CURRENT REPORT FOR ISSUERS SUBJECT TO THE
                         1934 ACT REPORTING REQUIREMENTS

                                   FORM 10-KSB/A

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act

                   For the Fiscal Year Ended December 31, 2003

                                AXM Pharma, Inc.
             (Exact name of registrant as specified in its charter)

             Nevada                                             20-0745214
(State or other jurisdiction    (Commission File Number)    (IRS Employer
 of incorporation)                                           Identification No.)
                            US Representative Office
                      3960 Howard Hughes Parkway, Suite 500
                               Las Vegas, NV 89109
               (Address of principal executive offices (zip code))

                                 (702) 990-3659
                                 (702) 990-3501
              (Registrant's telephone number, including area code)

                               PETER W. CUNNINGHAM
                      PRESIDENT AND CHIEF EXECUTIVE OFFICER
                      7251 WEST LAKE MEAD BLVD., SUITE 300,
                               LAS VEGAS, NV 89128
                                 (702) 562-4155
            (Name, address and telephone number of agent for service)


Securities  registered pursuant to Section 12(b) of the Act: common stock, $.001
par value
Securities registered pursuant to Section 12(g) of the Act:  common stock, $.001
par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Section  13 or 15(d) of the  Securities  Act of 1934  during the
past 12 months and (2) has been subject to such filing requirement for the  past
90 days.
YES     X     NO
       ----      ----

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of March 25, 2004:  $57,832,464









<PAGE>




PART I.

This  amendment  is being filed to  disclose  our change in auditors so that the
disclosure  herein conforms with the information  provided on our Form 8-K filed
on August 28, 2004.


ITEM 1.  DESCRIPTION OF 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 listed
under  the  symbol  "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 Shenyang  Tianwei
Werke  Pharmaceuticals  Co., Ltd., a Chinese  corporation located in the city of
Shenyang in the Northeastern portion of the People's Republic of China, which is
100% owned by our  wholly-owned  subsidiary,  Werke  Pharmaceuticals,  Inc.  Our
products are currently  produced by third-party  manufacturers  and sold through
third-party distributors. Shenyang Tianwei Werke Pharmaceuticals currently holds
43 licenses to produce over-the-counter and prescription pharmaceutical products
in The  Peoples  Republic  of China.  Of these 43  licenses,  we have,  to date,
commercialized  four of these licenses from which we produce five  products.  In
the future we plan to expand our business by commercializing additional licenses
held by Shenyang Tianwei Werke  Pharmaceuticals;  acquiring  additional  product
licenses;  and by moving the  manufacturing  and  distribution  of our  products
in-house.

         Werke  Pharmaceuticals  was organized on November 29, 2000, in order to
enter the Chinese Pharmaeutical  Industry.  Werke had the capability to organize
and  expand an  existing  China-based  Pharmaceutical  company,  as the  Chinese
industry  accelerated the process of privatization of State Owned Pharmaceutical
Companies.  Toward that end, on January 26, 2001, Werke Pharmaceuticals  entered
into an equity joint venture with Shenyang Tianwei Pharmaceutical Factory, Ltd.,
a Chinese company that manufactured and marketed  pharmaceuticals in The Peoples
Republic of China,  which  contributed  its assets and  operations  to the joint
venture.  The equity joint venture was organized under the name Shenyang Tianwei
Werke   Pharmaceuticals   Co.,  Ltd.  The   shareholders  of  Shenyang   Tianwei
Pharmaceutical  Factory  later  converted  their  interest  in the equity  joint
venture  into  shares  of  Werke   Pharmaceuticals   in  anticipation  of  Werke
Pharmaceuticals'  reverse  acquisition of Wickliffe  International  Corporation.
Upon the  conversion  of the interest of the  shareholders  of Shenyang  Tianwei
Pharmaceutical Factory into shares of Werke  Pharmaceuticals,  the joint venture
was granted  permission and rights to become a Wholly Foreign Owned  Enterprise.
As a result of the  change of status of  Shenyang  Tiawei  Werke  Pharmaceutical
Factory  from an equity  joint  venture to a Wholly  Foreign  Owned  Enterprise,
Shenyang  Tianwei  Werke  Pharmaceuticals  became  the  wholly  owned  operating
subsidiary of Werke.  Immediately prior to its reverse  acquisition of Wickliffe
International,  Werke's  sole  business was  conducted  through its wholly owned
subsidiary Shenyang Tianwei Werke Pharmaceuticals.  Wickliffe  International had
no  operations  immediately  prior  to  its  business  combination  with  Werke.
Following  the  reverse  acquisition  of  Wickliffe   International,   Wickliffe
International  became the parent of Werke  Pharmaceuticals  and Shenyang Tianwei
Werke   Pharmaceuticals.   Also  following  the  reverse  acquisition  Wickliffe
International  Corporation changed its name to Axiom Pharmaceuticals,  Inc., and
subsequently to AXM Pharma, Inc.

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



<PAGE>

Foreign Owned Enterprise 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.

         In  summary,  the  key  differences  between  a  Wholly  Foreign  Owned
Enterprise 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.

         There may of course be  disadvantages  to operating as a Wholly Foreign
Owned  Enterprise.  For example,  should we become subject to  liabilities  that
arise from our operations in The Peoples  Republic of China,  we would be wholly
responsible for such liabilities. In a joint venture, the foreign investor would
only be liable  for that  portion of the  liability,  which  corresponds  to its
ownership  in the  joint  venture.  Also,  as a  result  of our  wholly  foreign
ownership, we may receive less favorable treatment from governmental agencies in
The Peoples Republic of China and other Chinese  companies than we would receive
if we  had a  Chinese  Partner.  To  date  we  have  not  experienced  any  such
disadvantages in operating our business as a Wholly Foreign Owned Enterprise.

         Despite the possible  disadvantages  to  operating as a Wholly  Foreign
Owned Enterprise,  we feel that the advantages outweigh the disadvantages.  With
regard to AXM  Pharma,  the  advantage  of being able to own 100% of our Chinese
operating  subsidiary is particularly  important because of our status as a U.S.
public  company.  We believe  that  newly  formed  businesses  will also see the
advantages to operating as a Wholly Foreign Owned  Enterprise and that most such
businesses will, if permitted by the Chinese  government,  choose the use of the
Wholly Foreign Owned Enterprise  structure over the joint venture structure.  It
is also  anticipated  that many  existing  joint  ventures are likely to migrate
their  corporate  structures to Wholly Foreign Owned  Enterprises  over the next
five years.

         Shenyang  Tianwei  Werke  Pharmaceuticals  is  located  in the  City of
Shenyang,  which is in the Province of Liaoning in the  Northeastern  section of
The Peoples Republic of China.  Shenyang Tianwei Werke  Pharmaceuticals  and its
predecessor  company,  Shenyang  Tianwei  Pharmaceutical  Factory,  Ltd. have an
operating   history  of   approximately   10  years.   Shenyang   Tianwei  Werke
Pharmaceuticals   historically  has  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



<PAGE>

Chinese sales. The products  produced by Shenyang Tianwei Werke  Pharmaceuticals
in the past three years have  focused on relief of  selective  symptoms of upper
respiratory  infection,  skin  irritation and rash, and infectious  disease.  We
currently  own 43 product  permits,  of which only four  permits  are  currently
commercialized.  Shenyang  Tianwei Werke  Pharmaceuticals's  Shenyang  plant was
decommissioned  in 2002  due to the  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 urban residential neighborhood. As part of
a broad-based corporate development strategy,  the Shenyang plant is anticipated
to  be  contributed  to a  city  sponsored  commercial/residential  real  estate
development.  However,  since we did not own the land upon which the old factory
was located, we do not anticipate  receiving any material  reimbursement for our
contribution of the plant. Furthermore, the compensation we may receive, if any,
is not  expected  to have a  material  affect on our  results of  operations  or
financial condition. Shenyang Tianwei Werke Pharmaceuticals currently utilizes a
third-party original equipment manufacturing pharmaceutical plant to produce all
of  its  products  and  distributes   its  products  only  through   third-party
distributors. AXM Pharma has a marketing field force of 22 persons.

         We are  utilizing a portion of the net  proceeds  from  recent  private
financings  in order to build a modern  production  and  distribution  facility,
which  we plan to  qualify  under  United  States  Good  Manufacturing  Practice
regulations.  The site of our new plant is  located in a special  economic  zone
located  several  kilometers  from  the  old  plant.  We have  engaged  Liaoning
Pharmaceutical  Design &  Engineering  Company as our design  company.  Liaoning
Pharmaceutical  Design & Engineering  Company has provided us with the following
estimates in its report to us titled the " Basis for Design":

          o    Construction  and installation of equipment:  December  2003-July
               2004
          o    Trial batch production: August 2004-September 2004
          o    Chinese   Good   Manufacturing   Practices   licensing:   October
               2004-November 2004
          o    US Food and Drug and Administration inspection and certification:
               to be scheduled

         Prior to closing the old plant, we had approximately 320 employees.  By
utilizing third-party original equipment manufacturing  relationships,  our head
count has dropped to approximately 35 employees. We anticipate that when the new
facility is certified and becomes  operational  our total  headcount will likely
approach  the former  number of  employees  and  selected  third-party  original
equipment manufacturing production will be discontinued.

         Shenyang  Tianwei  Werke  Pharmaceuticals  has chosen to locate its new
production  facility in the Shenyang Hunnan National New & High-Tech  Industrial
Development  District,  an economic district 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.  We expect to
complete the construction and governmental approval process for the new facility
by the  fourth  quarter  of fiscal  2004.  We  believe  construction  of the new
facility  will  provide us with the ability to meet  current  demand  within The
Peoples Republic of China and with the flexibility to add production capacity to
meet future product  requirements  both within The Peoples Republic of China and
for potential export markets.  We believe  construction of the new facility will
provide  significant  operational  and  financial  benefits  as a result  of our
ability to implement operational  effectiveness as well as offer greater control
over quality assurance and production scheduling and capacity.

         The new  Shenyang  facility  is designed to meet  stringent  U.S.  Good
Manufacturing Practice protocols.  By meeting such protocols, we believe we will
be in a position to expand our marketing and sales activities to include exports
to neighboring  Asia-Pacific  countries,  as well as North  America,  Europe and
Africa.  In addition,  we believe we will be better  positioned to actively seek
and engage foreign  ethical and  over-the-counter  drug  manufacturers  that are
searching for high-quality,  low-cost manufacturing  capabilities for their high
demand medications.



<PAGE>


         The High-Tech Industrial Development District was established in May of
1988 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
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  Shenyang
Tianwei Werke Pharmaceuticals,  will enjoy exemption from income tax for 2 years
from the first year of operation.

GROWTH STRATEGY

         We believe we have a low risk corporate development strategy in that we
intend to organically  grow our operational  revenue using currently  profitable
products  commercializing  products for which  permits are issued.  Our strategy
includes a focus on branding and marketing.  We plan to attract unique molecules
from  large   pharmaceutical  and  drug  discovery   companies  through  license
agreements.  We will  continue  to sell in the Peoples  Republic  of China.  The
addition  of  revenues  through  international  sales  of  our  products  and/or
acquisitions  will only be  considered if they are deemed to enhance our revenue
and profitability.  Utilizing our low risk growth strategy,  however, we believe
that  we  can  become  a  leading   China-based,   current  Good   Manufacturing
Practice-qualified    pharmaceutical   manufacturer   and   distributor,    with
certification  from the U.S. Food and Drug  Administration and the Chinese State
Food and Drug  Administration.  To reach our goals,  we intend to implement  the
following strategy:

CONSTRUCTION OF US GOOD MANUFACTURING PRACTICE-QUALIFIED MANUFACTURING FACILITY

         We began  construction in January 2004 of a new U.S. Good Manufacturing
Practice-qualified pharmaceutical manufacturing facility in the special economic
zone in Shenyang. The Good Manufacturing Practice Regulations are promulgated by
the  United  States  Food and Drug  Administration  under the  authority  of the
Federal Food, Drug and Cosmetic Act. These regulations,  which have the force of
law,  require that  manufacturers,  processors  and packagers of drugs,  medical
devices, some foods, and blood take proactive steps to ensure their products are
safe, pure and effective.  Good Manufacturing  Practices  regulations  require a
quality approach to manufacturing,  enabling  companies to minimize or eliminate
instances of contamination,  mix-ups and errors. Failure of firms to comply with
Good  Manufacturing  Practices  regulations  can  result in  serious  penalties,
including  recall,  seizure,  fine and  imprisonment.  We expect to complete the
construction and  governmental  approval process by the fourth quarter of fiscal
2004. We believe  construction of the new plant will provide us with the ability
to meet  current  demand  within  The  Peoples  Republic  of China  and with the
flexibility to add production capacity to meet future product  requirements both
within The  Peoples  Republic  of China and for  potential  export  markets.  We
believe  construction of the new plant will provide significant  operational and
financial  benefits  as  a  result  of  our  ability  to  implement  operational
effectiveness  as well as offer  greater  control  over  quality  assurance  and
production scheduling and capacity.

         The new Shenyang facility has been designed to meet stringent U.S. Good
Manufacturing Practice protocols.  By meeting such protocols, we believe we will
be in a position to expand our marketing and sales activities to include exports
to neighboring  Asia-Pacific  countries,  as well as North  America,  Europe and
Africa.  In addition,  we believe we will be better  positioned to actively seek
and engage foreign  ethical and  over-the-counter  drug  manufacturers  that are



<PAGE>

searching for high-quality,  low-cost manufacturing  capabilities for their high
demand medications.

PRODUCT RANGE EXPANSION

         Upon completion of our new manufacturing  facility, we intend to expand
our existing product line by exploiting our existing base of licensed  products,
internal  research and  development  of new  formulas,  as well as acquiring new
ethical  and  over-the-counter   pharmaceutical   products  licensed  from  drug
manufacturers based in North America, Europe and Japan. Initially,  selection of
new products will be  determined  by criteria  such as: (a)  molecules  that can
achieve  a unique or  competitive  positioning  in the  market  relative  to the
competition in selected therapeutic categories,  (b) the size of the market, (c)
the price premium available based on the government's pricing mechanism in force
at the time and the projected profit margins, and (d) The opportunity  available
at the time to  market  the  products  and have the  product  purchased  through
channels other than government hospital tender purchasing. Our objective will be
to maximize  return on investment and still benefit from proposed  collaborative
partners. We believe cancer, respiratory disease,  diabetes,  cardiovascular and
infectious  diseases  represent  significant   therapeutic   opportunities.   In
addition,  we intend to focus on products developed from original molecules that
work in unique  ways  compared  to the  competition,  that have large  potential
markets and can be further differentiated through effective branding strategies.
This strategy should greatly limit the number of potential  competitors and help
us  maintain  higher  profit  margins.  We  anticipate  attempting  to develop a
portfolio  of  molecules  and  brands in  selected  therapeutic  categories  and
introduce new products each year, that have  significant  intellectual  property
protection.  Toward  this end,  in January  2004,  we entered  into 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.  The  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.

EXPAND MARKETING AND SALES

As we build  and  commission  a factory  achieving  current  Good  Manufacturing
Practice  standards,  we intend to expand our marketing and sales  capabilities,
first in The Peoples Republic of China, then internationally. We anticipate that
initially we will seek to expand our current domestic distribution  capabilities
beyond the regions in which we currently  sell.  To achieve this goal, we expect
to expand the current successful in-house marketing and sales capacity,  as well
as to engage  additional  domestic  third-party  distributors  to penetrate  new
markets.  We  are  also  developing  more  extensive  educational  programs  for
hospitals,  doctors, clinics and distributors with respect to our product lines.
We expect these educational  programs to significantly  improve the sell through
and promotion of our products.



<PAGE>


PRODUCTS

LICENSING AND INTELLECTUAL PROPERTY

         The State Food and Drug Administration of the Government of The Peoples
Republic of China issues the licenses and permits for  permission  to market and
manufacture pharmaceutical products in The Peoples Republic of China. Generally,
licenses  and  permits  issued by the  State  Food and Drug  Administration  are
revocable by the State Food and Drug Administration at any time, with or without
cause.  Shenyang  Tianwei  Werke  Pharmaceuticals  has been  granted  43 product
licenses and permits,  of which only four licenses currently are commercialized.
Shenyang Tianwei Werke Pharmaceuticals will likely undertake a selection process
to decide which of its remaining licenses,  if any, will be commercialized,  and
to determine the timeframe  for such  commercialization  over the next 10 years.
Shenyang Tianwei Werke Pharmaceuticals operates in both the over-the-counter and
the prescription  pharmaceutical product market segments. None of our registered
products are currently  patented nor do we have any patents  pending  before the
government of The Peoples Republic of China or any other government.

CURRENT PRODUCT LINE

         The five compounds we currently  manufacture are listed below.  Note of
the five compounds listed, four are  commercialized;  Lifupeng is available upon
request from government hospitals only, as a service item.

         Asarone,  which is  manufactured  in  tablet  form,  is  indicated  for
bronchial  infection and bronchial  constriction  (symptoms of upper respiratory
infection).

         Weifukang is an antiseptic  cream for cleansing  acne and for relieving
the symptoms of eczema,  psoriasis and other skin  irritations,  such as contact
dermatitis.

         Cefalexine,  Cefalexine  is a  broad-spectrum  antibiotic.  It has high
sensitivity  to   staphylococcus,   streptococcus,   pneumococcus,   gonococcus,
diplococcus  meningitis  and others.  Cephalexine is approved for and registered
for the treatment of respiratory  infections;  genitourinary  tract  infections;
skin  and soft  tissue  infections;  abdominal  (gastric)  infections;  and oral
infections.

         Norfloxacin  is  a  medium   spectrum   antibiotic  that  is  primarily
positioned for gastric and urinary infection.

         Lifupeng, Rifampicin is used for treatment of tuberculosis.

We currently manufacture five products, which include:

                                   REGISTRATION STATUS    DISTRIBUTION CHANNEL
     PRODUCT                       (RX OR OTC)            SALES (%RX, % OTC)
     -------                       -------------------    ------------------

     Cafalexin, an antibiotic      Rx                     100%Rx

     Weifukang skin cream          OTC                    100% OTC

     Norfloxacin, an antibiotic    Rx                     100% Rx

     Lifupeng (Rifampacin) for     Rx                     100% Rx
     Tuberculosis

     Asarone alpha (tablets)       OTC/Rx                 33% OTC/67%Rx


<PAGE>


TOTAL PERMITTED AND LICENSED PRODUCTS

         The  following  table  lists all of the  compounds  for which  Shenyang
Tianwei  Werke  Pharmaceuticals  has  permits  to  manufacture  and  market.  We
currently  only produce and market the five products  listed  above.  To date we
have not  commercialized  any of the other  compounds  listed below  because our
strategy is to focus on branding and brand  development prior to introducing new
product lines.  At present our focus is on  establishing  and expanding sales of
the brands which we have already launched. However, we plan to introduce two new
products in 2004 and two additional  products in each  subsequent  year. We have
not yet determined  which products we will introduce in 2004. The State Food and
Drug Administration has recently ordered pharmaceutical companies in The Peoples
Republic  of  China  to stop  producing  two of the 43  products  listed  below,
Meleumcyin  Tablets and Arsoer Tabellae for Common Cold. As a result,  the State
Food and Drug  Administration  will not  renew  these  licenses  in the  future.
However,  we do not feel that this will have an adverse  effect on our  business
since we are not currently commercializing these two products.


  Name
  ----
  ------------------------------------
  Tabellae Asarone
  ------------------------------------
  Compoint Sulfamethoxazole
  ------------------------------------
  Tabellae Amidopyririni Et Caffeini
  ------------------------------------
  Pharacetamol
  ------------------------------------
  Amidopyrini Et Paracetamoli
  Compositae
  ------------------------------------
  Metamizole Sodium
  ------------------------------------
  Tabellae Acidi Acetysalicylici
  Compositae
  ------------------------------------
  Erythromycin
  ------------------------------------
  Erthromycin Ethylsuccinate
  ------------------------------------
  Acetylspiramycini
  ------------------------------------
  Inosini
  ------------------------------------
  Chloramphenicol
  ------------------------------------
  Berberine Hydrochloride
  ------------------------------------
  Fenofibrate
  ------------------------------------
  Meleumycin
  ------------------------------------
  Tabellae Natril Bicarbonatis Cum
  Rheo Et Gentiana
  ------------------------------------
  Tabellae Acetamidopyrrolidoni
  ------------------------------------
  Vitamin C
  ------------------------------------
  Cyproheptadine Hydrochloride
  ------------------------------------
  Arsoer Tabellae for Common Cold
  ------------------------------------
  Atenolol
  ------------------------------------
  Lid Tabellae for Stomach-Regulating
  ------------------------------------
  Glucosum Pro Orale
  ------------------------------------
  Norfloxacin
  ------------------------------------
  Norflaxacin
  ------------------------------------
  Ke Kuai Hao for treating Cough
  ------------------------------------
  Fu Pai Shuan
  ------------------------------------
  Nifedipine
  ------------------------------------
  Tolperisoni Hydrochloridi
  ------------------------------------


<PAGE>

  Name
  ----
  ------------------------------------
  Cefalexini Compositum
  ------------------------------------
  Rifampicin
  ------------------------------------
  Indometacin
  ------------------------------------
  Acetamidopyrrolidoni
  ------------------------------------
  Pipemidic Acid
  ------------------------------------
  Paracetamoli Compositae
  ------------------------------------
  Capsules for Removing Erethism
  ------------------------------------
  Albendazol
  ------------------------------------
  Xiaoling for Common Cold
  ------------------------------------
  Weifukang Cream
  ------------------------------------
  Weifukang Cream
  ------------------------------------
  Anti-Chap Skin Cream
  ------------------------------------
  Unguentum Griseofulrini Compositum
  ------------------------------------
  Unguentum Methylis Salicylatis
  Compositum
  ------------------------------------
  Compound Zinc Undecylenate,
  Ointment
  ------------------------------------
  Cremor Crotamitoni
  ------------------------------------
  Clycerol
  ------------------------------------

         Qiqihaer Pharmaceutical Factory 2 of Heilong Group, which is located in
the City of Qiqihaer, Heilonjiang Province,  manufactures the following products
pursuant  to an  original  equipment  manufacturing  agreement.  These  products
constitute all of the products sold by AXM Pharma at this time.

          o    Asarone Tablets
          o    Cefalexin Capsules
          o    Norfloxacin Capsules
          o    Weifukang Antiseptic Cream
          o    Lifupeng Granules

         Our agreement with Qiqihaer  Pharmaceutical Factory 2, which we entered
into  in  September  2002,  requires  Qiqihaer   Pharmaceutical   Factory  2  to
manufacture  those  products that we designate.  Under the  agreement,  Qiqihaer
Pharmaceutical  Factory 2 must manufacture our products based on quality control
variables  and  timetables  supplied  by us. We are  obligated  to pay  Qiqihaer
Pharmaceutical  Factory 2 when the manufacturing  process is complete.  Qiqihaer
Pharmaceutical  Factory  2 is  prohibited  from  selling  any of  our  products.
Qiqihaer Pharmaceutical Factory 2 is a medium-sized  pharmaceutical factory with
approximately  600  employees  and  over  34  years  of  operating  history.  It
manufactures  injectables,  tablets,  capsules and other pharmaceutical products
for itself and  unaffiliated  third parties.  In 2000,  Qiqihaer  Pharmaceutical
Factory 2 received a Certificate of Good Manufacturing Practices for Human Drugs
from the State Food and Drug  Administration.  The  certification  remains valid
until 2008.  Our  agreement  with Qiqihaer  Pharmaceutical  Factory 2 expires in
September  2004.  We  anticipate  that most of the products  that are  currently
manufactured for us by Qiqihaer Pharmaceutical Factory 2 will be manufactured in
our new factory in Shenyang,  which is currently  under  construction.  We have,
however,  begun  discussions with other  third-party  manufacturers  whom we may
employ  if our new  facility  is not  complete  prior to the  expiration  of our
agreement with Qiqihaer Pharmaceutical Factory 2 or in the event that it is more
cost-effective to continue third-party production of certain products.


<PAGE>


CURRENT SALES AND MARKETING

         Our  products  are  currently  sold and  distributed  through  only one
third-party pharmaceutical  distributor,  Liaoning Weikang Medicine Co. Pursuant
to an agreement between our predecessor company, Shenyang Tianwei Pharmaceutical
Factory and Liaoning  Weikang  Medicine  Co., we have granted  Liaoning  Weikang
Medicine Co.  exclusive  rights to  distribute  our products in Shenyang.  Under
terms of our agreement  with Liaoning  Weikang  Medicine Co., our prices must be
competitive with other  suppliers.  Due to the exclusive nature of our agreement
with Liaoning Weikang Medicine Co., we are not permitted to sell our products to
other customers in Shenyang.  Liaoning  Weikang  Medicine Co. is required to pay
for our  products  in  cash  at the  time of  sale.  Also,  pursuant  to an oral
agreement, we permit Liaoning Weikang Medicine. Co. to sell our products through
sub-distributors in seven territories, including Guangdong, Heilongjiang, Jilin,
Fujian,   Liaoning  and  Inner   Mongolia   and  the  city  of   Shanghai.   Its
sub-distributors include Shanghai Shenwei Drug Co., Guangzhou Kangning Drug Co.,
and Guangzhou Mingsheng Drug Co. We believe other distributor relationships will
be available on comparable  terms should any of our existing sales and marketing
relationships  terminate.  Our agreement  with Liaoning  Weikang  Medicine.  Co.
expires in March 2004.  Liaoning  Weikang  Medicine.  Co. has verbally agreed to
continue its distribution  relationship  with us and we anticipate  renewing our
relationship  with Liaoning Weikang  Medicine.  Co. for distribution in Liaoning
Province.   Additionally,  we  are  currently  negotiating  with  several  other
distributors  for  distribution  of our products in additional  provinces in the
Peoples Republic of China.

COMPETITION
         At present, we do not have a single main competitor. Rather, we compete
with different companies in different therapeutic categories.  For example, with
regard to Asarone Tablets, the product from which we derive the most revenue, we
compete with Liuzhou Pharmaceutical  Factory,  located in Liuzhou City, Guang Xi
Autonomous  Region.  AXM and Liuzhou are the only two companies  approved by the
State Food and Drug  Administration  to  manufacture  Asarone  Tablets.  However
because Liuzhou distributes its Asarone tablets mainly in Southern China and AXM
distributes  its products  mainly in Northern  China,  the two  companies do not
really  compete head to head in their  respective  markets.  We compete with two
companies for  distribution  of our product  Weifukang  herbal  antiseptic  skin
cream,  Zhejiang  Wenzhou   Pharmaceutical  Factory  and  Ying  Kou  Biochemical
Pharmaceutical  Factory.  However,  one of these competitors,  Zhejiang Wenzhou,
targets  its  product  to  public  bath  houses,  and  does not  compete  in the
pharmaceutical  distribution  segments  in which AXM sells  Weifukang.  Ying Kou
Biochemical   Pharmaceutical   Factory's   main  business   focus  is  its  bulk
bioprocessing  business.  Their herbal  antiseptic  product is a minor line. Our
largest  competitor  for both  Cefaxlin  Capsules  and  Norfloxacin  Capsules is
Yanfeng  Pharmaceutical  in  Shenyang.  As a company in the same city,  they are
considered  to be a  direct  competitor.  Yanfeng  Pharmaceutical  Company  is a
recently  privatized  State  Owned  Enterprise.  They employ  approximately  400
persons.  Their sales  territory  focus is in Shenyang city and although  market
share information is not available we consider Yanfeng Pharmaceutical Company to
be a major competitor.

RESEARCH & DEVELOPMENT

         Our research  and  development  activities  have focused on quality and
laboratory  testing of compounds  developed by others, and administration of the
testing  process  and the  negotiations  for  rights to the  compounds.  In this
effort, we have developed working relationships with Shenyang Medical University
and the Liaoning Research Institute for Traditional Chinese Medicine and Beijing
Shiehe Medical University. As a result of our cooperative work with our research
partners,  we have expended only a nominal  amount  (relating only to analytical
testing,  travel and meeting  expenses) on research and  development  during the
year ended December 31, 2002.


<PAGE>



EMPLOYEES

         At March 25, 2004, we had two employees in our U.S.-based  headquarters
and  approximately  35  full-time  employees  at our  facilities  located in The
Peoples Republic of China. Until our new factory is completed, we intend to hire
additional  employees  on  a  part-time  or  independent   contractor  basis  in
connection  with  certain  projects  in The Peoples  Republic of China.  We also
intend  to  hire up to two  additional  employees  to  serve  in  administrative
positions at our U.S.-based headquarters in the near future.

         Once our new factory is completed, our forecast for staffing includes:

          o    approximately   200  full  time   employees   in   manufacturing,
               management administration and marketing/sales
          o    approximately  10  independent  contractors  assigned  to  market
               research and market analysis
          o    approximately 90 sales persons assigned to in-store  promotion at
               the retail pharmacy level
          o    approximately  10  medical  doctors  employed  part time to write
               technical briefs for products and diseases of interest

         None of our current  employees is  represented  by a labor union and we
consider our relationships with our employees to be good.

REGULATORY ENVIRONMENT

EFFECT OF GOVERNMENT REGULATION

         The  modernization  of regulations for the  pharmaceutical  industry is
relatively new in the The Peoples Republic of China and the manner and extent to
which it is regulated will continue to evolve. As a pharmaceutical  company,  we
are  subject  to  the  Pharmaceutical  Administrative  Law,  which  governs  the
licensing, manufacture, marketing and distribution of pharmaceutical products in
the  Peoples  Republic  China and sets  penalty  provisions  for  violations  of
provisions  of the  Pharmaceutical  Administrative  Law. In addition as a Wholly
Foreign Owned Enterprise we are subject to the Foreign Company provisions of the
Company Law of the Peoples  Republic of China,  which governs the conduct of our
wholly owned subsidiary, Shenyang Tianwei Werke Pharmaceuticals and its officers
and directors. Changes in these laws or new interpretations of existing laws may
have a significant impact on our methods and our costs of doing business.

         Additionally,  we will be subject to varying  degrees of regulation and
permitting  by  governmental  agencies  in The Peoples  Republic  of China.  For
example, in 1999, the State Food and Drug Administration of The Peoples Republic
of China set up an administrative  system for the classification of prescription
and  over-the-counter  drugs. Since then, the State Food and Drug Administration
has issued a series of guidelines on  interpretation  of the new  classification
system  in  such  areas  as  labeling,   usage  instructions  and  packaging  of
over-the-counter products.

         Recently,  the State Food and Drug Administration  implemented new Good
Manufacturing Practices guidelines for licensing of pharmaceutical  products. We
will be required to comply with these new  guidelines  by December 31, 2004,  in
order for our current licenses to be renewed.  Since we are constructing our new
factory in Shenyang to meet more  stringent  U.S. Good  Manufacturing  Practices
requirements,  we believe that we will satisfy the new  guidelines  and that our
current licenses will be renewed.  Failure to satisfy these new guidelines would
have a material adverse effect our business.


<PAGE>


         There  can  be  no  assurance  that  future  regulatory,  judicial  and
legislative  changes will not have a material  adverse  effect on our  business,
that  regulators or third parties will not raise material  issues with regard to
our business and operations or our compliance or non-compliance  with applicable
regulations or that any changes in applicable laws or regulations  will not have
a material adverse effect on AXM Pharma.

COMPLIANCE WITH ENVIRONMENTAL LAWS

         We are subject to the  environmental  laws of The  Peoples  Republic of
China  and its  local  governments.  However,  because  we  currently  outsource
manufacturing of our proprietary licensed products,  we do not incur significant
expense  related to  compliance  with such laws nor do we expect to be  affected
significantly by compliance with such laws.

COMPLIANCE WITH REGISTERED CAPITAL REQUIREMENTS

         Pursuant to the Company  Law of The Peoples  Republic of China,  we are
required to contribute a certain  amount of  "registered  capital" to our wholly
owned subsidiary, Shenyang Tianwei Werke Pharmaceuticals. Shenyang Tianwei Werke
Pharmaceuticals'  current registered capital  requirement is US $10,000,000,  of
which  we  have   contributed   $8,579,181.   Since   Shenyang   Tianwei   Werke
Pharmaceuticals is classified as a Wholly Foreign Owned Enterprise,  pursuant to
the Law on Foreign Capital Enterprises of The Peoples Republic of China, as well
as its implementation  rules (also known of the "Wholly Foreign Owned Enterprise
Law"),  we were not required to contribute all of our registered  capital at the
time Shenyang Tianwei Werke  Pharmaceuticals was issued its business license. We
are,  however,  expected to fully satisfy this  registered  capital  requirement
within a reasonable time period. We plan to satisfy this requirement through the
completion  of our new factory in  Shenyang,  the value of which will exceed the
current  shortfall in  registered  capital.  Since we have been  informed by our
legal  counsel in The  Peoples  Republic of China that they are not aware of any
instance  where the business  license of a Wholly  Foreign Owned  Enterprise has
been revoked due to failure to satisfy the registered capital requirement within
a  stipulated  time  period  when  most  of  its  registered  capital  has  been
contributed, we do not believe that the current shortfall presents material risk
to our business in The Peoples  Republic of China.  Moreover,  we currently have
sufficient  funds  available to satisfy the  registered  capital  requirement if
necessary.  However,  our management has determined that we will only contribute
the  funds to  Shenyang  Tianwei  Werke  Pharmaceuticals  as they are  needed to
accomplish construction of the new factory or for other valid corporate purposes
in The Peoples  Republic of China. In February and March 2004, we transferred an
additional  $1,500,000 to Shenyang Tianwei Werke  Pharmaceuticals,  Inc., which,
once the  appropriate  regulatory  authorities  accept it,  will  fully  satisfy
Shenyang Tianwei Werke Pharmaceuticals' registered capital requirement.

REPORTS TO SECURITY HOLDERS

         This annual report,  including the exhibits and schedules filed as part
of  the  annual  report,  may be  inspected  at the  public  reference  facility
maintained  by the  Securities  and  Exchange  Commission  ("SEC") at its public
reference room at 450 Fifth Street, NW,  Washington,  DC 20549 and copies of all
or any part  thereof  may be  obtained  from that  office  upon  payment  of the
prescribed fees. You may call the SEC at 1-800-SEC-0330 for further  information
on the operation of the public  reference room and you can request copies of the
documents upon payment of a duplicating fee, by writing to the SEC. In addition,
the SEC  maintains  a website  that  contains  reports,  proxy  and  information
statements and other information regarding registrants,  including us, that file
electronically with the SEC which can be accessed at www.sec.gov.

         The Company also makes its periodic and current reports available, free
of charge, on its website, www.axmpharma.com,  as soon as reasonably practicable
after such material is electronically filed with the SEC. Information  available
on our  website  is not a part of, and should  not be  incorporated  into,  this
annual report on Form 10-K.


<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

         Our  corporate  and United  States  offices  are located at 3960 Howard
Hughes  Parkway,  Suite  500,  Las Vegas,  Nevada.  The  current  rent for these
premises  is $200.00 per month.  Our lease  expires on February  28,  2005.  Our
United States  marketing  office is located at 4695 McArthur Court,  11th Floor,
Newport  Beach,  California  92660.  The  current  rent for  these  premises  is
$2,647.94 per month. Our lease expires in September 30, 2004.

         Our  principal  administrative,  sales  and  marketing  facilities  are
located at No.  F.3004  Sankei  Torch  Bldg,  262A Shifu  Road,  Shenyang  City,
Liaoning  Province,  The People's Republic of The Peoples Republic of China. The
current rent for these facilities is US$2,916.66 per month and our lease expires
in October 2007.


ITEM  3. LEGAL PROCEEDINGS

         On June 3, 2003, we received  correspondence  from counsel to an entity
purportedly  known as Axiom  Pharmaceutical  Corporation,  which alleged that we
were   infringing   upon  its  use  of  the  trademark   "Axiom   Pharmaceutical
Corporation." On September 29, 2003, we entered into a settlement agreement with
Axiom  Pharmaceutical  Corporation,  whereby  we agreed to cease  using the name
"Axiom   Pharmaceuticals,   Inc."  and  in  consideration  Axiom  Pharmaceutical
Corporation  agreed to release us from any claims of infringement  regarding use
of the trademark "Axiom Pharmaceutical Corporation" and to pay us $5,000.

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


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

         The  Company  did not  submit  any  matters  to a vote to the  security
holders during 2003.














<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

         The common stock is currently  listed on the  American  Stock  Exchange
under the symbol  "AXJ." Prior to March 14, 2003,  the date on which the reverse
acquisition  with Werke  Pharmaceuticals,  Inc.  occurred,  the common stock was
quoted under the symbol "WICK" on the over-the-counter Bulletin Board.

         The following  table sets forth the  quarterly  high and low bid prices
for the common  stock since the quarter  ended  March 30,  2002.  The prices set
forth below represent inter-dealer  quotations,  without retail markup, markdown
or commission and may not be reflective of actual transactions.

         Fiscal 2003                                                HIGH    LOW
                                                                    ----    ----
         Quarter ended March 31, 2002 ............................ $0.55   $0.10
         Quarter ended June 30, 2002 .............................  7.00    0.11
         Quarter ended September 30, 2002 ........................  0.51    0.10
         Quarter ended December 31, 2002 .........................  0.51    0.09
         January 1, 2003 to March 13, 2003 .......................  0.51    0.14
         Quarter ended March 30, 2003 (beginning on March 14) ....  1.85    0.14
         Quarter Ended June 30, 2003 .............................  6.69    1.05
         Quarter Ended September 30, 2003 ........................  5.68    4.20
         Quarter Ended December 31, 2003 .........................  5.10    3.30

         At December  31,  2003,  the closing bid price of our common  stock was
$4.95. At December 31, 2003, there were  approximately 118 record holders of our
common stock.  This number  excludes any estimate by AXM Pharma of the number of
beneficial owners of shares held in street name, the accuracy of which cannot be
guaranteed.

         Starting  on March 3, 2004,  our common  stock  listed on the  American
Stock Exchange,  also called the AMEX,  under the trading symbol "AXJ." On March
25, 2004, the closing bid for our common stock as reported on the AMEX was $5.21
per share.  As of March 25,  2004 there were  14,807,780shares  of common  stock
outstanding,  2,425,000  shares  of Series A  Preferred  Stock  outstanding  and
860,000 shares of Series B Preferred Stock outstanding.

         We have not paid cash  dividends  on any class of common  equity  since
formation  and we do not  anticipate  paying any  dividends  on our  outstanding
common stock in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

         In order to  accomplish  the  March  2003  share  exchange  with  Werke
Pharmaceuticals,  Inc.,  we issued an aggregate of  11,420,000  shares of common
stock in exchange for all of the issued and  outstanding  capital stock of Werke
Pharmaceuticals,  Inc.  The shares  issued to the former  shareholders  of Werke
Pharmaceuticals,  Inc.  were issued to 25  accredited  investors  pursuant to an
exemption from  registration  under Section 4(2) of the Securities Act and to 33
non-U.S.  persons pursuant to an exemption from registration  under Regulation S
promulgated under the Securities Act.


<PAGE>



         On April 30, 2003, we issued  30,000 shares of restricted  common stock
to Rabelaisian  Resources,  Plc. pursuant to a consulting agreement.  Rabelasian
Resources'  services  were  business  and product  development.  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 $1.80 per share,  the market price for shares of our common stock
at  the  time  of  issuance.   Therefore,  the  total  aggregate  value  of  the
consideration paid to Rabelasian Resources was $54,000.

         On April 30, 2003, we issued 150,000 shares of restricted  common stock
to Madden Consulting,  Inc. pursuant to a consulting agreement.  The services to
be provided under the consulting  agreement were investor and public  relations.
On  September  18,  2003,  we  issued  an  additional  400,000  shares to Madden
Consulting,  in connection with renewal of its consulting agreement.  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
issued on April 30, 2003,  were valued at $1.80 per share and the shares  issued
on  September  18,  2003,  were valued at $5.00 per share,  the market price for
shares of our common stock at the respective times of issuance.  Therefore,  the
total  aggregate  value  of the  consideration  paid to  Madden  Consulting  was
$270,000 on April 30, 2003, and $2,000,000 on September 18, 2003.

         On May 1, 2003, we issued  25,000 shares of restricted  common stock to
Robert Alexander pursuant to a consulting agreement. The services to be provided
under  the  consulting  agreement  were the  identification  and  evaluation  of
pharmaceutical  companies,  products  and  licenses  in Canada.  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 $1.50 per share,  the market price for shares of our common stock
at  the  time  of  issuance.   Therefore,  the  total  aggregate  value  of  the
consideration paid to Robert Alexander was $37,500.

         On May 21, 2003, we issued 40,000 shares of restricted  common stock to
Amaroq  Capital,  LLC  pursuant to a  consulting  agreement.  The services to be
provided under the consulting  agreement were business development and financial
consulting.  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 $1.75 per share, the market price for
shares  of our  common  stock  at the time of  issuance.  Therefore,  the  total
aggregate value of the consideration paid to Amaroq Capital was $70,000.

         On May 21, 2003, we issued 15,000 shares of restricted  common stock to
McCartney Multimedia,  Inc. in consideration for the creation of our website and
corporate   logo.  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 $1.75 per share,  the
market price for shares of our common stock at the time of issuance.  Therefore,
the total aggregate value of the consideration paid to McCartney  Multimedia was
$26,250.

         On June 27, 2003, we issued 80,000 shares of restricted common stock to
Woodbridge Management,  Ltd. pursuant to a consulting agreement. The services to
be provided under the consulting agreement were business development,  corporate
strategy,  and assistance with joint  ventures,  mergers and  acquisitions.  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 $4.45 per share, the market price for shares
of our common  stock at the time of  issuance.  Therefore,  the total  aggregate
value of the consideration paid to Woodbridge Management was $356,000.

         On August 21, 2003, and September 12, 2003, we issued  2,750,000 shares
of our  preferred  stock at a price per share of $2.00 and  2,750,000  warrants,
each of which  entitles the holder to purchase one share of our common stock for
a period of five years from the date of  issuance at a price of $3.00 per share,
to two accredited  investors pursuant to a private equity financing.  Each share


<PAGE>

of preferred stock is convertible,  at the option of the holder,  into one share
of common stock, subject to adjustment for certain occurrences. We also issued a
five-year  warrant to purchase up to 275,000 units , each Unit consisting of one
share of preferred  stock and one Warrant at an exercise price of $2.00 per Unit
to TN Capital Equities, Ltd., our placement agent in connection with the private
equity financing. The private equity financing described above was made pursuant
to the exemption from the registration provisions of the Securities Act provided
by Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder.

         On August 31, 2003, we issued 41,667  shares to Peter  Cunningham,  our
President and Chief Executive  Officer,  pursuant to the terms of his employment
agreement with AXM Pharma. 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 $5.00 per share,  the
market price for shares of our common stock at the time of issuance.  Therefore,
the total aggregate value of the  consideration  paid to Peter W. Cunningham was
$208,335.

         On September 18, 2003, we issued  100,000  shares to Lan Hao, our Chief
Financial  Officer,  pursuant to the terms of his employment  agreement with AXM
Pharma.  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 $5.00 per share, the market price for
shares  of our  common  stock  at the time of  issuance.  Therefore,  the  total
aggregate value of the consideration paid to Lan S. Hao was $500,000.

         On December 31, 2003, we issued 860,000 shares of our preferred  stock,
at a price per share of $2.25 and  1,000,000  warrants.  Each share of preferred
stock is  convertible,  at the  option of the  holder,  into one share of common
stock, subject to adjustment for certain occurrences.  Each warrant entitles the
holder to purchase one share of our common stock for a period of five years from
the date of issuance at a price of $3.00 per share.  Holders of our warrants may
also  exercise  the  warrants   through  a  cashless   exercise   under  certain
circumstances.  In addition,  we issued to TN Capital  Equities,  our  placement
agent,  a five-year  warrant to purchase  up to 86,000  shares of our  preferred
stock for $2.25 per share and up to 100,000  warrants to purchase  shares of our
common stock upon exercise at $3.00 per share, on a pro-rata basis to the number
of shares of preferred stock purchased.  The private equity financing  described
above was made pursuant to the exemption from the registration provisions of the
Securities  Act provided by Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder.

         On January  26,  2004,  the Board  authorized  the  issuance of 100,000
shares  of  restricted  common  shares  and  50,000  warrants  to Great  Eastern
Securities,  Inc. pursuant to an investment banking agreement. The shares are to
be released quarterly based upon a vesting schedule of 25,000 shares per quarter
during the term of the agreement.  Pursuant to an agreement that was executed on
December  18,  2003,  Great  Eastern will  provide  investor  relations  related
services and assist AXM Pharma with broker relations for our stock. The warrants
are for a term of five  years  and have an  exercise  price  equal to $4.74  per
share.  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 $5.65 per share, the market price for
shares  of our  common  stock  at the time of  issuance.  Therefore,  the  total
aggregate value of the consideration paid to Great Eastern Securities,  Inc. was
$565,000.

         On February 2, 2004, we issued 200,000  shares of restricted  common to
the Aston Organization. We have only released 20,000 of the issued shares to the
Aston  Organization.  The remaining  180,000  shares are to be released  monthly
based upon a vesting  schedule of 15,000 shares per month during the term of the
agreement.  The  services  to be  provided  under  the  agreement  are  investor
relations.  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 $5.65 per share, the market price for
shares  of our  common  stock  at the time of  issuance.  Therefore,  the  total
aggregate  value  of the  consideration  paid  to  the  Aston  Organization  was
$1,130,000.


<PAGE>


ITEM 6.  MANAGEMENT DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION


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 Shenyang  Tianwei  Werke  Pharmaceutical  Co.  Ltd., a
northern China-based  pharmaceutical  company.  The comparables  discussed below
relate to the  operations  of Werke and its wholly  owned  subsidiary,  Shenyang
Tianwei Werke Pharmaceutical Co., for the periods discussed.

         We  anticipate  seeking  Chinese  government  approval to repackage our
product  line with the AXM Pharma brand during 2004  following  completion  of a
full redesign and  reconfiguration  of our packaging by our international  brand
consulting firm.

         Our  products  are  currently  primarily  sold  through one third party
distributor,   Liaoning   Weikang   Medicine   Co.,   Ltd.   and  its   selected
sub-distributors,  to  hospital  pharmacies  in  the  key  cities  of  Shanghai,
Guangzhou and Shenyang. We anticipate expanding our sales into retail pharmacies
within  these  regions  during the next  quarter and will make efforts to expand
both  hospital  and retail  pharmacy  sales into other  regional  cities such as
Beijing.

         We are currently  seeking to license  various branded OTC products from
identifiable  North  American   pharmaceutical  and  supplement   companies  for
distribution and manufacturing in China and Asia-Pacific. As of the date of this
filing  we have  not  entered  into  any  definitive  agreements  with  any such
companies.

LIQUIDITY AND CAPITAL RESOURCES

         Total  assets  increased  from  $4,312,196  at  December  31,  2002  to
$11,024,738  at December 31, 2003.  The  increase is primarily  attributable  to
receipt of  $4,888,502  in net proceeds  from the  placement of  securities  and
accounts receivable that increased  approximately $1.7 million and a $.9 million
inventory  increase.  All of  these  increases  except  for  cash  are  directly
attributable  to the  increase in sales of $6.9  million or 223% over the period
ended December 31, 2002.

         During the third quarter,  we completed a private  equity  financing of
$5,500,000 with two accredited  investors.  After payment of costs and expenses,
including fees of the placement agent, we received net proceeds of approximately
$4,888,502. Pursuant to the terms of the purchase agreements with our investors,
dated as of August 21, 2003, and September 12, 2003, we issued  2,750,000 shares
of our preferred stock, $.001 par value per share, at a price per share of $2.00
and 2,750,000  warrants.  Each share of preferred stock is  convertible,  at the
option of the holder, into one share of common stock,  subject to adjustment for
certain  occurrences.  Each warrant entitles the holder to purchase one share of
our common stock,  $.001 par value,  for a period of five years from the date of
issuance at a price of $3.00 per share.


<PAGE>


         Our total outstanding  current  liabilities  increased to approximately
$3.4 million at December 31, 2003, as compared to approximately  $1.4 million at
December  31,  2002.  The  current  liabilities  increase  was the  result of an
increase in value-added tax payable and accrued expenses.

         From  December  31,  2002,  to  December  31,  2003,  our cash and cash
equivalents  increased by  approximately  $2.8 million as a result of receipt of
net proceeds in the private  placement  offering of $4,888,502.  This figure was
offset by cash general,  administrative  and selling  expenses of  approximately
$3.7 million. The sales,  general and administrative  expenditures were incurred
primarily for offering fees and expenses,  planning and construction,  legal and
accounting  fees and  consulting  fees.  Approximately  $3.5 million of non-cash
general, administrative and selling expenses were incurred in 2003. The 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.

         Assuming  there  is  no  decrease  in  current  accounts  payable,  and
accounting for various one-time  expenses,  the Company's  negative cash flow is
approximately  $185,000  per month.  Without a  significant  change in sales and
operating gross profits, our only source of significant additional funds to meet
future operating  expenses is the sale of our securities.  The amount of cash on
hand is sufficient to meet our operating  expenses through at least December 31,
2004.  Management  anticipates  that the  future  prospects  and  trends  in our
business  indicate that we may experience at least a 100 percent growth of sales
and operating gross profits during 2004.

         We do expect to incur material  capital  expenditures for the new plant
in  Shenyang.  Based on  discussions  with  engineering  and  design  firms  and
consultants  for  U.S.  Food  and  Drug   Administration   validation  and  Good
Manufacturing  Practices  certification,  the cost of the factory is budgeted at
approximately  U.S.$ 5.0  million.  Required  future  capital  expenditures  for
construction of the new plant,  associated  manufacturing equipment and staffing
of the new plant will be funded out of existing cash on hand, future revenues or
additional  financing  activities.  There  is no  assurance  we  will be able to
generate  sufficient revenues or obtain sufficient funds when needed, or whether
such funds,  if available,  will be obtained on terms  satisfactory to us. We do
not have any long term or contingent obligations that must be satisfied.

         Additionally, in order to ensure that sufficient funds are available to
develop various  additional phases of the new Shenyang plant, we may in the near
future, following completing any regulatory or contractual obligations,  provide
notice of redemption of the warrants sold in the private placement,  which would
have the effect of forcing exercise of the warrants; provided the exercise price
of the  warrants is less than the market  price of our common  stock at the time
the notice of redemption is provided to our investors. If one hundred percent of
these  warrants were  exercised,  we would receive  approximately  $8,250,000 in
gross proceeds.  Our ability to provide notice of redemption of the warrants is,
however,  subject to several factors beyond our control.  Such factors  include,
the effectiveness of our registration  statement on Form SB-2,  originally filed
on September 25, 2003, at the time of the notice of redemption, and the price of
our common stock on the market on which it is listed. Therefore, there can be no
guarantee  that we will be able to provide  notice of redemption of the warrants
or that we will receive any proceeds from the exercise of the warrants.

         If  the  warrants  are  not  exercised  and we are  unable  to  provide
necessary capital for construction of the Shenyang plant from future revenues or
financing activities,  this may cause delays in the construction of the Shenyang
plant.  More  likely,  however,  is that in the  absence  of the funds  from the
exercise of the warrants,  we will still be able to complete the Shenyang  plant
but we will be forced to acquire manufacturing  equipment that operates at lower
capacity and speed.  We intend to use the additional  funds from exercise of the
warrants,  if any,  for  engineering  support to  increase  speed of  production
through  improving work flow and using higher speed equipment;  for higher speed


<PAGE>

equipment  for  tableting and  encapsulation  production;  and for higher volume
equipment and higher speed equipment for cream mixing and filling production.

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 collectibility of our receivables at least quarterly.
If the financial condition of our customers were to deteriorate, resulting in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required.  The differences could be material and could significantly impact cash
flows from operating activities.

INVENTORY

         We write down our inventory for estimated  obsolescence or unmarketable
inventory  equal  to the  difference  between  the  cost  of  inventory  and the
estimated  market  value based upon  assumptions  about  future  demand,  future
pricing and market conditions. If actual future demand, 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


<PAGE>

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 2003 fiscal
year,  therefore  pro forma  disclosures  are not required for the twelve months
ended December 31, 2003.

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.

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 an 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.


<PAGE>



VALUE ADDED TAX

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

LITIGATION

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

COMPARISON OF RESULTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003, TO THE FISCAL
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2002.
-----------------------------

     REVENUE.  During the fiscal year ended  December  31,  2003,  we  generated
$10,025,605  from product sales  compared to revenues from product sales for the
fiscal year ended  December  31,  2002,  of  $3,103,656.  This is an increase of
$6,921,949 or  approximately  223%. The increase is primarily due to more robust
sales of our  product  line,  particularly  the  sales of  Asarone  tablets  and
Weifukang cream.  Domestic Chinese customers  accounted for 100% of total sales.
We estimate  that 45% of these  sales were from the sale of Asarone  Tablets and
27% were from the sale of Weifukang cream.

         Management  anticipates  growing  total  revenues by as much as 100% in
2004, through broader  distribution within China and the addition of one or more
new products.  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 gross sales below those
achieved for the year ended December 31, 2003. 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.  Gross profit on product sales for the fiscal year  ended
December 31, 2003, was $3,497,325 compared to $621,579 for the fiscal year ended
December 31, 2002, an increase of $2,875,746 or approximately 462%. The increase
in gross profits  during 2003 was due primarily to the $6.9 million  increase in
sales.  More  efficient  third party  product  manufacturing  accounted  for the
remainder of the increase in our gross  profits.  Assuming the product sales mix
remains the same, management anticipates future gross profit margins to increase
by as much as another 5% in 2004.  This gross profit  margin  increase is due to
higher  pricing of our products and slightly lower  production and  distribution
costs. We plan to achieve higher average unit prices through the introduction of
new high value  products and the revision of marketing  and pricing  programs to
reflect the Wholly  Foreign Owned Entity  status of the Company.  The State Food
and Drug  Administration  allows for higher prices to be charged in the hospital
tendering  process by foreign  owned  enterprises  as compared to locally  owned
companies.  We believe that lower production and distribution  costs will result
from the  opening of the new  manufacturing  facility,  which will  enable us to
reduce processing costs through the use of high speed equipment.  Further,  with


<PAGE>

our own factory  operating,  we eliminate the need to pay the processing fees to
the  third-party  original  equipment  manufacturer.  We also  believe  that the
increased  unit  production  and sales volume being  achieved  will enable us to
negotiate improved raw material supply prices.  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  achieved for the three months ended
September  30, 2003.  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. We incurred Sales, General
and  Administrative  expenses of $7,205,392  for fiscal year ended  December 31,
2003,  compared to $673,936  for the fiscal year ended  December  31,  2002,  an
increase  of  $6,531,456.   There  were  $3,522,085  in  non-cash   expenses  in
recognition  of  stock  issued  to cover  administrative  services  provided  by
consultants  in lieu of  cash.  The cash  Selling,  General  and  Administrative
expense was $3,683,307 for the same period, or an increase of $3,009,371 and was
the result of the increased  personnel and outside services  required to prepare
the  Company for the  increase in sales,  marketing  of our  products,  expenses
associated with our public reporting status and increased activities  associated
with the proposed construction of a new plant in Shenyang.

         NON-CASH  CONSULTING  ACTIVITIES.  During the year ended  December  31,
2003, our Board of Directors authorized the issuance of shares of our restricted
common stock to various  consultants  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 consulting expenses of $3,522,085 for the issuance of
these shares during the year ended December 31, 2003.

         NET LOSS. We recorded a Net Loss applicable to common  shareholders for
the fiscal year ended December 31, 2003, of $6,771,556 compared to a Net Loss of
$52,357 for the fiscal year ended  December 31, 2002. The increase is the result
of the aforementioned  increase in Selling,  General and Administrative expenses
and  approximately  $3.1 million  charged to the deemed dividend from beneficial
conversion  feature  embedded in the preferred stock. The net loss per share for
the year ended  December  31,  2003 was $0.52 per share  calculated  on weighted
average shares  outstanding  of 12,927,956.  This was compared to a net loss per
share for the year ended December 31, 2002 of $0.01 for weighted  average shares
outstanding of 10,000,000.


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


<PAGE>

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
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. As
a  result,  we plan to  submit  our  application  to the  State  Food  and  Drug
Administration within the required time period. Furthermore, we believe that our
new factory,  which is  currently  under  construction  in Shenyang and which is
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.

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

         Third parties manufacture and distribute all of our products. We do not
currently have manufacturing facilities, personnel or access to raw materials to
independently manufacture our products. Currently, our products are manufactured
by  Qiqihaer  Pharmaceutical  Factory  2 and our  products  are  distributed  by
Liaoning  Weikang  Medicine  Co.  Ltd.  Except  for any  contractual  rights and
remedies that we may have with our manufacturer and our distributor,  we have no
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.  expires at the end of March 2004.  Although
Liaoning  Weikang  Medicine  Co.  Ltd.  has  verbally  agreed to continue as our
distributor at this time, we have not yet signed a definitive  written agreement
for  distribution of our products with either Liaoning Weikang Medicine Co. Ltd.
or any other  distributor.  If for any  reason 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


<PAGE>

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  that we have  engaged 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.

During the fiscal  years  ended  December  31,  2003 and 2002,  one  distributor
accounted for 100% of our net revenues.

         During  the  fiscal  years  ended   December  31,  2003  and  2002, one
distributor,  Liaoning Weikang Medicine Co., Ltd., accounted for 100% of our net
revenues  during the past two fiscal years.  Any dispute with Liaoning  Medicine
Co.  could have a material  adverse  effect on our  ability  to  distribute  our
products.  Additionally,  should Liaoning Weikang Medicine Co.'s business suffer
for any reason or if they encounter  problems with their  customers our business
would be adversely affected.

         Additionally,  our  distributor,   Liaoning  Weikang  Medicine  Co.  is
required to comply with new Good Sales Practices  guidelines  promulgated by the
State Food and Drug  Administration  by December 31, 2004. We have been informed
by Liaoning  Weikang  Medicine Co. that they are in the process of preparing for
this   certification   requirement   and  that  they  expect  to  meet  the  new
requirements.  If, however,  Liaoning Weikang Medicine Co. does not meet the new
certification requirements, we would be forced to find a new distributor for our
products  that is in  compliance  with  the new  guidelines.  Any  delay  in our
distribution caused by such an event could have a material adverse effect on our
business.  Furthermore,  we may not be able to obtain  terms as  favorable to us
from a new  distributor as the terms we have currently  negotiated with Liaoning
Weikang Medicine Co., which could also have an adverse effect on our business.

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.

         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 Shenyang Tianwei Werke  Pharmaceuticals  and
Chairman  of AXM  Pharma.  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


<PAGE>

retain key personnel.

Our growth is  dependent  on our  ability to  successfully  develop,  acquire or
license new drugs.

         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 of new
drugs, 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 from our future
revenues.  Similarly, there is no assurance that we can successfully secure such
rights from third parties on an economically feasible basis.

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 use 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 first 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.

         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


<PAGE>

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  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


<PAGE>

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.

         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


<PAGE>

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.

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  February  2004,  our  common  stock  traded an  average of
approximately 55,000 shares per day. As of March 25, 2004, the closing bid price
of our common stock on the American Stock  Exchange was $ 5.21 per share.  As of
March 25, 2004, we had  approximately  114  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 38.65% of our capital



<PAGE>

stock may decrease your influence on shareholder decisions.

         Our executive  officers and directors,  in the aggregate,  beneficially
own  approximately  38.65% 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, and December 31, 2008, respectively, to exercise their warrants. There are
currently  3,333,750 warrants  outstanding,  which are exercisable at a price of
$3.00 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 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 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following  Financial  Statements  required by this item appear at the end of
this report:

         Report of Independent Public Accountant

         Balance Sheet as of December 31, 2003

         Statement of  Operations - For the years ended  December 31, 2002,  and
         2003.

         Statement  of  Stockholders  Equity - For the years ended  December 31,
         2002, and 2003.

         Statement of Cash Flows - For the years ended  December  31, 2002,  and
         2003.

         Notes to Financial Statements


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANICAL DISCLOSURES

We have had no disagreements  with our certified public accountants with respect
to accounting practices or procedures or financial disclosure.



<PAGE>


ITEM 8A. CONTROLS AND PROCEDURES

EVALUATION AND DISCLOSURE CONTROLS AND PROCEDURES

         The Company,  under the supervision and with the  participation  of the
Company's management,  including the Company's Chief Executive Officer and Chief
Financial  Officer,  has evaluated the effectiveness of the design and operation
of the Company's  "disclosure  controls and procedures," as such term is defined
in Rules  13a-15e  promulgated  under the Exchange Act as of this report.  Based
upon the evaluation, the Chief Executive Officer and Chief Financial Officer has
concluded that the Company's  disclosure  controls and procedures were effective
as of the  end of the  period  covered  by this  report  to  provide  reasonable
assurance  that  information  required to be disclosed by the Company in reports
that it  files  or  submits  under  the  Exchange  Act is  recorded,  processed,
summarized and report within the time periods specified in SEC rules and forms.

CHANGES IN INTERNAL CONTROLS

         There have been no changes in  internal  controls  or in other  factors
that could  significantly  affect those controls subsequent to the date of their
evaluation,   including  any  corrective  actions  with  regard  to  significant
deficiencies and material weaknesses.


PART III.

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

         The  following  table  and text set  forth  the  names  and ages of all
directors and executive  officers of AXM Pharma as of March 25, 2004.  The Board
of Directors is comprised  of only one class.  All of the  directors  will serve
until the next annual meeting of  shareholders,  which is anticipated to be held
in April of 2004, and until their successors are elected and qualified, or until
their earlier death, retirement, resignation or removal. To date we have not had
an annual  meeting.  There  are no  family  relationships  among  directors  and
executive officers.  Also provided herein are brief descriptions of the business
experience of each director and executive officer during the past five years and
an indication of directorships  held by each director in other companies subject
to the reporting requirements under the Federal securities laws.


NAME                            AGE           POSITION
----                            ---           --------
Wang Wei Shi                     45           Chairman
Douglas C. MacLellan             47           Vice Chairman
Peter W. Cunningham              47           Chief Executive Officer, President
Mark H. Elenowitz                34           Director
Mark J. Bluer                    41           Director
Chet Howard                      61           Chief Financial Officer
Montgomery F. Simus              36           Director
Chaoying (Charles) Li            33           Director

          MS. WANG WEI SHI,  CHAIRMAN.  Ms.  Wang became  Chairman of AXM Pharma
when we acquired Werke Pharmaceuticals, Inc. in March 2003 and has been Chairman
of  Shenyang   Tianwei  Werke   Pharmaceuticals   and   Vice-Chairman  of  Werke
Pharmaceuticals,  Inc. since  December 2000.  From 1999 until December 2000, Ms.
Wang was  Chairman  and  General  Manager  of  Shenyang  Tianwei  Pharmaceutical
Factory,  Ltd., a predecessor to Shenyang Tianwei Werke  Pharmaceuticals.  Since
May 1996,  she has also been  Chairman  of  Liaoning  Shenda  Import  and Export
Company, a Chinese  import/export  company. From 1984 through 1988, Ms. Wang was


<PAGE>

the Manager of the Finance  Department of the Shenyang  Five Mineral  Import and
Export  Company,  a Chinese  import/export  company.  Ms. Wang attended  Beijing
University and Shenyang University and studied financial management,  accounting
and economics.

         MR.  DOUGLAS  C.  MACLELLAN,   VICE-CHAIRMAN.   Mr.   MacLellan  became
Vice-Chairman  of AXM  Pharma  in  connection  with  our  acquisition  of  Werke
Pharmaceuticals,  Inc.  in  March  2003  and has  been  Vice-Chairman  of  Werke
Pharmaceuticals,  Inc.  since  October  2000 and Vice  Charman  of the  Board of
Directors of Shenyang  Tianwei Werke  Pharmaceutical  Co., Ltd.  since  December
2000. Mr. MacLellan is a venture capitalist and business  incubation  executive.
He  holds  significant  expertise  in  developing  and  financing  Chinese-based
businesses,  particularly  in  the  telecommunications,  software  and  Internet
industries. Since May 1992, Mr. MacLellan has been President and Chief Executive
Officer of the MacLellan Group,  Inc., a privately-held  business  incubator and
financial advisory firm. From March 1998 through October 2000, Mr. MacLellan was
the co-founder and a significant  shareholder of Wireless Electronique,  Ltd., a
China-based  telecommunications  company  having joint venture  operations  with
China Unicom (NASDAQ:  CHU) in Yunnan, Inner Mongolia and Ningxia provinces.  He
is also a  co-founder  and,  since  May 1997,  has been a  director  of  Datalex
Corporation,  a Canadian-based legacy software solution provider.  Mr. MacLellan
is also a member of the board of directors  and chairman of the audit  committee
of AMDL, Inc. (AMEX:  ADL), a  publicly-held  biotechnology  firm. From November
1996 to March 1998, Mr.  MacLellan was co-Chairman  and an Investment  Committee
member of the Strategic  East European  Fund.  From November 1995 to March 1998,
Mr. MacLellan was President,  Chief Executive Officer and a Director of PortaCom
Wireless,  Inc., a company  engaged as a developer  and operator of cellular and
wireless  telecommunications  ventures in selected developing world markets. Mr.
MacLellan  is a former  member  of the  board of  directors  and  co-founder  of
FirstCom Corporation (NASDAQ: FCLX), an international telecommunications company
that operates a competitive access fiber and satellite network in Latin America,
which became AT&T Latin America (NASDAQ:  ATTL) in August 2000.  During 1996, he
was also the Vice-Chairman of Asia American  Telecommunications  (now Metromedia
China  Corporation),  a  majority-owned  subsidiary of Metromedia  International
Group,  Inc.  (AMEX:  MMG).  Mr.  MacLellan  was educated at the  University  of
Southern  California  in  economics  and  finance,  with  advanced  training  in
classical economic theory.

         MR.  PETER W.  CUNNINGHAM,  CHIEF  EXECUTIVE  OFFICER,  PRESIDENT.  Mr.
Cunningham  was  appointed  as our Chief  Operating  Officer in August  2003 and
promoted to the positions of Chief Executive  Officer and President in September
2003. He is a known pharmaceutical industry advisor with extensive experience in
creating   increased  market  share  for  new  and  existing  ethical  drug  and
over-the-counter   pharmaceutical  products.  He  has  more  than  15  years  of
experience  working in the  healthcare  industries  in the Asia Pacific  region.
Since  1997  Mr.   Cunningham  has  been  an   independent   consultant  to  the
pharmaceutical  industry.  From 1994 to 1997, he was the Principal Consultant in
the firms Marc J Consultants & Coopers & Lybrand / Marc J Consultants Healthcare
Industry  Practice.  He is the former General Manager of Sterling Drug Singapore
(1983 to 1985),  where he was the  youngest  General  Manager  in the  company's
history.  He held regional  management  positions  with Rhone Poulenc Rorer from
1987 to 1990, and Becton Dickinson from 1990 to 1994. While at Becton Dickinson,
he held additional  responsibility  as a member of an internal strategy advisory
team  comprising  headquarters  staff  and  visionary  management  from  various
operations worldwide. Mr. Cunningham received his MBA from The George Washington
University  and a B.A.  from the State  University of New York and is a Research
Fellow at the American Red Cross National Headquarters.

         MR. MARK H. ELENOWITZ, DIRECTOR. Mr. Elenowitz became a Director of AXM
Pharma in connection  with our  acquisition  of Werke  Pharmaceuticals,  Inc. in
March 2003.  Mr.  Elenowitz  was a  co-founder  and since July 2001,  has been a
managing director of TriPoint Capital Advisors, LLC, a consulting firm, where he
is responsible for the overall  corporate  development of TriPoint and assisting
its clients with corporate and general business development. From September 2001
to March 2002, Mr.  Elenowitz was a Director and President of Image World Media,
Inc. (Pink sheet:  IMWI),  an  international  media company  specializing in the
production and distribution of various media content for worldwide  distribution


<PAGE>

across multiple media platforms,  such as traditional  television,  film and the
Internet.  From February 1998 to October 2001, Mr. Elenowitz was Co-Chairman and
Managing Director of GroupNow!, Inc., a financial consulting firm. He was also a
founder,  and since  1996 has been the  senior  managing  director  of  Investor
Communications  Company,  LLC, a national investor relations firm. Mr. Elenowitz
has held Series 7 and 63 licenses as a broker,  and has held a Series 24 license
at a regional  brokerage firm. Mr.  Elenowitz is a graduate of the University of
Maryland School of Business and Management, with a BS in Finance.

         MR. MARK J. BLUER,  DIRECTOR.  Mr. Bluer is the most recent addition to
AXM Pharma's  Board of Directors;  he joined the AXM Pharma team on February 25,
2004. Mr. Bluer is a founder and managing partner of Bluer and Bluer, LLP, which
was  founded in 2000 and is a San  Francisco  bay area based law firm  primarily
focused on business and employment  litigation.  Mr. Bluer personally represents
clients  through all stages of litigation  and many cases  involve  parties from
China or disputes  involving  transactions  between China and the United States.
Prior  to  founding   Bluer  and  Bluer,   Mr.  Bluer  served  as  Deputy  Chief
Representative for the Beijing  Representative  office of the law firm CHA & PAN
from 1997 to 1999. Mr. Bluer  represented  various  American clients of the firm
with business  interests in China. Mr. Bluer's first attorney  position was with
Kern,  Noda,  Devine & Segal from 1992 to 1995.  Mr.  Bluer was  enrolled in the
Taipei  Language  Institute where he took tutorial  classes in Mandarin  Chinese
from  1985 to 1986 and now has over 14 years  experience  speaking  and  reading
Mandarin  Chinese.  Mr. Bluer also has a BA in Business  Economics  and History,
from the  University of California,  Santa Barbara.  In 1990, Mr. Bluer received
his JD from Santa Clara  University  School of Law and has been an active member
of the California State Bar since 1991.

         MR. CHET HOWARD, CFO.  Mr. Chet Howard has  over 30 years  of financial
management  experience  working  with  a  variety  of  early  stage  and  growth
companies.  Since January 2000, Mr. Howard has maintained a consulting  practice
that  specializes in SEC reporting and  Sarbanes-Oxley  compliance.  His clients
have included Amerimmune Pharmaceuticals, Inc., Mandalay Resorts, Inc. and Smart
Chip  Technologies,  Inc.  From January 2001 to December  2002,  Mr.  Howard was
Executive Vice President and CFO of AirCard  Cellular,  Inc., where he organized
the finance department, implemented the accounting system and helped develop the
business  plan.  Prior to AirCard,  he was Senior Vice  President and CFO of Big
Hub.com,  Inc.,  where he was  responsible for all aspects of taking the company
public and instrumental in raising $7.5 million.  Before joining Big Hub.com, he
was Executive Vice President and CFO of USA Service  Systems,  Inc., a marketing
and merchandising company with clients such as Sam's Club, Wal-Mart,  Walgreen's
and Sears. Mr. Howard was also Executive Vice President and CFO of InterAmericas
Communication  Corp (now AT&T Latin  American) and Executive  Vice President and
CFO of HQ Office  Supplies  Warehouse,  Inc,  where he  managed  the sale of the
company to Staples,  Inc.  Previously,  he helped  develop the business plan and
manage venture capital investment as Senior Vice President, CFO and a co-founder
of the Sports  Authority,  Inc. In addition to these  corporate  positions,  Mr.
Howard has eight  years of  experience  as a  consultant  where he has  prepared
IPO's, several secondary offering documents and assisted company executives with
SEC  filings  on a regular  basis.  Mr.  Howard  holds both an MBA and BS degree
(Accounting  Major)  from  California  State Poly  University  and has  attended
numerous  seminars to maintain  current  expertise  in SEC  reporting  and other
corporate goverence matters.

         MR. MONTGOMERY FRANK SIMUS, DIRECTOR.  Mr. Simus  has  more  than  nine
years of experience  working in Central and Southeast  Asia,  including a unique
combination  of  information  and   communications   technology   expertise  and
international  development and team-building  experience.  Since August 2002, he
has been  President,  CEO and  founder of Golden  Asia  Ventures,  a  management
consultancy  that  focuses on  strategic  business  and  technology  investments
partnerships between Asian and North American organizations.  From 2001 to 2002,
Mr.  Simus  was a Vice  President  at  CEM  Investments,  where  he  focused  on
early-stage  commercial  and  residential  real estate and  mezzanine  financing
opportunities. Prior to CEM Investments, he worked as an Alliance Manager in the
Institutional  Business  Development  Group  at  Financial  Engines,  Inc.  from


<PAGE>

September 1999 to January 2001.  Before  joining  Financial  Engines,  Inc., Mr.
Simus held a variety of technology  and finance  related  positions with various
international  firms,  including AES  Corporation,  Lehman Brothers Asia Limited
(Hong Kong),  Hong Kong and Shanghai  Banking  Corporation  Limited (Hong Kong),
Oracle  Corporation  and EDS  Limited.  Mr.  Simus also  previously  managed the
implementation  of a multi-million  dollar  international  aid project portfolio
focused on  telecommunications,  aviation,  and parastatal reform for the United
Nations  Development  Program in Kenya.  He graduated from Harvard  University's
John F. Kennedy  School of  Government  with a Masters  Degree in Public  Policy
focused  on  International  Development.  He  has  a BA  in  History  from  Yale
University and is functional in French, Mandarin Chinese and Russian.

         MR. CHAOYING (CHARLES) LI, DIRECTOR.  Mr. Li is a registered lawyer and
trademark  attorney in the People's  Republic of China where he  specializes  in
foreign investments in China, mergers and acquisitions,  joint venture structure
and formations and intellectual  property and technology law. Since August 2001,
he has been a partner at T&C Law Offices in Beijing.  Prior to joining  T&C, Mr.
Li was a founder and general  counsel of Bookoo,  Inc.,  a pioneer in the e-book
marketplace  and one of the first  Internet  companies  in  Greater  China  that
extensively  emphasized  the  management of  intellectual  property  rights from
January 2000 to August 2001.  Before the founding of Bookoo,  Inc.,  Mr Li spent
over 4 years  from  August  1995 to  December  1999  working  for Cha & Cha,  an
international law firm specializing in Telecom,  Internet and joint venture law.
He  received a Master of Laws from the  University  of Ottawa in 2003 and both a
Master  of Laws in July  1999 and  Bachelor  of Laws in July  1996  from  Peking
University,  majoring  in  Intellectual  Property  Law. He also has earned BS in
Mathematics  in July 1995 from Peking  University.  Mr. Li has written  numerous
academic and professional articles that are widely published internationally and
in  Mainland  China,  Hong Kong and  Taiwan.  Mr. Li is  fluent in  English  and
Mandarin.  He also completed an internship at Gowling  Lafleur  Henderson LLP in
Ottawa, Canada in 2003.

AUDIT COMMITTEE FINANCIAL EXPERT AND IDENTIFY AUDIT COMMITTEE:

     The Audit Committee focuses its efforts on assisting our Board of Directors
to fulfill  its  oversight  responsibilities  with  respect to AXM  Pharma's:

        o   Quarterly and annual consolidated financial statements and financial
            information filed with the Securities and Exchange Commission;

        o   System of internal controls;

        o   Financial accounting principles and policies;

        o   Internal and external audit processes; and

        o   Regulatory compliance programs.

         The  committee  meets  periodically  with  management  to consider  the
adequacy of AXM Pharma's internal controls and financial  reporting process.  It
also  discusses  these matters with AXM Pharma's  independent  auditors and with
appropriate  financial  personnel  employed by AXM Pharma. The committee reviews
our financial  statements and discusses them with management and our independent
auditors  before those  financial  statements  are filed with the Securities and
Exchange Commission. The committee met 3 times in fiscal 2003.

         The  committee  has the  sole  authority  to  retain  and  dismiss  our
independent auditors and periodically reviews their performance and independence
from management.  The independent  auditors have unrestricted  access and report
directly to the committee.



<PAGE>


AUDIT COMMITTEE FINANCIAL EXPERT.

         The  Board has  determined  that the  Chairman  of the  committee,  Mr.
MacLellan is an "audit  committee  financial  expert" as that term is defined in
Item 401(e) of  Regulation  S-B and  "independent"  for  purposes  of  currently
adopted American Stock Exchange listing  standards and Section  10A(m)(3) of the
Securities Exchange Act of 1934. Mr. MacLellan is also currently the Chairman of
the Audit  Committee of AMDL,  Inc. a company also listed on the American  Stock
Exchange.  Our Board of Directors has determined that such simultaneous  service
does not  impair  the  ability  of Mr.  MacLellan  to  effectively  serve as the
Chairman of AXM Pharma's Audit Committee.


COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         On  December  26,  2003,  our  officers,  Directors  and 10% or greater
shareholders  became  subject  to  the  requirements  of  Section  16(a)  of the
Securities  Exchange  Act by  virtue of our  common  stock  becoming  registered
pursuant to Section 12 of the Securities Exchange Act on such date. As a result,
each of our officers, directors and 10% or greater shareholders were required on
that date to file a Form 3 reporting their beneficial  ownership of AXM Pharma's
securities  at such date.  Although  all of the  required  Form 3s have now been
filed as required by the  Securities  Exchange Act, Peter  Cunningham,  Lan Hao,
Doug  MacLellan,  Mark  Elenowitz,  Tongbo Wang and Wang Wei Shi all filed their
initial  statements  of beneficial  ownership on Form 3 late.  Other than as set
forth herein, we believe that all reports, which our officers, Directors and 10%
or greater  shareholders  were  required  to file in fiscal  2003,  pursuant  to
Section 16(a) of the Securities Exchange Act, have been timely filed.

CODE OF ETHICS

         The Company has always encouraged its employees, including officers and
directors to conduct business in an honest and ethical manner. Additionally,  it
has  always  been our  policy to comply  with all  applicable  laws and  provide
accurate and timely  disclosure.  Although we did not have a formal written code
of ethics for the 2003 fiscal year,  due to the  abundance  of tasks  associated
with our gaining  entrance to a public stock exchange.  In March 2004, our Board
adopted formal  written codes of ethics for both our executive  officers and for
our directors.

         Our codes of ethics are designed to deter wrongdoing and promote honest
and ethical conduct and compliance with applicable laws and  regulations.  These
codes also  incorporate  our  expectations  of our executives  that enable us to
provide  accurate and timely  disclosure in our filings with the  Securities and
Exchange  Commission  and other  public  communications.  Our codes of ethics is
posted on our website,  www.axmpharma.com.  Any future  changes or amendments to
our code of ethics, and any waiver of our codes of ethics will also be posted on
our website when applicable.

ITEM 10. EXECUTIVE COMPENSATION



<PAGE>

<TABLE>

<CAPTION>

                             EXECUTIVE COMPENSATION



                           Summary Compensation Table



                                                                   Long Term Compensation
                                                                 ----------------------------- -----------
ANNUAL COMPENSATION                                              AWARDS                        Payouts
                                                                 ----------------------------- -----------
---------------------------------------------------------------- ----------------------------- -----------
 (a)                 (b)         (c)         (d)       (e)       (f)         (g)               (h)         (i)



                                                        Other                 Securities                    All
 Name                                                   Annual    Restricted  Under-                        Other
 And                                                    Compen-   Stock       lying            LTIP         Compen-
 Principal                                              sation    Award(s)    Options/         Payouts      sation
                                                                    ($)       SARs (#)         ($)            ($)

Position             Year        Salary($)   Bonus($)     ($)
---------------------------------------------------------------- ----------------------------- ----------- -----------
<S>                  <C>         <C>         <C>          <C>    <C>           <C>             <C>         <C>

Peter W. Cunningham, 2003        $50,000        0          0      $208,335     41,667              0           0
President, CEO,      2002         0             0          0
                     2001         0             0          0
Lan Hao              2003         40,000        0          0      $500,000    100,000              0           0
CFO, Director,       2002         0             0          0
                     2001         0             0          0



Option/SAR in Last Fiscal Year
                               (Individual Grants)

--------------------------------------------------------------------------------------------------------------


Name                                Number of        Percent of total          Exercise or     Expiration
                                    Securities       options/SARs              base price      date
                                    Underlying       granted to                 ($/Sh)
                                    Options/SARs     employees in
                                    Granted (#)      fiscal year
--------------------------------------------------------------------------------------------------------------
(a)                                 (b)              (c)                       (d)             (e)

Peter W. Cunningham(1),              0                0                         0               N/A
President, CEO

Lan S. Hao(2)                        0                0                         0               N/A
CFO, Director
</TABLE>

     (1)  Does not include  400,000  incentive  stock options  authorized by our
          Board of Directors exercisable at $3.90 per share which are subject to
          ratification  of the "2004  Qualified  and  Nonstatutory  Stock Option
          Plan" by our Shareholders at the next annual meeting.
     (2)  Does not include  25,000  incentive  stock  options  authorized by our
          Board of Directors exercisable at $3.90 per share which are subject to
          ratification  of the "2004  Qualified  and  Nonstatutory  Stock Option
          Plan" by our Shareholders at the next annual meeting.


BOARD OF DIRECTORS

         Our directors who are  employees do not receive any  compensation  from
AXM Pharma for services rendered as directors.  Outside directors receive $3,000
a month for serving on the Board of  Directors.  Members of the Audit  Committee
receive an additional  $1,500 per month and the chairman of the Audit  Committee
receives an additional $9,000 per month. The chairpersons of the other two board
committees  receive an additional  $4,500 per month.  The  Vice-chairman  of the
Board receives an additional $6,000 for service in such position, in addition to
any other payments to which he is entitled,  and our Chairperson of the Board is
paid a flat fee of  $20,000  per  month.  All  board  members  are  entitled  to
participate in AXM Pharma's health insurance plan. In January 2004, our Board of
Directors  authorized the issuance of 910,000 stock options exercisable at $3.90
per share to members of our Board of Directors  and an  additional  40,000 stock
options  exercisable  at 5.70 per share.  The  foregoing  options are subject to
ratification of the "2004 Qualified and  Nonstatutory  Stock Option Plan" by our
Shareholders at the next annual meeting.

EMPLOYMENT AGREEMENTS

         In August 2003,  we entered  into an  employment  agreement  with Peter
Cunningham,   our  President  and  Chief  Executive  Officer.  Although  he  was
originally hired to serve as our Chief Operating Officer, in September 2003, Mr.
Cunningham  was  promoted to the  positions  of  President  and Chief  Executive
Officer.  At  the  time  of  his  promotion,   other  than  the  change  in  his
responsibilities,  the terms of Mr. Cunningham's  employment  agreement remained
the same. Pursuant to the terms of his agreement with AXM Pharma, Mr. Cunningham
shall be paid not less than $120,000 per year for his services. In January 2004,


<PAGE>

our Board of Directors  increased Mr. Cunningham's salary from $120,000 per year
to $240,000 per year. In addition, Mr. Cunningham is entitled to receive a stock
grant of 250,000  shares of our common stock,  which shall be issued and vest in
equal  installments  every six months (41,667 per six month period) beginning in
August 2003. Mr.  Cunningham is also entitled to health insurance and such other
bonus  and  incentives  as the  Board of  Directors,  in its  discretion,  shall
authorize.  Mr.  Cunningham's  salary,  bonus and  incentives  shall be reviewed
yearly by our Board of Directors  and  compensation  committee  with the goal of
bringing Mr. Cunningham's  salary in line with industry  standards.  The term of
Mr. Cunningham's  agreement with AXM Pharma is one year, but the agreement shall
automatically  renew on the first and second  anniversary dates of the agreement
unless either AXM Pharma or Mr. Cunningham  provides written notice to the other
not less  than 60 days  prior to the  anniversary  date that they do not wish to
renew the agreement,  in which case the agreement  shall expire on the day prior
to the  anniversary  date. The  employment  agreement may be terminated for good
cause by  either  party in the  event of a  material  breach  of the  employment
agreement  by  either  party or in the  case of Mr.  Cunningham  of a change  in
control  of AXM  Pharma.  In the event of  termination  with  good  cause by Mr.
Cunningham  or without good cause by AXM Pharma,  Mr.  Cunningham is entitled to
three  months  severance  plus  bonus  and  incentives  earned  to that date and
relocation  to Los  Angeles,  California.  In the event that Mr.  Cunningham  is
terminated  for good cause by the Company or terminates  the  agreement  without
good  cause he will  only be  entitled  to  payment  of his  salary,  bonus  and
incentives  earned to the date of  termination  and  relocation  to Los Angeles,
California.  Mr.  Cunningham's  agreement requires that he keep confidential any
proprietary  information  acquired  while  employed and upon  termination of his
employment.  He is also  prohibited  from soliciting any employees of AXM Pharma
for a period of one year following his termination for any reason.

         In September 2003, we entered into  employment  agreement with Lan Hao,
our former Chief Financial Officer.  Pursuant to the terms of his agreement with
AXM Pharma,  Mr. Hao was entitled to be paid $120,000 per year for his services.
In  addition,  Mr. Hao  received a stock  grant of 100,000  shares of our common
stock,  health  insurance  and such other bonus and  incentives  as the Board of
Directors, in its discretion,  shall authorize. The term of Mr. Hao's employment
agreement is one year but the  agreement  may be terminated by either party with
or without cause on 30 days written  notice.  In the event of  termination  with
good cause by Mr. Hao or without  good cause by AXM Pharma,  Mr. Hao is entitled
to three months severance pay plus bonus and incentives  earned to that date. In
the event that Mr. Hao is terminated for good cause by the Company or terminates
the  agreement  without  good cause he will only be  entitled  to payment of his
salary,  bonus and incentives earned to the date of termination.  Mr. Hao is not
subject to any restrictive covenants in his employment agreement.  In March 2003
Mr. Hao voluntarily  resigned from his position as our Chief Financial  Officer.
He  is  not  entitled  to  any  severance  pay  as a  result  of  his  voluntary
resignation.

STOCK OPTION PLANS

         In January of 2004, our Board of Directors approved the "2004 Qualified
and Nonstatutory  Stock Option Plan." The Board of Directors  reserved 3,000,000
shares of the  Company's  common  stock to be  issued  in the form of  incentive
and/or  non-qualified stock options for employees,  directors and consultants to
AXM. As of March 25, 2004,  our Board of Directors,  authorized  the issuance of
2,040,000 options to employees, directors and consultants. The stock option plan
and the options  authorized  thereunder are subject to ratification of the stock
option plan by our Shareholders at our next annual meeting.


ITEM 11. SECURITY OWNERSHIP OF MANANGEMENT AND BENEFICIAL OWNERS


         As used in this section,  the term beneficial ownership with respect to
a security is defined by Rule 13d-3 under the  Securities  Exchange Act of 1934,


<PAGE>

as amended, as consisting of sole or shared voting power (including the power to
vote or direct the vote) and/or sole or shared  investment  power (including the
power to dispose of or direct the  disposition  of) with respect to the security
through any contract,  arrangement,  understanding,  relationship  or otherwise,
subject to community property laws where applicable.

         As of March 25,  2004,  we had a total of  14,807,780  shares of common
stock and 3,285,000 shares of preferred stock issued and outstanding,  which are
the only issued and outstanding  voting equity securities of AXM Pharma.  Shares
of preferred stock vote on as converted basis with the common stock. At the date
of this filing,  each share of Preferred Stock is convertible  into one share of
common stock.

BENEFICIAL OWNERS OF MORE THAN 5% OF OUR COMMON STOCK AND PREFERRED STOCK

         The  following  table sets forth,  as of March 25, 2004,  the names and
addresses of each beneficial  owner of more than five percent (5%) of our common
stock and Preferred  Stock (taken together as one class) known to us (other than
as set forth under  "Security  Ownership of  Management"  below),  the number of
shares  of common  stock and  Preferred  Stock  beneficially  owned by each such
person,  and the percent of our common stock and Preferred Stock so owned.  Each
person has sole voting and  investment  power with  respect to the shares of our
common stock and  Preferred  Stock,  except as otherwise  indicated.  Beneficial
ownership  consists  of a direct  interest  in the  shares of  common  stock and
Preferred Stock, except as otherwise indicated.

                                      Amount and Nature of        Percentage
Name and Address                      Beneficial Ownership        Of Voting of
                                                                 Securities (1)
Byrle Lerner                          1,000,000                   5.53%
2904 Via Campesina
Palo Verdes Estates, CA 90274

Gryphon Master Fund, L.P.             1,807,469                   9.99%
500 Crescent Court
Suite 270
Dallas, Texas  75201


SF Capital Partners Ltd.                925,000                   5.11%
c/o Staro Asset Management, LLC
3600 South Lake Drive
St. Francis, Wisconsin 53235


----------------

(1)  All  Percentages  have been rounded up to the nearest one  hundredth of one
     percent.




<PAGE>


SECURITY OWNERSHIP OF MANAGEMENT

     The  following  table  sets  forth,  as of March  25,  2003,  the names and
addresses of each  director and executive  officer,  the number of shares of our
common stock and Preferred Stock  beneficially  owned, and the percentage of our
common stock and Preferred Stock so owned, by each such person.  Each person has
sole voting and investment  power with respect to the shares of our common stock
and  Preferred  Stock,  except  as  otherwise  indicated.  Beneficial  ownership
consists of a direct interest in the shares of common stock and Preferred Stock,
except as otherwise indicated.

                                                                Percentage
                                      Amount and Nature of      Of Voting of
Name and Address                      Beneficial Ownership      Securities (1)

Douglas C. MacLellan                  533,672(1)                2.95%
8324 Delgany Avenue
Playa Del Rey, California 90293

Peter W. Cunningham                   71,667(2)                 0.40%
755 Promontory Point Drive West
Newport Beach, California 92660

Mark Elenowitz                        225,160 (3)               1.24%
400 Professional Drive, Suite 310
Gaithersburg, MD 20879

Ms. Wang Wei Shi                      6,027,000 (4)             33.31%
46 Wen An Road
Building 4, 5th Floor
Shenyang, Liaoning, The Peoples
Republic of China 110003

Mr. Mark Bluer                        25,000                     0.14%
945 Magnolia Avenue, #77
Larkspur, CA 94939

Mr. Montgomery Simus                  0                          0%
33 Haight Street, Apt. #8
San Francisco, CA 94111

Mr. Chet Howard                       0                          0%
11792 Lily Rubin Ave.
Las Vegas, NV 89138

Chaoying (Charles) Li                 110,000                    0.61%
14/F, Building A, Huixium Plaza,
No.8 Beisihuan Zhong Road
Chaoyang District, Beijing 100101,
P.R. China
All directors and officers as a       6,992,499(5)              38.65%
group (6 persons)

-------------------
(1)  Includes  475,000  shares owned by Mr.  MacLellan  directly,  48,500 shares
     owned by The MacLellan Group,  Inc., which is owned by Mr.  MacLellan,  and
     16,953 shares owned by Broadband  Access  Market Space,  Ltd., a company in
     which Mr. MacLellan owns 60% of the outstanding shares.


<PAGE>

<TABLE>


(2)  Includes 41,667 shares owned by Mr.  Cunningham  directly and 30,000 shares
     owned by Rabelaisian Resources, Plc., a company owned by Mr. Cunningham. In
     addition to the shares listed herein Mr.  Cunningham is entitled to receive
     an additional  208,333 shares of our common stock over the next three years
     pursuant to his  employment  agreement  with AXM Pharma which provides that
     Mr.  Cunningham  is entitled to receive a stock grant of 250,000  shares of
     our common  stock,  which  shall be issued  and vest in equal  installments
     every six months (41,667 per six month period) beginning in August 2003.

(3)  Includes (i) 201,160 shares  indirectly owned by MHE, Inc. (a company owned
     100% by Mark  Elenowitz)  as a  result  of its 40%  ownership  interest  of
     TriPoint Capital Holdings,  LLC, which owns 502,900 shares of common stock,
     and (ii) 24,000  shares owned by Investor  Communications  Company,  LLC, a
     company which is owned by MHE, Inc.

(4)  Includes  3,117,000  shares owned by Ms. Wang directly and 2,910,000 shares
     owned by members of her immediate family.

(5)  The amounts  listed herein do not include  stock options  authorized by the
     Board of Directors which are subject to ratification of the 2004 "Qualified
     and Nonstatutory  Stock Option Plan" by our shareholders at the next annual
     meeting.  The following  option grants were approved by the Board:  Ms Wang
     300,000 options, Mr. MacLellan 400,000 options, Mr. Cunningham 400,000, Mr.
     Elenowitz 160,000 options, and Mr. Li 100,000 options. All of the foregoing
     options have a proposed  exercise price of $3.90 per share.  In addition on
     February 24, 2004, the Board of Directors authorized the issuance of 40,000
     options to Mr. Bluer at an exercise price of $5.70 per share.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

                      EQUITY COMPENSATION PLAN INFORMATION
<S>                             <C>                          <C>                          <C>
PLAN CATEGORY                   NUMBER OF SECURITIES TO BE   WEIGHTED-AVERAGE EXERCISE    NUMBER OF SECURITIES
-------------                   ---------------------------  --------------------------   --------------------
                                ISSUED UPON EXERCISE OF      PRICE OF OUTSTANDING         REMAINING AVAILABLE FOR
                                ------------------------     ---------------------        -----------------------
                                OUTSTANDING OPTIONS,         OPTIONS, WARRANTS AND        FUTURE ISSUANCE UNDER
                                ---------------------        ----------------------       ---------------------
                                WARRANTS AND RIGHTS          RIGHTS                       EQUITY COMPENSATION PLANS
                                -------------------          ------                       -------------------------
                                                                                          (EXCLUDING SECURITIES
                                                                                          ---------------------
                                                                                          REFLECTED IN COLUMN (A)
                                                                                          -----------------------

                                      (A)                           (B)                         (C)



EQUITY COMPENSATIONS PLANS      0                            0                            0
APPROVED BY SECURITY HOLDERS

EQUITY COMPENSATION PLANS NOT   0                            0                            0
APPROVED BY SECURITY HOLDERS

TOTAL                           0                            0                            0

</TABLE>




<PAGE>


CHANGES IN CONTROL

         As of the date of this  filing,  there  are no  arrangements  which may
result in a change in control of AXM Pharma, Inc.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTION

         We are party to a consulting  agreement with TriPoint Capital Advisors,
LLC, a company in which Mark Elenowitz,  a director and significant  shareholder
of AXM  Pharma,  indirectly  owns a 40%  interest.  Pursuant to the terms of the
consulting agreement,  we are required to pay TriPoint a monthly fee of $10,000.
The current  agreement  between  Tripoint  Capital Advisors and AXM Pharma has a
one-year term and is terminable by either party,  with or without cause, upon 30
days written notice.  Additionally,  on May 1, 2002,  pursuant to the terms of a
previous consulting agreement with TriPoint,  Werke  Pharmaceuticals,  Inc., our
wholly owned  subsidiary  issued  TriPoint  500,000  shares of its common stock,
which  shares  were  exchanged  pursuant  to the  terms  of our  share  exchange
agreement with the  shareholders of Werke  Pharmaceuticals,  Inc. into shares of
AXM Pharma common stock. In addition, Werke Pharmaceuticals,  Inc. is party to a
consulting  agreement with Investor  Communications  Company, LLC , a company in
which  Mark  Elenowitz  directly  benefits  from 20% of the  stock  compensation
received from the Company.  Pursuant to the terms of the  consulting  agreement,
Werke Pharmaceuticals,  Inc. is required to pay Investor Communications Company,
LLC a monthly fee of $5,000 and issued to Investor  Communications  Company, LLC
120,000 shares of its common stock which were subsequently converted into shares
of AXM Pharma common stock as a result of the Share Exchange.

         On September 12, 2002, Byrle Lerner,  a significant  shareholder of AXM
Pharma, made a capital contribution of $100,000 to Werke  Pharmaceuticals,  Inc.
to provide  working  capital for Werke  Pharmaceuticals,  Inc.'s  United  States
administrative offices, including expenses for travel to The Peoples Republic of
China by Werke  Pharmaceuticals,  Inc.'s U.S.  employees  and  consultants.  Mr.
Lerner received shares of Werke Pharmaceuticals,  which were later exchanged for
shares of AXM Pharma pursuant to our share exchange with Werke  Pharmaceuticals,
in consideration for his capital contribution.

         In September  2003, we engaged Amaroq  Capital,  LLC, to provide advice
regarding  business  development and to identify and review potential merger and
acquisition candidates in Asia. Amaroq Capital will be paid $5,000 per month for
its services and is entitled to receive  additional  compensation  in connection
with  mergers  or  acquisitions  that it  identifies  or for  which it  provides
substantive  assistance to AXM Pharma. The current agreement with Amaroq Capital
is for a six month term and is terminable  only upon the mutual written  consent
of AXM Pharma and Amaroq Capital.  Amaroq Capital is owned by Joseph Cunningham,
brother of Peter Cunningham, our President and Chief Executive Officer.

         In April  2003,  we engaged  Rabelaisian  Resources,  Plc.,  to provide
consulting services for AXM Pharma.  Rabelaisian Resources' agreement expired in
August  2003.  Rabelaisian  Resources  is  owned  by  Peter  Cunningham,  who is
currently  our  President  and Chief  Executive  Officer.  In August  2003,  Mr.
Cunningham  was hired as our Chief  Operating  Officer  and was  promoted to the
positions of President and Chief Executive  Officer following the resignation of
That Ngo from such positions in September 2003.



ITEM 13. EXHIBITS, FINANICAL STATEMENTS AND REPORTS ON FORM 8-K

(a) The  following  documents  are  filed  as part  of  this  report:  Financial
Statements (appearing at the end of this report):


<PAGE>


         Report of Independent Public Accountant

         Balance Sheet as of December 31, 2003

         Statement of  Operations - For the years ended  December 31, 2002,  and
         2003.

         Statement  of  Stockholders  Equity - For the years ended  December 31,
         2002, and 2003.

         Statement of Cash Flows - For the years ended  December  31, 2002,  and
         2003.

         Notes to Financial Statements


(b) Exhibits

         EXHIBIT NUMBER   DESCRIPTION
         --------------   -----------

            4.1*        Securities  Purchase  Agreement  dated as of August  21,
                        2003

            4.2*        Registration  Rights  Agreement  dated as of August  21,
                        2003

            4.3*        Designation  of  Rights  and  Preferences  of  Series  A
                        Preferred Stock dated as of August 21, 2003

            4.4*        Form of Warrant to Purchase  Common Stock issued  August
                        21, 2003

            4.5**       Securities  Purchase Agreement dated as of September 12,
                        2003

            4.6**       Registration  Rights Agreement dated as of September 12,
                        2003

            4.7**       Form  of  Warrant  to  Purchase   Common   Stock  issued
                        September 12, 2003

            4.8**       Form  of  Warrant  to  Purchase   Common   Stock  issued
                        September 12, 2003

            4.9***      Securities  Purchase  Agreement dated as of December 30,
                        2003

            4.10***     Registration  Rights  Agreement dated as of December 30,
                        2003

            4.11***     Designation  of  Rights  and  Preferences  of  Series  A
                        Preferred Stock dated as of December 30, 2003

            4.12***     Form of Warrant to Purchase Common Stock issued December
                        31, 2003

            10.1****++  Employment Agreement of Peter W. Cunningham

            10.2****++  Employment Agreement of Lan S. Hao

            10.3****    Agreement for Processing  between Shenyang Tianwei Werke
                        Pharmaceutical    Co.,   Ltd.   and   Qiqihaer   No.   2
                        Pharmaceutical Factory

            10.4****    Agreement  on  Agency  for Sale  (Distribution)  between
                        Shenyang  Taiwei  Pharmaceutical  Factory  and  Liaoning
                        Weikang Medicine Co., Ltd.


<PAGE>


            10.5****    Consulting Agreement with Tripoint Capital Advisors, LLC

            10.6****    Consulting Agreement with Amaroq Capital, LLC

            10.7****    Consulting    Services    Agreement   with    Woodbridge
                        Management, Ltd.

            10.8****    Consulting Agreement with Madden Consulting, Inc.

            10.9****    Investment   Banking   Agreement   with  Great   Eastern
                        Securities, Inc.

            10.10****   Investor Relations Agreement with the Aston Organization

            10.11+,++   Incentive and Nonstatutory Stock Option Plan

            14.1+       Code of Ethics for Board of Directors

            14.2+       Code of Ethics for Executive Officers

            21.1+       Subsidiaries of the Company

            31.1+       Certification  of Chief  Executive  Officer  pursuant to
                        Rule 13a-14(a)  Certification of Chief Executive Officer
                        pursuant to Rule 13a-14(a)*

            31.2+       Certification  of Chief  Financial  Officer  pursuant to
                        Rule 13a-14(a)  Certification of Chief Financial Officer
                        pursuant to Rule 13a-14(a)*

            32.1+       Certification of Chief Executive  Officer pursuant to 18
                        U.S.C.  1350  Certification  of Chief Executive  Officer
                        pursuant to 18 U.S.C. 1350*

            32.2+       Certification of Chief Financial  Officer pursuant to 18
                        U.S.C.  1350  Certification  of Chief Financial  Officer
                        pursuant to 18 U.S.C. 1350*

            99.1****    Form of lock-up agreement by officers,  directors and 5%
                        or greater shareholders

         *  Incorporated  herein by  reference  to Exhibits  10.1 to 10.4 of the
         Company's Current Report on Form 8-K Dated August 21, 2003.

         **  Incorporated  herein by reference  to Exhibits  10.1 to 10.5 of the
         Company's Current Report on Form 8-K Dated September 12, 2003.

         ***  Incorporated  herein by reference to Exhibits  10.1 to 10.4 of the
         Company's Current Report on Form 8-K Dated December 31, 2003

         **** Incorporated  herein by reference to Exhibits 10.1 to 10.10 of the
         Company's Registration Statement on Form SB-2 Dated March 4, 2004.


         + Filed herewith

         ++Exhibit  represents a  management  contract or  compensatory  plan or
arrangement.

(c)  Reports on Form 8-K.

          1.   On October 1, 2003, we filed a report on Form 8-K  disclosing the
               fact  that  we  had  changed  our  corporate   name  from  "Axiom
               Pharmaceuticals, Inc." to "AXM Pharma, Inc."


<PAGE>



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES-

(1) AUDIT FEES

The aggregate fees billed for professional services rendered by Malone & Bailey,
PLLC, for the audit of the registrant's  annual financial  statements and review
of the financial statements included in the registrant's Form 10-QSB or services
that are normally  provided by the  accountant in connection  with statutory and
regulatory  filings or engagements for fiscal years 2003 and 2002 were $6,280.00
and $4,800.00, respectively.

(2) AUDIT-RELATED FEES

The aggregate fees billed for professional services rendered by Malone & Bailey,
PLLC,  for  "Audit-related  fees" were  $12,100.00,  for issuance of consents in
connection our Registration Statement on Form SB-2 originally filed on September
25,  2003,  assistance  with  response  to SEC  comments  to  such  Registration
Statement and consultations regarding generally accepted accounting principles.

(3) TAX FEES

NONE

(4) ALL OTHER FEES

NONE

(5) AUDIT COMMITTEE POLICIES AND PROCEDURES

         Under its charter,  the Audit  Committee must  pre-approve all auditing
services and permitted non-audit services (including the fees and terms thereof)
to be performed for AXM Pharma by its  independent  auditors,  subject to the de
minimus exceptions for non-audit  services described in Section  10A(i)(1)(B) of
the Securities Exchange Act of 1934, which should nonetheless be approved by the
Audit Committee prior to the completion of the audit.  Each year the independent
auditor's retention to audit our financial statements,  including the associated
fee, is  approved  by the  committee  before the filing of the  previous  year's
annual  report on Form 10-KSB.  At the  beginning of the fiscal year,  the Audit
Committee will evaluate  other known  potential  engagements of the  independent
auditor,  including  the scope of work proposed to be performed and the proposed
fees,  and  approve or reject each  service,  taking  into  account  whether the
services are  permissible  under  applicable law and the possible impact of each
non-audit service on the independent auditor's independence from management.  At
each  subsequent  committee  meeting,  the  auditor and  management  may present
subsequent services for approval. Typically, these would be services such as due
diligence for an acquisition, that would not have been known at the beginning of
the year.

         Since the May 6, 2003,  effective  date of the  Securities and Exchange
Commission  rules stating that an auditor is not  independent of an audit client
if the services it provides to the client are not appropriately  approved,  each
new  engagement  of Malone & Bailey,  PLLC,  has been approved in advance by the
Audit  Committee,  and none of  those  engagements  made  use of the de  minimus
exception to  pre-approval  contained in Section  10A(i)(1)(B) of the Securities
Exchange Act of 1934.


<PAGE>




                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly caused this Annual  Report on Form 10-KSB/A to be signed on
its behalf by the undersigned hereunto duly authorized.


AXM PHARMA, INC.

By:   /s/ Peter Cunningham
      ---------------------------
          Peter Cunningham,
          Chief Executive Officer

Dated:  April 5, 2004

By:   /s/ Chet Howard
      ---------------------------
         Chet Howard,
         Chief Financial Officer

Dated:  April 5, 2004


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  this report has been signed by the following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

         /s/ Peter W. Cunningham                       Dated: April 5, 2004
         -----------------------------------------
             Peter W. Cunningham
             President and Chief Executive Officer


         /s/ Chet Howard                               Dated: April 5, 2004
         -----------------------------------------
             Chet Howard
             Chief Financial Officer

         /s/ Wang Wei Shi                              Dated: April 5, 2004
         -----------------------------------------
             Wang Wei Shi
             Chairman of the Board

         /s/ Douglas C. MacLellan                      Dated: April 5, 2004
         -----------------------------------------
             Douglas C. MacLellan
             Vice-chairman of the Board

         /s/ Mark H. Elenowitz                         Dated: April 5, 2004
         -----------------------------------------
             Mark H. Elenowitz
             Director


<PAGE>


         /s/ Chaoying Li                               Dated: April 5, 2004
         -----------------------------------------
             Chaoying Li
             Director

         /s/ Mark J. Bluer                             Dated: April 5, 2004
         -----------------------------------------
             Mark J. Bluer
             Director

         /s/ Montgomery F. Simus                       Dated: April 5, 2004
         -----------------------------------------
             Montgomery F. Simus
             Director

















<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
  AXM Pharma, Inc.
  Las Vegas, Nevada

We have audited the accompanying  consolidated balance sheet of AXM Pharma, Inc.
as of December 31, 2003 and the related statements of operations,  stockholders'
equity,  and cash flows for each of the two years then  ended.  These  financial
statements are the responsibility of AXM Pharma's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of AXM Pharma, Inc. as of December
31,  2003 and the results of its  operations  and its cash flows for each of the
two years  then  ended,  in  conformity  with  accounting  principles  generally
accepted in the United States of America.


/s/ Lopez, Blevins, Bork & Associates, LLP
------------------------------------------
Lopez, Blevins, Bork & Associates, LLP
Houston, Texas


August 26, 2004





<PAGE>

<TABLE>

<CAPTION>


                                AXM PHARMA, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003

                                     ASSETS

<S>                                                                        <C>
Current assets
  Cash                                                                     $  2,950,782
  Accounts receivable, net of allowance of $0                                 2,614,979
  Inventories                                                                 2,243,754
  Advances - supplier                                                         1,465,699
                                                                           ------------
    Total current assets                                                      9,275,214

Property and equipment, net                                                     299,776
Licenses                                                                      1,449,748
                                                                           ------------

    TOTAL ASSETS                                                           $ 11,024,738
                                                                           ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Value added tax payable                                                  $  2,917,826
  Accounts payable and accrued expenses                                         524,164
                                                                           ------------
    Total current liabilities                                                 3,441,990
                                                                           ------------

Commitments

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 10,000,000 shares authorized,
    2,750,000 shares issued and outstanding                                       2,750
  Common stock, $.001 par value, 50,000,000 shares authorized,
    13,728,347 shares issued and outstanding                                     13,728
  Additional paid-in capital                                                 12,844,354
  Accumulated deficit                                                        (5,278,084)
                                                                           ------------
    Total Stockholders' Equity                                                7,582,748
                                                                           ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 11,024,738
                                                                           ============
</TABLE>






                See accompanying summary of accounting policies
                       and notes to financial statements.




<PAGE>

<TABLE>

<CAPTION>

                                AXM PHARMA, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                                      December 31,
                                                                 2003              2002
                                                            --------------    --------------
<S>                                                         <C>               <C>

  Revenues                                                  $   10,025,605    $    3,103,656

  Cost of revenues                                               6,528,280         2,482,077
                                                            --------------    --------------

  Gross profit                                                   3,497,325           621,579
                                                            --------------    --------------

  General, administrative and selling:
    Cash                                                         3,683,307           673,936
    Non-cash                                                     3,522,085                 -
                                                            --------------    --------------

                                                                 7,205,392           673,936
                                                            --------------    --------------

  Net loss                                                  $   (3,708,067)   $      (52,357)
                                                            ==============    ==============

  Net loss applicable to common shareholders:
    Net loss                                                $   (3,708,067)   $      (52,357)
    Beneficial conversion of preferred stock                    (2,933,137)                -
    Deemed dividend from beneficial conversion
     feature of warrants                                          (130,362)                -
                                                            --------------    --------------
  Net loss applicable to common shareholders                $   (6,771,556)   $      (52,357)
                                                            ==============    ==============

  Net loss per share:
                                                            $        (0.52)   $        (0.01)
    Basic and diluted                                                =====             =====


  Weighted averaged shares outstanding:
    Basic and diluted                                           12,927,956        10,000,000
                                                            ==============    ==============
</TABLE>



                See accompanying summary of accounting policies
                       and notes to financial statements.



<PAGE>

<TABLE>

<CAPTION>

                                AXM PHARMA, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2003 AND 2002




                            Common Stock              Preferred Stock        Additional
                            ------------              ---------------        Paid-In        Accumulated
                          Shares        Amount       Shares       Amount     Capital          Deficit         Total
                       ------------   -----------  -----------   ---------   ------------   -------------   -------------
<S>                    <C>            <C>          <C>           <C>         <C>            <C>             <C>
Balance,
  December 31, 2001      10,000,000   $    10,000            -   $       -   $  4,362,877   $  (1,517,660)  $   2,855,217

Contributed capital               -             -            -           -        100,000               -         100,000

Net loss                          -             -            -           -              -         (52,357)        (52,357)
                       ------------   -----------  -----------   ---------   ------------   -------------   -------------

Balance,
  December 31, 2002      10,000,000        10,000            -           -      4,462,877      (1,570,017)      2,902,860

Issuance of common
  stock in connection
  with recapitalization   2,846,680         2,847            -           -        (25,539)              -         (22,692)

Issuance of common
  stock for services        881,667           881            -           -      3,521,204               -       3,522,085

Issuance of preferred
  stock and warrants,
  net of expenses                 -             -    2,750,000       2,750      4,885,812               -       4,888,562

Beneficial conversion
  feature embedded in
  preferred stock and
  warrants                        -             -            -           -      3,063,499               -       3,063,499

Deemed dividend on
  preferred stock                 -             -            -           -     (2,933,137)              -      (2,933,137)

Deemed dividends
  on warrants                     -             -            -           -       (130,362)              -        (130,362)

Net loss                          -             -            -           -              -      (3,708,067)     (3,708,067)
                       ------------   -----------  -----------   ---------   ------------   -------------   -------------

Balance,
  December 31, 2003      13,728,347   $    13,728    2,750,000   $   2,750   $ 12,844,354   $  (5,278,084)  $   7,582,748
                       ============   ===========  ===========   =========   ============   =============   =============

</TABLE>



                See accompanying summary of accounting policies
                       and notes to financial statements.


<PAGE>

<TABLE>

<CAPTION>

                                AXM PHARMA, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                                        2003              2002
                                                                  --------------     -------------
<S>                                                               <C>                <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                        $   (3,708,067)    $     (52,357)
  Adjustments to reconcile net loss to cash used in
    operating activities:
      Common stock issued for services                                 3,522,085                 -
      Depreciation and amortization                                       51,573            21,664
        Changes in assets and liabilities:
          Cash held in trust                                             149,203           738,360
          Accounts receivable                                         (1,681,978)         (387,622)
          Advances                                                    (1,166,101)         (291,597)
          Inventories                                                   (918,829)         (650,009)
          Accounts payable                                               457,317                 -
          Value added tax payable                                      1,705,755           538,901
          Accrued expenses                                              (161,111)           88,687
                                                                  --------------     -------------

CASH FLOWS PROVIDED BY (USED IN)
  OPERATING ACTIVITIES                                                (1,750,153)            6,027
                                                                  --------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                                  (293,654)                -
                                                                  --------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Capital contributions                                                        -           100,000
  Proceeds from the sale of preferred stock                            4,888,562                 -
                                                                  --------------     -------------

CASH FROM FINANCING ACTIVITIES                                         4,888,562           100,000
                                                                  --------------     -------------

NET INCREASE IN CASH                                                   2,844,755           106,027

Cash, beginning of period                                                106,027                 -
                                                                  --------------     -------------

Cash, end of period                                               $    2,950,782     $     106,027
                                                                  ==============     =============

SUPPLEMENTAL NON-CASH TRANSACTIONS:
  Net liabilities assumed in reverse merger                       $       22,692     $           -
                                                                  ==============     =============
</TABLE>


                See accompanying summary of accounting policies
                       and notes to financial statements.



<PAGE>


                                AXM PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND BASIS OF PRESENTATION

Nature of our Business

AXM Pharma,  Inc. ("AXM  Pharma"),  a Nevada  corporation,  is a  pharmaceutical
company  based in The  People's  Republic  of China.  We are a  publicly  listed
company  quoted  under the symbol  (OTCBB:  AXMA).  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,  Shenyang Tianwei Werke  Pharmaceuticals  Co.,
Ltd.,  located  in the  city of  Shenyang  in the  Northeastern  Portion  of the
People's  Republic of China. Our products are currently  produced by third-party
manufacturers and sold through a third-party distributor. Shenyang Tianwei Werke
Pharmaceuticals  currently  holds 43  licenses to produce  over-the-counter  and
prescription  pharmaceutical products in The Peoples Republic of China. Of these
43 licenses, we have, to date,  commercialized four of these licenses from which
we  produce  five  products.  In the future we plan to expand  our  business  by
commercializing   additional   licenses   held   by   Shenyang   Tianwei   Werke
Pharmaceuticals;  acquiring  additional  product  licenses;  and by  moving  the
manufacturing and distribution of our products in-house.

Our subsidiary,  Shenyang Tainwei Werke  Pharmaceutical Co., Ltd., 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 AXM Pharma's  management,
technology,  and finances that the typical  foreign  investor  requires.  From a
foreign  investors'  point of view,  the  advantages  of  establishing  a Wholly
Foreign Owned Enterprise 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


<PAGE>


In summary, the key differences between a Wholly Foreign Owned Enterprise 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.

Shenyang Tianwei Werke Pharmaceuticals is located in the City of Shenyang, which
is in the  Province  of  Liaoning  in the  Northeastern  section of The  Peoples
Republic of China.  Shenyang Tianwei Werke  Pharmaceuticals  and its predecessor
company, Shenyang Tianwei Pharmaceutical Factory, Ltd. have an operating history
of approximately 10 years. Shenyang Tianwei Werke  Pharmaceuticals  historically
has  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. We currently
own 43 product  licenses and permits,  of which only four licenses are currently
commercialized.  Shenyang  Tianwei Werke  Pharmaceuticals's  Shenyang  plant was
decommissioned in December 2001 due to the 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 urban residential neighborhood.
As part of a broad-based corporate  development strategy,  the Shenyang plant is
anticipated to be contributed  to a city sponsored  commercial/residential  real
estate development.  Shenyang Tianwei Werke Pharmaceuticals currently utilizes a
third-party original equipment manufacturing pharmaceutical plant to produce all
of its products and sells its products only through third-party distributors.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities at the date of the balance  sheet.  Actual results could differ from
those estimates.

Cash and Cash Equivalents

Cash  equivalents  include highly  liquid,  temporary  cash  investments  having
original  maturity dates of three months or less. For reporting  purposes,  cash
equivalents are stated at cost plus accrued  interest,  which  approximates fair
value.




<PAGE>

Inventories

Inventories  are valued at the lower of cost or market.  Cost is  determined  by
using the average cost method.  Inventories  consist  primarily of raw materials
for its three products which are for the treatment of bronchial infections, skin
infections  and  gastric  and  urinary  infections.  AXM Pharma uses third party
manufacturers and generally has no work in process or finished goods inventory.

Long-Lived Assets

Property and equipment are stated at cost less accumulated  depreciation.  Major
renewals and improvements are capitalized;  minor replacements,  maintenance and
repairs are charged to current operations.  Depreciation is computed by applying
the  straight-line  method over the  estimated  useful  lives of  machinery  and
equipment (three to seven years). The majority of AXM Pharma's long-lived assets
are located in The People's  Republic of China.  Axiom performs  reviews for the
impairment  of long-lived  assets  whenever  events or changes in  circumstances
indicate that the carrying amount of an asset may not be recoverable.

Licenses

Licenses  consist  of  permits to  produce  pharmaceutical  products  which were
acquired in a business combination. The licenses were valued at their historical
cost.  The cost of the licenses is not  amortized  since they have an indefinite
life.  The licenses are reviewed for  impairment  whenever  events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable. The permits are in the Peoples Republic of China.

Value Added Tax Payable

AXM Pharma is subject to a value  added tax rate of 17% on product  sales by the
Peoples  Republic of China.  Value  added tax  payable is computed  net of value
added tax paid on purchases for all sales in the Peoples Republic of China.

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.

Revenue Recognition

AXM Pharma recognizes revenue when persuasive evidence of an arrangement exists,
delivery  has  occurred,   the  sales  price  is  fixed  or   determinable   and
collectibility is probable.


<PAGE>


Product  sales are  recognized  by AXM Pharma  generally  at the time product is
shipped. Shipping and handling costs are included in cost of goods sold.

Income Taxes

Income taxes are computed using the asset and liability method.  Under the asset
and liability method,  deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation  allowance  is provided  for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized.

Foreign Currency Translation

The Renminbi ("RMB") is the functional  currency of AXM Pharma.  Transactions in
foreign  currency  are  translated  at rates of  exchange  rates  ruling  at the
transaction  date.  Monetary  assets  and  liabilities  denominated  in  foreign
currencies are retranslated at rates ruling at the balance sheet date.  Exchange
differences are recognize in the in the statement of operations.

Stock-Based Compensation

AXM Pharma accounts for stock-based  compensation for employees and non-employee
members of our board of  directors  in  accordance  with  Accounting  Principles
Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees." Under
APB Opinion No. 25, compensation  expense is based on the intrinsic value on the
measurement  date,  calculated as the  difference  between the fair value of our
common  stock and the  relevant  exercise  price.  We  account  for  stock-based
compensation for  non-employees,  who are not members of our board of directors,
at fair value using a Black-Scholes  option-pricing model in accordance with the
provisions of SFAS No. 123, "Accounting for Stock-Based  Compensation" and other
applicable accounting principles.  We recorded stock-based  compensation expense
of approximately  $3,522,000  million during 2003. There were no options granted
to employees during 2003 and 2002.

Basic and Diluted Net Loss per Share

Basic net loss per share is computed using the weighted average number of common
shares  outstanding  during the  period.  Diluted net loss per share is computed
using the weighted  average number of common and, if dilutive,  potential common
shares  outstanding  during the period.  Potential  common shares consist of the
incremental  common  shares  issuable  upon the  exercise  of stock  options and
warrants  (using the treasury  stock method).  For 2003 and 2002,  there were no
potential  common shares  outstanding  that were related to shares issuable upon
the exercise of stock options or warrants.

Recent Accounting Pronouncements

In May 2003, the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standard  No. 150  "Accounting  for Certain  Financial
Instruments   with   Characteristics   of  both  Liabilities  and  Equity"  (the


<PAGE>

"Statement").  The Statement  establishes standards for how an issuer classifies
and  measures  certain  financial   instruments  with  characteristics  of  both
liabilities  and equity.  The  Statement is generally  effective  for  financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. The adoption of this Statement had no effect on our consolidated financial
statements.

In January 2003, the FASB issued  Interpretation No. 46 ("FIN 46") Consolidation
of Variable  Interest  Entities,  which addresses the  consolidation of variable
interest  entities  ("VIEs")  by  business  enterprises  that  are  the  primary
beneficiaries.  A VIE  is  an  entity  that  does  not  have  sufficient  equity
investment  at risk to permit it to finance its  activities  without  additional
subordinated   financial   support,   or  whose   equity   investors   lack  the
characteristics of a controlling financial interest.  The primary beneficiary of
a VIE is the enterprise that has the majority of the risks or rewards associated
with  the  VIE.  In  December  2003,  the  FASB  issued  a  revision  to FIN 46,
Interpretation No. 46R ("FIN 46R"), to clarify some of the provisions of FIN 46,
and to defer certain  entities from adopting  until the end of the first interim
or annual reporting  period ending after March 15, 2004.  Application of FIN 46R
is required in financial  statements of public  entities that have  interests in
structures that are commonly referred to as special-purpose entities for periods
ending  after  December  15,  2003.  Application  for all other types of VIEs is
required in financial  statements  for periods  ending after March 15, 2004.  We
believe we have no  arrangements  that would require the application of FIN 46R.
We have no material off-balance sheet arrangements.

Reclassifications

Certain items in 2002 have been  reclassified  to conform to the 2003  financial
statement presentation.


NOTE 2 - ACCOUNTS RECEIVABLE

AXM Pharma's trade  accounts  receivable are shown net of allowance for doubtful
accounts of $0.

AXM Pharma  maintains  allowances  for doubtful  accounts for  estimated  losses
resulting from the inability of its customer to make required  payments.  If the
financial  condition of AXM Pharma's customer were to deteriorate,  resulting in
an impairment of their ability to make  payments,  additional  allowances may be
required.


NOTE 3 - PROPERTY AND EQUIPMENT:

Components  of  property,  plant,  and  equipment,  at December  31, 2003 are as
follows:

    Vehicles                                         $   77,473
    Equipment                                           126,704
    Construction in progress                            190,496
                                                     ----------
                                                        394,673
    Less: accumulated depreciation                      (94,897)
                                                     ----------
                                                     $  299,776



<PAGE>

Depreciation expense totaled $51,573 and $21,664 in 2003 and 2002, respectively.


NOTE 4 - STOCKHOLDERS' EQUITY

Common Stock

We periodically issue common stock for services rendered. Common stock issued is
valued at fair market value,  which is the quoted market price.  During the year
ended  December 31, 2003,  AXM Pharma issued  881,667 shares of common stock for
services valued at $3,522,085.

On September 18, 2003, we issued  400,000  shares of restricted  Common Stock to
Madden  Consulting,  Inc.  pursuant to a consulting  agreement.  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 services
provided are public relations consulting.

On September 18, 2003, we issued 100,000 shares to Lan Hao, our Chief  Financial
Officer,  pursuant to the terms of his employment agreement with AXM Pharma. The
shares were issued pursuant to an exemption from registration under Section 4(2)
of the Securities Act for issuances not involving a public offering.

On August 31, 2003, we issued 41,667 shares to Peter  Cunningham,  our President
and Chief Executive Officer,  pursuant to the terms of his employment  agreement
with  AXM  Pharma.  The  shares  were  issued  pursuant  to  an  exemption  from
registration  under  Section  4(2)  of the  Securities  Act  for  issuances  not
involving a public offering.

On June 27,  2003,  we  issued  80,000  shares  of  restricted  Common  Stock to
Woodbridge Management,  Ltd. pursuant to a consulting agreement. 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 services
provided are financial consulting.

On May 1, 2003, we issued  25,000  shares of  restricted  Common Stock to Robert
Alexander pursuant to a consulting agreement. 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  services  provided  are
identification  and consulting for  acquisition of  pharmaceutical  companies in
Canada.

On May 21, 2003, we issued  40,000  shares of restricted  Common Stock to Amaroq
Capital, LLC pursuant to a consulting agreement. 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 services  provided are
business development and financial consulting.


<PAGE>


On May 21, 2003, we issued 15,000 shares of restricted Common Stock to McCartney
Multimedia,  Inc.  pursuant to a  consulting  agreement.  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 services
provided are the creation of company's web site and logo.

On April  30,  2003,  we issued  30,000  shares of  restricted  Common  Stock to
Rabelaisian Resources,  Plc. pursuant to a consulting agreement. The shares were
issued pursuant to the exemption from  registration  provided by Section 4(2) of
the  Securities Act of 1933 for issuances not involving a public  offering.  The
services are to include business and product development.

On April 30, 2003, we issued 150,000 shares of restricted Common Stock to Madden
Consulting,  Inc.  pursuant to a  consulting  agreement.  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 services
provided are public relations consulting.

Convertible Preferred Stock

On  September  12,  2003,  AXM Pharma  completed a private  equity  financing of
$5,500,000 with two accredited  investors.  After payment of costs and expenses,
including fees of the placement agent, we received net proceeds of approximately
$4,889,000.  Pursuant to the terms of the Securities Purchase Agreements,  dated
as of August 21, 2003, and September 12, 2003, we issued 2,750,000 shares of our
preferred  stock,  $.001 par value per share,  at a price per share of $2.00 and
2,750,000 warrants. Each share of preferred stock is convertible,  at the option
of the holder, into one share of common stock, subject to adjustment for certain
occurrences.  Each  warrant  entitles  the holder to  purchase  one share of our
common  stock,  $.001 par  value,  for a period of five  years  from the date of
issuance  at a price  of $3.00  per  share.  Holders  of our  warrants  may also
exercise the warrants through a cashless  exercise under certain  circumstances.
The  warrants  are  redeemable  by AXM Pharma under  certain  circumstances.  In
addition to its fees and  expenses,  TN Capital  Equities,  Ltd.,  the placement
agent,  received a five-year  warrant to purchase up to 275,000 units. Each unit
granted to the placement  agent consists of one share of our preferred stock and
one  common  stock  purchase   warrant.   The  placement  agent's  warrants  are
exercisable at a price of $2.00 per unit.

The warrants are redeemable at AXM Pharma's option,  commencing 60 days from the
date of the final Closing,  by AXM Pharma at a price of $.05 per warrant upon 30
days written  notice;  provided (i) closing sales price for the common stock for
at least 30 days has been at $4.00  per  share;  (ii) a  registration  statement
relating to the common stock underlying the warrants has been declared effective
by the  Securities  and Exchange  Commission;  and (iii) the holder would not be
prevented from selling the common shares  issuable upon exercise of the warrants
subject  to the  notice of  redemption  as a result  of the  lock-up/dribble-out
provisions

In connection  with the  transaction,  AXM Pharma  recorded a deemed dividend of
$2,933,137 for the beneficial conversion feature embedded in the preferred stock
and a deemed dividend of $130,362 for the beneficial conversion feature embedded
in the warrants.


<PAGE>


AXM Pharma is authorized  to issue up to 4,095,000  shares of Series A preferred
stock par value $.001 per share.

Voting.  The  holder of each  share of the  Series A  Preferred  Stock  shall be
entitled  to the number of votes  equal to the number of shares of Common  Stock
into  which  such  share of Series A  Preferred  Stock  could be  converted  for
purposes of determining  the shares  entitled to vote at any regular,  annual or
special meeting of shareholders of AXM Pharma,  and shall have voting rights and
powers equal to the voting rights and powers of the Common Stock.

Dividend  Provisions.  The  holders of the  Series A  Preferred  Stock  shall be
entitled to receive,  when and as declared by the Board of Directors,  dividends
in such amounts as may be determined by the Board of Directors from time to time
out of funds legally available. No dividends (other than those payable solely in
Common  Stock)  shall be paid on the Common  Stock during any fiscal year of AXM
Pharma  until there shall have been paid or declared  and set apart  during that
fiscal  year for the  holders of the Series A  Preferred  Stock a dividend in an
amount per share equal to (i) the number of shares of Common Stock issuable upon
conversion  of the Series A  Preferred  Stock times (ii) the amount per share of
the dividend to be paid on the Common Stock.


NOTE 4 - INCOME TAXES

AXM Pharma is incorporated in the PRC which is governed by the Income Tax Law of
the PRC concerning  Foreign Investment  Enterprises and Foreign  Enterprises and
various  local  income tax laws (the  "Income Tax  Laws").  Under the Income Tax
Laws, foreign investment  enterprises ("FIE") generally are subject to an income
tax at an  effective  rate of 33% (30% state  income  taxes plus 3% local income
taxes) on income as  reported  in their  statutory  financial  statements  after
appropriate  tax  adjustments  unless the  enterprise  is  located in  specially
designated  regions or cities for which more  favorable  effective  rates apply.
Upon approval by the PRC tax authorities, FIEs scheduled to operate for a period
of 10 years or more and engaged in  manufacturing  and  production may be exempt
from income taxes for two years,  commencing with their first profitable year of
operations,  and thereafter with a 50% exemption for the next three years. As of
December 31, 2003,  AXM Pharma had not attained  profitable  operations  for tax
purposes.

For the years ended December 31, 2003 and 2002,  AXM Pharma  incurred net losses
and,  therefore,  has no tax liability.  The net deferred tax asset generated by
the loss  carry-forward  has been fully  reserved.  The cumulative net operating
loss  carry-forward is  approximately  $3,000,000 at December 31, 2003, and will
expire in the years 2007 through 2023.

Deferred income taxes consist of the following at December 31, 2003:

    Long-term:
      Net operating loss                                  $  1,020,000
      Valuation allowance                                   (1,020,000)
                                                          ------------
                                                          $          -
                                                          ============


<PAGE>



NOTE 5 - MAJOR DISTRIBUTOR

AXM Pharma has one  distributor  that accounted for 100% of net revenues for the
years ended December 31, 2003 and 2002, respectively. The distribution agreement
expires in March 2004.

AXM Pharma will maintain  allowances for estimated potential bad debt losses and
will revise its estimates of  collectibility  on a periodic  basis.  There is no
history  of bad debt  experience  with the  distributor  and  collection  of the
receivable is reasonably assured.

AXM Pharma  products  are sold by a third party  distributor  to  hospitals  and
hospital  distributors.  The slow down of the  pharmaceutical  industry globally
will have a material adverse effect on AXM Pharma's  business.  AXM Pharma's has
one  primary  distributor  and the  loss of this  distributor  could  cause  AXM
Pharma's business to suffer while they are finding new distributors.


NOTE 6 - RELATED PARTY TRANSACTIONS

AXM Pharma has a consulting  agreement with TriPoint  Capital  Advisors,  LLC, a
company in which Mark Elenowitz,  a director and significant  shareholder of AXM
Pharma, indirectly owns a 40% interest. AXM Pharma is required to pay TriPoint a
monthly fee of $10,000.  The current agreement between Tripoint Capital Advisors
and AXM Pharma is for a one-year  term and is terminable by either party with 30
days notice. The one-year term expires on August 24, 2004.

Additionally,  on May 1, 2002,  pursuant  to the terms of a previous  consulting
agreement  with  TriPoint,   Werke  Pharmaceuticals,   Inc.,  our  wholly  owned
subsidiary issued TriPoint 500,000 shares of its common stock, which shares were
exchanged  pursuant  to the  terms  of our  share  exchange  agreement  with the
shareholders  of Werke  Pharmaceuticals,  Inc.  into shares of AXM Pharma common
stock.  In  addition,  Werke  Pharmaceuticals,  Inc.  is party  to a  consulting
agreement  with Investor  Communications  Company,  LLC, a company in which Mark
Elenowitz directly benefits from 20% of the stock compensation received from AXM
Pharma.   Pursuant   to  the   terms   of  the   consulting   agreement,   Werke
Pharmaceuticals,  Inc. is required to pay Investor Communications Company, LLC a
monthly fee of $5,000 and issued to Investor Communications Company, LLC 120,000
shares of its common stock which were subsequently  converted into shares of AXM
Pharma common stock as a result of the Share Exchange.

In September 2003, we engaged Amaroq Capital,  LLC, to provide advice  regarding
business development and to identify and review potential merger and acquisition
candidates  in Asia.  Amaroq  Capital  will be paid  $5,000  per  month  for its
services and is entitled to receive  additional  compensation in connection with
mergers or acquisitions that it identifies or for which it provides  substantive
assistance to AXM Pharma.  The current  agreement  with Amaroq  Capital is for a
six- month term and is terminable  only upon the mutual  written  consent of AXM
Pharma and Amaroq Capital. Amaroq Capital is owned by Joseph Cunningham, brother
of Peter Cunningham, our President and Chief Executive Officer.


<PAGE>


In April 2003, we engaged  Rabelaisian  Resources,  Plc., to provide  consulting
services  for AXM Pharma.  Rabelaisian  Resources'  agreement  expired in August
2003.  Rabelaisian Resources is owned by Peter Cunningham,  who is currently our
President and Chief Executive Officer.  In August 2003, Mr. Cunningham was hired
as our Chief  Operating  Officer and was promoted to the  positions of President
and Chief  Executive  Officer  following the  resignation  of That Ngo from such
positions in September 2003.


NOTE 7 - VALUE ADDED TAX PAYABLE

AXM Pharma is subject  to  Chinese  value  added tax at a rate of 17% on product
sales.  Value added tax payable on sales is computed net of value added tax paid
on purchases for all domestic sales.


NOTE 8 - DISTRIBUTION OF PROFITS

As stipulated by the relevant laws and regulations applicable to China's foreign
investment  enterprises,  AXM Pharma is required to make appropriations from net
income as determined under accounting  principles  generally accepted in the PRC
("PRC GAAP") to  non-distributable  reserves which include a general reserve, an
enterprises expansion reserve and employee welfare and bonus reserves.

The general  reserve is used to offset  future  extraordinary  losses as defined
under PRC GAAP. AXM Pharma may, upon a resolution passed by the owners,  convert
the general reserve into capital. The employee welfare and bonus reserve is used
for the  collective  welfare of the  employees  of AXM  Pharma.  The  enterprise
expansion  reserve is used for the  expansion of AXM Pharma and can be converted
to capital subject to approval by the relevant  authorities.  AXM Pharma did not
record  any  reserves  in 2003  and  2002.  AXM  Pharma  incurred  losses  under
accounting  principles  generally accepted under the PRC. Therefore,  AXM Pharma
was not required to record such reserves. No such adjustments are required under
accounting principles generally accepted in the United States of America in 2003
and 2002.


NOTE 9 - EMPLOYEE RETIREMENT BENEFITS AND POST RETIREMENT BENEFITS

AXM Pharma's employees in the PRC are entitled to retirement benefits calculated
with reference to their basic salaries on retirement and their length of service
in accordance  with a government  managed  benefits  plan. The PRC government is
responsible for the benefit liability to these retired employees.  AXM Pharma is
required to make  contributions to the state retirement plan based on 19% of the
employees'  monthly basic salaries.  Because AXM Pharma only has temporary staff
for the  years  ended  2003 and 2002,  AXM  Pharma  is not  obligated  under any
contributions to the state  retirement.  AXM Pharma does not have any other post
retirement benefit plans and does not provide any post-employment benefits.


<PAGE>



NOTE 10 - COMMITMENTS

In August 2003, we entered into an employment  agreement with Peter  Cunningham,
our President and Chief Executive  Officer.  Although he was originally hired to
serve as our Chief  Operating  Officer,  in September  2003, Mr.  Cunningham was
promoted to the positions of President and Chief Executive Officer.  At the time
of his promotion,  other than the change in his  responsibilities,  the terms of
Mr. Cunningham's  employment  agreement remained the same. Pursuant to the terms
of his agreement  with AXM Pharma,  Mr.  Cunningham  shall be paid not less than
$120,000  per year for his  services.  In January  2004,  our Board of Directors
increased Mr.  Cunningham's  salary from $120,000 per year to $240,000 per year.
In  addition,  Mr.  Cunningham  is  entitled to receive a stock grant of 250,000
shares of our common stock, which shall be issued and vest in equal installments
every six months  (41,667 per six month  period)  beginning in August 2003.  The
term  of Mr.  Cunningham's  agreement  with  AXM  Pharma  is one  year,  but the
agreement shall automatically renew on the first and second anniversary dates of
the agreement unless either AXM Pharma or Mr. Cunningham provides written notice
to the other not less than 60 days  prior to the  anniversary  date that they do
not wish to renew the agreement, in which case the agreement shall expire on the
day prior to the  anniversary  date. The employment  agreement may be terminated
for good  cause  by  either  party in the  event  of a  material  breach  of the
employment  agreement  by either  party or in the case of a change in control of
AXM Pharma.  In the event of  termination  with good cause by Mr.  Cunningham or
without  good cause by AXM Pharma,  Mr.  Cunningham  is entitled to three months
severance  plus bonus and  incentives  earned to that date and relocation to Los
Angeles,  California.  In the event that Mr.  Cunningham is terminated  for good
cause by AXM Pharma or terminates the agreement  without good cause he will only
be entitled to payment of his salary, bonus and incentives earned to the date of
termination  and  relocation  to  Los  Angeles,   California.  Mr.  Cunningham's
agreement  requires  that  he  keep  confidential  any  proprietary  information
acquired  while  employed and upon  termination  of his  employment.  He is also
prohibited  from soliciting any employees of AXM Pharma for a period of one year
following his termination for any reason.

In September 2003, we entered into employment  agreement with Lan Hao, our Chief
Financial  Officer.  Pursuant to the terms of his agreement with AXM Pharma, Mr.
Hao is entitled to be paid $120,000 per year for his services. In addition,  Mr.
Hao received a stock grant of 100,000,  issued in December  2003,  shares of our
common stock,  health insurance and such other bonus and incentives as the Board
of  Directors,  in its  discretion,  shall  authorize.  The  term  of Mr.  Hao's
employment  agreement is one year but the  agreement may be terminated by either
party  with or  without  cause  on 30  days  written  notice.  In the  event  of
termination with good cause by Mr. Hao or without good cause by AXM Pharma,  Mr.
Hao is entitled to three months  severance plus bonus and  incentives  earned to
that date. In the event that Mr. Hao is terminated  for good cause by AXM Pharma
or  terminates  the  agreement  without  good cause he will only be  entitled to
payment of his salary,  bonus and incentives  earned to the date of termination.
Mr. Hao is not subject to any restrictive covenants in his employment agreement.
Mr. Hao's employment  agreement may be extended by mutual written consent of AXM
Pharma and Mr. Hao.


<PAGE>



NOTE 11 - SUBSEQUENT EVENTS

Stock Option Plans

In January of 2004,  our Board of  Directors  approved the "2004  Qualified  and
Nonstatutory  Stock  Option  Plan." The Board of  Directors  reserved  3,000,000
shares of AXM Pharma's common stock to be issued in the form of incentive and/or
non-qualified  stock options for  employees,  directors and  consultants  to AXM
Pharma.  As of January 2004, our Board of Directors,  authorized the issuance of
2,040,000 options to employees, directors and consultants. The stock option plan
and the options  authorized there under are subject to ratification of the stock
option plan by our Shareholders at our next annual meeting.

Private Equity Financings

In January  2004,  AXM Pharma,  Inc.  completed a private  equity  financing  of
$1,935,000,  with two accredited investors. Net proceeds from the offering after
estimated  costs  and  expenses,  including  fees of the  placement  agent,  are
approximately  $1,740,000.  We issued  860,000  shares of our Series B Preferred
Stock,  $.001 par value per share,  at a price per share of $2.25 and  1,000,000
Common Stock  Purchase  Warrants (the  "Warrants"),  each of which  entitles the
holder to purchase one share of our common stock,  $.001 par value, for a period
of five years  from the date of  issuance  at a price of $3.00 per  share.  Each
share of Series B Preferred Stock is  convertible,  at the option of the holder,
into one share of common stock,  subject to adjustment for certain  occurrences.
In addition to its fees and  expenses,  the  placement  agent,  or its  assigns,
received a five-year  warrant to purchase  up to 86,000  shares of AXM  Pharma's
Series  B  Preferred  Stock  at a price of $2.25  per  share  and up to  100,000
Warrants  on a  pro-rata  basis to the  number  of  shares  of  Preferred  Stock
purchased  upon  exercise.  AXM  Pharma  is  obligated  to  file a  registration
statement  within six months the  closing  covering  the shares of common  stock
issuable  upon  conversion  of the Series B Preferred  Stock and exercise of the
Warrants.

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.

Common Stock for Services

On May 10, 2004, we issued 300,000 shares of restricted  common shares valued at
$1,176,000  pursuant to an agreement with Madden  Consulting to provide investor
relations  services.  The shares were  issued  pursuant  to the  exemption  from
registration  provided by Section 4(2) of the  Securities  Act for issuances not


<PAGE>

involving a public  offering.  The shares  were  valued at $3.92 per share,  the
market price for shares of our common stock at the time of issuance.

On May 7, 2004, we issued  120,000  shares of restricted  common to XCL Partners
valued at  $490,800  pursuant  to an  agreement  with XCL  Partners  to  provide
investor  relations  services.  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 $4.09 per share, the
market price for shares of our common stock at the time of issuance.

On March 12, 2004, we issued 100,000 shares of restricted common 50,000 warrants
to Great Eastern  Securities,  Inc. pursuant to an investment banking agreement.
The shares are to be released  quarterly based upon a vesting schedule of 25,000
shares per quarter during the term of the agreement.  Investor relation services
are to be provided under the agreement, which was executed on December 18, 2003.
The  warrants  are for a term of five years and have an exercise  price equal to
$4.74 per share.  The services to be provided  under the agreement are to assist
AXM Pharma with broker  relations for our stock. 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
$5.65 per share,  the market price for shares of our common stock at the time of
issuance.  Therefore,  the total  aggregate value of the  consideration  paid to
Great Eastern Securities, Inc. was $565,000.

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 A Preferred  Stock and exercise of
Common Stock purchase warrants. AXM Pharma issued 200,000 shares of common stock
for the  conversion of 200,000  shares of Series A Preferred  Stock.  AXM Pharma
issued  20,000  shares of common stock for the exercise of warrants for proceeds
of $40,000.

Product Licenses

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
have been unable to  continue  manufacturing  and  selling  these items until we
receive  approval  from  the  State  Food  and Drug  Administration.  Under  the
proscribed timeline for the approval process of national licenses (more than 100
working  days from  submission  thereof),  we expect to receive  approval of our
applications in October 2004 and to restart production of these products at that
time. We have requested  accelerated  approval of our  application  for national
registration  approval  number  and hope that the  renewal  will be  granted  in
advance of the  inspection  of our new factory for  Chinese  Good  Manufacturing
Certification scheduled for the fourth quarter of 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


<PAGE>

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. On
July 29,  2004 we entered  into a  distribution  agreement  with  China  Zuellig
Xinxing Pharmaceutical Company Limited.  Zuellig Xinxing has the exclusive right
to distribute and sell our Whisper Feminine Hygiene Wash in Beijing. The term of
the agreement is one year,  however it can be extended for an additional year on
each  anniversary  of the date the agreement was entered into. We have finalized
the plan with 40  product  promoters  for the test  launch of  Whisper  Feminine
Hygiene  Wash in the top 100  pharmacies  in Beijing.  We have  already met with
three  of the  largest  chain  retail  pharmacies  in  Beijing,  namely,  Golden
Elephant,   Chaoyang  Dispatching  (Yiyuan  Tang),  and  Beijing  Medical  Group
(Yibaoquanxing),  all of whom we believe are enthusiastic and eager to carry our
product  in their  stores.  Zuellig  Xinxing  has also  agreed  to try to expand
distribution of our product to more pharmacies.  We are currently negotiating to
import additional  products under our Sunkist Agreement.  It is our intention to
begin importing  these products  sometime in the third or fourth quarter of this
fiscal year.

Although our new sales and marketing  initiatives  have been delayed until later
in the third and fourth quarters 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.







<PAGE>






                                                                   Exhibit 10.11

                                AXM PHARMA, INC.
                  Incentive and Nonstatutory Stock Option Plan


A. Purpose

This  Incentive and  Nonstatutory  Stock Option Plan (the "Plan") is intended to
further the growth and financial success of AXM Pharma, Inc. (the "Corporation")
by  providing  additional  incentives  to  directors,  executives  and  selected
employees of and  consultants to the Corporation so that such  participants  may
acquire or increase  their  proprietary  interest in the  Corporation.  The term
"Corporation" shall include any parent corporation or subsidiary  corporation of
the  Corporation  as those  terms are  defined in Section  424(e) and (f) of the
Internal  Revenue Code of 1986, as amended (the "Code").  Stock options  granted
under the Plan ("Options") may be either  "Incentive Stock Options",  as defined
in Code  section 422 and any  regulations  promulgated  under that  Section,  or
"Nonstatutory  Options"  at the  discretion  of the  Board of  Directors  of the
Corporation  (the  "Board")  and as reflected in the  respective  written  stock
option agreements granted pursuant to this Plan.

B. Administration

The Plan shall be administered by the Board;  provided  however,  that the Board
may delegate  such  administration  to a committee of not fewer than two members
(the  "Committee"),  each of whom is a member  of the  Board and all of whom are
disinterested  persons, as contemplated by Rule 16b-3 ("Rule 16b-3") promulgated
under the Securities Exchange Act of 1934, as amended ("Exchange Act").

Subject to the provisions of the Plan, the Board and/or the Committee shall have
authority to (a) grant, in its discretion, Incentive Stock Options in accordance
with Code section 422 or Nonstatutory  Options;  (b) determine in good faith the
fair  market  value of the stock  covered  by an  Option;  (c)  determine  which
eligible persons shall be granted Options, the number of shares to be covered by
the Options and the restrictions, terms and conditions thereof; (d) construe and
interpret the Plan;  (e)  promulgate,  amend and rescind  rules and  regulations
relating  to  its   administration,   and   correct   defects,   omissions   and
inconsistencies in the Plan or any Option; (f) consistent with the Plan and with
the consent of the Optionee,  as appropriate,  amend any  outstanding  Option or
amend the  exercise  date or dates;  (g)  determine  the duration and purpose of
leaves of  absence  which  may be  granted  to  Optionees  without  constituting
termination  of their  employment  for the purpose of the Plan; and (h) make all
other determinations  necessary or advisable for the Plan's administration.  The
interpretation and construction by the Board of any provisions of the Plan or of
any  Option  it shall be  conclusive  and  final.  No member of the Board or the
Committee  shall be liable  for any action or  determination  made in good faith
with respect to the Plan or any Option.

C. Eligibility

The  persons  who shall be  eligible  to  receive  Options  shall be  directors,
officers and employees of the  Corporation  and  consultants to the  Corporation
("Optionees").  The  term  consultant  shall  mean  any  person,  other  than an
employee,  who  is  engaged  by  the  Corporation  to  render  services  and  is
compensated for such services,  and any director of the  Corporation  whether or
not compensated for such services;  provided that, if the Corporation  registers


<PAGE>

any of its securities  pursuant to the Exchange Act, the term  consultant  shall
thereafter not include  directors who are not  compensated for their services or
are paid only a director fee by the Corporation.

(a)  Incentive  Stock  Options.  Incentive  Stock  Options may only be issued to
employees of the Corporation. Incentive Stock Options may be granted to officers
or directors, provided they are also employees of the Corporation.  Payment of a
director's  fee  shall  not  be  sufficient  to  constitute  employment  by  the
Corporation. Any grant of option, subsequent to the first registration of any of
the  securities  of  the  Corporation  under  the  Securities  Act,  may  at the
discretion  of the  Board be made  subject  to  certain  conditions,  including,
without  limitation,  condition  which are intended to avoid the  imposition  of
liability  under  Section  16(b) of the 1934 Act. An Optionee may hold more than
one Option.

The Corporation  shall not grant an Incentive Stock Option under the Plan to any
employee if the grant would result in the employee holding the right to exercise
for the first time in any one calendar year,  under all Incentive  Stock Options
granted under the Plan or any other plan maintained by the Corporation,  Options
with  respect  to  shares  of stock  having  an  aggregate  fair  market  value,
determined as of the date the Option is granted,  in excess of $100,000.  Should
it be determined  that an Incentive  Stock Option granted under the Plan exceeds
such  maximum  for any  reason  other  than a failure in good faith to value the
stock  subject  to such  Option,  the  excess  portion  of the  Option  shall be
considered a Nonstatutory  Option.  To the extent the employee holds two or more
such Options  which become  exercisable  for the first time in the same calendar
year, the foregoing limitation on the exercisability of such Option as Incentive
Stock  Options  under the  Federal tax laws shall be applied on the basis of the
order in which the Options are  granted.  If, for any reason,  an entire  option
does not  qualify  as an  Incentive  Stock  Option by reason of  exceeding  such
maximum, that option shall be considered a Nonstatutory Option.

(b) Nonstatutory  Option.  The provisions of Section 3(a) shall not apply to any
Option designated as a "Nonstatutory Stock Option Agreement" or which sets forth
the intention of the parties that the option be a Nonstatutory Option.

D. Stock

The stock subject to Options shall be shares of the Corporation's authorized but
unissued or reacquired common stock (the "Stock").

(a) Number of Shares.  Subject to  adjustment  as provided in Paragraph  5(i) of
this Plan,  the total number of shares of Stock which may be  purchased  through
exercise of Options granted under this Plan shall not exceed  3,000,000.  If any
Option shall for any reason terminate or expire,  any shares  allocated  thereto
but remaining  unpurchased  upon such  expiration or termination  shall again be
available for the grant of Options with respect to that Option under the Plan as
though no Option had been granted  with  respect to such  shares.  Any shares of
Stock issued pursuant to an Option and repurchased  pursuant to the terms of the
Option shall be available for future Options as though not previously covered by
an Option.

(b) Reservation of Shares.  The Corporation  shall reserve and keep available at
all  times  during  the term of the  Plan  such  number  of  shares  as shall be
sufficient  to  satisfy  the  requirements  of the Plan.  If,  after  reasonable
efforts, which efforts shall not include the registration of the Plan or Options
under the Securities Act, the Corporation is unable to obtain authority from any
applicable  regulatory  body,  which  authorization is deemed necessary by legal
counsel for the  Corporation for the lawful  issuance of shares  hereunder,  the


<PAGE>

Corporation  shall be relieved of any  liability  with respect to its failure to
issue  and sell the  shares  for  which  such  requisite  authority  was  deemed
necessary unless and until the authority is obtained.

(c) Application of Funds. The proceeds received by the Corporation from the sale
of Stock pursuant to the exercise of Options will be used for general  corporate
purposes.

(d) No Obligation to Exercise Option.  The granting of an Option shall impose no
obligation upon the Optionee to exercise such Option.

(e) Adjustment of Shares. In the event of any change in the outstanding Stock by
reason  of  a  stock  split,   stock  dividend,   combination,   subdivision  or
reclassification  of shares,  recapitalization,  merger,  or similar event,  the
Board or the  Committee may adjust  proportionately  (a) the number of shares of
Stock  reserved  under the Plan and available  for  Incentive  Stock Options and
Nonstatutory  Options;  and (b)  the  exercise  prices  related  to  outstanding
Options.  In  the  event  of  any  other  change  affecting  the  Stock  or  any
distribution  (other  than  normal  cash  dividends)  to holders of Stock,  such
adjustments as may be deemed equitable by the Board or the Committee,  including
adjustments to avoid fractional  shares,  shall be made to give proper effect to
such event. In the event of a corporate  merger,  consolidation,  acquisition of
property or stock, separation,  reorganization or liquidation,  the Board or the
Committee  shall be authorized to issue or assume  Options,  whether or not in a
transaction to which Code section 424(a)  applies,  by means of  substitution of
new Options for previously  issued Options or an assumption of previously issued
Options.

E. Terms and Conditions of Options

Options  granted  hereunder  shall  be  evidenced  by  agreements   between  the
Corporation  and the  respective  Optionees,  in such form and  substance as the
Board or Committee shall from time to time approve.  Such agreements need not be
identical,  and in each  case  may  include  such  provisions  as the  Board  or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:

(a) Number of Shares.  Each Option  shall state the number of shares to which it
pertains.

(b) Option  Price.  Each Option shall state the exercise  price,  which shall be
determined as follows:

(i) Any Stock  Option  granted to a person who at the time the Option is granted
owns (or is deemed to own pursuant to Code section 424(d)) stock possessing more
than  ten  percent  (10%) of the  total  combined  voting  power or value of all
classes  of stock of the  Corporation,  ("Ten  Percent  Holder")  shall  have an
exercise price of no less than one hundred ten percent (110%) of the fair market
value of the common stock as of the date of grant; and

(ii) Incentive  Stock Options  granted to a person who at the time the Option is
granted is not a Ten Percent Holder shall have an exercise price of no less than
one hundred  percent  (100%) of the fair market  value of the common stock as of
the date of grant.

(iii)  Nonstatutory  Options  granted  to a person who at the time the Option is
granted is not a Ten Percent Holder shall have an exercise price of no less than
eighty-five percent (85%) of the fair market value of the common stock as of the
date of grant.  For the purposes of this  Paragraph  5(b), the fair market value
shall be as determined by the Board, in good faith, which determination shall be


<PAGE>

conclusive and binding;  provided however,  that if there is a public market for
the Stock,  the fair market  value per share shall be the average of the bid and
asked prices (or the closing price if the stock is listed on the NASDAQ National
Market  System)  on the date of grant of the  Option,  or if  listed  on a stock
exchange, the closing price on such exchange on the date of grant.

(c)  Medium  and  Time of  Payment.  The  Option  exercise  price  shall  become
immediately  due upon  exercise of the Option and shall be paid in cash or check
made payable to the Corporation.  Should the  Corporation's  outstanding  common
stock be  registered  under  Section  12(g) of the  Exchange Act at the time the
Option is exercised, then the exercise price may also be paid as follows:

(i) in shares of Stock held by the Optionee for the requisite  period  necessary
to avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at fair market value on the exercise date, or

(ii)  through a special  sale and  remittance  procedure  pursuant  to which the
Optionee shall concurrently  provide irrevocable  written  instructions (a) to a
Corporation  designated  brokerage  firm to  effect  the  immediate  sale of the
purchased  shares  and  remit  to the  Corporation,  out of  the  sale  proceeds
available  on the  settlement  date,  sufficient  funds to cover  the  aggregate
exercise  price payable for the purchased  shares plus all  applicable  Federal,
state and local  income and  employment  taxes  required  to be  withheld by the
Corporation  by reason of such purchase,  and (b) to the  Corporation to deliver
the  certificates  for the purchased  shares  directly to such brokerage firm in
order to complete the sale transaction.

At the discretion of the Board,  exercisable  either at the time of Option grant
or of Option  exercise,  the exercise  price may also be paid (i) by  Optionee's
delivery  of a  promissory  note  in  form  and  substance  satisfactory  to the
Corporation and permissible under the Nevada Securities  Regulations and bearing
interest at a rate  determined  by the Board in its sole  discretion,  but in no
event less than the minimum rate of interest required to avoid the imputation of
compensation  income to the Optionee under the Federal tax laws, or (ii) in such
other form of consideration  permitted by the Nevada  Corporation Laws as may be
acceptable to the Board.

(d) Term and  Exercise  of  Options.  Any Option  granted to an  Employee of the
Corporation  shall become  exercisable  over a period of no longer than 5 years,
and no less than twenty percent (20%) of the shares covered thereby shall become
exercisable annually. No Option shall be exercisable, in whole or in part, prior
to one (1) year from the date it is granted unless the Board shall  specifically
determine  otherwise,  as  provided  herein.  In no event  shall  any  Option be
exercisable after the expiration of 10 years from the date it is granted, and no
Incentive  Stock Option granted to a Ten Percent Holder shall,  by its terms, be
exercisable after the expiration of 5 years from the date of the Option.  Unless
otherwise specified by the Board or the Committee in the resolution  authorizing
such Option,  the date of grant of an Option shall be deemed to be the date upon
which the Board or the Committee authorizes the granting of the Option.

Each Option shall be exercisable to the nearest whole share,  in installments or
otherwise,  as the respective Option agreements may provide. During the lifetime
of an Optionee,  the Option shall be exercisable  only by the Optionee and shall
not be assignable  or  transferable  by the Optionee,  and no other person shall
acquire any rights therein.  To the extent not exercised,  installments (if more
than one) shall accumulate, but shall be exercisable,  in whole or in part, only


<PAGE>

during the period for exercise as stated in the Option agreement, whether or not
other installments are then exercisable.

(e)  Termination  of Status as Employee,  Consultant or Director.  If Optionee's
status as an  employee  shall  terminate  for any reason  other than  Optionee's
disability  or death,  then  Optionee (or if the  Optionee  shall die after such
termination,  but prior to exercise,  Optionee's personal  representative or the
person  entitled to succeed to the Option)  shall have the right to exercise the
portions of any of Optionee's  Incentive Stock Options which were exercisable as
of the date of such termination,  in whole or in part, not less than 30 days nor
more  than  three  (3)  months  after  such  termination,  or,  in the  event of
"termination  for cause" (as that term is defined in Nevada  Labor Code and case
law related  thereto) or by the terms of the Plan or the Option  Agreement or an
employment  agreement,  the  Option  shall  automatically  terminate  as of  the
termination of employment as to all shares covered by the Option.

With  respect  to  Nonstatutory  Options  granted  to  employees,  directors  or
consultants,  the Board may specify such period for  exercise,  not less than 30
days except that in the case of "termination for cause" or removal of a director
pursuant  to  the  Nevada  Corporation  Laws,  the  Option  shall  automatically
terminate as of the  termination  of employment or services as to shares covered
by the Option,  following  termination  of  employment  or services as the Board
deems reasonable and appropriate.  The Option may be exercised only with respect
to  installments  that  the  Optionee  could  have  exercised  at  the  date  of
termination of employment or services. Nothing contained herein or in any Option
granted  pursuant hereto shall be construed to affect or restrict in any way the
right of the  Corporation to terminate the employment or services of an Optionee
with or without cause.

(f)  Disability of Optionee.  If an Optionee is disabled  (within the meaning of
Code section  22(e)(3)) at the time of  termination,  the three (3) month period
set forth in Paragraph  5(e) shall be a period,  as  determined by the Board and
set forth in the Option, of not less than 6 months nor more than one year.

(g) Death of  Optionee.  If an Optionee  dies while  employed  by,  engaged as a
consultant  to or serving as a Director of the  Corporation,  the portion of the
Optionee's  Option which was  exercisable at the date of death may be exercised,
in whole or in part, by the estate of the decedent or by a person  succeeding to
the right to exercise the Option at any time within (i) a period,  as determined
by the Board and set forth in the Option, of not less than three months nor more
than ten year after  Optionee's  death,  which period shall not be more,  in the
case  of  a  Nonstatutory   Option,  than  the  period  for  exercise  following
termination of employment or services,  or (ii) during the remaining term of the
Option,  whichever  is the  lesser.  The  Option may be so  exercised  only with
respect to  installments  exercisable  at the time of  Optionee's  death and not
previously exercised by the Optionee.

(h)  Nontransferability  of  Option.  No  Option  shall be  transferable  by the
Optionee, except by will or by the laws of descent and distribution.

(i) Recapitalization. Subject to any required action of shareholders, the number
of shares covered by each outstanding  Option,  and the exercise price per share
set forth in each Option, shall be proportionately  adjusted for any increase or
decrease in the number of issued shares of Stock resulting from a subdivision or
consolidation  of  shares  or the  payment  of a stock  dividend,  or any  other
increase or decrease in the number of such shares  affected  without  receipt of
consideration  by the  Corporation;  provided,  however,  the  conversion of any


<PAGE>

convertible  securities  of the  Corporation  shall  not be  deemed to have been
effected without receipt of consideration by the Corporation.

In the event a proposed dissolution or liquidation of the Corporation,  a merger
or consolidation in which the Corporation is not the surviving entity, or a sale
of all or  substantially  all of the assets or capital stock of the  Corporation
(collectively, a "Reorganization"), unless otherwise provided by the Board, this
Option shall  terminate  immediately  prior to such date as is determined by the
Board, which date shall be no later than the consummation of the Reorganization.
In such event, if the entity which shall be the surviving entity does not tender
to Optionee  an offer,  having no  obligation  to do so, to  substitute  for any
unexercised  Option a stock option or capital stock of the surviving  entity, as
applicable,  which  on an  equitable  basis  shall  provide  the  Optionee  with
substantially  the same economic  benefit as the  unexercised  Option,  then the
Board may grant to the Optionee, in its sole and absolute discretion and without
obligation,  the  right  for a period  commencing  30 days  prior to and  ending
immediately  prior to the date  determined  by the  Board  pursuant  hereto  for
termination of the Option or during the remaining term of the Option,  whichever
is the lesser, to exercise any unexpired Option or Options without regard to the
installment  provisions of Paragraph 5(d) of the Plan;  provided,  that any such
right  granted  shall be  granted to all  Optionees  not  receiving  an offer to
receive substitute options on a consistent basis, and provided further, that any
such exercise shall be subject to the consummation of the Reorganization.

Subject to any required action of stockholders,  if the Corporation shall be the
surviving  entity  in any  merger  or  consolidation,  each  outstanding  Option
thereafter  shall  pertain to and apply to the  securities  to which a holder of
shares of Stock  equal to the  shares  subject  to the  Option  would  have been
entitled by reason of the merger or consolidation.

In the event of a change in the Stock as presently constituted, which is limited
to a change of all of its  authorized  shares  without  par value  into the same
number of shares  with a par value,  the shares  resulting  from any such change
shall be deemed to be the Stock  within the  meaning of the Plan.

To the extent that the  foregoing  adjustments  relate to stock or securities of
the  Corporation,   such  adjustments   shall  be  made  by  the  Board,   whose
determination in that respect shall be final, binding and conclusive.  Except as
expressly  provided in this Paragraph 5(i), the Optionee shall have no rights by
reason of any  subdivision or  consolidation  of shares of stock of any class or
the  payment of any stock  dividend  or any other  increase  or  decrease in the
number  of shares of stock of any  class,  and the  number or price of shares of
Stock subject to any Option shall not be affected by, and no adjustment shall be
made by reason of, any dissolution,  liquidation,  merger, consolidation or sale
of assets or capital stock,  or any issue by the  Corporation of shares of stock
of any class or securities convertible into shares of stock of any class.

The  grant of an Option  pursuant  to the Plan  shall not  affect in any way the
right or power of the  Corporation to make any  adjustments,  reclassifications,
reorganizations  or changes in its  capital or business  structure  or to merge,
consolidate,  dissolve,  or  liquidate or to sell or transfer all or any part of
its business or assets.

(j) Rights as a  Stockholder.  An Optionee shall have no rights as a stockholder
with respect to any shares  covered by an Option until the effective date of the
issuance  of the  shares  following  exercise  of this  Option by  Optionee.  No
adjustment shall be made for dividends  (ordinary or  extraordinary,  whether in
cash,  securities or other property) or  distributions or other rights for which


<PAGE>

the record date is prior to the date such stock certificate is issued, except as
expressly provided in Paragraph 5(i) of this Plan.

(k) Modification,  Acceleration,  Extension,  and Renewal of Options. Subject to
the terms and conditions  and within the  limitations of the Plan, the Board may
modify an Option, or once an Option is exercisable, accelerate the rate at which
it may be exercised,  and may extend or renew outstanding  Options granted under
the Plan or accept the surrender of  outstanding  Options (to the extent not yet
exercised)  and authorize the granting of new Options in  substitution  for such
Options,  provided such action is permissible under Code and under the Corporate
Securities Rules of the Nevada  Corporations  Commissioner.  Notwithstanding the
provisions of this Paragraph 5(k),  however, no modification of an Option shall,
without the consent of the Optionee, alter to the Optionee's detriment or impair
any rights or obligations under any Option theretofore granted under the Plan.

(l) Exercise  Before  Exercise Date. At the discretion of the Board,  the Option
may,  but need not,  include  a  provision  whereby  the  Optionee  may elect to
exercise all or any portion of the Option prior to the stated  exercise  date of
the Option or any  installment  thereof.  Any shares so  purchased  prior to the
stated  exercise  date shall be subject to repurchase  by the  Corporation  upon
termination of Optionee's  employment as contemplated by Paragraphs 5(n) of this
Plan prior to the exercise date stated in the Option and such other restrictions
and conditions as the Board or Committee may deem advisable.

(m) Reacquisition,  Replacement and Reissuance of Options.  (a) The Board or the
Committee,  with or without the consent of the  Optionee,  may at any time cause
the Corporation to reacquire and cancel any outstanding and unexercised  Option,
or any  portion  therefor.  In such  event,  the  Corporation  shall pay to such
Optionee  an amount in cash equal to the excess (if any) of (i) the fair  market
value of the shares of Stock subject to such Option, or portion thereof,  at the
time of  reacquisition,  over (ii) the option price of such  Option,  or portion
thereof. The Corporation may withhold from any such payment applicable taxes and
other amounts.  The shares of Stock subject to such Option,  or portion thereof,
reacquired and canceled in consideration for a cash payment to an Optionee shall
not again be available for option under the Plan. In the event that the exercise
price of such Option,  or portion thereof,  exceeds the fair market value of the
shares of Stock  subject  to such  Option,  or portion  thereof,  at the time of
reacquisition, such Option may be reacquired and canceled by the Company without
payment  therefor.  The  shares of Stock  subject  to such  Option,  or  portion
thereof,  reacquired and canceled without payment therefor to the Optionee,  may
again be subject to an Option under the Plan.

(n) Other  Provisions.  The Option  agreements  authorized under this Plan shall
contain such other provisions, including, without limitation,  restrictions upon
the exercise of the Options, as the Board or the Committee shall deem advisable.
Shares  shall  not be issued  pursuant  to the  exercise  of an  Option,  if the
exercise of such Option or the issuance of shares  thereunder would violate,  in
the  opinion  of  legal  counsel  for the  Corporation,  the  provisions  of any
applicable law or the rules or regulations  of any  applicable  governmental  or
administrative  agency  or body,  such as the  Code,  the  Securities  Act,  the
Exchange Act, the Nevada  Securities  Rules, and the rules promulgated under the
foregoing or the rules and  regulations of any exchange upon which the shares of
the  Corporation are listed.  Without  limiting the generality of the foregoing,
the  exercise of each Option  shall be subject to the  condition  that if at any
time the Corporation  shall  determine that (i) the  satisfaction of withholding
tax  or  other  similar  liabilities,  or  (ii)  the  listing,  registration  or
qualification  of any  shares  covered  by such  exercise  upon  any  securities
exchange or under any state or federal  law, or (iii) the consent or approval of


<PAGE>

any  regulatory  body, or (iv) the  perfection  of any  exemption  from any such
withholding,  listing,  registration,  qualification,  consent  or  approval  is
necessary  or  desirable  in  connection  with such  exercise or the issuance of
shares thereunder,  then in any such event, such exercise shall not be effective
unless the withholding, listing registration,  qualification,  consent, approval
or  exemption  shall  have been  effected,  obtained  or  perfected  free of any
conditions not acceptable to the Corporation.

(o)  Repurchase  Agreement.  The Board  may,  in its  discretion,  require  as a
condition to the grant of an Option under this Plan, that an Optionee execute an
agreement with the Corporation,  in form and substance satisfactory to the Board
in its discretion ("Repurchase Agreement"), (i) restricting the Optionee's right
to transfer shares  purchased under the Option without first offering the shares
to the Corporation or another stockholder of the Corporation upon the same terms
and conditions as provided therein;  and (ii) providing that upon termination of
Optionee's employment with the Corporation,  for any reason, the Corporation (or
another stockholder of the Corporation, as provided in the Repurchase Agreement)
shall  have  the  right  at its  discretion  (or the  discretion  of such  other
shareholders) to purchase and/or redeem all such shares owned by the Optionee on
the date of  termination  of his or her  employment  at a price equal to (A) the
fair  value  of the  shares  as of  such  date  of  termination,  or (B) if such
repurchase  right  lapses at twenty  percent  (20%) of the  number of shares per
year,  the original  purchase  price of such  shares,  and upon terms of payment
permissible  under the Nevada  Securities  Rules;  provided  that in the case of
Options  or  Stock  Awards  granted  to  officers,  directors,   consultants  or
affiliates  of  the  Company,  such  repurchase  provisions  may be  subject  to
additional or greater restrictions as determined by the Board or Committee.

(p)  Investment  Intent.  Unless and until the  issuance  and sale of the shares
subject to the Plan are  registered  under the Securities Act or shall be exempt
pursuant to the rules promulgated  thereunder,  each Option under the Plan shall
provide that the purchases of shares thereunder shall be for investment purposes
and not with a view to,  or for  resale in  connection  with,  any  distribution
thereof. Further, unless the issuance and sale of the stock have been registered
under the  Securities  Act,  each Option  shall  provide that no shares shall be
purchased  upon the  exercise  of such  Option  unless  and  until  (i) any then
applicable  requirements of state and federal laws and regulatory agencies shall
have been fully complied with to the  satisfaction  of the  Corporation  and its
counsel,  and  (ii)  if  requested  to do  so by  the  Corporation,  the  person
exercising  the Option shall (i) give  written  assurances  as to knowledge  and
experience  of such  person (or a  representative  employed  by such  person) in
financial   and   business   matters   and  the   ability  of  such  person  (or
representative)  to evaluate the merits and risks of exercising the Option,  and
(ii) execute and deliver to the Corporation a letter of investment intent and/or
such other form related to applicable exemptions from registration,  all in such
form and  substance as the  Corporation  may require.  If shares are issued upon
exercise of an Option without  registration under the Securities Act, subsequent
registration  of the  shares  shall  relieve  the  purchaser  of any  investment
restrictions or representations made upon the exercise of such Options.

(q) Tax Withholding. The Company shall have the right to deduct applicable taxes
from any Option  payment  and  withhold,  at the time of delivery or exercise of
Options or vesting of shares under such Options, an appropriate number of shares
for  payment of taxes  required  by law or to take such  other  action as may be
necessary  in  the  opinion  of the  Company  to  satisfy  all  obligations  for
withholding  of such  taxes.  If Stock is used to satisfy tax  withholding,  the
Stock shall be valued  based on the fair market  value of the Stock when the tax
withholding is required to be made.


<PAGE>


F. Amendment and Termination of Plan

The Board may,  insofar as permitted by law, from time to time,  with respect to
any shares at the time not subject to Options,  suspend or terminate the Plan or
revise or amend it in any respect  whatsoever,  except that without the approval
of the shareholders of the Corporation,  no such revision or amendment shall (i)
increase the number of shares  subject to the Plan,  (ii)  decrease the price at
which  Options  may be  granted,  (iii)  materially  increase  the  benefits  to
Optionees, or (iv) change the class of persons eligible to receive Options under
the Plan; provided, however, no such action shall alter or impair the rights and
obligations  under any Option  outstanding  as of the date  thereof  without the
written consent of the Optionee  thereunder.  No Option may be granted while the
Plan is  suspended  or after it is  terminated,  but the rights and  obligations
under any Option  granted  while the Plan is in effect  shall not be impaired by
suspension or termination of the Plan.

G. Availability of Information

During the term of the Plan and any  additional  period  during  which an Option
granted  pursuant to the Plan shall be exercisable,  the Corporation  shall make
available,  not later  than 90 days  following  the close of each of its  fiscal
years,  such  financial and other  information  regarding the  Corporation as is
required by the bylaws of the  Corporation and applicable law to be furnished in
an annual report to the stockholders of the Corporation.

H. Notices

All notices,  requests,  demands, and other communications pursuant to this Plan
shall be in  writing  and shall be deemed to have been duly given on the date of
service if served  personally on the party to whom notice is to be given,  or on
the third day following  mailing to the party to whom notice is to be given,  by
first class mail, registered or certified, postage prepaid.

I. Indemnification of Board

In  addition  to such  other  rights  or  indemnifications  as they  may have as
directors or otherwise, and to the extent allowed by applicable law, the members
of the Board and the Committee shall be indemnified by the  Corporation  against
the  reasonable  expenses,  including  attorney fees,  actually and  necessarily
incurred  in  connection  with  the  defense  of  any  claim,  action,  suit  or
proceeding,  or in connection with any appeal  thereof,  to which they or any of
them may be a party by reason of any action taken,  or failure to act,  under or
in connection  with the Plan or any Option  granted under the Plan,  and against
all amounts paid by them in  settlement  thereof  (provided  the  settlement  is
approved by independent  legal counsel  selected by the  Corporation) or paid by
them  in  satisfaction  of a  judgment  in  any  such  claim,  action,  suit  or
proceeding,  except in any case in  relation  to matters as to which it shall be
adjudged in such claim,  action,  suit or proceeding that the Board or Committee
member is liable for  negligence or misconduct in the  performance of his or her
duties;  provided that within seven days after  institution  of any such action,
suit or Board  proceeding the member  involved shall offer the  Corporation,  in
writing, the opportunity, at its own expense, to handle and defend the same.

J. Governing Law

The Plan and all  determinations  made and actions taken  pursuant to it, to the
extent not otherwise  governed by the Code or the securities  laws of the United
States,  shall be  governed  by the laws of the  State of Nevada  and  construed
accordingly.




<PAGE>






                                                                    Exhibit 14.1

                                AXM PHARMA, INC.


                          CODE OF ETHICS FOR DIRECTORS



The Board of Directors  has adopted this Code of Ethics (the "Code') as a set of
guidelines  for AXM  Pharma,  Inc.  ("Company")  directors,  intended to promote
ethical  behavior and to provide  guidance to help directors  recognize and deal
with ethical issues.

The  business  of the  Company is managed  under the  direction  of the Board of
Directors and the various committees  thereof.  The basic  responsibility of the
directors  is  to  exercise   their  business   judgment,   carrying  out  their
responsibilities  in a manner  that they  reasonably  believe  to be in the best
interest of the  Company and its  stockholders.  The Board of  Directors  is not
expected to assume an active role in the  day-to-day  operational  management of
the Company.

1.    Conflicts of Interest. Directors should avoid actual or apparent conflicts
      of interest with the Company in personal and  professional  relationships.
      Generally  speaking,  a conflict of interest occurs when a director's or a
      director's  immediate  family's  personal  interest  interferes,  has  the
      potential to interfere,  or appears to interfere  materially with:  (a)the
      interests or business of the  Company;  or (b) the ability of the director
      to carry out his or her duties  and  responsibilities.  A director  should
      disclose to the Board any  transaction or  relationship  that the director
      reasonably  expects  could give rise to an actual or apparent  conflict of
      interest with the Company,

2.    Corporate    Opportunities.    In   carrying    out   their   duties   and
      responsibilities,  directors  should  endeavor to advance  the  legitimate
      interests of the Company when the  opportunity to do so arises.  Directors
      should avoid: (a) taking for themselves personally  opportunities that are
      discovered  in  carrying  out their  duties  and  responsibilities  to the
      Company;  (b) using Company property or information,  or their position as
      directors,  for personal gain; and (c) competing with the Company, in each
      of the foregoing eases, to the material detriment of the Company.  Whether
      any of the foregoing  actions is to the material  detriment of the Company
      will be determined by the Board of Directors  based on all relevant  facts
      and  circumstances,  including  in the ease of the  foregoing  clause (a),
      whether  the  Company has  previously  declined  to pursue  such  proposed
      opportunity for its own benefit.

3.    Confidentiality.   Directors   should  observe  the   confidentiality   of
      information   that  they   acquire  in  carrying   out  their  duties  and
      responsibilities,  except where  disclosure  is approved by the Company or
      legally mandated.  Confidential  information includes,  but is not limited
      to, all non-public  information  that might be of use to  competitors,  or
      harmful  to the  Company  or  its  customers,  if  disclosed.  Of  special
      sensitivity is financial information, which should under all circumstances
      be considered  confidential except where its disclosure is approved by the
      Company or when the information has been publicly disseminated.

4.    Fair   Dealing.   In  carrying  out  their  duties  and   responsibilities
      (including,  among others,  the  appointment  of senior  management of the
      Company  and the  setting  of  policies  pursuant  to  which  the  Company
      operates),  directors  should  promote fair dealing by the Company and its
      employees and agents with customers, suppliers, competitors and employees.

5.    Protection  and Proper Use of Company  Assets In carrying out their duties
      and  responsibilities,  directors  should promote the  responsible use and
      control of the  Company's  assets and  resources by die  Company.  Company
      assets, such as information,  materials, supplies,  intellectual property,


<PAGE>

      facilities,  software and other assets owned or leased by the Company,  or
      that are  otherwise in the Company's  possession,  should be used only for
      legitimate business purposes of the Company.

6.    Compliance with Laws, Rules and Regulations.  In carrying out their duties
      and  responsibilities,  directors should comply, and endeavor to cause the
      Company  to  comply,   with  applicable   governmental   laws,  rules  and
      regulations. In addition, if any director becomes aware of any information
      that lie or she believes  constitutes  evidence of a material violation of
      the  securities  or other laws,  rules or  regulations  applicable  to the
      Company and the operation of its business, by the Company, any employee or
      another director,  then such director should bring such information to the
      attention of any one or more of the following  persons,  as  circumstances
      may warrant: the Company's General Counsel, the Chair of the Board's Audit
      Committee or the Board's Presiding Director.

7.    Encouraging  the  Reporting  of Illegal or Unethical  Behavior.  Directors
      should  endeavor  to cause the  Company  to  proactively  promote  ethical
      behavior  and to  encourage  employees  to report  evidence  of illegal or
      unethical behavior to appropriate Company personnel.

8.    Insider Trading.  Directors should observe Company policies  applicable to
      them with respect to the purchase and sale of Company common stock.

9.    Personal Loans to Executive Officers or Directors. Federal securities laws
      prohibit  the Company  from,  directly or  indirectly  (including  through
      subsidiaries),  (a)  extending or arranging  for the extension of personal
      loans  to its  directors  and  executive  officers  and  (b)  renewing  or
      materially  modifying existing loans to such persons.  Directors shall not
      seek or facilitate personal loans from the Company in contravention of the
      foregoing.

Directors are expected to adhere to this Code. It is the  responsibility of each
director  to  become  familiar  with and  understand  this  Code,  seek  further
explanation and advice  concerning the  interpretation  and requirements of this
Code,  as well as any  situation  which  appears to be in conflict  with it. The
Board of Directors shall determine  appropriate actions to be taken in the event
of violations of this Code.

Any  waiver  of, or  amendment  to,  the  requirements  of this Code may only be
authorized by the Board of Directors,  and will be subject to public  disclosure
to the extent  required by law or the listing  standards of the  American  Stock
Exchange.

Directors should direct questions regarding the application or interpretation of
the Code to the Company's Counsel.


<PAGE>

                                                                    Exhibit 14.2

                                AXM PHARMA, INC.

    CODE OF ETHICS FOR THE CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER,
             SENIOR FINANCIAL OFFICERS AND OTHER EXECUTIVE OFFICERS


The Company has adopted this Code of Ethics (the "Code") as a set of  guidelines
pursuant  to which our chief  executive  officer and senior  executive  officers
should  perform their duties.  The Code is intended to deter  wrongdoing  and to
promote  adherence to the standards set forth below,  Executives  subject to the
Code include the  President and Chief  Executive  Officer,  the Chief  Financial
Officer,  the Chief  Accounting  Officer,  and any person who performs a similar
function (the "Covered  Executives").  The particular executives who are subject
to the Code  from time to time  will be  designated  by,  and  informed  of such
designation, by the Company.

o     In carrying  out their  duties and  responsibilities,  Covered  Executives
      should  endeavor to act with honesty and integrity,  including the ethical
      handling of actual or apparent  conflicts of interest between personal and
      professional relationships.

o     To promote full, fair, accurate,  timely and understandable  disclosure in
      the  periodic  reports  that the Company  files  with,  or submits to, the
      Securities and Exchange Commission and in other public communications made
      by the  Company,  it is  the  responsibility  of  each  Covered  Executive
      promptly to bring to the attention of the Company's  Disclosure  Committee
      any  material  information  of which he may become  aware that affects the
      disclosures made by the Company in its public filings or otherwise, and to
      otherwise   assist   the   Disclosure    Committee   in   fulfilling   its
      responsibilities.

      In addition,  each Covered Executive shall promptly bring to the attention
      of the Disclosure  Committee any  information  he may have  concerning (a)
      significant  deficiencies in the design or operation of internal  controls
      which could  adversely  affect the Company's  ability to record,  process,
      summarize  and  report  financial  data or (b) any  fraud,  whether or not
      material,   that  involves  management  or  other  employees  who  have  a
      significant  role in the Company's  financial  reporting,  disclosures  or
      internal controls.

o     In carrying  out their  duties and  responsibilities,  Covered  Executives
      should  endeavor  to comply,  and to cause the  Company  to  comply,  with
      applicable  governmental  laws, rules and regulations.  In addition,  each
      Covered  Executive shall promptly bring to the attention of the Compliance
      Officer  (as  defined  below)  or the  head  of the  Audit  Committee  any
      information he may have concerning evidence of a material violation of the
      securities or other laws,  rules or regulations  applicable to the Company
      and the operation of its business, by the Company or any agent thereof

o     Each Covered Executive shall promptly report to the Compliance Officer any
      information he may have concerning evidence of a material violation of the
      Code.

o     Covered  Executives  are expected to adhere to the Code. The Company shall
      determine  appropriate  actions to be taken in the event of  violations of
      the Code by any  Covered  Executives.  Such  actions  shall he  reasonably
      designed to deter wrongdoing and to promote  accountability  for adherence
      to the Code.

o     The Company will appropriately  disclose any substantive amendment to, and
      any waiver  of,  any  provision  of the Code that  applies to the  Covered
      Executives.

o     The compliance  officer (the "Compliance  Officer") for the implementation
      and  administration  of the Code shall be the  Company's  Chief  Financial
      Officer.

<PAGE>




                                                                    Exhibit 21.1

Werke Pharmaceuticals, Inc.
Shenyang Tianwei Werke Pharmaceuticals Co., Ltd.












<PAGE>





                                                                    Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Peter Cunningham, certify that:

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

2.   Based on my  knowledge,  this  annual  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 annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual 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 annual 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)) 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.   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

          c.   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):

          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: August 30, 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 annual report on Form 10-KSB of AXM Pharma, Inc.

2.   Based on my  knowledge,  this  annual  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 annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual 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 annual 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)) 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.   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

          c.   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):

          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: August 30, 2004

/s/ Chet Howard
---------------------------
    Chet Howard,
    Chief Financial 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 Annual Report of AXM Pharma, Inc. (the "Company") on Form
10-KSB for the period ending December 31, 2003, 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

August 30, 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 Annual Report of AXM Pharma, Inc. (the "Company") on Form
10-KSB for the period ending December 31, 2003, as filed with the Securities and
Exchange  Commission on the date hereof (the  "Report'),  I, Chet Howard,  Chief
Financial Officer of the Company,  certify,  pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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




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

August 30, 2004