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

                                   FORM 10-QSB

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

               For the quarterly period ended: September 30, 2004
                                              -------------------

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

          For the transition period from ______________to ____________


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

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


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

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

                                 (604) 460-8440
                            Issuer's telephone number


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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practical date:  September 30, 2004 1,079,949


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





<PAGE>



PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

                                                                                (Unaudited)
                                                                               September 30,        December 31,
                                                                                    2004                2003
                                                                             ------------------  ------------------
ASSETS
Current Assets:
<S>                                                                          <C>                 <C>
Cash and Cash Equivalents                                                    $                -  $                -
Accounts Receivable, Net                                                              1,000,781             735,323
Inventory                                                                             1,384,021           1,030,190
Prepaid expense                                                                          10,737               4,518
                                                                             ------------------  ------------------

     Total Current Assets                                                             2,395,539           1,770,031
                                                                             ------------------  ------------------

Fixed Assets:
Manufacturing Equipment                                                                 546,387             356,990
Office Equipment                                                                        259,148             222,503
Furniture & Fixtures                                                                      4,703               3,525
Leasehold improvements                                                                   61,408              51,443
Property Held Under Capital Lease                                                       432,927             432,928
                                                                             ------------------  ------------------
                                                                                      1,304,573           1,067,389
Less Accumulated Depreciation                                                          (364,430)           (244,503)
                                                                             ------------------  ------------------
                                                                                        940,143             822,886
                                                                             ------------------  ------------------

     TOTAL ASSETS                                                            $        3,335,682  $        2,592,917
                                                                             ==================  ==================
</TABLE>



                                        2

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)
<TABLE>
<CAPTION>
                                                                                (Unaudited)
                                                                               September 30,        December 31,
                                                                                    2004                2003
                                                                             ------------------  ------------------
LIABILITIES
Current Liabilities:
<S>                                                                          <C>                 <C>
Accounts Payable and Accrued Liabilities                                     $        1,226,688  $          881,250
Bank Overdraft                                                                          113,514              54,463
Bank Line                                                                               280,876              30,800
Related Party Loans                                                                     128,591             114,416
Current Portion of Obligations Under Capital Leases                                      61,754              62,333
Current Portion Long-Term Debt                                                           41,403              24,275
                                                                             ------------------  ------------------

     Total Current Liabilities                                                        1,852,826           1,167,537
                                                                             ------------------  ------------------

Non-Current Liabilities:
Long-Term Debt                                                                           30,865              32,180
Lease Obligations                                                                       119,166             159,737
Deferred Tax Liability                                                                  161,877             157,540
                                                                             ------------------  ------------------

     Total Non-Current Liabilities                                                      311,908             349,457
                                                                             ------------------  ------------------

     Total Liabilities                                                                2,164,734           1,516,994
                                                                             ------------------  ------------------

STOCKHOLDERS EQUITY
Common Stock - $0.001 par value, 100,000,000
   shares authorized, 1,079,949 issued and outstanding
   at September 30, 2004 and December 31, 2003                                            1,080               1,080
Additional Paid-in Capital                                                              698,961             698,961
Currency Translation Adjustment                                                         227,689              85,427
Retained Earnings (Deficit)                                                             243,218             290,455
                                                                             ------------------  ------------------

     Total Stockholders' Equity                                                       1,170,948           1,075,923
                                                                             ------------------  ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $        3,335,682  $        2,592,917
                                                                             ==================  ==================
</TABLE>



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

                                        3

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                     For the Three Months Ended         For the Nine Months Ended
                                                           September 30,                      September 30,
                                                 ---------------------------------- ----------------------------------
                                                       2004             2003              2004              2003
                                                 ---------------- ----------------- ----------------  ----------------
REVENUES
<S>                                              <C>              <C>               <C>               <C>
Sales                                            $      1,109,409 $       1,176,804 $      3,953,122  $      3,569,158
Cost of Sales                                             820,979           892,366        2,812,484         2,454,318
                                                 ---------------- ----------------- ----------------  ----------------
Gross Margin                                              288,430           284,438        1,140,638         1,114,840

EXPENSES
   Selling & Marketing                                     29,660            48,229          158,856            87,957
   General & Administrative                               131,227            81,604          372,378           176,380
   Consulting                                              37,923            14,678          118,117            66,187
   Depreciation Expense                                    31,422            29,633           89,222            66,137
   Salaries & Wages                                       114,122            57,545          313,330           204,641
                                                 ---------------- ----------------- ----------------  ----------------
                                                          344,354           231,689        1,051,903           601,302
                                                 ---------------- ----------------- ----------------  ----------------

Net Income (Loss) from Operations                         (55,924)           52,749           88,735           513,538
                                                 ---------------- ----------------- ----------------  ----------------

Other Income (Expense)
   Interest, Net                                          (14,940)           (9,083)         (42,263)          (22,571)
   Currency Exchange, Net                                     143            12,258                4             1,296
                                                 ---------------- ----------------- ----------------  ----------------

Net Income (Loss) Before Income Taxes                     (70,721)           55,924           46,476           492,263
Income Tax (Expense) Benefit                              (31,495)           (4,367)         (93,713)         (189,755)
                                                 ---------------- ----------------- ----------------  ----------------

NET INCOME (LOSS)                                $       (102,216)$          51,557 $        (47,237) $        302,508
                                                 ================ ================= ================  ================

Basic & Diluted Earnings Per Share               $         (0.10) $          (0.05) $         (0.04)  $           0.28
                                                 ================ ================= ================  ================

Weighted Average Shares Outstanding                     1,079,949         1,079,949        1,079,949         1,079,239
                                                 ================ ================= ================  ================
</TABLE>






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

                                        4

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                    For The Nine Months Ended
                                                                                          September 30,
                                                                              -------------------------------------
                                                                                    2004                2003
                                                                              -----------------  ------------------
Cash Flows From Operating Activities
<S>                                                                           <C>                <C>
   Net income (loss) for the period                                           $         (47,237) $          302,508
Adjustments to reconcile net loss to net cash
   Provided by operating activities
     Currency Translation Adjustment                                                    142,262              38,784
     Depreciation and Amortization                                                      119,927              66,137
     Decrease (Increase) in Receivables                                                (265,458)             67,977
     Decrease (Increase) in Inventory                                                  (353,831)           (157,960)
     Decrease (Increase) in Prepaid Expense                                              (6,219)             (4,023)
     Increase in Accounts Payable & Accrued Liabilities                                 345,438             (45,339)
     Increase (Decrease) in Bank Overdraft                                               59,051             (81,276)
     Increase (Decrease) in Deferred Tax Liability                                        4,337                   -
                                                                              -----------------  ------------------
Net Cash Provided by (Used in) Operating Activities                                      (1,730)            186,808
                                                                              -----------------  ------------------

Cash Flows From Investing Activities
   Purchase of Property and Equipment                                                  (237,184)           (215,787)
                                                                              -----------------  ------------------
Net Cash Used by Investing Activities                                                  (237,184)           (215,787)
                                                                              -----------------  ------------------

Cash Flows From Financing Activities
   Proceeds/Payments on Bank Line                                                       250,076              18,513
   Proceeds (Payments) Shareholder Payables                                              14,175             (26,658)
   Proceeds (Payments) Long-term Debt/Capital Lease Obligations                         (25,337)             73,383
                                                                              -----------------  ------------------
Net Cash Provided by (Used in) Financing Activities                                     238,914              65,238
                                                                              -----------------  ------------------

Increase (Decrease) in Cash                                                                   -              36,259
Cash at beginning of period                                                                   -                   -
                                                                              -----------------  ------------------
Cash at End of Period                                                         $                 -$           36,259
                                                                              =================  ==================


Supplemental Disclosure of Interest and Income Taxes Paid
   Interest paid during the period                                            $          42,263  $           29,058
                                                                              =================  ==================
   Income taxes paid during the period                                        $          15,200  $                -
                                                                              =================  ==================

Supplemental Disclosure of Non-cash Investing and Financing Activities
   Equipment acquired through Capital Lease                                   $               -  $           73,140
                                                                              =================  ==================
   Stock issued as payment on short-term notes payable                        $               -  $                -
                                                                              =================  ==================
</TABLE>

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


                                        5

<PAGE>



                    GFR PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Organization and Basis of Presentation

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

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

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

         On November 1, 2000, the Company entered into an Acquisition  Agreement
with GFR  Health,  Inc.  (Formerly  R & L  Health,  Inc.),  a  British  Columbia
corporation,  (R&L),  to acquire  100% of the  outstanding  common  stock of GFR
Health, Inc. in exchange for $0.01. The transaction was recorded as a purchase.

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

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


                                        6

<PAGE>



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

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

Principles of Consolidation

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

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

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

Nature of Business

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

Cash and Cash Equivalents

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

Inventories

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

Revenue Recognition

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

Advertising Costs

         Advertising is expenses as incurred.



                                        7

<PAGE>



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

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

Depreciation

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


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

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

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

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

Foreign Currency Translation

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

                                        8

<PAGE>



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

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

Pervasiveness of Estimates

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

Concentrations of Credit Risk

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

Income Taxes

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

Reclassifications

         Certain   reclassifications  have  been  made  in  the  2003  financial
statements to conform with the 2004 presentation.

Earnings (Loss) per Share

         Basic loss per share has been  computed  by  dividing  the loss for the
year  applicable to the common  stockholders  by the weighted  average number of
common  shares  outstanding  during the years.  There were no common  equivalent
shares outstanding at September 30, 2004 and 2003.

Stock Compensation for Non-Employees

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


                                        9

<PAGE>



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

NOTE 2 - ACCOUNTS RECEIVABLE

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


                                          September 30,     December 31,
                                               2004               2003
                                        ------------------  -----------------

Accounts Receivable                     $        1,064,287  $         817,480
Less: Allowance for Doubtful Accounts              (63,506)           (82,157)
                                        ------------------  -----------------

Total Accounts Receivable               $        1,000,781  $         735,323
                                        ==================  =================

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

NOTE 3 - INVENTORY

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


                                    September 30,        December 31
                                         2004                2003
                                  ------------------  ------------------
Raw materials                     $        1,202,645  $          861,276
Work in process                              159,031             168,914
Finished Goods                                22,345                   -
                                  ------------------  ------------------

Total Inventory                   $        1,384,021  $        1,030,190
                                  ==================  ==================

NOTE 4 - INCOME TAXES

         The  provision  for income  taxes  consists  of  Canadian  federal  and
provincial  and  territorial  income tax.  For the three and nine  months  ended
September  30,  2004,  income tax  expense  has been  estimated  as $31,495  and
$93,713,  respectively. For the same periods in 2003, it was estimated as $4,367
and $189,755.

         Deferred taxes result from temporary  differences in the recognition of
income and expenses for income tax reporting and financial  statement  reporting
purposes.  The Company had deferred tax liability of $161,877 and $157,540 as of
September  30, 2004 and  December 31,  2003.  The deferred tax  liability is the
result of excess  depreciation  for  income  tax  purposes  over the  amount for
financial reporting purposes.

                                       10

<PAGE>



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

NOTE 5 - RELATED PARTY TRANSACTIONS

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

         Richard Pierce,  CEO of Laredo and Lucretia  Schanfarber hold contracts
with R&L  Health  Inc that  licenses  their  names and  images to R&L for use on
certain  products.  Each are paid a  quarterly  bonus of 10% of R&L Health  Inc.
profits  before income taxes,  depreciation,  and  amortization  are deducted as
expenses.  As of  September  30, 2004 and 2003,  $41,073 and $0 were  accrued or
paid.

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

NOTE 6 - SHORT-TERM OBLIGATIONS

<TABLE>
<CAPTION>
                                                        September 30,        December 31,
                                                             2004                2003
                                                      ------------------  ------------------
<S>                                                   <C>                 <C>
Promissory note, repayable to related parties upon
   demand, including interest at 12%                  $          128,591  $          114,416
                                                      ==================  ==================
</TABLE>

         The Company has a line of credit with a bank with a total  amount owing
of  $280,876  and  $30,800 as of  September  30,  2004 and  December  31,  2003,
respectively.  This line carries an interest  rate of prime plus 1.5 and a total
available  credit of $192,500  ($250,000  Canadian) as of December 31, 2003. The
line is secured by certain manufacturing equipment of the Company.

NOTE 7 - LONG-TERM DEBT

<TABLE>
<CAPTION>

                                                                               September 30,        December 31,
                                                                                    2004                2003
                                                                             ------------------  ------------------
<S>                                                                          <C>                 <C>
TDBank Small Business loan, repayable in monthly instalments
$2,515 ($3,973 Canadian), including interest at 10.15%,
maturing September 15, 2005, secured by certain manufacturing
equipment of the Company                                                     $           38,006  $           56,455

Business Development Bank of Canada Loan, repayable in
monthly installment $657 ($830 Canadian), including interest
at prime plus 1%, maturing August 23, 2009                                               34,262                   -

Less current portion of long-term debt                                                   41,403              24,275
                                                                             ------------------  ------------------

                                                                             $           30,865  $           32,180
                                                                             ==================  ==================
</TABLE>
                                       11
<PAGE>

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

NOTE 7 - LONG-TERM DEBT (Continued)

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


       Year ending:                Amount
---------------------------  ------------------

           2004              $           24,275
           2005                          32,180
           2006                               -
           2007                               -
           2008                               -
                             ------------------
        Thereafter
           Total             $           56,455
                             ==================


NOTE 8 - ECONOMIC DEPENDENCE

         The Company sells a substantial portion of its product to one customer.
During  the  first  three  quarters  of 2004 and  2003,  sales to that  customer
aggregated 57% and 47%, respectively.  As of September 30, 2004 and December 31,
2003,  amounts due from that customer  included in accounts  receivable were 57%
and 22%,  respectively.  Future operations of the Company depend on continuation
of the manufacturing arrangement with that customer.

NOTE 9 - COMMITMENTS

         The Company has entered into a lease  agreements for its  manufacturing
and office  facilities  and certain  manufacturing  equipment with the Company's
major  shareholder  and other  parties.  The rental  charges  are  approximately
$86,250  ($115,000  Canadian) per year for real  property and $81,675  ($108,900
Canadian) per year for equipment.  The real property lease expires  December 31,
2004, and the equipment lease expires June 2005 through December 2008.

         The assets and  liabilities  under  capital  leases are recorded at the
fair value of the asset.  The  assets  are  depreciated  over the lower of their
estimated  productive  lives.  Depreciation  of assets under  capital  leases is
included in depreciation expense for 2004 and 2003.





                                       12

<PAGE>



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

NOTE 9 - COMMITMENTS (Continued)

         Following is a summary of property held under capital leases:

<TABLE>
<CAPTION>
                                                                 September 30,        December 31,
                                                                      2004                2003
                                                               ------------------  ------------------
<S>                                                            <C>                 <C>
Manufacturing Equipment                                        $          432,927  $          432,928
Less: Accumulated Depreciation                                            (41,323)            (34,339)
                                                               ------------------  ------------------

Net Assets Held Under Capital Lease                            $          391,604  $          398,589
                                                               ==================  ==================
</TABLE>

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

<TABLE>
<CAPTION>

    Ending December 31:                                          Real Property         Equipment
----------------------------                                   ------------------  -----------------
<S>   <C>                                                      <C>                 <C>
      2004                                                     $           86,250  $          62,333
      2005                                                                      -             67,097
      2006                                                                      -             50,338
      2007                                                                      -             50,338
      2008                                                                      -             19,508
                                                               ------------------  -----------------
      Net Minimum Lease Payments                                           86,250            249,614
      Less: Amount Representing Interest                                        -            (97,404)
                                                               ------------------  -----------------
      Present Value of Net Minimum Lease Payment               $           86,250  $         152,210
                                                               ==================  =================
</TABLE>

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

         During 2002, the Company  entered into a lease  agreement for warehouse
space.  The  lease is month to month  with a six  month  notice  of  termination
clause.  Under the terms of the lease  agreement,  the  monthly  rent  charge is
approximately $4,125 ($5,500 Canadian).

NOTE 10 - STOCK INCENTIVE PLAN

         The Board of Directors has authorized  and the Company has  established
the 2000  Incentive  and  Non-qualified  Stock Option  Plan.  Under the plan the
Company is authorized to issued up to 6,000,000  shares of the Company's  common
stock with such  exercise  price and vesting  periods as the Board of  Directors
deems to be in the best  interest of the Company.  As of September  30, 2004, no
options have been granted.


                                       13

<PAGE>



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

NOTE 11 - STOCK SPLIT

         On August 9, 2004, the Board of Directors authorized a retroactive 30:1
reverse stock split was approved by shareholders. All references to stock in the
accompanying 2004 and 2003 financial statements reflect this stock split.

























                                       14

<PAGE>



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

Plan of Operations

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

Liquidity and Capital Resources
Laredo's  working  capital ratio was 1.29 at September 30, 2004 compared to 1.52
at December 31, 2003.  Current  liabilities  include a $128,591  promissory note
payable to a party related to the major shareholder, which bears interest at 12%
annually. These funds are repayable on demand, however the request for repayment
occurring at this time is not expected.

Laredo has a small  business  loan  outstanding  with a balance of $41,403 as at
September 30, 2004.  This loan bears interest at 10.15% and matures on September
15, 2005.

Laredo acquired an additional  $50,860 of  manufacturing  equipment in the first
three quarters of 2004 in order to meet demands for new private label sales.  An
additional  $15,800 of  manufacturing  equipment  is expected to be purchased in
2004.

Results of Operations

<TABLE>
<CAPTION>

                                              For the Three Months Ended            For the Nine Months Ended
                                                     September 30,                        September 30,
                                          ----------------------------------- -------------------------------------
                                                2004              2003              2004                2003
                                          ----------------- ----------------- -----------------  ------------------
<S>                                               <C>               <C>               <C>                 <C>
Sales                                             1,109,409         1,176,804         3,953,122           3,569,158
Cost of Sales                                       820,979           892,366         2,812,484           2,454,318
                                          ----------------- ----------------- -----------------  ------------------
Gross Margin                                        288,430           284,438         1,140,638           1,114,840
Gross Profit Percentage                              26.00%            24.17%            28.86%              31.24%

Selling and Marketing Expenses                       29,660            48,229           158,856              87,957
Selling Expense as a % of Sales                       2.68%             4.10%             4.02%               2.47%

Admin. and Other Expenses                           314,694           183,460           893,047             513,345
Admin Expenses as a % of Sales                       28.37%            15.59%            22.59%              14.39%
</TABLE>


For the nine months ended  September 30, 2004,  sales were $383,964  higher than
2003 and are expected to continue to grow during 2004.


                                       15

<PAGE>



During the first three quarters of 2004 and 2003 sales to Prairie  Naturals Inc.
were 57% and 47% respectively.  Laredo has a verbal  arrangement to manufacture,
on an as-ordered  basis,  private label products that Prairie  Naturals Inc. and
distributes  under the Prairie Naturals Inc. name.  Laredo also has an exclusive
written   contract  to  manufacture  one  product  that  Prairie  Naturals  Inc.
distributes for a third party private label.

Operating  margins for the three months ending  September 30, 2004 and 2003 were
26.00%  and  24.17% of sales  revenue.  Cost of Sales  includes  the cost of raw
materials used in manufacturing,  production labor costs and an applicable share
of overhead expenses. Operating margins for the quarter are higher than the same
period for 2003 in part because of the decrease in costs associated with initial
runs of new products and the completion of jobs with lower margins in general.

General and  administrative  expenses for the three months ended  September  30,
2004 and 2003 were  28.37% and  15.59% of sales.  Laredo  anticipates  realizing
economies  of scale as  production  volumes  increase.  This  will be  reflected
favorably  in the  future  by  decreasing  the  percentage  of sales  for  these
expenses.

Effect of Inflation

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

ITEM 3. CONTROLS AND PROCEDURES
         The Company's Chief Executive  Officer and Chief Financial Officer have
concluded,  based on an evaluation  conducted within 90 days prior to the filing
date of this  Quarterly  Report on Form 10-QSB,  that the  Company's  disclosure
controls and  procedures  have  functioned  effectively  so as to provide  those
officers the information necessary whether:

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

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

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

                                       16

<PAGE>



PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         None.

ITEM 2. CHANGES IN SECURITIES

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5. OTHER INFORMATION

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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





                                       17

<PAGE>






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

                            GFR Pharmaceuticals, Inc.
                                  (Registrant)

DATE: November 15, 2004        By: /s/ Richard Pierce
      ------------------       ------------------------------------------------
                                   Richard Pierce
                               President, C.E.O., Director

DATE: November 15, 2004        By: /s/  Marc Casavant
      ------------------       ------------------------------------------------
                                    Marc Casavant
                                 C.F.O., Director




















                                       18