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

                                   FORM 10-QSB

(Mark One)
              [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended: March 31, 2006
                                                 ---------------

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                                  EXCHANGE ACT

          For the transition period from ______________to ____________

                        Commission file number 000-27959
                                   ----------

                            GFR Pharmaceuticals Corp.
                           ---------------------------
        (Exact name of small business issuer as specified in its charter)


                    Nevada                             77-0517964
         ---------------------------------------------------------------
            (State or other jurisdiction            (IRS Employer
         of incorporation or organization)       Identification No.)

        Suite 11405 - 201A Street, Maple Ridge, British Columbia V2X 0Y3
                    (Address of principal executive offices)

                                 (604) 460-8440
                            Issuer's telephone number

         (Former name,  former  address and former fiscal year, if changed since
last report.)

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares  outstanding of each of the issuer's classes
of common  equity,  as of the latest  practical  date:  March 31, 2006 1,079,940


         Indicate by check mark whether the  registrant  is a shell  company (as
defined by Rule 12b-2 of the Exchange Act). Yes No X

         Transitional  Small Business  Disclosure Format (check one). Yes ; No X


                                        1

<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS







                                         (Unaudited)
                                          March 31,          December 31,
                                             2006                2005
                                      ------------------  ------------------
ASSETS
Current Assets:
Cash and Cash Equivalents             $                -  $                -
Accounts Receivable, Net                       1,599,557           1,525,435
Inventory                                      2,051,308           1,789,407
Prepaid expense                                  112,169              86,765
                                      ------------------  ------------------

     Total Current Assets                      3,763,034           3,401,607
                                      ------------------  ------------------

Fixed Assets:
Manufacturing Equipment                          734,116             495,953
Office Equipment                                 270,522             240,533
Furniture & Fixtures                               5,094               4,061
Leasehold Improvements                            69,799              56,759
Property Held Under Capital Lease                353,269             353,269
                                      ------------------  ------------------
                                               1,432,800           1,150,575
Less Accumulated Depreciation                   (524,355)           (491,948)
                                      ------------------  ------------------
     Total Fixed Assets                          908,445             658,627
                                      ------------------  ------------------

     TOTAL ASSETS                     $        4,671,479  $        4,060,234
                                      ==================  ==================



                                        2

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)



<TABLE>
<CAPTION>
                                                               (Unaudited)
                                                                March 31,          December 31,
                                                                   2006                2005
                                                            ------------------  ------------------
LIABILITIES
Current Liabilities:
<S>                                                         <C>                 <C>
Accounts Payable and Accrued Liabilities                    $        1,369,239  $        1,298,032
Bank Line                                                              862,582             844,609
Related Party Loans                                                    165,678             166,742
Shareholder Payables                                                   194,433                   -
Current Portion of Obligations Under Capital Leases                     47,312              46,184
Current Portion Long-Term Debt                                           8,534               8,543
                                                            ------------------  ------------------

     Total Current Liabilities                                       2,647,778           2,364,110
                                                            ------------------  ------------------

Non-Current Liabilities:
Long-Term Debt                                                          19,912              22,069
Lease Obligations                                                       59,808              72,160
Deferred Tax Liability                                                 211,464             225,114
                                                            ------------------  ------------------

     Total Non-Current Liabilities                                     291,184             319,343
                                                            ------------------  ------------------

     Total Liabilities                                               2,938,962           2,683,453
                                                            ------------------  ------------------

STOCKHOLDERS EQUITY
Common Stock - $0.001 par value, 100,000,000
   shares authorized, 1,079,940 issued and outstanding
   at March 31, 2006 and December 31, 2005                               1,080               1,080
Additional Paid-in Capital                                             698,961             698,961
Currency Translation Adjustment                                        463,205             173,819
Retained Earnings (Deficit)                                            569,271             502,921
                                                            ------------------  ------------------

     Total Stockholders' Equity                                      1,732,517           1,376,781
                                                            ------------------  ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $        4,671,479  $        4,060,234
                                                            ==================  ==================
</TABLE>



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

                                        3

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)




                                                  For the Three Months Ended
                                                           March 31,
                                          -------------------------------------
                                                   2006                 2005
                                          ----------------- -------------------
REVENUES
Sales                                     $       1,899,320 $         1,374,801
Cost of Sales                                     1,311,340             917,163
                                          ----------------- -------------------
Gross Margin                                        587,980             457,638
                                          ----------------- -------------------

EXPENSES
   Selling & Marketing                               90,134              48,992
   General & Administrative                         162,215              95,547
   Consulting                                         2,165              18,145
   Depreciation Expense                              32,756              29,313
   Salaries & Wages                                 161,931             191,261
                                          ----------------- -------------------
                                                    449,201             383,258
                                          ----------------- -------------------

Net Income (Loss) from Operations                   138,779              74,380

Other Income (Expense)
   Interest, Net                                    (21,717)            (23,237)
   Currency Exchange, Net                            (6,792)                367
                                          ----------------- -------------------

Net Income (Loss) Before Income Taxes               110,270              51,510
Income Tax (Expense) Benefit                        (43,920)            (21,953)
                                          ----------------- -------------------

NET INCOME (LOSS)                         $          66,350 $            29,557
                                          ================= ===================

Basic & Diluted Earnings Per Share        $            0.06 $              0.03
                                          ================= ===================

Weighted Average Shares Outstanding               1,079,940           1,079,940
                                          ================= ===================





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

                                        4

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   For The Three Months Ended
                                                                                            March 31,
                                                                              -------------------------------------
                                                                                    2006                2005
                                                                              -----------------  ------------------
Cash Flows From Operating Activities
<S>                                                                           <C>                <C>
   Net income (loss) for the period                                           $          66,350  $           29,557
Adjustments to reconcile net loss to net cash
   Provided by operating activities
     Depreciation and Amortization                                                       32,756              29,313
     Decrease (Increase) in Receivables                                                  76,949             358,995
     Decrease (Increase) in Inventory                                                  (266,598)           (218,057)
     Decrease (Increase) in Prepaid Expense                                             (25,769)             (8,181)
     Increase in Accounts Payable & Accrued Liabilities                                  59,770              37,520
     Increase (Decrease) in Bank Overdraft                                             (134,418)             86,783
     Increase (Decrease) in Deferred Tax Liability                                            -              95,076
                                                                              -----------------  ------------------
Net Cash Provided by (Used in) Operating Activities                                    (190,960)            411,006
                                                                              -----------------  ------------------

Cash Flows From Investing Activities
   Purchase of Property and Equipment                                                    (6,335)                  -
                                                                              -----------------  ------------------
Net Cash Used by Investing Activities                                                    (6,335)                  -
                                                                              -----------------  ------------------

Cash Flows From Financing Activities
   Proceeds/Payments on Bank Line                                                             -            (147,960)
   Proceeds (Payments) Shareholder Payables                                             196,534            (247,788)
   Proceeds (Payments) Long-term Debt/Capital Lease Obligations                          (8,509)            (12,298)
                                                                              -----------------  ------------------
Net Cash Provided by (Used in) Financing Activities                                     188,025            (408,046)
                                                                              -----------------  ------------------

Net Effect of Foreign Currency Translation                                                9,270              (2,960)
Increase (Decrease) in Cash                                                                   -                   -
Cash at beginning of period                                                                   -                   -
                                                                              -----------------  ------------------
Cash at End of Period                                                         $               -  $                -
                                                                              =================  ==================


Supplemental Disclosure of Interest and Income Taxes Paid
   Interest paid during the period                                            $          21,117  $           23,237
                                                                              =================  ==================
   Income taxes paid during the period                                        $               -  $                -
                                                                              =================  ==================

Supplemental Disclosure of Non-cash Investing and Financing Activities
   Equipment acquired through Capital Lease                                   $               -  $               -
                                                                              =================  ==================
   Stock issued as payment on short-term notes payable                        $               -  $               -
                                                                              =================  ==================
</TABLE>

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

                                        5

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         This summary of accounting policies for GFR  Pharmaceuticals,  Inc. and
Subsidiaries  is presented to assist in  understanding  the Company's  financial
statements.  The accounting  policies conform to generally  accepted  accounting
principles  and  have  been  consistently  applied  in  the  preparation  of the
financial statements.

Interim Reporting

         The unaudited financial  statements as of March 31, 2006, for the three
month period  ended,  reflect,  in the opinion of  management,  all  adjustments
(which include only normal recurring  adjustments) necessary to fairly state the
financial  position and results of operations  for the three  months.  Operating
results for interim periods are not necessarily  indicative of the results which
can be expected for full years.

Organization and Basis of Presentation

         The Company was  incorporated  under the laws of the State of Nevada on
December 18, 1996. The Company ceased all operating activities during the period
from December 18, 1996 to July 9, 1999 and was  considered  dormant.  On July 9,
1999,  the Company  obtained a Certificate  of renewal from the State of Nevada.
From July 9, 1999 to January 21, 2000, the Company was in the development stage.

         On January 21, 2000, Laredo entered into an Acquisition  Agreement with
GFR  Pharma,  Ltd.  (Formerly  GFR  Nutritionals,   Ltd.),  a  British  Columbia
corporation,  (GFR),  Richard Pierce and Lucretia  Schanfarber (the GFR Majority
Shareholders)  to acquire  their  shares  representing  100% of the  outstanding
common stock of GFR in exchange for  19,000,000  newly issued shares of Laredo's
restricted common stock. The transaction was recorded as a reverse  acquisition.
GFR was incorporated in March 1997 as Helm  Developments  Ltd. In June 1998, the
Company formally changed its name to GFR Nutritionals Ltd. GFR was 100% owned by
the President and CEO,  Richard  Pierce from  inception  until January 17, 2000,
when a 10% interest was acquired by Lucretia  Schanfarber.  Business  operations
began in October 1998 after acquiring  manufacturing  equipment and arranging to
manufacture nutritional supplements under a private label contract.

         On June 21, 2000,  the Company  entered into an  Acquisition  Agreement
with Nutritionals (USA) Direct.Com, a Washington corporation,  (NDC), to acquire
100%  of the  outstanding  common  stock  of NDC in  exchange  for  $1,000.  The
transaction  has been recorded as a purchase.  NDC operations were wound down in
October 2002 and the company became dormant.

         On November 1, 2000, the Company entered into an Acquisition  Agreement
with GFR

                                        6

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Health, Inc. (Formerly R & L Health, Inc.), a British Columbia  corporation,  to
acquire 100% of the outstanding common stock of GFR Health, Inc. in exchange for
$0.01. The transaction was recorded as a purchase.

         On April 5, 2004,  GFR  Nutritionals  Ltd.  and R&L Health Inc  changed
their names to GFR Pharma, Ltd. and GFR Health, Inc. respectively.

         On August 9, 2004,  Laredo  Investment  Corp.  changed  its name to GFR
Pharmaceuticals, Inc.

Principles of Consolidation

         The  consolidated  financial  statements  include  the  accounts of GFR
Pharmaceuticals,  Inc.  (Formerly  Laredo  Investment  Corp.) and the  following
wholly owned subsidiaries:

*        GFR Pharma Ltd.  (Formerly GFR Nutritionals,  Ltd.), a British Columbia
         corporation
*        Nutritionals(USA) Direct.com, a Washington corporation
*        GFR Health,  Inc.  (Formerly R & L Health,  Inc.),  a British  Columbia
         corporation

         All  significant  inter-company  accounts  and  transactions  have been
eliminated.

Nature of Business

         The Company  specializes in formulating,  blending,  encapsulating  and
packing nutritional products.  The Company also distributes products through its
GFR Health Inc. subsidiary. The Company's operations are located in the province
of British Columbia, Canada.

Cash and Cash Equivalents

         For purposes of the statement of cash flows, the Company  considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.

Inventories

         Raw materials  inventory is stated at a lower of weighted  average cost
and replacement value. Inventories of work in progress is stated at the lower of
weighted average cost and net realizable value.

                                        7

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Revenue Recognition

         Revenue is recognized  from sales of product at the time of shipment to
customers.

Advertising Costs

         Advertising is expensed as incurred.

Depreciation

         Fixed  assets  are stated at cost.  Depreciation  and  amortization  is
calculated  on a  straight-line  basis over the  estimated  useful  lives of the
assets as follows:


                     Asset                              Rate
------------------------------------------------  -----------------

Manufacturing equipment                                 10-20 years
Furniture and fixtures                                    5-7 years
Office equipment                                          3-5 years
Computer Software                                           4 years
Leasehold improvements                                Term of lease

         Maintenance  and  repairs are charged to  operations;  betterments  are
capitalized.  The  cost  of  property  sold  or  otherwise  disposed  of and the
accumulated  depreciation  thereon are eliminated  from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged to income.

         The Company has adopted the Financial  Accounting  Standards Board SFAS
No., 121,  "Accounting  for the  Impairment of Long-lived  Assets." SFAS No. 121
addresses  the  accounting  for (i)  impairment of  long-lived  assets,  certain
identified  intangibles and goodwill  related to assets to be held and used, and
(ii) long- lived assets and certain identifiable  intangibles to be disposed of.
SFAS  No.  121  requires  that  long-lived   assets  and  certain   identifiable
intangibles  be held and used by an entity be reviewed for  impairment  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be  recoverable.  If the sum of the expected  future cash flows from the
use of the  asset  and  its  eventual  disposition  (un-discounted  and  without
interest  charges) is less than the carrying  amount of the asset, an impairment
loss is recognized.



                                        8

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Foreign Currency Translation

         The  Company's  functional  currency  is the  Canadian  dollar  and the
reporting currency is the U.S. Dollar. All elements of financial  statements are
translated  using a current  exchange  rate.  For  assets and  liabilities,  the
exchange  rate at the  balance  sheet  date is  used.  Stockholders'  Equity  is
translated using the historical rate. For revenues,  expenses,  gains and losses
the weighted average exchange rate for the period is used. Translation gains and
losses are included as a separate component of stockholders'  equity.  Gains and
losses resulting from foreign currency transactions are included in net income.

Pervasiveness of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  required  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk

         The  Company has no  significant  off-balance-sheet  concentrations  of
credit  risk such as foreign  exchange  contracts,  options  contracts  or other
foreign hedging arrangements.

Income Taxes

         The Company  accounts for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No.109 requires recognition of deferred
income  tax  assets  and   liabilities   for  the  expected  future  income  tax
consequences,  based on enacted tax laws, of temporary  differences  between the
financial reporting and tax bases of assets and liabilities.

Reclassifications

         Certain   reclassifications  have  been  made  in  the  2005  financial
statements to conform with the 2006 presentation.




                                        9

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Earnings (Loss) per Share

         Basic  earnings  (loss) per share has been  computed  by  dividing  the
income (loss) for the year applicable to the common stockholders by the weighted
average  number of common  shares  outstanding  during the years.  There were no
common equivalent shares outstanding at March 31, 2006 and 2005.

Stock Compensation for Non-Employees

         The  Company  accounts  for the fair  value of its  stock  compensation
grants for  non-employees  in accordance with FASB Statement 123. The fair value
of each grant is equal to the market price of the Company's stock on the date of
grant if an active  market  exists or at a value  determined  in an arms  length
negotiation between the Company and the non-employee.

NOTE 2 - ACCOUNTS RECEIVABLE

         As of March  31,  2006  and  December  31,  2005,  accounts  receivable
consisted of the following:


                                             March 31,       December 31,
                                                2006               2005
                                         ------------------  -----------------

Accounts Receivable                      $        1,681,474  $       1,607,437
Less: Allowance for Doubtful Accounts               (81,917)           (82,002)
                                         ------------------  -----------------

Total Accounts Receivable                $        1,599,557  $       1,525,435
                                         ==================  =================

         The allowance for doubtful accounts is based on management  estimate of
75% of receivables over 120 days outstanding.









                                       10

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 3 - INVENTORY

         Inventory  is valued at lower of cost or market.  As of March 31,  2006
and December 31, 2005, inventory consists of the following:


                                    March 31,          December 31
                                       2006                2005
                                ------------------  ------------------
Raw Materials                   $        1,571,706  $        1,419,651
Work in Process                             96,275              39,654
Finished Goods                             383,327             330,102
                                ------------------  ------------------

Total Inventory                 $        2,051,308  $        1,789,407
                                ==================  ==================

NOTE 4 - INCOME TAXES

         The  provision  for income  taxes  consists  of  Canadian  federal  and
provincial  and  territorial  income tax.  For the three  months ended March 31,
2006,  income tax expense has been estimated as $43,920.  For the same period in
2005, it was estimated as $21,953.

         Deferred taxes result from temporary  differences in the recognition of
income and expenses for income tax reporting and financial  statement  reporting
purposes.  The Company had deferred tax liability of $211,464 and $225,114 as of
March 31, 2006 and December 31, 2005.  The deferred tax  liability is the result
of excess  depreciation  for income tax purposes  over the amount for  financial
reporting purposes.

NOTE 5 - RELATED PARTY TRANSACTIONS

         As of March 31,  2006,  a major  shareholder  of the  Company,  Richard
Pierce, CEO of GFR  Pharmaceuticals,  Inc. gave the Company an unsecured line of
credit of up to $214,205 (250,000  Canadian).  As of March 31, 2006, the Company
owes $194,433 (226,924 Canadian) against this line of credit.

         Richard  Pierce,  CEO of Laredo and Lucretia  Schanfarber,  former Vice
President of Sales,  hold contracts with GFR Health,  Inc.  (Formerly R&L Health
Inc.) that licenses their names and images for use on certain products. Each are
paid a quarterly bonus of 10% of GFR Health,  Inc.  profits before income taxes,
depreciation,  and amortization  are deducted as expenses.  As of March 31, 2006
and 2005, $0 and $8,184 were accrued or paid.

         As of April 1,  2004,  Ms.  Schanfarber  is no longer  being  paid this
license fee as her name and image has been removed from all products.


                                       11

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 6 - SHORT-TERM OBLIGATIONS


<TABLE>
<CAPTION>
                                                           March 31,          December 31,
                                                              2006                2005
                                                       ------------------  ------------------
Promissory note, repayable to related parties upon
<S>                                                    <C>                 <C>
   demand, including interest at 12%                   $          165,678  $          166,742
                                                       ==================  ==================
</TABLE>

         The Company has a line of credit with a bank with a total amount due of
$862,582 and $844,609 as of March 31, 2006 and December 31, 2005,  respectively.
This  line  carries  an  interest  rate of prime  plus 0.5  percent  and a total
available  credit of $856,820  ($1,000,000  Canadian) as of March 31, 2006.  The
line is secured by certain manufacturing equipment of the Company.

NOTE 7 - LONG-TERM DEBT


<TABLE>
<CAPTION>
                                                                                 March 31,          December 31,
                                                                                    2006                2005
                                                                             ------------------  ------------------
Business Development Bank of Canada Loan, repayable in
monthly installments $686 ($830 Canadian), including interest
<S>           <C>                 <C> <C>                                    <C>                 <C>
at prime plus 1%, maturing August 23, 2009                                   $           28,446  $           30,612

Less current portion of long-term debt                                                   (8,534)             (8,543)
                                                                             ------------------  ------------------

                                                                             $           19,912  $           22,069
                                                                             ==================  ==================
</TABLE>

         Principal  payments  due on  long-term  debt for each of the five years
subsequent to December 31, 2005 and thereafter are as follows:


       Year ending:                Amount
---------------------------  ------------------
           2006              $            8,232
           2007                           8,232
           2008                           8,232
           2009                           3,750
           2010                               -
                             ------------------
        Thereafter
           Total             $           28,446
                             ==================






                                       12

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 8 - ECONOMIC DEPENDENCE

         The Company sells a substantial portion of its product to one customer,
Prairie Naturals,  Inc. During the first quarter of 2006 and 2005, sales to that
customer aggregated 41% and 53%, respectively. As of March 31, 2006 and December
31, 2005,  amounts due from that customer  included in accounts  receivable were
41%  and  34%,  respectively.   Future  operations  of  the  Company  depend  on
continuation of the manufacturing arrangement with that customer.

NOTE 9 - COMMITMENTS

         The Company has entered into a lease  agreements for its  manufacturing
and office  facilities  and certain  manufacturing  equipment with the Company's
major  shareholder,  Richard  Pierce and other  parties.  The rental charges are
approximately  $229,865  ($268,000  Canadian)  per year for  real  property  and
$56,100 ($65,400  Canadian) per year for equipment.  There are two real property
leases.  The first  expires  December 31, 2006,  it is comprised of the original
building  that the Company has been  operating  from.  The second is a five year
lease that will expire  March 31,  2011.  This lease is where the new  operating
premises will be located. The equipment leases expire June 2005 through December
2008.

         The assets and  liabilities  under  capital  leases are recorded at the
fair value of the asset.  The  assets  are  depreciated  over the lower of their
estimated  productive  lives.  Depreciation  of assets under  capital  leases is
included in depreciation expense for 2006 and 2005.

         Following is a summary of property held under capital leases:


<TABLE>
<CAPTION>
                                                                   March 31,          December 31,
                                                                      2006                2005
                                                               ------------------  ------------------
<S>                                                            <C>                 <C>
Manufacturing Equipment                                        $          353,269  $          353,269
Less: Accumulated Depreciation                                            (70,313)            (61,430)
                                                               ------------------  ------------------

Net Assets Held Under Capital Lease                            $          282,956  $          291,839
                                                               ==================  ==================
</TABLE>

         The minimum  future lease payments under these leases for the next five
years are:

<TABLE>
<CAPTION>

    Ending December 31:                                          Real Property         Equipment
----------------------------                                   ------------------  -----------------
<S>   <C>                                                      <C>                 <C>
      2006                                                     $          229,624  $          50,338
      2007                                                                295,603             50,338
      2008                                                                295,603             19,508
      2009                                                                295,603                  -
      2010                                                                295,603                  -
                                                               ------------------  -----------------
      Net Minimum Lease Payments                                                -            120,184
      Less: Amount Representing Interest                                        -            (46,489)
                                                               ------------------  -----------------
      Present Value of Net Minimum Lease Payment               $        1,412,036  $          73,695
                                                               ==================  =================
</TABLE>

                                       13

<PAGE>

                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Continued) (Unaudited)

NOTE 9 - COMMITMENTS (Continued)

         The leases  generally  provides  that  insurance,  maintenance  and tax
expenses  are  obligations  of the  Company.  It is expected  that in the normal
course of business,  leases that expire will be renewed or replaced by leases on
other properties.

NOTE 10 - STOCK INCENTIVE PLAN

         The Board of Directors has authorized  and the Company has  established
the 2000  Incentive  and  Non-qualified  Stock Option  Plan.  Under the plan the
Company is  authorized to issue up to 6,000,000  shares of the Company's  common
stock with such  exercise  price and vesting  periods as the Board of  Directors
deems to be in the best  interest  of the  Company.  As of March  31,  2006,  no
options have been granted.

NOTE 11 - STOCK SPLIT

         On August 9, 2004, the Company changed its name from Laredo  Investment
Corp. to GFR Pharmaceuticals, Inc. In addition, a retroactive 30:1 reverse stock
split was approved by shareholders.  All references to stock in the accompanying
financial statements reflect this stock split.

NOTE 12 - LITIGATIONS

         The  Company is in dispute  with one of its waste  disposal  vendor for
cancellation of the service contract  between the two companies.  The dispute is
being  heard in small  claims  court  with the  vendor  asking  for  $12,578  in
compensation.  The Company  believes the suit is  completely  without  merit and
intends to vigorously defend its position.








                                       14

<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Plan of Operations

The  Company  is  currently  working  on  securing   additional   private  label
manufacturing  contracts.  The key target for private  label sales are wholesale
distributors   of  health  food  nutrition   products.   GFR  is  also  pursuing
opportunities  for direct  sales to  consumers  through  the  Internet.  GFR has
entered into the OTC (Over the  Counter)  drug market with the  introduction  of
Acetaminophen and A.S.A. products but has no signed contracts at this time.

Liquidity and Capital Resources

GFR's  working  capital  ratio was 1.42 at March 31,  2006  compared  to 1.44 at
December  31,  2005.  Current  liabilities  include a $165,678  promissory  note
payable to a party related to the major shareholder, Richard Pierce, which bears
interest at 12%  annually.  These  funds are  repayable  on demand,  however the
request for repayment occurring at this time is not expected.

GFR has a small business loan  outstanding with a balance of $28,446 as of March
31, 2006.  This loan bears interest at prime plus 1.00%,  maturing on August 23,
2009.

GFR  acquired  an  additional  $6,335 of  manufacturing  equipment  in the first
quarter of 2006. An additional  $340,000 of manufacturing  equipment is expected
to be purchased in 2006 in order to meet demands for new private label sales.

Results of Operations



                                               For the Three Months Ended
                                                       March 31,
                                          ------------------------------------
                                                2006               2005
                                          -----------------  -----------------
Sales                                             1,899,320          1,374,801
Cost of Sales                                     1,311,340            917,163
                                          -----------------  -----------------
Gross Margin                                        587,980            457,638
Gross Profit Percentage                              30.96%              33.29%

Selling and Marketing Expenses                       90,134             48,992
Selling Expense as a % of Sales                       4.75%              3.56%

Admin. and Other Expenses                           359,067            334,266
Admin Expenses as a % of Sales                       18.90%             24.31%


For the three months ended March 31, 2006,  sales were $524,519 higher than 2005
and are expected to continue to grow during 2006.


                                       15

<PAGE>



During the first  quarter of 2006 and 2005 sales to Prairie  Naturals  Inc. were
41% and 53%  respectively.  GFR has a verbal  arrangement to manufacture,  on an
as-ordered basis,  private label products that Prairie Naturals Inc. distributes
under the Prairie Naturals Inc. name. GFR also has an exclusive written contract
to manufacture  one product that Prairie  Naturals Inc.  distributes for a third
party private label.

Operating  margins  for the three  months  ending  March 31,  2006 and 2005 were
30.96%  and  33.29% of sales  revenue.  Cost of Sales  includes  the cost of raw
materials used in manufacturing,  production labor costs and an applicable share
of overhead expenses.  Operating margins for the quarter are lower than the same
period  for 2005 in part  because  the  product  mix  contained  jobs with lower
margins in general.

General and  administrative  expenses  for the three months ended March 31, 2006
and 2005 were 18.90% and 24.31% of sales. GFR anticipates realizing economies of
scale as production  volumes increase.  This will be reflected  favorably in the
future by decreasing the percentage of sales for these expenses.

Effect of Inflation

GFR does not anticipate any financial impact, whether beneficial or detrimental,
as a result of inflation.

ITEM 3. CONTROLS AND PROCEDURES

The  Company's  Chief  Executive   Officer  and  Chief  Financial   Officer  are
responsible for establishing and maintaining  disclosure controls and procedures
for the Company.

                  (a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report,  the Company  carried out an
evaluation,  under the supervision and with the  participation  of the Company's
management,  including  the Company's  President,  of the  effectiveness  of the
design  and  operation  of the  Company's  disclosure  controls  and  procedures
pursuant to Rule 13a-15 under the  Securities  Exchange Act of 1934,  as amended
(the  "Exchange  Act").  Based  upon the  evaluation,  the  Company's  President
concluded that, as of the end of the period, the Company's  disclosure  controls
and  procedures  were effective in timely  alerting him to material  information
relating to the Company  required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.

                 (b) Changes in Internal Controls

Based on this evaluation as of March 31, 2006, there were no significant changes
in the  Company's  internal  controls over  financial  reporting or in any other
areas that could significantly affect the Company's internal controls subsequent
to the date of his most recent evaluation, including any corrective actions with
regard to significant deficiencies

PART II- OTHER INFORMATION

                                       16

<PAGE>




ITEM 1. LEGAL PROCEEDINGS

         The  Company is in dispute  with one of its waste  disposal  vendor for
cancellation of the service contract  between the two companies.  The dispute is
being  heard in small  claims  court  with the  vendor  asking  for  $12,578  in
compensation.  The Company  believes the suit is  completely  without  merit and
intends to vigorously defend its position.

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.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         The Company did not file a report on Form 8-K during the past quarter.






                                       17


<PAGE>




                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





                                             GFR Pharmaceuticals, Inc.
                                                   (Registrant)

DATE: May 17, 2006                   By: /s/ Richard Pierce
      ------------                   -------------------------------------------
                                         Richard Pierce
                                     President, C.E.O., Director
                                     (Principal Executive Officer)

DATE: May 17, 2006                   By: /s/  Marc Casavant
      ------------                   -------------------------------------------
                                          Marc Casavant
                                       C.F.O., Director
                                     (Principal Accounting Officer)













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