UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[x]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
                    For the fiscal year ended - June 30, 2005
                                       OR
[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                         For the transition period from:

                       Commission file number: 333-126654
                               Birch Branch, Inc.
                 (Name of Small Business Issuer in its charter)


                    Colorado                               84-1124170
         (State or other jurisdiction                  (I.R.S. Employer
         incorporation or organization)              Identification Number)


                2525 Fifteenth Street, Suite 3H, Denver, Co 80211
                    (Address of principal executive offices)

                    Issuer's telephone number: (303) 480-5037

           Securities registered under Section 12(b) of the Act: None

              Securities registered under Section 12(g) of the Act:

                      Common Stock, no par value per share
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(D) of the Exchange Act during the past 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 [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

Indicate by check mark whether registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act)    YES [ ] NO [X]

         State issuer's revenues for its most recent fiscal year. $ -0-

State the aggregate market value of the voting stock held by non- affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act): $ -0-

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.    Yes [ ] No [ ] Not applicable.

         (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
             1,287,393 as of September 30, 2005.

   Transitional Small Business Disclosure Format (Check one):    Yes [ ]; No [X]

                                        1
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

Birch Branch, Inc. (Birch Branch) is a corporation which was formed under the
laws of the State of Colorado on September 28, 1989. The Articles of
Incorporation of the Company authorized it to issue 500,000,000 shares of common
stock with no par value per share and 50,000,000 shares of preferred stock with
no par value per share.

Birch Branch was a wholly-owned subsidiary of Pride Holdings, Inc. (Pride
Holdings). 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 pro rata 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 in
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 is 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 stipulate that PRIDE would be spun-off
to PIDV shareholders. The shares of PRIDE are being held by Michael L.
Schumacher, President, for the benefit of PIDV shareholders, in escrow with
instructions to distribute the PRIDE shares upon the effectiveness of a
registration statement with the Securities and Exchange Commission. Management
of PRIDE intends to continue operations of PRIDE in the same manner as prior to
the pro rata spin-off and does not anticipate any additional corporate
transactions which might impact the continuing interest of the shareholders.
PIDV changed its name to U.S. MedSys Corp. in March 2004.

Simultaneous with the pro rata spin-off of Pride, Inc., the directors of Pride
and Pride Holdings, Inc. determined that Birch Branch should also be distributed
on the same basis to the same qualified PIDV shareholders. Birch Branch is 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 and since Pride and Pride Holdings, Inc. are
not in the real estate development business, 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. The shares of Birch Branch, Inc. are being held by
Michael L. Schumacher, for the benefit of the PIDV qualified shareholders. The
shares will not be distributed to the PIDV shareholders until the effectiveness
of a registration statement.

The principal executive offices of the Company are located at 2525 Fifteenth
Street, Suite 3H, Denver, Colorado 80211, and the Company's telephone number is
(303) 480-5037.

GENERAL BUSINESS PLAN

Birch Branch is principally in the real estate investment business. Birch Branch
owns real estate in Nebraska. At November 12, 2002, Birch Branch had tentative
plans to build a replica of a historic artist's studio (Studio) on one of the
Nebraska property lots, but had not commenced construction at that time. The
tentative plans called for using the Studio as a bed and breakfast type rental
facility. Construction began on the Studio in 2003 and was completed in
September 2005. The total cost including furnishings and construction interest
was approximately $410,000, of which $384,731 was incurred as of June 30, 2005.
All of the costs have been funded by advances from the Company's President.
Since there are five lots included in this property, the remaining four lots are
being held as investments for potential future development or sale.

DISTRIBUTION OF PRODUCTS AND SERVICES

Birch Branch intends to market its bed and breakfast rental facility by local
advertising.

COMPETITION

Birch Branch's intended business is highly competitive. There are thousands of
bed and breakfast rental facilities in the United States of America.

                                       2
<PAGE>

AVAILABILITY OF RAW MATERIAL: PRINCIPAL SUPPLIERS

Since the Company is not involved in manufacturing, there is no need for raw
materials. Supplies used in the planned business are minimal.

PATENTS AND INTELLECTUAL PROPERTY

The Company has no patent or intellectual property rights.

GOVERNMENTAL APPROVAL

There are no governmental approval requirements related to the Company's
business.

EFFECT OF GOVERNMENTAL REGULATIONS: COMPLIANCE WITH ENVIRONMENTAL LAWS

Various local zoning, homeowners associations and various other rules and
regulations limit how properties may be used and require certain maintenance and
repairs for properties. Residential property located in Keith County, Nebraska,
where our property is located, may be used as a bed and breakfast under existing
zoning regulations. Certain federal and state environmental protection statutes
exist related to hazardous wastes and other environmental concerns. To our
knowledge, we are in compliance with all environmental laws.

RESEARCH AND DEVELOPMENT

The Company has not been involved in any research and development projects.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company currently maintains a mailing address at 2525 Fifteenth Street,
Suite 3H, Denver, CO 80211, which is the address of its President. The Company
pays no rent for the use of this mailing address. The Company does not believe
that it will need to maintain an office at any time in the foreseeable future in
order to carry out its plan of operations described herein.

ITEM 3. LEGAL PROCEEDINGS.

In the opinion of counsel there are no known legal proceedings or outstanding
judgments against the Company, nor any pending litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a) Market Information.

There currently exists no public trading market for our common stock. We do not
intend to develop a public trading market until the Spin-Off has been completed.
There can be no assurance that a public trading market will develop at that time
or be sustained in the future. Without an active public trading market, you may
not be able to liquidate your shares without considerable delay, if at all. If a
market does develop, the price for our securities may be highly volatile and may
bear no relationship to our actual financial condition or results of operations.
Factors we discuss in this prospectus, including the many risks associated with
an investment in our company, may have a significant impact on the market price
of our common stock. Also, because of the relatively low price of our common
stock, many brokerage firms may not effect transactions in the common stock.

                                       3
<PAGE>

Upon effectiveness of this SB-2, we plan to apply for quotation of the Common
Stock on the OTC Bulletin Board operated by the National Association of
Securities Dealers, Inc. Birch Branch will have 1,287,393 shares of common stock
issued and outstanding.

(b) Holders.

Following the spin-off, we believe that there will be approximately 417
stockholders of record.

(c) Dividends.

The Company has never paid a dividend on its common stock. We do not anticipate
paying any dividends on our common stock in the foreseeable future. Management
anticipates that earnings, if any, will be retained to fund our working capital
needs and the expansion of our business. The paying of any dividends is in the
discretion of the Board of Directors.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITIONS.

     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, and changes in applicable laws or regulations. The following
discussion and analysis should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this report.

     Our activities have been primarily focused on real estate investment and it
is a development stage enterprise since planned principal operations have not
yet commenced. The development stage began when we commenced planning for the
construction of the bed and breakfast on July 1, 2002. Accordingly, management
does not consider the historical results of operations to be representative of
our future results of operation.

Critical Accounting Policies

     We have identified the following policies below as critical to our business
and results of operations. For further discussion on the application of these
and other accounting policies, see Note 1 to the accompanying audited financial
statements for the year ended June 30, 2005, included elsewhere in this filing.
Our reported results are impacted by the application of the following accounting
policies, certain of which require management to make subjective or complex
judgments. These judgments involve making estimates about the effect of matters
that are inherently uncertain and may significantly impact quarterly or annual
results of operations. For all of these policies, management cautions that
future events rarely develop exactly as expected, and the best estimates
routinely require adjustment. Specific risks associated with these critical
accounting policies are described in the following paragraphs.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

     The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.

                                       4
<PAGE>

Revenue Recognition
-------------------

     We have had no revenue during the two years ended June 30, 2005.
Anticipated future operating revenue will represent daily room rentals and
revenues from food and other services. Such revenues will be recorded as the
rooms are rented or the services are performed.

Impairment of Long-Lived Assets
-------------------------------

     We review our long-lived assets, including property, construction in
progress, and equipment, for impairment when events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. We
evaluate, at each balance sheet date, whether events and circumstances have
occurred which indicate possible impairment. As of June 30, 2005, we do not
consider any of its long-lived assets to be impaired.

Plan of Operation for June 30, 2005 to June 30, 2006

     Birch Branch intends to market its bed and breakfast rental facility by
local advertising, such as placing an advertisement in the local newspaper. We
expect that the cost of local advertising will be insignificant. Operating costs
are expected to range between $20,000 and $25,000, for the next twelve months.
These operating costs include insurance, taxes, utilities, maintenance, food
costs, janitorial, contract services, advertising and all other costs of
operations. We expect to generate revenues in the next twelve months from rental
income from referrals from certain individuals and entities that operate
unrelated businesses nearby the property. Our President has agreed to allow
interest to accrue rather than requiring payment on the funds advanced for the
next five years. Management intends to acquire necessary services from
independent contractors. Since there can be no assurances that rental income
will be sufficient to cover operating costs for the foreseeable future, it may
be necessary to raise additional funds. Due to our lack of operating history,
raising additional funds may be difficult. Contingencies exist with respect to
this matter. Our President has agreed to provide operating capital in the form
of advances to cover operating expenses for the year ending June 30, 2006.

     We generated no revenues during the year ended June 30, 2005, and
management does not anticipate any revenues until May 2006, as contemplated by
our business plan.

Seasonality

     It is expected that our business will be seasonal with nearly all revenue
generated during the period commencing May 1 and ending October 31. Therefore,
we do not anticipate any material revenue until May 2006.

Results of Operations

Year ended June 30, 2005
------------------------

We had no revenue for the year ended June 30, 2005.

Operating expenses during the year ended June 30, 2005 totaled $12,988,
consisting of professional fees of $10,546, real estate taxes of $1,405 and
other expenses of $1,037.

Year ended June 30, 2004
------------------------

We had no revenue for the year ended June 30, 2004.

Operating expenses during the year ended June 30, 2004 totaled $1,252,
consisting of real estate taxes and filing fees.

                                       5
<PAGE>

Liquidity and Capital Resources

At June 30, 2005, we had an unrestricted cash balance of approximately $2,980.
Our current assets were approximately $2,980 at June 30, 2005 and our current
liabilities totaled approximately $14,084, resulting in a net working capital
deficit of ($11,104).

Financial Position

At June 30, 2005, we had commitments of approximately $35,000 for capital
expenditures, including construction interest, related to the completion of the
bed and breakfast. The bed and breakfast is now complete, and our President
funded the necessary completion costs. Our President has agreed to accrue
interest at the rate of 8% per annum with a balloon payment due in five years
(December 31, 2010) and with the note being collateralized by a first mortgage
on the five lots and the bed and breakfast. No principal or interest payments
are due prior to maturity. Our President has also agreed to provide advances
sufficient to cover working capital needs through June 30, 2006. Management
estimates it will take approximately $20,000 - $25,000 per year to fund existing
operations. Should we decide to develop or improve the four remaining lots that
it owns, it will require additional development capital. We currently have no
plans to develop or build on the remaining four lots it owns.

Trends

There is significant uncertainty inherent to the real estate investment and
development industry. However, other than historical and public information,
there are no known trends, events or uncertainties that have had or that are
reasonably expected to have a material impact on the net sales or revenues or
income from rental property. Other than the completion costs of the bed and
breakfast, our management has not made any commitments which will require any
material financial resources.


                                       6
<PAGE>

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------------------------------------------


                          INDEX TO FINANCIAL STATEMENTS

                               BIRCH BRANCH, INC.
                               ------------------
                          (A Development Stage Company)


                              FINANCIAL STATEMENTS

                                      with

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Audited Financial Statements:

         Report of Independent Registered Public Accounting Firm            F-2

         Balance Sheet                                                      F-3

         Statements of Operations                                           F-4

         Statement of Changes in Stockholders' Equity                       F-5

         Statements of Cash Flows                                           F-6

         Notes to Financial Statements                                      F-7






                                       F-1

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors
Birch Branch, Inc.
Denver, CO

We have audited the accompanying balance sheet of Birch Branch, Inc. (a
development-stage company) as of June 30, 2005 and the related statements of
operations, stockholders' equity and cash flows for the two years ended June 30,
2005 and 2004 and for the period from July 1, 2002 (date of commencement of
development stage) through June 30, 2005. 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 audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). 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 audit 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. An audit also includes 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 Birch Branch, Inc. (a
development-stage company) as of June 30, 2005 and the related statements of
operations and cash flows for the two years ended June 30, 2005 and 2004 and for
the period from July 1, 2002 (date of commencement of development stage) through
June 30, 2005 in conformity with accounting principles generally accepted in the
United States of America.




Miller & McCollom
Certified Public Accountants
4350 Wadsworth Blvd., Suite 300
Wheat Ridge, CO 80033

October 11, 2005


                                       F-2
<PAGE>

                               BIRCH BRANCH, INC.
                               ------------------
                          (A Development Stage Company)

                                 BALANCE SHEETS
                                  JUNE 30, 2005

                                     ASSETS
                                     ------

Current Assets:
Cash                                                         $   2,980
                                                             ---------
Total Current Assets                                             2,980

Real estate, land (Note 4)                                      55,595
Real estate, construction in progress (Note 4)                 384,731
Other assets                                                     1,434
                                                             ---------

TOTAL ASSETS                                                 $ 444,740
                                                             =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current Liabilities:
 Accounts payable, related party (Note 4)                    $  13,414
 Accrued real estate taxes                                         670
                                                             ---------
Total Current Liabilities                                       14,084

Advance payable, related party (Note 4)                        355,590
Accrued interest payable, related party (note 4)                30,082
                                                             ---------

TOTAL LIABILITIES                                              399,756
                                                             ---------

Commitments and contingencies (Notes 1, 2, 3, and 4)

Stockholders' Equity:
  Preferred stock, no par value
    50,000,000 shares authorized,
    none issued and outstanding                                   --
  Common stock, no par value,
    500,000,000 shares authorized,
    1,287,393 issued and outstanding                            65,613
  Accumulated (Deficit)                                         (5,173)
  Accumulated (Deficit) during Development Stage               (15,456)
                                                             ---------

TOTAL STOCKHOLDERS' EQUITY                                      44,984
                                                             ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 444,740
                                                             =========


    The accompanying notes are an integral part of the financial statements.

                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                               BIRCH BRANCH, INC.
                               ------------------
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS
  For the Period from July 1, 2002 (date of commencement of development stage)
                              through June 30, 2005

                                                                          For the period
                                                                           from July 1,
                                                                          2002 (date of
                                                                           commencement
                                                                          of development
                                                  Year Ended              stage) through
                                                   June 30,                  June 30,
                                           2005              2004              2005
                                      --------------    --------------    --------------
<S>                                   <C>               <C>               <C>

Revenue                               $         --      $         --      $         --
                                      --------------    --------------    --------------

Expenses
   Accounting and auditing                     7,495              --               7,495
   Legal fees                                  3,051              --               3,051
   Real estate taxes                           1,405             1,227             3,823
   Filing fees                                 1,037             1,087
                                      --------------    --------------    --------------
                                                                                      25
                                              12,988             1,252            15,456
                                      --------------    --------------    --------------

Net (Loss)                            $      (12,988)   $       (1,252)   $      (15,456)
                                      ==============    ==============    ==============

Per Share                             $         (.01)   $          nil    $         (.01)
                                      ==============    ==============    ==============

Weighted Average Shares Outstanding        1,287,393         1,287,393         1,299,929
                                      ==============    ==============    ==============

</TABLE>





    The accompanying notes are an integral part of the financial statements.


                                       F-4
<PAGE>
<TABLE>
<CAPTION>

                               BIRCH BRANCH, INC.
                               ------------------
                          (A Development Stage Company)

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
  For the Period from July 1, 2002 (date of commencement of development stage)
                              through June 30, 2005

                                                                                                  Accumulated
                                                                                                   (Deficit)
                                                                                                     during
                               Preferred     Stock        Common        Stock      Accumulated    Development
                              No./Shares     Amount     No./Shares      Amount      (Deficit)        Stage          Total
                              ----------   ----------   ----------    ----------   -----------    -----------    -----------
<S>                           <C>          <C>          <C>           <C>          <C>            <C>            <C>
Balance at July 1, 2002       $     --     $     --      1,325,000    $   63,189   $    (5,173)   $      --      $    58,016

Cash capital contributions          --           --           --           1,192          --             --            1,192

Common stock canceled
(Note 4)                            --           --        (37,607)         --            --             --             --
Net loss for the year ended
 June 30, 2003                      --           --           --            --            --           (1,216)        (1,216)
                              ----------   ----------   ----------    ----------   -----------    -----------    -----------
Balance at June 30, 2003            --           --      1,287,393        64,381        (5,173)        (1,216)        57,992

Cash capital contributions          --           --           --           1,232          --             --            1,232

Net loss for the year ended
 June 30, 2004                      --           --           --            --            --           (1,252)        (1,252)
                              ----------   ----------   ----------    ----------   -----------    -----------    -----------
Balance at June 30, 2004            --           --      1,287,393        65,613        (5,173)        (2,468)        57,972

Net loss for the year ended
 June 30, 2005                      --           --           --            --            --          (12,988)       (12,988)
                              ----------   ----------   ----------    ----------   -----------    -----------    -----------
Balance at June 30, 2005      $     --     $     --      1,287,393    $   65,613   $    (5,173)   $   (15,456)   $    44,984
                              ==========   ==========   ==========    ==========   ===========    ===========    ===========

</TABLE>

The accompanying notes are an integral part of the financial statements.


                                       F-5
<PAGE>
<TABLE>
<CAPTION>

                               BIRCH BRANCH, INC.
                               ------------------
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS
  For the Period from July 1, 2002 (date of commencement of development stage)
                              through June 30, 2005

                                                                                          For the period
                                                                                            from July 1,
                                                                                           2002 (date of
                                                                                           commencement
                                                                                          of development
                                                                    Year Ended            stage) through
                                                                      June 30,              June 30,
                                                                2005           2004           2005
                                                            -----------    -----------    --------------
<S>                                                         <C>            <C>            <C>
Cash Flows from Operating Activities:
Net (Loss)                                                  $   (12,988)   $    (1,252)    $   (15,456)
  Adjustment to reconcile net (loss) to net cash provided
    by operating activities:
        Increase in accrued real estate taxes                    12,988             20          13,032
                                                            -----------    -----------     -----------
Net Cash (Used in) Operating Activities                            --           (1,232)         (2,424)
                                                            -----------    -----------     -----------

Cash Flows from Investing Activities                               --             --              --
                                                            -----------    -----------     -----------

Cash Flows from Financing Activities:
  Additional paid-in capital                                       --            1,232           2,424
                                                            -----------    -----------     -----------
Net Cash Provided by Financing Activities                          --             --             2,424
                                                            -----------    -----------     -----------

Increase in Cash                                                   --             --              --

Cash, Beginning of Period                                         2,980          2,980           2,980
                                                            -----------    -----------     -----------

Cash, End of Period                                         $     2,980    $     2,980     $     2,980
                                                            ===========    ===========     ===========

Interest Paid                                               $      --      $      --       $      --
                                                            ===========    ===========     ===========

Income Taxes Paid                                           $      --      $      --       $      --
                                                            ===========    ===========     ===========

Supplementary Schedule of Non-cash Transactions:

Construction in progress financed
  by advances payable from related party
  including accrued interest (Note 4)                       $   163,506    $   222,166     $   385,672
                                                            ===========    ===========     ===========

</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       F-6
<PAGE>

                               BIRCH BRANCH, INC.
                               ------------------
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                             June 30, 2005 and 2003

(1)  Organization and Summary of Accounting Policies
     -----------------------------------------------

This summary of significant accounting policies of Birch Branch, Inc. (Company)
is presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management
who is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles in the United
States of America and have been consistently applied in the preparation of the
financial statements.

     Organization

     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 in
     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 is 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
     stipulate that PRIDE would be spun-off to PIDV shareholders. The shares of
     PRIDE are 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 is effective with the Securities and
     Exchange Commission. Management of PRIDE intends to continue operations of
     PRIDE in the same manner as prior to the spin-off and does not anticipate
     any additional corporate transactions which might impact the continuing
     interest of the shareholders.

     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 is 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.

                                       F-7
<PAGE>

     Description of Business

     Birch Branch is principally in the real estate investment business. Birch
     Branch owns real estate in Nebraska. At November 12, 2002, Birch Branch had
     tentative plans to build a replica of a historic artist's studio (Studio)
     on one of the Nebraska lots, but had not commenced construction at that
     time. The tentative plans called for using the Studio as a bed and
     breakfast type rental facility. Construction began on the Studio in 2003
     and was approximately 99% complete at June 30, 2005, and 100% complete on
     September 7, 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.

     Development Stage Enterprise

     Based upon the Company's business plan, it is a development stage
     enterprise since planned principal operations have not yet commenced.
     Accordingly, the Company presents its financial statements in conformity
     with the accounting principles generally accepted in the United States of
     America that apply in establishing operating enterprises. As a development
     stage enterprise, the Company discloses the deficit accumulated during the
     development stage and the cumulative statements of operations and cash
     flows from commencement of development stage to the current balance sheet
     date. The development stage began when the Company commenced planning for
     the construction of the Studio, July 1, 2002.

     Per Share Information

     Per share information is computed by dividing the net income or loss by the
     weighted average number of shares outstanding during the period.

     Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
     accepted accounting principles 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 revenue and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     Risks and Uncertainties

     The Company is subject to substantial business risks and uncertainties
     inherent in starting a new business. There is no assurance that the company
     will be able to generate sufficient revenues or obtain sufficient funds
     necessary for launching a new business venture.

     Revenue Recognition

     The Company had no revenue during the two years ended June 30, 2005.
     Anticipated future operating revenue will represent daily room rentals and
     revenues from food and other services. Such revenues will be recorded as
     the rooms are rented on a straight-line basis or the services are
     performed.

                                       F-8
<PAGE>

     Cash and Cash Equivalents

     The Company considers cash and cash equivalents to consist of cash on hand
     and demand deposits in banks with an initial maturity of 90 days or less.

     Property, Construction in Progress, and Furnishings

     Property, construction in progress and furnishings are stated at cost and
     will be depreciated upon receipt of a certificate of occupancy, on the
     straight-line method over their respective estimated useful lives ranging
     from 3 to 40 years.

     Impairment of Long-Lived Assets

     The Company reviews its long-lived assets, including property, construction
     in progress, and equipment, for impairment when events or changes in
     circumstances indicate that the carrying value of an asset may not be
     recoverable. The Company evaluates, at each balance sheet date, whether
     events and circumstances have occurred which indicate possible impairment.
     As of June 30, 2005, the Company does not consider any of its long-lived
     assets to be impaired.

     Fair Value of Financial Instruments

     The Company, as required, discloses fair value information about financial
     instruments when it is practicable to estimate that value. The carrying
     value of the Company's cash, cash equivalents, and accounts payable
     approximate their estimated fair values due to their short-term maturities.

     Recent Accounting Pronouncements

     There were various accounting standards and interpretations issued during
     2005 and 2004, none of which are expected to have a material impact on the
     Company's consolidated financial position, operations, or cash flows.

     Income Taxes

     The Company records deferred tax assets and liabilities for temporary
     differences between the tax bases of assets and liabilities and the amounts
     at which they are carried in the financial statements, the effect of net
     operating losses, based upon the enacted tax rates in effect for the year
     in which the differences are expected to reverse. A valuation allowance is
     established when necessary to reduce deferred tax assets to the amount
     expected to be realized.

     Other

     The Company has selected June 30 as its fiscal year end.

     The Company has paid no dividends during the years ended June 30, 2005 and
     2004.

                                       F-9
<PAGE>


     No advertising expense has been incurred.

     The Company has not entered into any leases.

     All of the Company's assets are located in the United States.

(2)  Income Taxes
     ------------

As of June 30, 2005, the Company has an estimated net operating loss carry
forward of approximately $20,629 to offset future taxable income. The net
operating loss carry forward, if not used, will expire in various years through
2024, and use may be restricted if there is a change in ownership. No deferred
income taxes have been recorded because of the uncertainty of future taxable
income to be offset.

Significant components of the Company's net deferred income tax asset are as
follows:

         Net operating losses carry forward                   $     3,816
         Deferred income tax allowance                             (3,816)
                                                              -----------
         Net deferred income tax asset                        $         -
                                                              ===========

The change in the deferred tax asset and related allowance was $2,402.

The reconciliation of income tax (benefit) computed at the federal statutory
rate to income tax expense (benefit) is as follows for the years ended June 30,
2005 and 2004:

         Tax (benefit) at Federal statutory rate                   (15.00)%
         State tax (benefit) net of Federal benefit                 (3.50)
         Valuation allowance                                        18.50
                                                              -----------
         Tax provision (benefit)                                        -
                                                              ===========

(3)  Common and Preferred Stock
     --------------------------

The Company's articles of incorporation authorize the issuance of 500,000,000
shares of no par common stock and 50,000,000 shares of no par preferred stock.
At June 30, 2005, there were 1,287,393 shares of common stock outstanding. At
June 30, 2005, there were no preferred shares outstanding. Terms and preferences
of future issuances of preferred stock, if any, are at the discretion of the
Company's Board of Directors.

The Company's outstanding common stock has been issued to its President to be
held in trust for the distribution to qualified spin-off shareholders upon the
effectiveness of a registration statement with the Securities and Exchange
Commission. During March 2003, the Company's outstanding common stock was
reduced to 1,287,393 shares to match the number of shares to be distributed to
eligible shareholders.

                                      F-10
<PAGE>

(4)  Related Party Transactions
     --------------------------

As of June 30, 2005, the Company's President has advanced $355,590, plus accrued
interest at 8% per annum of $30,082 to the Company for the construction in
progress. Subsequent to June 30, 2005, the Company's President has funded
approximately an additional $35,000 including construction interest for the
completion costs of the Studio. Since the construction has been completed, the
Company's President and the Company are in the process of converting the advance
to a mortgage note payable collateralized by the land and building owned by the
Company.

The mortgage loan will accrue interest at 8% per annum with the total note and
accrued interest due five years from the date of completion of the construction.
Construction note interest is being capitalized during the construction period.
Immaterial real estate taxes on this property, subject to the construction in
progress, are expensed as incurred.

As of June 30, 2005, $13,414 was payable to Pride, Inc., a related party.
Subsequent to June 30, 2005, the balance was paid in full.

There were 1,325,000 shares of common stock outstanding at July 1, 2002. To
facilitate the one for one distribution, 37,607 shares were cancelled for no
consideration.

The Company uses the offices of its President for its minimal office facility
needs for no consideration. No provision for these costs has been provided since
it has been determined that they are immaterial.












                                      F-11
<PAGE>

--------------------------------------------------------------------------------

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT.

OFFICERS AND DIRECTORS

The following table sets forth certain information concerning each of the
Company's directors and executive officers:

NAME                       AGE          POSITION

Michael Schumacher         56           President, Treasurer, Chief Financial
                                          Officer and Director

George Powell              80           Vice President, Secretary and Director


MICHAEL SCHUMACHER. Michael Schumacher has been President, Treasurer, Chief
Financial Officer and a Director of the Company since acquisition by PIDV. Mr.
Schumacher was President and Chairman of the Board of PIDV, a public real estate
company, until December 2002. Mr. Schumacher was from October 1996 until
September 1999, a director, president and treasurer of Rocky Mountain Power
Company, a public real estate company. Mr. Schumacher has also been a director,
president and treasurer of Pride, Inc., a real estate company, since inception,
August 22, 2001. Mr. Schumacher was a director and officer of Sun Vacation
Properties Corporation (formerly Commonwealth Equities, Inc.), an inactive
public company, from November 2000 until February 2001, and a director and
officer of Vacation Ownership Marketing, Inc., an inactive public company, from
May 2000 until August 2001. Since January 2003, Mr. Schumacher has been
Vice-President and a Director of Federal Mortgage Corporation of Puerto Rico
(Federal), which was an inactive public company until March 31, 2005. Effective
March 31, 2005, Federal acquired 100% ownership of Pride Lending, Inc. from a
related party. Pride Lending, Inc. principally invests in mortgage loans. He was
also, from June 2003 to May 31, 2005, a Vice-President and Director of National
Superstars, Inc, an inactive public company until May 31, 2005. Effective May
31, 2005, National Superstars, Inc. completed a business combination with MSO
Holdings, Inc. resulting in a change in control of National Superstars, Inc.
Since January 2005, he has been President, Treasurer, Chief Financial Officer
and a Director of Marwich II, Ltd., an inactive public company. Also since
January 2005, he has been President, Treasurer, CFO and a director of
Springfield Financial, Inc., an inactive public company. Since March 2005, he
has been Secretary, Treasurer and a director of American Telstar, Inc., an
inactive public company. Mr. Schumacher is President, Chairman of the Board, and
controlling shareholder of Pride, Inc. and its wholly-owned subsidiaries,
including Pride Equities, Inc. Pride, Inc. and its subsidiaries are primarily in
the real estate investment business. Mr. Schumacher is and has been for more
than 20 years, a Director and President of Schumacher & Associates, Inc., a
certified public accounting firm located in Denver, Colorado that provides audit
services, principally to public companies on a national basis throughout the
U.S.A. Mr. Schumacher is a Certified Public Accountant, Certified Management
Accountant and an Accredited Financial Planning Specialist. Mr. Schumacher has a
Bachelor of the Sciences Degree in Business Administration with a major in
accounting from the University of Nebraska at Kearney and a Masters in Business
Administration from the University of Colorado.

GEORGE A. POWELL. George A. Powell has been Secretary, Vice-President and a
Director of the Company since acquisition by PIDV. Mr. Powell has been a
director, secretary and vice-president of Pride, Inc., a real estate company,
since August 22, 2001. Mr. Powell was from October 1996 until September 1999, a
director, secretary and vice-president of Rocky Mountain Power Co., a public
real estate company. Mr. Powell was previously, until November 12, 2002, a
director, secretary and vice-president of Prime Rate Income & Dividend
Enterprises, Inc. (PIDV), a public real estate company. Since December 2004, he
has been Vice-President and Secretary of Springfield Financial, Inc., an
inactive public company. Since January 2005, he has been secretary and a
director of Marwich II, Ltd., an inactive public company. Mr. Powell was
previously a director and president of Continental Investors Life, Inc., a
public reporting insurance company. Since Mr. Powell's retirement from the
insurance business in 1988, he has been self-employed as a business consultant.

                                       7
<PAGE>

SIGNIFICANT EMPLOYEES

We have no employees other than Michael L. Schumacher and George A. Powell, and
they devote approximately 5% of their time to our business.

ITEM 10. DIRECTOR AND EXECUTIVE COMPENSATION.

Presently, none of the Company's current officers or directors received any
compensation for their respective services rendered unto the Company, nor have
they received such compensation in the past 5 years. They all have agreed to act
without compensation until authorized by the Board of Directors, which is not
expected to occur until the Company has generated revenues from operations after
consummation of a merger or acquisition. The Company currently has no funds
available to pay officers or directors. Further, none of the officers or
directors are accruing any compensation pursuant to any agreement with the
Company.

It is possible that, after the Company successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity that proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors is offered
compensation in any form from any prospective merger or acquisition candidate,
the proposed transaction will not be approved by the Company's Board of
Directors as a result of the inability of the Board to affirmatively approve
such a transaction.

It is possible that persons associated with management may refer a prospective
merger or acquisition candidate to the Company. In the event the Company
consummates a transaction with any entity referred by associates of management,
it is possible that such an associate will be compensated for their referral in
the form of a finder's fee. It is anticipated that this fee will be either in
the form of restricted common stock issued by the Company as part of the terms
of the proposed transaction, or will be in the form of cash consideration.
However, if such compensation is in the form of cash, such payment will be
tendered by the acquisition or merger candidate, because the Company has
insufficient cash available. The amount of such finder's fee cannot be
determined as of the date of this registration statement, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finder's fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.

No retirement, pension, profit sharing, stock option or insurance programs or
other similar programs have been adopted by the Company for the benefit of its
employees.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of September 30, 2005
regarding the beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) by each Director and executive officer of the
Company and (iii) by all executive officer and Directors of the Company as a
group. Each of the persons named in the table has sole voting and investment
power with respect to Common Stock beneficially owned.

NAME AND ADDRESS                             NUMBER OF              PERCENTAGE
                                            SHARES OWNED             OF SHARES
                                           OR CONTROLLED               OWNED

Michael Schumacher (1)                        693,054                  53.8%
President, Treasurer, Chief
Financial Officer & Director
2525 Fifteenth Street Suite 3H
Denver, Colorado 80211


                                       8
<PAGE>


Harold L. Morris (2)                          364,059                  28.3%
4 Harbor Pointe
Corona del Mar, CA 92625

George A Powell                                   670                  -0-
Vice President, Secretary &
Director
7209 S. Garland Court
Littleton, CO 80128

All Officers and Directors as a Group         693,724                  53.9%
(2 persons)

(1) Michael L. Schumacher owns 7,264 shares individually. In addition, Mr.
Schumacher, President and Director of Birch Branch is the sole beneficiary of
the Schumacher & Associates, Inc. Money Purchase Plan & Trust (Schumacher Plan),
which owns 681,368 shares of Birch Branch. Shares owned by the Schumacher Plan
are considered to be beneficially owned by Mr. Schumacher. Mr. Schumacher's
beneficial ownership also includes the following shares owned by certain
relatives of Mr. Schumacher:

Owner                          Relationship                  Number of Shares

Jada Schumacher                Daughter                           1,024
Spencer Schumacher             Son                                1,024
Quinn Schumacher               Son                                1,204
Ralph and Alma Schumacher      Parents                              366
Roberta and Timothy Weiss      Sister and her spouse                328
Constance and Gary Novak       Sister and her spouse                328
Cynthia Rubinson               Sister                               328
                                                                 ------

Total                                                             4,422
                                                                 ------

(2) Harold L. Morris individually owns 132,680 shares of Birch Branch. In
addition, Harold L. Morris and his spouse, Connie Morris are the sole
beneficiaries of the Harold L. Morris Profit Sharing Plan, which owns 168,358
shares of Birch Branch. Applegates Landing I, a Harold L. Morris family
partnership, owns 48,598 shares. Mr. Morris' beneficial ownership also includes
the following shares owned by certain relatives:

Owner                          Relationship                  Number of Shares

Debra L. Morris                Daughter                           9,592
Gary A. Morris                 Brother                            4,794
                                                                 ------

Total                                                            14,386
                                                                 ------

Under the SEC Rules, we include in the number of shares owned by each person the
number of shares issuable under outstanding options if those options are
exercisable within 60 days of this filing. We calculate the ownership of each
person who owns exercisable options by adding (i) the number of exercisable
options for that person only to (ii) the number of shares outstanding and
dividing that result into (iii) the total number of shares and exercisable
options owned by that person.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Once the spin-off distribution is effected, the Schumacher Plan will hold
681,368 shares of our issued and outstanding stock, representing 52.9% of our
issued and outstanding common stock. Michael L. Schumacher is the sole
beneficiary of the Schumacher Plan. The Schumacher Plan may be deemed a "parent"
as defined under the rules and regulations promulgated under the Securities Act.

                                       9
<PAGE>

     As of June 30, 2005, our President had advanced $355,590 plus accrued
interest at 8% per annum of $30,082 to our company for the construction in
progress. Our President funded the remaining completion costs of the studio
subsequent to June 30, 2005. Since the construction has been completed, the
Company's President and the Company are in the process of converting the advance
to a mortgage note payable collateralized by the land and building owned by the
Company. The mortgage loan will accrue interest at 8% per annum with the total
note and accrued interest due five years from the date of completion of the
construction. Construction note interest is being capitalized during the
construction period. Immaterial real estate taxes on this property, subject to
the construction in progress, are expensed as incurred.

     At June 30, 2005, we owed $13,414 to Pride, Inc., a related party, of which
$1,092 was related to the construction in progress as stated above. The advances
are uncollateralized, bear no interest and have no written repayment terms. The
advances were repaid in full in September 2005.

     There were 1,325,000 shares of common stock outstanding at July 1, 2002. To
facilitate the one for one distribution, 37,607 shares were cancelled for no
consideration.

     We use the mailing address of the offices of its President for its mailing
address. No expense provision for this use has been provided since it has been
determined that it is immaterial.

                                    PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) Financial Statements are contained in Item 7.

(b) Reports on Form 8-K

No reports on Form 8-K have been filed during the last quarter of the period
covered by this report.

(c) Exhibits.

* 3.1 Articles of Incorporation
* 3.2 Bylaws of the Company

* These documents are rendered as previously filed and incorporated by reference
to the Company's previous filings with the Securities and Exchange Commission.


31.1   Certification of Chief Executive         Filed herewith
       Officer and Chief Financial              electronically
       Officer pursuant to Section 302
       of the Sarbanes-Oxley Act of 2002

31.2   Certification of Vice President          Filed herewith
       pursuant to Section 302 of  the          electronically
       Sarbanes-Oxley Act of 2002

32.1   Certification of Chief Executive         Filed herewith
       Officer and Chief Financial              electronically
       Officer pursuant to 18 U.S.C.
       Section 1350

32.2   Certification of Vice President          Filed herewith
       pursuant to 18 U.S.C.                    electronically
       Section 1350


                                       10
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Birch Branch, Inc.

Date: October 12, 2005

By:


 /s/ Michael Schumacher
-------------------------------------------
Michael Schumacher
President, Treasurer, Chief Financial Officer and Director



By:


  /s/ George A. Powell
-------------------------------------------
Peter Porath
Vice-President, Secretary and Director













                                       11