of Trust related to a residential property in WonderLake, Illinois, and the borrower was obligated to repay the $35,000 in principal, plus fifteen percent (15%) interest per annum, within 150 days. The prepaid interest of $2,178 on this loan which deposited in December, 2015.  The Company earned interest income totaling $892 related to this note during 2015.
On December 17, 2015, the Company used $89,930 of its cash funds to purchase a Note and Deed of Trust from DoHardMoney.com. The Note and Deed of Trust related to a residential property in Waxhaw, North Carolina, and the borrower was obligated to repay the $89,930 in principal, plus eighteen percent (18%) interest per annum, within 150 days. The prepaid interest of $6,745 on this loan which deposited in January, 2016.  The Company earned interest income totaling $621 related to this note during 2015.
 
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, 2015 and June 30, 2014
The Company had revenues of $0 and $5,075 for the three month periods ended June 30, 2015 and 2014, respectively. The decrease in revenue for the three month periods ended June 30, 2015 compared to the three month period ended June 30, 2014 related to decreased interest income. The Company incurred operating expenses of $283 and $26,006 for the three month periods ended June 30, 2015 and 2014, respectively. Operating expenses in 2014 were significantly higher than for the same period in 2015 due primarily to professional fees related to the Company’s public filings. The Company had had net interest expense of $976 and $2,706 for the three month periods ended June 30, 2015 and 2014 respectively. Interest expense decreased primarily due to the decrease in related party payables.
Overview of Earnings for the six month periods ended June 30, 2015 and June 30, 2014
The Company had revenues of $0 and $238,389 for the six month periods ended June 30, 2015 and 2014, respectively. The decrease in revenue for the six months ended 2015 compared to six month period ended June 30, 2014 related to a decrease in interest income and no property sales.  The Company incurred operating expense of $7,148 and $42,737 during the six month periods ended June 30, 2015 and 2014, respectively. The decrease in operating expenses in 2015 primarily relates to higher professional fees related to the Company’s public filings in 2014. The Company had net interest expense of $3,224 and $4,683 for the six month periods ended June 30, 2015 and 2014, respectively. Interest expense decreased primarily due to decreased related party payables.
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
CH RE
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.
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, 2015, the Company had cash and cash equivalents of $86,176, with which to continue its operations. Cash flows provided from (used in) operations were $275,602 and ($51,226) for the six month periods ended June 30, 2015 and 2014. 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.
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
On October 30, 2015, the Company used $35,000 of its cash funds to purchase a Note and Deed of Trust from DoHardMoney.com. The Note and Deed of Trust related to a residential property in WonderLake, Illinois, and the borrower was obligated to repay the $35,000 in principal, plus fifteen percent (15%) interest per annum, within 150 days. The prepaid interest of $2,178 on this loan which deposited in December, 2015.  The Company earned interest income totaling $892 related to this note during 2015.
On December 17, 2015, the Company used $89,930 of its cash funds to purchase a Note and Deed of Trust from DoHardMoney.com. The Note and Deed of Trust related to a residential property in Waxhaw, North Carolina, and the borrower was obligated to repay the $89,930 in principal, plus eighteen percent (18%) interest per annum, within 150 days. The prepaid interest of $6,745 on this loan which deposited in January, 2016.  The Company earned interest income totaling $621 related to this note during 2015.
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.
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, 2015, the Company had an accumulated deficit of $73,790. 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.
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.
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, 2015 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 2015 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.

ITEM 6. LEGAL EXHIBITS

 The following exhibits are filed as a part of this report:
 
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: March 10, 2016
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.

March 10, 2016
/s/ Curt Hansen
 
 
Curt Hansen, Chief Executive Officer,
Principal Financial Officer
Principle Accounting Officer, and Chairman of the Board of Directors
   
 
 
 
 
 
 
 
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