ITEM 1. BUSINESS
Use of Certain Defined Terms
Except as otherwise indicated by the context, references in this report to:
·
“CH Real Estate,” “CH,” “CH Real Estate II, Inc.,” “we,” “us,” or “our,” “Successor” and the “Company” are references to the business of CH Real Estate II, Inc. and its wholly-owned subsidiaries.
·
“Securities Act” refers to the Securities Act of 1933, as amended, and “Exchange Act” refers to the Securities Exchange Act of 1934, as amended
Overview
CH Real Estate II, Inc. is a real estate development company primarily engaged in purchasing properties for the purpose of keeping them as rental properties, and/or remodeling them and selling them at a profit. We also make so-called “hard money loans,” as described herein. Curt Hansen founded the company. The Company was organized in Utah on June 29, 2010, as an LLC and incorporated on April 14, 2011 as a corporation.
Real estate development is a multifaceted business encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of improved parcels to others. Developers are the coordinators of the activities, converting ideas on paper into real property. Real estate development is different from construction.
Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control and orchestrate the process of development from the beginning to end. Developers usually take the greatest risk in the creation or renovation of real estate and receive the greatest rewards. Typically, developers purchase a tract of land, determine the marketing of the property, develop the building program and design, obtain the necessary public approval and financing, build the structure, and lease, manage, and ultimately sell it. Developers work with many different counterparts along each step of this process, including architects, city planners, engineers, surveyors, inspectors, contractors, leasing agents and more.
Although the Company intends to primarily engage in the purchase, improvement, and disposition of real property, it has also purchased and sold hard money loans that are secured by real property, and generally earn above-market interest. The Company typically earns interest of 15%-18% on these loans.
Our financial status creates doubt about whether we will continue as a going concern. As we have an accumulated deficit as of December 31, 2016 of $198,528. We currently have limited assets with which to fund operations and pay for the expenses associated with complying with our reporting requirements under the federal securities laws, it is likely that we may not be able to comply with those reporting requirements, which would mean that limited information regarding the Company and our operations would not be available to investors and the public.
Company Information
CH Real Estate II, Inc. was incorporated in 2011 and will pursue purchasing and developing real estate properties in Utah and Colorado (and other states as available) at discounted prices, and lending money secured by real estate at higher than usual interest rates, i.e. “hard money” loans. In its history, and before the fiscal year which began on January 1, 2016, the Company had entered into five such hard money loan transactions, and was repaid in full each time at a profit.
As of the date of the filing of this Annual Report on Form 10-K, the Company is a creditor with respect to one hard money loan:
On December 17, 2015, the Company loaned $89,930 a borrower, secured by property in Waxhaw, North Carolina. This is a five-month loan, due on May17, 2016, and was made along with a trust whose trustee is the Company’s CEO. The total amount of the loan was $107,250, which includes the trust. On January 25, the borrower prepaid $6,745 in interest, based on an annual interest rate of 18%. As this note is currently in default, the Company reserved $44,965 or 50% of the principal balance of this note as of December 31, 2016. DoHardMoney.com has taken possession of this residential property as the result of the note default.
The Company’s cash and this hard money loan are the Company’s only assets as of the date of this Annual Report on Form 10-K; however, management continues to search for appropriate real estate opportunities within its limited budget.
Business Strategies
CH’s business strategy is to take advantage of what the Company believes are relatively low prices in the real estate market. CH attempts to purchase distressed properties renovate them, and then sell them at a profit. The Company has purchased and sold four properties in its history, and sold each of them at a profit.
As of the date of the filing of this Annual Report on Form 10-K, the Company owns no real estate properties or assets other than the one hard money loan described above.
Industry Summary
The Utah and Colorado real estate markets have remained steady during the past twelve months; and the national real estate market is also stronger, in general. Management believes that an improving real estate market helps the Company when it owns properties for sale, because people are more likely to purchase as opposed to simply hunting for bargains. The reduction in the unemployment rate, in Utah, Colorado and nationally is also helpful to the Company’s business, assuming that the Company owned properties for sale. However, as noted above, the Company currently owns no real estate properties; therefore, it is likely that, in a rising market, the Company will have to pay more than it would pay if real estate prices were declining.
Competitive Strengths within the Industry
The Company relies on management’s personal expertise and experience in the real estate industry. The Company has many ties to the Utah and Colorado communities, and has cultivated relationships with individuals and companies in those states.
An important strength of the Company lies in its and its founder’s relationships with vendors, agents, and customers. CH seeks properties from and markets to unrelated parties with whom the founder has done business in the past, and intends to in the future.
Growth Strategy
The Company’s main priorities and strategies for future growth include: (i) the use of new and competitive business strategies, and (ii) the use of new and competitive sales models. Through the use of new strategies and sales models, and subject to having enough capital, we hope to acquire properties in Salt Lake City and other parts of Utah, and in Colorado. The Company has abandoned its search to acquire real estate opportunities in California.
The Company has been financed by its founder, and additional capital may currently be available from the founder, if needed. However, there is no agreement between the Company and its founder which requires the founder to financially support the Company. The Company has not raised capital from outside investors since 2011, and currently does not intend to seek additional equity and debt capital from outside investors. Instead, the Company intends to look for different leveraging opportunities to purchase more properties.
Primary Business Strategy
Our primary business strategy is to find and purchase properties which it believes will appreciate in price, to make hard money secured loans, and to develop property it may purchase in Utah and Colorado. The Company has no agreements or understandings regarding any such purchases, and its ability to purchase any properties is very restricted because the Company has virtually no working capital. Management will make a determination based on its real estate investment experience, and its limited capital as to which option offers the best risk-reward potential. The decision may also be effected by time listed as compared to average days listed in each market. The longer a subject property is listed for sale without being sold, the more likely it will be that management will convert the property into a rental, either temporarily or permanently. Decisions as to what properties to purchase and/or loan against will also be substantially affected by the limited amount of its own capital, interest rates, and other factors which are common to the real estate industry.
Sales Model
The Company does not advertise. Our sales model is to continue to market to parties with whom the founder has done business in the past, as well as marketing properties through typical real estate listings with local real estate brokerages with whom we or our founder have worked with in the past.
Where You Can Find Us
Our corporate headquarters are located at 2851 B ½ Road, Grand Junction CO 81503, which is the office of Michael Hansen, treasurer and a director of the Company. We pay no rent to use this space. Our telephone number is (970) 424-6935.
ITEM 1A.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES
The Company does not currently own or lease any real property. The Company’s corporate headquarters are located at 2851 B ½ Road Grand Junction CO 81503. The space is provided to us by Michael Hansen, who is a director and treasurer of the Company, and is the brother of Curt Hansen, our CEO and majority shareholder. The Company currently does not pay any rental fees for the use of this space, and if the Company did pay rent for this space it would not be a material amount. The Company feels this space is sufficient until the Company commences full operations. The Company’s main telephone number is (970) 424-6935.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There has been no market for our securities. Our common stock is not traded on any exchange or on the over-the-counter market. We hope to have a market maker file an application with the Financial Industry Regulatory Authority, FINRA for our common stock to be eligible for trading on OTC Markets. We are in the process of having Spartan Securities Group Ltd. do so, but there is no assurance that any such application will ever be approved or that a trading market will develop, or, if developed, that it will be sustained.
As of the date of this Annual Report on Form 10-K, we have 32 shareholders of record and 100,000,000 common shares issued and outstanding.
We have not reserved any securities for issuance under any equity compensation plan, as we currently have not adopted any equity compensation plan.
We have never declared dividends or paid cash dividends on our common stock and our board of directors does not intend to distribute dividends in the near future.
Penny Stock Rules
We will be subject to the penny stock rules adopted by the Securities and Exchange Commission (“SEC”) that require brokers to provide extensive disclosure to its customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our stockholders to sell their securities.
Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000, or annual income exceeding $200,000 individually, or $300,000 together with his or her spouse, is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:
· Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
· Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
· Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks;
· Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our stockholders will, in all likelihood, find it difficult to sell their securities.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
As the Company is a “smaller reporting company,” this Item is not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Overview of Earnings for the period ended December 31, 2016
The Company had revenues of $26,085 for the fiscal year ended December 31, 2016 which comprised of interest income of $24,156 and extension income of $1,929. The increase in revenue for the period compared to 2015 related to an increase in interest income from the Company’s notes receivables. The Company did not purchase, renovate or sell any properties in the period ended December 31, 2016.
The Company incurred operating expense of $114,937 during the period. The increase in operating expenses in 2016 compared to 2015 is due primarily to bad debt expense related to the reserve for the Waxhaw, North Carolina note receivable in the amount of $44,965. The Company incurred net interest expense of $7,157. Interest expense increased due to an increase in related party payables during the year.
Overview of Earnings for the period ended December 31, 2015
The Company had revenues of $8,312 for the fiscal year ended December 31, 2015 which comprised of interest income of $6,200 and extension income of $2,112. The decrease in revenue for the period compared to 2014 related to the sale of the property in Salt Lake City, Utah sold in 2014 and no properties being sold in the fiscal year ended December, 31, 2015. The Company did not purchase, renovate or sell any properties in the period ended December 31, 2015.
The Company incurred operating expense of $42,233 during the period. The decrease in operating expenses in 2015 compared to 2014 is due primarily to a reduction of professional fees related to the Company’s public filings. The Company incurred net interest expense of $5,180. Interest expense decreased due to a reduction in 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 was 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.
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 three 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 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 section, we have no other financing plans at this time.
Liquidity and Capital Resources
As of December 31, 2016, the Company had cash and cash equivalents of $229,347 with which to continue its operations. Our cash flows from operations (used) provided were $(553) and $205,564 for the years ended December 31, 2016 and 2015, respectively. We have an accumulated deficit of $198,528. The Company’s management believes that it is in position to fund its operation for the near term, but the use of cash in operations and our accumulated deficit cause doubt on our ability to continue as a going concern. 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
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.
Our significant accounting policies are summarized in Note 2 of our financial statements. 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. In April 2015, the Financial Accounting Standards Board (“FASB’) issued an accounting standard update related to simplifying the presentation of debt issuance costs. The updated accounting guidance requires that debt issuance costs be presented as a direct deduction from the associated debt obligation. The amendment is effective for annual reporting periods beginning after December 15, 2015, which for the Company is January 1, 2016. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
In November 2015, the FASB updated the accounting guidance related to the balance sheet presentation of deferred taxes. The updated accounting guidance requires that all deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this update. The amendment is effective for annual reporting periods beginning after December 15, 2015, which for the Company is January 1, 2016. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
August 2016, the FASB issued an accounting standard update which updates the guidance as to how certain cash receipts and cash payments should be presented and classified within the statement of cash flows. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted, including adoption in an interim period.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As the Company is a “smaller reporting company,” this item is not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Green & Company, CPAs
A PCAOB Registered Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
CH Real Estate II, Inc.
We have audited the accompanying balance sheet of CH Real Estate II, Inc. as of December 31, 2016 and 2015, and the related statements of operations, stockholders’ deficiency, and cash flows for the years ended December 31, 2016 and 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CH Real Estate II, Inc. as of December 31, 2016 and December 31, 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has significant net losses and cash flow deficiencies. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Green & Company, CPAs
Green & Company, CPAs
Temple Terrace, Florida
March 27, 2017
10320 N 56th Street, Suite 330
Temple Terrace, FL 33617
813.606.4388
CH Real Estate II, Inc.
Condensed Balance Sheets
See the accompanying notes to the unaudited financial statements.
CH Real Estate II, Inc.
Condensed Statements of Operations
See the accompanying notes to the unaudited financial statements.
CH Real Estate II, Inc.
Consolidated Statement of Stockholders' Equity
See the accompanying notes to the financial statements
CH Real Estate II, Inc.
Condensed Statements of Cash Flows
See accompanying notes to the unaudited financial statements.
CH REAL ESTATE II, INC.
Notes to the Financial Statements
For the years ended December 31, 2016 and 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.
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.
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.
Concentration: In 2016 and 2015, 100% of the Company’s revenues resulted from hard money loans with one customer, DoHardMoney.com
Inventories
Inventories are stated at the lower of cost or market (“LCM”). Inventory consists of finished goods and recorded under the first in first out (“FIFO”) method.
Basis of Presentation
These financial statements have been prepared to reflect the financial position, results of operations and cash flows of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Note 2: Significant Accounting Policies
Basis of Presentation and the Use of Estimates:
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CH REAL ESTATE II, INC.
Notes to the Financial Statements
For the years ended December 31, 2016 and 2015
Financial instruments:
Financial Accounting Standards Board (“FASB’) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below.
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of the period end. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
Cash and Cash Equivalents:
Cash is maintained with a major financial institution in the United States. Deposits with this bank, at times, may exceed the amount of insurance provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered to be cash equivalents.
Common Stock:
The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.
Revenue and Cost Recognition:
The company has three revenue sources: real estate sales, real estate rental income, and interest income on notes receivable.
Interest Income from notes receivable is recognized as interest accrues (using the effective interest method) and is included in “Interest Income” on the statement of operations.
The Company follows ASC 970-340, Other Assets and Deferred Costs and ASC 970-360, Property, Plant and Equipment for cost capitalization policies. Costs, such as real estate taxes and insurance, we incur subsequent to acquisition and during the time we are readying the property for its intended resale are capitalized. Additionally, any costs that are clearly associated with the acquisition and rehabilitation of the property, such as legal fees, labor and materials are also capitalized. After rehabilitation of the property is substantially complete and the property is ready for resale, subsequent costs are charged to expense as incurred. When revenue is recognized and earned we charge all related capitalized costs to expense.
CH REAL ESTATE II, INC.
Notes to the Financial Statements
For the years ended December 31, 2016 and 2015
The Company follows ASC 360-20, Real Estate Sales, for recognizing profit on sales of real estate. We consider sales consummated at time of closing and when all the following criteria are met: We are bound, along with the buyer, by the terms of the contract; all consideration has been exchanged; we have arranged permanent financing, if any, that we are responsible for; and, all conditions precedent to closing have been performed.
The Company follows ASC 970-605, Revenue Recognition, for rental income. When a real estate property is substantially complete and is not immediately saleable we consider it held and available for occupancy and initial rental operations. We anticipate rental operations to be short-term and recognize rental revenues and associated operating costs in income and expense as they accrue. Carrying costs such as taxes, insurance, and depreciation are also charged to expense when incurred.
The Company may derive revenue from rents or through the purchase and sales of real estate properties. Rents are to be accrued when earned, generally through the passage of time. Revenue from the sales of property is recognized upon the closing of the real estate transaction and all rights have been assigned and title transfers. Costs are accumulated and recognized as expense in the period that the sale is complete.
The Company values inventories at the lower of cost or market. The Company provides for estimated losses for slow moving inventory. Reserves are estimated based on inventory on hand, industry trends, the real estate market and the expected net realizable value. The net realizable value is determined based upon current awareness of market prices.
Advertising Costs:
The Company’s policy regarding advertising is to expense advertising when incurred. There have been no advertising expenses incurred during periods presented.
Share Based Payments:
Share-based payments to employees, including grants of employee stock options are recognized as compensation expense in the consolidated financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The Company has not issued shares as compensation in the past; however we may consider this option in future periods for employee services.
The Company may issue restricted stock to consultants for services. Cost for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete. The company has not issued any shares as compensation in the periods presented
Income Taxes:
The Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets will not be realized.
CH REAL ESTATE II, INC.
Notes to the Financial Statements
For the years ended December 31, 2016 and 2015
ASC 740 clarifies the accounting and disclosure for uncertainty in tax positions, as defined. ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company is subject to the provisions of ASC 740 and has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.
Earnings (Loss) Per Share:
Basic loss per share is computed by dividing net earnings (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share are computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. The Company does not have any potentially dilutive common shares outstanding.
Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. In April 2015, the Financial Accounting Standards Board (“FASB’) issued an accounting standard update related to simplifying the presentation of debt issuance costs. The updated accounting guidance requires that debt issuance costs be presented as a direct deduction from the associated debt obligation. The amendment is effective for annual reporting periods beginning after December 15, 2015, which for the Company is January 1, 2016. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
In November 2015, the FASB updated the accounting guidance related to the balance sheet presentation of deferred taxes. The updated accounting guidance requires that all deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this update. The amendment is effective for annual reporting periods beginning after December 15, 2015, which for the Company is January 1, 2016. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
August 2016, the FASB issued an accounting standard update which updates the guidance as to how certain cash receipts and cash payments should be presented and classified within the statement of cash flows. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted, including adoption in an interim period.
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 December 31, 2016, the Company had an accumulated deficit of $198,528. This condition, in addition to operating losses in prior years, raises 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.
CH REAL ESTATE II, INC.
Notes to the Financial Statements
For the years ended December 31, 2016 and 2015
Note 3: Loans Receivable and Related Interest
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. On July 5, 2016 the borrower extended the term of this note to three months by paying an extension fee of $1,929. 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 and $2,715 during 2016.. On July 5, 2016 the borrower for the residential property in WonderLake, Illinois, extended the term of this note to three months by paying an extension fee of $1,929. This note was paid in full by the borrower on July 22, 2016.
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. As this note is currently in default, the Company reserved $44,965 or 50% of the principal balance of this note as of September 30, 2016. The expense related to this reserve is included in general and administrative expenses on the statement of operations. The prepaid interest of $6,745 on this loan was deposited in January 2016. The Company earned interest income totaling $621 related to this note during 2015 and $8,071 during the twelve months ended December 31, 2016. DoHardMoney.com has taken possession of this residential property as the result of the note default.
On July 8, 2016, the Company used $182,000 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 Marlboro, Maryland, and the borrower was obligated to repay the $182,000 in principal, plus fifteen percent (15%) interest per annum, within 150 days. The Company earned interest income totaling $11,375 related to this note during the twelve months ended December 31, 2016. This note was paid in full December 2016.
Note 4: 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 are being renovated. As of December 31, 2016 and 2015 the Company did not hold any properties under renovation.
Note 5: Deferred Revenue
The Company records deferred revenue when it receives payments from customers for services that have not been rendered or income not yet earned. The Company had $0 in deferred revenue at December 31, 2016 and $665 as of December 31, 2015, respectively.
Note 6: Income Taxes
The Company did not have any temporary differences for the period ended December 31, 2016 and 2015.
As of December 31, 2016, the Company’s net operating loss carryforward was $183,528. 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 December 31, 2016 and 2015 were $79,411 and $41,008, 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 years ending December 31, 2013 through 2016. The Company recognizes interest and penalties related to income taxes in income tax expense. The Company had incurred no penalties and interest for the years ended December 31, 2016 and 2015.
CH REAL ESTATE II, INC.
Notes to the Financial Statements
For the years ended December 31, 2016 and 2015
Note 7: Related Party Transactions
At inception, the Company has 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 December 31, 2016 and 2015, the loan balance was $344,493 and $129,493, respectively. The Company currently is accruing interest on the loan balance at a rate of 3% per annum. The total accrued interest is $30,848 and $23,691 as of December 31, 2016 and 2015, respectively.
The Company does not own or lease property or lease office space for its own internal use. The Company uses the office of Mike Hansen, one of its directors and officers, at no charge,
Note 8: 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.
As described above, on June 29, 2010, the Company issued 9,600,000 shares of its common stock to the officer and director of the Company in exchange for $2,500.
In March 2011, the Company received $15,500 in cash for the issuance of 77,500 shares of common stock at $.20 per share for gross proceeds in the amount of $15,500.
In March 2011, the Company issued 322,500 shares to consultants for services rendered. Shares were valued at the then fair market value of $.20 per share, for a total value of $64,500, which was expensed as stock-based compensation.
On September 1, 2016, the Company effected a 10 for 1 forward stock split of its outstanding common stock, resulting in each 1 share of outstanding common stock being automatically converted into 10 shares of common stock. All share and per share information herein has been retroactively adjusted to reflect the forward stock split.
Note 9: Subsequent Events
Management has evaluated subsequent events according to the requirements of ASC Topic 855, and has determined that there were no material reportable subsequent events to be disclosed.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A.
ITEM 9A. 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 has 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 year ended December 31, 2016 covered by this Form 10-K. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer has 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.
Management’s Report on Internal Control Over Financial Reporting
The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to management and to the board of directors regarding the preparation and fair presentation of published financial statements.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Corporation; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on our financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework - Guidance for Smaller Public Companies (the COSO criteria) which was updated in 2013. Based on our assessment we believe that, as of December 31, 2016, our internal control over financial reporting is not effective based on those criteria. The internal controls over financial accounting are not effective because the Corporation cannot afford to hire independent directors for an audit committee, a CFO, a controller, or other full-time personnel with accounting expertise, and the Corporation simply is not large enough to establish and maintain effective financial controls and procedures and to conduct complex accounting controls.
This annual report does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The directors and executive officers of the Company are:
Curt Hansen, 55, was born in the United States. Mr. Hansen has extensive experience in many areas of real estate. These areas include buying, renovating and selling real estate for profit, as well as lending funds to other investors for similar purposes. This process requires having the ability to identify and evaluate real estate, have current knowledge of the market and being able to acquire distressed properties. In addition to being profitable buying and selling real estate, Mr. Hansen has expert knowledge in managing rental properties. For over twenty-five years, Mr. Hansen has worked as a sole proprietor and real estate investor, buying and remodeling houses, duplexes, fourplexes and larger projects in his own name and using the DBA “CH Enterprises.” At times he has owned as many as 52 rental units and nineteen buildings. For several years, Mr. Hansen has also been a private money lender, where he leveraged his experience as a real estate entrepreneur to financially assist other investors in their efforts to make a profit in buying and selling properties. Mr. Hansen has been able to lend over $1,000,000 to investors located in Alaska, Utah, Colorado, Montana and Bulgaria. During the past six years, Mr. Hansen has been self-employed as a real estate and general business investor, locating, buying, selling, and managing real estate, and making other strategic debt and equity investments.
The Company believes that Mr. Hansen’s extensive experience in the real estate investment and development industries provides him crucial insight into market opportunities and the nuances of the development process, and that this experience, along with his entrepreneurial spirit, makes him a valuable member of the Company’s board of directors. Curt Hansen is Mike Hansen’s brother.
Mike Hansen, 56, was born in the United States. Mike Hansen is a seasoned real estate veteran who has been investing in real estate since 1984. He graduated from Colorado Mountain College in 1986 with a degree in solar retrofit technology, and is currently employed as a Program Manager for Housing Resources of Western Colorado, where he has worked since 1987 and which provides low-income customers with self-help housing, housing rehabilitation, weatherization, and rental services. As a Program Manager, he has assisted real estate purchasers, renters, and homeowners with locating suitable properties, finding financing, and building and/or improving their homes. Additionally, for the past 17 years, he has been Mr. Curt Hansen’s right hand man on many of Mr. Curt Hansen’s real estate projects.
The Company believes that Mr. Hansen’s extensive real estate investment experience and experience working alongside Mr. Curt Hansen in the real estate industry makes him a valuable member of the Company’s board of directors. Mike Hansen is Curt Hansen’s brother.
None of our directors qualify as “independent” as that term is defined under the applicable rules and regulations of the SEC, meaning that our directors may have business interests in the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. We believe that the members of our executive team are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material income to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors. Further, we are not a "listed company" under SEC rules and thus we are not required to have a compensation committee or a nominating committee.
We do not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. Our board of directors believes that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.
A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our Chief Executive Officer at the address appearing on the face page of this filing.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office or until his successor has been elected and qualified in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
Audit Committee
We do not have an audit committee of the Board of Directors. Management has determined not to establish an audit committee at present because of our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the Board of Directors or employed as an officer based on management’s belief that the cost of obtaining the services of a person who meets the criteria for a financial expert under Section 407 of the Sarbanes-Oxley Act of 2002 and Item 407(d) of Regulation S-K is beyond our limited financial resources and the financial skills of such an expert are simply not required or necessary for us to maintain effective internal controls and procedures for financial reporting in light of the limited scope and simplicity of accounting issues raised in our financial statements at this stage of our development.
Certain Legal Proceedings
No director, nominee for director, or executive officer has appeared as a party in any legal proceeding material to an evaluation of his ability or integrity during the past five years.
Code of Ethics
The Board of Directors has established a written code of ethics that applies to the Company’s officers. A copy of the Code of Ethics is filed as Exhibit 14.1.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Table. The following table sets forth information concerning the annual and long-term compensation awarded to, earned by, or paid to the named executive officer for all services rendered in all capacities to our company, or any of its subsidiaries, for the years ended December 31, 2016 and December 31, 2015:
Employment Agreements
The Company has no formal employment agreements. Neither Curt Hansen nor Mike Hansen has received any remuneration from the Company since inception; and it is not expected that either will receive remuneration unless and until the Company’s cash flow permits. The Company believes that if Curt or Mike were compensated, amounts would not be material to the financial statements.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our Common Stock as of December 31, 2016 for:
· each of our executive officers and directors;
· all of our executive officers and directors as a group; and
· any other beneficial owner of more than 5% of our outstanding Common Stock.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares issuable upon the exercise of stock options that are immediately exercisable or exercisable within 60 days. Except as otherwise indicated, all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Curt Hansen, the majority shareholder, has advanced funds to the Company, as necessary. As of December 31, 2016 and December 31, 2015, the loan balance was $375,341 and $153,184, respectively. The Company is currently accruing interest on the loan balance at a rate of 3% per annum. The total accrued interest (which is included in the loan balance) is $30,847 and $23,692 as of December 31, 2016 and December 31, 2015, respectively.
Other than as previously disclosed, none of the following parties has, since the date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
The officers and directors;
· Any person proposed as a nominee for election as a director;
· Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to the outstanding shares of common stock;
· Any relative or spouse of any of the foregoing persons who have the same house as such person.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed by our principal independent accountants for each of our last two fiscal years for the categories of services indicated for Green & Company:
Audit fees. Consists of fees billed for the audit of our annual financial statements and review of our interim financial information and services that are normally provided by the accountant in connection with year-end and quarter-end statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees billed for services relating to review of other regulatory filings including registration statements, periodic reports and audit related consulting.
Tax fees. Consists of professional services rendered by our principal accountant for tax compliance, tax advice and tax planning.
Other fees. Other services provided by our accountants.
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
______________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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.
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 29, 2017 By: /s/ Curt Hansen
Curt Hansen, Chief Executive Officer, Principal Financial Officer
Principal Accounting Officer, and Chairman of the Board of Directors
March 29, 2017
/s/ Mike Hansen
Mike Hansen, Member of the Board of Directors