# UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 10-QSB

(Mark One)

# [X] QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the quarterly
period ended: June 30, 2004

# [ ] TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THEEXCHANGE ACT

For the transition
period from ______________to ____________

Commission file number
000-27959

GFR Pharmaceuticals,
Inc. (Exact >name of small business issuer as specified in its charter)

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

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

(604) 460-8440Issuers telephone
number

Laredo Investment
Corp.(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:    June 30, 2004 1,079,949

Transitional
Small Business Disclosure Format (check one). Yes      ;  NoX

---



# PART I 
FINANCIAL INFORMATION

# Item 1. Financial Statements

GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) CONSOLIDATED BALANCE SHEETS

|                                  | (Unaudited)
June 30,
2004 | December 31,
2003
|--------------------------------- | ------------------------- | -----------------
|ASSETS                            |                           |                  
|Current Assets:                   |                           |                  
|Cash and Cash Equivalents         |                           |                  
|Accounts Receivable, Net          |                           |                  
|Inventory                         |                           |                  
|Prepaid expense                   |                           |                  
|                                  |                           |                  
|Total Current Assets              |                           |                  
|                                  |                           |                  
|Fixed Assets:                     |                           |                  
|Manufacturing Equipment           |                           |                  
|Office Equipment                  |                           |                  
|Furniture & Fixtures              |                           |                  
|Leasehold improvements            |                           |                  
|Property Held Under Capital Lease |                           |                  
|                                  |                           |                  
|                                  |                           |                  
|Less Accumulated Depreciation     |                           |                  
|                                  |                           |                  
|                                  |                           |                  
|                                  |                           |                  
|TOTAL ASSETS                      |                           |                  
|                                  |                           |                  

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES(Formerly LAREDO
INVESTMENT CORP.) CONSOLIDATED BALANCE
SHEETS (Continued)

|                                                    | (Unaudited)
June 30,
2004 | December 31,
2003
|--------------------------------------------------- | ------------------------- | -----------------
|LIABILITIES                                         |                           |                  
|Current Liabilities:                                |                           |                  
|Accounts Payable and Accrued Liabilities            |                           |                  
|Bank Overdraft                                      |                           |                  
|Bank Line                                           |                           |                  
|Related Party Loans                                 |                           |                  
|Current Portion of Obligations Under Capital Leases |                           |                  
|Current Portion Long-Term Debt                      |                           |                  
|                                                    |                           |                  
|Total Current Liabilities                           |                           |                  
|                                                    |                           |                  
|Non-Current Liabilities:                            |                           |                  
|Long-Term Debt                                      |                           |                  
|Lease Obligations                                   |                           |                  
|Deferred Tax Liability                              |                           |                  
|                                                    |                           |                  
|Total Non-Current Liabilities                       |                           |                  
|                                                    |                           |                  
|Total Liabilities                                   |                           |                  
|                                                    |                           |                  
|STOCKHOLDERS EQUITY                                 |                           |                  
|Common Stock - $0.001 par value, 100,000,000        |                           |                  
|shares authorized, 1,079,949 issued and outstanding |                           |                  
|at June 30, 2004 and December 31, 2003              |                           |                  
|Additional Paid-in Capital                          |                           |                  
|Currency Translation Adjustment                     |                           |                  
|Retained Earnings (Deficit)                         |                           |                  
|                                                    |                           |                  
|Total Stockholders' Equity                          |                           |                  
|                                                    |                           |                  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          |                           |                  
|                                                    |                           |                  

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

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)

|                                      | For the Three Months Ended
June 30, | For the Six Months Ended
June 30,
|------------------------------------- | ----------------------------------- | ---------------------------------
|
|REVENUES                              |                                     |                                  
|Sales                                 |                                     |                                  
|Cost of Sales                         |                                     |                                  
|                                      |                                     |                                  
|Gross Margin                          |                                     |                                  
|EXPENSES                              |                                     |                                  
|Selling & Marketing                   |                                     |                                  
|General & Administrative              |                                     |                                  
|Consulting                            |                                     |                                  
|Depreciation Expense                  |                                     |                                  
|Salaries & Wages                      |                                     |                                  
|                                      |                                     |                                  
|                                      |                                     |                                  
|                                      |                                     |                                  
|Net Income (Loss) from Operations     |                                     |                                  
|                                      |                                     |                                  
|Other Income (Expense)                |                                     |                                  
|Interest, Net                         |                                     |                                  
|Currency Exchange, Net                |                                     |                                  
|                                      |                                     |                                  
|Net Income (Loss) Before Income Taxes |                                     |                                  
|Income Tax (Expense) Benefit          |                                     |                                  
|                                      |                                     |                                  
|NET INCOME (LOSS)                     |                                     |                                  
|                                      |                                     |                                  
|Basic & Diluted Earnings Per Share    |                                     |                                  
|                                      |                                     |                                  
|Weighted Average Shares Outstanding   |                                     |                                  
|                                      |                                     |                                  

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

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)

|                                                                       | For The Six Months Ended
June 30,
|---------------------------------------------------------------------- | ---------------------------------
|
|Cash Flows From Operating Activities                                   |                                  
|Net income (loss) for the period                                       |                                  
|Adjustments to reconcile net loss to net cash                          |                                  
|Provided by operating activities                                       |                                  
|Currency Translation Adjustment                                        |                                  
|Depreciation and Amortization                                          |                                  
|Decrease (Increase) in Receivables                                     |                                  
|Decrease (Increase) in Inventory                                       |                                  
|Decrease (Increase) in Prepaid Expense                                 |                                  
|Increase in Accounts Payable & Accrued Liabilities                     |                                  
|Increase (Decrease) in Bank Overdraft                                  |                                  
|Increase (Decrease) in Deferred Tax Liability                          |                                  
|                                                                       |                                  
|Net Cash Provided by (Used in) Operating Activities                    |                                  
|                                                                       |                                  
|Cash Flows From Investing Activities                                   |                                  
|Purchase of Property and Equipment                                     |                                  
|                                                                       |                                  
|Net Cash Used by Investing Activities                                  |                                  
|                                                                       |                                  
|Cash Flows From Financing Activities                                   |                                  
|Proceeds/Payments on Bank Line                                         |                                  
|Proceeds (Payments) Shareholder Payables                               |                                  
|Proceeds (Payments) Long-term Debt/Capital Lease Obligations           |                                  
|                                                                       |                                  
|Net Cash Provided by (Used in) Financing Activities                    |                                  
|                                                                       |                                  
|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                                        |                                  
|                                                                       |                                  
|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                    |                                  
|                                                                       |                                  

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

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) 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.

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 Health, Inc.
(Formerly R & L Health, Inc.), a British Columbia corporation, (R&L), 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.

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES(Formerly LAREDO
INVESTMENT CORP.) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

Revenue Recognition

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

Advertising Costs

Advertising
is expenses as incurred.

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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

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 |     
|Furniture and fixtures  |     
|Office equipment        |     
|Computer Software       |     
|Leasehold improvements  |     

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 that the carrying amount
of an asset may not be recoverable. If the sum of the expected future cash flows from the
used 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. Gain and losses resulting from foreign currency transactions are included in net
income.

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES(Formerly LAREDO
INVESTMENT CORP.) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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

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 2003 financial statements to conform with the 2004
presentation.

Earnings (Loss) per Share

Basic
loss per share has been computed by dividing the 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, 2004 and 2003.

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.

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES(Formerly LAREDO
INVESTMENT CORP.) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 2  ACCOUNTS
RECEIVABLE

As
of June 30, 2004 and December 31, 2003, accounts receivable consisted of the following:

|                                      | June 30,
2004 | December 31,
2003
|------------------------------------- | ------------- | -----------------
|Accounts Receivable                   |               |                  
|Less: Allowance for Doubtful Accounts |               |                  
|                                      |               |                  
|Total Accounts Receivable             |               |                  
|                                      |               |                  

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

NOTE 3  INVENTORY

Inventory
is valued at lower of cost or market. As of June 30, 2004 and December 31, 2003, inventory
consists of the following:

|                | June 30,
2004 | December 31
2003
|--------------- | ------------- | ----------------
|Raw materials   |               |                 
|Work in process |               |                 
|Finished Goods  |               |                 
|                |               |                 
|Total Inventory |               |                 
|                |               |                 

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, 2004, income tax expense has been
estimated as $23,542 and $62,218, respectively. For the same periods in 2003, it was
estimated as $131,423 and $185,388.

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 $152,640 and $157,540 as of June 30, 2004 and December 31, 2003. The
deferred tax liability is the result of excess depreciation for income tax purposes over
the amount for financial reporting purposes.

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 5  RELATED
PARTY TRANSACTIONS

As
of June 30, 2004 and December 31, 2003, shareholder payables include approximately $0
owing to a major shareholder.

Richard
Pierce, CEO of Laredo and Lucretia Schanfarber hold contracts with R&L Health Inc that
licenses their names and images to R&L for use on certain products. Each are paid a
quarterly bonus of 10% of R&L Health Inc. profits before income taxes, depreciation,
and amortization are deducted as expenses. As of June 30, 2004 and 2003, $31,289 and $0
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.

NOTE 6  SHORT-TERM
OBLIGATIONS

|                                                   | June 30,
2004 | December 31,
2003
|-------------------------------------------------- | ------------- | -----------------
|Promissory note, repayable to related parties upon |               |                  
|demand, including interest at 12%                  |               |                  
|                                                   |               |                  

The
Company has a line of credit with a bank with a total amount owing of $220,084 and $30,800
as of June 30, 2004 and December 31, 2003, respectively. This line carries an interest
rate of prime plus 1.5 and a total available credit of $192,500 ($250,000 Canadian) as of
December 31, 2003. The line is secured by certain manufacturing equipment of the Company.

NOTE 7  LONG-TERM
DEBT

|                                                 | June 30,
2004 | December 31,
2003
|------------------------------------------------ | ------------- | -----------------
|TDBank Small Business  loan, repayable           |               |                  
|in monthly instalments $2,515 ($3,973 Canadian), |               |                  
|including  interest at 10.15%, maturing          |               |                  
|September 15, 2005, secured by certain           |               |                  
|manufacturing equipment of the Company           |               |                  
|Less current portion of long-term debt           |               |                  
|                                                 |               |                  
|                                                 |               |                  
|                                                 |               |                  

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 7  LONG-TERM
DEBT (Continued)

Principal
payments due on long-term debt for each of the five years subsequent to December 31, 2003
and thereafter are as follows:

| | Year ending: | Amount | 
| | ------------ | ------ | 
| | 2004         |        | 
| | 2005         |        | 
| | 2006         |        | 
| | 2007         |        | 
| | 2008         |        | 
| |              |        | 
| | Thereafter   |        | 
| | Total        |        | 
| |              |        | 

NOTE 8  ECONOMIC
DEPENDENCE

The
Company sells a substantial portion of its product to one customer. During the first two
quarters of 2004 and 2003, sales to that customer aggregated 54% and 52%, respectively. As
of June 30, 2004 and December 31, 2003, amounts due from that customer included in
accounts receivable were 64% and 75%, 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 and other
parties. The rental charges are approximately $86,250 ($115,000 Canadian) per year for
real property and $81,675 ($108,900 Canadian) per year for equipment. The real property
lease expires 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 2004
and 2003.

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 9  COMMITMENTS (Continued)

Following
is a summary of property held under capital leases:

|                                    | June 30,
2004 | December 31,
2003
|----------------------------------- | ------------- | -----------------
|Manufacturing Equipment             |               |                  
|Less: Accumulated Depreciation      |               |                  
|                                    |               |                  
|Net Assets Held Under Capital Lease |               |                  
|                                    |               |                  

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

|Ending December 31:                        | Real Property | Equipment
|------------------------------------------ | ------------- | ---------
|2004                                       |               |          
|2005                                       |               |          
|2006                                       |               |          
|2007                                       |               |          
|2008                                       |               |          
|                                           |               |          
|Net Minimum Lease Payments                 |               |          
|Less: Amount Representing Interest         |               |          
|                                           |               |          
|Present Value of Net Minimum Lease Payment |               |          
|                                           |               |          

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 $4,125 ($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 issued 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, 2004, no options have been granted.

---



GFR PHARMACEUTICALS
INC. AND SUBSIDIARIES (Formerly LAREDO
INVESTMENT CORP.)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SUBSEQUENT EVENTS

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 2004 and 2003 financial
statements reflect this stock split.

---



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
Pharmaceuticals, Inc. (GFR) (Formerly Laredo Investment Corp.) 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
1.35 at June 30, 2004 compared to 1.52 at December 31, 2003.

Current liabilities include an
$117,657 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. Current Liabilities also include a bank
line of credit with a total amount due of $220,084 as of June 30, 2004. This line carries
an interest rate of prime plus 1.5% and is secured by certain manufacturing equipment.

GFR has a small business loan
outstanding with a balance of $39,499 as at June 30, 2004. This loan bears interest at
10.15% and matures on September 15, 2005.

GFR acquired an additional $25,979 of
manufacturing equipment in the first two quarters of 2004 in order to meet demands for new
private label sales. An additional $45,000 of manufacturing equipment is expected to be
purchased in 2004.

Results of Operations

|                                | For the Three Months Ended
June 30, | For the Six Months Ended
June 30,
|------------------------------- | ----------------------------------- | ---------------------------------
|
|Sales                           |                                     |                                  
|Cost of Sales                   |                                     |                                  
|                                |                                     |                                  
|Gross Margin                    |                                     |                                  
|Gross Profit Percentage         |                                     |                                  
|Selling and Marketing Expenses  |                                     |                                  
|Selling Expense as a % of Sales |                                     |                                  
|Admin. and Other Expenses       |                                     |                                  
|Admin Expenses as a % of Sales  |                                     |                                  

For the six months ended June 30,
2004, sales were $451,359 higher than 2003 and are expected to continue to grow during
2004.

During the first two quarters of 2004
and 2003 sales to Prairie Naturals Inc. were 54% 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, 2004 were 34.02% and 29.97% and for the same periods in 2003
44.05% and 36.24% 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 less than the same period for 2003 in part because
of the increase in costs associated with initial runs of new products and the completion
of jobs with lower margins in general. Margins for the Over the Counter Drug products will
continue to be low until the tablet bulk is produced by GFR Pharma Ltd. and not purchased
from suppliers.

Selling and Marketing expenses for
the three and six months ending June 30, 2004 were 2.87% and 4.55% of sales and for the
same periods in 2003 were 2.41% and 1.66%. The increase in selling and marketing expenses
is due to listing fees and promotional campaigns for GFR Health Inc. Benefits from
promotional campaigns will vary in their effectiveness but should help increase sales for
GFR Health Inc. over the following quarters. There are no new Marketing and Sales
initiatives planned for the remainder of 2004.

Administrative and other expenses for
the three and six months ended June 30, 2004 were 18.51% and 20.34% of sales and for the
same periods in 2003 were 19.51% and 15.32%. 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 have concluded, based
on an evaluation conducted within 90 days prior to the filing date of this Quarterly
Report on Form 10-Q, that the Companys disclosure controls and procedures have
functioned effectively so as to provide those officers the information necessary whether:

|(i) | this Quarterly Report on Form 10-Q contains any untrue statement of a material
          fact or omits to state a material fact necessary to make the statements made, in
          light of the circumstances under which such statements were made, not misleading
          with respect to the period covered by this Quarterly Report on Form 10-Q, and
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | the financial statements, and other financial information included in this
          Quarterly Report on Form 10-Q, fairly present in all material respects the
          financial condition, results of operations and cash flows of the Company as of,
          and for, the periods presented in this Quarterly Report on Form l0-Q.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There
have been no significant changes in the Companys internal controls or in other
factors since the date of the Chief Executive Officers and Chief Financial
Officers evaluation that could significantly affect these internal controls,
including any corrective actions with regards to significant deficiencies and material
weaknesses.

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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

| | The
Board of Directors of GFR through a corporate resolution has removed Ms. Lucretia
Schanfarber as a Director and Officer of GFR. This action was made pursuant to the Bylaws
of Laredo and was deemed in the best interest of GFR at this time. Ms. Schanfarber has
also received notice as per her contract of employment and will be terminated December 31,
2003. Ms. Schanfarber has signed a release and received a one-time payment of
$15,902.86CDN in consideration for any past or future claim against Laredo or any of its
subsidiaries.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Item 6. Exhibits and
Reports on Form 8-K

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

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# 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(Registrant)

| |                         |                                                                       
| | ----------------------- | ----------------------------------------------------------------------
| | DATE: August  12 , 2004 | By: /s/  Richard Pierce    
Richard Pierce
President, C.E.O., Director
| | DATE: August   12, 2004 | By: /s/  Marc Casavant
Marc Casavant
C.F.O., Director                 

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