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: June 30, 2005
                                                 --------------

             [ ] 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:  August 11, 2005 1,079,940


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




<PAGE>



PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS






                                       (Unaudited)
                                         June 30,          December 31,
                                           2005                2004
                                    ------------------  ------------------
ASSETS
Current Assets:
Cash and Cash Equivalents           $                -  $                -
Accounts Receivable, Net                     1,275,470           1,537,243
Inventory                                    1,640,250           1,502,719
Prepaid expense                                 18,993                   -
                                    ------------------  ------------------

     Total Current Assets                    2,934,713           3,039,962
                                    ------------------  ------------------

Fixed Assets:
Manufacturing Equipment                        676,342             615,409
Office Equipment                               257,634             262,320
Furniture & Fixtures                             4,851               4,939
Leasehold improvements                          66,474              67,682
Property Held Under Capital Lease              353,269             432,928
                                    ------------------  ------------------
                                             1,358,570           1,383,278
Less Accumulated Depreciation                 (469,483)           (415,199)
                                    ------------------  ------------------
     Total Fixed Assets                        889,087             968,079
                                    ------------------  ------------------

     TOTAL ASSETS                   $        3,823,800  $        4,008,041
                                    ==================  ==================



                                        2

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)
<TABLE>
<CAPTION>

                                                                                (Unaudited)
                                                                                  June 30,          December 31,
                                                                                    2005                2004
                                                                             ------------------  ------------------
LIABILITIES
Current Liabilities:
<S>                                                                          <C>                 <C>
Accounts Payable and Accrued Liabilities                                     $        1,092,306  $        1,093,160
Bank Overdraft                                                                          106,910              24,306
Bank Line                                                                               330,480             643,902
Related Party Loans                                                                     146,431             139,159
Shareholder Payables                                                                    275,245             253,409
Current Portion of Obligations Under Capital Leases                                      38,136              57,721
Current Portion Long-Term Debt                                                           11,780              34,468
                                                                             ------------------  ------------------

     Total Current Liabilities                                                        2,001,288           2,246,125
                                                                             ------------------  ------------------

Non-Current Liabilities:
Long-Term Debt                                                                           25,737              29,653
Lease Obligations                                                                        94,843             114,636
Deferred Tax Liability                                                                   58,143             169,986
                                                                             ------------------  ------------------

     Total Non-Current Liabilities                                                      178,723             314,275
                                                                             ------------------  ------------------

     Total Liabilities                                                                2,180,011           2,560,400
                                                                             ------------------  ------------------

STOCKHOLDERS EQUITY
Common Stock - $0.001 par value, 100,000,000
   shares authorized, 1,079,940 issued and outstanding
   at June 30, 2005 and December 31, 2004                                                 1,080               1,080
Additional Paid-in Capital                                                              698,961             698,961
Currency Translation Adjustment                                                         113,546              42,882
Retained Earnings (Deficit)                                                             830,202             704,718
                                                                             ------------------  ------------------

     Total Stockholders' Equity                                                       1,643,789           1,447,641
                                                                             ------------------  ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $        3,823,800  $        4,008,041
                                                                             ==================  ==================
</TABLE>



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

                                        3

<PAGE>



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

<TABLE>
<CAPTION>
                                                     For the Three Months Ended         For the Six Months Ended
                                                              June 30,                          June 30,
                                                 ---------------------------------- ---------------------------------
                                                       2005              2004             2005             2004
                                                 -----------------  --------------- ----------------  ---------------
REVENUES
<S>                                              <C>                <C>             <C>               <C>
Sales                                            $       1,561,874  $     1,643,059 $      2,936,675  $     2,843,713
Cost of Sales                                              812,209        1,084,225        1,729,372        1,991,505
                                                 -----------------  --------------- ----------------  ---------------
Gross Margin                                               749,665          558,834        1,207,303          852,208
                                                 -----------------  --------------- ----------------  ---------------

EXPENSES
   Selling & Marketing                                      66,171           47,145          115,163          129,196
   General & Administrative                                445,154          140,302          540,701          241,151
   Consulting                                               20,111           38,551           38,256           80,194
   Depreciation Expense                                     31,353           30,732           60,666           57,800
   Salaries & Wages                                        167,529           94,603          358,790          199,208
                                                 -----------------  --------------- ----------------  ---------------
                                                           730,318          351,333        1,113,576          707,549
                                                 -----------------  --------------- ----------------  ---------------

Net Income (Loss) from Operations                           19,347          207,501           93,727          144,659
                                                 -----------------  --------------- ----------------  ---------------

Other Income (Expense)
   Interest, Net                                           (23,192)         (14,965)         (46,429)         (27,323)
   Currency Exchange, Net                                  (16,708)         (13,367)          93,465              147
                                                 -----------------  --------------- ----------------  ---------------

Net Income (Loss) Before Income Taxes                      (20,553)         179,169          140,763          117,483
Income Tax (Expense) Benefit                                 6,674          (23,542)         (15,279)         (62,218)
                                                 -----------------  --------------- ----------------  ---------------

NET INCOME (LOSS)                                $         (13,879) $       155,627 $        125,484  $        55,265
                                                 =================  =============== ================  ===============

Basic & Diluted Earnings Per Share               $          (0.01)  $          0.14 $           0.12  $          0.05
                                                 =================  =============== ================  ===============

Weighted Average Shares Outstanding                      1,079,940        1,079,940        1,079,940        1,079,940
                                                 =================  =============== ================  ===============
</TABLE>






   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 Six Months Ended
                                                                                            June 30,
                                                                              -------------------------------------
                                                                                    2005                2004
                                                                              -----------------  ------------------
Cash Flows From Operating Activities
<S>                                                                           <C>                <C>
   Net income (loss) for the period                                           $         125,484  $           55,265
Adjustments to reconcile net loss to net cash
   Provided by operating activities
     Currency Translation Adjustment                                                    (42,975)             69,363
     Depreciation and Amortization                                                       54,266              72,798
     Decrease (Increase) in Receivables                                                 334,569            (357,937)
     Decrease (Increase) in Inventory                                                  (137,384)           (162,591)
     Decrease (Increase) in Prepaid Expense                                             (18,991)             (5,607)
     Increase in Accounts Payable & Accrued Liabilities                                 (68,692)            266,036
     Increase (Decrease) in Bank Overdraft                                               82,597              69,241
     Increase (Decrease) in Deferred Tax Liability                                            -              (4,901)
                                                                              -----------------  ------------------
Net Cash Provided by (Used in) Operating Activities                                     328,874               1,667
                                                                              -----------------  ------------------

Cash Flows From Investing Activities
   Purchase of Property and Equipment                                                    24,830            (137,850)
                                                                              -----------------  ------------------
Net Cash Used by Investing Activities                                                    24,830            (137,850)
                                                                              -----------------  ------------------

Cash Flows From Financing Activities
   Proceeds/Payments on Bank Line                                                      (313,452)            189,284
   Proceeds (Payments) Shareholder Payables                                              21,811                   -
   Proceeds (Payments) Long-term Debt/Capital Lease Obligations                         (62,063)            (53,101)
                                                                              -----------------  ------------------
Net Cash Provided by (Used in) Financing Activities                                    (353,704)            136,183
                                                                              -----------------  ------------------

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                                            $          38,683  $           27,323
                                                                              =================  ==================
   Income taxes paid during the period                                        $               -  $           15,200
                                                                              =================  ==================
</TABLE>

Supplemental Disclosure of Non-cash Investing and Financing Activities
   None



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

                                        5

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         This summary of accounting policies for GFR  Pharmaceuticals,  Inc. and
Subsidiaries  (Formerly  Laredo  Investment  Corp.)  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 June 30,  2005,and for the
three and six months then 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 and
six 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.





                                        6

<PAGE>



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

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

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

         The  results  of  subsidiaries  acquired  or sold  during  the year are
consolidated  from their effective dates of acquisition  through their effective
dates of disposition.

         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.




                                        7

<PAGE>



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

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

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.

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-live 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

                                        8

<PAGE>



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

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

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.

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  2004  financial
statements to conform with the 2005 presentation.

                                        9

<PAGE>



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

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 June 30, 2005 and 2004.

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  June  30,  2005  and  December  31,  2004,  accounts  receivable
consisted of the following:

<TABLE>
<CAPTION>
                                                        June 30,       December 31,
                                                          2005               2004
                                                   ------------------  -----------------

<S>                                                <C>                 <C>
Accounts Receivable                                $        1,355,261  $       1,630,830
Less: Allowance for Doubtful Accounts                         (79,791)           (93,587)
                                                   ------------------  -----------------

Total Accounts Receivable                          $        1,275,470  $       1,537,243
                                                   ==================  =================
</TABLE>

         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)

NOTE 3 - INVENTORY

         Inventory is valued at lower of cost or market. As of June 30, 2005 and
December 31, 2004, inventory consists of the following:


                                         June 30,          December 31
                                           2005                2004
                                    ------------------  ------------------
Raw materials                       $        1,034,811  $          937,864
Work in process                                312,408             229,032
Finished Goods                                 293,031             335,823
                                    ------------------  ------------------

Total Inventory                     $        1,640,250  $        1,502,719
                                    ==================  ==================


NOTE 4 - INCOME TAXES

         The  provision  for income  taxes  consists  of  Canadian  federal  and
provincial and  territorial  income tax. For the three and six months ended June
30,  2005,  income  tax  benefit  (expense)  has been  estimated  as $6,674  and
($15,279),  respectively.  For the same  periods in 2004,  it was  estimated  as
($23,542) and ($62,218).

         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 $58,143 and $169,986 as of
June 30, 2005 and December 31, 2004. 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 June  30,  2005,  a major  shareholder  of the  Company  gave the
Company an unsecured line of credit of up to $310,125 (375,000 Canadian).  As of
June 30, 2005, the Company owes $275,245 (337,310  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 June 30, 2005 and
2004, $8,184 and $23,855 were accrued or paid.

         As of April 1,  2004,  Ms.  Schanfarber  is no longer  being  paid this
licence 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)

NOTE 6 - SHORT-TERM OBLIGATIONS

<TABLE>
<CAPTION>
                                                                                  June 30,          December 31,
                                                                                    2005                2004
                                                                             ------------------  ------------------
Promissory note, repayable to related parties upon
<S>                                                                          <C>                 <C>
   demand, including interest at 12%                                         $          146,431  $          139,159
                                                                             ==================  ==================
</TABLE>

         The Company has a line of credit with a bank with a total  amount owing
of  $330,480   and  $643,902  as  of  June  30,  2005  and  December  31,  2004,
respectively.  This line carries an interest  rate of prime plus 1.5 and a total
available  credit of $693,600  ($850,000  Canadian) as of December 31, 2004. The
line is secured by certain manufacturing equipment of the Company.

NOTE 7 - LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                  June 30,          December 31,
                                                                                    2005                2004
                                                                             ------------------  ------------------
<S>                                                                          <C>                 <C>
TDBank Small Business  loan,  repayable in monthly  installments  $2,515 ($3,973
Canadian), including interest at 10.15%, maturing September 15, 2005, secured by
certain manufacturing equipment of the Company                               $           11,780  $           26,959

Business Development Bank of Canada Loan, repayable in
monthly installments $657 ($830 Canadian), including interest
at prime plus 1%, maturing August 23, 2009                                               25,737              37,162

Less current portion of long-term debt                                                  (11,780)            (34,468)
                                                                             ------------------  ------------------

                                                                             $           25,737  $           29,653
                                                                             ==================  ==================
</TABLE>

         Principal  payments  due on  long-term  debt for each of the five years
subsequent to December 31, 2004 and thereafter are as follows:


       Year ending:                Amount
---------------------------  ------------------
           2005              $            6,945
           2006                           7,551
           2007                           8,117
           2008                           8,726
           2009                           6,178
                             ------------------
        Thereafter
           Total             $           37,517
                             ==================

                                       12
<PAGE>

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

NOTE 8 - ECONOMIC DEPENDENCE

         The Company sells a substantial portion of its product to one customer.
During the first quarter of 2005 and 2004, sales to that customer aggregated 49%
and 52%,  respectively.  As of June 30, 2005 and December 31, 2004,  amounts due
from  that  customer   included  in  accounts   receivable  were  41%  and  17%,
respectively.  Future  operations of the Company depend on  continuation  of the
manufacturing arrangement with that customer.

NOTE 9 - COMMITMENTS

         The Company has entered into lease agreements for its manufacturing and
office facilities and certain  manufacturing  equipment with the Company's major
shareholder  and other  parties.  The rental charges are  approximately  $83,840
($115,000  Canadian) per year for real property and $88,862 ($108,900  Canadian)
per year for equipment.  The real property lease expired  December 31, 2004, and
the equipment lease expires 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 2005 and 2004.

         Following is a summary of property held under capital leases:


<TABLE>
<CAPTION>
                                                  June 30,          December 31,
                                                    2005                2004
                                             ------------------  ------------------
<S>                                          <C>                 <C>
Manufacturing Equipment                      $          353,269  $          432,928
Less: Accumulated Depreciation                          (55,867)            (57,640)
                                             ------------------  ------------------

Net Assets Held Under Capital Lease          $          297,402  $          375,288
                                             ==================  ==================
</TABLE>

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









                                       13

<PAGE>



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

<TABLE>
<CAPTION>

    Ending December 31:                                          Real Property         Equipment
----------------------------                                   ------------------  -----------------
<S>   <C>                                                      <C>                 <C>
      2005                                                     $                  -$          67,097
      2006                                                                      -             50,338
      2007                                                                      -             50,338
      2008                                                                      -             19,508
      2009                                                                      -                  -
                                                               ------------------  -----------------
      Net Minimum Lease Payments                                                -            187,281
      Less: Amount Representing Interest                                        -            (97,404)
                                                               ------------------  -----------------
      Present Value of Net Minimum Lease Payment               $                  -$          89,877
                                                               ==================  =================
</TABLE>

         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.

         During 2002, the Company  entered into a lease  agreement for warehouse
space.  The  lease is month to month  with a six  month  notice  of  termination
clause.  Under the terms of the lease  agreement,  the  monthly  rent  charge is
approximately $4,488 ($5,500 Canadian).

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 June 30, 2005, 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.






                                       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 1.47 at June 30,  2005  compared  to 1.35 at
December  31,  2004.  Current  liabilities  include a $146,431  promissory  note
payable to a party related to the major shareholder, 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 $11,780 as of June
30, 2005.  This loan bears interest at 10.15% and matures on September 15, 2005.
The Company has a second business loan with an outstanding balance of $25,737 as
of June 30,  2005.  This loan bears  interest at prime plus 1 percent,  maturing
August 23, 2009.

GFR did not acquired any manufacturing  equipment in the second quarter of 2005.
An additional $125,000 of manufacturing equipment is expected to be purchased in
2005 in order to meet demands for new private label sales.

Results of Operations

<TABLE>
<CAPTION>
                                             For the Three Months Ended            For the Six Months Ended
                                                      June 30,                             June 30,
                                         -----------------------------------  ----------------------------------
                                                2005              2004              2005              2004
                                         ------------------ ----------------  ----------------- ----------------
<S>                                      <C>                <C>               <C>               <C>
Sales                                    $        1,561,874 $      1,643,059  $       2,936,675 $      2,843,713
Cost of Sales                                       812,209        1,084,225          1,729,372        1,991,505
                                         ------------------ ----------------  ----------------- ----------------
Gross Margin                                        749,665          558,834          1,207,303          852,208
Gross Profit Percentage                              48.00%           34.02%             41.12%           29.97%

Selling and Marketing Expenses                       66,171           47,145            115,163          129,196
Selling Expense as a % of Sales                       4.24%            2.87%              3.93%            4.55%

Admin. and Other Expenses                           664,147          304,188            998,413          578,353
Admin Expenses as a % of Sales                       42.53%           18.52%             34.00%           20.34%
</TABLE>


                                       15

<PAGE>



For the six months ended June 30, 2005,  sales were $92,962 higher than 2004 and
are expected to continue to grow during 2005.

During the second  quarter of 2005 and 2004 sales to Prairie  Naturals Inc. were
49% and 52%  respectively.  GFR has a verbal  arrangement to manufacture,  on an
as-ordered  basis,  private  label  products  that  Prairie  Naturals  Inc.  and
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 and six months ending June 30, 2005 were 48.00%
and 41.12% and for the same periods in 2004 34.02% and 29.97% 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 higher than the same period for 2004 in part because
of the  decrease in costs  associated  with initial runs of new products and the
completion of jobs with higher margins in general.

General and administrative  expenses for the three and six months ended June 30,
2005 were  42.53%  and  34.00% of sales  and for the same  periods  in 2004 were
18.52% and 20.34%.  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.



                                       16

<PAGE>



(b) Changes in Internal Controls

         Based on this evaluation as of June 30, 2005, 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 and material weaknesses.

PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         None.

ITEM 2. CHANGES IN SECURITIES

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5. OTHER INFORMATION

         None.

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: August 19 ,2005         By: /s/ Richard Pierce
      ---------------         --------------------------------------------------
                              Richard Pierce
                              President, C.E.O., Director

DATE: August 19, 2005         By: /s/  Marc Casavant
      ---------------         --------------------------------------------------
                              Marc Casavant
                              C.F.O., Director




























                                       18