Correspondence
Birch Branch, Inc.
March 15, 2007
Ms. Amanda Jaffe
U.S. Securities & Exchange Commission
Division of Corporate Finance
100 F Street, N.E.
Washington, D.C. 20549
RE: Birch Branch, Inc.
Dear Ms. Jaffe:
As we discussed on the telephone, I have sent to you via general correspondence
on Edgar, the amended December 31, 2006 10QSB for Birch Branch, Inc. This file
shows our proposed changes that address the comments in your letter of February
28, 2007. I have noted our changes in this letter as below:
Question 7.
Note 5- Related Party Transactions - Note 5 has been amended to read as
follows:
Prior to December 2006, the Company's then President advanced funds to the
Company for construction in progress for a building and general operating
expenses. The construction of the building was completed in September 2005, and
the Company's then President and the Company converted $381,134 of the advances
and $48,866 of accrued interest to a mortgage note payable totaling $430,000,
collateralized by the building and attached real estate owned by the Company.
In December 2006, the land, building and improvements ("LB&I") and furniture in
the building were sold, pursuant to an Asset Purchase Agreement, dated December
6, 2006, to the Company's then President in exchange for (i) the cancellation of
the $430,000 note payable, (ii) accrued interest payable related to the note of
approximately $39,976, (iii) additional advances of approximately $50,739, (iv)
the assumption of accounts payable and accrued liabilities of approximately
$3,468 and, (v) the return to the Company of 12,500 shares of the Company's
outstanding common stock valued at $25,000, collectively "Proceeds". The Company
recognized a loss of $52,017 from the sale of LB&I and furniture. This loss is
reported in Discontinued Operations in the Company's Statement of Operations for
the three and six months ended December 31, 2006.
The loss on the sale of the LBI and furniture was calculated by deducting the
net book value of the LB&I and furniture of $452,697 from the deemed proceeds of
$400,681. Deemed proceeds consisted of $390,000 in fair market value of the LB&I
and $10,681 of net book value of the furniture. Fair market value for the LB&I
was determined based on a local real estate broker's research and evaluation of
the local market and the subject property.
2560 W. Main Street, Suite 200 Littleton, CO 88120 ph 303-794-9450
The Proceeds received by the Company from the then President totaled $549,183.
All proceeds in excess of fair market value, approximately $96,485, have been
recognized as an increase to paid-in-capital pursuant to Accounting Principles
Board Opinion No. 26 and FAS 57 and APB 26 paragraph 20 as they relate to
transactions with affiliated parties and extinguishment of debt.
Questions 8 & 9.
Item 3- CONTROLS AND PROCEDURES- this disclosure has been revised to read
as follows:
The Company's management, including the president and chief financial officer
has evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined by Rules 13a-15 (e) of the Securities Exchange Act of
1934) as of December 31, 2006. Their evaluation concluded that, although these
disclosure controls and procedures are not intended to prevent all errors,
emissions or instances of fraud (i) the disclosure controls and procedures are
effective as of December 31, 2006 and provide reasonable assurance that material
information relating to the Company is made known to management including the
president and chief financial officer and;(ii) the financial statements, and
other financial information included in this Quarterly Report on Form 10-QSB,
fairly present, in all material respects, the financial condition, results of
operations and cash flows of the Company as of, and for, the periods presented
in this Quarterly Report on Form 10-QSB.
Question 10.
Exhibits- These disclosures have been revised to reflect the following:
Mr. Mathis is the President and principal executive officer and Mr. Lazzeri is
the Chief Financial Officer and principal financial officer. The additional
certification has been included in the amended 10QSB.
Related to all inquiries of your letter dated February 28, 2007 the Company
acknowledges the following:
>> the Company is responsible for the adequacy and accuracy of the
disclosures in the filings;
>> staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filings; and
>> the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Amanda, please call me to discuss these updates at your earliest
convenience.
Best Regards,
/s/ Bob Lazzeri
- ---------------
Bob Lazzeri
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2006
Commission File Number: 000-50936
Birch Branch, Inc.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1124170
------------------------------ ------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2560 W. Main St., Suite 200, Littleton, CO 80120
----------------------------------------------------------
(Address of principal executive offices including zip code)
(303) 794-9450
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)
Yes [X] No [_]
As of December 31, 2006, the Registrant had 1,274,893 shares of common stock, no
par value per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
ITEM 1 - FINANCIAL INFORMATION
BIRCH BRANCH, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31, June 30,
2006 2006
(Unaudited) (See Note 1)
------------ -----------
Current Assets
Cash $ - $ 2,980
----------- ----------
Total Current Assets - 2,980
Real estate, land - 55,595
Real estate, building, net of accumulated
depreciation of $7,660 at June 30, 2006 - 390,678
Furnishings, net of accumulated depreciation
of $1,262 at June 30, 2006 - 7,838
----------- ----------
Total Assets $ - $ 457,091
=========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Accounts payable $ 1,000 $ -
Accounts payable, related party - 34,069
Accrued expenses - 2,944
----------- ----------
Total Current Liabilities 1,000 37,013
Mortgage note payable, related party - 430,000
Accrued interest payable, related party - 25,557
----------- ----------
Total Liabilities 1,000 492,570
Stockholders' (Deficit):
Preferred Stock, no par value,
50,000,000 shares authorized,
none issued and outstanding - -
Common Stock, no par value,
500,000,000 shares authorized
1,274,893 shares issued and
outstanding 65,613 65,613
Additional Paid-In Capital 148,502 -
Treasury Stock (25,000) -
Accumulated (Deficit) (5,173) (5,173)
Accumulated (Deficit) during development stage (184,942) (95,919)
----------- ----------
Total Stockholders' (Deficit) (1,000) (35,479)
----------- ----------
Total Liabilities and Stockholders' (Deficit) $ - $ 457,091
=========== ==========
The accompanying notes are an integral part of the financial statements.
F-1
BIRCH BRANCH, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31, December 31,
2006 2005
Revenues $ -- $ --
----------- -----------
Expenses
Accounting and auditing -- 6,220
Legal fees 2,094 12,291
Stock transfer fees 2,088 --
Other 762 420
----------- -----------
4,944 18,931
----------- -----------
(Loss) From Continuing Operations (4,944) (18,931)
Discontinued Operations:
Loss on discontinued operations
(including loss on disposal in
2006 of $52,017) (63,751) (13,565)
----------- -----------
Net (Loss) $ (68,695) (32,496)
----------- -----------
Per Share $ (.05) $ (.03)
=========== ===========
Weighted Average Number of Shares
Outstanding 1,287,121 1,287,393
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-2
BIRCH BRANCH, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
From July 1,
2002 (date of
commencement of
development
Six Months Ended stage) through
December 31 December 31,
2006 2005 2006
Revenues $ - $ - $ -
------------ ----------- -----------
Expenses
Accounting and auditing 4,810 7,095 20,920
Legal fees 2,094 13,786 28,407
Stock transfer fees 3,809 - 7,661
Other 1,507 546 6,722
------------ ----------- -----------
12,220 21,427 63,710
------------ ----------- -----------
(Loss) From Continuing Operations (12,220) (21,427) (63,710)
Discontinued Operations:
Loss on discontinued operations
(including loss on disposal in
2006 of $52,017) (76,803) (16,964)
(121,232)
----------- ----------- -----------
Net (Loss) $ (89,023) (38,391) (184,942)
------------ ----------- -----------
Per Share $ (.07) $ (.03) $ (.14)
============ =========== ===========
Weighted Average Number of Shares
Outstanding 1,287,257 1,287,393 1,287,393
============ =========== ===========
The accompanying notes are an integral part of the financial statements.
F-3
BIRCH BRANCH, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
From July 1,
2002 (date of
commencement of
development
Six Months Ended stage) through
December 31 December 31,
2006 2005 2006
Cash Flows from (Used in):
Operating Activities of
Continued Operations
Net (Loss) $ (89,023) $ (38,391) $ (184,942)
Less(Loss)from Discontinued
Operations (76,803) (16,964) (121,232)
----------- ----------- -----------
Net (Loss) from Continuing
Operations (12,220) (21,427) (63,710)
Adjustment to reconcile net
(Loss) to net cash provided
by operating activities:
(Decrease) in accounts payable
and accrued expenses (2,153) (10,947) (15,017)
----------- ----------- -----------
Net Cash (Used in) Operating
Activities (14,373) (32,374) (78,727)
----------- ----------- -----------
Cash Flows from (Used in):
Financing Activities of Continuing
Operations:
Additional paid-in capital - - 2,424
Advances from related party 16,670 35,321 85,936
----------- ----------- -----------
Net Cash Provided by Financing
Activities 16,670 35,321 88,360
----------- ----------- -----------
Discontinued Operations:
Cash (Used in) Discontinued
Operations (5,277) (2,947) (12,613)
----------- ----------- -----------
Net Cash Provided by (Used in)
Discontinued Operations (5,277) (2,947) (12,613)
----------- ----------- -----------
Increase (Decrease) in Cash (2,980) - (2,980)
Cash, Beginning of Period 2,980 2,980 2,980
----------- ----------- -----------
Cash, End of Period - 2,980 -
=========== =========== ===========
Interest Paid $ - $ - $ -
=========== =========== ===========
Income Taxes Paid $ - $ - $ -
=========== =========== ===========
F-4
Schedule of non-cash financing and investing activities:
Construction in progress financed
by advances payable from related
party including accrued interest $ - $ 12,680 $ 398,517
=========== =========== ===========
Exchange of real estate for note
payable and other liabilities $ (96,485) $ - $ (96,485)
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-5
BIRCH BRANCH, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2006 (Unaudited)
Note 1 - Unaudited Financial Statements
- ------------------------------------------
The balance sheet as of December 31, 2006, the statements of operations for the
three months and six month periods ended December 31, 2006 and 2005 and the
statements of cash flows for the six month periods ended December 31, 2006 and
2005, have been prepared by Birch Branch, Inc. (Company) without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures, normally included in the financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, have been condensed or omitted as allowed by
such rules and regulations, and the Company believes that the disclosures are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in financial position at December 31, 2006 and for all periods
presented, have been made.
It is suggested that these statements be read in conjunction with the June 30,
2006 audited financial statements and the accompanying notes included in the
Company's Report on Form 10-KSB, filed with the Securities and Exchange
Commission.
Note 2- Description of Business and Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
Birch Branch, Inc. (the Company) was incorporated in the State of Colorado on
September 28, 1989. The Company was formed to pursue real estate development in
Nebraska, and has since completed construction on a Studio/private museum/bed
and breakfast rental facility. There were four additional lots included in this
development, which were being held as investments for potential future
development or sale.
In December, 2006 all of the property described above was sold pursuant to an
Asset Purchase Agreement, dated December 6, 2006, between the Company and the
Company's then President ("Purchaser"). The consideration received by the
Company consisted of 12,500 shares of Company common stock that was owned by the
Purchaser together with the cancellation of a note due to Purchaser with a
principal amount due of $430,000, secured by the Company's assets, all related
accrued interest and the release of the Company from all other liabilities due
to Purchaser.
The Company is a development stage company that has not had any significant
revenue since inception. The Company realized a net loss of approximately
$184,942 during the period from inception through December 31, 2006, and there
is no assurance that the Company will generate revenue or earn profit in the
future. Effective December 6, 2006 the Company intends to evaluate structure and
complete a merger with, or acquisition of, prospects consisting of private
companies, partnerships or sole proprietorships.
Since inception, the Company has been economically dependent on its officers and
directors to fund operations. In order to meet its liquidity needs during the
next fiscal year, the Company signed a Revolving Credit Agreement with certain
officers and shareholders on January 23, 2007. The Revolving Credit Agreement
does not obligate the Lender to make any loans but any loans made by the Lender
to the Company, up to an outstanding principal balance of $250,000, will be
subject to the terms of the Revolving Credit Agreement and the Revolving Loan
Note.
F-6
Cash
- ----
The Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents. The Company continually
monitors its positions with, and the credit quality of, the financial
institutions with which it invests.
Use of Estimates
- ----------------
The preparation of 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, disclosures 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.
Note 3 - Basis of Presentation - Going Concern
- -----------------------------------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplates continuation of the Company as a going concern. However, the
Company has negative working capital, a stockholders' deficit and no active
business operations, which raises substantial doubt about its ability to
continue as a going concern.
In view of these matters, the Company will need to continue to be dependent on
its officers and directors in order to meet its liquidity needs during the next
fiscal year.
There is no assurance that the Company's officers and directors will fund the
necessary operating capital, or that revenues will commence sufficient to assure
the eventual profitability of the Company. Management believes that this plan
provides an opportunity for the Company to continue as a going concern.
Note 4 - Stockholders' Equity
- ------------------------------
The common stock of the Company is currently trading on the Over the Counter
Bulletin Board system under the symbol "BHBH.OB".
As of December 31, 2006 there were 1,274,893 shares of the Company's common
stock outstanding and held of record by approximately 398 holders. This number
of holders does not include beneficial owners who hold shares at broker/dealers
in "street name".
On December 6, 2006, 12,500 shares of the Company's common stock was returned to
treasury pursuant to an Asset Purchase Agreement with the Company's then
President.
F-7
Note 5 - Related Party Transactions
- ------------------------------------
Prior to December 2006, the Company's then President advanced funds to the
Company for construction in progress for a building and general operating
expenses. The construction of the building was completed in September 2005, and
the Company's then President and the Company converted $381,134 of the advances
and $48,866 of accrued interest to a mortgage note payable totaling $430,000,
collateralized by the building and attached real estate owned by the Company.
In December 2006, the land, building and improvements ("LB&I") and furniture in
the building were sold, pursuant to an Asset Purchase Agreement, dated December
6, 2006, to the Company's then President in exchange for (i) the cancellation of
the $430,000 note payable, (ii) accrued interest payable related to the note of
approximately $39,976, (iii) additional advances of approximately $50,739, (iv)
the assumption of accounts payable and accrued liabilities of approximately
$3,468 and, (v) the return to the Company of 12,500 shares of the Company's
outstanding common stock valued at $25,000, collectively "Proceeds". The Company
recognized a loss of $52,017 from the sale of LB&I and furniture. This loss is
reported in Discontinued Operations in the Company's Statement of Operations for
the three and six months ended December 31, 2006.
The loss on the sale of the LBI and furniture was calculated by deducting the
net book value of the LB&I and furniture of $452,697 from the deemed proceeds of
$400,681. Deemed proceeds consisted of $390,000 in fair market value of the LB&I
and $10,681 of net book value of the furniture. Fair market value for the LB&I
was determined based on a local real estate broker's research and evaluation of
the local market and the subject property.
The Proceeds received by the Company from the then President totaled $549,183.
All proceeds in excess of fair market value, approximately $96,485, have been
recognized as an increase to paid-in-capital pursuant to Accounting Principles
Board Opinion No. 26 and FAS 57 and APB 26 paragraph 20 as they relate to
transactions with affiliated parties and extinguishment of debt.
Note 6 - Change in Control and Agreement and Plan of Reorganization
- ---------------------------------------------------------------------
On September 26, 2006 the Company entered into an Agreement and Plan of
Reorganization with Fluid Audio Networks, Inc. ("FAN") under which, following a
proposed 3.75 for 1 forward stock split of the outstanding common stock of the
Company, the Company would issue 30,808,584 shares of common stock to acquire
all of the outstanding common stock of FAN. Additionally, the Company was to
divest itself of its real estate assets by conveying these assets to its
President in exchange for the assumption of all the parent company debt and
cancellation of 50,000 (post split) shares of its common stock held by its
President and transferred to it. The Company's President was to convey for
cancellation an additional 50,000 shares (post split) of the Company's common
stock in exchange for a payment of $500,000.
The Agreement and Plan of Reorganization was subject to certain significant
contingencies which must have been resolved by November 30, 2006 in order for
the transaction to close. As of November 30, 2006, several contingencies had not
been satisfied, therefore, following a brief extension of time to attempt to
clear the open contingencies, which was not successful, the Agreement and Plan
of Reorganization was terminated without any further commitment or obligation by
the Company.
F-8
On December 6, 2006, a Stock Purchase Agreement was made by and between Mathis
Family Partners, Ltd., Lazzeri Family Trust, and Timothy Brasel and/or assigns
(Mathis, Lazzeri and Brasel collectively "Investor") and Schumacher &
Associates, Inc. Money Purchase Plan & Trust, a shareholder of Birch Branch,
Inc. and Michael L. Schumacher, the Company's past President. In the Stock
Purchase Agreement, Schumacher agreed to sell 762,500 fully paid and
nonassessable Shares of Birch Branch's common stock to Investor. The Birch
Branch Shares purchased equal approximately 59.81% of all issued and outstanding
Shares of Birch Branch common stock as of December 31, 2006. The aggregate
purchase price paid by the Investors for the Birch Branch Shares was $450,000.
This transaction resulted in a change in control of the Company.
F-9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical facts are
forward-looking statements such as statements relating to future operating
results, existing and expected competition, financing and refinancing sources
and availability and plans for future development or expansion activities and
capital expenditures. Such forward-looking statements involve a number of risks
and uncertainties that may significantly affect our liquidity and results in the
future and, accordingly, actual results may differ materially from those
expressed in any forward-looking statements. Such risks and uncertainties
include, but are not limited to, those related to effects of competition,
leverage and debt service financing and refinancing efforts, general economic
conditions, changes in laws and regulations, and risks related to merger and
acquisition activities. The following discussion and analysis should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
in this report.
Overview
The Company was organized on September 28, 1989 under the laws of the state of
Colorado. Until November 12, 2002, the Company was a wholly owned subsidiary of
Pride Holdings, Inc. Pride Holdings is a wholly-owned subsidiary of Pride, Inc.
(PRIDE). Pride, Inc. was a wholly-owned subsidiary of Prime Rate Income &
Dividend Enterprises, Inc. (PIDV). On November 12, 2002, the directors of PIDV
approved, subject to the effectiveness of a registration with the Securities and
Exchange Commission, the spin-off of PRIDE to the PIDV shareholders of record on
November 26, 2002 on a pro rata basis, exclusive of shares issued to U.S.
Medical Systems, Inc. (USMS) shareholders effective November 12, 2002. PIDV
entered into a share exchange agreement with USMS whereby USMS became a
wholly-owned subsidiary of PIDV. This business combination completed November,
2002, was accounted for as a reverse acquisition of PIDV since the former
controlling shareholders of USMS controlled PIDV after the transaction. Since
USMS's business was not related to the real estate and mortgage investment
business of PRIDE, the PIDV directors decided it was in the best interest of
PIDV and PRIDE and PIDV's shareholders to spin-off PRIDE. The conditions of the
business combination agreement with USMS stipulated that PRIDE would be spun-off
to PIDV shareholders. The shares of PRIDE were being held by Michael L.
Schumacher, President, for the benefit of PIDV shareholders, in escrow with
instructions to distribute the PRIDE shares once the PRIDE Form 10-SB became
effective with the Securities and Exchange Commission. Management of PRIDE
continued operations of PRIDE in the same manner as prior to the spin-off and
does not anticipate any additional corporate transactions.
Simultaneous with the spin-off of Pride, Inc., the directors of Pride and Pride
Holdings, Inc. determined that Birch Branch should also be distributed in the
same manner to the same qualified PIDV shareholders. Birch Branch was the owner
of five residential lots comprising a total of eight acres in Nebraska. Since
Birch Branch desired to develop this property and needed additional capital to
fund this development, it was determined that it was in the best interest of
Pride's shareholders to spin-off Birch Branch to the same PIDV qualified
shareholders.
10
At November 12, 2002, the Company had tentative plans to build a replica of a
historic artist's studio (Studio) on one of the five Nebraska lots, but had not
commenced construction at that time. The tentative plans called for using the
Studio as a private museum and as a bed and breakfast type rental facility.
Construction began on the Studio in 2003 and it was complete as of December 31,
2005. Since there are five lots included in this property, the remaining four
lots are being held as investments for potential future development or sale.
On December 6, 2006, a Stock Purchase Agreement ("Agreement") was made by and
between Mathis Family Partners, Ltd., Lazzeri Family Trust, and Timothy Brasel
and/or assigns (Mathis, Lazzeri and Brasel collectively "Investor") and
Schumacher & Associates, Inc. Money Purchase Plan & Trust, a shareholder of
Birch Branch, Inc. and Michael L. Schumacher, individually. In the Agreement,
Schumacher agreed to sell 762,500 fully paid and nonassessable Shares of Birch
Branch's common stock. The Birch Branch Shares purchased equal approximately
59.81% of all issued and outstanding Shares of Birch Branch common stock as of
December 31, 2006. The aggregate purchase price by the Investors for Birch
Branch Shares shall be $450,000 at closing.
Results of Operations
Three Months Ended December 31, 2006 compared with Three Months Ended
- ---------------------------------------------------------------------
December 31, 2005
- -----------------
No operating revenues were generated during the three months ended December 31,
2006 and December 31, 2005. Operating expenses decreased by $ 13,987 to $ 4,944
for the three months ended December 31, 2006. The decreased operating expenses
resulted principally from decreased legal and accounting fees paid in 2006 as
compared with 2005. The Company's net loss increased to $ 68,695 for the three
months ended December 31, 2006 compared to $ 32,496 for the three months ended
December 31, 2005. The Company's net loss increase resulted principally from the
loss on discontinued operations.
Six Months Ended December 31, 2006 compared with Six Months Ended
- -----------------------------------------------------------------
December 31, 2005
- -----------------
No operating revenues were generated during the six months ended December 31,
2006 and December 31, 2005. Operating expenses decreased by $ 9,207 to $ 12,220
for the six months ended December 31, 2006. The decreased operating expenses
resulted principally from decreased legal and accounting fees paid in 2006 as
compared with 2005. The Company's net loss increased to $ 89,023 for the six
months ended December 31, 2006 compared to $ 38,391 for the six months ended
December 31, 2005. The Company's net loss increase resulted principally from the
loss on discontinued operations.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 2006, the Company had a working capital deficit of ($1,000),
compared to working capital deficit of $($15,037) at December 31, 2005.
The Company does not have sufficient funds to continue its operating activities.
Future operating activities are expected to be funded through a Revolving Credit
Agreement loans from major shareholders.
11
ITEM 3 - CONTROLS AND PROCEDURES
The Company's management, including the president and chief financial officer
has evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined by Rules 13a-15 (e) of the Securities Exchange Act of
1934) as of December 31, 2006. Their evaluation concluded that, although these
disclosure controls and procedures are not intended to prevent all errors,
emissions or instances of fraud (i) the disclosure controls and procedures are
effective as of December 31, 2006 and provide reasonable assurance that material
information relating to the Company is made known to management including the
president and chief financial officer and;(ii) the financial statements, and
other financial information included in this Quarterly Report on Form 10-QSB,
fairly present, in all material respects, the financial condition, results of
operations and cash flows of the Company as of, and for, the periods presented
in this Quarterly Report on Form 10-QSB.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
12
Item 6. Exhibits
(a) Exhibits.
31.1 Certification of President and Chief Filed herewith
Executive Officer pursuant to Section electronically
302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Filed herewith
pursuant to Section 302 of the Sarbanes- electronically
Oxley Act of 2002
32.1 Certification of President and Chief Filed herewith
Executive Officer pursuant to 18 electronically
U.S.C. Section 1350
32.2 Certification of Chief Financial Officer Filed herewith
pursuant to 18 U.S.C. Section 1350 electronically
(b) Reports on Form 8-K.
None
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this quarterly report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Birch Branch, Inc.
/s/ Earnest Mathis
- -------------------------
Earnest Mathis, President
Date: February 12, 2007
14
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Earnest Mathis, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Birch Branch, Inc.
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: February 12, 2007
/s/ Earnest Mathis
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Earnest Mathis
President
EXHIBIT 31.2
CERTIFICATION OF CHIEF OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Lazzeri, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Birch Branch, Inc.
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: February 12, 2007
/s/ Robert Lazzeri
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Robert Lazzeri
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
BIRCH BRANCH, INC.
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of Birch Branch, Inc. (the "Company") on
Form 10-QSB for the period ended December 31, 2006, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Earnest Mathis,
President 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 to the
best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Earnest Mathis
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Earnest Mathis
President
February 12, 2007
EXHIBIT 32.2
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
BIRCH BRANCH, INC.
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of Birch Branch, Inc. (the "Company") on
Form 10-QSB for the period ended December 31, 2006, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Robert
Lazzeri, 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 to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Robert Lazzeri
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Robert Lazzeri
Chief Financial Officer
February 12, 2007