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**U.S.      Securities and Exchange Commission**

**Washington,      D.C. 20549**

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**FORM      10-QSB**

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| **[X]** | **Quarterly                Report Under Section 13 or 15(d) of The Securities Exchange Act of                1934                for the Quarterly Period Ended September 30,                2007** |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **[                 ]** | **Transition                Report Under Section 13 or 15(d) of The Securities Exchange Act of                1934                for the Transition Period from _______ to                _______** |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Commission      File Number: 000-27959**

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**GFR      PHARMACEUTICALS INC.**

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| **Nevada**                                                                                          | **77-0517964**                                                            |
|-----------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------|
| **(State                or Other Jurisdiction of****incorporation                or organization)** | **(I.R.S.                Employer****Identification                No.)** |

**99      Yan Xiang Road, Biosep Building, Xi An**

**Shaan      Xi Province, P.R. China 710054**

**(Address      of Principal Executive Offices)**

**(8629)      8339-9676**

**(Issuer’s      Telephone Number)**

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|   | Yes                [x] |   |   | No                [ ] |
|--------|------------------------|--------|--------|-----------------------|

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*Table          of Contents*

**CAUTIONARY      STATEMENT REGARDING FORWARD LOOKING INFORMATION**

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|   **TABLE                OF                CONTENTS**                                                |   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
| **PART                I. FINANCIAL INFORMATION**                                                               |   |
|                                                                                                           |   |
|                                                                                                           |   |
|                                                                                                           |   |
| ITEM                1. FINANCIAL                STATEMENTS                                                     | 4      |
|                                                                                                           |   |
| ITEM                2. MANAGEMENT'S                DISCUSSION AND                ANALYSIS OR PLAN OF OPERATION | 19     |
|                                                                                                           |   |
| ITEM                3  CONTROLS AND                PROCEDURES                                        | 23     |
|                                                                                                           |   |
| **PART                II. OTHER INFORMATION**                                                                  |   |
|                                                                                                           |   |
| ITEM                1. LEGAL                PROCEEDINGS                                                        | 23     |
|                                                                                                           |   |
| ITEM                2. CHANGES IN                SECURITIES AND USE OF                PROCEEDS                 | 23     |
|                                                                                                           |   |
| ITEM                5. OTHER INFORMATION                                                                       | 23     |
|                                                                                                           |   |
| ITEM                6. EXHIBITS AND                REPORTS ON FORM                8-K                          | 23     |
|                                                                                                           |   |
| SIGNATURES                                                                                                     | 24     |
|                                                                                                           |   |
| INDEX                TO                EXHIBITS                                                                | 25     |

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*Table          of Contents*

**ITEM      1.**
**FINANCIAL STATEMENTS**

**GFR        PHARMACEUTICALS INC.**

**INDEX        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

|                                                                                                                                                                                        |   | **Page** |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|
|                                                                                                                                                                                        |   |     |   |   |
| Condensed                  Consolidated Balance Sheets as of September 30, 2007 and December                  31,                  2006                                                     |   | 5        |   |   |
|                                                                                                                                                                                        |   |     |   |   |
| Condensed                  Consolidated Statements of Operations And Comprehensive Income                  for the                  three and nine months ended September 30, 2007 and 2006 |   | 6        |   |   |
|                                                                                                                                                                                        |   |     |   |   |
| Condensed                  Consolidated Statements of Cash Flows for the nine months ended                  September                  30, 2007 and 2006                                    |   | 7        |   |   |
|                                                                                                                                                                                        |   |     |   |   |
| Condensed                  Consolidated Statement of Stockholders’ Equity for the nine months ended                  September 30, 2007                                               |   | 8        |   |   |
|                                                                                                                                                                                        |   |     |   |   |
| Notes                  to Condensed Consolidated Financial Statements                                                                                                                       |   | 9-18     |   |   |

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*Table            of Contents*

| **GFR                  PHARMACEUTICALS INC.****CONDENSED                  CONSOLIDATED BALANCE SHEETS****AS                  OF SEPTEMBER 30, 2007 AND DECEMBER 31, 2006****(Currency                  expressed in United States Dollars (“US$”), except for number of                  shares)**       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                               |   | September                  30, 2007 |   |   | December                  31, 2006 |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                         |   | (unaudited) |   |   | (audited) |   |
| Current                  assets:                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                                                                                         |   | $ | 1,364,935 |   |   | $ | 64,543 |   |
| Accounts                  receivable, trade                                                                                                                                                                                                                                                                                                        |   |   | 335,759 |   |   |   | 472,601 |   |
| Prepayments                  and deposits                                                                                                                                                                                                                                                                                                          |   |   | 53,936 |   |   |   | 187,761 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  current assets                                                                                                                                                                                                                                                                                                              |   |   | 1,754,630 |   |   |   | 724,905 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Property,                  plant and equipment, net                                                                                                                                                                                                                                                                                                |   |   | 5,570,391 |   |   |   | 5,272,074 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **TOTAL                  ASSETS**                                                                                                                                                                                                                                                                                                                  |   | $ | 7,325,021 |   |   | $ | 5,996,979 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Current                  liabilities:                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| Short-term                  bank loan                                                                                                                                                                                                                                                                                                              |   | $ | 519,844 |   |   | $ | 1,280,000 |   |
| Income                  tax payable                                                                                                                                                                                                                                                                                                                |   |   | 590,075 |   |   |   | 11,474 |   |
| Other                  payables and accrued liabilities                                                                                                                                                                                                                                                                                            |   |   | 219,781 |   |   |   | 151,298 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  current liabilities                                                                                                                                                                                                                                                                                                         |   |   | 1,329,700 |   |   |   | 1,442,772 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Non-current                  liabilities:                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Amount                  due to a stockholder                                                                                                                                                                                                                                                                                                       |   |   | 329,615 |   |   |   | 169,961 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  liabilities                                                                                                                                                                                                                                                                                                                 |   |   | 1,659,315 |   |   |   | 1,612,733 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Minority                  interest                                                                                                                                                                                                                                                                                                                 |   |   | 277,566 |   |   |   | 221,163 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Stockholders’                  equity:                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| Common                  stock, $0.001 par value; 100,000,000 shares authorized; 42,079,940                  and                  41,079,940 shares issued and outstanding as of September 30, 2007                  and                  December 31, 2006                                                                                         |   |   | 42,080 |   |   |   | 41,080 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                                                                                        |   |   | 3,713,060 |   |   |   | 3,413,120 |   |
| Deferred                  compensation                                                                                                                                                                                                                                                                                                             |   |   | (36,000 | ) |   |   | - |   |
| Accumulated                  other comprehensive income                                                                                                                                                                                                                                                                                            |   |   | 264,733 |   |   |   | 89,578 |   |
| Statutory                  reserve                                                                                                                                                                                                                                                                                                                 |   |   | 77,579 |   |   |   | 77,579 |   |
| Retained                  earnings                                                                                                                                                                                                                                                                                                                 |   |   | 1,326,688 |   |   |   | 541,726 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  stockholders’ equity                                                                                                                                                                                                                                                                                                  |   |   | 5,388,140 |   |   |   | 4,163,083 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **TOTAL                  LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                              |   | $ | 7,325,021 |   |   | $ | 5,996,979 |   |

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*Table            of Contents*

| **GFR                  PHARMACEUTICALS INC.****CONDENSED                  CONSOLIDATED STATEMENTS OF OPERATIONS****AND                  COMPREHENSIVE INCOME****FOR                  THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND                  2006**** (Currency                  expressed in United States Dollars (“US$”), except for number of                  shares)****(Unaudited)**       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Three                  months ended September 30, |   |   | Nine                  months ended September 30, |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| **REVENUE,                  NET**                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $ | 850,101 |   |   | $ | 416,021 |   |   | $ | 2,295,937 |   |   | $ | 981,196 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OPERATING                  EXPENSES:**                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consulting                  and professional fee                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | 14,325 |   |   |   | - |   |   |   | 22,390 |   |   |   | - |   |
| Stock                  based compensation                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 36,000 |   |   |   | - |   |   |   | 264,000 |   |   |   | - |   |
| Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 117,433 |   |   |   | 107,661 |   |   |   | 342,575 |   |   |   | 317,605 |   |
| General                  and administrative                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 49,267 |   |   |   | 81,530 |   |   |   | 186,165 |   |   |   | 120,273 |   |
|  Total                  operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   | 217,025 |   |   |   | 189,191 |   |   |   | 815,130 |   |   |   | 437,878 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **INCOME                  FROM OPERATIONS**                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 633,076 |   |   |   | 226,830 |   |   |   | 1,480,807 |   |   |   | 543,318 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OTHER                  INCOME (EXPENSE):**                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | 74 |   |   |   | 133 |   |   |   | 269 |   |   |   | 170 |   |
| Interest                  expense                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   | (16,637 | ) |   |   | (29,604 | ) |   |   | (73,745 | ) |   |   | (93,821 | ) |
|  Total                  other expense                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | (16,563 | ) |   |   | (29,471 | ) |   |   | (73,476 | ) |   |   | (93,651 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **INCOME                  BEFORE INCOME TAXES AND MINORITY INTEREST**                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 616,513 |   |   |   | 197,359 |   |   |   | 1,407,331 |   |   |   | 449,667 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  tax expenses                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | (224,384 | ) |   |   | - |   |   |   | (565,966 | ) |   |   | - |   |
| Minority                  interest                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   | (21,561 | ) |   |   | (9,868 | ) |   |   | (56,403 | ) |   |   | (22,483 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  INCOME**                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $ | 370,568 |   |   | $ | 187,491 |   |   | $ | 784,962 |   |   | $ | 427,184 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  comprehensive income:                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -                  Foreign currency translation gain                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | 150,158 |   |   |   | 61,758 |   |   |   | 175,155 |   |   |   | 85,897 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $ | 520,726 |   |   | $ | 249,249 |   |   | $ | 960,117 |   |   | $ | 513,081 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income per share – Basic and diluted                                                                                                                                                                                                                                                                                                                                                                                                  |   | $ | 0.01 |   |   | $ | 0.00 |   |   | $ | 0.02 |   |   | $ | 0.01 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of shares outstanding during the period – Basic and                  diluted                                                                                                                                                                                                                                                                                                                                      |   |   | 42,079,940 |   |   |   | 40,047,997 |   |   |   | 41,983,644 |   |   |   | 40,047,997 |   |

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*Table            of Contents*

| **GFR                  PHARMACEUTICALS INC.****CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS****FOR                  THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006****(Currency                  expressed in United States Dollars (“US$”))****(Unaudited)**    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                               |   |   |   |
|                                                                                                                                                                                                                                                                                                               |   | Nine                  months ended September 30, |   |
|                                                                                                                                                                                                                                                                                                               |   | 2007 |   |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |
| **Cash                  flows from operating activities:**                                                                                                                                                                                                                                                         |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                                                                                                                                        |   | $ | 784,962 |   |   | $ | 286,213 |   |
| Adjustments                  to reconcile net income to net cash provided by (used in) operating                  activities:                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                                                                                                                                                                                       |   |   | 342,575 |   |   |   | 317,605 |   |
| Amortization                  of deferred compensation                                                                                                                                                                                                                                                             |   |   | 264,000 |   |   |   | - |   |
| Rent                  expense, non-cash                                                                                                                                                                                                                                                                            |   |   | 940 |   |   |   | - |   |
| Minority                  interest                                                                                                                                                                                                                                                                                 |   |   | 56,403 |   |   |   | 15,064 |   |
| Change                  in operating assets and liabilities:                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| Accounts                  receivable, trade                                                                                                                                                                                                                                                                        |   |   | 153,555 |   |   |   | (187,328 | ) |
| Prepayments                  and deposits                                                                                                                                                                                                                                                                          |   |   | 138,068 |   |   |   | (266,031 | ) |
| Income                  tax payable                                                                                                                                                                                                                                                                                |   |   | 565,966 |   |   |   | 148,390 |   |
| Other                  payables and accrued liabilities                                                                                                                                                                                                                                                            |   |   | 62,779 |   |   |   | 73,545 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Net                  cash provided by operating activities                                                                                                                                                                                                                                                         |   |   | 2,369,248 |   |   |   | 387,458 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **Cash                  flows from investing activities:**                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |
| Purchase                  of property, plant and equipment                                                                                                                                                                                                                                                         |   |   | (283,100 | ) |   |   | (148,938 | ) |
|  Net                  cash used in investing activities                                                                                                                                                                                                                                                       |   |   | (283,100 | ) |   |   | (148,938 | ) |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **Cash                  flows from financing activities:**                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |
| Advances                  to a stockholder                                                                                                                                                                                                                                                                         |   |   | (17,819 | ) |   |   | - |   |
| Repayment                  of short-term bank loan                                                                                                                                                                                                                                                                 |   |   | (797,367 | ) |   |   | (230,600 | ) |
|  Net                  cash used in financing activities                                                                                                                                                                                                                                                       |   |   | (815,186 | ) |   |   | (230,600 | ) |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **Foreign                  currency translation adjustment**                                                                                                                                                                                                                                                       |   |   | 29,430 |   |   |   | 2,743 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **NET                  CHANGE IN CASH AND CASH EQUIVALENTS**                                                                                                                                                                                                                                                       |   |   | 1,300,392 |   |   |   | 10,663 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **CASH                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD**                                                                                                                                                                                                                                                |   |   | 64,543 |   |   |   | 4,023 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **CASH                  AND CASH EQUIVALENTS, END OF PERIOD**                                                                                                                                                                                                                                                      |   | $ | 1,364,935 |   |   | $ | 14,686 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                  DISCLOSURE OF CASH FLOW INFORMATION:**                                                                                                                                                                                                                                             |   |   |   |   |   |
| Cash                  paid for income taxes                                                                                                                                                                                                                                                                        |   | $ | - |   |   | $ | - |   |
| Cash                  paid for interest expenses                                                                                                                                                                                                                                                                   |   | $ | 73,745 |   |   | $ | 93,821 |   |
|                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                  DISCLOSURE OF NON-CASH TRANSACTIONS:**                                                                                                                                                                                                                                             |   |
| Equipment                  financed by minority interest in a subsidiary                                                                                                                                                                                                                                           |   | $ | - |   |   | $ | 181,130 |   |
| Equipment                  financed by a stockholder                                                                                                                                                                                                                                                               |   | $ | - |   |   | $ | 3,441,463 |   |

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*Table            of Contents*

| **GFR                  PHARMACEUTICALS INC.****CONDENSED                  CONSOLDIATED STATEMENT OF STOCKHOLDERS’ EQUITY****FOR                  THE NINE MONTHS ENDED SEPTEMBER 30, 2007****(Currency                  expressed in United States Dollars (“US$”))****(Unaudited)** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                   |   | Common                  stock |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                   |   | No.                  of shares |   |   | Amount |   |   | Additionalpaid-in                  capital |   |   | Deferredcompensation |   |   | Accumulatedothercomprehensiveincome |   |   | Statutoryreserve |   |   | Retainedearnings |   |   | Totalequity |   |
|  Balance                  as of January 1, 2007                                                                                                                                                                                                                                                   |   |   | 41,079,940 |   |   | $ | 41,080 |   |   | $ | 3,413,120 |   |   |   |   |   | $ | 89,578 |   |   | $ | 77,579 |   |   | $ | 541,726 |   |   | $ | 4,163,083 |   |
|                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                  issued for service rendered, non-cash                                                                                                                                                                                                                                          |   |   | 1,000,000 |   |   |   | 1,000 |   |   |   | 299,000 |   |   |   | (300,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                  of deferred compensation                                                                                                                                                                                                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 264,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 264,000 |   |
|                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rent                  expense for office maintained by shareholder, non-cash                                                                                                                                                                                                                           |   |   | - |   |   |   | - |   |   |   | 940 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 940 |   |
|                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation adjustment                                                                                                                                                                                                                                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 175,155 |   |   |   | - |   |   |   | - |   |   |   | 175,155 |   |
|                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income for the period                                                                                                                                                                                                                                                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 784,962 |   |   |   | 784,962 |   |
|                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  as of September 30, 2007                                                                                                                                                                                                                                                      |   |   | 42,079,940 |   |   | $ | 42,080 |   |   | $ | 3,713,060 |   |   | $ | (36,000 | ) |   | $ | 264,733 |   |   | $ | 77,579 |   |   | $ | 1,326,688 |   |   | $ | 5,388,140 |   |

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*Table            of Contents*

**GFR          PHARMACEUTICALS INC.**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency          expressed in United States Dollars (“US$”))**

**(Unaudited)**

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**NOTE          1 BASIS OF PRESENTATION**

**NOTE          2 ORGANIZATION AND BUSINESS BACKGROUND**

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

**NOTE          3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

| l   | Basis                  of presentation |
|---------------|----------------------------------------|

| l   | Use                  of estimates |
|---------------|-----------------------------------|

| l   | Basis                  of consolidation |
|---------------|-----------------------------------------|

| l   | Cash                  and cash equivalents |
|---------------|--------------------------------------------|

| l   | Accounts                  receivable |
|---------------|--------------------------------------|

| l   | Property,                  plant and equipment, net |
|---------------|-----------------------------------------------------|

|                                              | Depreciable                  life |   | Residual                  value |
|---------------------------------------------------|-----------------------------------|--------|---------------------------------|
|                                              |                              |   |                            |
| Buildings                                         | 20                  years         |   | 5%                              |
| Medical                  equipment                | 13                  to 16 years   |   | 5%                              |
| Furniture,                  fixture and equipment | 5                  years          |   | 5%                              |

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

| l   | Construction                  in progress |
|---------------|-------------------------------------------|

| l   | Impairment                  of long-lived assets |
|---------------|--------------------------------------------------|

*Accounting for the Impairment or Disposal of Long-Lived        Assets*

| l   | Revenue                  recognition |
|---------------|--------------------------------------|

| a)   | Service                  revenue |
|----------------|----------------------------------|

*“Reporting Revenues        Gross as a Principle versus Net as an Agent.”*

| b)   | Interest                  income |
|----------------|----------------------------------|

| l   | Income                  taxes |
|---------------|-------------------------------|

*“*
*Interim Financial Reporting”*
*“*
*Accounting for        Income Taxes in Interim Periods*
*.*
*”*

*“*
*Accounting        for Income Taxes”*

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

| l   | Net                  income per share |
|---------------|---------------------------------------|

*“*
*Earnings per Share*
*.*
*”*

| l   | Comprehensive                  income |
|---------------|---------------------------------------|

*“*
*Reporting Comprehensive Income”*

| l   | Foreign                  currencies translation |
|---------------|-------------------------------------------------|

*Foreign        Currency Translation*
*”*

|                                                   |   | 2007   |   |   | 2006   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                   |   |   |   |   |   |   |
| Months                  end RMB:US$ exchange rate      |   |   | 7.4960 |   |   |   | 7.9051 |   |
| Average                  monthly RMB:US$ exchange rate |   |   | 7.6543 |   |   |   | 7.9913 |   |
|                                                   |   |   |   |   |   |   |   |   |
|                                                   |   |   |   |   |   |   |   |   |

| l   | Stock-based                  compensation |
|---------------|-------------------------------------------|

*“Accounting for Stock-Based Compensation”*

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

| l   | Related                  parties |
|---------------|----------------------------------|

| l   | Segment                  reporting |
|---------------|------------------------------------|

*“*
*Disclosures about Segments of an Enterprise and Related        Information”*

| l   | Fair                  value of financial instruments |
|---------------|------------------------------------------------------|

*Disclosures about Fair Value of        Financial Instruments*

| l   | Recently                  issued accounting standards |
|---------------|-------------------------------------------------------|

*Accounting for Uncertainty        in Income Taxes*

*“*
*The Fair        Value Option for Financial Assets and Financial Liabilities *
*—*
*        Including an Amendment of FASB Statement        No. *
*115”*
* *
*“*
*Accounting for Certain        Investments in Debt and Equity Securities,”*

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

**NOTE          4 ACCOUNTS RECEIVABLE, TRADE**

**NOTE          5 PREPAYMENTS AND DEPOSITS**

|                                   |   | September                  30, 2007 |   |   | December                  31, 2006 |   |
|----------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|--------|
|                                   |   |                                |   |   | (audited)                          |   |
|                                   |   |                                |   |   |                               |   |
| Advances                  to employees |   | $                                   | 30,139 |   |                               | $      | 17,923 |   |
| Prepaid                  expenses      |   |                                | 23,797 |   |                               |   | 42,324 |   |
| Deposits                               |   |                                | -      |   |                               |   | 127,514 |   |
|                                   |   | $                                   | 53,936 |   |                               | $      | 187,761 |   |

**NOTE          6 PROPERTY, PLANT AND EQUIPMENT, NET**

|                                                |   | September                  30, 2007 |      |   | December                  31, 2006 |   |
|-----------------------------------------------------|--------|-------------------------------------|-----------|--------|------------------------------------|--------|
|                                                |   |                                |      |   | (audited)                          |   |
|                                                |   |                                |      |   |                               |   |
| Buildings                                           |   | $                                   | 83,133    |   |                               | $      | 83,133 |   |
| Medical                  equipment                  |   |                                | 5,379,652 |   |                               |   | 5,379,652 |   |
| Furniture,                  fixture and equipment   |   |                                | 23,953    |   |                               |   | 17,027 |   |
| Construction                  in progress           |   |                                | 521,586   |   |                               |   | 245,412 |   |
| Foreign                  exchange adjustment        |   |                                | 391,697   |   |                               |   | - |   |
|                                                |   |                                | 6,400,021 |   |                               |   | 5,725,224 |   |
|                                                |   |                                |      |   |                               |   |   |   |
| Less:                  accumulated depreciation     |   |                                | (795,725  | )      |                               |   | (453,150 | ) |
| Less:                  foreign exchange adjustments |   |                                | (33,905   | )      |                               |   | - |   |
| Property,                  plant and equipment, net |   | $                                   | 5,570,391 |   |                               | $      | 5,272,074 |   |

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

**NOTE          7 OTHER PAYABLES AND ACCRUED LIABILITIES**

|                                     |   | September                  30, 2007 |    |   | December                  31, 2006 |   |
|------------------------------------------|--------|-------------------------------------|---------|--------|------------------------------------|--------|
|                                     |   |                                |    |   | (audited)                          |   |
|                                     |   |                                |    |   |                               |   |
| Business                  tax payable    |   | $                                   | 126,006 |   |                               | $      | 83,028 |   |
| Government                  levy payable |   |                                | 26,492  |   |                               |   | 13,969 |   |
| Salaries                  payable        |   |                                | 13,737  |   |                               |   | 11,128 |   |
| Accrued                  expenses        |   |                                | 53,546  |   |                               |   | 43,173 |   |
|                                     |   | $                                   | 219,781 |   |                               | $      | 151,298 |   |

**NOTE          8 SHORT-TERM BANK LOAN**

**NOTE          9 AMOUNT DUE TO A STOCKHOLDER**

imputed 
interest on the amount        due to a stockholder        was not significant.

|                                         |   | September                  30, 2007 |    |   | December                  31, 2006 |   |
|----------------------------------------------|--------|-------------------------------------|---------|--------|------------------------------------|--------|
|                                         |   |                                |    |   | (audited)                          |   |
|                                         |   |                                |    |   |                               |   |
| Amount                  due to a stockholder |   | $                                   | 152,142 |   |                               | $      | 169,961 |   |
| Foreign                  exchange adjustment |   |                                | 177,473 |   |                               |   | - |   |
|                                         |   | $                                   | 329,615 |   |                               | $      | 169,961 |   |

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

**NOTE          10 INCOME TAXES**

|                                                                    |   | Nine                  months ended September 30, |      |
|-------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                                    |   | 2007                                             |      |   | 2006 |   |
|                                                                    |   |                                             |      |   |   |   |
| Loss                  subject to U.S. operation                         |   | $                                                | (270,916  | ) |   | $ | - |   |
| Income                  subject to PRC operation                        |   |                                             | 1,678,247 |   |   |   | 449,667 |   |
|  Income                  before income taxes and minority interest |   | $                                                | 1,407,331 |   |   | $ | 449,667 |   |

*United        States of America*

*The        PRC*

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

----

----

|                                                            |   | Nine                  months ended September 30, |      |
|-----------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                            |   | 2007                                             |      |   | 2006 |   |
|                                                            |   |                                             |      |   |   |   |
| Income                  before income taxes                     |   | $                                                | 1,678,247 |   |   | $ | 449,667 |   |
| Statutory                  income tax rate                      |   |                                             | 33        | % |   |   | 33 | % |
|                                                            |   |                                             | 553,822   |   |   |   | 148,390 |   |
|                                                            |   |                                             |      |   |   |   |   |   |
| Expenses                  not deductible for the PRC income tax |   |                                             | 12,144    |   |   |   | - |   |
| Tax                  holiday                                    |   |                                             | -         |   |   |   | (148,390 | ) |
|  Income                  tax expenses                      |   | $                                                | 565,966   |   |   | $ | - |   |

**NOTE          11 STOCK-BASED COMPENSATION**

**NOTE          12 CONCENTRATION AND RISK**

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*Table            of Contents*

**GFR            PHARMACEUTICALS INC.**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(Currency            expressed in United States Dollars (“US$”))**

**(Unaudited)**

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**NOTE        13 COMMITMENT AND CONTINGENCIES**

**NOTE 14 SUBSEQUENT EVENTS**

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*Table          of Contents*

**ITEM      2.**
**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL      CONDITION AND RESULTS OF OPE**
**RATION**

**GENERAL      DESCRIPTION OF BUSINESS**

**RESULTS      OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,      2007**

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*Table          of Contents*

*Revenue      recognition*

| a)   | Service                revenue |
|----------------|--------------------------------|

*“Reporting Revenues      Gross as a Principle versus Net as an Agent.”*

| b)   | Interest                income |
|----------------|--------------------------------|

*Stock-based      compensation*

*“Accounting for Stock-Based Compensation”*

*Property,      plant and equipment, net*

|                                            | Depreciable                life |   | Residual                value |
|-------------------------------------------------|---------------------------------|--------|-------------------------------|
|                                            |                            |   |                          |
| Buildings                                       | 20                years         |   | 5%                            |
| Medical                equipment                | 13                to 16 years   |   | 5%                            |
| Furniture,                fixture and equipment | 5                years          |   | 5%                            |

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*Table          of Contents*

**Revenues**

**Net      Income**

**Expenses**

| -   | Advise                on matters relating to our structure, management, operation and                subsidiaries;                   |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------|
| -   | The                preparation and implementation of a new business plan and a future                growth                strategy; |
| -   | Assistance                with preparation of applicable filings with the SEC;                                                       |
| -   | Assistance                with preparation of financial statements;                                                                  |
| -   | EDGAR                services                                                                                                        |

| -   | Assistance                with preparation of applicable filings with the SEC;                          |
|---------------|---------------------------------------------------------------------------------------------------------|
| -   | Assistance                with preparation of financial statements;                                     |
| -   | EDGAR                services                                                                           |
| -   | Advise              on procedures, regulations, and compliance of a public listed              company; |

**Impact      of Inflation**

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*Table          of Contents*

**Liquidity      and Capital Resources**

| * | Curtail                new services launches |
|---|----------------------------------------------|

| * | Limit                our future marketing efforts to areas that we believe would be the                most                profitable. |
|---|----------------------------------------------------------------------------------------------------------------------------------------|

** **

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*Table          of Contents*

**ITEM      3. CONTROLS AND PROCEDURES.**

**PART      II. OTHER INFORMATION**

**ITEM      1.      LEGAL PROCEEDINGS**

**ITEM      2.      CHANGES IN SECURITIES**

**ITEM      3.      DEFAULTS UPON SENIOR SECURITIES**

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

**ITEM      5.      OTHER INFORMATION**

**ITEM      6. EXHIBITS AND REPORTS ON FORM 8-K**

| (1)   | Exhibits:                Exhibits required to be attached by Item 601 of Regulation S-B are                listed                in the Index to Exhibits Beginning on page 8 of this Form 10-QSB,                which is                incorporated herein by reference. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

**SIGNATURES**

|                                               | **GFR                PHARMACEUTICALS, INC.**                 |
|----------------------------------------------------|--------------------------------------------------------------|
|                                               |                                                         |   |
| Date:                November 16, 2007   | By:                                                | /s/ Su,                Jie |
|                                               | Su,                JieChief                Executive Officer |

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*Table          of Contents*

**INDEX      TO EXHIBITS**

| **Exhibit                No.** |   | **Description**                                                                                                                                                 |
|--------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |   |                                                                                                                                                            |
| 31.1                           |   | Certification                of Chief Executive                Officer                                                                                          |
|                           |   |                                                                                                                                                            |
| 31.2                           |   | Certification                of Chief Financial                Officer                                                                                          |
|                           |   |                                                                                                                                                            |
| 32.1                           |   | Statement                required by 18 U.S.C. Section 1350, as adopted                pursuant to section 906 of the Sarbanes-Oxley Act of                2002 |
|                           |   |                                                                                                                                                            |
| 32.2                           |   | Statement                required by 18 U.S.C. Section 1350, as adopted                pursuant to section 906 of the Sarbanes-Oxley Act of                2002 |

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