U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


  (MARK ONE)

     [X]  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(D) OF THE  SECURITIES
            EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

     [ ]  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 __________


                                AXM PHARMA, INC.
      ---------------------------------------------------------------------
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


            NEVADA                                        20-0745214
-----------------------------------             --------------------------------
(STATE OR OTHER JURISDICTION                    IRS EMPLOYER IDENTIFICATION NO.)
  OF INCORPORATION OR ORGANIZATION)


                            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
                           ---    ---

         AS OF SEPTEMBER 30, 2004, THERE WERE  16,066,789SHARES  OF COMMON STOCK
OUTSTANDING,  2,255,000  SHARES  OF SERIES A  PREFERRED  STOCK  OUTSTANDING  AND
860,000  SHARES OF SERIES B PREFERRED  STOCK  OUTSTANDING  AND 30.419  SHARES OF
SERIES C PREFERRED STOCK OUTSTANDING.



<PAGE>



PART I - FINANCIAL INFORMATION.................................................3

Item 1.  Financial Statements

Balance Sheet at September 30, 2004 (unaudited)................................3

Unaudited Statements of Operations for the three month periods ended
  September 30, 2004 and 2003..................................................4

Unaudited Statements of Cash Flows for the
  nine month periods ended September 30, 2004 and 2003.........................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......................................................10

Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS...................................12

Item 3 - CONTROLS AND PROCEDURES..............................................26


PART II - OTHER INFORMATION...................................................27

Item 1.  LEGAL PROCEEDINGS....................................................27

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS............................27

Item 3.  DEFAULTS UPON SENIOR SECURITIES......................................28

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................28

Item 5.  OTHER INFORMATION....................................................28

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................29

<PAGE>

<TABLE>

<CAPTION>

                            PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                                AXM Pharma, Inc.
                           CONSOLIDATED BALANCE SHEET
                               September 30, 2004
                                   (UNAUDITED)
<S>                                                                       <C>

ASSETS
Current assets

  Cash                                                                    $    941,623
  Accounts Receivable, net of allowance of 0                                    25,717
  Inventories                                                                2,976,012
  Advances, Suppliers                                                           90,119
                                                                          ------------


    Total current assets                                                     4,033,472


Property and equipment, net                                                  4,176,333
Licenses                                                                     1,449,871
                                                                          ------------


TOTAL ASSETS                                                              $  9,659,676
                                                                          ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

  Value added tax payable                                                 $    678,746
  Accounts payable and accrued expenses                                        340,785
                                                                          ------------

    Total current liabilities                                                1,019,531

Stockholders' Equity
Series A Preferred stock, $.001 par value, 4,050,00 shares authorized,
  2,255,000 shares issued and outstanding                                        2,255
Series B Preferred stock, $.001 par value, 2,000,000 shares authorized,
  860,000 shares issued and outstanding                                            860
Series C Preferred stock, $.001 par value,  100 shares authorized,
  34 shares issued and outstanding                                                   1
Common stock, $.001 par value, 50,000,000 shares authorized,

  16,066,789 issued and outstanding                                             16,067
Additional paid-in-capital                                                  23,896,429
Accumulated deficit                                                        (15,275,467)
                                                                          ------------


Stockholders' Equity                                                         8,640,145
                                                                          ------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                      $  9,659,676
</TABLE>


<PAGE>

<TABLE>

<CAPTION>

                                 AXM PHARMA, INC
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      THREE MONTHS ENDED September 30, 2004
                                   (UNAUDITED)

                                                  Three Months Ended              Nine Months Ended
                                                    September 30,                   September 30,
                                             ----------------------------    ----------------------------
                                                 2004            2003             2004            2003
                                             ------------    ------------    ------------    ------------
<S>                                                                          <C>             <C>

Revenues                                     $          0    $  3,123,441    $ 2,097,628     $   6,338,657

Cost of revenues                                        0       2,186,519       1,045,772        4,151,293
                                             ------------    ------------    ------------    -------------

Gross profit                                            0         936,922       1,051,856        2,187,364

General, administrative and selling:

  Cash                                          1,908,627       1,258,517       6,477,320        2,114,046
  Non-cash                                      1,240,118       2,708,335       4,571,918        3,495,835
                                             ------------    ------------    ------------    -------------

Net loss                                     $ (3,148,745)   $ (3,029,930)   $ (9,997,382)   $  (3,422,517)

Net loss applicable common shareholders:
  Net loss                                   $ (3,148,745)   $ (3,029,930)   $ (9,997,382)   $  (3,422,517)
  Beneficial conversion features of
   preferred stock                                      0      (2,933,137)     (2,357,916)       (2,933,137)
  Deemed dividend from beneficial
      conversion feature of warrants              (95,754)        (40,743)       (665,099)          (40,743)
                                             ------------    ------------    ------------    -------------

Net loss applicable to common shareholders   $ (3,244,499)   $ (6,003,810)   $(13,020,397)   $  (6,396,397)
                                             ============    ============    ============    =============

Net loss per share:
  Basic and diluted                          $      (0.22)   $      (0.45)   $      (0.82)   $       (0.51)

Weighted averaged shares outstanding:
  Basic and diluted                            15,969,560      13,257,332      15,070,424       12,658,227

</TABLE>


<PAGE>



                                AXM PHARMA, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 2004 and 2003
                                   (UNAUDITED)

                                                         2004           2003
                                                     -----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                            (9,997,382)    (3,422,517)
  Adjustments to reconcile net loss to cash used in
   operating activities:
    Common stock issued for services                   4,571,918      3,495,835
    Depreciation and amortization                         33,731         43,776
     Changes in assets and liabilities:
      Cash held in trust                                       0        (66,573)
     Accounts receivable                               2,589,262     (1,890,025)
     Advances                                          1,374,580        291,597
     Inventories                                        (732,258)      (392,887)
     Accounts payable and accrued expenses              (179,291)       146,855
     Value added tax payable                          (2,239,080)     1,104,183
                                                     -----------    -----------

CASH FLOWS USED IN OPERATING ACTIVITIES               (4,578,520)      (689,576)

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                (3,906,707)       (27,236)

CASH FROM FINANCING ACTIVITIES
  Proceeds from sale of stock                          6,476,068      4,888,562

NET INCREASE IN CASH                                  (2,009,159)     4,171,570

Cash, beginning of period                              2,950,782        106,036

Cash, end of period                                      941,623      4,277,597

SUPPLEMENTAL NON-CASH TRANSACTIONS
  Net liabilities assumed in reverse merger







<PAGE>


                                AXM PHARMA, INC.
                     (FORMERLY AXIOM PHARMACEUTICALS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: MANAGEMENT REPRESENTATION AND PRESENTATION

Operating  results  for the  three  months  ended  September  30,  2004  are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2004.  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, 2003 included in our Annual Report on Form 10-KSB.

The balance  sheet of AXM Pharma,  Inc. as of September  30,  2004,  the related
consolidated  statement  of  operations  for the  three  and nine  months  ended
September 30, 2004,  and the  consolidated  statement of cash flows for the nine
months  ended  September  30,  2004  included  in  the  consolidated   financial
statements have been prepared by us without audit. In the opinion of management,
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 nine months ended  September 30, 2004,
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, 2003 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 based in The
People's  Republic of China.  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.  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  and  distributor  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 42 of these  licenses,
including all of those which we have historically commercialized,  have now been
renewed by the State Food and Drug  Administration.  We anticipate  recommencing
production of Asarone and Weifukang as soon as our factory receives Chinese Good
Manufacturing   Practices   certification.    We   anticipate   receiving   this
certification  in December  2004,  although  there can be no  guarantee.  In the
future we plan to expand our  business by  commercializing  additional  licenses
held by AXM Shenyang; acquiring


<PAGE>

additional product licenses; and by moving the manufacturing and distribution of
our products in-house.

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 WFOE include:

     o    Independence and freedom to implement the worldwide  strategies of its
          parent company without having to consider the involvement of a Chinese
          partner;
     o    Ability to carry on business rather than just a representative  office
          function;
     o    Ability to issue  invoices to their  customers  in  Renminbi  (Chinese
          Currency) and receive Renminbi revenues;
     o    Ability to convert  Renminbi  profits to US dollars for  remittance to
          their parent company outside China;
     o    Ability to employ staff directly within China;
     o    Protection of intellectual know-how technology;
     o    Greater   efficiency  in  its   operations,   management   and  future
          development; and
     o    No requirement to share profits with another party; and

In  summary,  the key  differences  between a WFOE 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.

FINANCIAL CONDITION

On June 24, 2004, we completed a private equity  financing of $3,042,500 with 11
accredited investors. After payment of costs and expenses, including fees of the
placement agent, we received net proceeds of approximately $2,773,800. We issued
30.425 shares of our Series C Preferred  Stock,  $.001 par value per share, at a
price per share of $100,000 and 357,936 common stock purchase warrants,  each of
which  entitles the holder to purchase one share of our common stock,  $.001 par
value,  for a period of three  years from the date of  issuance  at an  exercise
price equal to $5.50 per share. Each share of the preferred stock is convertible
into a number  of fully  paid and  non-assessable  shares  of our  common  stock
obtained  by  dividing  the  face  value of  $100,000  per  share  by the  fixed
conversion  price of $4.25 per share.  The warrants are redeemable by AXM Pharma
under certain circumstances.


<PAGE>

During the  three-month  period ended September 30, 2004 we did not generate any
product sales compared to revenues from product sales for the three-month period
ended  September 30, 2003 of  $3,123,441.  This  represents a sales  decrease of
$3,123,441 from the three-month period ended September 30, 2003.

The lack of sales was  specifically due to the changing  government  regulations
regarding the sales and marketing of  pharmaceutical  products in China.  Due to
new State Food and Drug Administration guidelines, we are now required to obtain
Chinese Good  Manufacturing  Practices  certification  and renew our licenses to
manufacture and sell our existing  products at the national level, as opposed to
the state and local level as had been required in the past. Because our national
approval  license  applications  were not  submitted  until April 2004,  we were
required  to cease  manufacturing  and  selling  these  items  until we received
approval  from  the  State  Food  and  Drug  Administration.  We  have  received
confirmation  that 42 of our license  renewals  have been  approved by the State
Food and Drug  Administration.  We expect to begin  producing  and selling these
products again as soon as our new factory  receives  Chinese Good  Manufacturing
Practices certification. We hope to receive Chinese Good Manufacturing Practices
certification  in December  2004  following  an  anticipated  inspection  of our
factory in November 2004.

In addition to the  licenses  for the  products  listed  above,  we acquired the
rights to Qiyao,  an  adjunctive  therapy for Type II  diabetes;  Tong Yang,  an
anti-fatigue  functional  food;  Sunkist Vitamin Range;  and,  Whisper  Feminine
Hygiene Wash. We intend to  manufacture,  market and sell these  products in the
future, when we enter into appropriate marketing and distribution agreements.

Although our new sales and marketing  initiatives  have been delayed until later
in the fourth quarter of 2004,  management remains confident that the activities
currently  being  completed  in China will  position  us to be able to execute a
solid growth plan of increased sales and earnings during the 4th quarter of 2004
and on into 2005.  Management  recognizes that 2004 is a significant  transition
year,  where we are  transforming  a  localized  privately-owned  pharmaceutical
company  into an  international  company  with  state  of the art  manufacturing
facilities,  nation-wide  distribution reach and new globally recognized branded
products.  Delays  in the  actual  launch  of our  new  products,  which  is the
culmination  of our  efforts  over the past  year,  is typical  within  emerging
markets and the pharmaceutical industry as a whole.

Due to the absence of any sales for the three  months ended  September  30, 2004
there was not any gross profit compared to $936,922 for the  three-month  period
ended  September  30, 2003, a decrease of $936,922.  During the  remainder of FY
2004,  we  anticipate  continuing  to increase our gross profit  margin with the
sales  of our  new  and  re-licensed  products.  We  continue  to  anticipate  a
significant  increase in gross profit  margin  through the  introduction  of our
various new products,  which are  anticipated to have an average gross margin of
75%, the  re-branding of our products under the AXM Pharma  Shenyang and Sunkist
brands,  signing new  distribution  contracts at margins that are  equivalent or
better than the agreements in force in 2003, and the opening of our new state of
the art manufacturing plant in Shenyang scheduled for December 2004.

At September  30,  2004,  we had total  assets of  $9,659,676  compared to total
assets of  $11,024,738  at December 31, 2003.  Cash was $941,623 as of September
30,  2004,  a decrease  of  $2,009,159  from the  $2,950,782  cash on hand as of
December 31, 2003. Cash used in operations was $5,038,269.  Accounts  receivable



<PAGE>

was $25,717 at September 30, 2004, a decrease of $2,589,262  from the $2,614,979
at December 31, 2003. Trade  receivables of approximately  $828,902 were written
off due to  Chinese  trade  laws  governing  pharmaceuticals  that are no longer
licensed  for  sale.  Inventories  increased  $732,259  to  $2,976,013  from the
$2,243,754 at December 31, 2003.  Total  liabilities  at September 30, 2004 were
$1,019,531,  a decrease of $2,422,459  from the $3,441,990 at December 31, 2003.
Accounts payable and accrued  liabilities were $340,785 at September 30, 2004, a
decrease of $183,379 from the $524,164 at December 31, 2003.

Despite the views of management, the statements concerning future gross revenues
and gross profits are forward-looking  statement that involves 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

In October we completed  construction  on several key facilities  within our new
factory,  including  our  Ointment/Cream  facility,  which is now ready for Good
Manufacturing Practices  certification.  This facility has undergone a test-run,
standard  operating  procedures  have been  established  for Good  Manufacturing
Practices, and technicians and department employees have undergone the necessary
training.  Additionally,  construction  is now complete on our Solid Dosage Form
facility.  The major  equipment,  such as a high speed  tablet  press,  has been
shipped  from the  supplier  and we  anticipate  that it will be  installed  and
operational in late November or December 2004. . Standard  operating  procedures
have been established for this equipment and training has already been completed
by a team of engineers from the US and Shenyang.  We anticipate that the Chinese
Good Manufacturing  Practices  inspection group will perform their inspection at
the end of November.  We  anticipate  that we will obtain the final Chinese Good
Manufacturing Practices certificate of approval in December2004.

Since July 2004, we signed exclusive  supply  agreements for a range of chewable
prescription  and OTC products under the Sunkist  brand In Asia.  We have signed
distribution  contracts with distributors in Shenzhen,  Beijing and Shanghai and
plan to launch Whisper in November 2004 in these territories.

In June 2004 we appointed as our key advertising advisor the Ogilvy Group public
relations firm to assist us in our product launch strategy focused on the second
half of 2004.  We also acquired an anti-depression and anti-fatigue compound for
OTC  distribution  in China.  We also,  launched a new product  line of chewable
prescription  and OTC products under the Sunkist brand in Asia that included the
acquisition of the exclusive rights to an oral drug delivery technology.

In June 2004, we completed a $3,042,500  financing led by HC Wainwright  and the
Shemano  Group.  We  received a key drug  manufacturing  license  and  appointed
Saatchi & Saatchi to advise on certain  advertising and marketing issues related
to new product launches.

In May 2004,  we were  approved  to use the name AXM  Pharma  in China.  We also
appointed  the  Alliance of ZZAD and Ogilvy  Group to advise on various  product
packaging and marketing issues.  Also, our feminine hygiene product was approved
by the National Ministry for Health and Hygiene in China.

In October 2003, we began  construction of a modern  production and distribution
facility,  which we intend to qualify  under  United  States Good  Manufacturing


<PAGE>

Practice regulations. The new plant is located in a special economic zone in the
city  of  Shenyang  that  will  provide  us  with  various  multi-year  tax  and
development  incentives.  We anticipate  that when our new facility is certified
and becomes operational, we will have approximately 320 employees.

AXM  Shenyang has chosen to locate its new  production  facility in the Shenyang
Hunnan National New & High-Tech Industrial  Development  District.  This special
economic district is located at the southern part of the city of Shenyang with a
total  area  of  approximately  120  square  kilometers.   The  development  and
construction of the High-Tech  Industrial  Development  District is a major step
for Shenyang's economic and social development.

The High-Tech Industrial  Development District was established in May of 1988 in
order  to  accelerate  the  development  and   industrialization   of  high-tech
industries in the North-Eastern  portion of the Peoples Republic of China. After
thirteen years of development,  it has successfully  attracted various high-tech
industries,  including:   biotechnology,   pharmaceuticals,   software,  digital
technology,  robots,  nano-materials and a distribution  center for IT products.
Currently, over 480 foreign enterprises including General Motors, Toshiba and LG
that have set up offices or manufacturing facilities in the High-Tech Industrial
Development District.

In order to create  unique  incentives  for companies to locate in the High-Tech
Industrial  Development  District,  favorable  corporate  income rates have been
established.  The income tax rate for those companies that have chosen to locate
in the High-Tech  Industrial  Development  District will be levied at 15 percent
annually.  Newly founded  high-tech  enterprises,  including AXM Shenyang,  will
enjoy exemption from income tax for 2 years from the first year of operation.

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 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.  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.  We may
have difficulty  establishing adequate management,  legal and financial controls
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


<PAGE>

securities.  The fact that our directors and officers own  approximately  45% 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.

INVENTORIES

Inventories, which consist primarily of raw materials and related materials, are
stated at the  lower of cost or  market  with  cost  determined  on a  first-in,
first-out (FIFO) basis. We regularly monitor  inventories for excess or obsolete
items and make any valuation corrections when such adjustments are needed.


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 the
board of  directors  of the  Company.  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  September 30, 2004, we issued  283,334 shares of
common stock for services valued at $1,085,169.

On September  10, 2004,  we issued  83,334  shares of  restricted  common shares
valued at $319,169  pursuant to an agreement  with Peter  Cunningham,  our Chief
Executive  Officer.  The shares  were  issued  pursuant  to the  exemption  from
registration  provided by Section 4(2) of the  Securities  Act for issuances not
involving a public  offering.  The shares  were  valued at $3.83 per share,  the
market price for shares of our common stock at the time of issuance.

On July 21, 2004, we issued 100,000 shares of restricted  common to Chet Howard,
our Chief Financial Officer and Chief Accounting Officer, valued at $383,00. The
shares  were issued  pursuant to the  exemption  from  registration  provided by
Section  4(2) of the  Securities  Act  for  issuances  not  involving  a  public
offering. The shares were valued at $3.83 per share, the market price for shares
of our common stock at the time of issuance.

On July 21, 2004, we issued 100,000 shares of restricted  common to Harry Zhang,
Chief Accounting Officer of our wholly owned subsidiary, valued at $383,000. The
shares  were issued  pursuant to the  exemption  from  registration  provided by
Section  4(2) of the  Securities  Act  for  issuances  not  involving  a  public
offering. The shares were valued at $3.83 per share, the market price for shares
of our common stock at the time of issuance.

On August 27, 2004 we issued 35,000 stock  options to each of  Montgomery  Simus
and Mark Bluer, both of whom are members of our Board of Directors,  valued at a
total of  $190,400.  The shares  were  issued  pursuant  to the  exemption  from
registration  provided by Section 4(2) of the  Securities  Act for issuances not
involving a public  offering.  The shares  were  valued at $2.72 per share,  the
market price for shares of our common stock at the time of issuance.

On September 1, 2004 we issued stock options, for an aggregate of 100,000 shares
valued at $269,000 pursuant to an agreement with Dreamvest, LLC. The shares were
issued pursuant to the exemption from  registration  provided by Section 4(2) of


<PAGE>

the  Securities  Act for issuances not involving a public  offering.  The shares
were valued at $2.69 per share,  the market price for shares of our common stock
at the time of issuance.

On September 8, 2004 we issued stock options,  for an aggregate of 80,000 shares
valued at $312,000 pursuant to an agreement with RCG Capital Markets Group, Inc.
The shares were issued pursuant to the exemption from  registration  provided by
Section  4(2) of the  Securities  Act  for  issuances  not  involving  a  public
offering. The shares were valued at $3.90 per share, the market price for shares
of our common stock at the time of issuance.
At September 30, 2004, the Company had a stock-based compensation plan. In April
2004, the Board of Directors  adopted the 2004 Qualified and Nonstatutory  Stock
Option  Plan.  The  Board of  Directors  reserved  3,000,000  stock  options  to
directors, executive officers, employees and consultants. During the nine months
ended  September 30, 2004, the Company granted options to no employees under the
2004 Plan and 180,000 options to various  consultants under the 2004 Plan. . The
recorded  stock  based  compensation  totaling  $154,949  related to the options
issued to consultants.

The  Company  applies  and  intends 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.  The  Company  recorded $0 of
stock-based  compensation expense for stock options issued to employees which is
reflected in the net loss for the nine month period ended September 30, 2004. In
addition,  the  Company  recorded  stock  based  compensation  expense  totaling
$$154,949 related to the options issued to consultants.  The consultant  options
vested  immediately and were expensed based on the fair value  calculated  using
the Black-Scholes pricing model using the following assumptions: 56% volatility,
one year life, 2.5% discount rate and 0% dividend yield.

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 and Warrant Exercises
----------------------------------------------------

During the third quarter, AXM Pharma issued shares of common stock in connection
with the  following  conversions  of its Series C  Preferred  Stock.  AXM Pharma
issued 141,175 shares of common stock for the conversion of 6 shares of Series C
Preferred Stock.

ACCOUNTING FOR STOCK-BASED COMPENSATION

We account for stock-based  compensation issued to employees and advisors of the
Company 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.



<PAGE>


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 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."


CASH FINANCING ACTIVITIES

On June 24, 2004, we completed a private equity  financing of $3,042,500 with 11
accredited investors. After payment of costs and expenses, including fees of the
placement agent, we received net proceeds of approximately $2,773,800. We issued
30.425 shares of our Series C Preferred  Stock,  $.001 par value per share, at a
price per share of $100,000 and 357,936 common stock purchase warrants,  each of
which  entitles the holder to purchase one share of our common stock,  $.001 par
value,  for a period of three  years from the date of  issuance  at an  exercise
price equal to $5.50 per share. Each share of the preferred stock is convertible
into a number  of fully  paid  and  nonassessable  shares  of our  common  stock
obtained  by  dividing  the  face  value of  $100,000  per  share  by the  fixed
conversion  price of $4.25 per share.  The warrants are redeemable by AXM Pharma
under certain circumstances.

In addition to its fees and expenses,  the placement agent received a three-year
warrant to purchase up to 3 shares of our Series C Preferred Stock at a price of
$100,000 per share and up to 35,793 warrants.

Also in  connection  with the  issuance  of the  shares of  preferred  stock and
warrants  issued on June 24, 2004,  we agreed to file a  registration  statement
with the Securities and Exchange Commission to register for resale the shares of
our common stock into which the shares of our  preferred  stock may be converted
and the shares of common stock  issuable upon the exercise of the  warrants.  We
are required to keep this registration  statement  continuously  effective under
the Securities Act until such date as is the earlier of (x) the date when all of
the securities covered by such registration  statement have been sold or (y) the
date on which such  securities may be sold without any  restriction  pursuant to
Rule 144 as  determined  by the  counsel  to AXM  Pharma  pursuant  to a written
opinion letter,  addressed to our transfer agent to such effect.  We also agreed
to provide the same penalty  provisions to our Series B Shareholders whose stock
is also being registered as part of this prospectus.


STOCK OPTION PLANS

In April of 2004, our Shareholders approved the "2004 Qualified and Nonstatutory
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  2,040,000  options  to
employees, directors and consultants.

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.


<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
 OF OPERATIONS

The  following  discussion  should  be read in  conjunction  with our  financial
statements  and the notes  thereto  which appear  elsewhere in this report.  The
results  shown  herein  are not  necessarily  indicative  of the  results  to be
expected  in  any  future  periods.  This  discussion  contains  forward-looking
statements based on current expectations,  which involve  uncertainties.  Actual
results   and  the  timing  of  events   could   differ   materially   from  the
forward-looking  statements as a result of a number of factors.  Readers  should
also  carefully  review  factors set forth in other reports or documents that we
file from time to time with the Securities and Exchange Commission.


Overview

On March 14, 2003,  we completed a share  exchange  with Werke  Pharmaceuticals,
Inc.,  a Delaware  corporation,  formed to  develop  and  finance  the growth of
Chinese based pharmaceutical companies. As a result of the share exchange, Werke
became our wholly owned subsidiary. Werke's wholly owned operating subsidiary is
AXM  Shenyang  Inc.,  a  northern   China-based   pharmaceutical   company.  The
comparables  discussed  below relate to the  operations  of Werke and its wholly
owned subsidiary, AXM Shenyang, for the periods discussed.


During the fiscal  quarter  ended  September  30, 2004,  our  products  were not
available for sale due to new licensing  requirements  at the national  level in
China.  Beginning  July 1, 2004, all  pharmaceutical  companies must obtain Good
Manufacturing   Practices   certification  and  national  approval  licenses  to
manufacture each of their  pharmaceutical  products.  The application period can
take more than 100 working days. In April 2004,  in accordance  with  guidelines
provided by the Liaoning sFDA, we submitted  applications  to renew licenses for
all of our pharmaceutical  products. We have received confirmation that 42 of 43
of our licenses, including those that we have historically commercialized,  have
been  approved for renewal at the  national  level.  In June 2004,  we submitted
applications  for Good  Manufacturing  Practices  certification  pursuant to the
requirements  of State Food and Drug  Administration,  which we are  required to
obtain prior to December 31, 2004. We have currently  completed  construction on
several of the key facilities at our new factory. We have completed training and
established  standard  operating  procedures for the  facilities  that have been
completed and upon receipt of certain  equipment,  which has been ordered and is
expected  to arrive  shortly,  we believe  that we will be ready for our Chinese
Good Manufacturing Practices certification review. We anticipate that our review
will occur in late November  2004 and believe that we will receive  Chinese Good
Manufacturing Practices certification in December 2004.

After our factory is Chinese Good Manufacturing Practices approved, we intend to
immediately  reintroduce  Asarone  Tablets  and  the  Wefukang  Cream  with  new
packaging and to market these products much more broadly. We expect that we will
launch the Qiyao  Diabetes  product  and the Sunkist  line of imported  products
during the first  quarter of 2005.  We expect to  commence  sales of the Whisper
Feminine  Hygiene Product in November 2004 in Shenzhen,  followed by launches in
Shanghai and Beijing shortly thereafter.

We  are  currently   seeking  to  license  various  branded  OTC  products  from
identifiable  North  American   pharmaceutical  and  supplement   companies  for


<PAGE>

distribution and manufacturing in China and Asia-Pacific. We are currently party
to a licensing  agreement to  manufacture  market and sell  certain  vitamin and
vitamin  supplements  in The Peoples  Republic of China under the Sunkist  brand
name and trademark and other  products  under AXM Pharma owned brand names.  The
Sunkist  trademark  agreement  grants AXM Pharma exclusive rights in The Peoples
Republic of China,  excluding  Macao and Hong Kong, for use of the Sunkist brand
name for AXM  Pharma's  range of  vitamin  and  vitamin  supplements  (excluding
vitamin-fortified  confections). The agreement also grants AXM Pharma a right of
first  refusal  for any  territory  in the rest of Asia where  Sunkist  does not
currently  license the product  categories  covered by their  agreement with AXM
Pharma.  Under the terms of the  agreement,  we are required to achieve  certain
sales  targets  each  year,  for each  category  of product  licensed  under the
agreement.  If we fail to achieve  the agreed  upon  sales  targets  for any two
consecutive  years,  the agreement may be terminated with regard to such product
category by Sunkist in its discretion.

Recent events have led us to examine  closely the management  performance at our
wholly owned operating  subsidiary,  AXM Shenyang.  There are clear  indications
that deficiencies have arisen at the senior level.  These  deficiencies may have
contributed to the delays in the process to obtain national  approval  licenses,
the lower than expected  sales in the second quarter and the absence of sales in
the  third  quarter.  In order to  address  these  deficiencies  in  August  and
September  2004 we retained  several  senior  level  advisors to assist with the
renewal of our national  approval  licenses and the completion and certification
of our new manufacturing  facility.  We believe that these changes are beginning
to yield positive results in that we have recently  received  confirmation  that
the national State Food and Drug  Administration has approved our application to
renew 42 of 43 of our pharmaceutical licenses and we have completed construction
of several key phases of our new  factory and believe  that we will be ready for
Chinese Good  Manufacturing  Practices  certification  in November 2004, with an
anticipated  approval in December  2004. We  anticipate  adding  several  strong
industry experienced  executives to our management team and reorganizing various
roles and  responsibilities  within senior  management in the fourth quarter and
early  2005.  We hope that  these  changes  in senior  management  will  enhance
productivity,  reduce  conflicts and lead to more  effective  integration of our
U.S. and Chinese management teams in order to enhance our ability to conduct our
business in an effective manner in future periods.


LIQUIDITY AND CAPITAL RESOURCES

Total assets  decreased  from  $11,024,738 at December 31, 2003 to $9,659,676 at
September 30, 2004. This decrease is attributable to the increase of Losses from
operating activities and the expensing of over $560,000 in factory United States
Good   Manufacturing   Practices   and  China   Good   Manufacturing   Practices
certification processes for the new factory.

Our total outstanding current liabilities decreased to approximately  $1,019,531
at September  30, 2004,  as compared to  approximately  $3,441,990  at March 31,
2003.  This  reduction  of  $2,422,459  is mostly  attributable  primarily  to a
reduction in Value Added Tax liabilities of $2,239,162.

From  December 31, 2003, to September  30, 2004,  our cash and cash  equivalents
decreased  by  approximately  $2,009,159 million  as a result of  receipt of net
proceeds in the private placement offering of approximately $6,492,963. This was
offset by cash used for factory and  equipment of $3,906,707  and  reductions in
current liabilities of $2,422,459. Approximately $1,240,118 of non-cash general,
administrative  and selling expenses were incurred in the period ended September
30, 2004. The non-cash expenses for the nine months ended September 30, 2004 was



<PAGE>

$4,571,918.  Non-cash  expense  is where  we pay for  services  (e.g.  financial
consulting and investor relations services) using shares of our common stock. In
the past the Company took advantage of these opportunities to conserve cash.

We currently have sufficient cash to maintain  operations at their present level
through  the end of the  current  year.  Capital  used  to  date  in  activities
associated with the building and certification of the new facilities in Shenyang
is approximately US$4 million. We anticipate requiring additional  investment of
approximately  US$ 4.2 million  primarily  during the fourth  quarter of 2004 in
order to complete the new production  facilities,  laboratory and administration
buildings.  However,  to  fulfill  our  planned  expansion  in sales  territory,
complete  the  factory,  implement  the  required  systems  and fund our working
capital  needs,  we will need to raise  approximately  $8 million in  additional
funds. We are currently seeking to raise this additional  capital through either
sales of our equity securities or debt financing of our factory and equipment in
Shenyang,  but there cannot be any guarantees that we will be able to raise this
additional  capital on terms  acceptable  to  management  or at all.  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  $10.5  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.


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.







<PAGE>


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  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

We account 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  Interpretation  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. We 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.  We 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 March
31, 2004,  therefore pro forma disclosures are not required for the three months
ended March 31, 2004.

CONVERTIBLE PREFERRED STOCK

Convertible  Preferred  Sock  issued  by AXM  Pharma  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.




<PAGE>


SALES ALLOWANCES

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


<PAGE>

estimates  are refined each  accounting  period,  as additional  information  is
known.  Accordingly, we are often 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.

RESULTS OF OPERATIONS

COMPARISON OF RESULTS FOR THE THREE AND NINE MONTHS ENDED  SEPTEMBER 30, 2004 TO
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003

REVENUE

During the  three-month  period ended September 30, 2004 we did not generate any
sales from  product  sales  compared  to  revenues  from  product  sales for the
three-month  period ended  September 30, 2003 of $3,123,441.  This  represents a
sales decrease of $3,123,441  from the  three-month  period ended  September 30,
2003. For the nine months ended September 30, 2004 sales were $2,097,628  versus
sales of $6,338,657 for the comparable period ended September 30, 2003.

The absence of sales for the three months period ended September 30, 2004 is due
to  the  fact  that  we  have  not  yet  received   national  approval  for  our
pharmaceutical  licenses  or Chinese  Good  Manufacturing  certification,  which
caused us to cease  manufacturer  of our  pharmaceutical  products as of July 1,
2004,  and  also  disqualified  us and  any  distributors  we use  from  certain
competitive  bidding  processes  prior  to  that  date.  For  example,  we  were
disqualified  from a competitive  bidding process for the sale of Asarone direct
to hospitals in Shanghai because we could not provide the  documentation of Good
Manufacturing  Practices  certification  required  by the  local  government  to
participate  in such process.  Management  estimates that the approvals from the
regulatory  body for these items will be obtained in December  2004.  Management
further  estimates  that the Company  will not be able to achieve  our  original
sales plan for the remainder of the year related to these items.

Despite these setbacks,  we have now received  confirmation  that the State Food
and Drug  Administration  has now renewed 42 of our  licenses,  including all of
those that we have historically commercialized.  Additionally, we have completed
construction  of key  phases  of our new  factory,  as well as  training  of our
personnel and we are awaiting Chinese Good Manufacturing Practices certification
review in  November  2004.  We expect to receive  Good  Manufacturing  Practices
certification in December 2004. Once the plant is Good  Manufacturing  Practices
certified,  we will immediately  commence the  reintroduction of Asarone Tablets
and the Wefukang Cream. Both products will have updated  packaging,  and will be
distributed in additional territories in China. We also anticipate launching the
Qiyao  Diabetes  product and the Sunkist  line of imported  products  during the
first  quarter of 2005. We plan to launch our Whisper  Feminine  Hygiene Wash in
Shenzhen in November 2004,  followed by Shanghai in December 2004 and Beijing in
January 2005.

<PAGE>


Despite the views of management,  the statement concerning future gross revenues
is a  forward-looking  statement that involves 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.

GROSS PROFIT

There was not any gross profit on product sales for the three-month period ended
September  30,  2004 due to the  absence of sales as  discussed  above.  This is
compared to $936,922  for the  three-month  period ended  September  30, 2003, a
decrease of  $936,922.  For the nine months ended  September  30, 2004 the gross
profit was $1,051,856  compared to $2,187,364 for the comparable period in 2003.
In both instances the decrease in gross profit is  attributable  to the decrease
in sales.

The gross margin for the nine months ended September 30, 2004 was 50.1% compared
to 34.5% for the nine months ended  September  30, 2003.  This increase in gross
margin was achieved through a planned  elimination of the sales of our ultra-low
margin antibiotic products.  During the fourth quarter of FY 2004, we anticipate
continuing  to increase  our gross  profit  margin with the sales of our new and
re-licensed  products. We continue to anticipate a significant increase in gross
profit margin through the  introduction  of our various new products,  which are
anticipated  to have an average  gross  margin of 75%,  the  re-branding  of our
products  under  the  AXM  Pharma  Shenyang  and  Sunkist  brands,  signing  new
distribution  contracts  at  margins  that are  equivalent  or  better  than the
agreements  in  force  in  2003,  and the  opening  of our new  state of the art
manufacturing plant in Shenyang scheduled for December 2004.

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


SALES, GENERAL AND ADMINISTRATIVE EXPENSES

The cash portion of this expense  category for the three months ended  September
30, 2004 was  $1,908,627  compared to $1,258,517  for the same period last year.
The cash portion of this expense for the nine months  ended  September  30, 2004
was  $6,477,320 compared to $2,114,046 for the comparable  period in 2003.  This
increase in cash expenditures on general, administrative and selling expense for
this  quarter  compared to the same  quarter  last year is due  primarily to the
expansion of  administrative  staff in the US and China to provide for financial
reporting,  capital raising  efforts and  maintaining our public  relations at a
level  consistent with a public  company.  We also added staff in setting up the
information  technology  function for reviewing  possible  software and hardware
solutions.  The expenditures in the information technology area are necessary in
order  to  proceed  with  the  actual  implementation  and  role  our of our new
manufacturing,  marketing  and  accounting  software  modules  in step  with the
completion  of our new  manufacturing  facility in Shenyang  and meeting US Good
Manufacturing Practices and China Good Manufacturing Practices standards.


<PAGE>


In addition to the aforementioned  cash expenses in the general,  administrative
and selling expense category there were $1,240,118 in non-cash expenses relating
to stock issued for  professional  services  rendered for the three months ended
September  30,  2004.  For the nine months  ended  September  30, 2004 there was
$4,571,918  in  non-cash  expenditures  for  professional  services  rendered as
compared to $3,495,835 for the comparable period in 2003.


NON-CASH CONSULTING ACTIVITIES

During the  three-month  period ended September 30, 2004, our Board of Directors
authorized the issuance of shares of restricted  common stock to various Company
officers in lieu of cash payments.  Based upon the common stock trading price at
the times of  issuance,  and FASB  rules,  we were  required  to incur  non-cash
administrative  expenses of  $1,240,118  for the issuance of these shares during
the three-month period ended September 30, 2004. For the nine month period ended
September  30,  2004 the Company  incurred  $4,571,918  in non-cash  expense for
compensation to various consultants and Company officers.

NET LOSS AND LOSS PER SHARE

The  net  loss  for  the  three   months   ended   September   30,   2004,   was
$3,148,745 including $1,240,118 in non-cash stock issuance.  The net loss in the
period  applicable to common  shareholders  was  $3,244,499 or $(0.20) per share
compared to a $6,003,810  loss the same period during 2003. The Net Loss for the
three  months ended  September  30, 2004 was  primarily  the result of increased
expenses  related  to our  public  reporting  status  and  increased  activities
associated with the construction of our new plant in Shenyang.  Also included in
this loss was  approximately  $803,185 for write off of receivables that were no
longer  collectible due to expiration of licensing on products  covered by those
receivables.  The net loss for the nine  months  ended  September  30,  2004 was
$9,997,382 per share as compared  to a loss of  $3,422,517  for the  comparable
period in 2003.  The same reasons attributable  to the three month loss increase
are applicable to the nine month results.  The net loss applicable to the common
shareholders  for the nine month period ended September 30, 2004 was $13,020,397
or $(0.81) per share as compared to a loss of $6,396,397 or $(.51) per share for
the comparable period in 2003.

Delays in regulatory  approval have caused delays in the  implementation  of new
sales and  marketing  initiatives  until  later in the  fourth  quarter of 2004.
Management  remains  confident that the activities  currently being completed in
China will  position us to be able to execute a solid  growth plan of  increased
sales and earnings  during the 4th quarter of 2004 and on into 2005.  Management
recognizes that 2004 is a significant transition year, where we are transforming
a localized privately owned pharmaceutical company into an international company
with state of the art manufacturing  facilities,  nation-wide distribution reach
and new globally recognized branded products. Delays in the actual launch of our
new  products,  which is the  culmination  of our efforts over the past year, is
typical within emerging markets and the pharmaceutical industry as a whole.

The net loss and loss per share results for the three months ended September 30,
2004,  were  higher  than  internal  management  estimates.  We  had  previously
forecasted $33 million in gross sales and earnings per share for FY2004 at $0.42
cents per  share,  excluding  non-cash  expenses,  on a fully  diluted  basis of
approximately  21  million  shares  outstanding  at  year-end.   Management  now
estimates that we will incur a loss of approximately  $13.4 million or ($0.63.8)
per share on FY 2004 sales of approximately $4 million and gross profits of $2.2




<PAGE>

million,  excluding non-cash expenses, on a fully diluted basis of approximately
21 million shares outstanding at year-end. The primary reasons for these revised
estimates are the delays in bringing certain products to market, as well as lost
sales due to the particular  regulations,  which require us to receive  national
approval of licenses for the manufacture and sale of our pharmaceutical products
and the need to receive Chinese Good Manufacturing Practices certification.

Despite  the  views of  management,  the  statement  concerning  future  loss or
earnings per share is a  forward-looking  statement that involves  certain risks
and  uncertainties,  which could result in a fluctuation of earnings 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  impacted
future earnings.

ASSETS AND LIABILITIES

At September 30, 2004, we had total assets of $9,659,676compared to total assets
of $11,024,738 at December 31, 2003. Cash was $941,623 as of September 30, 2004,
a decrease of  $2,009,159  from the  $2,950,782  cash on hand as of December 31,
2003.  Cash used in  operations  was  $5,038,269  and cash provided by financing
activities from the sale of common and preferred stock was $6,980,218.

Accounts  receivable was $25,717 at September 30, 2004, a decrease of $2,589,262
from the $2,614,979 at December 31, 2003. This decrease reflects the lack of new
sales in the previous quarter and the write-off of approximately $803,185 due to
Chinese  regulations  on  product  registration  expiration  as they  relate  to
purchased but unsold items by distributors.  Inventories  increased  $732,258 to
$2,976,012 from the $2,243,754 at December 31, 2003.

Total  liabilities  at  September  30,  2004  were  $1,019,531,  a  decrease  of
$2,422,459  from the  $3,441,990  at December  31,  2003.  Accounts  payable and
accrued  liabilities were $340,785 at September 30, 2004, a decrease of $183,379
from the $524,164 at December 31, 2003.

RISK FACTORS
------------

You  should  carefully  consider  the risks  described  below  before  making an
investment in AXM Pharma. All of these 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 you may lose all or
part of your investment.

RISKS RELATING TO OUR BUSINESS

We may not be able to adequately protect and maintain our intellectual property.

Our  success  will  depend  in part  on our  ability  to  protect  and  maintain
intellectual  property rights and licensing  arrangements  for our products.  No
assurance  can be given that  licenses  or rights used by AXM Pharma will not be
challenged,  invalidated,  infringed or circumvented, or that the rights granted
thereunder will provide competitive  advantages to us. There can be no assurance
that we will be able to obtain a license to any  third-party  technology that we
may require to conduct our business or that such technology can be licensed at a
reasonable  cost.  There is no certainty  that we will not be  challenged by our
partners for non-compliance with our licensing arrangements.  Furthermore, there
can be no  assurance  that we will be able to  remain  in  compliance  with  our
existing or future  licensing  arrangements.  Consequently,  there may be a risk




<PAGE>

that licensing  arrangements  are withdrawn with no penalties to the licensor or
compensation to AXM Pharma.

We may  not  be  able  to  obtain  regulatory  approvals  for  our  products  or
reimbursement from the sale of our products.

The manufacture and sale of  pharmaceutical  products in The Peoples Republic of
China is highly regulated by a number of state,  regional and local authorities.
These  regulations  significantly  increase the difficulty and costs involved in
obtaining and maintaining  regulatory  approval and  reimbursement  listings for
marketing  new and  existing  products.  In  addition,  our  future  growth  and
profitability are, to a significant extent, dependent upon our ability to obtain
timely regulatory approvals and reimbursement from the relevant authorities.

The State Food and Drug Administration of The Peoples Republic of China recently
implemented  new  guidelines  for  licensing  of  pharmaceutical  products.  All
existing  manufacturers  with  licenses,  which are  currently  valid  under the
previous  guidelines,  are  required to apply for Good  Manufacturing  Practices
certification by June 30, 2004, and to receive approval by December 31, 2004. We
believe that our new factory,  which is currently under construction in Shenyang
and being constructed to meet more stringent U.S. Good  Manufacturing  Practices
requirements,  will pass the certification process and that our current licenses
will be renewed  under the new  guidelines.  However,  should we fail to receive
certification  under the new  guidelines  promulgated by the State Food and Drug
Administration, our business would be impacted in a materially adverse manner.


Our  dependence  on certain  local  parties  may  impact our  ability to control
certain aspects of our operations.

Our operations may become  substantially  dependent on local Chinese partners to
provide marketing expertise and knowledge of the local regulatory environment in
order to  facilitate  the  acquisition  of necessary  licenses and permits.  Any
failure to form or maintain alliances with local partners,  or the preemption or
disruption of such alliances by our  competitors or otherwise,  could  adversely
affect  our  ability  to  penetrate  and  compete  successfully  in the  Chinese
marketplace.  In addition,  in the uncertain  legal  environments in The Peoples
Republic of China, our business may be vulnerable to local  government  agencies
or other  parties  who wish to  renegotiate  the  terms  and  conditions  of, or
terminate their agreements or other understandings with AXM Pharma.

Our ability to successfully  integrate management of our U.S. parent company and
our Chinese  operating  subsidiary will have a material impact on our ability to
successfully operate our business.

At AXM Shenyang,  there are clear indications that management  deficiencies have
arisen at the senior level,  which result, in many cases, from the difficulty to
successfully  implement U.S. style management at a Chinese operating company and
the  difficulty  faced  by U.S.  trained  managers  operating  in  China.  These
deficiencies  may have  contributed  to the  delays  in the  process  to  obtain
national approval licenses and the lower than expected sales in the 2nd quarter.
We and AXM  Shenyang  are  actively  seeking  solutions  to these  issues.  Such
solutions may include,  among other actions, the hiring of senior level managers
who are  familiar  with both U.S.  management  methods and Chinese  language and
culture. In the event that we are unable to implement such solutions in a timely
manner it could have a material  adverse effect on our business and  operations,


<PAGE>


including  but not limited to,  further  delays in future  anticipated  national
approval  licensing  activities and the ramp-up of the sales of new and existing
products.


We rely on third parties for the supply,  manufacture  and  distribution  of our
products.

Third parties have  manufactured  and distributed  all of our products.  We have
not,  and do not have  manufacturing  facilities,  personnel  or  access  to raw
materials to independently  manufacture our products.  Prior to the interruption
in the manufacture and sale of our drugs for regulatory  reasons and because our
factory is still under construction,  our products were manufactured by Qiqihaer
Pharmaceutical  Factory 2 and distributed by Liaoning  Weikang Medicine Co. Ltd.
Except for any  contractual  rights and  remedies  that we may have had with our
manufacturer  and  our  distributor,  we did  not  have  any  control  over  the
availability of our products,  their quality or cost or the actual  distribution
of our  products.  Our current  distribution  agreement  with  Liaoning  Weikang
Medicine Co. Ltd.  expired at the end of March 2004.  Although  Liaoning Weikang
Medicine Co. Ltd.  verbally agreed to continue as our  distributor,  we have not
signed a definitive  written  agreement  for  distribution  of our products with
Liaoning Weikang Medicine Co. Ltd. or any other  distributor.  Our manufacturing
agreement  with  Qiqihaer  Pharmaceutical  Factory 2 expired in September  2004.
Depending  upon when our national  license  application  and Good  Manufacturing
Practices  certification  are approved,  our new factory may be operational  and
therefore we may no longer require the services of Quiqihaer Pharmaceutical.  If
however,  construction  of our new factory is not  complete and we are unable to
obtain or retain  third-party  manufacturers  and  distributors  on commercially
acceptable  terms we may not be able to produce and  distribute  our products as
planned.  If we encounter delays or difficulties with our contract  manufacturer
in producing or packaging our products or with our  distributor in  distributing
our products,  the production,  distribution,  marketing and subsequent sales of
these products would be adversely affected,  and we may have to seek alternative
sources  of  supply  or  distribution  or  abandon  or  sell  product  lines  on
unsatisfactory  terms.  We may not be able to  enter  into  alternative  supply,
production or distribution  arrangements on commercially acceptable terms, if at
all. There can be no assurance that the  manufacturer  we engage will be able to
provide  sufficient  quantities of these products or that the products  supplied
will  meet  with  our  specifications  or that our  distributor  will be able to
distribute  our  products in  accordance  with our  requirements.  In  addition,
production  of our products may require raw  materials for which the sources and
quantities  are  limited.  An  inability  to  obtain  adequate  supplies  of raw
materials  could  significantly  delay  development,   regulatory  approval  and
marketing of our products.


We may have difficulty  competing with larger and better  financed  companies in
our sector.

The ethical and  over-the-counter  drug markets in The Peoples Republic of China
are very competitive and competition may increase. Products compete on the basis
of efficacy, safety, side effect profiles, price and brand differentiation. Some
of our competitors may have greater  technical and financial  resources than AXM
Pharma  and may use  these  resources  to  pursue a  competitive  position  that
threatens our products. Our products could be rendered obsolete, or uneconomical
by the development of new  pharmaceuticals to treat conditions  addressed by our
products,  as  a  result  of  technological   advances  affecting  the  cost  of
production,  or as a result of marketing or pricing action by one or more of our
competitors.

We are dependant on certain key existing and future personnel.


<PAGE>


Our success will depend,  to a large  degree,  upon the efforts and abilities of
our officers and key management  employees such as Peter  Cunningham,  our Chief
Executive Officer;  Chet Howard, our Chief Financial Officer;  and Wang Wei Shi,
Chief Executive Officer of AXM Shenyang, Inc. The loss of the services of one or
more  of  our  key  employees  could  have  a  material  adverse  effect  on our
operations.   We  currently  only  have  an  employment   agreement  with  Peter
Cunningham.  We do not currently  maintain key man life  insurance on any of our
key employees. In addition, as our business plan is implemented, we will need to
recruit and retain  additional  management  and key  employees in virtually  all
phases  of our  operations.  Key  employees  will  require  not  only  a  strong
background in the pharmaceutical  industry,  but a familiarity with language and
culture in the  markets in which we  compete.  We cannot  assure that we will be
able to successfully attract and retain key personnel.

Our growth is  dependent  on our  ability to  successfully  develop,  acquire or
license new products and on our ability to successfully  introduce such products
to the market.

We must  invest  substantial  time,  resources  and capital in  identifying  and
developing  new drugs,  dosage  and  delivery  systems,  either on our own or by
acquiring and licensing such products from third parties. Our growth depends, in
part, on our success in such process. Our planned expansion over time is founded
on a simple  principal of introducing  two new products or line  extensions each
year  and to  expand  distribution  into two new  territories  each  year.  This
strategy has the advantage of building brands through  geographic  expansion and
line  extensions,  and  establishing  incremental  capabilities  for new product
introductions.  We believe that our planned  expansion will require $5.0 million
in total over three  years,  which we intend to fund out of our future  revenues
and, if necessary,  additional financing. If we are unable to either develop new
products on our own or acquire licenses for new products from third parties, our
ability  to grow  revenues  and  market  share will be  adversely  affected.  In
addition,  we may not be able to recover our  investment in the  development  or
acquisition   of  new  products,   given  that  projects  may  be   interrupted,
unsuccessful,  not as profitable as initially contemplated or we may not be able
to obtain necessary financing for such development if we are unable to fund such
development  or  acquisition  from our future  revenues.  Even if we are able to
develop  acquire  or  license  new  products,  our  growth  could be  materially
adversely  impacted  if we are unable to  successfully  market and sell such new
products once they are available to us.

We may be subject to product liability claims in the future.

We face an inherent business risk of exposure to product liability claims in the
event that the uses of our technologies or products are alleged to have resulted
in adverse side  effects.  Side effects or marketing or  manufacturing  problems
pertaining to any of our products  could result in product  liability  claims or
adverse  publicity.  These  risks  will  exist for those  products  in  clinical
development and with respect to those products that receive regulatory  approval
for commercial sale. Furthermore,  although we have not historically experienced
any  problems  associated  with  claims  by  users  of our  products,  we do not
currently  maintain  product  liability  insurance.  We plan  to have a  product
liability insurance plan in place by the second quarter of fiscal 2004; however,
there can be no  assurance  that we will be able to  acquire  product  liability
insurance with terms that are commercially feasible.


RISKS RELATING TO THE PHARMACEUTICAL INDUSTRY IN THE PEOPLE'S REPUBLIC OF CHINA

Changes  in the  laws and  regulations  in The  Peoples  Republic  of China  may
adversely affect our ability to conduct our business.


<PAGE>


The  pharmaceutical  industry is relatively  new in the emerging  markets of The
Peoples  Republic of China that we are  targeting,  and the manner and extent to
which it is regulated  in these  geographical  areas is  evolving.  As a Chinese
corporation, AXM Pharma is subject to the Company Law of The Peoples Republic of
China and more specifically to the Foreign Company provisions of the Company Law
and the Law on Foreign  Capital  Enterprises of the People's  Republic of China.
Additionally,  as a pharmaceutical company, we are subject to the Pharmaceutical
Administrative Law. Changes in existing laws or new interpretations of such laws
may have a significant  impact on our methods and costs of doing  business.  For
example,   new  legislative   proposals  for  pharmaceutical   product  pricing,
reimbursement  levels,  approval criteria and manufacturing  requirements may be
proposed and adopted. Such new legislation or regulatory requirements may have a
material  adverse  effect on our financial  condition,  results of operations or
cash flows. In addition, we will be subject to varying degrees of regulation and
licensing by governmental  agencies in The Peoples Republic of China.  There can
be no assurance that the future  regulatory,  judicial and  legislative  changes
will not have a material adverse effect on AXM Pharma,  that regulators or third
parties  will not  raise  material  issues  with  regard  to AXM  Pharma  or our
compliance or  non-compliance  with  applicable  laws or regulations or that any
changes in  applicable  laws or  regulations  will not have a  material  adverse
effect on AXM Pharma or our operations.

We may experience barriers to conducting business due to governmental policy.

The State Food and Drug Administration of The Peoples Republic of China set up a
classification    administrative   system   in   1999   for   prescription   and
over-the-counter  drugs. Since then, the State Food and Drug  Administration has
issued a series  of  guidelines  for  interpretation  of the new  classification
system for  labeling,  usage  instructions  and  packaging  of  over-the-counter
products.  The  State  Food  and Drug  Administration  currently  requires  that
pharmaceutical  manufacturers clearly label drugs for over-the-counter sales and
distinguish  them from those to be sold in hospitals as ethical  drugs.  We have
instituted this policy as required by the State Food and Drug Administration. To
date,  we  have  never   experienced  any  problems  with  compliance  with  the
regulations  of the  State  Food and Drug  Administration.  We have  never  been
investigated  for  noncompliance  by  this  agency  nor  have  we  violated  any
regulations of the State Food and Drug Administration.

Our business may be adversely  affected by government plans to consolidate state
owned pharmaceutical companies in the Peoples Republic of China.

The Ministry of Commerce announced plans to consolidate nearly 5,000 state owned
pharmaceutical  companies into approximately 12 to 15 companies. The Ministry of
Commerce has stated that it targets the size of these  remaining  firms to be at
least U.S.$ 10.0 billion  revenue per annum in the future  (U.S.$ 5.0 billion by
the year 2010).  Their primary  business will be to make generic  pharmaceutical
products  for sale to state  owned  hospitals.  The  planned  consolidation  has
already commenced and is anticipated to continue until the goals of the Ministry
of Commerce  have been  realized.  The  Ministry of Commerce has set a near term
goal of having 10 large  companies  with  annual  sales of over RMB 5 billion by
2005. We are not aware,  however,  at this time of how many  companies have been
consolidated  or when the  planned  consolidation  will be  completed.  A recent
example of the consolidation amongst state owned pharmaceutical companies is the
acquisition  by the  conglomerate  Huayuan  Group  of a 40%  stake  in  Shanghai
Pharmaceutical  Group.  This  new  company  will  be  involved  in  manufacture,
distribution and research and development.  An objective of the consolidation is
to establish a manufacturing  standard  consistent with U.S. Good  Manufacturing


<PAGE>

Practices.  It is planned that all products manufactured in The Peoples Republic
of China will meet U.S. Good Manufacturing Practices standard in the future.

AXM Pharma has initiated  several  programs to mitigate any  potential  negative
impact  that  this  consolidation  may  have.  These  steps  include  commencing
construction of a U.S. Good Manufacturing Practices qualified facility that will
comply with both  Chinese  and U.S.  requirements;  seeking to license  original
molecules from multi national pharmaceutical firms and specialist drug discovery
firms to participate in the patented  prescription product segment of the market
which provides certain  protections and pricing multiples not available in other
segments;;   and  pursuing  expansion  into  the  distribution  segment  of  the
pharmaceutical  business  which is being  opened for foreign  companies  at this
time.  This access is  supported by new  government  regulation.  Despite  these
steps, however, should The Ministry of Commerce follow through with its plans to
consolidate the many fragmented Chinese pharmaceutical  companies into a smaller
number of large  firms,  we will face  increased  competition  from large,  well
funded, government supported companies. Our business could be adversely affected
by this increased competition.

RISKS RELATING TO THE PEOPLE'S REPUBLIC OF CHINA

Capital outflow policies in The Peoples Republic of China may hamper our ability
to remit income to the United States.

The  Peoples  Republic  of China  has  adopted  currency  and  capital  transfer
regulations.   These  regulations  may  require  that  we  comply  with  complex
regulations  for the  movement  of  capital.  In  order  to  comply  with  these
regulations we may have to revise or change the banking structure of our company
or its subsidiaries Although we believe that we are currently in compliance with
these  regulations,  should these  regulations or the  interpretation of them by
courts or  regulatory  agencies  change  we may not be able to remit all  income
earned and proceeds received in connection with our operations to the U.S.

Fluctuation of the Renminbi could materially affect our financial  condition and
results of operations.

The value of the  Renminbi  fluctuates  and is subject to changes in The Peoples
Republic  of  China's  political  and  economic  conditions.   Since  1994,  the
conversion of Renminbi into foreign currencies, including United States dollars,
has been based on rates set by the People's  Bank of China,  which are set daily
based upon the  previous  day's  interbank  foreign  exchange  market  rates and
current exchange rates on the world financial markets.  Since 1994, the official
exchange  rate for the  conversion  of  Renminbi  to United  States  dollars has
generally  been stable.  As of November 15, 2003,  the exchange rate between the
Renminbi  and the United  States  dollar was 8.26  Renminbi  to every one United
States dollar.

We may face  obstacles  from the  communist  system in The  Peoples  Republic of
China.

Foreign  companies  conducting  operations in The Peoples Republic of China face
significant  political,  economic and legal risks.  The Communist  regime in The
Peoples Republic of China, including a stifling bureaucracy,  may hinder Western
investment.  Another obstacle to foreign  investment is corruption.  There is no
assurance  that we will be able to obtain  recourse,  if  desired,  through  The
Peoples Republic of China's poorly developed and often corrupt judicial systems.

We may have difficulty  establishing  adequate  management,  legal and financial
controls in The Peoples Republic of China.


<PAGE>


The Peoples  Republic of China  historically has been deficient in Western style
management and financial reporting concepts and practices,  as well as in modern
banking,  computer and other control  systems.  We may have difficulty in hiring
and retaining a sufficient number of qualified  employees to work in The Peoples
Republic of China. As a result of these factors, we may experience difficulty in
establishing management, legal and financial controls, collecting financial data
and preparing financial  statements,  books of account and corporate records and
instituting business practices that meet Western standards.

Trade  barriers  and  taxes  may have an  adverse  effect  on our  business  and
operations.

We may  experience  barriers to  conducting  business  and trade in our targeted
emerging markets in the form of delayed customs  clearances,  customs duties and
tariffs.  In addition,  we may be subject to repatriation  taxes levied upon the
exchange of income from local currency into foreign currency,  substantial taxes
of profits,  revenues,  assets and  payroll,  as well as  value-added  tax.  The
markets in which we plan to operate may impose onerous and unpredictable duties,
tariffs and taxes on our  business and  products,  and there can be no assurance
that this will not have an adverse effect on our finances and operations.

It will be extremely  difficult to acquire  jurisdiction and enforce liabilities
against our  officers,  directors  and assets  based in The Peoples  Republic of
China.

Because  several of our  directors,  including Wei Shi Wang, the chairman of our
Board of Directors, are Chinese citizens it may be difficult, if not impossible,
to acquire  jurisdiction  over these persons in the event a lawsuit is initiated
against AXM Pharma and/or its officers and  directors by a shareholder  or group
of  shareholders  in the U.S.  Also,  although our  executive  officers are U.S.
citizens,  because they may be residing in The Peoples  Republic of China at the
time such a suit is initiated  achieving service of process against such persons
would be extremely  difficult.  Furthermore,  because the majority of our assets
are  located  in The  Peoples  Republic  of  China it  would  also be  extremely
difficult to access those assets to satisfy an award entered  against us in U.S.
court.

There can be no  guarantee  that The Peoples  Republic of China will comply with
the membership requirements of the World Trade Organization.

Due  in  part  to  the  relaxation  of  trade  barriers  following  World  Trade
Organization accession in January 2002, we believe The Peoples Republic of China
will become one of the world's largest  pharmaceutical  markets by the middle of
the twenty-first  century. As a result, we believe the Chinese market presents a
significant  opportunity for both domestic and foreign drug manufacturers.  With
the   Chinese   accession   to  the  World  Trade   Organization,   the  Chinese
pharmaceutical  industry  is gearing up to face the new  patent  regime  that is
required by World Trade  Organization  regulation.  The Chinese  government  has
begun to reduce its average tariff on  pharmaceuticals.  The Peoples Republic of
China has also  agreed  that  foreign  companies  will be allowed to import most
products,  including  pharmaceuticals,  into any part of The Peoples Republic of
China. Current trading rights and distribution restrictions are to be phased out
over a three-year period. In the sensitive area of intellectual property rights,
The  Peoples  Republic  of China  has  agreed  to  implement  the  trade-related
intellectual property agreement of the Uruguay Round. There can be no assurances
that The Peoples Republic of China will implement any or all of the requirements
of its membership in the World Trade Organization in a timely manner, if at all.



<PAGE>


The recent  outbreak of Severe Acute  Respiratory  Syndrome (SARS) may adversely
impact our  operations  and the  operations  of our contract  manufacturers  and
distributors.

The SARS  outbreak  has been most  notable in Asia,  in  particular  The Peoples
Republic of China, Singapore and Vietnam. Our principal  administrative,  sales,
marketing  and  production  development  facilities  are located in the Northern
portion  of The  Peoples  Republic  of China  and the  operations  of all of our
contract  manufacturers  and distributors are located in The Peoples Republic of
China, as well. The development,  manufacture, marketing and distribution of our
pharmaceutical products could suffer if a significant number of our employees or
the employees of our contract  manufacturers  or  distributors  contract SARS or
otherwise are unable to fulfill their  responsibilities.  In addition,  while we
possess  technology  that would  allow us to develop  and market  products  with
minimal  travel to or from Asia,  our business could also be harmed if travel to
or from Asia and the United States is restricted or inadvisable.  Because of our
relatively  small size,  many of our competitors may be better able to withstand
the adverse impact to their businesses resulting from the SARS outbreak.

RISKS RELATING TO OWNERSHIP OF COMMON STOCK

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 October  2004,  our  common  stock  traded an average of  approximately
52,000  shares per day. As of November  17,  2004,  the closing bid price of our
common stock on the American Stock Exchange was $2.35 per share.  As of November
17, 2004, we had  approximately  105 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 43.70% of our capital
stock may decrease your influence on shareholder decisions.

Our  executive  officers  and  directors,  in the  aggregate,  beneficially  own
approximately  43.70% 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.

The holders of the  warrants  have until August 21,  2008,  September  12, 2008,
December 31, 2008, and June 24, 2007  respectively,  to exercise their warrants.
There are currently 3,683,689 warrants  outstanding,  which are exercisable at a
price of $3.00 per share,  with the exception of those  warrants which expire on
June 24, 2007,  which are exercisable at a price of $5.50 per share,  subject to
adjustment in certain circumstances. 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



<PAGE>

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 3.  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.
















<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS

We are not involved in any lawsuits and are not aware of any pending litigation.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) Not Applicable.

(b) Not Applicable.

(c) On July 21, 2004, we issued 83,334 shares of restricted common shares valued
at $319,169 pursuant to an agreement with Peter Cunningham,  our Chief Executive
Officer.  The shares were issued  pursuant to the  exemption  from  registration
provided by Section 4(2) of the  Securities  Act for  issuances  not involving a
public offering. The shares were valued at $3.83 per share, the market price for
shares of our common stock at the time of issuance.

On July 21, 2004, we issued 100,000 shares of restricted  common to Chet Howard,
our Chief Financial Officer and Chief Accounting Officer, valued at $383,00. The
shares  were issued  pursuant to the  exemption  from  registration  provided by
Section  4(2) of the  Securities  Act  for  issuances  not  involving  a  public
offering. The shares were valued at $3.83 per share, the market price for shares
of our common stock at the time of issuance.

On July 21, 2004, we issued 100,000 shares of restricted  common to Harry Zhang,
Chief Accounting Officer of AXM Shenyang, our wholly owned subsidiary, valued at
$383,00.  The shares were issued  pursuant to the  exemption  from  registration
provided by Section 4(2) of the  Securities  Act for  issuances  not involving a
public offering. The shares were valued at $3.83 per share, the market price for
shares of our common stock at the time of issuance

On August 27, 2004 we issued 35,000 stock  options to each of  Montgomery  Simus
and Mark Bluer, both of whom are members of our Board of Directors,  valued at a
total of  $190,400.  The shares  were  issued  pursuant  to the  exemption  from
registration  provided by Section 4(2) of the  Securities  Act for issuances not
involving a public  offering.  The shares  were  valued at $2.72 per share,  the
market price for shares of our common stock at the time of issuance.

On September 1, 2004 we issued stock options, for an aggregate of 100,000 shares
valued at $269,000 pursuant to an agreement with Dreamvest, LLC. The shares were
issued pursuant to the exemption from  registration  provided by Section 4(2) of
the  Securities  Act for issuances not involving a public  offering.  The shares
were valued at $2.69 per share,  the market price for shares of our common stock
at the time of issuance.

On September 8, 2004 we issued stock options,  for an aggregate of 80,000 shares
valued at $312,000 pursuant to an agreement with RCG Capital Markets Group, Inc.
The shares were issued pursuant to the exemption from  registration  provided by
Section  4(2) of the  Securities  Act  for  issuances  not  involving  a  public
offering. The shares were valued at $3.90 per share, the market price for shares
of our common stock at the time of issuance.



<PAGE>



(d) Not applicable.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

Not Applicable.


ITEM 5.   OTHER INFORMATION

The Company  recently  moved its U.S.  corporate  headquarters  from 3960 Howard
Hughes Parkway, Suite 500, Las Vegas, Nevada 89109 to 7251 West Lake Mead Blvd.,
Suite 300, Las Vegas, Nevada 89128.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

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

        Exhibit No.                     Document

           31.1  Certification  of  Chief  Executive  Officer  required  by Rule
                 13a-14/15d-14(a) under the Exchange Act.

           31.2  Certification  of  Chief  Financial  Officer  required  by Rule
                 13a-14/15d-14(a) under the Exchange Act.

           32.1  Certification of Chief Executive  Officer pursuant to 18 U.S.C.
                 Section  1350,  as  adopted  pursuant  to  Section  906  of the
                 Sarbanes-Oxley Act of 2002.

           32.2  Certification of Chief Financial  Officer pursuant to 18 U.S.C.
                 Section  1350,  as  adopted  pursuant  to  Section  906  of the
                 Sarbanes-Oxley Act of 2002.

(b) Reports of Form 8-K

1.   On August 18, 2004, we filed a Current Report on Form 8-K reporting that on
     August 18, 2004,  we held a  conference  call  discussing  our fiscal 2004,
     second quarter results and current events of AXM Pharma. (Item 12).

2.   On August 18, 2004, we filed a Current Report on Form 8-K reporting that on
     August 13, 2004, we dismissed  Malone & Bailey,  PLLC,  as our  independent
     auditors and hired Batemen & Co., Inc. as our independent auditors.  (Items
     4 and 7).



<PAGE>


3.   On August 27, 2004, we filed a Current Report on Form 8-K reporting that on
     August 25,  2004,  we dismissed  Batemen & Co.,  Inc.,  as our  independent
     auditors  and  hired  Lopez,  Blevins,  Bork  &  Associates,  LLP,  as  our
     independent auditors. (Items 4.01 and 9.01).



                                   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:  November 18, 2004                    AXM PHARMA, INC.

                                          By:   /s/ Peter Cunningham
                                                    ----------------------------
                                                    Peter Cunningham,
                                                    President and CEO

                                               /s/  Chet Howard
                                                    ----------------------------
                                                    Chet Howard,
                                                    Chief Financial Officer
                                                    Principle Accounting Officer















<PAGE>


Exhibit 31.1


CERTIFICATION OF CHIEF EXECUTIVE OFFICER
----------------------------------------

I, Peter Cunningham, certify that:

1. I have reviewed this quarterly report on Form 10-QSB 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 small business issuer'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 small business issuer 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 small
          business  issuer,  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 small business issuer'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 small  business  issuer's
          internal  control over financial  reporting  that occurred  during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's  fourth fiscal  quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5. The small business issuer's other certifying officer(s) and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the small business  issuer's  auditors and the audit committee of
the small  business  issuer's  board of  directors  (or persons  performing  the
equivalent functions):




<PAGE>


     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 small  business  issuer'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 small business  issuer's
          internal control over financial reporting.

Date:  November 18, 2004


/s/ Peter Cunningham
---------------------------
    Peter Cunningham
    Chief Executive Officer











<PAGE>


Exhibit 31.2


CERTIFICATION OF CHIEF FINANCIAL OFFICER
----------------------------------------

I, Chet Howard, certify that:

1. I have reviewed this quarterly report on Form 10-QSB 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 small business issuer'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 small business issuer 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 small
          business  issuer,  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 small business issuer'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 small  business  issuer's
          internal  control over financial  reporting  that occurred  during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's  fourth fiscal  quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5. The small business issuer's other certifying officer(s) and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the small business  issuer's  auditors and the audit committee of
the small  business  issuer's  board of  directors  (or persons  performing  the
equivalent functions):



<PAGE>


     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 small  business  issuer'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 small business  issuer's
          internal control over financial reporting.

Date:  November 18, 2004

/s/ Chet Howard
--------------------------------
    Chet Howard,
    Chief Financial Officer
    Principle Accounting Officer

<PAGE>



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-QSB  for the  period  ending  September  30,  2004,  as filed  with the
Securities and Exchange  Commission on the date hereof (the "Report'),  I, Peter
W. Cunningham,  Chief Executive 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/ Peter W. Cunningham
----------------------------
    Peter W. Cunningham,
    Chief Executive Officer

November 18, 2004















<PAGE>



Exhibit 32.2


                            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-QSB  for the  period  ending  September  30,  2004,  as filed  with the
Securities and Exchange  Commission on the date hereof (the  "Report'),  I, Chet
Howard, Chief Financial Officer and Principle Accounting 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 Financial Officer
    Principle Accounting Officer

November 18, 2004