SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
 (Mark One)

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

                      For the Year ended December 31, 2001


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

                          Commission File No. 33-3276-D


                             CHINA CONTINENTAL, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Nevada                                        87-0431063
--------------------------------               ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

               1801-02 Evening Newspaper Mansion, 358 Nanjaing Rd.
                                  Tianjun, PRC
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant Telephone Number,  Included Area Code : 011-852-2750-1802

Securities Registered Pursuant to Section 12(b) of the Act:

          Title of Each Class          Name of Each Exchange on Which Registered
          -------------------          -----------------------------------------
               None                                    None

           Securities Registered Pursuant to Section 12(g) of the Act:

                                      None
                                ----------------
                                (Title of Class)

      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  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
YES      NO X
    ---    ----

     Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not  contained  in this  form and will not be  contained,  to the best of
registrant knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-KSB.
[X]

     The issuer revenues for its most recent fiscal year were US$21,538,000.

     At of  December  31,  2001,  257,894,000  shares  of  common  stock  of the
Registrant were outstanding.  As of such date, the aggregate market value of the
common stock held by non-affiliates,  based on the closing bid price on the NASD
Bulletin Board, was approximately $21,315,658.

                       DOCUMENTS INCORPORATED BY REFERENCE

      No annual reports to security holders, proxy or information statements, or
prospectuses  filed  pursuant  to Rule 424(b) or (c) have been  incorporated  by
reference in this report.

      Annual Small Business Disclosure Format:      Yes    No X
                                                       ---   ----
<PAGE>

                                TABLE OF CONTENTS
PART I
                                                                        Page
      ITEM 1.     DESCRIPTION OF BUSINESS..............................   3
      ITEM 2.     DESCRIPTION OF PROPERTIES............................  11
      ITEM 3.     LEGAL PROCEEDINGS....................................  11
      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE
                  OF SECURITY HOLDERS..................................  11
PART II
         ITEM 5.  MARKET FOR COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS .........................  11
         ITEM 6.  SELECTED FINANCIAL DATA..............................  12
         ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF
                  OPERATION............................................  14
         ITEM 7A  QUANTITATIVE AND QUALIFICATION DISCLOSURE
                  ABOUT MARKET RISK....................................  18
         ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
                  DATA.................................................  18
         ITEM 9.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.............................  18
PART III
      ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE
                  REGISTRANT...........................................  18
         ITEM 11. EXECUTIVE COMPENSATION...............................  20
         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT................................  20
         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY
                  TRANSACTION..........................................  20
PART IV
      ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTINGS
                  ON FORM 8-K..........................................  21
                  SIGNATURES...........................................  22
                  INDEX TO CONSOLIDATED FINANCIAL
                  STATEMENTS........................................... F-1

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act
of 1934.  The Company's  actual results could differ  materially  from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference  are discussed in the section  entitled  "Certain  Factors  Affecting
Future Operating Results" beginning on page 17 of this Form 10-K.

The Company

The  Company  became a U.S.  publicly  listed  company  via a revenue  merger in
February 1995.

Until  calendar year 2000,  China  Continental,  Inc. (the  "Company" or "CHCL")
designed,  installed and sold plastic  production  lines on a turn-key basis and
sold machinery and equipment for the manufacture of plastic products.  The major
portion of the  Company's  sales were to plastic  manufacturers  in the People's
Republic of China  ("PRC" or  "China").  Two turn-key  projects  were  completed
during  calendar  year 2000  averaging  US$3.9  million per  contract.  However,
because of increased price  competition and a change in management,  the Company
terminated  the  sale  of  turn-key  projects  and  refocused  its  business  an
agricultural  genetics and water  resources.  To strengthen its revenue base and
diversify its business  activities,  the Company  purchased  East Wu-Zhu Muo Qin
Banner Green Demonstration Farm ("East Wu") in Inner Mongolia. Subsequently, the
Company  acquired two water  sources in Inner  Mongolia  with a view to bottling
high quality mineral water.

Our  objectives  are to be the market  leader in improving the  agriculture  and
farming  industry in The People's  Republic of China ("PRC"),  to make available
the latest techniques and know-how in agricultural genetics ("agrogenetics") and
farming, and to leverage our pure water resources.

Our focus is on  developing  agricultural  genetics and water  resources to help
meet the increasing demand of the growing population in The PRC.

The  Company's  products  and  services  are  generally  divided into three main
categories:  (i) the sale of breeding livestock, semen and embryos, and services
to contract  breeders and growers;  (ii) the  planting,  harvesting  and sale of
forage grass; and (iii) beginning in 2002, the sale of potable water.

The Company has a 25 year lease on its  farmland  in Inner  Magnolia.  The total
farm area of Dongwu Bio Tech Farm ("Dongwu") is  approximately  252 square miles
or 110,000 square acres. It is located in Dong Ujimqin Qi, Inner Mongolia in the
PRC. Dong Ujimqin Qi is located in the far north region of China near the border
with  Mongolia.  Dong Ujimqi Qi is an  agricultural  based area where  livestock
(beef, cattle, dairy, goats and sheep) are the primary agricultural products.


                                       3
<PAGE>


The farm is the  major  focal  point  for our  agricultural  genetics  and water
resources. Agricultural genetics will be applied both to animal husbandry and in
the to growing of forage grasses.

The agricultural genetics portion of the farm includes  administration  offices,
barns, surgery rooms and laboratories, kid barns, breeding barns, feedlot areas,
fenced  pastures,  shelters  and paddocks  for grazing  goats.  Because of harsh
winter  conditions,  additional  barns will be  erected  to house the  livestock
during winter months.

As the government promotes its grain conservation  policy, there will be a shift
from grain-fed  livestock  (pigs) to pasture-fed  livestock  (cattle and goats).
This policy is expected to positively  impact our  activities.  Also  positively
affecting  our  activities  is the  increasing  demand for non-pork  meat. It is
estimated  that  this  year,  the  PRC  will  be   experiencing  a  shortage  of
approximately 200,000 metric tons of goat and sheep meat and 300,000 metric tons
of beef.

The farm will allocate  approximately 50% of its land to the forage  operations.
Guided by the principle of "popularizing  agriculture and husbandry technologies
for green  environmental  protection," We have chosen American alfalfa and other
high quality forage grasses that will improve soil and protect the  environment.
We plan to spend the next  three  years  cultivating  and  improving  our forage
grassland.  In 2001 the Company had approximately  24,900 hectares (a hectares =
approximately 2.5 acres) or 62,250 acres under cultivation.  In 2003, management
expects to have 36,500 hectares  planted.  Additional land will be leased nearby
to  support  these  activities.  Depending  on the type of forage  planted,  one
hectare will  typically  generate  from three to twelve metric tons of grass per
year.

By the year 2003,  assuming that there is no change in the pattern of increasing
meat  consumption  within The PRC, the demand for goat and sheep meat will reach
approximately  4.26 million metric tons.  Because embryo transfer is the fastest
and most economical way to propagate  superior  goats,  Dongwu has a significant
advantage in the  production of livestock and in providing  embryo  transfer and
artificial  insemination  technologies that will provide lower operational costs
for the farm, thereby adding value to both Dongwu and the Company's customers.

We intend to  dramatically  increase  the  breeding  livestock  of purebred  and
crossbred  Boer  goats  to  meet  the  increasing   demand  for  meat,  and  the
Government's  new grain  conservation  policy  which is  expected to result in a
shift from  livestock  requiring  grain-based  feed,  i.e.  pigs, to pasture-fed
livestock such as cattle and goats.  The benefits of raising goats include:  low
maintenance  costs,  a  rising  demand  for  goat  meat  both  domestically  and
internationally,  the ability to control  undesirable  shrubs and weeds,  and an
increased  awareness of the health benefits of consuming lower fat meat, such as
goat meat.

Boer goats are a genetically  superior breed  providing  significant  advantages
over  domestic  goats,  namely  adaptability,  productivity,  meat quality and a
higher  meat-to-bone ratio. The Company has determined that its Boer goat embryo
program will be adaptable to the conditions and environment of its farm.

                                       4
<PAGE>

The present-day  Boer goat,  identified by its short white hair and red markings
on its head and neck,  emerged in the early 20th  century  when  ranchers  began
breeding the goat for its meat, high growth rate and fertility.  Boer goats have
been further improved through artificial insemination and embryo transfer in the
US,  resulting in greater  profit  margins for the producer.  The Boer goat is a
large framed animal with mature weights between 78 to 113 kg for males and 50 to
70 kg for females.

In recent years, Boer goats have received  considerable  attention worldwide and
have  become the key factor in many goat  farming  improvement  programs in less
developed and developed countries.

A small number,  approximately 20 Boer goats,  were exported from Germany to the
Provinces of Shanxi and Jiansu in 1996, and an additional 200 head of Boer goats
were recently imported by the National Animal Science and Veterinary Bureau from
New Zealand.  However, the number of pure breed and crossbred Boer goats remains
small.

Benefits of Boer goats:

-    One of the hardiest of all livestock breeds:

     o    Boer goats  produced from embryo  transfer  with domestic  goats adapt
          better than imported animals because they acquire  immunities to local
          diseases, and better tolerate the heat and humidity in the PRC
     o    Proven to adapt very well to a variety of ecosystems
     o    Purebred  Boers have a high  resistance  to disease  and adapt well to
          various climates and terrain

-    Grow at a faster rate than other goat breeds:

     o    Known for their outstanding size and rate of growth
     o    Bucks  can  grow at an  average  of 15 lbs per  month  while  does can
          average 12 lbs per month
     o    Dressing percentage is between 50% to 60%
     o    Meat to bone  ratio is over 7:1  compared  to 4:1 for  other  types of
          goats

-    Superior to domestic Chinese goats in fertility and prolificacy:

     o    High percentage of multiple births
     o    Extended  breeding  season and  possibility of achieving  three births
          every two years
     o    Reach puberty early,  usually at about six months of age for males and
          eight months for first-mating females

-    Good "milkers",  which enable them to successfully raise multiple offspring
     with  excellent  weight  gains  and  little   pre-weaning   mortality  thus
     demonstrating superior maternal capabilities:

-    Forage on a wide spectrum of plants:

     o    Prefer a dietary ratio of 82% brush and 16% grass
     o    Integrate   successfully  into  a  multi-species  grazing  scheme  and
          complement  cattle in their grazing  patterns with very little dietary
          overlap
     o    Multi-species  grazing  offers many  advantages  in pasture and range,
          land management and economic diversification

                                       5
<PAGE>

-    Produce excellent skin, which is superior to other breeds of goat skin

The Three-Year Plan

The Company has adopted a "Three Year Plan" to be implemented in three Phases to
achieve its objectives to be both a fully  functioning farm and to be one of the
leaders in the  agriculture  and farming  industry in the PRC by leveraging  the
Company's ability to make available the latest agrogenetic techniques.

Phase One -  Importation  of  Australian  livestock  genetics  through  Castella
Research  Pty  Ltd.,  of  Sydney,  Australia,  in the form of goat  embryos  for
implanting  into local  recipients.  Superior  genetics from  Australia  will be
selected and collected for  propagation.  Dongwu  purchased  2,000 embryos which
will produce  approximately  1,000 Boer kids and purchased  approximately  2,400
native Chinese goats as recipient goats.  This purchase included a 20% provision
for recipients  that did not respond to hormonal  treatment or were not suitable
recipients because of poor ovarian response.  The best recipients are those that
have  previously  carried one litter at two to three years of age. All purchases
of local  livestock  will be paid in (RMB) and all  purchases of embryos will be
paid in US dollars.  Domestic  sales of products  and  services are paid in RMB.
International sales are paid in the currency of the paying party.

During  2001,  the  Company  established  genetic  and  biotechnology   services
including  the  introduction  of embryo  transfer  and  artificial  insemination
technology.  The Company has  approximately  1,000 Boer kids derived from embryo
transfer and will gradually build its stock.

Phase Two - After several  years,  the  Company's  production of Boer goats will
have been  established,  and  Dongwu  will have a  sufficient  stock of male and
female Boer goats to provide live animals to both its  customers and to continue
its production.

The Company  also plans to  distribute  and market its genetics  through  semen,
embryos and live breeding stock to contract growers and municipal and provincial
governments.  The  Company's  trained  technicians  will assist these clients by
inseminating  the semen,  implanting  the embryos and providing  services in the
sale of the Company's feed, feed additives, minerals, vitamins, veterinary drugs
and other supplementary products.

The Company will also train selected local technicians in agricultural  genetics
technologies,  including  training in insemination  and implantation of embryos,
sexing and splitting of embryos.  These  services will be provided both in-house
and to contract farmers and breeders.

Phase Three - Within three years, we expect to produce 200,000 Boer goat hybreds
with 25%, 50%, 75% and 87% Boer blood lines through embryo  transfer.  Following
the  useful  life of  goats  for  breeding  purposes,  the  Company  will  begin
processing  both its own animals and purchase the offspring of  previously  sold
embryos  for  slaughter.  We expect to  develop a joint  venture  abattoir  with
tannery,  fabricating and rendering facilities which will meet USDA, EU, The PRC
and Halal  health  requirements.  The  project  will have a planned  capacity to
process  500,000 goats  annually.  Quality,  branded,  chilled,  and frozen meat
products will be distributed to institutions,  hotels,  restaurants,  wholesales
and  retailers.  Boer goats also produce  excellent  skin,  which is superior to
other goat's skin which will be used in a variety of leather products.

                                       6
<PAGE>

Although  the local  market will absorb  most of the farm's  production  of Boer
goats, we believe that establishing  export contacts now will provide profitable
expansion opportunities in the future.

In the past, The PRC has exported about 250,000 sheep and goats to Saudi Arabia,
Kuwait,  Nepal and Hong  Kong.  However,  due to the  increasing  demand its the
domestic market,  the export market has not  significantly  grown. In Asia, most
countries are net importers of meat.  Taiwan,  Hong Kong, South Korea, Japan and
all ASEAN  countries  import meat.  Singapore  imports all of its  livestock and
meat.  Malaysia  produces only about 11% of its domestic  requirements for sheep
and goat meat and annually and imports  about 30,000 live sheep and 4,000 metric
tons of mutton from Australia and New Zealand.  Therefore,  a significant export
market could also be developed.

The Embryo  transfer  process - Embryo  transfer is the process of  transferring
fertilized  embryos to female recipients six to seven days after they have shown
signs of heat.  Embryo  transfer  will  produce  100% full  blooded kids if full
blooded  animals are used for breeding and  collecting.  When  imported  embryos
derived by embryo  transfer have matured,  they will be ovulated using fertility
drugs to  maximize  the number of embryos  produced.  One fresh  embryo  will be
transferred  to each  synchronized  recipient doe.  Embryo  transfer is the best
method of  establishing  a large  number  of  animals.  After  the full  blooded
offspring mature, they can serve as donors.

The Advantages of Embryo Transfer

-    It is less  expensive to transport and propagate  genetics than to purchase
     and transport live animals
-    There is better survivability and adaptability of the animals
-    Superior genetics can be propagated faster than by traditional breeding
-    The  offspring  acquire  immunity from the local  recipients  against local
     diseases
-    It prevents the transfer of exotic disease from exporting countries
-    A uniformity of genetics is produced

Artificial  Insemination - Artificial  Insemination ("AI") is achieved by taking
semen (sperm) from the male and depositing the semen in the cervix of the female
to produce an  offspring.  We will take  semen from full  blooded  Boer goats by
using AI, and will produce 50% hybred Boer goats.

Crossbreeding  of native goats with Boer goats -  Crossbreeding  has long been a
valuable tool of animal  breeders for  improving the quality of livestock.  Most
Chinese goats are well adapted to their  environment and local feedstuff and are
resistant to endemic  diseases  and  parasites.  However,  they are slow to gain
weight, mature late and have poor milk production. Boer goats are both excellent
meat and milk  producers.  In several  early tests,  they adapted  easily to the
Chinese  environment  as they have proven to do in South  Africa.  Nevertheless,
purebred exotic breeds may need improved management practices to combat disease,
parasites,  cold,  heat and  occasional  humidity  stresses.  The  objective  of
crossbreeding  is to  blend  together  the  best  qualities  of the  exotic  and
indigenous breeds.

                                       7
<PAGE>

It has been  observed that under  intensive  management  and in relatively  mild
equatorial environments, crossbred animals with 60-100% exotic genes produce the
best  overall  performance.  Under  less  intensive  management  and in  harsher
environments,  crossbred animal with 25-50% exotic genes performed best. Without
any improvements in management and in very harsh environments,  indigenous goats
or  crossbred  animals  with less  than 25%  exotic  genes  perform  best.  In a
successful crossbreeding program to develop a dual-purpose goat for most Chinese
native goats in  agricultural  highlands and range area, a crossbred  population
with 50% exotic  dairy  genes was judged to be the best.  Therefore,  we plan to
develop 50% and 75% Boer crossed with Hebei, Henan, Hubei,  Fujian,  Liaoning or
Shandong goats (domestic  breeds) for distribution to local farmers.  Based on a
program of two embryo collections and transfers prior to natural breeding, it is
estimated that over a three-year period the  crossbreeding  program can generate
approximately 200,000 kids.

Phase Three - Forage Grass
This year the  harvest for nature  forage  grass  produced  on our farm  totaled
113,000  tons,  which was sold to  Beijing  Fengrun  Fine-Breed  Husbandry.  The
current market price for natural forage grass is approximately US$73 per ton and
higher quality forage grass can be sold for up to US$181 per ton.

Inner Mongolia has rich soil. However,  after years of overgrazing,  much of the
grassland has  deteriorated  and the ecological  environment  has been impaired.
Specialists  in  environment  protection  and  husbandry  have been  working  to
rationalize  resource  utilization,  increase  animal  husbandry  and to improve
grassland recovery.

In the spring of 2000,  Beijing  and other  large  cities were struck by massive
sandstorms that originated in Inner Mongolia's Hunshandake Tibba region. Because
of this  disaster,  the Chinese  Government,  adopted a policy to "stop planting
grain crops, to grow more forage" and to "transfer  livestock feeding from grain
fed  animals  (pigs) to pasture  fed  animals  (goats,  sheep and  cattle).  The
government is promoting these efforts through tax benefits.

Guided by the principle of "popularizing  agriculture and husbandry technologies
for green  environmental  protection," we have chosen American alfalfa and other
fine forage  grasses  that can both  improve  soil and  protect  the  ecological
environment.  We plan  to  spend  three  years  cultivating  and  improving  our
grasslands and expanding them to approximately 36,500 hectares.  When completed,
this will enable us to market approximately  200,000 metric tons of high quality
forage grass annually.

We are  planning to leverage our  technology,  scientific  planting  methods and
modern  management  techniques along with American  machinery and seeds to build
one of The PRC's largest areas of grassland.

                                       8
<PAGE>

Our initial focus will be to enlarge the amount of high quality  forage grass to
36,500 hectares. By reaching this scale, the total yearly production of the high
quality forage grass will be approximately 200,000 metric tons.

Xilinguole Grassland,  where the forage grass base is now located, is one of the
best-preserved  natural areas with the most grassland  varieties and the richest
forage grass. "Xilinguole Prairie Nature Protection Zone" was accepted by UNESCO
as a unit in "MAB" in 1987.  In 1997,  it was entitled as The PRC's State Nature
Protection Zone.

Our forage  grass is located in Wulagai  Development  Zone in the  northeast  of
Xilinguole  Prairie.  It is free from  pollution  because of its  remoteness and
sparse population.  The soil is still under natural  conditions,  which makes it
one of the few green virgin lands in the world.

There are a number of factors which determine revenues generated from grassland:

-    The time of planting.  The first  harvest after seeding takes about 60 days
     but subsequent growths can then be harvested every 30-35 days.
-    The type of forage grown.  We will harvest several types of grass including
     natural grass depending on the type of grass harvested, 3 to 12 metric tons
     per hectare will be produced
-    Depending on the type of grass harvested,  the revenue generated per metric
     ton will range from US$73 to US$181.

Our plans for seeding are as follows:

     In 2001:  24,900 hectares were seeded
     In 2002: an additional 6,100 hectares
     In 2003: an additional 5,500 hectares

Bottled Water
The  availability  of water for urban  residents in The PRC is worsening  daily.
Because of the  continuing  dry conditions in the northern part of The PRC, many
cities have restricted water  consumption.  Also because local water sources are
seriously  polluted,  the quality of water supplied in many of the larger cities
has been reduced. Unfortunately, up to ninety percent of The PRC's water sources
have been polluted to various  degrees.  These factors provide  opportunities to
develop and market drinkable mineral water. Several areas of The PRC are rich in
mineral water resources with potential for  development.  However,  bottling and
transporting  water from  these  resources  to the cities  where it is needed is
often difficult.  Presently,  several large enterprises  including  Wahaha,  the
largest mineral water  manufacturer in the PRC,  provide  consumers with potable
water products.

Although,  the PRC is rich in water  resource  reserves,  totaling  roughly  280
million cubic meters (Source:  The Mineral Water Source  Exploration & Surveying
Dept.  of The Inner  Mongolia  Autonomous  Region)  and it ranks  sixth in water
reserves  behind only  Brazil,  the former  Soviet  Union,  Canada,  the USA and
Indonesia. However, on a per capita basis, the PRC ranks 109th in the world.

                                       9
<PAGE>

Based on  internationally  standards,  2,000 cubic meters of water per person is
considered the minimum before there is a serious water shortage.  By 2030, it is
estimated  that  the PRC  will  be  1.6-1.7  billion.  Based  on that  projected
population, there will be 1,700 cubic meters per person of available water.

There has been rapid  development of bottled  mineral water in the PRC beginning
in the mid 80s. With the gradual  improvement of people's  living  standards and
with the  implement of a "Potable  Natural  Mineral  Water"  National  Standard,
mineral water  production  developed at an annual rate of 30-40%.  In 1998,  the
volume of bottled  mineral  water was  approximately  2.5 million tons from more
than 1,000  bottlers.  It is estimated  that in 2001,  output volume  exceeded 3
million tons.

The Company's  mineral water sources are located at Dongwu and surrounding areas
in Wulagai  Development  Zone in the  northeast  of Xilingol in Inner  Mongolia,
which has a convenient  road  connection  with Huhehot.  These water sources are
surrounded  by a vast  natural  prairie,  a  pure  natural  environment  without
industrial  pollution where it exists in the  pyroclastic  rock crevice from the
Jurassic Period. Rainfall seeps along the rock crevices into the soil, dissolves
the microelements and  micro-components  in rocks through deep circulation,  and
then rises through crevices to the surface,  thus forming natural mineral water.
This  high-grade  natural mineral water is rich in  microelements  and meets the
GB8537-95  Standard  for  "Potable  Natural  Mineral  Water."  It can be used to
produce bottled or tubbed potable natural mineral water or mineral water drinks.
Our bottling and distribution operation is expected to be in operation in 2002.

Principal Suppliers

The Company acquires the majority of its goat embryos from Castella Research Pty
Ltd.,  based in  Austrailia.  The balance of the Company's  needs come from many
suppliers.

Employees

As of December  31,  2001,  the Company  employed an  administrative  staff of 8
persons and a technical and sales staff of  approximately  40 persons all in the
PRC. To streamline the operations of the Company,  the administrative  office in
Hong Kong was closed during 2001.

Competition

The  market  for  livestock  and  for  meat  products  and  water  is  currently
unbalanced,  with demand exceeding supply. Strong demand for livestock meats and
water is expected  to  continue  for the near  future.  Although  the market for
agricultural  genetics and water resources is highly  fragmented in the PRC, the
Company  believes  that  it  is  in a  leading  position  in  providing  quality
agricultural genetics, water and superior technical support to its customers. To
date,  there has been no significant  price  competition  in these markets,  but
price competition may become a factor in the future.

                                       10
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTIES

      The  Company  principal   administrative  office,   marketing,   technical
facilities and supporting teams are located 1801-02 Evening  Newspaper  Mansion,
358 Nanjung Road, Tianjin, PRC, Tianjin, PRC.

      The farm which the Company purchased,  Dong Wu Bio-Tech Farm is located in
the PRC and has in excess of 110,000 acres.

ITEM 3.  LEGAL PROCEEDINGS

      The  Company  is not  currently  subject  to any  material  pending  legal
proceeding.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
      None

                                     PART II

ITEM 5.     MARKET FOR REGISTRANT COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information

      The Company's common stock trades on the OTC Electronic Bulletin Board and
is quoted under the symbol  "CHCL.OB",  the following  table sets forth the high
and low bid price per share for the  Company's  common stock for each  quarterly
period for the prior two years.

                                       11
<PAGE>

                         2001                           2000
                         ----                           ----
                  High              Low              High              Low
                  ----              ----             ----              ----
First Quarter     0.13              0.06             2.40              0.375
Second Quarter    0.13              0.06             1.25              0.375
Third Quarter     0.09              0.06             0.56               0.10
Fourth Quarter    0.13              0.06             0.16              0.055

      These quotation  reflects the  inter-dealer  prices without retail markup,
markdown or commission and may not represent actual transactions.

Holders

      At December 31, 2001 there were 3,260 holders of record.

Dividends

      Since being listed in the United  States in fiscal  1994,  the Company has
not declared or paid any cash  dividends on its Common Stock and does not expect
to declare or pay any such dividend in the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA
        (In thousand United States dollars, except per share data)

      The  following  table sets forth,  for the  periods  and dates  indicated,
selected  consolidated  financial  and  operating  data  for  the  Company.  The
financial  data was derived from the  consolidated  financial  statements of the
Company and should be read in conjunction with the Company audited  consolidated
financial  statements  in the Index to Financial  Statements on page F-1 of this
report.
<TABLE>

Income Statement Data:
(US$, 000)                                Year       Year       Year         Year       Nine
                                          Ended      Ended      Ended        Ended      Months
                                                                                        Ended
                                          Dec 31     Dec 31     Dec 31       Dec 31     Dec 31
                                          2001       2000       1999         1998       1997
                                          ----       ----       ----         ----       ----
<S>                                       <C>        <C>       <C>          <C>        <C>

Automatic production lines                    0          0     36,434       32,806     18,815
Raw materials                                 0          0        670        1,594      1,846
Breeding center                           9,398          0      1,770        2,388          0
Forage grass                             12,138      5,873          0            0          0
                                         ------      ------    ------       -------    -------
Total sales                              21,316      5,873     38,874       36,788     20,661
Cost of sale                              5,323         45     14,674       14,284      8,335
                                         ------      ------    ------       -------    -------
Gross profit                             15,992     45,828     24,200       22,504     12,325
Depreciation of fixed assets             (7,210)    (2,405)    (3,897)      (4,841)      (386)
Selling and administrative
   expenses                                (414)      (391)    (1,205)      (2,395)      (510)
(Provision) Recovery for
   doubtful accounts                          0         (1)      (675)        (681)         0
Financial income (expenses), net              0          0       (126)        (165)       (57)
Other income (expenses) net               1,000         51         (9)         360      2,919
Gain on disposal of Subsidiaries              0     17,608     11,431            0          0
Income from discontinued operations           0      5,505          0            0          0
Share of income/ (loss) of
   associated companies                       0          0          0          103        144
                                         ------      ------    ------       -------    -------
Income before income tax                  7,368     26,195     29,719       14,885     14,435
Income taxes                                  0          0      3,114        2,890      1,290
                                         ------      ------    ------       -------    -------
Income before minority interest           7,368     26,195     26,605       11,995     13,145
                                          -----     ------     ------       -------    -------
Minority interest                             0          0      1,631        2,114          0
                                         ------     ------     ------       ------     ------
Net income                                7,368     26,195     28,236       14,109     13,145
                                          -----    -------     ------       ------     ------
Net income per share                       0.03       0.26       0.37         0.23       0.50
                                        =======    =======     ======       ======     ======
Weighted average shares
    outstanding                         232,289    102,230     75,904       62,306     26,000
                                        =======    =======     ======       ======     ======
</TABLE>


                                       12
<PAGE>

<TABLE>


Balance Sheet Data at period end
                                   Year       Year       Year       Nine        Year
                                   Ended      Ended      Ended      Months     Ended
                                                                    Ended
                                   Dec 31     Dec 31     Dec 31     Dec 31     Dec 31
                                   2000       1999       1998       1997       1997
                                   ------     -------    -------    -------    ------
<S>                                <C>        <C>        <C>        <C>        <C>

Working Capital (deficit)           26,301     11,991    (14,678)     35,938    (26,392)
Total Assets                       212,869    204,384    188,941     253,269    218,447
Long-term Liabilities                    0          0      1,245       1,261          0
                                   -------    -------    -------    -------     ------
Shareholders Equity                211,506    203,058    164,737    128,543     70,694
                                   -------    -------    -------    -------     ------
</TABLE>


                                       13
<PAGE>


ITEM 7.MANAGEMENT  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
       OPERATIONS

Twelve months ended  December 31, 2000 versus  Twelve months ended  December 31,
1999 Revenues Revenues from continuing operations increased by US $15,442,000 or
262.9% to US  $21,316,000  for the twelve months ended December 31, 2001 from US
$5,873,000 for the prior year.  This increase is  attributable to the first sale
of goats  that have  received  embryos  and the  increase  in the sale of forage
grasses.

Cost of Revenues/Sales
      Costs of Sales  represent  purchases  of embryos and  recipient  goats and
salaries and wages paid to workers for the  harvesting and sale of forage grass.
Cost of sales  increased by US $5,278,000  to US  $5,323,000  for the year ended
December 31, 2001 from US $45,000 for the year ended  December  31,  2000.  This
increase  resulted  from a larger sale of boer goats  where the gross  profit is
less than that from the sale of forage  grasses  and from an  increase in forage
grass sales.

Depreciation and Amortization
      Depreciation and amortization  increased by US $4,805,000 to US $7,210,000
for the year ended  December 31, 2001 from US $2,405,000 for the prior year. The
increase  is  primarily   attributable  to  a  full  year  of  depreciation  and
amortization of the East Wu facility compared to only a quarter year in 2000.

Selling and Administrative Expenses
      Selling and administrative  expenses include salaries of company personnel
and general corporate overhead.  Selling and administrative expense increased by
US $21,000 or 5.4% to US $414,000 for the year ended  December 31, 2001 compared
to US$392,000  for the prior year.  The increase  resulted  because of increased
operations at the Company's facilities.

Consulting.  Consulting  expenses  totaled  $1,000,000  for the year  ended 2001
compared with no consulting  expense for the year ended  December 31, 2000.  The
consulting  expense  was  incurred  for  services  rendered in  connection  with
corporate re-engineering and management consulting.

Other  income.  The Company had no other income for the year ended  December 31,
2001,  but other income of $50,616 for the year ended  December 31, 2000.  Other
income consisted of

Income  from  operations  of divested  entities.  The Company had no income from
divested entities for the year ended December 31, 2001, because all divestitures
were  completed  during the year ended  December  31,  2000.  For the year ended
December 31, 2000, the Company had income from  operations of divested  entities
totaling $5,509,077.

                                       14
<PAGE>


Gain on Disposal of Associated  Companies and investments in  subsidiaries.  The
Company had no income from the disposal of associated  companies and investments
in  subsidiaries  for the year ended  December 31, 2001  because all  associated
companies and  subsidiaries  were disposed of during the year ended December 31,
2000.  For the year ended  December  31,  2000,  the Company had income from the
disposition  of  associated   companies  and  investment  in   subsidiaries   of
$17,604,615.

As a result of the foregoing,  the Company had income from continued  operations
of $7,368,519 for the year ended December 31, 2001, an increase of $4,287,516 or
139.2% from the $3,081,003  for the year ended  December 31, 2000.  Earnings per
share  remained at $.03 for the year ended  December 31, 2001,  the same for the
year ended December 31, 2000.  Although  there was an increase in earnings,  per
share income did not increase  because of an increased  number of shares  issued
and outstanding.

Twelve Months Ended  December 31, 2000 versus  Twelve Months Ended  December 31,
1999

Revenues
      Revenues from continuing  operations decreased by US $33,001,000 or 84.89%
to US  $5,873,000  for  the  twelve  months  ended  December  31,  2000  from US
$38,874,000  for the prior year.  This decrease is entirely  attributable to the
discontinuation of the plastics turnkey production business. Management believes
that because of increasing price competition in the turnkey-business,  there was
little room for further  expansion  at  acceptable  profit  levels.  With a view
toward  enhancing  shareholder  value, the Company had refocused its business to
the field of agricultural genetics services and products.

Cost of Revenues/Sales
      Costs of Sales of  approximately US $45,000  represent  salaries and wages
paid to workers for the harvesting and sale of forage grass.

Depreciation of Fixed Assets
      Depreciation expense decreased by US $1,492,000 or 38.28% to US $2,405,000
for the year ended  December 31, 2000 from US $3,897,000 for the prior year. The
decrease was  attributable  to the sale of the farm located on Chengde Dafeng in
October 1999 resulting in no depreciation  charge for this entity for the fourth
quarter.  The decrease in depreciation  was partially  offset by three months of
depreciation  of the Dong Wu farm  located  in Inner  Mongolia.  With an  annual
depreciation  charge of US $7,200,000,  management is now  negotiating  with the
relevant  governmental bodies to extend the lease term for another 25 years. Had
the lease term been extended for another 25 years, the depreciation charge would
have been reduced to US$3,600,000 per annum. Management expects approval for the
extension of lease in 2001.

Selling and Administrative Expenses
      Selling and administrative  expenses include salaries of Company personnel
and general corporate overhead.  Selling and administrative expense decreased by
US  $812,000  or 67.38% to US  $393,000  for the year ended  December  31,  2000
compared to US $1,205,000 for the prior year. The decrease  resulted because the
Company reduced its public  relations  expense together with  discontinuing  the
turnkey business during 2000.

                                       15
<PAGE>

Other Income
      Other  income of US  $51,000  represents  gains on  conversion  of foreign
currencies and miscellaneous income.

Discontinued Operations
      Discontinued  operations  represent the net income less applicable  income
taxes of the turnkey business.

Gain on Disposal of Associated Companies and Investment in Subsidiaries
      The  gain on the  disposal  of  associated  companies  and  investment  in
subsidiaries increased by US $6,177,000 or 54.04% to US $17,608,000 for the year
ended December 31, 2000 from US$11,431,000.  The gain on disposal of investments
of US  $11,413,000  in 1999  represented  gain on the  disposal of Wealthy  Asia
Limited.  The major asset of Wealthy  Asia  Limited was a 51% holding in Chengde
Dafeng Agriculture and Animal Husbandry Co. Ltd., a Sino-Singapore joint venture
incorporated in the People's  Republic of China. With a view to streamlining the
business of the Company  during 2000,  management  disposed of three 100 percent
owned  subsidiaries,  Billion Pearl Investments  Limited,  Prime Hill Investment
Limited and Prime View Limited producing a gain of US $17,608,000.

Net Income
      Net income  decreased by US $2,041,000 or 7.22% to US $26,195,000  from US
$28,236,000  for the year ended December 31, 2000. The decrease is  attributable
to the  discontinuation  of the turnkey business which had been partially offset
by the increase in sale of forage grass and the extraordinary item.

Liquidity and Capital Resources
      At December 31, 2001, the Company had working  capital of US  $26,301,000,
including a cash balance of US  $11,331,000.  This compares to a working capital
of US$11,991,000 and a cash balance of US $7,666,000 at December 31, 2000.

      Net cash provided by operating  activities decreased to US $5,014,000 from
US $12,858,000 for the prior year. This decrease is principally  attributable to
a  decrease  in total  earnings  and an  increase  in current  assets  which was
partially  offset by increased  depreciation  and amortization and shares issued
for services.

      Net cash used in investing activities decreased to $1,349,000 for the year
ended December 31, 2001 compared to $6,062,000 used in investing  activities for
the year ended December 31, 2000.  This decrease is  attributable to a reduction
in property purchases which was partially offset by the tendering of a deposit.

                                       16
<PAGE>

      The Company had no cash flows from financing activities in either the year
ended December 31, 2001 or December 31, 2000.

      The  Company's  business has generally  not been capital  intensive.  Cash
generated from earnings and available lines of credit have historically provided
sufficient   liquidity  to  meet  ordinary  capital   requirements.   Management
anticipates  that cash generated from  operations  combined with current working
capital and  available  credit lines will provide  sufficient  liquidity to meet
ordinary capital  requirements for the foreseeable future.  However, it may also
seek to raise additional capital through the sale of stock.

Impact of inflation
      To date,  the  Company has not  experienced  any  significant  effect from
inflation.  The  Company's  major  expenses  have been the cost of  purchase  of
embryo,  salaries and related costs incurred  principally  for the  agricultural
genetic projects.  The Company generally has been able to meet increase in costs
by raising prices of its products.

Certain Factors Affecting Certain Future Operating Results

a)       Revised Corporate Business

     In the past, the Company has been actively  involved in the sale of turnkey
production  lines,  machinery and  equipment,  accessories,  spare parts and raw
materials.  The  Company  has now moved  away from  this line of  business  into
agricultural   genetics  and  farming  in  China.   Because  of  the   Company's
inexperience  with this  industry,  there is no guaranty that its future results
will equal  those of the past or that the  Company  will be  profitable  in this
industry.

b)       Country Risk

     Substantially  all of the Company  operations  are conducted in the PRC and
accordingly,  the Company is subject to special  considerations  and significant
risks not typically  associated  with  companies  operating in North America and
Western Europe. These include the risks associated with the political,  economic
and  legal  environments  and  foreign  currency  exchange,  among  others.  The
Company's  results  may be  affected  by,  among  other  things,  changes in the
political and social  conditions  in the PRC and changes in government  policies
with  respect  to  laws  and  regulations,   anti-inflation  measures,  currency
conversion  and  remittance  abroad  and rates and method of  taxation.  The PRC
government has implemented  economic reform policies in recent years,  and these
reforms may be refined or changed by the  government at any time. It is possible
that a change in the PRC leadership could lead to changes in economic policy. In
addition,  a  substantial  portion  of the  Company  revenue is  denominated  in
Renminbi (RMB) which must be converted into other currencies  before  remittance
outside the PRC. Both the conversion of the Reminbi and other foreign currencies
and  remittance  of  foreign  currencies  abroad  require  approval  of the  PRC
government.

                                       17
<PAGE>

c)       Agricultural Genetics Industry
     The Company is subject to the risks and  uncertainties  associated with the
     agricultural  genetics business industry.  The industry,  can be negatively
     affected by a number of factors,  including the following: the market price
     of  livestock,  outbreaks of diseases in humans or animals  (such as BSE or
     "mad  cow  disease",  or  foot  and  mouth  disease);  weather  conditions;
     government  farm  programs;   government  regulations;   restrictive  quota
     policies and trade policies and tariffs;  and general economic  conditions,
     either local, regional or global.

d)       Bottled Water Industry

     The Company is subject to the risks and  uncertainties  associated with the
     bottling industry.  The business can be negatively  affected by a number of
     factors,  including the following:  finding the  appropriate  joint venture
     partner,  raising the  necessary  capital,  general risks  associated  with
     building a bottling plant, competition, government regulations, and general
     economic conditions.

ITEM 7A  QUANTITATIVE AND QUALIFICATION DISCLOSURE ABOUT MARKET RISK
            Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  financial  statements of the Company are annexed to this Report as
pages F2 through F-14. An index to such materials appears on page F-1.

ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
      None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVES OFFICERS OF THE REGISTRANT

     The following table sets forth the name and ages of the executive  officers
of the Company and the position held by each.

     Name                   Age                  Title
     ----                  -----                -------
     Jia Ji Shang           48              Chairman of the Board and Chief
                                            Executive Officer
     Jian Sheng Wei         55              Chief Financial Officer/Secretary
                                            And Director
     Malcolm Roy Brandon    55              Technical Director
     Zhang Cheng Zhang      60              Director
     Shujing Li             39              Director


                                       18
<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT

The Company executive officers are as follows:

Mr. Jia Ji Shang, is the Chairman and Chief Executive Officer of the Company. He
holds a Master of Business  Adminstration  from Ukrane  Institute  of  Wisconsin
International  University.  He has  over 10 years of  commercial  experience  in
international  trade,  particularly  in  bioengineering,  civil  engineering and
biotechnology.  Mr. Shang is the founder of Towering  Technology  Group Limited,
which  engages  itself in the civil and  engineering  construction  in  Mainland
China,  bioengineering  and biotechnology  throughout the Far East Region and in
North America.

Mr.  Jian Sheng Wei,  is the  Business  Director,  Chief  Financial  Officer and
Secretary of the Company.  Mr. Wei holds a Bachelor in civil  engineering  and a
Master  in  Business  Administration.  He has  over 30 years  experience  in the
operation,  research  and  management  of  agricultural  and  husbandry.  He has
established  breeding centers and large-scale  slaughterhouse  in Inner Mongolia
and Huber. Mr. Wei specializes in husbandry  operation and is responsible in the
promotion of business in the Far East Region, South Africa,  Australia and North
America.

Mr. Malcolm Roy Brandon is the Technical Director of the Company. Mr. Brandon is
the Managing Director of Castella Research Pty. Ltd.,  Honorary Professor of the
University   of  Inner   Mongolia,   Principal   Fellow  of  Centre  for  Animal
Biotechnology,  School of Veterinary  Science at the University of Melbourne and
Research  Associate of the Austin  Research  Institute,  Austin and  Repatrishon
Hospital.  Mr.  Brandon  received his Bachelor of  Agricultural  Science and PhD
degree at the  University  of Sydney.  He has over 26 years  experience in basic
research,  development  and  production  of  biological  products.  He has  been
visiting  professor of Oxford  Unversity and Michigan State  University.  He has
over 102 patents for his researches.

Professional Zhong Cheng Zhang is a Technical  Director of the Company.  He is a
leader of animal biology and has contributed greatly in maintaining the People's
Republic of China's highly competitive  research field. He has established eight
research  projects  with the  Government  and has over 30  years  experience  in
biotechnology.  He has  over  60  referred  research  papers,  review  and  book
chapters.  He has  received  two  honorary  awards  from China  Agriculture  and
Husbandry for best thesis of the year.

Mr. Shujing Li is a Director of the Company. He received his Doctorate degree in
Agricultural  Science  from  China  Agricultural  University.  He  is  primarily
responsible   for  developing,   researching   and  supplying   technologies  in
agricultural  genetics.  He  established  state owned  project  "95",  a project
employing  agricultural  genetics to improve the equality of existing foodstuff.
He has over 20 referred papers, reviews and book chapters. He holds positions in
the Chinese Youth  Association of Science and  Technology,  the Asian Society of
Animal Biotechnology, the Chinese Society of Animal Reproduction and the College
of Animal Science and Technology.

                                       19
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

     The  following  table  sets forth all  compensation  paid or to be paid for
services rendered during the last three fiscal years by the Company to its chief
executive  officers and the one remaining most highly paid executive officer who
earn more than $100,000 for the three fiscal years ended December 31, 2001.

     Name of Individuals                    Year        Salary           Bonus
     -------------------                   ------      --------         -------
     Chan Kwai Chiu                         1999       108,000             0
                                            2000       108,000             0
      Jai Ji Shang (1)                      2000             0             0
                                            2001             0             0

(1) Was not employed by the Company prior to 2000.

No cash  compensation  was paid or accrued by the  Company in excess of $100,000
for any other  executive  officer.  The  Company  does not  provide  retirement,
pension, profit sharing or similar benefit program of plans to its officers. The
Company does not pay fees or other  compensation  to its directors for attending
meeting or special assignments.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth as of December 31, 2001 the number of shares of
the  Company's  Common  Stock  known to be held by the  Executive  Officers  and
Directors, individually, and as a group, and by beneficial owners more than five
percent of the Company Common Stock.


                                             Amount and Nature of
                                             Beneficial Ownership
                                                                      Percentage
Name and Address (1) of Beneficial Owner            Shares            of Class
----------------------------------------            ------            ----------
Shang Jia Ji                                       33,000,000           12.80%
Clever Boy Limited                                 52,825,000           20.48%
                                                  -----------          -------
All officers and directors as a group (one)        85,825,000           33.28%

(1)  Address for all persons and  entities is Room.  1801-02  Evening  Newspaper
     Mansion,   358  Nanjung  Rd.,  Tianjin,  PRC  and  all  shares  are  deemed
     beneficially owned by Shang Jia Ji.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The Company amounts due from / (to) directors and related  companies owned
and/ or controlled by a director, Jia Ji Shang, are unsecured, interest-free and
are repayable on demand.

                                       20
<PAGE>

      In the normal course of business, some of the companies are engaged in the
set-up of automatic production lines on a turn-key basis for its joint ventures.
Other than the above-mentioned transactions,  the companies also arrange for the
sale of raw materials to these joint ventures. Amounts of revenue from the sales
of raw materials to these joint ventures are summarized as follows:

                                Year Ended        Year Ended         Year Ended
                                December 31,      December 31,      December 31,
                                   1999              2000              2001
                                ------------      ------------      ------------
Sales to joint ventures:
         Raw materials           US$669,976           US$0              US$0

The unrealized  profits arising form these  transactions  were eliminated in the
consolidated financial statements to the extent of the Company interest in these
joint ventures.

The Company and Eternal  Technologies,  Inc.  ("Eternal")  have  certain  common
directors  and  shareownership.  During the year ended  December 31,  2001,  the
Company  purchased  $424,000 of Boer goats from Eternal and sold  $1,730,000  of
natural grass to Eternal. The Company believes that all sales and purchases were
at prevailing market prices.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     a.   Exhibits

          None

     b.   Reports on Form 8-K

          1.   Form 8-K dated March 1, 2001  reporting  the  acquisition  of the
               water resources and the change in control.

          2.   Form 8-K dated  March 19, 2001  reporting a change in  certifying
               accountants.

                                       21
<PAGE>

                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                      CHINA CONTINENTAL, INC.


                                                By:  /s/ Jia Ji Shang
                                                     ---------------------------
                                                     Jia Ji Shang
                                                     Chairman of the Board and
                                                     Chief Executive Officer

                                                By:  /s/ Jian Sheng Wei
                                                     ---------------------------
                                                     Jian Sheng Wei
                                                     Chief Financial Officer

Dated: May 20, 2001

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

Signatures                           Titles                             Date
----------                          --------                           ------

/s/ Jia Ji Shang
----------------------
Jia Ji Shang                        Chairman of the Board and Chief
                                    Executive Officer               May 20, 2002
/s/ Macolm Roy Brandon
----------------------
Macolm Roy Brandon                  Director                        May 20, 2002

/s/ Zhong Cheng Zhang
----------------------
Zhong Cheng Zhang                   Director                        May 20, 2002

/s/ Shujing Li
----------------------
Shujing Li                          Director                        May 20, 2002

/s/ Jian Sheng Wei
----------------------
Jian Sheng Wei                      Secretary / Treasurer /
                                    Chief Financial Officer and     May 20, 2002
                                    Director
<PAGE>


                        CONSOLIDATED FINANCIAL STATEMENTS
                     CHINA CONTINENTAL, INC AND SUBSIDIARIES

                   THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                           Pages

 Report of Independent Auditors                                              F-2
 Consolidated Balance Sheets as of  December 31, 2001 and 2000             F-3-4
 Consolidated Statements of Income for the years ended December 31,
 2001,  2000 and 1999                                                        F-5
 Consolidated Statements of Changes in Stockholders' Equity for
 the years ended December 31, 2001, 2000, and  1999                          F-6
 Consolidated Statements of Cash Flows for the years ended December 31,
 2001, 2000 and 1999                                                       F-7-8
 Notes to Financial Statements                                            F-9-14
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders
of China Continental, Inc.


We  have  audited  the   accompanying   consolidated   balance  sheet  of  China
Continental, Inc. (the "Company") and subsidiaries (collectively the "Group") as
of  December  31,  2001 and 2000,  and the related  consolidated  statements  of
income,  retained earnings,  and cash flows for the year ended December 31, 2001
and 2000. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated   financial  statements  based  on  our  audits.  The  consolidated
financial statements of China Continental,  Inc. and subsidiaries as of December
31,  1999,  were  audited by other  auditors  whose  report  dated May 23, 2000,
expressed an unqualified opinion on those statements.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of China Continental,
Inc. and  subsidiaries  as of December 31, 2001 and 2000, and the results of its
operations  and its cash flows for the year ended December 31, 2001 and 2000, in
conformity with accounting principles generally accepted in the United States of
America.




Thomas Leger & Co., L.L.P.
Houston, Texas
March 28, 2002

                                      F-2
<PAGE>

   ASSETS
                                                         December 31,
                                                   2001              2000
                                                   US$               US$
                                                  ------            ------
CURRENT ASSETS
  Cash and bank balances                        11,330,717        7,666,459
  Trade receivables                                      -        2,300,670
  Third parties                                  4,568,675                -
   Related company                               1,715,663                -
   Inventory                                             -        3,350,456
   Deposit and prepaids                         10,048,193                -
                                                -----------      -----------

TOTAL CURRENT ASSETS                            27,663,248       13,317,585
FIXED ASSETS                                     2,531,954        2,824,102
LAND LEASE RIGHTS, net of
 accumulated amortization of US$9,225,520 and
US$2,307,572 at December 31,2001 and 2000      155,765,864      162,683,812
WATER RESOURCES                                 25,558,887       25,558,887
Deposit for improvements                         1,349,093                -
                                               ------------    ------------
TOTAL ASSETS                                   212,869,046      204,384,386
                                               ============    ============
                                      F-3
<PAGE>

          CHINA CONTINENTAL, INC. AND SUBSIDIARIES
          CONSOLIDATED BALANCE SHEETS (Continued)
            LIABILITIES AND STOCKHOLDERS' EQUITY
                                                            December 31,
                                                       2001              2000
                                                        US$               US$
                                                      -------           --------
CURRENT LIABILITIES
   Account payable to related company                  508,782           769,386
   Amounts due to directors                            229,210                12
   Amounts due to related parties                      424,034           375,937
   Accounts payable and accrued liabilities            200,608           181,159
                                                    -----------       ----------
TOTAL CURRENT LIABILITIES                            1,362,634         1,326,494
                                                    -----------       ----------
TOTAL LIABILITIES                                    1,362,634         1,326,494
                                                    -----------       ----------
STOCKHOLDERS' EQUITY
   Common stock, par value US$0.001 per share:
   Authorized:
   1,000,000,000 shares authorized:
   312,894,000 issued; 257,894,000 outstanding
    as of December 31, 2001; and 230,894,000 at
    2000                                               312,894           230,894
   Additional paid-in capital                       69,602,972        68,549,972
   Treasury stock                                      (55,000)                -
   Retained earnings                               141,645,546       134,277,027
                                                   ------------      -----------
TOTAL STOCKHOLDERS' EQUITY                         211,506,412       203,057,893
                                                   ------------      -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY                                             212,869,046       204,384,387
                                                  =============     ============
                                      F-4
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>

                                                             Year Ended December 31,
                                                   2001                 2000                1999
                                                    US$                  US$                 US$
                                                  -------              -------             --------
<S>                                           <C>                    <C>                 <C>

SALES                                          21,315,658            5,873,403                  -
COST OF SALES                                   5,323,244               45,648                  -
GROSS PROFIT                                   15,992,414            5,827,755                  -
DEPRECIATION AND
    AMORTIZATION                                7,210,097            2,404,955                  -
SELLING AND ADMINISTRATIVE
EXPENSES                                          413,798              392,413                  -
CONSULTING                                      1,000,000                    -                  -
OTHER INCOME                                            -               50,616                  -
INCOME FROM CONTINUING OPERATIONS               7,368,519            3,081,003                  -
DISCONTINUED OPERATIONS
    Income from operations
    of divested entities less
    applicable income taxes of
    US$2,907,000 for 1999                               -            5,509,077         16,805,117
NET GAIN ON DISPOSAL OF ASSOCIATED
    COMPANIES AND
    INVESTMENTS IN SUBSIDIARIES                         -           17,604,615         11,431,175
NET INCOME                                      7,368,519           26,194,695         28,236,292
                                               ===========        =============       ============

INCOME PER COMMON SHARE
BASIC AND DILUTED
Income from continuing operations                    0.03                 0.03                  -
Income from discontinued operations                     -                 0.05               0.23
Gain on disposals                                       -                 0.18               0.15
                                                     0.03                 0.26               0.38
                                               ===========       =============        ============

AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING
Basic and diluted                             232,288,521   (1)    102,230,137         75,904,100
                                              ============       =============        ============
</TABLE>


(1) Excludes 55,000,000 shares in treasury

                                      F-5
<PAGE>
                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  Years ended December 31, 2001, 2000 and 1999
<TABLE>

                                                  Additional
                                   Share           paid-in                          Retained
                                  capital          capital         Treasury         earnings           Total
                                    US$              US$             Stock            US$               US$
                                 ----------      ------------     -----------      ----------         -------
<S>                              <C>             <C>              <C>              <C>             <C>

Balance at December 31, 1998       69,894        45,393,172                       79,846,039      125,309,105
Issuance of 30,000,000 shares
 on October 9, 1999 at

 US$0.37 per share                 30,000        11,070,000                                -       11,100,000

Assumption of liabilities
 on December 31, 1999 and
 contribution to capital                -           91,800                                 -           91,800
Net income                              -                -                        28,236,292       28,236,292
                                 ---------    -------------                     -------------    -------------
Balance at December 31, 1999       99,894       56,554,972                       108,082,331      164,737,197
                                 ---------    -------------                     -------------    -------------
Issuance of 131,000,000 shares on
 December 23, 2000 at US$0.091975
 per share                        131,000      11,995,000                                 -        12,126,000
Net income                                            -                   -      26,194,696        26,194,696
                                 ---------    -------------       ----------    -------------    -------------
Balance at December 31, 2000      230,894      68,549,972                       134,277,027       203,057,893
Issuance of 55,000,000 shares
 On November 19, 2001 at par       55,000               -           (55,000)              -                 -
Issuance of 2,000,000 shares
 for services On November 19,
 2001 at US$.04
 per share                          2,000          78,000                 -               -            80,000
Issuance of 25,000,000 shares
for services
 On December 14, 2001 at
 US$.04 per share                  25,000         975,000                                           1,000,000
Net income                              -               -                 -       7,368,519         7,368,519
                                 ---------    -------------       ----------    -------------    -------------
Balance at December 31, 2001    $ 312,894    $ 69,602,972         $ (55,000)   $141,645,546     $ 211,506,412
                                 =========    =============       ==========    =============    =============
</TABLE>

                                      F-6
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>

                                                       2001              2000               1999
                                                       US$                US$               US$
                                                      -------           -------           --------
<S>                                                  <C>                <C>            <C>

CASH FLOWS FROM OPERATING
 ACTIVITIES:
Net income                                          7,368,519        26,194,696         28,236,292
Adjustments to reconcile net income to
 net cash provided by operating activities:
   Depreciation and amortization                   7,210,096         2,404,955          3,897,230
   Issuance of shares for services                 1,080,000                 -                  -
   Provision for doubtful debts and
    diminution in values of investments
    and associated companies                               -                 -            675,014
   Gain on disposal of subsidiaries                        -       (17,604,615)       (11,431,175)
(Income) loss allocated to minority interest               -                 -         (1,631,346)
(Increase) decrease in assets:
    Inventories                                    3,350,456          (428,971)                 -
    Trade receivables third parties               (2,268,005)        5,110,156          1,673,859
    Prepayments and deposits                     (10,048,193)                -             74,869
    Trade receivables from related companies      (1,715,663)                -            (58,625)
    Amounts due from associated companies                  -                 -           (307,216)
    Amounts due from directors                             -                 -            139,277
Increase/(decrease) in liabilities:
    Accounts payable to related company             (260,604)          769,386                  -
    Amounts due to directors                         229,200          (732,709)         1,990,380
    Amounts due to related parties                    48,096          (375,937)           (62,425)
    Accounts payable and accrued liabilities          19,449           170,165           (828,533)
    Income taxes payable                                   -        (2,648,728)         2,987,748
                                                  -----------      ------------       ------------
Net cash provided by operating activities          5,013,351        12,858,398         25,355,349
                                                  ===========      ============       ============
</TABLE>

                                      F-7
<PAGE>
                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>

                                                       Year Ended December 31,
                                            2001                 2000                1999
                                             US$                  US$                 US$
                                           -------              -------             -------
<S>                                      <C>                 <C>               <C>

CASH FLOWS FROM
 INVESTING ACTIVITIES
  Deposit                                (1,349,093)                   -        (159,613,386)
  Purchase of water sources                       -           (6,000,000)                  -
  Purchase of fixed assets                        -              (62,083)                  -
  Proceeds from disposal of subsidiaries                               -          99,543,594
                                        ------------         ------------       -------------
Net cash used in investing activities    (1,349,093)          (6,062,083)        (60,069,792)
                                        ------------         ------------       -------------
CASH FLOWS FROM
 FINANCING ACTIVITIES
  Repayment of bank loans                         -                    -             (83,028)
                                        ------------         ------------       -------------
NET (DECREASE) INCREASE IN
 CASH AND BANK BALANCES                   3,664,258            6,796,315         (34,797,471)
Cash and bank balances, at beginning
 of period                                7,666,459              870,144          35,667,615
                                        ------------         ------------       -------------
Cash and bank balances, at end of period 11,330,717            7,666,459             870,144
                                        ===========          ============       =============
SUPPLEMENTARY CASH FLOWS
 DISCLOSURES:
1. Interest paid                                 -                     -             236,700
                                        ===========          ============       =============
    Income taxes paid                            -                     -             125,600
                                        ===========          ============       =============
</TABLE>

                                      F-8
<PAGE>
                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION AND PRINCIPAL ACTIVITIES

     China  Continental,  Inc. (the "Company") was  incorporated in the state of
     Utah, in the United States of America. The Company redomiciled to the state
     of Nevada in 2002. The Company's principal activity is a 100% investment in
     Sun's  International  Holdings  Limited  (Sun's  International),  a holding
     company  for   investments   in  various   operating   companies.   Sun  's
     International  was  incorporated  under  the  laws  of the  British  Virgin
     Islands.  All  current  operations  are in the  Peoples  Republic  of China
     ("PRC").

     The consolidated  financial  statements include the accounts of the Company
     and Sun's  International and its wholly owned  subsidiaries,  Billion Pearl
     Investments  Limited (disposed of in 2000),  Prime Hill Investment  Limited
     (disposed of in 2000), Prime View Industrial Limited (disposed of in 2000),
     Danbury Inc.,  (disposed of in 2001),  Wealthy Asia Limited (disposed of in
     October   1999),   Battonic   Company   Limited  and  its  operation   East
     Wu-Zhu-Mu-Qin Banner Green Demonstration Farm ("Dong Wu Farm") (acquired in
     1999);  Famous Goal  International  Ltd and its holdings in water resources
     (acquired in 2000).

     Battonic Company Limited, the Company's only operating company, through its
     operation East Wu-Zhu-Mu-Qin Banner Green Demonstration Farm, is engaged in
     forage grass  agriculture and a breeding center to propagate Boer goats and
     other livestock breeds.


2.   BASIS OF PRESENTATION

     The  consolidated  financial  statements  are prepared in  accordance  with
     generally  accepted  accounting  principles in the United States of America
     ("US  GAAP").  This  basis of  accounting  differs  from  that  used in the
     statutory financial statements of the subsidiaries in the PRC.

     There  were no  material  adjustments  made  to  present  the  consolidated
     financial statements to conform with US GAAP.


3.   SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a)      Basis of consolidation
         ----------------------

The consolidated financial statements of the Company include the accounts of the
Company and its wholly owned subsidiaries.  All material  inter-company balances
and transactions have been eliminated on consolidation.

(b)      Cash and cash equivalents
         -------------------------

The Company  considers  cash and cash  equivalents  to include  cash on hand and
demand  deposits  with banks with  original  term to maturity of three months or
less at the date of acquisition.

The Company currently has no bank accounts outside the PRC.

(c)      Inventory
         ----------

Inventories  are  measured at lower of cost and net  realizable  value using the
first-in first-out ("FIFO") or weighted average cost formulas.
                                      F-9
<PAGE>


3.       SUMMARY OF PRINCIPAL ACCOUTNTING POLICIES (Continued)


(d)  Fixed assets and Depreciation

Fixed assets are stated at cost less accumulated  depreciation.  Depreciation of
fixed assets is calculated on the straight-line basis to write off the cost less
estimated  residual  value of each asset over its  estimated  useful  life.  The
principal annual rates used for this purpose are as follows:



                 Leasehold land and buildings                   2.0% -4%

                 Furniture and fixtures                              20%

                 Office equipment                                    20%

                 Motor vehicles                                      20%

(e)      Land lease rights and amortization
         ----------------------------------

Land  lease  rights in  Mainland  China  were  stated  at cost less  accumulated
amortization.   Amortization   of  land  lease  rights  was  calculated  on  the
straight-line  basis over the lesser of its  estimated  useful life or the lease
term. The principal annual rate used for this purpose is 2.5% to 4.0%

(f)      Income taxes
         ------------

Income taxes are determined  under the liability method as required by Statement
of Financial  Accounting  Standard  No.109,  "Accounting  for Income Taxes." The
Company's current operations are exempt from taxation.

(g)      Foreign currency translation
         ----------------------------

The Companies  maintain their books and accounting  records in Renminb:  ("RMB")
the PRC's  currency.  Translation  of amounts from RMB in United States  dollars
("US$")  has been made at the single rate of  exchange  of  US$1.00:RMB8.30.  No
representation  is made that RMB amounts have been or could be,  converted  into
US$ at that rate.

On January 1, 1994, the PRC  government  introduced a single rate of exchange as
quoted daily by the People's Bank of China (the "Unified Exchange Rate").

The quotation of the exchange rates does not imply free convertibility of RMB to
other foreign  currencies.  All foreign exchange  transactions  continue to take
place either through the Bank of China or other banks authorized to buy and sell
foreign  currencies at the exchange  rates quoted by the People's Bank of China.
Approval of foreign currency payments by the Bank of China or other institutions
requires submitting a payment application form together with invoices,  shipping
documents and signed contracts

(h)       Revenue recognition
          -------------------

Revenue  from the sale of  livestock  and forage  grass is  recognized  when the
merchandise is delivered and title passes.

(i)       Retirement benefits
          -------------------

The Companies participate in a defined contribution retirement plan administered
by an insurance company (the "Retirement Plan"). All staff (except for PRC staff
and directors of the Company)  covered under the Retirement Plan are entitled to
a monthly pension,  borne by the insurance company,  upon their retirement equal
to a fixed proportion of their ending salary amount as at their retirement.  The
Company is required to make contributions to the Retirement Plan at a rate of 5%
of the salaries of its existing  staff,  and is not responsible for any payments
beyond the  contributions  to the Retirement Plan as noted above. The retirement
benefit  contributions  are charged to the  statements of income as services are
provided.
                                      F-10
<PAGE>

3.       SUMMARY OF PRINCIPAL ACCOUTNTING POLICIES (Continued)

(j)      Use of estimates
         ----------------

The preparation of consolidated  financial statements in conformity with US GAAP
requires  management to make estimates and  assumptions  that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.

(k)       Earnings Per Share
          ------------------

The Company has adopted  Statement of  Financial  Accounting  Standards  NO. 128
("SFAS 128"),  "Earnings Per Share." Under SFAS 128, basic earnings per share is
computed  by  dividing   income   available  to  common   shareholders   by  the
weighted-average  number of common shares assumed to be  outstanding  during the
period of computation.  Diluted  earnings per share is computed similar to basic
earnings  per share  except that the  denominator  is  increased  to include the
number of  additional  common  shares  that would have been  outstanding  if the
potential common shares had been issued and if the additional common shares were
dilutive.

Average  number of shares  outstanding do not include  55,000,000  shares issued
November  19, 2001 which are  included in the  financial  statement  as treasury
stock.  The Company has received the shares back in 2002 and is  nullifying  the
transaction.

Certain  balances  in the prior  year have been  reclassified  to conform to the
presentation used in the current year.


4.      INCOME TAXES
        ------------

The Companies operated in several  jurisdictions  prior to the year 2001 and may
be subject to taxes in those jurisdictions.

It is  management's  intention  to reinvest all the income  attributable  to the
Company earned by its  operations  outside the United  States.  Accordingly,  no
United  States  corporate  income  taxes have been  provided in these  financial
statements.

Under the current law of the British Virgin  Islands,  any dividends the Company
will  distribute  in the future,  and capital  gains  arising from the Company's
investments are not subject to income tax in the British Virgin Islands.

Those  companies  carrying on  operations  in Hong Kong are subject to Hong Kong
profits tax on their income arising in or derived from Hong Kong after adjusting
for income and expense items which are not  assessable or deductible for profits
tax purposes.  As such,  current  income taxes are calculated at a statutory tax
rate of 16% on their  estimated  taxable  income for the year.  No companies are
carrying on operations in Hong Kong at December 31, 2001 and 2000.

Companies with operations in the PRC may be subject to PRC income tax for income
on services  rendered  therein.  The  applicable  effective  tax rate for income
derived from services tendered in that  jurisdiction is approximately  8.5%. The
Company is of the opinion  there will be no taxes on  operations  in the PRC for
the next four years because of a special exemption.

Undistributed  earnings  of the  Company's  non-U.S.  subsidiaries  amounted  to
approximately  $142,000,000  and  $134,277,027  at  December  31, 2001 and 2000.
Because those earnings are considered to be indefinitely  invested, no provision
for United States corporate income taxes have been provided.  Upon  distribution
of those  earnings in the form of dividends or  otherwise,  the Company would be
subject to United States  corporate income taxes.  Unrecognized  deferred United
States  corporate  income  tax in  respect of these  undistributed  earnings  at
December  31,  2001 and  2000 was  approximately  $49,000,000  and  $46,000,000,
respectively.
                                      F-11
<PAGE>

5.   FIXED ASSETS

                                                Year Ended December 31,
                                                2001               2000
                                                US$                 US$
                                               ------             -------
Cost:
        Machinery and equipment             2,921,485           2,921,485
        Less: accumulated depreciation       (389,531)            (97,383)
                                           ----------          -----------
        Net book value                      2,531,954           2,824,102
                                           ==========          ===========

6.  ACQUISITIONS AND DISPOSITIONS

During 2000 the Company  disposed of Billion Pearl  Investments  Limited,  Prime
Hill Investment Limited,  Prime View Industrial  Limited;  and ceased operations
and liquidated Danbury, Inc.

The following amounts represent the non-cash portion of these transactions:

                                                        US$
                                                       ------
Fixed assets                                           390,560
Interest in associated companies                       107,130
Amount due from related companies                    1,311,566
Other                                                  646,263
Bank Overdraft                                        (510,409)
Bank import loans                                     (385,597)
Income taxes payable                               (15,283,716)
Amounts due to directors                            (2,618,165)
Secured bank loan                                   (1,262,255)
                                                  --------------
                                                   (17,604,623)
                                                  ==============

On December 23, 2000 the Company  initiated  the purchase of a 100%  interest in
Famous Goal International Limited for a consideration of US$6,000,000,  exchange
of the Company's  Megaway  interest was valued at  US$7,432,887  and 131,000,000
shares of stock in the  Company.  The shares  were  valued

6.  ACQUISITIONS AND DISPOSITIONS


On December 23, 2000 the Company  initiated  the purchase of a 100%  interest in
Famous Goal International Limited for a consideration of US$6,000,000,  exchange
of the Company's  Megaway  interest was valued at  US$7,432,887  and 131,000,000
shares of stock in the  Company.  The shares were valued at  US$12,126,000.  The
principal assets of Famous Goal International  Limited are 2.6 square kilometers
of land  with two  water  resources  located  in  Wulagai  Development  District
northwest of Xi Lin Gol Meng. The water resources can be used to produce bottled
water.

Had the  131,000,000  shares of common  stock been  outstanding  through out the
periods presented,  earnings per share would have been US$0.13 and US$0.12, 2000
and 1999 respectively.
                                      F-12
<PAGE>

6.   ACQUISITIONS AND DISPOSITIONS (Continued)

On October 4, 1999, Sun's  International  sold its 100% interest in Wealthy Asia
Limited  to an  unrelated  third  party  for a  consideration  of  approximately
US$l00,000,000.

The following amounts represent the non-cash portion of this transaction:

        Cash disposed of with sale of subsidiary        US$             214,772
        Accounts receivable                                             172,686
        Prepayments, deposits and other                                 156,768
        Amounts due from directors                                    5,100,000
        Land lease rights, neta                                      79,117,281
        Income taxes payable                                            (80,917)
        Accounts payable and accrued liabilities                        (34,464)
                                                                    ------------
                                                                     84,646,127
                                                                    ============

On October  9,1999,  the Company  initiated  the purchase of a 100%  interest in
Battonic Co., Ltd. for a consideration of  US$148,363,386  and 30,000,000 shares
of stock in the Company. The shares were valued at US$11,250,000, based upon the
trading  value  of the  shares  on this  date.  The  cash and  stock  were  both
transferred to the seller, an unrelated individual,  on that date. Subsequently,
that individual became an employee of the Company.

The  principal   asset  of  Battonic  Co.  Ltd.  is  a  100%  interest  in  East
Wu-Zhu-Mu-Qin  Banner Green Demonstration Farm (Banner).  The principal asset of
Banner is a 100% interest in Dong Wu Farm. Dong Wu has been established to run a
breeding  center to propagate Boer goats and other livestock  breeds.  Dong Wu's
principal  asset is the right to use 156 square  miles of land  located in Inner
Mongolia  for 25 years from July 1, 1999 to July 1, 2024 and may be  extended by
the Company.

7.   CONCENTRATION OF CREDIT RISKS

Financial  instruments which potentially subject the Group to a concentration of
credit risk principally consist of cash deposits,  trade receivables,  long-term
receivable and the amounts due from and to directors and related companies.

(i)  Cash deposits

The Group places it cash deposits with an international bank.

(ii) Amounts due from related companies

At December 31, 2001, there is US$1,715,663 due from a related company.

The Group does not have a policy of requiring collateral.

(iii)Amounts due from and to directors (See  "Additional  related party balances
     and transactions")
                                      F-13
<PAGE>


8.   FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of financial instruments are set out as follows

                   (i)     Cash deposits

                   The cash  deposits  are  stated at cost,  which  approximates
                   market value.

                   (ii)    Trade receivables, other receivables and amounts due
                   from directors and related companies

                   Trade receivables, other receivables and the amounts due from
                   related  companies  and  directors  are  stated at their book
                   value less provision for doubtful debts,  which  approximates
                   the fair value.

                   (iii) Accounts  payable and amounts due to related  companies
                   and   directors   are  stated  at  their  book  value   which
                   approximates their fair value.


9.   CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

                  The Group's operations are conducted in the PRC.  Accordingly,
                  the  Group's  business,  financial  condition  and  results of
                  operations  may be influenced by the  political,  economic and
                  legal environments in the PRC, and by the general state of the
                  PRC economy.

                  The  Group's  operations  in the PRC are  subject  to  special
                  considerations and significant risks not typically  associated
                  with  companies  in North  America and Western  Europe.  These
                  include risks associated  with,  among others,  the political,
                  economic and legal environments and foreign currency exchange.
                  The Group's  results may be  adversely  affected by changes in
                  the political and social conditions in the PRC, and by changes
                  in governmental policies with respect to laws and regulations,
                  anti-inflationary measures, currency conversion and remittance
                  abroad, and rates and methods of taxation, among other things.


10.  ADDITIONAL RELATED PARTY BALANCES AND TRANSACTIONS

                  The Group's amounts due from/(to) directors,  related parties,
                  and  related  company  are  unsecured,  interest-free  and are
                  repayable   on  demand.   Eternal   Technology   Group,   Ltd.
                  ("Eternal")  is  a  related  company.  One  of  the  Company's
                  officers,  directors and major shareholder owns  approximately
                  24% of Eternal.

                  Dong Wu Farm  acquired  2,000 goat embryos and  services  from
                  Eternal, a related company, for US$425,000 in December,  2000.
                  Dong Wu Farm's 2,000 goats with implanted embryos were sold in
                  March, 2001 for approximately US$1,687,000.

                  Dong  Wu Farm  had  sales  of  forage  grass  to  Eternal  for
                  approximately  US$1,735,000  during 2001.  These sales were at
                  the same price as to third parties.


11.  CONTINGENCIES AND COMMITMENTS

                  During  September,  2001 the Dong Wu Farms  entered into three
                  contracts  with Inner Mongolia Sai Ri Ji He Husbandry Co. Ltd.
                  The contracts are for the  construction  of fences,  roads and
                  the preparation of fields for planting in the spring of 2002.

                  The roads and fences estimated cost are US$4,180,000. The cost
                  for preparation of the fields is approximately  US$20,096,000.
                  The contracting  company  required a deposit of  approximately
                  US$11,397,000 with the balance to be paid in 2002.

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