U.S. Securities and Exchange Commission

                              Washington, Dc 20549

                                   FORM 10-KSB


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


                   For the fiscal year ended December 31, 2005
                                             -----------------

                        Commission file number 000-27959

                            GFR Pharmaceuticals, Inc.
                            -------------------------
                 (Name of small business issuer in its charter)


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

        Suite 11405 - 201A Street, Maple Ridge, British Columbia V2X 0Y3
             (Address of principal executive office) Zip/Postal Code

         Issuer's telephone number: (604) 460-8440

Securities registered pursuant to Section 12(b) of the Act: None
                                                            ----

Securities registered pursuant to Section 12(g) of the Act:

                                  Common Stock
                                (Title of Class)

         Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the  Exchange  Act during the  preceding 12 months (or
for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes (
X ) No ( ).

         Check here if there is no disclosure  of delinquent  filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated  by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. ( X )

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). Yes ( ) No ( X )

         Issuer's revenues for its most recent fiscal year, were $6,536,108.

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         Issuer's Common Shares  outstanding at December 31, 2005 was 1,079,940.
The  aggregate  market  value of voting and  non-voting  common  equity  held by
non-affiliates as of April 12, 2006 was $413,112,  computed based on the average
bid and asked price of such common equity as of April 12, 2006.

         Except for the historical information contained herein, the matters set
forth in this Form 10- KSB are forward looking  statements within the meaning of
the "Safe Harbor" provision of the Private  Securities  Litigation Reform Act of
1995.  These  forward-looking  statements are subject to risk and  uncertainties
that may cause  actual  results  to  differ  materially.  These  forward-looking
statements  speak  only  as of the  date  hereof  and  Laredo  Investment  Corp.
disclaims any intent or obligation to update these forward-looking statements.

Documents Incorporated by Reference:  Certain exhibits






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ITEM 1.           DESCRIPTION OF BUSINESS.

Business Development

GFR  Pharmaceuticals,  Inc.  (Formerly Laredo Investment Corp.) was incorporated
under the laws of the State of Nevada on December 18, 1996. GFR Pharmaceuticals,
Inc. ceased all operating activities during the period from December 18, 1996 to
July 9, 1999 and was considered dormant.  On July 9, 1999, GFR  Pharmaceuticals,
Inc.  obtained a certificate  of renewal from the State of Nevada.  From July 9,
1999 to January 21,  2000,  GFR  Pharmaceuticals,  Inc.  was in the  development
stage.

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

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

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

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

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

Narrative Description of the Business

GFR Pharma, Ltd. (Formerly GFR Nutritionals Ltd.), GFR  Pharmaceuticals,  Inc.'s
wholly owned  subsidiary is an established  manufacturer of quality  nutritional
supplement products. GFR Pharma, Ltd. (Formerly GFR Nutritionals Ltd.), operates
a full service manufacturing facility that produces natural-source  nutritional,
vitamin,  mineral,  herbal  sports  nutrition  products  and  over  the  counter
pharmaceutical products which are sold on a private label basis to wholesale and
retail   clients.   GFR  Health,   Inc.   (Formerly   R&L  Health   Inc.),   GFR
Pharmaceuticals,  Inc.'s wholesale division markets products manufactured by GFR
to mass market retailers.


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Nutritional  supplements  are being  increasingly  recognized by the medical and
scientific communities as an integral component of a healthy lifestyle.  Much of
the growth in this industry is driven by six key factors:

         o        Positive  publicity - For several years,  medical journals and
                  news  reports  have  widely and  consistently  publicized  the
                  positive  effects of  nutritional  supplements.  Many of these
                  reports focus on the correlation  between  consumed  nutrients
                  and the reduced  incidence of certain  diseases.  As a result,
                  the nutritional  supplement  industry has experienced  greater
                  acceptance and popularity.

         o        Increased research - The more the scientific  community learns
                  about the human body, more is proved that an individual's diet
                  and health are  undoubtedly  connected.  Government  agencies,
                  universities,  and  private  companies  are  increasing  their
                  sponsorship of research  assessing the benefits of nutritional
                  supplements and herbs.

         o        Favorable  regulatory  environment - The US Dietary Supplement
                  Health and Education  Act (DSHEA)  created a set of guidelines
                  specific  to  the  supplement   industry  and   established  a
                  regulatory  environment  which  allows  responsible  nutrition
                  companies to thrive and allows the industry to regulate itself
                  with  supervision by the FDA.  Health Canada has followed suit
                  and  defined   Good   Manufacturing   Practices,   with  which
                  compliance in the industry is voluntary.

         o        Mass market distribution - Nutritional supplements,  including
                  all-natural  products,   vitamins,  minerals  and  herbs,  are
                  increasingly  sold in mass volume retail  stores.  Due to this
                  new market channel,  millions of shoppers are exposed to these
                  products as they are introduced into the mainstream.

         o        Ageing of the  population - The largest  demographic  group in
                  the history of North America is now turning 50 years old. Over
                  the  next  15  years,  approximately  80  million  more  "baby
                  boomers" will join this group of individuals who are concerned
                  with preserving their health and fitness,  directly increasing
                  the demand for nutritional supplements.

         o        Trend  toward   preventative  care  -  The  collective  health
                  consciousness  of the population  that began over 20 years ago
                  is gaining  momentum  and,  along with  regular  exercise,  it
                  embraces nutritional supplements.

According to the Nutrition Business Journal,  the US nutrition  industry,  which
includes natural foods, dietary supplements, and natural personal care products,
has grown  14-16%  annually  over the past two years and is  expected to sustain
double digit growth for the near future.  The Nutrition  Business Journal states
that the US nutrition  industry  generated  $28.8  billion of consumer  sales in
2002. Canadian sales tend to approximate 10% of the US market.


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Principal  Products:  GFR  Pharmaceuticals,   Inc.  currently  manufactures  300
different products in capsule,  tablet, powder, and liquid form. GFR specializes
in production of:

         -        Vitamin and mineral formulations
         -        Indication and herbal formulas (nutritional and herbal)
         -        Nutritional herbal formulas for women
         -        Nutritional herbal formulas for men
         -        "Boomer nutrition" - nutritional and herbal formulas for 50+
         -        Sports nutrition products
         -        Family fitness products
         -        Weight loss and diet products
         -        Soy and whey protein shakes
         -        Green food powders
         -        Daily nutrient packets

Markets:  Established  market  channels  for  nutritional  products  within  the
industry  include  distribution  through health food retail stores,  mass market
retail through department and grocery stores, multi-level marketing, mail order,
health practitioners, and the Internet.

Currently, GFR Pharmaceuticals,  Inc. manufactures nutritional supplements under
private label contracts with wholesale  distributors.  During 2005 and 2004, one
private label customer,  Prairie Naturals,  Inc. has comprised approximately 46%
and 41%, respectively of GFR Pharmaceuticals, Inc.'s sales.

GFR  Pharmaceuticals,  Inc.'s  primary  goal is to  achieve  a level  of  annual
revenues in excess of $10.0 million by the fiscal year ended 2006 resulting from
expanded  marketing efforts and vertical  integration  through  acquisitions and
expansion  into  new  markets.  GFR   Pharmaceuticals,   Inc.  is  also  pursing
opportunities to market direct sales to consumers through the Internet.

Competition:  The  main  competitors  in the  Canadian  natural  health  product
industry are privately  owned  corporations.  A couple of larger  companies that
manufacture their products for retail distribution are Jamieson Laboratories and
Natural  Factors.  There  are also many  companies  which  manufacture  only for
private  label  sales.  Many  smaller  manufacturers  have their  products  sold
strictly in specialty health food and nutrition stores.

Natural health product manufacturing has significant cost barriers for new start
up companies.  Start up costs include set up of manufacturing facilities through
purchase of equipment,  acquiring skilled labor and research and  implementation
of processes acceptable to government standards.

Regulation:  In both the US and Canada,  the natural health products industry is
self  regulating.  In Canada,  products are not required to be approved prior to
introduction to the market, however Health Canada has defined Good Manufacturing
Practices, with which compliance is voluntary.  Health Canada has indicated that
stricter  regulations  for  natural  health  products  will be enacted in future
years.


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In 1996,  US Congress  enacted the Dietary  Supplement  Health and Education Act
(DSHEA) which included a set of guidelines  specific to the supplement  industry
and established a self regulatory environment for the industry.

Employees:  GFR  Pharmaceuticals,  Inc.  currently has 65  employees.  Executive
management and office administration  personnel are comprised of 18 individuals.
Operations personnel is made up of 47 individuals, including the Quality Control
Director and Production  Manager.  Future employees will be hired as dictated by
increases in business volume.

ITEM 2.           DESCRIPTION OF PROPERTY.

GFR  Pharmaceuticals,  Inc.'s operations are located in a building that is owned
by a major  shareholder.  The  lease  agreement  is for a one year  term  ending
December  31,  2006.  Under the terms of the lease  agreement,  the monthly rent
charge is approximately $4,350 ($5,000 Canadian), and GFR Pharmaceuticals,  Inc.
is responsible for paying the property taxes,  utility charges, and any costs of
repair and  maintenance.  Any repairs and  maintenance  expenses paid for by the
landlords  are required to be reimbursed  by GFR  Pharmaceuticals,  Inc. at cost
plus  15%.  All  other  terms  are  consistent  with  those  standard  to  lease
agreements.

Both  GFR  Pharmaceuticals,   Inc.'s  administration  office  and  manufacturing
operations  are located in the same  premises.  The total square  footage of the
building is 10,000. The area used by manufacturing  currently comprises 3,625 of
that  total.  During  2002,  GFR  Pharmaceuticals,  Inc.  entered  into a  lease
agreement  for  warehouse  space.  The lease is month to month  with a six month
notice of termination  clause.  In 2003 GFR  Pharmaceuticals,  Inc. increase the
spaced  leased  to  10,000  square  feet  from  5,000.  As of March 1,  2006 GFR
Pharmaceuticals,  Inc.  will enter into a lease for a building that holds 50,000
square feet of office,  warehouse, and manufacturing space, The entire operation
should be moved over into the new building and out of the existing  space before
the end of the  fiscal  year  2006.  The new  building  will  lease for  $15,000
($17,333 Canadian) in the first year of the lease and $25,000 ($28,750 Canadian)
in years 2-5 of the lease. The original building will be leased until the end of
2006 at a cost of $4,350 ($5,000 Canadian) per month..

ITEM 3.           LEGAL PROCEEDINGS.

None


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

No matters were submitted for a vote of security holders of GFR Pharmaceuticals,
Inc. during the fourth quarter of the fiscal year ended December 31, 2005.



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                                     PART II


ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTER.

Market Information

GFR Pharmaceuticals, Inc.'s stock has been listed for sale on the OTC Electronic
Bulletin  Board  under the  symbol  "GFRP."  The high and low bid  prices of the
Common Stock of GFR Pharmaceuticals, Inc. have been as follows:


    Period              High                Low
--------------   ------------------  ------------------
 1st Qtr 2004    $             0.10  $             0.06
 2nd Qtr 2004                  0.11                0.04
 3rd Qtr 2004                  1.45                0.02
 4thQtr 2004                   1.30                0.35

 1st Qtr 2005    $             0.25  $             0.55
 2nd Qtr 2005                  0.25                1.50
 3rd Qtr 2005                  1.05                3.55
 4thQtr 2005                   0.85                1.61

The above  quotations  reflect  inter-dealer  prices,  without  retail  mark-up,
markdown, or commission and may not necessarily represent actual transactions.

Holders

There were  approximately  18 holders of GFR  Pharmaceuticals,  Inc.'s 1,079,940
shares of common stock outstanding as of December 31, 2005.

Dividends

GFR  Pharmaceuticals,  Inc. has not declared any dividends since inception,  and
has no present intention of paying any cash dividends on its common stock in the
foreseeable future. The payment by GFR Pharmaceuticals,  Inc., of dividends,  if
any, in the future,  rests within the  discretion  of its Board of Directors and
will depend, among other things, upon GFR Pharmaceuticals,  Inc.'s earnings, its
capital  requirements  and its financial  condition,  as well as other  relevant
factors.


ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS.

Plan of Operations


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<PAGE>



The  Company  is  currently  working  on  securing   additional   private  label
manufacturing  contracts.  The key target for private  label sales are wholesale
distributors of health food nutrition products.

Liquidity and Capital Resources

GFR Pharmaceuticals, Inc.'s working capital ratio was 1.44 at December 31, 2005.
Key contributing  factors for this change were the approximate $287,000 increase
in inventory and a decrease in shareholder payables of approximately $254,000.

Current  liabilities  include as of December 31, 2005,  $166,742 promissory note
payable to a party related to the major shareholder, which bears interest at 12%
annually. These funds are repayable on demand however, the request for repayment
occurring at this time is not expected.

GFR  Pharmaceuticals,  Inc. has a small business loan outstanding with a balance
of $0 as of December 31, 2005. This loan bears interest at 10.15% and matures on
March 15,  2005.  The Company  has a second  business  loan with an  outstanding
balance of $30,612 as of December  31, 2005.  This loan bears  interest at prime
plus 1 percent, maturing August 23, 2009.

GFR Pharmaceuticals, Inc. did not acquired additional manufacturing equipment in
2005. An additional $350,000 of manufacturing equipment is expected to be needed
in 2006. GFR Pharmaceuticals,  Inc. is also expected to spend $350,000 for plant
renovations  to be completed in 2006.  GFR  Pharmaceuticals,  Inc.  acquired new
software  during 2006 at a cost of $56,000.  Increased  sales  volumes will also
necessitate hiring additional operations, sales and administrative personnel.

Results of Operations


                                                   2005          2004
                                               ------------  ------------
Sales                                          $  6,536,108  $  5,859,763
Cost of Sales                                     4,909,356     4,207,405
Gross Profit                                      1,626,752     1,652,358
Gross Profit Margin                                  24.90%        28.20%
Administrative Expenses                           1,426,495     1,490,334
Administrative Expenses as a % of Sales              21.80%        25.43%


For the year ended December 31, 2005, sales were  approximately  $676,000 higher
than 2004 and are  expected to continue  to grow  during  2006.  During 2005 and
2004,  46% and 41% of sales,  respectively  were to  Prairie  Naturals  Inc.,  a
wholesale  distributor for which GFR Pharmaceuticals,  Inc. manufactures private
label  products.   GFR  Pharmaceuticals,   Inc.  has  a  verbal  arrangement  to
manufacture,  on an  as-ordered  basis,  private  label  products  that  Prairie
Naturals  Inc.   distributes   under  the  Prairie   Naturals  Inc.   name.  GFR
Pharmaceuticals,  Inc. also has an exclusive written contract to manufacture one
product that Prairie Naturals Inc, distributes for a third party private label.



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Operating  margins in 2005 were 24.90% of sales revenue,  3.30% lower than 2004.
Cost of  Sales  includes  the  cost  of raw  materials  used  in  manufacturing,
production  labor  costs  and an  applicable  share of  overhead  expenses.  The
decrease in margin can be  attributed  to a product mix with lower  markups that
products produced in 2004 and an temporary  increase in the cost of whey protein
which is a main ingredient in products with higher margins.

General and  administrative  expenses,  which  includes  selling  and  marketing
expense,  were 21.80% of sales in 2005,  3.63% lower than 2004.  The decrease in
general and  administrative  expense  was due to the  reduction  in  promotional
expenditures for 2005.

Income Taxes

The effective tax rate increased from  approximately  22 percent at December 31,
2004 to  approximately 32 percent at December 31, 2005. This increase was due to
differences  in the  recognition of income and expenses for income tax reporting
and financial  statement  reporting  purposes.  The primary  difference  are the
result of excess depreciation and capital cost allowance for income tax purposes
over the amount of depreciation expense for financial reporting purposes.

Foreign Currency Gains and Loses

Foreign currency gains and losses are the result of fluctuations in the exchange
rate between Canada and our Foreign customers and vendors.  Our foreign currency
gains and losses result  primarily due to the our purchasing of raw materials in
foreign  currencies  from both  inside  and  outside  Canada.  During  2005,  we
purchased  approximately  37 % of our raw materials in U.S.  dollars compared to
43% for 2004. We also have sales to foreign countries amounting to approximately
1% of our total sales for 2005 and 1% in 2004.  Foreign currency gains increased
by $292 to $34,711 in 2005 from  $34,419 in 2004.  We expect our  purchases  and
sales in foreign  currencies to remain relatively  constant over the next twelve
months. Because exchange rates are outside our control,  however, exchange gains
and losses are unpredictable.

Effect of Inflation

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

Critical Accounting Policies

Our critical  accounting policies are those which we believe require significant
judgements,  often as a result of the need to make estimates about the effect of
matters that are inherently  uncertain.  A discussion of our critical accounting
policies  is set  forth  below.  A  complete  discussion  of all our  accounting
policies can be found in the Notes to our Financial  Statements included as part
of this Report.




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Inventories

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

Revenue recognition

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

Foreign currency translation

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

Pervasiveness of Estimates

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

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2004, the FASB issued SFAS No. 151,  INVENTORY  COSTS - AN AMENDMENT
OF ARB NO. 43,  CHAPTER 4. This  Statement  amends the  guidance  in ARB No. 43,
Chapter 4, "Inventory  Pricing," to clarify the accounting for abnormal  amounts
of  idle  facility  expense,   freight,  handling  costs,  and  wasted  material
(spoilage).  Paragraph 5 of ARB 43,  Chapter 4 previously  stated  that"...under
some  circumstances,  items such as idle facility expense,  excessive  spoilage,
double freight,  and rehandling costs maybe so abnormal as to require  treatment
as current  period  charges..."  This  Statement  requires  that those  items be
recognized  as  current-period  charges  regardless  of  whether  they  meet the
criterion of "so abnormal." In addition, this Statement requires that allocation
of fixed production  overheads to the costs of conversion be based on the normal
capacity of the production facilities. This statement is effective for inventory
costs incurred during fiscal years beginning after Jun 15, 2005. Management does
not believe the  adoption of this  Statement  will have any  immediate  material
impact on the Company.

On December 16, 2004, the FASB issued SFAS No. 123 ( R ),  SHARE-BASED  PAYMENT,
which is an amendment to SFAS No. 123, ACCOUNTING FOR STOCK-BASED  COMPENSATION.
This new standard

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<PAGE>



eliminates  the ability to account  for  share-based  compensation  transactions
using Accounting  Principles Board ("APB") Opinion No. 25,  ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES,  and generally  requires such  transactions to be accounted
for using a fair-value  based method and the  resulting  cost  recognized in our
financial  statements.  This new  standard  is  effective  for  awards  that are
granted,  modified  or settled in cash in interim and annual  periods  beginning
after June 15,  2005.  In  addition,  this new  standard  will apply to unvested
options  granted  prior to the  effective  date. We will adopt this new standard
effective for the fourth fiscal quarter of 2005, management determined that this
standard  will not have an  impact  on our  financial  position  or  results  of
operations.

In December  2004,  the FASB issued  SFAS No.  152,  ACCOUNTING  FOR REAL ESTATE
TIME-SHARING  TRANSACTIONS,  which amends FASB statement No. 66,  Accounting for
Sales of Real Estate,  to  reference  the  financial  accounting  and  reporting
guidance  for real estate  time-sharing  transactions  that is provided in AICPA
Statement  of Position  (SOP) 04-2,  Accounting  for Real Estate  Time-  Sharing
Transactions.  This statement also amends FASB Statement No. 67,  Accounting for
Costs and Initial Rental  Operations of Real Estate Projects,  to state that the
guidance  for (a)  incidental  operations  and (b) costs  incurred  to sell real
estate  projects does not apply to real estate  time-sharing  transactions.  The
accounting for those operations and costs is subject to the guidance in SOP04-2.
This Statement is effective for financial  statements for fiscal years beginning
after June 15, 2005.  Management  believes the adoption of this  Statement  will
have no impact on the financial statements of the Company.

In December 2004, the FASB issued SFAS No. 153, EXCHANGE OF NONMONETARY  ASSETS.
This Statement addresses the measurement of exchanges of nonmonetary assets. The
guidance in APB Opinion NO. 29,  Accounting  for  Nonmonetary  Transactions,  is
based on the principle that  exchanges of nonmonetary  assets should be measured
based on the fair value of the assets  exchanged.  The guidance in that Opinion,
however,  included certain  exceptions to that principle.  This Statement amends
Opinion 29 to  eliminate  the  exception  for  nonmonetary  exchanges of similar
productive  assets and  replaces it with a general  exception  for  exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial  substance if the future cash flows of the entity are expected to
change  significantly  as a result of the exchange.  This Statement is effective
for financial statements for fiscal years beginning after June 15, 2005. Earlier
applications  is permitted for  nonmonetary  assets  exchanges  incurred  during
fiscal years  beginning  after the date of this statement is issued.  Management
believes the adoption of this  Statement  will have not impact on the  financial
statements fo the Company.

ITEM 7.           FINANCIAL STATEMENTS.

The  financial  statements of the Company and  supplementary  data are included,
preceding  the  signature  page to this  report.  See Item 13. for a list of the
financial statements and financial statement schedules included.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE.

There have been no  disagreements  with  accountants on accounting and financial
disclosure.



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ITEM 8A.          CONTROLS AND PROCEDURES

As of the end of the period covered by this report,  we carried out a review and
evaluation,  under the  supervision  and with the  participation  of management,
including our chief executive officer and principal  financial  officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  as  defined  in Rules  13a-15(e)  and  15d-15(e)  of the  Securities
Exchange  Act of 1934.  Based upon that review and  evaluation,  those  officers
concluded that our disclosure controls and procedures are effective to cause the
material  information required to be disclosed by us in the reports that we file
or submit  under the  Exchange Act to be  recorded,  processed,  summarized  and
reported within the time periods  specified in the SEC's rules and forms; and to
ensure that the information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and  communicated
to our  management  including  our  principal  executive  officers,  or  persons
performing similar functions, as appropriate to allow timely decisions regarding
required  disclosure.  There have been no  significant  changes in our  internal
controls  or in  other  factors  that  significantly  affect  internal  controls
subsequent to the date we carried out our evaluation.

ITEM 8B.          OTHER INFORMATION

None


                                       12

<PAGE>



                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT.

Business Experience of Management

Richard Pierce,  Age 45, President and CEO,  Director,  Chairman of the Board of
Directors.

Mr. Pierce is the President and Chief Executive Officer of GFR  Pharmaceuticals,
Inc.  In his role he  oversees  all aspects of  operations,  administration  and
financing of GFR Pharmaceuticals, Inc.

Mr. Pierce has almost 16 years experience in the natural health  industry.  From
1997 to 1998,  prior to founding GFR  Nutritionals  Ltd., Mr. Pierce worked as a
Business  Development  Coordinator  for  Integrated  Equity  Management.  He was
involved in marketing bridge financing arrangements to private corporations. For
one year spanning 1996 and 1997, Mr. Pierce worked as an Industry Consultant for
Natraceuticals  Inc. He  specialized  in the  development  and  marketing of new
sports nutrition products.

For ten years prior to joining  Natraceuticals Inc, Mr. Pierce founded and acted
as President  and CEO of NHF  (Nutrion  Health and Fitness  Inc.).  This company
researched,   designed,  formulated,   manufactured  and  marketed  four  sports
nutrition product lines throughout Canada.

In 1983, Mr. Pierce founded  Natural Health  Products and acted as President and
CEO. Natural Health Products designed, formulated, manufactured and marketed the
first sports nutrition line in Atlantic Canada.

Marc Casavant, Age 43, Chief Financial Officer

Mr. Casavant  joined GFR  Pharmaceuticals,  Inc. as Chief  Financial  Officer in
April 2000  through  April 2001 and from  October  2002 to  present.  During his
absence he took a leave of abscence.  From March 1998 to April 2000, he was Vice
President of Operations for Basic Sports  Nutrition,  Surrey,  British Columbia.
During  1996 to March 1998 Mr.  Casavant  served as Plant  Manager  for  Nu-Life
Nutrition,  Maple  Ridge,  British  Columbia.  During 1995  through  1997 he was
Controller of Nutrion Health & Fitness,  Maple Ridge,  British Columbia.  During
1993 to 1995, Mr.  Casavant was  Controller of Majestic  Marketing  Ltd.,  White
Rock, British Columbia. From 1989 to 1993, he was the Senior Accountant for Ebco
Industries,  Ltd.,  in  Richmond,  British  Columbia.  Mr.  Casavant  obtained a
Business Administration Diploma in 1985 from Okanagan College,  Kelowna, British
Columbia.

Rose Marie Pierce, Age 56, Director

Ms. Pierce has been owner  operator of  Sunstreams  Health Foods in Calgary ALTA
since 1998,  and from 1995 to 1998 worked as a pharmacist  at various  locations
for Coop Super Markets in Calgary ALTA.

AUDIT COMMITTEE FINANCIAL EXPERT

         The  Company's  board of  directors  does not have an "audit  committee
financial   expert,"  within  the  meaning  of  such  phrase  under   applicable
regulations of the Securities and Exchange

                                       13

<PAGE>



Commission, serving on its audit committee. The board of directors believes that
all members of its audit committee are  financially  literate and experienced in
business  matters,  and that one or more  members  of the  audit  committee  are
capable of (i) understanding  generally accepted accounting  principles ("GAAP")
and  financial  statements,  (ii)  assessing  the  general  application  of GAAP
principles  in  connection  with our  accounting  for  estimates,  accruals  and
reserves,  (iii)  analyzing  and  evaluating  our  financial  statements,   (iv)
understanding our internal controls and procedures for financial reporting;  and
(v) understanding audit committee  functions,  all of which are attributes of an
audit committee financial expert.  However, the board of directors believes that
there is not any  audit  committee  member  who has  obtained  these  attributes
through the  experience  specified in the SEC's  definition of "audit  committee
financial expert." Further,  like many small companies,  it is difficult for the
Company to attract and retain  board  members  who  qualify as "audit  committee
financial  experts," and competition for these  individuals is significant.  The
board  believes  that its current  audit  committee  is able to fulfill its role
under SEC regulations despite not having a designated "audit committee financial
expert."

Code of Ethics

We do not currently have a Code of Ethics applicable to our principal executive,
financial and accounting  officers,  however;  the senior financial officer Marc
Casavant  carries  out his  function  under  the  code of  ethics  and  rules of
professional conduct as outlined by the Society of Certified General Accountants
of British Columbia.

ITEM 10.          EXECUTIVE COMPENSATION.

Summary Compensation Table

For the year ended December 31, 2005 and 2004, the President and CEO received in
compensation $83,500 ($96,000Canadian) and $80,000 ($96,000 Canadian) and $8,350
($9,600 Canadian) and $8,000 ($9,600 Canadian) in automobile  allowance pursuant
to an oral agreement.

GFR Pharmaceuticals, Inc. has not granted any options to Directors, Officers, or
Key Personnel.

Compensation Of Directors

The members of GFR Pharmaceuticals, Inc.'s Board of Directors are reimbursed for
actual expenses incurred in attending Board meetings.

ITEM 11.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Security  Ownership of Management  and Certain  Beneficial  Owners  holding five
percent or greater of the  1,079,940  shares of common stock  outstanding  as of
December 31, 2004.


Title of   Name and Address             Amount and Nature        % of
Class      of Beneficial Owner          of Beneficial Ownership   Class
---------  ---------------------------  -----------------------  --------
Common     Richard Pierce (1)                           570,000    52.78%
           President, CEO, Director

           Lucretia Schanfarber (1)                      63,333     5.86%




                                       14

<PAGE>




          All officers and directors                     570,000   52.78%
          as a Group (3 persons)

(1) c/o Suite 11405 - 201A Street, Maple Ridge, British Columbia V2X 0Y3


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

As at December 31, 2005 and 2004, accounts payable include  approximately $0 ($0
Canadian) and $253,409 ($305,003 Canadian) owing to a major shareholder, Richard
Pierce,  who is also the CEO and  Chairman of the Board of GFR  Pharmaceuticals,
Inc. Mr. Pierce  personally  borrowed and provided the funds to GFR, a temporary
cash injection required to pay for materials  required to manufacture  inventory
for a sales promotion with Costco Canada. The funds will be repaid to Mr. Pierce
by January 31, 2005 or at the time that Costco Canada pays for the inventory.

Current  liabilities  include a  $166,742  promissory  note  payable  to a party
related to the major  shareholder,  which bears interest at 12% annually.  These
funds are repayable on demand  however,  the request for repayment  occurring at
this time is not expected.  The major shareholder is Richard Pierce and the note
holders are Francina and George Pierce,  Richard's mother and father.  The funds
were borrowed in October 1998 and used to provide start up and operating capital
to the business.

GFR  Pharmaceuticals,  Inc.'s operations are located in a building that is owned
by a major  shareholder,  Richard Pierce.  The lease agreement is for a one year
term ending  December  31,  2006.  Under the terms of the lease  agreement,  the
yearly rent charge is approximately  $52,000  ($60,000  Canadian) per year. Paid
monthly  in  twelve  equal  installments  and  GFR   Pharmaceuticals,   Inc.  is
responsible for paying the property  taxes,  utility  charges,  and any costs of
repair and  maintenance.  Any repairs and  maintenance  expenses paid for by the
landlords  are required to be reimbursed  by GFR  Pharmaceuticals,  Inc. at cost
plus  15%.  All  other  terms  are  consistent  with  those  standard  to  lease
agreements.  GFR  Pharmaceuticals,  Inc. will be moving its  operations to a new
location  in 2006 and will be  vacating  the  premises  it now  leases.  The new
location   is  also  owned  by  Richard   Pierce  and  will  be  leased  to  GFR
Pharmaceuticals, Inc. for approximately $180,000 ($208,000 Canadian) in year one
of the lease which ends  February 28 2007.  In years two through  five the lease
amount will change to $300,000 ($345,000 Canadian).

GFR  Pharmaceuticals,  Inc. has also entered into a lease  agreement for certain
manufacturing  equipment with the Company's major shareholder and other parties.
The rental charges are  approximately  $56,091 ($65,374  Canadian) per year. The
equipment leased from major shareholder Richard Pierce expired June 30, 2005, at
which time the  equipment  will now be owned by GFR  Pharmaceuticals,  Inc.  The
equipment  consisted of a tableting machine and other various items as listed on
the  lease  agreement,  (See  exhibit  10.4).  The  cost  of the  equipment  was
approximately  $126,000 Canadian.  The A.P.R. on this lease is 16% compared to a
quote from a third party leasing company of 18%.

Richard  Pierce,  CEO of GFR  Pharmaceuticals,  Inc. and  Lucretia  Schanfarber,
former  Vice  President  of Sales,  hold  contracts  with GFR  Health,  Inc that
licenses their names and images to GFR Health for use on certain products.  Each
are paid a quarterly  bonus of 10% of GFR Health,  Inc.  profits  before  income
taxes,  depreciation,  and amortization are deducted as expenses. As of December
31,2005 and 2004,  $0 and  $59,783 in bonuses  have been paid and $0 and $15,486
have been

                                       15

<PAGE>



accrued.

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

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K.

The following documents are filed as part of this report under Part II, Item 8:

Exhibits as required by Item 601 of Regulation S-B

Exhibit Number             Description

3.1    Articles of Incorporation as amended (1)
3.2    Bylaws (1)
10.1   Office and production space building lease
10.2   Warehouse space lease
10.3   Additional warehouse space lease
10.4   Equipment Lease
10.5   Bonus Agreement
10.6   Loan Agreement/Promissory Note 1
10.7   Loan Agreement/Promissory Note 2
14.1   Code of Ethics
31.1   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(1)  Incorporated  by reference to GFR  Pharmaceuticals,  Inc.'s  report on Form
10SB12G dated November 5, 1999

(b) Reports of Form 8-K

         On October 17, 2005,  the Company filed a Current  Report,  to announce
         the termination of a material definitive agreement.

         On December 19, 2005, the Company filed a Current  Report,  to announce
filing  an  amendment  to its  Annual  Report on Form  10KSB for the year  ended
December 31, 2004.

ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

         The following is a summary of the fees billed to us by Robison,  Hill &
Company for professional services rendered for the years ended December 31, 2005
and 2004:


                                       16

<PAGE>




Service                                    2005                2004
--------------------------------    ------------------   -----------------
Audit Fees                          $           14,770   $          12,600
Audit Related Services                               -                   -
Tax Fees                                           300                 300
All Other Fees                                       -                   -
                                    ------------------   -----------------
Total                               $           15,070   $          12,900
                                    ==================   =================


AUDIT FEES.  Consists of fees billed for professional  services rendered for the
audits  of  our  financial  statements,  reviews  of  our  interim  consolidated
financial  statements  included in  quarterly  reports,  services  performed  in
connection  with filings with the  Securities & Exchange  Commission and related
comfort letters and other services that are normally provided by Robison, Hill &
Company in connection with statutory and regulatory filings or engagements.

TAX FEES. Consists of fees billed for professional  services for tax compliance,
tax  advice  and tax  planning.  These  services  include  assistance  regarding
federal,  state and local tax compliance  and  consultation  in connection  with
various transactions and acquisitions.

Audit  Committee  Pre-Approval of Audit and  Permissible  Non-Audit  Services of
Independent  Auditors  The  Audit  Committee  is to  pre-approve  all  audit and
non-audit  services  provided by the  independent  auditors.  These services may
include audit services,  audit-related services, tax services and other services
as allowed by law or regulation.  Pre-approval  is generally  provided for up to
one year and any  pre-approval  is  detailed  as to the  particular  service  or
category of services and is generally subject to a specifically approved amount.
The independent  auditors and management are required to periodically  report to
the Audit Committee regarding the extent of services provided by the independent
auditors in accordance with this pre-approval and the fees incurred to date. The
Audit  Committee  may also  pre-approve  particular  services on a  case-by-case
basis.

The  Audit  Committee  pre-approved  100%  of the  Company's  2005  audit  fees,
audit-related  fees,  tax fees,  and all other fees to the  extent the  services
occurred  after May 6, 2003,  the effective  date of the Securities and Exchange
Commission's final pre-approval rules.


                                       17

<PAGE>















                            GFR PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                                       -:-

                          INDEPENDENT AUDITOR'S REPORT

                           DECEMBER 31, 2005 AND 2004





<PAGE>






                                    CONTENTS


                                                                         Page

Independent Auditor's Report..............................................F - 1

Consolidated Balance Sheets
  December 31, 2005.......................................................F - 2

Consolidated Statements of Operations for the
  Years Ended December 31, 2005 and 2004..................................F - 4

Consolidated Statement of Stockholders' Equity for the
  Years Ended December 31, 2005 and 2004..................................F - 5

Consolidated Statements of Cash Flows for the
  Years Ended December 31, 2005 and 2004..................................F - 6

Notes to Consolidated Financial Statements................................F - 7



<PAGE>












                          INDEPENDENT AUDITOR'S REPORT


GFR Pharmaceuticals, Inc. and Subsidiaries


         We have audited the  accompanying  consolidated  balance  sheets of GFR
Pharmaceuticals, Inc. and Subsidiaries as of December 31, 2005 and 2004, and the
related  consolidated  statements of operations,  cash flows, and  stockholders'
equity for the two years ended December 31, 2005. These financial statements are
the responsibility of the Company'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 GFR Pharmaceuticals,
Inc. and  Subsidiaries  as of December 31, 2005 and 2004, and the results of its
operations  and its cash  flows for the two years  ended  December  31,  2005 in
conformity with accounting principles generally accepted in the United States of
America.

                                             Respectfully Submitted,



                                             /s/ Robison, Hill & Co.
                                             Certified Public Accountants

Salt Lake City, Utah
April 12, 2006


                                      F - 1

<PAGE>



                   GFR PHARMACEUTICALS, INC, AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS







                                                      December 31,
                                                          2005
                                                  ---------------------
ASSETS
Current Assets:
Cash and Cash Equivalents                         $                   -
Accounts Receivable                                           1,525,435
Inventory                                                     1,789,407
Prepaid Expense                                                  86,765
                                                  ---------------------

     Total Current Assets                                     3,401,607
                                                  ---------------------

Fixed Assets:
Manufacturing Equipment                                         495,953
Office Equipment                                                240,533
Furniture & Fixtures                                              4,061
Leasehold Improvements                                           56,759
Property Held Under Capital Lease                               353,269
                                                  ---------------------
                                                              1,150,575
Less Accumulated Depreciation                                  (491,948)
                                                  ---------------------
                                                                658,627
                                                  ---------------------

     TOTAL ASSETS                                 $           4,060,234
                                                  =====================



                                      F - 2

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)






                                                               December 31,
                                                                   2005
                                                           ---------------------
LIABILITIES
Current Liabilities:
Accounts Payable and Accrued Liabilities                   $           1,298,032
Bank Line                                                                844,609
Related Party Loans                                                      166,742
Current Portion of Obligations Under Capital Leases                       46,184
Current Portion Long-Term Debt                                             8,543
                                                           ---------------------

     Total Current Liabilities                                         2,364,110

Long-Term Debt                                                            22,069
Lease Obligations                                                         72,160
Deferred Tax Liability                                                   225,114
                                                           ---------------------

     Total Liabilities                                                 2,683,453
                                                           ---------------------

STOCKHOLDERS EQUITY
Common Stock - $0.001 par value, 100,000,000
   shares authorized, 1,079,940 shares issued and
   outstanding at December 31, 2005                                        1,080
Additional Paid-in Capital                                               698,961
Currency Translation Adjustment                                          173,819
Retained Earnings (Deficit)                                              502,921
                                                           ---------------------

     Total Stockholders' Equity                                        1,376,781
                                                           ---------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $           4,060,234
                                                           =====================





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

                                      F - 3

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                         For The Year Ended
                                                            December 31,
                                               --------------------------------------
                                                      2005                2004
                                               ------------------  ------------------
REVENUES
<S>                                            <C>                 <C>
Sales                                          $        6,536,108  $        5,859,763
Cost of Sales                                           4,909,356           4,207,405
                                               ------------------  ------------------
Gross Margin                                            1,626,752           1,652,358
                                               ------------------  ------------------

EXPENSES
   Selling & Marketing                                    360,513             378,396
   General & Administrative                               401,040             276,934
   Consulting                                              69,177              75,539
   Depreciation Expense                                    59,930             170,696
   Salaries & Wages                                       535,835             588,769
                                               ------------------  ------------------
                                                        1,426,495           1,490,334
                                               ------------------  ------------------

Net Income from Operations                                200,257             162,024

Other Income (Expense)
   Interest, Net                                          (75,154)            (64,114)
   Currency Exchange, Net                                  34,711              34,419
                                               ------------------  ------------------

Net Income (Loss) Before Income Taxes                     159,814             132,329
Income Tax (Expense) Benefit                              (50,429)            (29,248)
                                               ------------------  ------------------

NET INCOME (LOSS)                              $          109,385  $          103,081
                                               ==================  ==================

Basic Earnings (Loss) Per Share                $             0.10  $             0.10
                                               ==================  ==================

Weighted Average Shares Outstanding                     1,079,940           1,079,940
                                               ==================  ==================
</TABLE>





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

                                      F - 4

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                                Cumulative          Retained
                                        Common Stock           Paid-In          Translation        Earnings /
                                     Shares    Par Value       Capital          Adjustment         (Deficit)           Total
                                 ------------- ---------- ------------------ -----------------  ---------------- ------------------
<S>                              <C>           <C>        <C>                <C>                <C>              <C>
Balance at December 31, 2003         1,079,940 $    1,080 $          698,961 $          85,427  $        290,455 $        1,075,923

Net Income                                   -          -                  -                 -           103,081            103,081
Currency Translation                         -          -                  -            38,380                 -             38,380
                                 ------------- ---------- ------------------ -----------------  ---------------- ------------------
Total Comprehensive Income                   -          -                  -            38,380           103,081            141,461
                                 ------------- ---------- ------------------ -----------------  ---------------- ------------------

Balance at December 31, 2004         1,079,940      1,080            698,961           123,807           393,536          1,217,384

Net Income                                   -          -                  -                 -           109,385            109,385
Currency Translation                         -          -                  -            50,012                 -             50,012
                                 ------------- ---------- ------------------ -----------------  ---------------- ------------------
Total Comprehensive Income                   -          -                  -            50,012           109,385            159,397
                                 ------------- ---------- ------------------ -----------------  ---------------- ------------------

Balance at December 31, 2005         1,079,940 $    1,080 $          698,961 $         173,819  $        502,921 $        1,376,781
                                 ============= ========== ================== =================  ================ ==================
</TABLE>












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

                                      F - 5

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                       For The Year Ended
                                                                                          December 31,
                                                                              -------------------------------------
                                                                                     2005               2004
                                                                              ------------------ ------------------
Cash Flows From Operating Activities
<S>                                                                           <C>                <C>
   Net income (loss) for the period                                           $          109,385 $          103,081
Adjustments to reconcile net loss to net cash
   Provided by operating activities
     Depreciation and Amortization                                                       125,583            170,696
     Decrease (Increase) in Receivables                                                  182,783           (758,278)
     Decrease (Increase) in Inventory                                                   (239,100)          (391,222)
     Decrease (Increase) in Prepaid Expense                                              (86,765)             4,876
     Increase in Accounts Payable & Accrued Liabilities                                   94,378            131,346
     Increase (Decrease) in Bank Overdraft                                               814,155            (30,157)
     Increase in Deferred Tax Liability                                                    5,362             12,446
                                                                              ------------------ ------------------
Net Cash Provided by (Used in) Operating Activities                                    1,005,781           (757,212)
                                                                              ------------------ ------------------

Cash Flows From Investing Activities
   Purchase of Property and Equipment                                                          -            (83,186)
                                                                              ------------------ ------------------
Net Cash Used by Investing Activities                                                          -            (83,186)
                                                                              ------------------ ------------------

Cash Flows From Financing Activities
   Proceeds (Payments) on Bank Line                                                     (664,723)           613,102
   Proceeds (Payments) Shareholder Payables                                             (257,312)           249,300
   Proceeds (Payments) Long-term Debt/Capital Lease Obligations                          (77,801)           (17,301)
                                                                              ------------------ ------------------
Net Cash Provided by (Used in) Financing Activities                                     (999,836)           845,101
                                                                              ------------------ ------------------

Net Effect of Foreign Currency Translation                                                (5,945)            (4,703)
Increase (Decrease) in Cash                                                                    -                  -
Cash at beginning of period                                                                    -                  -
                                                                              ------------------ ------------------
Cash at End of Period                                                         $                - $                -
                                                                              ================== ==================


Supplemental Disclosure of Interest and Income Taxes Paid
   Interest paid during the period                                            $           75,264 $           64,114
                                                                              ================== ==================
   Income taxes paid during the period                                        $                - $          138,527
                                                                              ================== ==================

Supplemental Disclosure of Non-cash Investing and Financing Activities:
   Equipment acquired through Capital Lease                                   $                - $           23,220
                                                                              ================== ==================
</TABLE>


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

                                      F - 6

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Organization and Basis of Presentation

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

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

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

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







                                      F - 7

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

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

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

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

Principles of Consolidation

         The  consolidated  financial  statements  for December 31, 2005 and the
year ended include the accounts of GFR  Pharmaceuticals,  Inc. and the following
wholly owned subsidiaries:

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

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

Nature of Business

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

Cash and Cash Equivalents

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

Inventories

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

                                      F - 8

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

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

Depreciation

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


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

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

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

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

Revenue recognition

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

Advertising Costs

         Advertising is expensed as incurred.



                                      F - 9

<PAGE>


                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

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

Foreign currency translation

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

Pervasiveness of Estimates

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

Concentrations of Credit Risk

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

Income Taxes

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

Reclassifications

         Certain   reclassifications  have  been  made  in  the  2004  financial
statements to conform with the 2005 presentation.


                                     F - 10

<PAGE>


                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

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

Earnings (Loss) per Share

         Basic loss per share has been  computed  by  dividing  the loss for the
year  applicable to the common  stockholders  by the weighted  average number of
common  shares  outstanding  during the years.  There were no common  equivalent
shares outstanding at December 31, 2005 and 2004.

Stock Compensation for Non-Employees

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

NOTE 2 - ACCOUNTS RECEIVABLE

         As  of  December  31,  2005,  accounts  receivable   consisted  of  the
following:



                                                          2005
                                                   ------------------

Accounts Receivable                                $        1,607,437
Less: Allowance for Doubtful Accounts                         (82,002)
                                                   ------------------

Total Accounts Receivable                          $        1,525,435
                                                   ==================

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









                                     F - 11

<PAGE>


                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

NOTE 3 - INVENTORY

         Inventory  is valued at lower of cost or  market.  As of  December  31,
2005, inventory consists of the following:


                                                   2005
                                            ------------------
Raw Materials                               $        1,419,651
Work in Process                                         39,654
Finished Goods                                         330,102
                                            ------------------

Total Inventory                             $        1,789,407
                                            ==================

NOTE 4 - INCOME TAXES

         The  provision  for income  taxes  consists  of  Canadian  federal  and
provincial and territorial income tax. The provision consists of the following:


Current:                                           2005
                                            ------------------
   Canadian Income Tax                      $           45,067
   Deferred Tax Liability                                5,362
                                            ------------------

   Income Tax Expense                       $           50,429
                                            ==================

         Deferred taxes result from temporary  differences in the recognition of
income and expenses for income tax reporting and financial  statement  reporting
purposes.  The Company had deferred tax liability of $225,114 and $169,986 as of
December  31,  2005.  The  deferred  tax  liability  is  the  result  of  excess
depreciation  for income tax purposes  over the amount for  financial  reporting
purposes.

         The  difference  between the effective  income tax rate and the federal
statutory  income tax rate on the income (loss) from  continuing  operations are
presented below:


                                                                  2005
                                                               --------------
Expense at the federal statutory rate of 37.62%                $       60,122
Deferred Tax Liability                                                  5,362
Benefits from Temporary Differences in Depreciation and other         (15,055)
                                                               --------------

Effective Tax Expense                                          $       50,429
                                                               ==============


                                     F - 12

<PAGE>


                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

NOTE 5 - RELATED PARTY TRANSACTIONS

         Richard  Pierce,  CEO  of  GFR   Pharmaceuticals,   Inc.  and  Lucretia
Schanfarber, former Vice President of Sales, hold contracts with R&L Health Inc.
that licenses their names and images to R&L for use on certain  products.  He is
paid a quarterly  bonus of 10% of R&L Health Inc.  profits  before income taxes,
depreciation, and amortization are deducted as expenses. As of December 31, 2005
and 2004,  $0 and $59,783 in bonuses have been paid and $0 and $15,846 have been
accrued.

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

NOTE 6 - SHORT-TERM OBLIGATIONS


                                                           December 31,
                                                               2005
                                                        ------------------
Promissory note, repayable to related parties upon
   demand, including interest at 12%                    $          166,742
                                                        ------------------

Total                                                   $          166,742
                                                        ==================

         The Company has a line of credit with a bank with a total amount due of
$844,609 as of December  31, 2005,  respectively.  This line carries an interest
rate of prime  plus  0.50  percent  and a total  available  credit  of  $870,000
($1,000,000  Canadian)  at  December  31,  2005.  The line is secured by certain
manufacturing equipment of the Company.















                                     F - 13

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

NOTE 7 - LONG-TERM DEBT


                                                                    December 31,
                                                                      2005
                                                                  -------------
Toronto Dominion Bank Small Business Loan, repayable
  in monthly instalments $2,515 ($2,933 Canadian),
  including interest at 10.15%, maturing
  September 15, 2005, secured by certain
  manufacturing equipment of the Company                          $           -

Business Development Bank of Canada Loan, repayable in
  monthly installment $657 ($766 Canadian), including interest
  at prime plus 1%, maturing August 23, 2009                             30,612

Less current portion of long-term debt                                   (8,543)
                                                                  -------------

                                                                  $      22,069
                                                                  =============

         Principal  payments  due on  long-term  debt for each of the five years
subsequent to December 31, 2005 and thereafter are as follows:


       Year ending:                Amount
---------------------------  ------------------
           2006              $            8,543
           2007                           7,814
           2008                           8,201
           2009                           6,054
           2010                               -
                             ------------------
        Thereafter
           Total             $           30,612
                             ==================


NOTE 8 - ECONOMIC DEPENDENCE

         The Company sells a substantial  portion of its product to one customer
Prairie Naturals,  Inc. During 2005 and 2004, sales to that customer  aggregated
46% and 41%,  respectively.  As of December 31, 2005 and 2004,  amounts due from
that customer  included in accounts  receivable were 36% and 17%,  respectively.
Future  operations of the Company depend on  continuation  of the  manufacturing
arrangement with that customer.

                                     F - 14

<PAGE>



                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

NOTE 9 - COMMITMENTS

         The Company has entered into a lease  agreements for its  manufacturing
and office  facilities  and certain  manufacturing  equipment with the Company's
major  shareholder  and other  parties.  The rental  charges  are  approximately
$233,040  ($267,996  Canadian) per year for real  property and $64,350  ($74,000
Canadian) per year for equipment.  The real property  leases expire December 31,
2010, and the equipment lease expires June 2005 through December 2008.

         The assets and  liabilities  under  capital  leases are recorded at the
fair value of the asset.  The  assets  are  depreciated  over the lower of their
estimated  productive  lives.  Depreciation  of assets under  capital  leases is
included in depreciation expense for 2005.

         Following is a summary of property held under capital leases:


                                                  2005
                                           ------------------
Manufacturing Equipment                    $          353,269
Less: Accumulated Depreciation                        (61,430)
                                           ------------------

Net Assets Held Under Capital Lease        $          291,839
                                           ==================

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

<TABLE>
<CAPTION>
    Ending December 31:                              Real Property         Equipment
----------------------------                       ------------------  -----------------
<S>   <C>                                          <C>                 <C>
      2006                                                    233,040  $          56,091
      2007                                                    233,040             56,091
      2008                                                    233,040             23,837
      2009                                                    233,040                  -
      2010                                                    233,040                  -
                                                   ------------------  -----------------
      Net Minimum Lease Payments                            1,165,200            136,019
      Less: Amount Representing Interest                            -            (15,537)
                                                   ------------------  -----------------
      Present Value of Net Minimum Lease Payment            1,165,200  $         120,482
                                                   ==================  =================
</TABLE>

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




                                     F - 15

<PAGE>


                   GFR PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                                   (Continued)

NOTE 10 - STOCK INCENTIVE PLAN

         The Board of Directors has authorized  and the Company has  established
the 2000  Incentive  and  Non-qualified  Stock Option  Plan.  Under the plan the
Company is authorized to issued up to 6,000,000  shares of the Company's  common
stock with such  exercise  price and vesting  periods as the Board of  Directors
deems to be in the best  interest of the Company.  As of December  31, 2005,  no
options have been granted.

NOTE 11 - COMMON STOCK TRANSACTIONS

         On August 9, 2004, the Company changed its name from Laredo  Investment
Corp. to GFR Pharmaceuticals, Inc. In addition, a retroactive 30:1 reverse stock
split was approved by shareholders.  All references to stock in the accompanying
financial statements reflect this stock split.

NOTE 12 - GEOGRAPHIC INFORMATION

         The Company's revenues were generated  primarily from Canadian sources.
During 2005 and 2004, 99% of the Company's  revenues were from customers  inside
Canada,  and  only  two  orders,  approximately  1%,  were  shipped  to  foreign
countries.


                                     F - 16

<PAGE>




                                                    SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

GFR Pharmaceuticals, Inc.


Dated: April 20, 2006



/s/ RICHARD PIERCE
Richard Pierce, President and C.E.O., Director
(Principal Executive Officer)

/s/ MARC CASAVANT
Marc Casavant, Chief Financial Officer
(Principal Accounting Officer)

/s/ ROSEMARIE PIERCE
RoseMarie Pierce, Director


                                       18