UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
|
|
[X] |
Quarterly Report pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 |
|
|
|
For the quarterly
period ended August 31, 2014 |
|
|
[ ] |
Transition Report pursuant to 13 or 15(d)
of the Securities Exchange Act of 1934 |
|
|
|
For the transition
period from __________ to__________ |
|
|
|
Commission File Number:
333-171423 |
Berkshire
Homes, Inc.
(Exact
name of registrant as specified in its charter)
|
|
Nevada |
68-0680858 |
(State or other jurisdiction
of incorporation or organization) |
(IRS Employer Identification
No.) |
|
2375
East Camelback Road, Suite 600
Phoenix,
AZ 85016 |
(Address
of principal executive offices) |
|
(602)
387-5393 |
(Registrant’s
telephone number) |
_______________________________________________________ |
(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 [X] 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 [X] No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
[
] Large accelerated filer |
[
] Accelerated filer |
[
] Non-accelerated filer |
[X]
Smaller reporting company |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X]
No
State
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 157,200,000
as of October 15, 2014.
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
Our
consolidated financial statements included in this Form 10-Q are as follows:
These
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Operating results for the interim period ended August 31, 2014
are not necessarily indicative of the results that can be expected for the full year.
BERKSHIRE
HOMES, INC.
CONSOLIDATED
BALANCE SHEETS
(unaudited)
|
August 31, 2014 | |
November 30, 2013 |
ASSETS |
| | | |
| | |
Current Assets |
| | | |
| | |
Cash and equivalents |
$ | 385,602 | | |
$ | 146,048 | |
Inventory of property under development |
| 8,604,160 | | |
| 1,914,762 | |
Total Current Assets |
| 8,989,762 | | |
| 2,060,810 | |
Deferred financing costs |
| 7,778 | | |
| 15,147 | |
TOTAL ASSETS |
$ | 8,997,540 | | |
$ | 2,075,957 | |
|
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| | | |
| | |
Current Liabilities |
| | | |
| | |
Accounts payable and accrued liabilities |
$ | 5,782 | | |
$ | 17,438 | |
Accrued interest |
| 259,170 | | |
| 60,753 | |
Accounts payable to related parties |
| 494,020 | | |
| 494,020 | |
Advances due to related party |
| 275 | | |
| 275 | |
Advances due to Longview Realty, Inc. |
| 168,447 | | |
| 50,496 | |
Promissory notes - current |
| 2,650,000 | | |
| — | |
Total Current Liabilities |
| 3,577,694 | | |
| 622,982 | |
|
| | | |
| | |
Promissory notes - long term |
| 6,500,000 | | |
| 2,650,000 | |
Total liabilities |
| 10,077,694 | | |
| 3,272,982 | |
|
| | | |
| | |
Stockholders’ Deficit |
| | | |
| | |
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; 2,000,000 and nil shares issued and outstanding |
| 200 | | |
| — | |
Common Stock, $.0001 par value, 500,000,000 shares authorized, 157,200,000 and 215,200,000 shares issued and outstanding |
| 15,720 | | |
| 21,520 | |
Additional paid-in capital |
| 152,680 | | |
| 127,080 | |
Preferred share subscription receivable |
| (20,000 | ) | |
| — | |
Accumulated Deficit |
| (1,228,754 | ) | |
| (1,345,625 | ) |
Total Stockholders’ Deficit |
| (1,080,154 | ) | |
| (1,197,025 | ) |
|
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
$ | 8,997,540 | | |
$ | 2,075,957 | |
See
accompanying notes to unaudited consolidated financial statements.
BERKSHIRE
HOMES INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
|
Three months ended
August 31, 2014 | |
Three months ended
August 31, 2013 | |
Nine months ended
August 31, 2014 | |
Nine months ended
August 31, 2013 |
|
| | | |
| | | |
| | | |
| | |
REVENUES |
$ | 3,411,705 | | |
$ | — | | |
$ | 4,621,705 | | |
$ | — | |
|
| | | |
| | | |
| | | |
| | |
COST OF SALES |
| 2,997,901 | | |
| | | |
| 4,106,511 | | |
| | |
|
| | | |
| | | |
| | | |
| | |
GROSS PROFIT |
| 413,804 | | |
| | | |
| 515,194 | | |
| | |
|
| | | |
| | | |
| | | |
| | |
EXPENSES |
| | | |
| | | |
| | | |
| | |
Consulting fees |
| — | | |
| — | | |
| 12,000 | | |
| 1,000 | |
Insurance |
| 832 | | |
| — | | |
| 6,897 | | |
| — | |
General and administrative |
| 22,988 | | |
| 33,039 | | |
| 49,319 | | |
| 55,335 | |
Professional fees |
| 731 | | |
| 3,700 | | |
| 45,696 | | |
| 47,076 | |
Management fees and expenses |
| 31,624 | | |
| 37,500 | | |
| 85,995 | | |
| 87,500 | |
TOTAL EXPENSES |
| 56,175 | | |
| 74,239 | | |
| 199,907 | | |
| 190,911 | |
|
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM OPERATIONS |
| 357,629 | | |
| (74,239 | ) | |
| 315,287 | | |
| (190,911 | ) |
|
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE) |
| | | |
| | | |
| | | |
| | |
Interest expense |
| (102,595 | ) | |
| (37,522 | ) | |
| (198,416 | ) | |
| (73,922 | ) |
Loss on extinguishments of liabilities |
| — | | |
| (35,715 | ) | |
| — | | |
| (35,715 | ) |
TOTAL OTHER INCOME ( EXPENSE) |
| (102,595 | ) | |
| (73,237 | ) | |
| (198,416 | ) | |
| (109,637 | ) |
|
| | | |
| | | |
| | | |
| | |
|
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) |
$ | 255,034 | | |
$ | (147,476 | ) | |
$ | 116,871 | | |
$ | (300,548 | ) |
|
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) PER SHARE: BASIC AND DILUTED |
$ | 0.00 | | |
$ | (0.02 | ) | |
$ | 0.00 | | |
$ | (0.05 | ) |
|
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED |
| 157,200,000 | | |
| 6,593,333 | | |
| 170,088,889 | | |
| 5,551,667 | |
See
accompanying notes to unaudited consolidated financial statements.
BERKSHIRE
HOMES INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
|
Nine months ended
August 31, 2014 | |
Nine months ended
August 31, 2013 |
CASH FLOWS FROM OPERATING ACTIVITIES |
| | | |
| | |
Net income (loss) |
$ | 116,871 | | |
$ | (300,548 | ) |
Non-cash working capital items
|
| | | |
| | |
Loss on extinguishments of liabilities |
| — | | |
| 35,715 | |
Amortization of deferred financing costs |
| 7,369 | | |
| — | |
Adjustments to reconcile net loss to net cash used in operating activities |
| | | |
| | |
Changes in assets and liabilities |
| | | |
| | |
Inventory |
| (6,689,398 | ) | |
| (1,023,980 | ) |
Accounts payable - related party |
| — | | |
| 8,588 | |
Accounts payable and accrued expenses |
| 186,761 | | |
| 70,834 | |
Net cash used in operating activities |
| (6,378,397 | ) | |
| (1,209,391 | ) |
|
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES |
| | | |
| | |
Net cash used in investing activities |
| — | | |
| — | |
|
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES |
| | | |
| | |
Deferred financing costs |
| — | | |
| (19,650 | ) |
Advances from Longview Realty Inc. |
| 117,951 | | |
| — | |
Repayment of long term debt |
| | | |
| (500,000 | ) |
Proceeds from promissory notes |
| 6,500,000 | | |
| 2,750,000 | |
Net cash provided by financing activities |
| 6,617,951 | | |
| 2,230,350 | |
|
| | | |
| | |
NET CHANGE IN CASH |
| 239,554 | | |
| 1,020,959 | |
|
| | | |
| | |
CASH - BEGINNING OF PERIOD |
| 146,048 | | |
| — | |
|
| | | |
| | |
CASH - END OF PERIOD |
$ | 385,602 | | |
$ | 1,020,959 | |
|
| | | |
| | |
SUPPLEMENTAL CASH FLOW INFORMATION: |
| | | |
| | |
Cash paid for interest |
$ | — | | |
$ | — | |
Cash paid for taxes |
$ | — | | |
$ | — | |
|
| | | |
| | |
NON-CASH TRANSACTIONS: |
| | | |
| | |
Accrued interest converted into shares |
$ | — | | |
$ | 89,285 | |
Subscription receivable |
$ | 20,000 | | |
$ | — | |
Cancellation of common stock |
$ | 5,800 | | |
$ | — | |
See
accompanying notes to unaudited consolidated financial statements.
BERKSHIRE
HOMES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description
of Business
Berkshire
Homes, Inc. (the “Company”) was incorporated in Nevada on June 2, 2010. The Company is no longer in the
development stage as defined under Statement on Financial Accounting Standards Accounting Standards Codification FASB ASC
915-205 "Development-Stage Entities.”
The Company acquires, rehabilitates and sells
or leases distressed residential real estate in the United States.
Basis
of Presentation
The accompanying
unaudited interim financial statements of Berkshires Homes, Inc. (the “Company”) have been prepared in accordance
with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission,
and should be read in conjunction with the Company’s audited 2013 annual financial statements and notes thereto filed on
Form 10-K with the SEC. In the opinion of management, all adjustments, consisting of normal reoccurring adjustments, necessary
for a fair presentation of financial position and the results of operations for the interim periods present have been reflected
herein. The results of operation for interim periods are not necessarily indicative of the results to be expected for the full
year. Notes to the financial statements, which would substantially duplicate the disclosure required in the Company’s fiscal
2013 financial statements have been omitted.
NOTE
2- RELATED PARTY TRANSATIONS
As
of August 31, 2014, the Company had a payable of $494,020 owed to Bay Capital A.G., who became a related party during 2013 by
obtaining majority ownership.
During
2013, Cannabis-RX Inc., an entity with common ownership, advanced an aggregate of $50,496 to the Company. In addition,
during the nine months ended August 31, 2014, Cannabis advanced an additional $117,951 to the Company. As at August 31, 2014,
the total advances from Cannabis was $168,447.
The
amounts due to these related parties are due on demand, non-interest bearing and unsecured.
NOTE
3 - PROMISSORY NOTES
On June 13, 2013, the Company borrowed $2,150,000
at an interest rate of 5% per annum. The promissory note is unsecured and is due on June 13, 2015. In connection with the note,
the Company paid a fee of $19,650 to a third party which was recorded as deferred financing costs and is being amortized to interest
expense over the life of the loan using the effective interest rate method. During the period ended August 31, 2014, amortization
expense of $7,369 was recognized and unamortized financing costs of $7,778 are deferred on the balance sheet. As of August 31,
2014, $2,150,000 was classified as a short-term liability.
On June 27, 2013, the Company borrowed $500,000
at an interest rate of 5% per annum. The promissory note is unsecured and is due on June 27, 2015. As of August 31, 2014, $500,000
was classified as a short-term liability.
On April 21, 2014, the Company borrowed $4,500,000
at an interest rate of 5% per annum. The promissory note is unsecured and is due on April 21, 2016. As of August 31, 2014, 4,500,000
was classified as a long-term liability.
On June 23, 2014, the Company borrowed $2,000,000
at an interest rate of 5% per annum. The promissory note is unsecured and is due on June 23, 2016. As of August 31, 2014, $2,000,000
was classified as a long-term liability.
NOTE
4- COMMON STOCK
On
February 12, 2014, the Company authorized a class of Series A preferred stock consisting of 5,000,000 shares with a par
value of $ 0.0001 per share. On February 12, 2014, the Company issued 2,000,000 such shares for cash of $20,000. As August
31, 2014 of the date of filing, the Company had not received the proceeds of the share subscription and the proceeds have
been recorded as share subscriptions receivable.
During
the nine months ended August 31, 2014, the sole director and officer returned an aggregate of 58,000,000 common shares to the
Company and they were cancelled.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements.” These forward-looking statements generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are
subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our
ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have
a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes
in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted
accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements.
Company
Overview
We
are focused on the acquisition and rehabilitation of distressed residential properties in the United States. Our corporate offices
are located at 2375 East Camelback Road, Suite 600, Phoenix, AZ 85016 and our phone number is (602) 387-5393.
We
believe that the current housing market environment presents an unprecedented opportunity for those who have the expertise, operating
platform, technology systems and capital in place to execute an acquisition and operating strategy in a cost-effective manner.
We intend to build a geographically diversified portfolio of residential homes in target markets that we believe exhibit favorable
demographics and long-term economic trends, attractive acquisition prices, rental yields and appreciation potential. We intend
to implement a buy and renovate strategy to increase value, livability, and attractiveness, and then sell the properties or keep
them for value as rental properties.
In
furthering our business plan, we have been actively searching for capital to purchase distressed properties and build our inventory.
We have sold an aggregate of $7,150,000 of our 5% unsecured promissory notes (the “5% Notes”) for gross proceeds to
us of $7,150,000. The 5% Notes accrued interest at the rate of 5% per annum are due and payable twenty four months from their
respective dates of issuance, subject to acceleration in the event of default and the 5% Notes may be prepaid, in whole or in
part, without penalty or premium.
With
the money we have raised through debt financing to date we have acquired 20 properties for a purchase price of $11,049,890. Of
these 20 properties we have sold 7 for $4,667,500 prior to closing costs. Also, one property is under contract for sale, 2 are
listed for sale, and 10 are under rehab. The properties include single and multi-family residences in 5 States. We plan to recycle
all the capital from these properties and purchase more similar type assets to rehabilitate and sell. Additionally, we plan to
expand our portfolio and have been looking at other major urban markets to enter into. Our short and long-term goals are to seek
out opportunistic real estate investments that meet our underwriting criteria including twenty percent annualized returns. There
is no assurance, however, that we will find the assets that fit our parameters or that we will raise the needed capital to implement
our business plan.
We
will continue our efforts to secure additional financing, which is necessary to implement our business strategy of acquiring a
substantial portfolio investment properties. We plan to continue our efforts to secure financing.
Results
of Operations for the three and nine months ended August 31, 2014 and 2013
Revenues
We
generated sales of $3,411,705 for the three months ended August 31, 2014, our second quarter to post revenues. We generated sales
of $4,621,705 for the nine months ended August 31, 2014, as compared with no revenue for the same period ended August 31, 2013.
Our cost of sales totaled $2,997,901 and 4,106,511 for the three and nine months ended August 31, 2014, respectively. Our costs
of sales includes: purchase price, rehabilitation, escrow, closing costs, and commissions. We achieved a gross profit of $413,804
for the three months ended August 31, 2014, which represented a 12% margin, and a gross profit of $515,194 for the nine months
ended August 31, 2014, which represents an 11% margin.
Operating
Expenses
Operating
expenses decreased by $18,064 to $56,175 for the three months ended August 31, 2014 from $74,239 for the three months ended August
31, 2013. Our operating expenses for the three months ended August 31, 2014 consisted of management fees and expenses of $31,624,
general and administrative expenses of $22,988, professional fees of $731 and insurance expenses of $832. In comparison, our operating
expenses for the three months ended August 31, 2013 consisted of management fees and expenses of $37,500, general and administrative
expenses of $33,039, and professional fees of $3,700.
Operating
expenses increased by $8,996 to $199,907 for the nine months ended August 31, 2014 from $190,911 for the nine months ended August
31, 2013. Our operating expenses for the nine months ended August 31, 2014 consisted of management fees and expenses of $85,995,
professional fees of $45,696, general and administrative expenses of $49,319, consulting fees of $12,000 and insurance expenses
of $6,897. In comparison, our operating expenses for the nine months ended August 31, 2013 consisted of management fees and expenses
of $87,500, general and administrative expenses of $55,335, professional fees in the amount of $47,076 and consulting fees of
$1,000.
We
anticipate our operating expenses will increase as we continue to expand our operations. The increase will be attributable to
administrative and operating costs associated with the acquisition, expand renovation and sale of residential properties and our
continued reporting obligations with the Securities and Exchange Commission.
Interest
Expenses
Other
Interest expenses increased by $65,073 to $102,595 for the three months ended August 31, 2014 from $37,522 for the three months
ended August 31, 2013. The increase is attributable to an increase in debt to finance our real estate operations.. Interest expenses
increased by $124,494 to $198,416 for the nine months ended August 31, 2014 from $73,922 for the nine months ended August 31,
2013. The increase is attributable to an increase in debt to finance our real estate operations.
On
June 13, 2013, we issued a promissory note for proceeds of $2,150,000 at an interest rate of 5% per annum. The promissory note
is unsecured and is due on June 13, 2015. On June 27, 2013, we issued a promissory note for proceeds of $500,000 at an interest
rate of 5% per annum. The promissory note is unsecured and is due on June 27, 2015. On April 21, 2014, we issued a promissory
note for proceeds of $4,500,000 at an interest rate of 5% per annum. The promissory note is unsecured and is due on April 21,
2016.
Net
Income ( Loss)
We
incurred net income of $255,034 for the three months ended August 31, 2014, compared to a net loss of $147,476 for the three months
ended August 31, 2013. We incurred net income of $116,871 for the nine months ended August 31, 2014, compared to a net loss of
$300,548 for the nine months ended August 31, 2013.
Liquidity
and Capital Resources
As
of August 31, 2014, we had total current assets of $8,989,762, consisting of cash and our real property inventory. We had current
liabilities of $3,577,694 as of August 31, 2014. Accordingly, we had working capital of $5,412,068 as of August 31, 2014.
Operating
activities used $6,378,397 in cash for the nine months ended August 31, 2014, as compared with $1,209,391 used for the nine months
ended August 31, 2013. Our negative operating cash flow for August 31, 2014 was a result of the increase in our real property
inventory.
Financing
activities for nine months ended August 31, 2014 generated $6,617,951 in cash, as compared with cash flows provided by financing
activities of $2,230,350 for the three months ended August 31, 2013. Our positive cash flow from financing activities for the
nine months ended August 31, 2014 was the result of our ability to raise debt financing.
As
of August 31, 2014, we had $385,602 in cash. Until we are able to sustain our ongoing operations through revenue, we intend to
fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures,
working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the
advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on
acceptable terms, or at all.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management
Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the
portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
We do not believe that any accounting policies currently fit this definition.
Recently
Issued Accounting Pronouncements
We
do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations,
financial position or cash flow.
Off
Balance Sheet Arrangements
As
of August 31, 2014, there were no off balance sheet arrangements.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
A
smaller reporting company is not required to provide the information required by this Item.
Item
4. Controls and Procedures
Disclosure
Controls and Procedures
We
conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as of August 31, 2014, to ensure that information required to be disclosed
by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required
to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that as of August 31, 2014, our disclosure controls and procedures were not effective at the reasonable
assurance level due to the material weaknesses identified and described below.
Our
principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud.
Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and
our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control
system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of
the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company
have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual
a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions.
Remediation
Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis. Management identified the following three material weaknesses that have caused management to conclude
that, as of August 31, 2014, our disclosure controls and procedures, and our internal control over financial reporting, were not
effective at the reasonable assurance level:
• We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls
over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the period ending August 31, 2014. Management
evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of
our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
• We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size
and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to
the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed
by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our
disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
•
Effective controls over the control environment were not maintained. Specifically, a formally adopted written code of business
conduct and ethics that governs our employees, officers, and directors was not in place. Additionally, management has not developed
and effectively communicated to employees its accounting policies and procedures. This has resulted in inconsistent practices.
Further, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee
financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect
across the organization, management has determined that these circumstances constitute a material weakness.
To
address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial
statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows
for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all
material respects, our financial condition, results of operations and cash flows for the periods presented.
To
remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party
firm to assist us in remedying this material weakness once resources become available.
We
intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order
to segregate duties in a manner that establishes effective internal controls once resources become available.
Changes
in Internal Control over Financial Reporting
No
change in our system of internal control over financial reporting occurred during the period covered by this report, the period
ended August 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
We
are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers,
directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse
to us.
Item
1A. Risk Factors
A
smaller reporting company is not required to provide the information required by this Item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item
3. Defaults upon Senior Securities
None
Item
4. Mine Safety Disclosures
N/A
Item
5. Other Information
None
Item
6. Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
|
|
Berkshire
Homes, Inc.
|
Date: |
October
15, 2014
|
By: |
/s/ Llorn
Kylo |
|
Llorn Kylo |
Title: |
President, Chief Executive Officer, Chief
Financial Officer and Director |
CERTIFICATIONS
I, Llorn Kylo, certify that;
1. |
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended August 31, 2014 of Berkshire Homes, Inc. (the “registrant”); |
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. |
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. |
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. |
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. |
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: October 15, 2014
/s/ Llorn Kylo
By: Llorn Kylo
Title: Chief Executive Officer
CERTIFICATIONS
I, Munjit Johal, certify that;
1. |
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended August 31, 2014 of Berkshire Homes, Inc. (the “registrant”); |
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. |
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. |
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. |
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. |
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: October 15, 2014
/s/ Munjit Johal
By: Munjit Johal
Title: Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the quarterly
Report of Berkshire Homes, Inc. (the “Company”) on Form 10-Q for the quarter ended August 31, 2014 filed with
the Securities and Exchange Commission (the “Report”), I, Llorn Kylo, Chief Executive Officer of the Company, and
I, Munjit Johal, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a)
of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material
respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations
of the Company for the periods presented. |
By: |
/s/ Llorn Kylo |
Name: |
Llorn Kylo |
Title: |
Principal Executive Officer and Director |
Date: |
October 15, 2014 |
By: |
/s/ Munjit Johal |
Name: |
Munjit Johal |
Title: |
Principal Financial Officer |
Date: |
October 15, 2014 |
This certification has been furnished solely pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
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