U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB

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

FOR THE QUARTER ENDED APRIL 30TH, 2004

Commission File No. 0-25553

HUBEI PHARMACEUTICAL GROUP LTD.
-------------------------------
(Name of Small Business Issuer in its Charter)

Nevada 88-0419476
-------------------------------- --------------------------------
State or other jurisdiction of I.R.S. employer identification
incorporation or organization number

410 PARK AVENUE, 15TH FLOOR
NEW YORK, NY, USA
10222
-------------------------------------------
(Address of principal executive offices)

(604) 881-2899
-----------------------------------
Issuer's telephone number

--------------------------------------------------------------
Former name or former address, if changed since last report

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

(1) Yes X No (2) Yes X No
- - - -

STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY, AS OF THE LATEST PRACTICABLE DATE
As of April 30th, 2004 the company had issued 31,430,635 shares

DOCUMENTS INCORPORATED BY REFERENCE
A description of any "Documents Incorporated by Reference" is contained in Item
6 of this Report.

TRANSITIONAL SMALL BUSINESS ISSUER FORMAT YES NO X
-

INDEX

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

ITEM 1 - FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 3

ITEM 1 - NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . .9
Note 1. Organization and Nature of Business . . . . . . . . . . . . . . . .9
Note 2. Development Stage Activities . . . . . . . . . . . . . . . . . . .11
Note 3. Summary of Significant Accounting Policies . . . . . . . . . . . .11
Note 4. Joint Venture and Basis of Presentation . . . . . . . . . . . . . 15
Note 5. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Note 6. Related Party Transactions . . . . . . . . . . . . . . . . . . . .15
Note 7. Pension and Employment Liabilities . . . . . . . . . . . . . . . .16
Note 8. Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Note 9. Summary of Warrants Outstanding . . . . . . . . . . . . . . . . . 17
Note 10. Summary of Options Outstanding . . . . . . . . . . . . . . . . . 18
Note 11. Income Tax Exemptions and Reductions - China . . . . . . . . . . 19
Note 12. Income Tax - The United States . . . . . . . . . . . . . . . . . .20
Note 13. Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . 20
Note 14. Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . 20

ITEM 2. MANAGEMENTS DISCUSSION AND PLAN OF OPERATIONS . . . . . . . . . . . .22

ITEM 3. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . .23

PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .24

ITEM 1 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ITEM 2 CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 24

ITEM 3 DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . 26

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . 26

ITEM 5 OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ITEM 6. EXHIBITS AND REPORTS ON FORM 8K . . . . . . . . . . . . . . . . . . .26

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

HUBEI PHARMACEUTICAL GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2004
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
- -------------------------------------------------------------------------------------------

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

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 3) $ 295,119 $ 18,930
Accounts receivable 393,818 185,050
Prepaid expenses 358,014 --
Inventory (Note 4 & Note 5) 783,586 --
Travel advance 4,766 --
------------ ------------
TOTAL CURRENT ASSETS 1,835,303 203,980
------------ ------------

PROPERTY, PLANT AND EQUIPMENT, AT COST (NOTE 3 & NOTE 4) 3,040,228 --
LESS: ACCUMULATED DEPRECIATION (1,900) --
------------ ------------
NET PROPERTY, PLANT AND EQUIPMENT 3,038,328 --
------------ ------------
TOTAL ASSETS $ 4,873,631 $ 203,980
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable $ 512,858 $ 138,571
------------ ------------

MINORITY INTEREST IN JOINT VENTURE CORPORATION (NOTE 13) 3,622,500 --
------------ ------------

STOCKHOLDERS' EQUITY
Capital stock (Note 8)
Par value - 31,430,635 common shares (2003 - 15,828,762) 31,431 18,829
Additional paid in capital 2,945,677 1,265,163
Advances on proposed subscriptions 265,070
Retained earnings (deficit) during development stage (Note 2) (2,238,835) (1,483,653)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 738,273 65,409
------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,873,631 $ 203,980
============ ============

COMMITMENTS - NOTES 4, 14
-------------------------
SUBSEQUENT EVENTS - NOTE 14
---------------------------

APPROVED ON BEHALF OF THE BOARD:

_______________________, Director and Chief Executive Officer

_______________________, Director and Chief Financial Officer

See Accompanying Notes and Independent Accountants Review Report

HUBEI PHARMACEUTICAL GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF INCOME
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------

Cumulative From
Inception Date of Quarter Ended
December 18, 1998 April 30,
To April 30, -------------------------------
2004 2004 2003
------------------- --------------- --------------

Revenue $ 86,533 $ 86,533 $ --
Cost of Good Sold 46,562 (46,562) --
------------------- --------------- --------------
133,095 39,971 --
------------------- --------------- --------------
General and Administration Costs
Bank charges and interest 120,217 148 946
Contract cancellation costs 34,000 -- --
Depreciation 1,900 567 --
Finders' fee 105,475 36,335 8,900
Foreign exchange loss 8,906 -- --
Freight expenses 1,478 1,478 --
Investor communications 52,795 23,055 --
Joint Venture organization costs 160,743 -- --
Management fees 287,546 31,050 6,000
Mineral property maintenance
and exploration expenditures 11,201 -- --
Office expenses 50,162 9,731 612
Professional fees 330,639 25,679 8,389
Salary and benefits 13,756 13,756 --
Selling expenses 14,964 14,964 --
Stock transfer and filing fees 37,225 -- 1,403
Stock-based compensation 25,000 -- 25,000
Travel and promotion 29,884 3,437 --
Write-off of accounts payable (70,000) -- (70,000)
------------------- --------------- --------------
1,215,891 160,200 (18,750)
------------------- --------------- --------------
Net profit (loss) from operations (1,082,796) (120,229) 18,750
Abandonment of mineral property (3,500) -- --
Loss on terminated acquisition (1,059,415) -- --
------------------- --------------- --------------
Net profit (loss) for the period $ (2,145,711) $ (120,229) $ 18,750
=================== =============== ==============

Basic earnings (loss) per common share $ (0.00) $ 0.00
=============== ==============
Diluted earnings (loss) per common share $ (0.00) $ 0.00
=============== ==============
Weighted average number of shares outstanding
Basic 31,296,129 4,582,876
=============== ==============
Diluted 34,740,556 4,585,876
=============== ==============

See Accompanying Notes and Independent Accountants Review Report

HUBEI PHARMACEUTICAL GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
- -------------------------------------------------------------------------------------------------

Cumulative From
Inception Date of Quarter Ended
December 18, 1998 April 30,
To April 30, -----------------------------
2004 2004 2003
------------------- --------------- ------------

Net profit (loss) for the period $ (2,145,711) $ (120,229) $ 18,750
Retained earnings (deficit),
beginning of period -- (2,118,606) (1,502,403)
------------------- --------------- ------------
Retained earnings (deficit),
end of period $ (2,145,711) $ (2,238,835) $(1,483,653)
=================== =============== ============
93,124

See Accompanying Notes and Independent Accountants Review Report

HUBEI PHARMACEUTICAL GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------

Cumulative From
Inception Date of Quarter Ended
December 18, 1998 April 30,
To April 30, ---------------------------
2004 2004 2003
------------------- --------------- ----------

CASH DERIVED FROM (APPLIED TO)
OPERATING ACTIVITIES
Net profit (loss) for the period $ (2,145,711) $ (120,229) $ 18,750
Items not requiring use of cash
Depreciation. 1,900 567 --
Stock issued for bonus 10,000 -- --
Stock issued for finders' fees 22,169 3,774 --
Stock issued for consulting fees 515,000 -- --
Stock issued for the Joint Venture Corporation 22,000 -- --
Stock issued for debt 131,577 -- (77,000)
Loss on terminated acquisition 1,059,415 -- --
Abandonment of mineral property 3,500 -- --
Cumulative currency translation adjustments -- 623 --
Changes in non-cash working capital items
Prepaid expenses (358,014) (5,736) --
Inventory (105,343) (104,801) --
Accounts receivable (393,818) (393,818) --
Travel advance (4,766) (4,766) --
Accounts payable 512,858 209,656 (5,906)
------------------- --------------- ----------
Net cash applied to operating activities (729,233) (414,730) (64,156)
------------------- --------------- ----------
CASH RESTRICTED AS TO USE BY COURT ORDER 82,056 --
------------------- --------------- ----------
FINANCING ACTIVITIES
Capital stock issued for cash 1,216,947 404,313 --
Contributed surplus -- (12,075) --
Advances on proposed subscriptions -- (22,000) 265,070
------------------- --------------- ----------
Net cash provided by financing activities 1,216,947 370,238 265,070
------------------- --------------- ----------
INVESTING ACTIVITIES
Fixed assets purchased (95,971) (64,741) --
Deferred charges -- 78,492 --
Advance to the joint venture (182,050)
Mineral property (3,500) -- --
------------------- --------------- ----------
Net cash (used in) provided by investing activities (99,471) 13,751 (182,050)
------------------- --------------- ----------
CASH AND CASH EQUIVALENTS,
INCREASE DURING THE PERIOD 388,243 51,315 18,864
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -- 243,804 66
------------------- --------------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 388,243 $ 295,119 $ 18,930
=================== =============== ==========
93,124
SUPPLEMENTARY DISCLOSURE OF NON-CASH TRANSACTIONS:
Inventory transferred to the Joint Venture Corporation
as the investment from the minority party $ 783,044 $ --
Property, plant and equipment transferred to the Joint Venture
Corporation as the investment from the minority party 2,839,456 --
--------------- ----------
Minority interest in Joint Venture Corporation $ 3,622,500 $ --
=============== ==========

See Accompanying Notes and Independent Accountants Review Report

HUBEI PHARMACEUTICAL GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM DATE OF INCEPTION ON DECEMBER 18, 1998 TO APRIL 30, 2004
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------

Additional Advances on
Number of Par Paid-in Proposed Contributed
Shares Value Capital Subscriptions Surplus
------------ --------- ------------ -------------- ------------

Shares issued for cash at $0.01 600,006 $ 600 $ 59,400 $ $
Shares issued for cash at $0.10 5,000 5 4,995
Net loss for the period
------------ --------- ------------ -------------- ------------
Balance, January 31, 1999 605,006 605 64,395 0
Net loss for the year
------------ --------- ------------ -------------- ------------
Balance, January 31, 2000 605,006 605 64,395 0
Shares issued for convertible debt 917,500 918 457,832
Net loss for the year
------------ --------- ------------ -------------- ------------
Balance, January 31, 2001 1,522,506 1,523 522,227 0
Net loss for the year
------------ --------- ------------ -------------- ------------
Balance, January 31, 2002 1,522,506 1,523 522,227 0 0
Shares issued for
acquisition of business 14,000,000 14,000 1,246,000
Shares issued for debt 17,629,136 17,629 747,756
Shares issued for services 5,950,000 5,950 529,550
Shares cancelled on rescission of
acquisition agreement (23,272,880) (23,273) (1,700,370)
Net loss for the year
------------ --------- ------------ -------------- ------------
Balance, January 31, 2003 15,828,762 15,829 1,345,163 0 0
Shares issued for consulting fee 1,500,000 1,500 13,500
Shares issued for debt 1,500,000 1,500 13,500
Shares issued for bonus 1,000,000 1,000 9,000
Cancellation of issuance for debt (4,000,000) (4,000) (116,000)
------------ --------- ------------ -------------- ------------
15,828,762 15,829 1,265,163 0 0
------------ --------- ------------ -------------- ------------
1:10 consolidation, April 2, 2003 1,582,884 15,829 1,265,163 0 0
Shares issued for the deposit on assignment of
acquisition agreement for 57.1% interest of
Hubei Pharmaceutical Co., Ltd.
(Total of 22,000,000 shares),
recorded at par value 3,000,000 3,000
Shares issued for cash @$0.15
Issued on July 6, 2003 2,446,324 2,446 364,503
Shares issued for finders' fees
Issued on July 6, 2003 55,500 56 16,839
Balance of Shares issued for the deposit on assignment
of acquisition agreement for 57.1% interest of HuBei
Pharmaceutical Co., Ltd. (Total of 22,000,000
shares) recorded at par value 19,000,000 19,000 0
Adjustment of Paid in Capital (14,246) 14,246
Shares issued for finders' fees
Issued on August 15, 2003 1,500,000 1,500
Shares issued for cash @$0.30

Cumulative
Retained Currency
Earnings Translation
(Deficit) Adjustments Total
- ------------------------------------------------------------------------------------------------

Shares issued for cash at $0.01 $ $ $ 60,000
Shares issued for cash at $0.10 5,000
Net loss for the period (7,401) (7,401)
------------ ------------ ------------
Balance, January 31, 1999 (7,401) 57,599
Net loss for the year (46,422) (46,422)
------------ ------------ ------------
Balance, January 31, 2000 (53,823) 0 11,177
Shares issued for convertible debt -- 458,750
Net loss for the year (547,038) (547,038)
------------ ------------ ------------
Balance, January 31, 2001 (600,861) 0 (77,111)
Net loss for the year (16,989) (16,989)
------------ ------------ ------------
Balance, January 31, 2002 (617,850) 0 (94,100)
Shares issued for
acquisition of business 1,260,000
Shares issued for debt 765,385
Shares issued for services 535,500
Shares cancelled on rescission of 0
acquisition agreement (1,723,643)
Net loss for the year (884,553) (884,553)
------------ ------------ ------------
Balance, January 31, 2003 (1,502,403) 0 (141,411)
Shares issued for consulting fee 15,000
Shares issued for debt 15,000
Shares issued for bonus 10,000
Cancellation of issuance for debt (120,000)
------------ ------------ ------------
(1,502,403) 0 (221,411)
------------ ------------ ------------
1:10 consolidation, April 2, 2003 (1,502,403) 0 (221,411)
Shares issued for the deposit on assignment of 0
acquisition agreement for 57.1% interest of 0
Hubei Pharmaceutical Co., Ltd.
(Total of 22,000,000 shares), 0
recorded at par value 3,000
Shares issued for cash @$0.15 0
Issued on July 6, 2003 366,949
Shares issued for finders' fees 0
Issued on July 6, 2003 16,895
Balance of Shares issued for the deposit on assignment 0
of acquisition agreement for 57.1% interest of HuBei 0
Pharmaceutical Co., Ltd. (Total of 22,000,000 0
shares) recorded at par value 19,000
Adjustment of Paid in Capital 0
Shares issued for finders' fees
Issued on August 15, 2003 1,500
Shares issued for cash @$0.30 0

See Accompanying Notes and Independent Accountants Review Report

Cumulative
Additional Advances on Retained Currency
Number of Par Paid-in Proposed Contributed Earnings Translation
Shares Value Capital Subscriptions Surplus (Deficit) Adjustments
---------- ------- ---------- -------------- ------------ ------------- ------------

Issued on August 21, 2003 693,333 693 207307
Shares issued for Consultants
fees, issued on August 29, 2003 2,000,000 2,000 498,000
Shares issued for cash @$0.45/unit,
issued on December 1, 2003 301,300 301 135,284
Shares issued for cash @$0.30/unit,
issued on December 11, 2003 35,666 36 10,664
Warrants exercised @$0.20/share 104,500 105 20,795
Option exercised @$0.22/share 25,000 25 5,475
Advances on proposed subscriptions 22,000
Contributed Surplus 12,075
Cumulative translation adjustments (623)
Net loss for the year ended
January 31, 2004 (616,203)
---------- ------- ---------- -------------- ------------ ------------- ------------
Balance, January 31, 2004 30,744,507 30,052 2,330,969 22,000 12,075 (2,118,606) (623)
Shares issued for cash @$0.53/share
issued on February 20, 2004 27,500 28 14,547
Shares issued for cash @$0.55/share
issued on February 20, 2004 40,000 40 21,960
Shares issued for cash @$0.53/share
issued on April 19, 2004 65,308 65 34,548
Shares issued for cash @$0.55/share
issued on April 19, 2004 110,000 110 60,390
Shares issued for finders fees
issued on April 19, 2004 7,120 7 3,767
Shares issued for cash @$0.625/share
issued on April 21, 2004 436,200 436 272,189
Contributed Surplus (12,075)
Cumulative translation adjustments 623
Advances on proposed subscriptions (22,000)
Net loss for the period ended
April 30, 2004 (120,229)
---------- ------- ---------- -------------- ------------ ------------- ------------
Balance, April 30, 2004 31,430,635 $30,738 $2,738,370 $ 0 $ 0 $ (2,238,835) $ 0
========== ======= ========== ============== ============ ============= ============

Total
----------

Issued on August 21, 2003 0
Shares issued for Consultants 0
fees, issued on August 29, 2003 500,000
Shares issued for cash @$0.45/unit,
issued on December 1, 2003 135,585
Shares issued for cash @$0.30/unit, 0
issued on December 11, 2003 10,700
Warrants exercised @$0.20/share 20,900
Option exercised @$0.22/share 5,500
Advances on proposed subscriptions 22,000
Contributed Surplus 12,075
Cumulative translation adjustments (623)
Net loss for the year ended 0
January 31, 2004 (616,203)
----------
Balance, January 31, 2004 275,867
Shares issued for cash @$0.53/share
issued on February 20, 2004 14,575
Shares issued for cash @$0.55/share
issued on February 20, 2004 22,000
Shares issued for cash @$0.53/share
issued on April 19, 2004 34,613
Shares issued for cash @$0.55/share
issued on April 19, 2004 60,500
Shares issued for finders fees
issued on April 19, 2004 3,774
Shares issued for cash @$0.625/share
issued on April 21, 2004 272,625
Contributed Surplus (12,075)
Cumulative translation adjustments 623
Advances on proposed subscriptions (22,000)
Net loss for the period ended
April 30, 2004 (120,229)
----------
Balance, April 30, 2004 $ 530,273
==========

See Accompanying Notes and Independent Accountants Review Report

ITEM 1 - NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Nature of Business

Hubei Pharmaceutical Group, Ltd. ("the Company") was incorporated in the State
of Nevada, U.S.A. on December 18, 1998, under the name of Explore Technologies,
IncIn the exploration stage, the Company was engaged in the acquisition,
exploration and development of mineral properties. The Company had intended to
carry out exploration work on the Miranda Property in order to ascertain whether
the Miranda Property possessed commercially developable quantities of gold and
other precious minerals. The Company's board of directors determined that
further exploration of the Miranda Property was not commercially viable and
decided on April 25, 2000 to abandon its interest in the property.

In April 2002, the Company identified a business opportunity and acquired the
issued and outstanding shares of Access Network Limited ("Access"), a British
Virgin Island Company, and certain assets associated with the operations of
Access by the issuance of 14,000,000 common shares at a price of $0.09 per
share. Access was in the business of supplying long distance telephone services
to Asian users. Also, the Company changed its name from Explore Technologies,
Inc. to Pan Asia Communications Corp.

On May 15, 2002, the Company issued 12,598,500 common shares to creditors of
Access in settlement of debt of $629,925.

On June 5, 2002, the Company issued 5,950,000 shares of common stock to
consultants at a deemed price of $0.09 per share for a number of agreements to
provide customer research, technology support and financial services related to
the business acquired from Access. The Company has cancelled all agreements for
services from consultants and other agents effective (September 3rd 2002) with
the rescission of the acquisition of Access. No shares issued with respect to
consulting services will be returned to treasury.

The Company was unable to raise the capital necessary to pursue the development
of Access and on September 3, 2002, the Company entered into an agreement to
rescind the Access agreement dated May 15, 2002 and to return 14,000,000 common
shares issued, to treasury. Effective October 30, 2002, the Company cancelled
and returned to treasury 14,000,000 acquisition shares. In addition, the Company
cancelled 9,272,880 shares from the 12,598,500 common shares issued to creditors
of Access in respect of the acquisition. The remaining 3,325,620 shares were
deposited by two creditors as collateral and were not available for physical
return to the Company. The Company is pursuing cancellation of the shares

JOINT VENTURE INVESTMENT WITH HUBEI ZENITH AIRBECK PHARMACEUTICAL CO. LTD.
("AIRBECK")

On February 26, 2003, the Company identified a new business opportunity and on
March 18, 2003 entered into an Acquisition Agreement with Red Dot Capital Inc.
("Red Dot") to acquire, on certain terms and conditions, 100% of Red Dot's
57.14% joint venture interest in Hubei Pharmaceutical Co., Ltd. ("HBJV"). HBJV
was incorporated as a private Chinese joint venture corporation in the city of
Xiangfan in Hubei province, People's Republic of China ("China") on January 24,
2003 by Red Dot and Hubei Zenith Airbeck Pharmaceutical Co. Ltd. The latter is
licensed to engage in research, development, production and sale of
pharmaceutical products. Airbeck is a Chinese government funded company located
in Xiangfan, involved in research, development, production and sale of bulk
pharmaceutical products through its Bulk Division as well as over-the-counter
and patented pharmaceutical products in dosage forms including injections,
capsules, tablets, syrups and other form through its Dosage Division. HBJV's
initial line of business will be to operate the Dosage Division contributed by
Airbeck to the joint venture.

Effective April 2, 2003, the Company underwent a name change from Pan Asia
Communications Corp. to Hubei Pharmaceutical Group, Ltd. and consolidated its
capital on a 10 old for 1 new basis. Its common shares commenced trading on the
OTC Bulletin Board on a Post-consolidation basis on Thursday, April 3, 2003
under the new symbol HBEI.

The terms of the Acquisition Agreement are as follows:

The company is to issue 22,000,000 post-consolidation, restricted shares of
common stock in its capital (the "Shares") at par value of $0.001 per share, to
Red Dot, or Red Dot's nominees, appointed in writing on the following terms and
conditions:
3,000,000 common shares to be issued on closing. These were issued from
treasury on April 3, 2003
19,000,000 common shares to be issued at the time the Airbeck assets are
vended into the joint venture. These were issued from treasury on July 25,
2003.

The company is to issue 2,000,000 post-consolidation, restricted shares of
common stock in its capital as a finders' fee due and payable at such time as
Airbeck assets are vended into the joint venture as referred to above. These
shares were re-negotiated at a total of 1,500,000 common shares and issued on
August 15, 2003. However, 1,000,000 common shares as a part of this finders' fee
are subsequently cancelled on April 23, 2004 (See Note 15 - Subsequent events,
below).

The company is to assume all of Red Dot's obligations pursuant to the Joint
Venture Agreement with Airbeck.

As further consideration of Red Dot's assignment of its interest in HBJV, the
Company is to issue the following number of post-consolidation, restricted
shares of common stock in its capital to Red Dot, or Red Dot's nominees
appointed in writing, upon HBJV attaining the following cumulative, gross sales
revenue:

Gross Sales Additional Shares
Amount to Be Issued
------------------------------
$ 5,000,000 5,000,000
7,500,000 2,500,000
10,000,000 2,500,000
12,500,000 2,500,000
15,000,000 2,500,000
==============================

Based on the Joint Venture Agreement between Airbeck and Red Dot dated December
23, 2002, the Amended HBJV Articles dated July 8, 2003 and the Supplemental
Joint Venture Agreement between Airbeck, Red Dot and the Company dated July 31,
2003, the details of the joint venture are as follows:

The Company owns a controlling interest of 57.14% in HBJV by agreeing to invest
US dollar cash of $4,830,000 (RMB40,000,000), and to transfer its US dollar cash
investment to HBJV as follows:
- An initial 15% ($724,500) on or before October 22, 2003.
- A further 35% ($1,690,500) on or before April 23, 2004.
- A further 25% ($1,207,500) on or before April 23, 2005.
- A final 25% ($1,207,500) on or before April 23, 2006.

This amount is not recorded as a liability in these financial statements as it
is contingent upon the Company raising funds for investment. The Company
invested $278,000 and advanced $123,672 cash to HBJV before

January 31, 2004. On February 28, 2004, the Company, the management of Airbeck
and the board of HBJV subsequently arrived a memorandum to amend the
abovementioned investment agreement. Based on this memorandum, the Company's
cash investment schedule is changed to total cash investment should be invested
in HBJV on or before April 23, 2006.

Airbeck owns a minority interest of 42.86% in HBJV by investing intangible
assets in the form of pharmaceutical production licenses valued at $3,381,000
(RMB28,000,000) along with machinery and equipment valued at $241,500
(RMB2,000,000). On January 16, 2004, an amended investment agreement was arrived
between the Company and the management of Airbeck. Based on this amended
investment agreement, Airbeck would retain $3,381,000 intangible assets of
pharmaceutical production licenses. Instead of these intangible assets, Airbeck
transferred $678,243 of inventory and $2,702,757 of plant, property and
equipment, to HBJV.

The values of inventory, plant, property and equipment contributed by Airbeck
were assessed and appraised by Xiangfan Huaju Certified Public Accountant Co.,
Ltd., a qualified appraisal firm registered in Xiangfan, China. Total investment
of $3,622,500 from Airbeck in the form of inventory, plant, property and
equipment were transferred into HBJV except buildings are under the procedure of
title transfer.

Airbeck is presently in the procedure of privatization, and it is expected that
the privatization process will take a number of months for approvals and
finalization. Management agrees that the new ownership of Airbeck, after
privatization, will own the 42.86% interest in HBJV. The detailed name of the
ownership will not be known until finalization of the privatization procedure.

Note 2. Development Stage Activities

The Company is a development stage company as defined in the Statement of
Financial Accounting Standards No.7. The Company is devoting substantially all
of its present efforts to establish a new business for the Company by acquiring
the operating Dosage Division of Hubei Zenith Airbeck Pharmaceutical Co. Ltd.
and none of this joint venture corporation's planned principal operations have
commenced at January 31, 2004. All accumulated expenses of $78,492 in HBJV are
considered as part of the Company's development stage activities and are
capitalized as deferred charges in the balance sheet. Also, all losses
accumulated since inception has been considered as part of the Company's
development stage activities.

Since its inception, the Company has funded operations through invested cash
from common stock issuances to meet its strategic objectives. Management
believes that sufficient funding will be available to meet its business
objectives, including anticipated cash needs for working capital.

Note 3. Summary of Significant Accounting Policies

(a) Basis of Presentation
These consolidated financial statements have been prepared in
accordance with Accounting Principles Generally Accepted in the United
States ("USGAAP).

(b) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and the HBJV. The 42.86% interest in the HBJV
owned by Airbeck is shown as a minority interest in the consolidated
financial statements. All intercompany transactions and intercompany
balances have

been eliminated. HBJV has not commenced operating activities;
therefore, HBJV does not affect the statement of income.

(c) Use of Estimates
The preparation of financial statements in conformity with USGAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those
estimates.

(d) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturity at the date of
purchase of three months or less.

(e) Income Taxes
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax bases of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statement at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income
Taxes. Deferred tax assets are reduced by a valuation reserve to nil
due to uncertainty of applying tax losses brought forward. As changes
in tax laws or rate are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes. (Note 14. Income
Tax - The United States, below)

Income Tax Exemptions and Reductions, relating to operation of the
joint venture corporation in China are disclosed in Note 11. Income
Tax Exemptions and Reductions - China, below.

(f) STOCK BASED COMPENSATION SFAS No. 123, "Accounting for stock-based
compensation" permits the use of either a "fair value based method" or
the "intrinsic value method" defined in Accounting Principles Board
Opinion 25, "Accounting for stock issued to employees" (APB 25) to
account for employee stock-based compensation arrangements.

The Company accounts for employee stock based compensation using the
intrinsic value method prescribed in APB 25 and related
interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company's
common stock at the date of the grant over the amount an employee must
pay to acquire the common stock. Non-employee stock based compensation
is accounted for using the fair value method in accordance with SFAS
No. 123 - "Accounting for Stock Based Compensation".

No disclosures relating to stock based compensation have been included
with the accompanying consolidated balance sheet, as all stock options
were granted to directors and employees at exercise prices that were
the same as or excess of the fair market value of the Company's common
stock at the date of the grant. (See Note 10 -- Summary of Options
outstanding, below.)

(g) Compensated Absences Employees of the corporation are entitled to paid
vacations, sick days and other time off depending on job
classification, length of service and other factors. It is impractical
to estimate the amount of

compensation for future absences, and accordingly, no liability has
been recorded in the accompanying consolidated financial statements.
The corporation's policy is to recognize the costs of compensated
absences when paid to employees.

(h) Net Profit (Loss) Per Share
The Company adopted Statement of Financial Accounting Standards No.
128 that requires the reporting of both basic and diluted earnings per
share. Basic earnings per share is computed by dividing net income
available to common share owners by the weighted average number of
common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock. In accordance with FASB 128, any anti-dilutive effects
on net loss per share are excluded.

(i) Disclosure about Fair Value of Financial Instruments
As defined in FASB 107, the company estimates whether the fair value
of all financial instruments differ materially from the aggregate
carrying values of its financial instruments recorded in the
accompanying balance sheet, which need to be disclosed. The estimated
fair values of amounts have been determined by the Company using
available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates
are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.

(j) Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of cash and
cash equivalents which are not collateralized. The Company limits its
exposure to credit loss by placing its cash and cash equivalents with
high credit quality financial institutions.

(k) Long-lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset in question may not be recoverable.
This standard did not have a material effect on the Company's results
of operations, cash flows or financial position in these financial
statements.

(l) FOREIGN CURRENCY TRANSLATION
The reporting currency of the Company is the United States Dollar. The
accounts of other currencies are translated into US Dollars on the
following basis:

Monetary assets and liabilities are translated at the current rate of
exchange. The weighted average exchange rate for the period is used to
translate revenue, expenses, and gains or losses from the functional
currency to the reporting currency. The weighted average exchange rate
for the period is used to translate revenue, expenses, and gains or
losses from the functional currency to the reporting currency. The
gain or loss on the of foreign currency financial statements is
reported as a separate component of stockholders' equity and not
recognized in net income. Gains or losses on re-measurement from the
recording currency are recognized in current net income. Gains or
losses from foreign currency transactions are recognized in current
net income. Fixed assets are measured at historical exchange rates
that existed at the time of the transaction.

Depreciation is measured at historical exchange rates that existed at
the time the underlying related asset was acquired.

The effect of exchange rate changes on cash balances is reported in
the statement of cash flows as a separate part of the reconciliation
of change in cash and cash equivalents during the period.

(m) Revenue Recognition
The Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements, in
December 1999. The SAB summarizes certain of the SEC staff's views in
applying generally accepted accounting principles to revenue
recognition in financial statements. During the current year, the
Company performed a review of its revenue recognition policies and
determined that it is in compliance with SAB 101.

(n) FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, prepaid expenses,
accounts payable, none of which are held for trading purposes.

It is management's opinion that this Company is not exposed to
significant interest or credit risks arising from these financial
instruments, as the fair value of these financial instruments
approximate their carrying values/

(o) Segmented Information
The Company's identifiable assets as are located in the following
countries:

APRIL 30, 2004 CANADA CHINA TOTAL
--------------------------------

Current assets $632,659 $1,202,644 $1,835,303
Net fixed assets 6,988 3,031,340 3,038,328
-------- ---------- ----------
Total assets $639,647 $4,233,984 $4,873,631
======== ========== ==========

APRIL 30, 2003 CANADA CHINA TOTAL
--------------------------------
Current assets $203,980 $ -- $ 203,980
-------- ---------- ----------
Total assets $203,980 $ -- $ 203,980
======== ========== ==========

(p) Property, Plant and Equipment
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is recorded at the following rates, based upon the useful
life of the assets:

Office equipment - 20% per annum on the declining balance
Computer - 30% per annum on the declining balance
Leasehold improvement - Allocated on a straight-line basis over the term of the lease
Property, plant and buildings - 6% per annum on the straight-line basis
Lease equipment - 7.14% to 12.5% per annum on the straight-line basis

Fixed assets in the HBJV will record depreciation based on above rates
when the operations commence.

Note 4. Joint Venture and Basis of Presentation

JOINT VENTURE - HUBEI PHARMACEUTICAL CO., LTD. ("HBJV")
The details of the investment items and proposed investment items are disclosed
in Note 1 - Joint Venture Investment with Hubei Zenith Airbeck Pharmaceutical
Co., Ltd. above. Salient points from Note 1 are repeated here for convenience
along with additional clarification.

$3,622,500 of capital stock in the joint venture is composed of investments
from Airbeck as follows:

Appraised Value Recognized Value
(See Note 1, above) by Management
-------------------- -----------------

(a) Plant, property and equipment. $ 2,944,257 $ 2,944,257
-------------------- -----------------
(b) Inventory 690,071 678,243
Total investments from Airbeck $ 3,634,328 $ 3,622,500
==================== =================

Based on the original investment agreements signed on December 23, 2002, the
Amended HBJV Articles dated July 8, 2003 and the Supplemental Joint Venture
Agreement between Airbeck, Red Dot and the Company dated July 31, 2003, Airbeck
owns a minority interest of 42.86% in HBJV by investing intangible assets in the
form of pharmaceutical production licenses valued at $3,381,000 (RMB28,000,000)
along with machinery and equipment valued at $241,500 (RMB2,000,000).

Based on the amended investment agreement signed on January 16, 2004, Airbeck
would transfer further $2,702,757 of plant, property and equipment and $678,243
of inventory instead of $3,381,000 above mentioned intangible assets. The effect
of this change of Airbeck's investment in HBJV is to transfer the operating
dosage division, complete with $2,944,257 of plant, property and equipment and
$678,243 of inventory to HBJV while leaving with Airbeck $3,381,000 of
aforementioned intangible assets, all of its liabilities, and its current assets
except inventory of $678,243 transferred to the Joint Venture.

CAPITAL LEASE AGREEMENT IN HBJV
On July 8, 2003, HBJV signed a lease agreement with Airbeck to lease two
properties with equipment from Airbeck. This lease agreement no longer applies
because Airbeck transferred these two properties with equipment to HBJV as a
part of Airbeck's investments under the amended investment agreement signed on
January 16, 2004.

Note 5. Inventory
The management of HBJV and Airbeck agreed that the value of this inventory is
$783,586 at April 30, 2004, as disclosed in these financial statements.

Note 6. Related Party Transactions
The Company acquired $8,888 (CAD$9,180.18) of new computers and printers from a
company related to a Director during the year ended January 31, 2004.

Managements fees of $31,050 (2003 - $6,000) were paid to Directors of the
Company for the period ended April 30, 2004.

INVESTMENT IN HBJV

The President and Director is the owner of Red Dot Capital Inc. that assigned
its interest in the joint venture to the Company and Red Dot received 22,000,000
post consolidated restricted common shares at par value of $0.001 per share.

Note 7. Pension and Employment Liabilities
The company does not have liabilities as at April 30, 2004, for pension, post
employment benefits or post-retirement benefits. The company does not have a
pension plan.

Note 8. Capital Stock
On March 24, 2003, four million pre-consolidation common shares were returned to
the transfer agent for cancellation pursuant to a renegotiated debt settlement.
The Company re-negotiated a debt settlement made previously with Eurocapital
Holdings A.V.V. ("EuroCapital"), referenced in the audited statement dated
January 31st, 2003. Under the terms of the re-negotiated agreement, EuroCapital
agreed to tender their 4,000,000 shares on the condition that the Company make
payment to EuroCapital and/or their nominee in the sum of Fifty Thousand Dollars
which the company later paid EuroCapital on March 18, 2003. The 4,000,000 common
shares were returned to the transfer agent for cancellation on March 24, 2003.

On April 2, 2003, the Company consolidated its issued and outstanding common
shares on a 10-old for 1-new basis. Following the rollback, the Company's
authorized capital was increased back to one hundred million (100,000,000)
common shares.

On April 3, 2003, the Company issued 3,000,000 common shares of common stock
pursuant to an agreement entered into with Red Dot Capital, Inc. to acquire a
57.14% interest in a joint venture located in China. This issue has been
recorded at par value pending completion of the transaction.

On July 25, 2003, the Company issued 19,000,000 common shares of common stock
from the treasury pursuant to an agreement entered into with Red Dot Capital,
Inc. to acquire a 57.1% interest in a joint venture located in China. This issue
has been recorded at par value pending completion of the transaction.

On July 25, 2003, the Company accepted private placement subscription offers
from a group of accredited investors to subscribe for 728,999 units at a price
of $0.30 each. Each unit consisted of one share of common stock and one
purchase warrant to purchase an additional share of common stock at a price of
$0.80 if exercised on or before July 31, 2004 or at a price of $1.50 if
exercised after July 31, 2004 and before July 31, 2005. The Company issued
693,333 common shares on August 21, 2003, and 35,666 common shares on December
11, 2003. The shares carry an appropriate restrictive legend. A summary of all
Warrants Outstanding is presented at Note 11, below.

On August 29, 2003, in accordance with a directors resolution dated August 21,
2003, the company issued 750,000 shares to consultant, Ding Hong, MD pursuant to
an Independent Contractor / Consulting Agreement dated May 30, 2003; 350,000
common shares to consultant, Erwin Heuchert pursuant to an Independent
Contractor / Consulting Agreement dated June 5, 2003; 400,000 common shares to
consultant, Wei Jian Ping, MD pursuant to an Independent Contractor / Consulting
Agreement dated June 12, 2003; and 500,000 common

shares to consultant, Xiang Qian pursuant to an Independent Contractor /
Consulting Agreement dated June 13, 2003. Management determined that these
shares are issued at a price of $0.25 per share, and those agreements for two
year period consulting services and initially recorded as prepaid expenses, and
expended in the period when services are delivered.

On December 11, 2003, one of Directors exercised 25,000 shares of his stock
options at the exercise price of $0.22 per share. (See Note 12 - Summary of
Options Outstanding, below)

On February 20th, 2004, 27,500 shares were issued at a price of $0.53 per share
and 40,000 shares were issued at a price of $0.55 per share with respect to
private placements. Each of these shares carries a warrant to purchase an
additional share at a price of $0.80 per share on or before February 13th, 2005
or at $1.50 per share after February 13th, 2005, but on or before February 13,
2006. These shares were issued under the conditions of Rule 144 and carry an
appropriate restrictive legend. Gross proceeds from the sale of shares with
respect to this issue were $36,575.00. The company paid a finders fee of
$2,200.00

On April 19th, 2004, 65,308 shares were issued at a price of $0.53 per share,
110,000 shares were issued at a price of $0.55 per share and 7,120 shares were
issued as finders fees with respect to private placements. 32,428 of these
shares carry a warrant to purchase an additional share at a price of $0.80 per
share on or before February 13th, 2005 or at $1.50 per share after February
13th, 2005, but on or before February 13, 2006. 150,000 of these shares carry a
warrant to purchase an additional share at a price of $0.80 per share on or
before March 13th, 2005 or at $1.50 per share after March 13thh, 2005, but on or
before March 13th, 2006. These shares were issued under the conditions of Rule
144 and carry an appropriate restrictive legend. Gross proceeds from the sale
of shares with respect to this issue were $95,113.00

On April 21st, 2004, 436,200 shares were issued at a price of $0.625 per share
with respect to private placements. Each of these shares carries a warrant to
purchase an additional share at a price of $0.90 per share on or before April
2nd, 2005 or at $1.50 per share after April 2nd, 2005, but on or before April
2nd, 2006. These shares were issued under the conditions of Rule 144 and carry
an appropriate restrictive legend. Gross proceeds from the sale of shares with
respect to this issue were $272,625.00. The company paid a finders fee of
$25,200.00.

Total shares issued as at April 30th, 2004 are 31,430,635.

Note 9. Summary of Warrants Outstanding

Warrants to purchase up to 1,716,427 shares of common stock are outstanding at
January 31, 2004. The details are as follows:

Summary of outstanding warrants:

Shares
Warrant Exercise Terms Available
-------------------------------------------------------------------------- ---------

At $0.80 before July 31st, 2004 or $1.50 before July 31st, 2005 728,999
At $0.80 before November 14th, 2004 or $1.50 before November 14th, 2005 301,300
At $0.80 before February 13th, 2005 or at $1.50 before February 13th, 2006 99,928
At $0.80 before March 13th, 2005 or at $1.50 before March 13th, 2006 150,000
At $0.90 before April 2nd, 2005 or at $1.50 before April 2nd, 2006 436,200
---------
Total warrants outstanding as at April 30th, 2004. 1,716,427
=========

Note 10. Summary of Options Outstanding

STOCK OPTIONS GRANTED TO DIRECTORS
On August 21st, 2003, the Company passed resolutions to grant stock options to
purchase 750,000 shares of common stock at a price of $0.22 to its president,
Reid Li and 500,000 shares of common stock at a price of $0.22 to its corporate
secretary, Eric Fletcher. The options have fixed terms and shall expire on
August 20th, 2008. On the date of stock options granted, the fair market value
of the Company's common stock is $0.20 per share.

On December 11, 2003, Eric Fletcher exercised 25,000 of the titled 500,000 stock
options granted leaving a balance of 475,000 options available.

The company also granted a stock option to purchase 200,000 shares of common
stock at a price of $0.22 to its director, Clint Cheng. Mr. Clint Cheng resigned
his position in the Company on October 24, 2003, so the titled options under his
name expired 30 days thereafter based on the terms of the option agreement.

EMPLOYEE STOCK OPTION PLAN
On August 21, 2003, the Board of Directors of the Company passed a resolution to
establish an employee stock option plan. The Company engaged Dieterich and
Associates to prepare documentation and a registration statement in support of
the Stock Option Plan and Directors Options granted to date. In accordance with
information provided by Dieterich and Associates, the Company established an
employee stock option plan consisting of 3,000,000 shares and filed a
registration statement with respect to the plan on December 9, 2003. The summary
of this 2003 employee stock option plan is as follows:

(a) Type of Awards
The Board of Directors (the "Board") and the Compensation Committee
(the "Committee") of the Company are authorized under this Plan to
enter into any type of arrangement ("Grant" or "Award") with a
Participant that is not inconsistent with the provisions of this Plan
and that, by its terms, involves or might involve the issuance of
shares of the Company's $0.001 par value common stock (the "Stock") or
a derivative security.

(b) Amount of Stock
The aggregate number of shares of Stock which may be purchased
pursuant to the exercise of Awards shall be 3,000,000 shares of Stock.
Of this amount, the Board or the Committee shall have the power and
authority to designate whether any options so issued shall be the
options which meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended ("ISOs") or not ISOs ("NSOs"). If an
Award ceases to be exercisable, in whole or in part, the shares of
Stock underlying such option shall continue to be available under this
Plan.

(c) Eligible Persons
With respect to ISOs, an eligible person means any individual who has
been employed by the Company or by any subsidiary of the Company for a
continuous period of at least thirty days; or with respect to all
other forms of Awards, an eligible person means (i) any individual who
has been employed by the Company or by any subsidiary of the Company,
for a continuous period of at least sixty days, (ii) any director of
the Company or any subsidiary of the Company (iii) any member of the
Company advisory board or of any of the Company's subsidiary(ies), or
(iv) any consultant of the Company or by any subsidiary of
the Company.

(d) Grant of Awards
The Board or the Committee has the right to issue the Awards
established by this Plan to eligible persons.

(e) Exercise Price
The exercise price per share shall be determined by the Board or the
Committee at the time any Award is granted, and shall be not less than
(i) in the case of an ISO, the fair market value, (ii) in the case of
an ISO granted to a ten percent or greater stockholder, shall be
determined by the Board, or (iii) in the case of all other Awards, not
less than 75% of the fair market value (but in no event less than the
par value) of one share of Stock on the date the Award is granted, as
determined by the Board or the Committee.

(f) Determination of Fair Market Value
In granting ISO's under this Plan, the Board or the Committee shall
make a good faith determination as to the fair market value of the
Stock at the time of granting the ISO.

(g) No Guarantee of Employment and Non-transferability
Nothing in this plan or in any writing granting an Award will confer
upon any eligible person the right to continue in the employ of the
eligible person's employer, or will interfere with or restrict in any
way the right of the eligible person's employer to discharge such
eligible person at any time for any reason whatsoever, with or without
cause. No Award granted under the Plan shall be transferable other
than by will or by the laws of descent and distribution.

(h) Effective Date
The effective date that the Plan was adopted by the Company is August
21, 2003

GRANTED EMPLOYEE STOCK OPTION
On October 1, 2003, the Company signed an Employee Non-qualified Stock Option
Agreement with Howard Milne/HDM Capital Inc., an investor communication
consultant, pursuant to the stock option plan. Accordingly, Howard Milne/HDM
Capital Inc. has been granted an option to purchase up to 500,000 shares at a
price of $0.50 (Fair market value at the grant date) under the employee stock
option plan. The option will expire on August 20, 2008 and includes a monthly
vesting rate provision.

A summary of options outstanding as at April 30, 2004 is as follows:

OPTIONS GRANTED SHARES EXERCISE PRICE
-----------------------------
EXPIRE DATE:
AUG.20, 2008
---------------

Reid Li, President 750,000 $ 0.22
Eric Fletcher, Secretary 475,000 $ 0.22
Howard Milne/HDM Capital Inc. 500,000 $ 0.50
------------
1,725,000
============
<FN>
(1) If the expiry date for the warrant falls on a weekend or
Statutory holiday the date will be extended to close of business
on the next business day.

Note 11. Income Tax Exemptions and Reductions - China
The Chinese government provides a special tax incentive to encourage foreign
investment. HBJV is a joint venture company and one of the investors is an
American company thereby qualifying the joint venture for special income tax
treatment under the provision. HBJV will be exempt from tax for the first two
years and then

benefit from a 50% reduction in income tax for a further three years. The
corporate income tax rate, before the reduction, is currently 33% of taxable
income.

Note 12. Income Tax - The United States
Actual income tax expense differs from income tax expense computed by applying
the U.S. federal statutory corporate rate of 35% to pretax income as follows:

April 30,
---------------------
2004 2003
----------- --------

Provision (Benefit) at the statutory tax rate $ (42,080) $ 6,563
Increase in valuation allowance 42,080 (6,563)
----------- --------
Income tax provision. $ -- $ --
=========== ========

Realization of the net deferred tax asset is dependent on the Company's ability
to generate taxable earnings in the future. The Company has $2,238,835 of net
operating losses carried forward as at April 30, 2004.

Note 13. Minority Interest
The parent company theory is used almost exclusively in practice for disclosing
minority interests in a consolidated balance sheet. Under the parent company
theory, minority interests are not considered part of stockholders' equity and
are disclosed in the consolidated balance sheet between the liability section
and the stockholders' equity section.

The Company owns a majority interest of 57.14% in HBJV and Airbeck owns a
minority interest of 42.86% in HBJV. Airbeck's interest of $3,622,500
investment in HBJV is disclosed as the Minority Interest in the consolidated
balance sheet. The joint venture corporation has not commenced operating
activities; therefore, the statement of operations does not show any adjustment
of the joint venture corporation.

Note 14. Subsequent Events

CHANGES OF JOINT VENTURE OWNERSHIP
- --------------------------------------
As indicated in Note 1 above, Airbeck is in the procedure of privatization.
Management agrees that the new ownership of Airbeck following privatization will
own the 42.86% minority interest in HBJV. The detailed name of the ownership may
not be known until the privatization process is completed.

PLANT BUILDING IN PROCESS OF RENOVATION
- ---------------------------------------
A four story concrete building is in the process of renovation, from a warehouse
facility to result in a "clean" medical product (dosage) production facility.
This renovation commenced on March 1, 2004 and is expected to be completed by
June 20, 2004.

ACQUISITION OF 60% INTEREST IN JOINT VENTURE (JV) COMPANY IN CHINA, P.R.
- ------------------------------------------------------------------------
The company agreed to acquire a 60% interest in a new joint venture in China,
the latter of which owns a pharmaceutical plant in China. This plant has been in
operation as a private enterprise since 2001. Additional preliminary
information is included in this filing under Item 5. Complete disclosure will
be detailed in a subsequent 8K filing with the U.S. Securities and Exchange
Commission following completion of an audit of the

acquisition by Moen and Company schedule for the 4th week of June, 2004. In
subsequent reporting periods, this joint venture will be consolidated into our
financial statements.

ITEM 2. MANAGEMENTS DISCUSSION AND PLAN OF OPERATIONS
THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE
COMPANY'S FUTURE FINANCIAL PERFORMANCE. ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE CURRENTLY ANTICIPATED AND FROM HISTORICAL RESULTS DEPENDING UPON A
VARIETY OF FACTORS. ONE CAN IDENTIFY THESE FORWARD-LOOKING STATEMENTS BY USE OF
WORDS SUCH AS "STRATEGY," "EXPECTS," "PLANS," "ANTICIPATES," "BELIEVES," "WILL,"
"CONTINUES," "ESTIMATES," "INTENDS," "PROJECTS," "GOALS," "TARGETS" AND OTHER
WORDS OF SIMILAR MEANING. ONE CAN ALSO IDENTIFY THEM BY THE FACT THAT THEY DO
NOT RELATE STRICTLY TO HISTORICAL OR CURRENT FACTS. THESE STATEMENTS ARE BASED
ON OUR ASSUMPTIONS AND ESTIMATES AND ARE SUBJECT TO RISKS AND UNCERTAINTIES.
HISTORICAL REFERENCES, PARTICULARLY TO PERIODS PRE-DATING THE THREE AND A HALF
YEARS SUBJECTED TO INDEPENDENT REVIEW AND INCLUDED IN THE NOTES TO THE FINANCIAL
STATEMENTS PRESENTED HEREIN, ARE MADE TO THE BEST OF THE ABILITY OF MANAGEMENT
TO DETERMINE AND ARE BELIEVED TO BE ACCURATE; HOWEVER, ALL ENTERPRISES IN CHINA
WERE PREVIOSLY STATE OWNED, THERE WERE NO PROVISIONS WITHIN CHINESE LAW FOR THE
CREATION OF LEGAL CORPORATE ENTITIES AND NO REQUIREMENT THAT OPERATING BUSINESS
BE SUBJECT TO INDEPENDENT REVIEW. SOURCES OF INFORMATION INCLUDED HISTORICAL
INFORMATION AVAILABLE THROUGH THE STATE DRUG ADMINISTRATION; INFORMATION
AVAILABLE IN THE PUBLIC DOMAIN; INDUSTRY SOURCES; STATE, LOCAL AND MINUCIPAL
OFFICIALS; AS WELL AS OPERATIONAL MANAGEMENT AND STAFF IN THE OPERATING
BUSINESS. THIS IS NOT CONSIDERED BY MANAGEMNT TO BE SIGNIFICANT AS ALL DUE
DILIGENCE AND OPERATIONAL ASSESMENTS WERE MADE BASED UPON RECENT YEARS HISTORY
DURING WHICH THE COMPANY HAS OPERATED WITH A MUCH SMALLER BUDGET THAN PERIODS
COVERED BY THE HISTORICAL REFERENCES AND FOR WHICH DOCUMENTION IS MORE READILY
AVAILABLE. IT IS SUGGESTED THAT THE READER ALSO REVIEW THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE YEAR ENDED JANUARY 31st, 2003, THE QUARTERLY
REPORTS ON FORM 10-QSB FOR THE QUARTERS ENDED APRIL 30TH AND JULY 31ST, AND
OCTOBER 21ST, 2003 AND THE ANNUAL REPORT FILED ON FOR 10-KSB FOR TE YEAR ENDED
JANARY 31ST, 2004.

Managements focus with respect to its interest in the Hubei Pharmaceutical Co.
Ltd. joint venture(HBJV) for the first two quarters of the 2004 fiscal year will
be to complete renovations and GMP certification of the tablet factory. It is
essential that certification be completed by the end of the second quarter to
comply with government regulations and to move beyond the limitations the
renovations place on production capacity. Renovations are progressing on
schedule, management are confident that they will be completed prior to the end
of the second quarter as required. Concurrent with this we will continue to
make improvements within its sales force and distribution network and to solicit
orders and plan for the increased production capacity available in the second
half of the fiscal year. HBJV will continue its discussion with the minority
partner regarding expanding the scope of the joint venture operation to include
other aspects of Airbeck's core business once privatization is complete. We are
monitoring the progress of the privatization process carefully as part of an
ongoing risk and opportunity assessment. While there is no contractual
obligation to provide additional working capital in the 2004 fiscal year,
renovations and certification of the tablet factory tax available working
capital while opportunities to increase sales subject to the availability of
inventory look promising. We will continue to discuss financing with interested
parties and may provide HBJV with additional working capital through debt or
equity in the current fiscal year, ahead of the schedule required by the joint
venture agreement.

Concurrent with this we continue to search for additional acquisition targets or
joint venture opportunities and are considering several possibilities. Our near
term goal was to complete the acquisition of an additional revenue producing
interest within the current fiscal year and, ideally, to complement the product
mix produced by HBJV rather than compete with it. We view HBJV as a solid
foundation on which to grow based upon a range of low risk patented and generic
pharmaceuticals with established markets and as a high quality production base
with an existing distribution pipe and established branding. At the same time
we see opportunities similar to those present in the Western world for
pharmaceuticals to treat diabetes, certain types of advanced dementia, cancer
and other diseases associated with an aging population, more stressful lifestyle
and obesity. We believe there may opportunities to license or acquire an
interest in products nearing the end of their development cycle at a fraction of
the cost associated with new biotech development and without the risks
associated with commencing long term research and development projects in an
extremely dynamic market.

Subsequent to the end of the fiscal quarter the company entered into an
agreement to acquire a 60% controlling interest in a new joint venture in China.
The joint venture owns modern production facilities and has been in operation as
a private enterprise since 2001

with a successful legacy prior to that as a state owned operation since 1975.
Additional information is included in Item 5 of this report. In addition to a
production and distribution base of 79 high-tech pharmaceutical products in
injectable and tablet forms, the new joint venture expects, in its first year of
operation, to complete patenting and production licensing of several biotech
pharmaceuticals to be used in the treatment of Cancer and Diabetes. It is
anticipated that production revenues from the new joint venture, Hubei Tongji
Benda Ebei Pharmaceutical Co. Ltd. (HBBenda), will commence prior to the end of
the second quarter and that it will contribute significantly to profitability in
the current fiscal year.

In addition to funds already advanced, the company has agreed to make additional
payments to its minority partners with respect to acquisition of the controlling
interest. This will require 4.2 million RMB (approximately $500,000) of
additional financing in the current 2004 fiscal year and an additional 6 million
RMB (approximately $725,000) in the 2005 fiscal year. The company does not have
the reserves necessary to meet these commitments and will need to raise
additional funds through equity or debt. Management is considering expressions
of interest in providing the necessary funding from several parties and do not
anticipate a problem meeting the commitments.

ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures as defined in the Securities
Exchange Act of 1934. Our Chief Executive Office and Chief Financial Officer
evaluated these controls and procedures and have concluded that, as of the
evaluation date, our disclosure controls and procedures are effective to ensure
that all material information required to be filed in this Quarterly Report on
from 10-QSB has been made known to them in a timely fashion.

CHANGES IN INTERNAL CONTROLS
There have been no significant changes or corrective actions with respect to
significant deficiencies or material weaknesses in our internal controls or in
other factors that could significantly affect these controls subsequent to the
evaluation date set forth above.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

Nothing to report

ITEM 2 CHANGES IN SECURITIES

RECENT SALES OF UNREGISTERED SECURITIES
During the prior three years the Company issued the following unregistered
securities in offshore transactions to persons who are not US persons pursuant
to Regulation S of the United States Securities Act of 1933, as amended. The
share certificates were issued under the conditions of Rule 144 and carry an
appropriate restrictive legend.

On September 18th 2000 the company issued 9,175,000 common shares to a group of
accredited investors in settlement of $367,000 in convertible debt under rule
144. These shares were bearing an appropriate restrictive legend. The proceeds
were used previously funding mineral exploration efforts. The company
consolidated its common stock on a 10 old for one new basis following this
issue.

On May 14th, 2002 and June 14th, 2002 the company issued a total of 26,598,500
shares with respect to the acquisition of Access Networks Ltd. under rule 144.
The acquisition was subsequently rescinded and all but 3,325,620 shares were
returned to treasury (see Note 1 to the Financial Statements above). The Company
is pursuing cancellation of the shares

On December 10th, 2002 the company issued 4,000,000 shares as settlement. The
debt settlement was subsequently renegotiated and settled with cash at a
discount. The shares were returned to treasury.

On March 14th, 2003 the Company issued 1,500,000 shares of common stock at a
price of $0.01 per share to a creditor in settlement of a debt of $15,000.00.

On March 17th, 2003 the Company issued 1,000,000 shares of common stock, at a
price of $0.01 per share to its president as a signing bonus pursuant to a
resolution dated December 4th, 2002. This President has since resigned. The
company consolidated its common stock on a 10 old for one new basis following
this issue.

On April 3rd, 2003, the Company issued 3,000,000 shares of common stock pursuant
to an agreement entered into with Red Dot Capital, Inc. to acquire a 57.14%
interest in a joint venture located in China. This issue has been recorded at
par value.

On July 6th, 2003 the Company issued 80,000 shares of common stock for the
private placement subscription tendered by an accredited investor and closed May
30th, 2003. The investor subscribed for 80,000 units consisting of one share at
$0.15 and 2.5 purchase warrants to purchase an additional share, on or before
November 30th, 2003, at a price of $0.20. Gross proceeds were $12,000. An
additional 12,000 units consisting of 1 share and 2.5 purchase warrants were
recorded as a finders' fee with respect to this private placement.

On July 6th, 2003 the Company issued 2,366,324 shares of common stock at a price
of $0.15 per share, for the private placement subscription tendered by a group
of accredited investors closed May 30th, 2003. Gross proceeds were $354,949.
The company recorded payment of $16,895 and issued 43,500 shares of common stock
as finders' fees with respect to this private placement.

On August 15th, 2003, the Company issued 1,500,000 common shares of common stock
as finders' fees relating to the acquisition of Red Dot's interest in HBJV. The
finders' fee was re-negotiated and reduced from the 2,000,000 common shares
originally approved by the shareholders. This issue has been recorded at par
value. The board of directors has since accepted a recommendation from its
President and approved a resolution to return an additional 1,000,000 finders
fee shares to treasury following the arrest of one of the finders leading to
criminal charges relating to a long term conspiracy to undermine the project,
discredit the joint venture partners and falsely incriminate the president of
the company through forgery of documents. The company is seeking a legal
opinion regarding the appropriateness of re-issuing some or all of the cancelled
shares to other members of the original finders group who worked hard to
overcome the attempts to undermine the project and were instrumental in
successfully completing it. No decision has been made as to whether additional
shares would be issued if deemed appropriate.

On July 25, 2003, the Company accepted private placement subscription offers
from a group of accredited investors to subscribe for 728,999 units at a price
of $0.30 each. Each unit consisted of one share of common stock and one
purchase warrant to purchase an additional share of common stock at a price of
$0.80 if exercised on or before July 31, 2004 or at a price of $1.50 if
exercised after July 31, 2004 and before July 31, 2005. The Company issued
693,333 common shares on August 21, 2003, and 35,666 common shares on December
11, 2003. Gross proceeds were $218,700. The company recorded payment of
$19,500 as finders' fees with respect to this private placement.

On December 1, 2003, the Company accepted private placement subscription offers
from a group of accredited investors to subscribe for 301,300 units at a price
of $0.45 each. Each unit consisted of one share of common stock and one purchase
warrant to purchase an additional share of common stock at a price of $0.80 if
exercised on or before November 14, 2004 or at a price of $1.50 if exercised
after November 14, 2004, and before November 14, 2005. Gross proceeds were
$135,585. The company recorded payment of $9,000 as finders' fees with respect
to this private placement.

On December 1, 2003, a total of 104,400 warrants were exercised with respect to
private placement shares issued July 6th, 2003.

On February 20th, 2004, 27,500 shares were issued at a price of $0.53 per share
and 40,000 shares were issued at a price of $0.55 per share with respect to
private placements to a group of accredited investors. Each of these shares
carries a warrant to purchase an additional share at a price of $0.80 per share
on or before February 13th, 2005 or at $1.50 per share after February 13th,
2005, but on or before February 13, 2006. Gross proceeds from the sale of
shares with respect to this issue were $36,575.00. The company paid a finders
fee of $2,200.00

purchase an additional share at a price of $0.80 per share on or before February
13th, 2005 or at $1.50 per share after February 13th, 2005, but on or before
February 13, 2006. 150,000 of these shares carry a warrant to purchase an
additional share at a price of $0.80 per share on or before March 13th, 2005 or
at $1.50 per share after March 13thh, 2005, but on or before March 13th, 2006.
Gross proceeds from the sale of shares with respect to this issue were
$95,113.00

On April 21st, 2004, 436,200 shares were issued at a price of $0.625 per share
with respect to private placements to a group of accredited investors. Each of
these shares carries a warrant to purchase an additional share at a price of
$0.90 per share on or before April 2nd, 2005 or at $1.50 per share after April
2nd, 2005, but on or before April 2nd, 2006. Gross proceeds from the sale of
shares with respect to this issue were $272,625.00. The company paid a finders
fee of $25,200.00.

A summary of outstanding warrants appears as Note 9 in the accompanying notes to
the financial statements.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

Nothing to report

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Nothing to report

ITEM 5 OTHER INFORMATION
On JUNE 3RD, 2004, SUBSEQUENT TO THE END OF THE CURRENT FISCAL QUARTER, the
company announced that it had entered into a formal agreement to acquire a 60%
controlling interest in Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd.
(HBBenda) Located in Guangshui City, Hubei Province, China. HBBenda is a new
Sino-American Joint Venture Corporation into which the minority partners have
vended their operating dosage division originally established in 1975. In
addition to a base of 79 high-tech pharmaceutical products in injectable and
tablet forms, the new joint venture expects, in its first year of operation, to
complete patenting and production licensing of several biotech pharmaceuticals
to be used in the treatment of Cancer and Diabetes. In total the company will
issue three million shares and pay 12 million RMB (approximately equal to 1.45
million dollars) to the minority partners with respect to the acquisition. Cash
is be advanced on a schedule over 12 months, common stock is to be issued in two
stages, the first upon completion of an independent audit, the second upon
completion of licensing of one of the new biotech products. Common stock will
be issued in reliance upon exemption from registration as an offshore
transaction and carry an appropriate restrictive legend. To date, the company
has advanced approximately $220,000. It is anticipated that 1.6 million shares
will be issued prior to the end of June and that an additional 1.4 million
shares will be issued in the current fiscal year. This will not result in a
change of control. Complete disclosure will be detailed in a subsequent 8K
filing with the U.S. Securities and Exchange Commission following completion of
an audit of the acquisition by Moen and Company schedule for the 4th week of
June, 2004.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
The following are included by reference:
2.1 03-12-04 Form 8-K Swap of Intangible Assets for Fixed Assets
17.1 04-07-04 Form 8-K GMP Certification, Resignation of Director

The following Exhibits are filed as part of this report:

15.1 Independent Accountants Review
31.1 Certification of REID LI pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
31.2 Certification of ERIC FLETCHER pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
99.1 Certification of the Chief Executive Officer and Chief Financial Officer
pursuant to 19 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

Dated this 18th day of June, 2004, Hubei Pharmaceutical Group, Ltd.

By: /s/ H. Y. Li
-------------------------------
H. Y. (Reid) Li, President, CEO

/s/ E. H. Fletcher
---------------------
E. H. (Eric) Fletcher