U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549



FORM 10-Q





(Mark
One)



| | [x] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
| | --- | ---------------------------------------------------------------------------------------





For the quarterly period ended June 30, 2005





| | [  ] | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
| | ---- | ----------------------------------------------------------------------------------------





For the transition period from _______________ to
_______________





Commission
File Number 001-31886



AXM Pharma, Inc.

(Exact name of registrant as specified in its
charter)



|
|
|
|



US Representative Office



7251 West Lake Mead Blvd., Suite 300,
Las Vegas, NV  
89128

(Address of principal executive offices)



(702) 562-4155

(Issuer's telephone number)





(Former address)





Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of
1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.



Yes X          No
_______



Indicate
by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes  ⁭
  No  x



As of August 11, 2005, there   were
19,564,085 shares of Common Stock outstanding, 838,200 shares of Series
A Preferred Stock  outstanding and 17.425 Shares of Series C
Preferred Stock outstanding.  All stock par value is $.001.





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|PART
I - FINANCIAL INFORMATION                                                                | 3 
|--------------------------------------------------------------------------------------------- | --
|                                                                                              |   
|Item
1.  Financial Statements Note:                                                           |   
|                                                                                              |   
|Balance
Sheet at June 30, 2005 (unaudited)                                                    | 3 
|                                                                                              |   
|Unaudited
Statements of Operations for the three and six month  ended June
30, 2005, and 2004 | 4 
|                                                                                              |   
|Unaudited
Statements of Cash Flows for the six month period ended June 30, 2005
and 2004      | 5 
|                                                                                              |   
|Notes
to Financial Statements                                                                 | 6 
|                                                                                              |   
|NOTE
1: MANAGEMENT REPRESENTATION AND PRESENTATION                                            | 6 
|                                                                                              |   
|NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                           | 6 
|                                                                                              |   
|NOTE
3 – STOCK ISSUANCES                                                                      | 7 
|                                                                                              |   
|Item
2 –Management’s Discussion and Analysis of Results of Operations and
Financial Condition | 12
|                                                                                              |   
|Item
3 – Quantitative and Qualitative Disclosures about Market Risk                           | 16
|                                                                                              |   
|Item
 4 – Controls and Procedures                                                             | 17
|                                                                                              |   
|PART
II - OTHER INFORMATION                                                                   | 18
|                                                                                              |   
|Item
1.  LEGAL PROCEEDINGS                                                                    | 18
|                                                                                              |   
|Item
2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                                            | 19
|                                                                                              |   
|Item
3.  DEFAULTS UPON SENIOR SECURITIES                                                      | 20
|                                                                                              |   
|Item
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  | 20
|                                                                                              |   
|Item
5.  OTHER INFORMATION                                                                    | 21
|                                                                                              |   
|Item
6.  EXHIBITS                                                                             | 21





2







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PART I – FINANCIAL INFORMATION

ITEM
1. FINANCIAL STATEMENTS



|AXM PHARMA, INC. AND SUBSIDIARIES                                        
|-------------------------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                                              
|(Unaudited)                                                              
|                                                                         
|                                                                         
|ASSETS                                                                   
|Current
Assets                                                           
|Cash                                                                     
|Accounts
Receivable, net of allowance                                    
|Inventory                                                                
|Advances,
Suppliers                                                      
|Other
Current Assets                                                     
|                                                                         
|Total
Current Assets                                                     
|                                                                         
|Property
& Equipment, Net                                                
|Licenses                                                                 
|                                                                         
|TOTAL
ASSETS                                                             
|                                                                         
|LIABILITIES
AND STOCKHOLDERS' EQUITY                                     
|Current
Liabilities                                                      
|Short Term
Loan                                                          
|Value Added
Tax Payable                                                  
|Accounts
Payable and accrued expense                                     
|                                                                         
|Total
Current Liabilities                                                
|                                                                         
|Long Term
Notes                                                          
|                                                                         
|STOCKHOLDERS'
EQUITY                                                     
|Series A,
Preferred stock, $.001 par value, 10,000,000 shares authorized,
|938,200
shares issued and outstanding                                    
|Series B
Preferred stock, $.001 par value, 2,000,000 shares authorized,  
|no
shares issued and outstanding                                         
|Series C
Preferred stock, $.001 par value, 100 shares authorized,        
|17.425
shares issued and outstanding                                     
|Common
Stock, $.001 par value, 50,000,000 shares authorized,             
|19,564,085
shares issued and outstanding                                 
|Additional
paid-in capital                                               
|Accumulated
deficit                                                      
|                                                                         
|Total Equity                                                             
|                                                                         
|Liabilities
and Equity                                                   



3







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|AXM PHARMA, INC.                     
|-------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS
|(Unaudited)                          
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|Revenues                             
|                                     
|Cost
of Revenues                     
|                                     
|Gross
Profit                         
|                                     
|General,
Administrative and Selling: 
|Cash                                 
|Non-cash                             
|                                     
|Total
general, administrative        
|and
selling                          
|                                     
|Operating
Income (Loss)              
|                                     
|Interest
Expense                     
|                                     
|Net
Income (Loss)                    
|                                     
|Net
Income (Loss) applicable to      
|common
shareholders:                 
|Net
Income (Loss)                    
|Beneficial
conversion features       
|of
preferred stock                   
|Deemed
dividend from beneficial      
|Conversion
of warrants               
|                                     
|Net
Income (Loss) applicable to      
|common
shareholders                  
|                                     
|Net
Income (Loss) per share:         
|Basic
and diluted                    
|Weighted
averaged shares outstanding:
|Basic
and diluted                    







See
accompanying notes to financial statements.



4







---



|AXM PHARMA, INC.                                 
|-------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS            
|Six  Months Ended June 30,                       
|(Unaudited)                                      
|                                                 
|                                                 
|                                                 
|CASH FLOWS
FROM OPERATING ACTIVITIES             
|Net
loss                                         
|Adjustments
to reconcile net loss to cash used in
|operating
activities:                            
|Common
stock  issued for services and interest   
|Depreciation
and amortization                    
|Non-cash
interest expense                        
|Changes
in assets and liabilities:               
|Accounts
receivable                              
|Advances,
suppliers                              
|Inventories                                      
|Accounts
payable and accrued expenses            
|Value
added tax payable                          
|                                                 
|CASH FLOWS
USED IN OPERATING ACTIVITIES          
|                                                 
|CASH FLOWS
FROM INVESTING ACTIVITIES             
|Capital
expenditures                             
|                                                 
|CASH FROM
FINANCING ACTIVITIES                   
|Proceeds
from notes payable                      
|Proceeds
from bank loans                         
|                                                 
|CASH FROM
FINANCING ACTIVITIES                   
|                                                 
|NET
INCREASE IN CASH                             
|                                                 
|Cash,
beginning of period                        
|                                                 
|Cash, end
of period                              



See
accompanying notes to financial statements.







5







---



AXM PHARMA, INC.

(FORMERLY AXIOM PHARMACEUTICALS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1: MANAGEMENT REPRESENTATION AND PRESENTATION



Operating results for the three and six months ended
June 30, 2005 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2005.  It is suggested
that the financial statements be read in conjunction with the audited
financial statements and notes for the fiscal year ended December 31,
2004 included in our Annual Report on Form 10-KSB.



The balance sheet of AXM Pharma, Inc. as of June 30,
2005, the related consolidated statement of operations for the three
and six months ended June 30, 2005, and the consolidated statement of
cash flows for the six months ended June 30, 2005 included in the
consolidated financial statements have been prepared by us without
audit. In management’s opinion, the accompanying consolidated financial
statements include all adjustments (consisting of normal, recurring
adjustments) necessary to summarize fairly our consolidated financial
position and results of operations. The consolidated results of
operations for the three and six months ended June 30, 2005, are not
necessarily indicative of the results of operations for the full year
or any other interim period. Notes to the financial statements which
would substantially duplicate the disclosure contained in the audited
financial statements for the most recent fiscal year ended December 31,
2004 and reported in our most recent Form 10-KSB, have been omitted.





NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Nature of our Business



AXM Pharma, Inc., a Nevada corporation, is a
pharmaceutical company with a subsidiary and plant located in The
People’s Republic of China, a subsidiary located in Hong Kong and a
branch office located in Taiwan. We are a publicly listed company
trading under the symbol (AMEX: AXJ). Our business is the sale of
over-the-counter and prescription pharmaceutical products in the
People’s Republic of China, Hong Kong and Taiwan.  Our business in
the People’s Republic of China is conducted by our wholly-owned
subsidiary, AXM Pharma Shenyang, Inc., located in the city of Shenyang
in the Northeastern portion of the People’s Republic of China.
 AXM Shenyang and its predecessor company, Shenyang Tiawei
Pharmaceutical Factory, Ltd., have an operating history of
approximately 10 years.  AXM Shenyang has historically been a
manufacturer of proprietary and generic pharmaceutical products, which
include injectables, capsules, tablets, liquids and medicated skin
products for export and domestic Chinese sales.  AXM Shenyang’s
plant was decommissioned in 2002 due to significant growth of the
population of Shenyang that caused the surrounding area to change from
a city-edge industrial area to a city-center, non-industrial,
residential neighborhood. In April 2004, AXM Shenyang applied for
national renewal of its 43 licenses to produce over-the-counter and
prescription pharmaceutical products in The Peoples Republic of China.
 We have received confirmation that the State Food and Drug
Administration has renewed 42 of these licenses, including all of those
that we have historically commercialized.  We recommenced
production of Asarone and Weifukang and started the production of
Whisper, our Feminine Hygiene Wash at the end of the beginning of the
current quarter.

6

---

Our subsidiary, AXM Shenyang, is classified under
Chinese Company Law as a Wholly Foreign Owned Enterprise. Wholly
Foreign Owned Enterprises have recently become the investment vehicle
of choice for foreign investors who wish to manufacture, process, or
assemble products in China. Wholly Foreign Owned Enterprises are
limited liability companies established under Chinese Company Law,
which are owned exclusively by one or more foreign investors and thus
offer controls over the company’s management, technology, and finances
that the typical foreign investor requires. From a foreign investors'
point of view, the advantages of establishing a Wholly Foreign Owned
Enterprises include:



§

Independence and freedom to implement
the worldwide strategies of its parent company without having to
consider the involvement of a Chinese partner;

§

Ability to carry on business rather
than just a representative office function;

§

Ability to issue invoices to their
customers in Renminbi (Chinese Currency) and receive Renminbi revenues;

§

Ability to convert Renminbi profits to
US dollars for remittance to their parent company outside China;

§

Ability to employ staff directly within
China;

§

Protection of intellectual know-how
technology;

§

Greater efficiency in its operations,
management and future development; and

§

No requirement to share profits with
another
party.





In summary, the key differences between a Wholly
Foreign Owned Enterprises and an equity or cooperative joint venture
are that the joint venture business structure requires profit sharing
between the stake holders, significant involvement in operational and
business matters by the Chinese stake holders, indirect representation
in business matters and much less effective and efficient cooperation
between the stake holders. Typically, the foreign party to a Chinese
joint venture experiences significantly less control over the business
structure than if the foreign party forms a Wholly Foreign Owned
Enterprise or converts an existing joint venture into a Wholly Foreign
Owned Enterprise. Because the Wholly Foreign Owned Enterprise business
structure is relatively new compared to the joint venture structure,
fewer than 5% of foreign firms currently operate as Wholly Foreign
Owned Enterprises.  It is anticipated that newly formed businesses
will likely choose the use of the Wholly Foreign Owned Enterprise
structure over the joint venture structure. It is also anticipated that
existing joint ventures are likely to migrate their corporate
structures to Wholly Foreign Owned Enterprises over the next five years.



In the last quarter we opened a subsidiary in Hong
Kong and a Branch Office in Taiwan for the purposes of sales and
marketing of our Sunkist labeled over the counter vitamins and
supplements which are part of our International Division administered
from our corporate office in Las Vegas, Nevada.





NOTE 3 – STOCK ISSUANCES



Common Stock Issued for Stock-Based Compensation



We periodically issue common stock for services
rendered.  Common stock issued is valued at the estimated fair
market value, as determined by management and our board of directors.
 Management and the board of directors consider market price
quotations, recent stock offering prices and other factors in
determining fair market value for purposes of valuing the common stock.
During the three months ending June 30, 2005, we issued 95,000 shares
of common stock for services valued at $261,250.

7







---



On April 1, 2005 we issued 40,000 shares of restricted
common stock to Newbridge Securities as compensation for investor
relations consulting services.  The stock was valued at $2.75 per
share, the closing stock price on the date of issuance, the Company
recognized $110,000 in expenses for the issuance of this stock.
 On April 1, 2005 we issued 45,000 shares of stock to Zhu Ming and
10,000 shares of stock to Li Shuzhen, both at $2.75 per share and
totaling $151,250 for services rendered in obtaining formulations for
our factory in Shenyang.  We also issued 28,583 shares of common
stock as dividends to Series C Preferred shareholders as payment of
interest totaling $40,016 in lieu of cash payment.



We apply and intend to continue to apply the
recognition and intrinsic value measurement principles of Accounting
Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to
Employees,” and related Interpretations in accounting for those plans.



We did not issue any stock options in the quarter
ended June 30, 2005.  There was no effect on net income and
earnings per share if AXM Pharma, Inc. had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.



Conversions of Preferred Stock



During the quarter ended June 30, 2005 we issued
shares of common stock in connection with the following conversions of
its Preferred Stock.  We issued 11,700 shares of common stock for
the conversion of 11,700  shares of Series A Preferred Stock.
 We also issued 78,329 shares of common stock for the conversion
of fractional shares of Series C Preferred.



Accounting for Stock-Based Compensation



We account for stock-based compensation issued to our
employees and advisors using the intrinsic value based method as
prescribed by APB Opinion No. 25 “Accounting for Stock Issued to
Employees” (“APB 25”).  Under
the intrinsic value based method, compensation is the excess, if any,
of the
fair value of the stock at the grant date or other measurement date
over the
amount an employee must pay to acquire the stock.  Compensation,
if any,
is recognized over the applicable service period, which is usually the
vesting
period.



In October 1995, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial Accounting Standards No.
123, “Accounting for Stock-Based Compensation” (“SFAS 123”).  This
standard, if fully adopted, changes the method of accounting for
employee stock-based compensation plans to the fair value based method.
 For stock options and warrants, fair value is determined using an
option pricing model that takes into account the stock price at the
grant date, the exercise price, the expected life of the option or
warrant and the annual rate of quarterly dividends.  Compensation
expense, if any, is recognized over the applicable service period,
which is usually the vesting period.



In March 2000, the FASB issued FASB Interpretation No.
44 (“FIN 44”), “Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion 25.”  FIN 44
clarifies the application of APB 25 for (a) the definition of employee
for purposes of applying APB 25, (b) the criteria for determining
whether a plan qualifies as a non-compensatory plan, (c) the accounting
consequence for various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of
stock compensation awards in a

8







---

business combination.  FIN 44 is effective July
1, 2000, but certain provisions cover specific events that occur after
either December 15, 1998, or January 12, 2000.  The adoption of
FIN 44 did not have a material effect on the financial statements.



The adoption of the accounting methodology of SFAS 123
is optional and we have elected to continue accounting for stock-based
compensation issued to employees using APB 25, as amended by FIN 44;
however, pro forma disclosures, as if we adopted the cost recognition
requirements under SFAS 123, are required to be presented (see below).
 For stock-based compensation issued to non-employees, the Company
values these grants at fair value as defined in SFAS 123, FIN 44 and
EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling Goods or
Services.”



Stock Option Plans



In April of 2004, our Shareholders approved the “2004
Qualified and Non-statutory Stock Option Plan.” The Board of Directors
reserved 3,000,000 shares of our common stock to be issued in the form
of incentive and/or non-qualified stock options for employees,
directors and consultants to AXM. On April 29, 2004, our shareholders
approved and ratified the issuance of 2,140,000 options to employees,
directors and consultants.  On February 1, 2005, our Board of
Directors approved the 2005 Equity Incentive Plan, which will replace
the 2004 Plan.  Our shareholders approved the 2005 Plan at our
Special Meeting on March 10, 2005.   Shares available under
the 2005 Plan include 5,000,000 shares of our common stock, plus all
shares remaining available for issuance under the 2004 Plan.  At
the time of filing this report, 687,500 common shares have been issued
under the 2005 Plan.



Revenue Recognition



Product sales revenue is recognized upon passage of
title to customers, typically upon shipment of product.  Any
provision for discounts and estimated returns are accounted for in the
period the related sales are recorded.



Critical Accounting Policies

We believe the following critical accounting policies,
among others, affect our more significant judgments and estimates used
in the preparation of our financial statements:



Allowance for Doubtful Accounts



We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make
required payments.  The allowance for doubtful accounts is based
on specific identification of customer accounts and our best estimate
of the likelihood of potential loss, taking into account such factors
as the financial condition and payment history of major customers.
 We evaluate the collectability of our receivables at least
quarterly.  If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.  The differences
could be material and could significantly impact cash flows from
operating activities.



Inventory



We write down our inventory for estimated obsolescence
or unmarketable inventory equal to the difference between the cost of
inventory and the estimated market value based upon assumptions

9







---

about future demand, future pricing and market
conditions.  If actual future demands, future pricing or market
conditions are less favorable than those projected by management,
additional inventory write-downs may be required and the differences
could be material.  Such differences might significantly impact
cash flows from operating activities.



Accounting for Stock-Based Compensation



The Company accounts for stock-based compensation
based on the provisions of Accounting Principles Board Opinion No 25
"Accounting for Stock Issued to Employees," as amended by the Financial
Accounting Standards Board Interpretaion No. 44, "Accounting for
Certain Transactions Involving Stock Compensation." Accounting
Principles Board Opinion No. 25 and Financial Accounting Standards
Board Interpretation No. 44 state that no compensation expense is
recorded for stock options or other stock-based awards to employees
that are granted with an exercise price equal to or above the estimated
fair value per share of the company's common stock on the grant date.
The Company adopted the disclosure requirements of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation," which requires compensation expense to be disclosed
based on the fair value of the options granted at the date of the
grant.



In December 2002, the Financial Accounting Standards
Board issued its Statement No. 148, “Accounting for Stock-Based
Compensation — Transition and Disclosure—an amendment of Financial
Accounting Standards Board Statement No. 123.” This Statement amends
Statement of Financial Accounting Standards No. 123, to provide
alternative methods of transition for an entity that voluntarily
changes to the fair value based method of accounting for stock-based
employee compensation.  It also amends the disclosure provisions
of Statement of Financial Accounting Standards No. 123 to require
prominent disclosure about the effects on reported net income of an
entity’s accounting policy decisions with respect to stock-based
employee compensation. The transition and annual disclosure provisions
of Statement of Financial Accounting Standards No. 148 are effective
for fiscal years ending after December 15, 2002, and the interim
disclosure provisions were effective for the first interim period
beginning after December 15, 2002. The Company did not voluntarily
change to the fair value based method of accounting for stock-based
employee compensation, therefore, the adoption of Statement of
Financial Accounting Standards No. 148 did not have a material impact
on our operations and/or financial position.



We did not issue any stock options to employees during
the period ended June 30, 2005, therefore pro forma disclosures are not
required for the six months ended June 30, 2005.



Convertible Preferred Stock



Convertible Preferred Stock that we issue is initially
offset by a discount representing the relative fair value of the
beneficial conversion feature and warrants.  This beneficial
conversion for the preferred stock is recorded as a dividend over the
period the preferred stock is convertible and accelerated pro-rata as
the preferred stock are converted.  The beneficial conversion
feature allocated to warrants is recognized over the life of the
warrants and accelerated as warrants are exercised.  The fair
value of the warrants and beneficial conversion discount are calculated
based on available market data using appropriate valuation models.
 The beneficial conversion feature is limited to the total
proceeds received.



Sales Allowances



10







---

A portion of our business is to sell products to
distributors who resell the products to the end customers.  In
certain instances, these distributors obtain discounts based on the
contractual terms of these arrangements.  Sales discounts are
usually based upon the volume of purchases or by reference to a
specific price in the related distribution agreement.  We
recognize the amount of these discounts at the time the sale is
recognized.  Additionally, sales returns allowances are estimated
based on historical return data, and recorded at the time of sale.
 If the quality or efficacy of our products deteriorates or market
conditions otherwise change, actual discounts and returns could be
significantly higher than estimated, resulting in potentially material
differences in cash flows from operating activities.



Valuation of Intangibles



From time to time, we acquire intangible assets that
are beneficial to our product development processes.  We
periodically evaluate the carrying value of intangibles, including the
related amortization periods.  In evaluating acquired intangible
assets, we determine whether there has been impairment by comparing the
anticipated undiscounted cash flows from the operation and eventual
disposition of the product line with its carrying value.  If the
undiscounted cash flows are less than the carrying value, the amount of
the impairment, if any, will be determined by comparing the carrying
value of each intangible asset with its fair value.  Fair value is
generally based on either a discounted cash flows analysis or market
analysis.  Future operating income is based on various
assumptions, including regulatory approvals, patents being granted, and
the type and nature of competing products. If regulatory approvals or
patents are not obtained or are substantially delayed, or other
competing technologies are developed and obtain general market
acceptance or market conditions otherwise change, our intangibles may
have a substantially reduced value, which could be material.



Deferred Taxes



We record a valuation allowance to reduce the deferred
tax assets to the amount that is more likely than not to be realized.
 We have considered estimated future taxable income and ongoing
tax planning strategies in assessing the amount needed for the
valuation allowance.  Based on these estimates, all of our
deferred tax assets have been reserved.  If actual results differ
favorably from those estimates used, we may be able to realize all or
part of our net deferred tax assets.  Such realization could
positively impact our operating results and cash flows from operating
activities.



Value Added Tax



Value added tax payable is reported as a significant
liability.  The accounting policies adopted by management include
full disclosure of the Value Added Tax liability calculated at 17% of
the difference between ex factory price and the cost of raw materials,
less the cost of the fees paid to the third-party original equipment
manufacturing company.



Litigation



We account for litigation losses in accordance with
Statement of Financial Accounting Standards (SFAS) No. 5, “Accounting
for Contingencies.”  Under SFAS No. 5, loss contingency provisions
are recorded for probable losses at management’s best estimate of a
loss, or when a best estimate cannot be made, a minimum loss
contingency amount is recorded.  These estimates are often
initially developed substantially earlier than the ultimate loss is
known, and the estimates are refined each accounting period, as
additional information is known.  Accordingly, we are often

11







---

initially unable to develop a best estimate of loss;
therefore, the minimum amount, which could be zero, is recorded.
 As information becomes known, either the minimum loss amount is
increased or a best estimate can be made, resulting in additional loss
provisions.  Occasionally, a best estimate amount is changed to a
lower amount when events result in an expectation of a more favorable
outcome than previously expected.  Due to the nature of current
litigation matters, the factors that could lead to changes in loss
reserves might change quickly and the range of actual losses could be
significant, which could materially impact our results of operations
and cash flows from operating activities.



|Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF
|------- | --------------------------------------------------

OPERATIONS AND FINANCIAL CONDITION

| | 
| | 





Results of Operations



During the three-month period ended June 30, 2005 we
entered into our first three international markets for our Sunkist
labeled products.  The markets entered were Hong Kong, Taiwan and
Shanghai.  This combined with the ramp up of our new factory in
Shenyang, China enabled us to record the best sales quarter in our
history.  Sales for the three months ended June 30, 2005 were
$3,220,978, this represents a sales increase of $2,242,315, from the
three-month period ended June 30, 2004.  Sales for the six month
period ended June 30, 2005 were $3,249,238 compared to $2,097,628 for
the six months ended June 30, 2004.  This represents an increase
of $1,151,610.



The gross profit for the three months ended June 30,
2005 was $1,707,838 compared to $513,228 for the three-month period
ended June 30, 2004, an increase of $1,194,610. This tripling of gross
profit is attributable to the record sales for the quarter.  For
the six months ended June 30, 2005 the gross profit was $1,712,623 or
an increase of $660,767 over the comparable six month period last year.



During the quarter ended June 30, 2005 we had total
general and administrative expense of $1,029,490 compared to $4,866,479
for the comparable period in 2004, a decrease of $3,836,989.  This
general and administrative expense included $301,266 in non-cash
general and administrative expense. For the sixth month period ended
June 30, 2005, we had total general and administraive expenses of
$4,136,568 compared to $7,900,493, a decrease of $3,763,925. This
general and administrative expense included approximately $1,600,000 in
non-cash general administrative expense.



The reason for the significant improvement in both
cash and non-cash general and administrative expenses was the lack of
significant consulting expense as compared to expenses incurred in the
prior year as the factory was being constructed and we were setting up
our infrastructure to enter our various sales markets.



Non-cash expense is where we pay for services (e.g.
financing consulting and investor relations services) using shares of
our common stock. In the past we took advantage of these opportunities
to conserve cash.



During the quarter we incurred $498,939 in interest
expense with $126,755 in interest on bank loans in our subsidiary in
Shenyang China and $372,184 in interest charges relating to the debt
discount on notes payable financing in April 2005.



We generated our first quarterly net profit two
quarters ahead of management expectations.   For the three
months ended June 30, 2005 we had net income of $179,409 compared to a
loss of $4,353,251 for the three months ended June 30, 2004. This
represents an improvement of $4,532,660.  Our net profit
applicable to common shareholders was $72,394 compared to a loss of
$5,265,140 for the three months ended June 30, 2004.  The net loss
recorded for the six months

12







---

ended June 30, 2005 was $(2,922,884) as compared to a
net loss of $6,848,637 for the comparable period last year, or an
improvement of $3,925,753.



This significant improvement in operating results was
the result of the large sales increase and corresponding gross profit
improvement coupled with the reductions in general and administrative
expense with the reductions in factory completion related costs and
resultant reductions in outside consulting expense.



Liquidity and Capital Resources



At June 30, 2005, we had total assets of $16,164,864
compared to total assets of $12,340,946 at December 31, 2004.  The
increase of $3,823,918 is attributable primarily to the $3,425,000 in
notes payable executed during the quarter which was used to increase
sales and receivables.

Our cash was $559,832 as of June 30, 2005, a decrease
of $695,849 from the $1,255,681 cash on hand as of December 31, 2004.
 Cash used in operations was $5,399,398. Accounts receivable was
$3,222,305, an increase of $1,786,077 from the $225,403 at December 31,
2004.  The increased receivables level is attributable entirely to
the rapid increase in sales.  Inventories increased $184,685 to
$2,186,815 from the $2,002,130 at December 31, 2004.  Total
liabilities were $7,479,374, an increase of $2,132,678 from the
$5,346,696 at December 31, 2004.  Accounts payable and accrued
liabilities were $3,815,031, a decrease of $526,982 from the $4,342,013
at December 31, 2004.

On April 20, 2005 we completed a private financing
with 9 accredited investors.  We executed notes totaling
$3,425,000.  Net proceeds from the issuance of the notes after
offering costs were approximately $3,034,000. The notes were issued as a portion of 6.25
Units, each consisting of one (1) $500,000 Secured Promissory Note;
three hundred thousand (300,000) Common Stock Purchase Warrants (Series
A Warrants); and three hundred thousand (300,000) special Common Stock
Purchase Warrants (Series B Warrants).  The Series A Warrants were
issued with an exercise price of $2.90 per share and the Series B
Warrant s were issued with an exercise price per share of $3.50.
 Each Purchaser also received a Series C Warrant to purchase a
number of shares of Common Stock equal to one hundred percent (100%) of
the number of Conversion Shares issuable upon conversion of such
Purchaser’s notes at an exercise price per share equal to the
Conversion Price.  The Series A Warrants and the Series B Warrants
expire five (5) years following the Closing Date and the Series C
Warrants expire one (1) year following the effective date of the
registration statement providing for the resale of the Conversion
Shares and the Warrant Shares.  The value of these warrants and
the fees paid were recorded as a discount to the notes and are being
amortized over the term of the notes using the effective interest
method.

Please refer to the Recent Developments section of
this item for details of financing received as a result of a Special
Warrant Offer extended to investors in our July 9, 2005, financing,
which occurred after the end of this reporting period.

In the first quarter of 2005 we began transitioning
the production of certain of our products to our Shenyang production
facilities.  However, due to our limited cash on hand in the
second quarter, we have been unable to fund the Shenyang operations to
the extent necessary for those facilities to reach their full capacity.
Additionally, AXM Shenyang has been unable to pay its 200 employees
since June.  This has resulted in some of these employees leaving
its employ.  With the recent financing we received we believe that
we will be able to allocate sufficient funds to AXM Shenayang, for it
to pay all of its employees and be able to produce its products

13







---

at current levels at least through the end of the
third quarter of 2005.   We will, however, need to put
substantial additional funds into our Shenyang operations in order to
realize the full potential of the factory.  Additionally, we have
been informed that in order to met certain safety regulations in
Shenyang, we may have to upgrade certain systems such as our fire
prevention systems and sewage processing system or we may be forced to
halt production until such time as we are in compliance with these
requirements. We believe that we currently have sufficient funds to
meet these requirements. However, we may not have sufficient funds to
finance our full production requirement and if we are unable to obtain
additional financing we may have to substantially curtail our Shenyang
operations, which could have a material adverse impact on our business
and operation in Shenyang. As with our Sunkist products, we are seeking
traditional accounts receivable based financian to compres the sales
cycle of our Shenyang based product line, which would assist with our
cash needs at those facilities.

Our decisions as to how to allocate our limited
available cash have been based on Management’s assessment of how such
allocation will yield the greatest return to us.  In the second
quarter, we made the decision to allocate a greater proportion of our
available funds to the production of our Sunkist line of products.
 Although we hope in the future to be able to fund both our
Sunkist line and our products produced from our Shenyang facility to
the extent required to achieve maximum capacity from both of those
lines, there can be no guarantee that we will have sufficient resources
available to do
so.

With the recently completed financing we currently
have sufficient cash to cover our anticipated normal operating needs
for the next quarter. By the fourth quarter, however, we will have to
obtain additional financing either through increased bank borrowing
against our inventory and receivables, or from the exercise of
outstanding warrants from previous financings.  There is no
guarantee that we will be successful in obtaining such additional
financing, in which case we would be forced to curtail operations to
conserve cash and that could possibly result in lower sales than we
currently anticipate.  We are not currently in a position to call
any of our outstanding warrants.  However, should our common stock
trade at a price of $4.00, based on the closing sales price, for 30
consecutive calendar days, assuming an effective registration statement
is in place with regard to the underlying shares of our common stock,
we would be in a position to call a significant portion of the
outstanding warrants.  In the event that these warrants were
called and converted we would receive gross proceeds of approximately
$18.5 million. If we are not able to raise this additional capital
through warrant exercises or additional fund raising activities we
could be forced to curtail some of the currently anticipated
expenditures in the above mentioned areas.  Should we be forced to
do this it could have an impact on the anticipated future sales and
earnings.

Despite the views of management, the statements
concerning future gross revenues and gross profits are forward-looking
statements that involve certain risks and uncertainties, which could
result in a fluctuation of total sales below those anticipated to be
achieved. Pricing of our products and gross profit on product sales
could change due to competitive forces, which could negatively impact
future sales and or operating profits.



Recent Developments



On August 9, 2005, we completed a financing totaling
$2,127,436.20 pursuant to a Special Warrant Offer that we extended to
the purchasers to our Note and Warrant Purchase Agreement dated as of
April 19, 2005.  Pursuant to the Purchase Agreement dated April
19, 2005, such purchasers received (i) a secured convertible promissory
note; (ii) a Series A warrant with an exercise price per share of
$2.90; (iii) a Series B warrant with an exercise price per share of
$3.50; and (iv) a Series C warrant with an exercise price per share
equal to $2.10.  The Special Warrant Offer reduces the exercise
price of

14







---

the Series C warrants to $1.80 per share.  8 out
of 9 purchasers participated in the Special Warrant Offer.  Such
participants shall now receive



(i)

an amendment to the exercise price of their existing
Series A warrants reducing the exercise price per share to a price
equal to one hundred five percent of the closing bid price of our
common stock on August 8, 2005, which calculates to $2.41 per share;



(ii)

an amendment to the exercise price of their existing
Series B warrants reducing the exercise price per share to $1.80, none
of which have been exercised;



(iii)

new Series D incentive warrants in an amount equal to
one hundred percent of the number of shares of common stock issued upon
exercise of the purchaser’s Series C warrants pursuant to the Special
Warrant Offer.  The Series D Incentive Warrants shall have a term
of five years exercisable commencing on October 19, 2005, contain a
cashless exercise provision if we do  not have an effective
registration statement within one year, piggyback registration rights
and weighted average anti-dilution protection and have an exercise
price per share equal to one hundred five percent of the closing bid
price of our common stock on August 8, 2005; and



(iv)

full ratchet anti-dilution protection on their notes
for issuances of our securities at a conversion price, exercise price
or price per share less than the Conversion Price (as defined in the
notes) for a period of three (3) months following the closing date of
the Special Warrant Offer.



Investors in our April 2005 financing who did not
elect to exercise their Series C Warrants pursuant to the Special
Warrant Offer retain the right to exercise their Series C Warrants at
the reduced price of $1.80 per share; provided, however,
such purchasers are not entitled to receive an adjustment to the
exercise prices of their Series A warrants and Series B warrants, the
new Series D Incentive Warrants or the full ratchet anti-dilution
protection on its notes.



Risks and Uncertainties



All of the following risks may impair our business
operations.  If any of the following risks actually occurs, our
business, financial condition or results of operations could be
materially adversely affected.  In such case, the trading price of
our common stock could decline, and one may lose all or part of your
investment.  Additional risks include:



- We will require substantial amounts
of additional capital to support our planned growth.
- We may not be able to
adequately protect and maintain our intellectual property.
- We may not be able to obtain
regulatory approvals for our products or reimbursement from the sale of
our products.

15







---



- Our dependence on certain local
third parties may impact our ability to control certain aspects of our
operations.
- We may have difficulty competing
with larger and better financed companies in our sector.
- New legislative or regulatory
requirements may adversely affect our business and operations.
- We are dependant on certain key
existing and future personnel.
- Our growth is dependent on our
ability to successfully develop, acquire or license new drugs.
- We may be subject to product
liability claims in the future.
- Changes in the laws and regulations
in The Peoples Republic of China may adversely affect our ability to
conduct our business.
- We may experience barriers to
conducting business due to governmental policy.
- Capital outflow policies in The
Peoples Republic of China may hamper our ability to remit income to the
United States.
- Fluctuation of the Renminbi could
materially affect our financial condition and results of operations. We
may face obstacles from the communist system in The Peoples Republic of
China.
- Trade barriers and taxes may have an
adverse affect on our business and operations.
- There can be no guarantee that The
Peoples Republic of China will comply with the membership requirements
of the World Trade Organization.
- A future outbreak of Severe Acute
Respiratory Syndrome (SARS) or similar virus may adversely impact our
operations and the operations of our contract manufacturers and
distributors.
- There may not be sufficient
liquidity in the market for our securities in order for investors to
sell their securities.
- The fact that our directors and
officers own approximately 42% of our capital stock may decrease the
influence on shareholder decisions.
- The outstanding warrants may
adversely affect us in the future and cause dilution to existing
shareholders.





|Item 3. | Quantitative and Qualitative
Disclosures about Market Risk |  | 
|------- | ---------------------------------------------------------- |  | 







There may not be sufficient liquidity in the market
for our securities in order for investors to sell their securities.



There is currently only a limited public market for
our common stock, which is listed on the American Stock Exchange, and
there can be no assurance that a trading market will develop further or
be maintained in the future.   During the month of April
2005, our common stock traded an average of approximately 70,875 shares
per day.  As of May 13, 2005, the closing bid price of our common
stock on the American Stock Exchange was  $1.25 per share.
 As of May 13, 2005, we had approximately 143 shareholders of
record not including shares held in street name.  In addition,
during the past two years our common stock has had a trading range with
a low price of $.09 per share and a high price of $7.30 per share.



The fact that our directors and officers own
approximately 41.78% of our capital stock may decrease your influence
on shareholder decisions.

16







---



Our executive officers and directors, in the
aggregate, beneficially own approximately 41.78% of our capital stock.
 As a result, our officers and directors, will have the ability to
influence our management and affairs and the outcome of matters
submitted to shareholders for approval, including the election and
removal of directors, amendments to our bylaws and any merger,
consolidation or sale of all or substantially all of our assets.



The outstanding warrants may adversely affect AXM
Pharma in the future and cause dilution to existing Shareholders.



There are currently 10,096,930 warrants outstanding.
 The terms of these warrants expire as early as 2007 and as late
as 2010.  The exercise price of these warrants range from $1.80 to
$5.50 per share, subject to adjustment in certain circumstances.
 The holders of the warrants have until August 21, 2008, September
12, 2008, December 31, 2008, June 24, 2007, and April 19, 2010
respectively, to exercise their warrants.Exercise of the warrants may cause dilution in the
interests of other shareholders as a result of the additional common
stock that would be issued upon exercise.  In addition, sales of
the shares of our common stock issuable upon exercise of the warrants
could have a depressive effect on the price of our stock, particularly
if there is not a coinciding increase in demand by purchasers of our
common stock.   Further, the terms on which we may obtain
additional financing during the period any of the warrants remain
outstanding may be adversely affected by the existence of these
warrants as well.



ITEM 4.  CONTROLS AND PROCEDURES





(a) Evaluation of disclosure controls and
procedures



We maintain controls and procedures designed to ensure
that information required to be disclosed in the reports that we file
or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
the rules and forms of the Securities and Exchange Commission. Based
upon their evaluation of those controls and procedures performed as of
the end of the period covered by this report, our chief executive
officer and principal financial officer concluded that our disclosure
controls and procedures were adequate.



(b) Changes in internal controls



There were no significant changes in our internal
controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by
the chief executive officer and principal financial officer.

17







---

PART II - OTHER INFORMATION



ITEM
1.Legal Proceedings



In February 2005, we were notified that Don Bates, our
Chinese Good Manufacturing Practices consultant hired counsel to pursue
collection of outstanding invoices we allegedly owe him.  Mr.
Bates is claiming that $408,275.00 is due to him.  Management is
evaluating Mr. Bates’ claim and currently plans to negotiate an
amicable settlement with Mr. Bates if possible. Although management has
not determined the claim amount that it believes to be valid, it has
accrued the full amount allegedly due in the event that it is
ultimately determined that such amount is due to Mr. Bates.



Our subsidiary obtained loans in the aggregate amount
of 8,290,302 RMB (US $1,002,455) between October 22, 2004 and December
29, 2004, through a series of short term non—recourse loans from ten
individual Chinese lenders.  Our subsidiary is in default on these
loans.  Although these loans are not secured by any of our
property or assets, we could be subject to lawsuits if they are not
paid.  Currently, no lawsuits regarding these loans have been
initiated and we are not aware that any such lawsuits are being
contemplated by any of the lenders.



In June 2005, we became aware of a lawsuit filed in
the U.S. District Court for the Central District of California by a
company known as Apex Associates, which alleged that on or around May
2004, Peter Cunningham, our former Chief Executive Officer and former
President of International Sales and Marketing, entered into a
consulting agreement with Apex.  The agreement allegedly requires
Apex to provide strategic licensing and marketing advisory services to
us in consideration for 50,000 stock options at $5.24 per share, the
strike price at the time the agreement was allegedly entered into and
$900,000 over approximately five years.  We have disputed the
validity of the agreement since it was never approved by our board of
directors and does not contain terms that we believe are consistent
with similar agreements with consultants providing similar services in
our sector.  As a result, we engaged counsel to defend the lawsuit
vigorously and we instituted a third-party complaint against Mr.
Cunningham seeking indemnity for any sums for which we may be held
liable for under the alleged agreement, for our costs and expenses in
defending the lawsuit, for the costs of our third-party complaint
against Mr. Cunningham and for any other sums we have paid to Apex.
 At the time of this filing we have agreed to a proposed
settlement with Apex, that has not yet been finalized, wherein we would
pay $100,000 to Apex and issue Apex 50,000 shares of our restricted
common stock, for which we agree to file a registration statement for
their resale within 60 days of the final settlement.
 Additionally, the alleged agreement with Apex would be rescinded
and we would agree to dismiss our third party complaint against Peter
Cunningham.  We expect to finalize this settlement through the
execution of a formal agreement in the near future.



We have engaged outside counsel to conduct an internal
investigation into the circumstances of the Apex agreement, as well as
the conduct of Mr. Cunningham while in our employ.  Such counsel
will report its findings directly to our Audit Committee as soon as
they are available. Mr. Cunningham was terminated for cause on July 20,
2005.



In July 2005, we received a demand letter from Saatchi
& Saatchi, an ad firm that alleged that AXM Shenyang, our wholly
subsidiary in China, owed them approximately RMB582,055.48 (U.S.
$71,770) in connection with advertising services supposedly provided to
AXM Shenyang.

18







---

We are currently reviewing their claim and plan to
negotiate a settlement of such claim.  We do not feel that this
matter will have a material impact on our business or operations.



Due to our limited available cash in the second
quarter, we were unable to allocate sufficient cash to our Chinese
subsidiary, AXM Shenyang, for it to pay its approximately 200 employees
in June and July.  As a result some of these employees have
resigned. Further, although we have been able to retain most of them
and believe that we will be able to pay them through at least the end
of the third quarter, we may face employment actions from those
employees who resigned for violations of Chinese labor laws.  At
present, we have not received notice of any contemplated proceedings.



Other than as disclosed herein, we are not a party to
any material legal proceeding and no such proceeding is known to be
contemplated.





ITEM
2. Unregistered Sales of Equity Securities and Use of Proceeds



(a) Unregistered Sales of Equity Securities



(i) On April 20 2005, we completed a private financing
with 9 accredited investors. We accepted total subscriptions in the
amount of $3,425,000 for a total of 6.85 Units.  Net proceeds from
the offering after estimated costs and expenses, including fees of the
placement agent were approximately $3,067,500.  Each Unit consists
of one (1) $500,000 Secured Promissory Note and three hundred thousand
(300,000) Common Stock Purchase Warrants (Series A Warrants) and three
hundred thousand (300,000) special Common Stock Purchase Warrants
(Series B Warrants).  For each $500,000 of Notes purchased a
Purchaser received a Series A Warrant to purchase up to 300,000 shares
of Common Stock at an exercise price of $2.90 per share and a Series B
Warrant to purchase up to 300,000 shares of Common Stock at an exercise
price per share of $3.50.  Each Purchaser also received a Series C
Warrant to purchase a number of shares of Common Stock equal to one
hundred percent (100%) of the number of Conversion Shares issuable upon
conversion of such Purchaser’s Note at an exercise price per share of
$2.10.  The Series A Warrants and the Series B Warrants expire
five (5) years following the Closing Date and the Series C Warrants
expires one (1) year following the effective date of the registration
statement providing for the resale of the Conversion Shares and the
Warrant Shares. The Note is convertible at $2.10 per share.



On August 9, 2005, we completed a financing totaling
$2,127,436.20 pursuant to a Special Warrant Offer that we extended to
the purchasers to our Note and Warrant Purchase Agreement dated as of
April 19, 2005.  Pursuant to the Purchase Agreement dated April
19, 2005, such purchasers received (i) a secured convertible promissory
note; (ii) a Series A warrant with an exercise price per share of
$2.90; (iii) a Series B warrant with an exercise price per share of
$3.50; and (iv) a Series C warrant with an exercise price per share
equal to $2.10.  The Special Warrant Offer reduces the exercise
price of the Series C warrants to $1.80 per share.  8 out of 9
purchasers participated in the Special Warrant Offer.  Such
participants shall now receive



19







---

|(v)    | an amendment to the exercise price of their
existing Series A warrants reducing the exercise price per share to a
price equal to one hundred five percent of the closing bid price of our
common stock on August 8, 2005, which calculates to $2.41 per share;                                                                                                                                                                                                                                                                                                                                                                                                     
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(vi)   | an amendment to the exercise price of their
existing Series B warrants reducing the exercise price per share to
$1.80, none of which have been exercised;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(vii)  | new Series D incentive warrants in an amount
equal to one hundred percent of the number of shares of commonstock
issued upon exercise of the purchaser’s Series C warrants pursuant to
the Special Warrant Offer.  The Series D Incentive Warrants shall
have a term of five years exercisable commencing on October 19, 2005,
contain a cashless exercise provision if we do  not have an
effective registration statement within one year, piggyback
registration rights and weighted average anti-dilution protection and
have an exercise price per share equal to one hundred five percent of
the closing bid price of our common stock on August 8, 2005; and
|(viii) | full ratchet anti-dilution protection on their notes for
issuances of our securities at a conversion price, exercise price or
price per share less than the Conversion Price (as defined in the
notes) for a period of three (3) months following the closing date of
the Special Warrant Offer.                                                                                                                                                                                                                                                                                                                                                                   



















Investors in our April 2005 financing who did not
elect to exercise their Series C Warrants pursuant to the Special
Warrant Offer retain the right to exercise their Series C Warrants at
the reduced price of $1.80 per share; provided, however,
such purchasers are not be entitled to receive an adjustment to the
exercise prices of their Series A warrants and Series B warrants, the
new Series D Incentive Warrants or the full ratchet anti-dilution
protection on its notes.





(b) Not Applicable.



(c) Not Applicable.





ITEM
3. Defaults upon Senior Securities



Not Applicable.



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



Under Rule 713 of the Listing Standards, Policies
and Requirements of the American Stock Exchange (“AMEX”), on which our
common stock is listed, we must obtain stockholder approval in
connection with any transaction, other than a public offering, that
involves the issuance of

20







---

common stock that equals 20% or more of our
then-outstanding common stock if we issue the stock at a price below
the market value at the time of issuance. Accordingly, on June 15,
2005, we held a special meeting of our shareholders in order to approve
the proposal to issue up to 8,109,116 shares of common stock at
below-then current prices in accordance with the terms of our April 20,
2005, financing.



On the date of the Special Meeting, we had 20,940,462
shares outstanding.  10,837,769 (51.76%) votes were cast in favor
of the proposal and 649,207 (3.10%) votes were cast against the
proposal.  Pursuant to Nevada Revised Statutes, NRS 78.320, the
proposal would be approved if the votes cast favoring this proposal
exceeded the votes cast opposing this proposal.  Therefore, the
proposal was approved.





ITEM 5. OTHER INFORMATION



Not
applicable.



ITEM
6.  EXHIBITS



(a)
The following exhibits are filed as part of this report.



Exhibit
No.
                    Document

|     |                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                         
|31.1 | Certification
 of  Chief  Executive  Officer and Acting Chief
Financial Officer  required  by Rule 13a-14/15d-14(a) under
the Exchange Act                                              
|     |                                                                                                                                                                                         
|32.1 | Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C.
      Section
1350, as adopted pursuant   to Section   906 of the
Sarbanes-Oxley Act of 2002.













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.



|Date:  August 15, 2005 | AXM
PHARMA, INC.                                                                                          
|---------------------- | ----------------------------------------------------------------------------------------------------------
|                       | By:   /s/ Chet Howard
      Chet Howard
      Chief Executive Officer
      Acting Chief Financial Officer



21







---



CERTIFICATION OF CHIEF EXECUTIVE OFFICER and ACTING
CHIEF FINANCIAL OFFICER



I, Chet Howard, certify that:



1. I have reviewed this quarterly report on Form 10-Q
of AXM Pharma, Inc.



2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit 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;



3. Based on my knowledge, the financial statements,
and other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;



4. The registrant’s other certifying officer(s) and I
are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



a.

Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;



b.

Designed such internal control over financial
reporting, or caused such internal control to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles.



c.

Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and



d.

Disclosed in this report any change in the
registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and



5.

The registrant’s other certifying officer(s) and I
have disclosed, based on our most recent

22







---

evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent
functions):



a.

All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information;
and



b.

Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant’s internal control over financial reporting.



Date:  
August 15
, 2005



/s/ Chet Howard

Chet Howard

Chief Executive Officer

Acting Chief Financial Officer

23







---

Exhibit 32.1



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002





In connection with the Quarterly Report of AXM Pharma,
Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2005,
as filed with the Securities and Exchange Commission on the date hereof
(the “Report’), I, Chet Howard, Chief Executive Officer and Acting
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:



(1)The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)The information contained in the Report fairly
presents, in all material respects, the financial condition and results
of operations of the Company at the dates and for the periods
indicated.







/s/  Chet Howard

Chet Howard,

Chief Executive Officer

Acting Chief Financial Officer



August 15
, 2005











24