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, 2000


[ ]  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)

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

  Room 2407, China Resources Building, No. 26 Harbour Road, Wanchai, Hong Kong.
  -----------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant Telephone Number,  Included Area Code : 011-852-2802-8988  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$14,344,706.

     At of  December  31,  2000,  230,000,000  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 $17,963,000.

                       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............................... 9
      ITEM 3.     LEGAL PROCEEDINGS....................................... 9
      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE
                  OF SECURITY HOLDERS..................................... 9
PART II
         ITEM 5.  MARKET FOR COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS ............................ 9
         ITEM 6.  SELECTED FINANCIAL DATA.................................10
         ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF
                  OPERATION...............................................11
         ITEM 7A  QUANTITATIVE AND QUALIFICATION DISCLOSURE
                  ABOUT MARKET RISK.......................................16
         ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
                  DATA....................................................16
         ITEM 9.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE................................16
PART III
      ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE
                  REGISTRANT..............................................16
         ITEM 11. EXECUTIVE COMPENSATION..................................17
         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT...................................18
         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY
                  TRANSACTION.............................................19
PART IV
      ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTINGS
                  ON FORM 8-K.............................................20
                  SIGNATURES..............................................20
                  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 of this Form 10-K.

The Company

      Historically,  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"). The Company has completed approximately 84
turn-key  projects  throughout the PRC,  varying in size from US$300,000 to US$5
million.  Two  turn-key  projects  were  completed  during  calendar  year  2000
averaging US$3.9 million per contract.  However, because of an increase in price
competition  and a change in  management,  the Company has abandoned the sale of
turn-key projects and refocused its business in 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.  The Company has further acquired two water resources in
Inner Mongolia with a view of providing high quality mineral water.  The Company
became a US listed public company via a reverse merger in February, 1995.

Market and Client Base

      During the 1990's,  the Company began to market on a turn-key  basis fully
automated  production  lines to plastic  product  manufactures  in the PRC. This
business  continued  until the  summer of 2000 when the  Company  refocused  its
activities to  agrigenetics.  In October 2000,  the Company  imported  semen and
embryos of Australian  livestock for  implantation  into local  recipients.  The
sheep from the first  generation of offspring will be reared at East Wu and then
be sold in Mainland China. During the fourth quarter of 2000, the Company's sole
source of  revenue  approximating  US$5.3  million  was from the sale of natural
forage  grass.  Sale of grass will continue in 2001.  Livestock  sales will also
begin in 2001.

Business Segments

The Company operates the following principal business segments:

                                       3
<PAGE>


o    Sale of  breeding  livestock,  including  the sale of semen  and  supplying
     genetic and agricultural  services to contract  breeders and growers in the
     animal husbandry industry
o    Planting, harvesting and sale of forage grass
o    The sale of potable water beginning in 2002

Sale of Breeding Livestock

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

Sale of forage grass

     This year the harvest for forage grass totaled  approximately  65,000 tons,
which was sold to Beijing  Fengrun  Fine Breed  Husbandry.  The market price for
natural forage grass was  approximately  US$73 per ton.  Better quality  planted
forage grass can be sold up to US$181 per ton. Sale of Potable Water

The Company  acquired  water rights  through the purchase of a 100%  interest in
Famous Goal  International  Ltd.  Famous Goal's primary assets are 2.6 sq. km of
land with two water  resources  located in Wulagai  Development  District in the
northwest  of Xi Lin Gol Meng.  Total water flow is over 6,000 cubic  meters/day
with a daily  extraction  limit of 3,000 cubic meters.  The water resources have
been tested and meet the Chinese GB8537-95 Standard for "Potable Natural Mineral
Water."

Principal Suppliers

     The Company  acquires all of its embryos from  Castella  Research Pty Ltd.,
based in Sydney, Australia.

Employees

     As of December 31, 2000, the Company employed an administrative  staff of 8
persons in Hong Kong and a technical and sale staff of  approximately 40 persons
in the PRC.

                                       4
<PAGE>

Competition

      The  market  for  agricultural  genetics  and  water  resources  is highly
fragmented in the PRC. The Company  believes that it is in a position to provide
quality  agricultural  genetics to local customers along with superior technical
support.  Likewise,  the Company  believes  that it will be able to produce high
quality  drinking  water  from its  water  sources.  To date,  there has been no
significant price competition in either of these markets,  but price competition
may become a factor in the future.

Economic Development in the People's Republic of China ("PRC" or "China")

      Since 1953, the development of the PRC's economy has been characterized by
the adoption of the "Five Year Plans".  Implementation  of the plans are carried
our under  the  supervision  of the State  Planning  Commission,  which  reports
directly to the State Council.  The ninth Five Year Plan for national,  economic
and social  development  for  1996-2000,  along with a  ten-year  program  which
extends to 2010, was adopted in 1996, by the Standing  Committee of the National
People's Conference.

      In 1999, facing complicated  political and economic  circumstances at home
and aboard,  China  enacted a number of policy  measures to increase  output and
expand demand.  The net result of these  initiatives  was a 7.1% increase in the
gross domestic product.

      Although the domestic political and economic situation in the PRC and Asia
is still  complicated,  it has improved to some degree  since 1999.  In the PRC,
market  consumption  is steady.  Since the 4th quarter of 1999,  retail sales of
consumer goods have increased while deflation has moderated.

      During  2000,   reform  of  PRC  state  owned   enterprises   was  further
accelerated.  With the adjustment of strategic  distribution  in the state owned
economy  and  the  implementation  of  strategic   reshuffling  in  state  owned
enterprises,  the economic efficiency of state owned enterprises will,hopefully,
be improved.

      The economic re-development of Western China has also begun.  Construction
of infrastructure,  including acceleration of the construction of the main lines
of the  national  railroad  and  provincial  trunk  lines  has  begun as has the
expansion of facilities for transporting  water to Western China.  Both the jobs
created by the infrastructure  development,  and those resulting from it, should
help  economic  development  in Western  China and the PRC.  China has  averaged
increases of 7% per year in its gross domestic  production  during for the Ninth
Five Year Plan.

         During the opening address of the National  People's  Congress on March
5, 2001,  Premier Zhu Ronji was  optimistic  that the economy  would  achieve an
average seven percent  growth in the coming five years and double in size in the
next 10 years.

                                       5
<PAGE>

FUTURE PROSPECT OF THE COMPANY

Overview

      Food  production  in China is still the  paramount  issue  despite  recent
advances in scientific  methods in agriculture and animal husbandry.  The global
demand for food is expected to be critical for continued growth, particularly in
developing countries. The Company feels that the challenge of providing food can
only be met through agricultural genetic engineering.  Therefore the goal of the
Company  is to  increase  shareholders'  value by its  involvement  in  selected
emerging  high-growth  sectors,  particularly  in the provision of  technologies
utilized in agricultural genetics and farming in China.

      Despite being the most populous nation and the largest livestock  producer
in the world, China lacks high quality livestock and hybred seeds to sustain its
agricultural  industry.  Unless new emphasis is placed on optimizing  the use of
land and livestock, economic self-sufficiency will not be achieved.

      The Company believes that it has identified a niche market by initiating a
multi-phase  program to enhance  agricultural  production  in China  through the
supplying  of  agricultural   genetics   technology  to  support  the  Country's
increasing demand of food. The strong  relationship that the Company enjoys with
both its Chinese  and  international  partners  will  provide  the Company  with
strategic access to this development opportunity.

      The  Company  intends to  maximize  cashflow  to enhance the values of its
businesses through modern management, operations and development strategies. The
Company believes opportunities exist for its growth in the agricultural industry
as well as the bottled water industry in China.

Breeding of Livestock

      The Company has embarked on a livestock and genetic engineering project at
East Wu . The farm is located in Inner Mongolia.  The emphasis of the Company is
to lead and  manage a  selected  high  growth  emerging  business  in  providing
technological  services  and  products in  agricultural  genetics and farming in
China. The Company believes  opportunities  exist for its growth in the business
of agricultural genetics and farming in China,  particularly in those areas that
offer  potential  proprietary   technology   development  and  potential  market
dominance.

      The Company  believes  that there are a number of  favorable  factors that
will  enable it to achieve  its  objectives,  including,  but not limited to the
following:

-    The opportunity to lead the market in the agricultural genetics and farming
     industry in China with the ability to make available  modern  techniques in
     genetics technology and farming;
-    The  presence  of  dedicated   management  and  staff  with  the  necessary
     expertise;
-    The unique location and availability of a significant size of land; and
-    The strong support from its Chinese and  international  partners,  ensuring
     that it is in a position to exploit  existing and future  opportunities  in
     agricultural genetics.


                                       6
<PAGE>

      A highly  qualified team of five genetic  professors has been recruited by
the Company.  This team will establish and initially  manage a feedlot  breeding
center for Boer goats and crossbred Boer goats and to improve the genetic makeup
of the domestic  Chinese  herd through  advanced  semen  extraction,  artificial
insemination and embryo transplant techniques. The research and development team
will also introduce enhanced farm management practices and technology, including
nutritional expertise, animal husbandry techniques and western farming practices
proven to maximize efficiency in livestock production and herd management.

      The objectives of this project are:
      -  Produce  superior  breeding  livestock  to  improve  China's  livestock
population; and - Provide red meat for a population of 1.2 billion people.

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

      Phase One - Important of Australian  livestock  genetics  through Castella
Research Pty Ltd., based in Sydney,  Australia,  in the form of goat embryos for
implanting into local recipients. East Wu has purchased 2,000 embryos to produce
approximately  1,000 Boer kids. It purchased  approximately 2,400 native Chinese
goats to serve as recipient  goats.  During 2001,  the activities of the Company
will  primarily be to establish  genetic and  biotechnology  services  including
introduction of embryo  transfer and artificial  insemination  technology.  CHCL
plans to import 6,000 embryos from Australia and purchase 7,000 local recipients
in 2001.

      Phase Two - After the first two years, the Company's commercial production
of Boer goats should be in place.  The Company  plans to  distribute  and market
genetics through semen, embryos and live breeding stocks to contact growers, and
municipal and provincial  governments.  Company trained  technicians  will serve
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.

      Phase Three - The Company  expects to produce  Boer goat crosses with 25%,
50%,  75% and 87%  full  blood  Boer  goats  through  embryo  transfer  within a
three-year period.


                                       7
<PAGE>


Forage Grass

       With the increased meat  consumption by China  residents,  there has been
increased  demand for China's forage grasses.  This has resulted in the planting
of  specialized  forage grass like alfalfa.  Alfalfa is not only a fodder with a
higher  nutritional value for cows and sheep, but it also improves the soil. The
consumption of milk and milk products by residents of China has been increasing,
contributing to the increasing demand for forage grass.

         In  view of  this,  China  Continental  is  planning  to  leverage  its
technologies,  scientific  planting methods and modern management  techniques to
establish  the largest area of grassland in China  utilizing  American  advanced
machinery and high quality imported seed.

         The  initial  focus of the plan is to enlarge  the  percentage  of high
quality forage grass to 36,500 hectares (or  approximately  91,250 acres) within
three years.  By achieving this scale,  the total yearly  production of the high
quality forage grass should be approximately 200,000 metric tons.

Water Resources

         The Company  acquired two water resources  through the acquisition of a
100% equity stake in Famous Goal International  Limited. The water resources are
surrounded  with a vast  nature  prairie  producing a pure  natural  environment
without industrial pollution.

         The Company  plans to enter into a joint  venture with a marketing  and
distribution company and to build a bottling plant. Construction of the plant is
expected to begin late in 2001,  with  commercial  production  beginning  in the
fourth quarter of 2002.

      Water Source - The water source is surrounded with a vast natural prairie,
a pure natural  environment  without  industrial  pollution.  The mineral  water
exists in the pyroclastic rock crevice from the Jurassic Period.  Rainfall seeps
along  the  rock  crevice  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.  The high-grade
natural mineral water 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.

      Proposed  Bottling  Plant - The first  phase of the  proposed  plant  will
include  building a structure to house six  production  lines.  The second phase
calls  for four  additional  production  lines.  Management  expects  that  each
production line will have a capacity of 100 million bottles at 600ml/bottle  per
year or 200 cubic meters per day of water.


                                       8
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTIES

      The  Company  principal  administrative  office is located in Hong Kong at
Room 2407 China  Resources  Building,  26 Harbour  Road,  Wanchai.  The  Company
occupies these facilities under a two year lease.

      The marketing,  technical  facilities and supporting  teams are located in
Tianjin, People's Republic of China.

      The farm  which  the  Company  purchased,  (East Wu) is  located  in Inner
Mongolia in the People's Republic of China.

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.
                                 2000                    1999
                               -------                  ------
                            High       Low           High     Low

First Quarter              2.40       0.375          0.75    0.328
Second Quarter             1.25       0.375          0.703   0.203
Third Quarter              0.56       0.10           0.563   0.188
Fourth Quarter             0.16       0.055          1.50    0.313

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


                                       9
<PAGE>

Holders

      At December 31, 2000 there were approximately 350 holders of record.

Dividends

      Since 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         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>

Automatic production lines                      0     36,434     32,806       18,815     31,957
Raw materials                                   0        670      1,594        1,846      2,782
Breeding center                                 0      1,770      2,388            0          0
Forage grass                                5,873          0          0            0          0
                                           ------    -------     ------            -          -
Total sales                                 5,873     38,874     36,788       20,661     34,759
Cost of sale                                   45     14,674     14,284        8,335     14,290
                                           ------    -------     ------       ------     ------
Gross profit                               45,828     24,200     22,504       12,325     20,469
Depreciation of fixed assets               (2,405)    (3,897)    (4,841)        (386)       (80)
Selling and administrative
   expenses                                  (391)    (1,205)    (2,395)        (510)      (959)
(Provision) Recovery for
   doubtful accounts                           (1)      (675)      (681)           0        289
Financial income (expenses), net                0       (126)      (165)         (57)       (55)
Other income (expenses) net                    51         (9)       360        2,919       (595)
Gain on disposal of Subsidiaries           17,608     11,431          0            0          0
Income from discontinued operations         5,505
Share of income/ (loss) of
   associated companies                         0          0        103          144          0
                                           ------     ------     ------      -------     ------
Income before income tax                   26,195     29,719     14,885       14,435     19,069
Income taxes                                    0      3,114      2,890        1,290      2,635
                                           ------     ------     ------       ------     ------
Income before minority interest            26,195     26,605     11,995       13,145     16,434
                                           ------
Minority interest                               0      1,631      2,114            0          0
                                           ------     ------     ------       ------     ------
Income before extraordinary item           26,195     26,605     11,995       13,145     16,434
Extraordinary item                              0          0          0            0          0
                                           ------      -----      -----        -----     ------
Net income                                 26,195     28,236     14,109       13,145     16,434
                                          -------     ------     ------       ------     ------
Net income per share                         0.26       0.37       0.23         0.50       0.63
                                          =======     ======     ======       ======     ======
Weighted average shares
    outstanding                           102,230     75,904     62,306       26,000     26,000
                                          =======     ======     ======       ======     ======
</TABLE>


                                       10
<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)                  11,991   (14,678)     35,938     (26,392)    55,784
                                          -------   -------     -------     -------     ------
Total Assets                              204,384   188,941     253,269     218,447     73,282
                                          -------   -------     -------     -------     ------
Long-term Liabilities                           0     1,245       1,261           0          0
                                          -------   -------     -------     -------     ------
Shareholders Equity                       203,058   164,737     128,543      70,694     57,516
                                          -------   -------     -------     -------     ------
</TABLE>


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  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 is
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.

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.


                                       11
<PAGE>

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 East Wu facility  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.

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.


                                       12
<PAGE>

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.

Twelve Months Ended  December 31, 1999 versus  Twelve Months Ended  December 31,
1998

Revenues

      Revenues increased by US$2,086,000 or 5.6% to US$38,874,000 for the twelve
months  ended  December  31, 1999 from  US$36,788,000  for the prior year.  This
increase  is  principally  attributable  to an  increase in the sale of turn-key
projects of  US$3,628,000,  which was partially offset by a decrease in the sale
of raw-materials of US$924,000 and in breeding center income of US$618,000.

Cost of Revenues/Sales

      Cost of sales of turn-key  projects  includes cost of machinery  purchased
and the salaries and wages paid to engineers and consultants. For the year ended
December 31, 1999, cost of sales as a percentage of revenue on turn-key projects
was 36.40%, representing a decrease of 2.40% form 38.8% for the prior year. This
decrease is principally attributable to an increase in the cost of materials.

Depreciation of Fixed Assets

      Depreciation  expense decreased by US$944,000 or 19.5% to US$3,897,000 for
the year ended  December  31, 1999 from  US$4,841,000  for the prior  year.  The
decrease is  attributable  to the sale of the farm located on Chengde  Dafeng in
October, 1999.

Selling and administrative expenses

      Selling and  administrative  expenses  include  salaries,  commissions and
other direct  employment costs paid to the Company's sales  representatives  and
other   professionals.   Selling  and   administrative   expense   decreased  by
US$1,190,000  or 49.68% to  US$1,205,000  for the year ended  December  31, 1999
compared to US$2,395,000  for the prior year. The decrease  resulted because the
Company spent less on public relation during 1999.

Provision for Doubtful Accounts

      The  provision  for  doubtful  accounts  decreased  by  US$6,000  or 1% to
US$675,000  for the year ended  December 31, 1999 from  US$681,000 for the prior
year.  Generally,  uncollectible  accounts as a percent of  receivables  remains
fairly constant.

                                       13
<PAGE>

Financial Income (Expense) Net

     Financial   income  /  (expense)  is  interest  earned  on  cash  and  cash
equivalents, less interest expense. Net financial expense decreased by US$39,000
or 23.6% to US$126,000 for the year ended December 31, 1999 from  US$165,000 for
the prior year. This decrease is attributable to a decrease in bank borrowing.

Gain on Disposal of Wealthy Asia Limited

     The gain on disposal of Wealthy Asia  Limited  totaled  US$11,431,000.  The
major  asset  of  Wealthy  Asia  Limited  is 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.

Income Taxes

     Income  taxes for the year ended  December  31, 1999 were  US$3,114,000  or
16.65% of pre-tax income.  This compares with  US$2,890,000 or 18.89% of pre-tax
income for calendar year 1999. The tax rate was lower for 1999 because a portion
of the income was classified as capital gains which are not subject to tax.

Net Income

     Net  income  increased  by  US$14,127,000  or  100% to  US$28,236,000  from
US$14,109,000 for the year ended December 31, 1999. The increase is attributable
to an increase in sales of US$2,086,000  and the gain on the sale of the farm of
US$11,431,000,  which was  partially  offset by the  increase in  provision  for
doubtful accounts.

Liquidity and Capital Resources

     At December 31,  2000,  the Company had working  capital of  US$11,991,000,
including a cash balance of US$7,666,000.  This compares to a working capital of
US$(14,678,000) and a cash balance of US$870,000 at December 31, 1999.

     Net cash provided by operating  activities  decreased to US$24,984,000 from
US$25,355,000  for the prior year.  The cash  provided by  operating  activities
consisted  principally  of  US$26,194,000  of net  income,  decrease  in gain on
disposal of  subsidiary,  a decrease in accounts  receivable,  and a decrease in
income tax payable.

      Net cash used in investing  activities totaled  US$18,188,000 for the year
ended  December 31, 2000 compared to  US$60,070,000  for the year ended December
31,  1999.  In both years the  Company had nominal  purchases  of fixed  assets.
During the year ended  December 31, 1999, the Company used  US$159,600,000  as a
deposit  for the  purchase  of the new farm.  This was  partially  offset by the
proceeds on disposal of subsidiaries and investment in subsidiaries.

                                       14
<PAGE>

      The Company business has historically not been capital intensive.  In most
years internally  generated funds were sufficient to fund the Company operations
and financial its growth.  While the cash  generated from earnings and available
lines of credit has historically  provided sufficient liquidity to meet ordinary
capital  requirements,  management  anticipates that cash generated from the new
operations combined with current working capital and available credit lines will
provide  sufficient  liquidity  (other  than the  purchase  of the farm) to meet
ordinary capital requirements for the foreseeable future.

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 purchasing of
embryos,  salaries and related costs incurred  principally  in the  agricultural
genetic projects. The Company generally has been able to meet increased costs by
raising the prices of its products.

Certain Risk Factors Affecting 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 exited this line of business  and has moved 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 risks associated with the political,  economic and
legal  environments  and with  foreign  currency  exchange,  among  others.  The
Company's  results may be  affected  by,  among  other  things by 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,  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,  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.

                                       15
<PAGE>

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.

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-26. An index to such materials appears on page F-1.

ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
      Not applicable.

                                    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                47         Chairman of the Board and Chief
                                            Executive Officer
     Jian Sheng Wei              54         Chief Financial Officer/Secretary
                                            And Director
     Malcolm Roy Brandon         54         Technical Director
     Zhang Cheng Zhang           59         Director
     Shujing Li                  38         Director

                                       16
<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, 2000.

     Name of Individuals             Year             Salary            Bonus
     --------------------        ------------       ----------       -----------
         Chan Kwai Chiu             1998             108,000              0
                                    1999             108,000              0
                                    2000                   0              0
      Jai Ji Shang (1)              2000                   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.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The Company executive officers are as follows:

     Mr. Jia Ji Shang, age 47 is the Chairman and Chief Executive Officer of the
Company. He holds a Master of Business  Administration from Ukraine Institute of
Wisconsin International  University.  He has in excess of 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 in civil and engineering  construction in Mainland
China and bioengineering and biotechnology throughout the Far East Region and in
North America.

     Mr.  Jian Sheng  Wei,  age 54 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  agriculture  and
husbandry.  He has established breeding centers and large-scale  slaughterhouses
in Inner Mongolia and Hubei.  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.

     Dr.  Malcolm Roy Brandon,  age 54 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 &
Repatriation 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 a
visiting  professor of Oxford  University and Michigan State  University.  He is
associated with 102 patents produced from his research.

                                       17
<PAGE>

     Professional  Zhong  Cheng  Zhang,  age 59 is a  Technical  Director of the
Company.  He is a leader  in  animal  biology  and has  contributed  greatly  in
maintaining the Peoples' Republic of China's highly competitive  research in his
field. He has initiated eight research  projects with the PRC government and has
over 30  years  experience  in  biotechnology.  He has  published  more  than 60
referred research papers, reviews and books and has received two honorary awards
from China Agriculture and Husbandry for best thesis of the year.

      Mr.  Shujing Li, age 38 is a Director  of the  Company.  He  received  his
Doctorate degree in Agriculture 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 foodstuffs.
He has  authored  more than 20  research  papers,  reviews  and books.  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.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

         Under the security laws of the United States, the Company's  directors,
its  executive  officers and  beneficial  owners of more than ten percent of any
class of the Company's securities are required to report their initial ownership
of the Company's  securities and any subsequent changes in that ownership to the
Securities and Exchange Commission. However, none of these parties has yet filed
the required forms with the Securities and Exchange Commission.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth as of December 31, 2000 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              14.35%
Jian Sheng Wei                                       0                  0
Malcolm Roy Brandon                                  0                  0
Zhang Cheng Zhang                                    0                  0
Shuking Li                                           0                  0
Clever Boy Limited                          52,825,000              22.96%
                                            ----------             -------
All officers and directors as a
group (five)                                85,825,000              37.31%

                                       18
<PAGE>

Address for all persons and entities is Room. 2407 China Resources Building,  26
Harbour Road, Wanchai, Hong Kong and all shares are deemed beneficially owned by
Shang Jia Ji.

(1)  Clever Boy Limited is beneficiarily 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.

      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,
                                     1998             1999           2000
                                  ------------     -------------  ------------
Sales to joint ventures:
         Raw materials            US$1,542,354      US$669,976       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.

                                     PART IV

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

(a)  Exhibits

(b)  Report on Form 8-K

     1.   Form 8-K dated November 16, 2000 reporting the resignation of Blackman
          Kallick Bartelstein LLP as the Company's certifying accountants.

     2.   Form 8-K dated  December 23, 2000 reporting a change in control of the
          registrant and the acquisition of Famous Goal International Limited.


                                       19
<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: April 13, 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                  April 13, 2001
/s/ Macolm Roy Brandon
---------------------------
Macolm Roy Brandon             Director                           April 13, 2001

/s/ Zhong Cheng Zhang
---------------------------
Zhong Cheng Zhang              Director                           April 13, 2001

/s/ Shujing Li
---------------------------
Shujing Li                     Director                           April 13, 2001

/s/ Jian Sheng Wei
---------------------------
Jian Sheng Wei                 Secretary / Treasurer /
                               Chief Financial Officer and        April 13, 2001
                               Director
<PAGE>


                        CONSOLIDATED FINANCIAL STATEMENTS
                     CHINA CONTINENTAL, INC AND SUBSIDIARIES

                   THE YEARS ENDED DECEMBER 31, 1999 AND 2000

<PAGE>


                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                          Pages
                                                                         -------
             Report of Independent Auditors                                 F- 2

             Consolidated Balance Sheets                              F-3 to F-4

             Consolidated Statements of Income                       F-5 to F- 6

             Consolidated Statements of Changes in Stockholders' Equity      F-7

             Consolidated Statements of Cash Flows                   F-8 to F-10

              Notes to Consolidated Financial Statements            F-11 to F-26

                                       F-1
<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, 2000, and the related  statements of income,  retained earnings,
and cash flows for the year ended December 31, 2000. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express  an opinion  on these  financial  statements  based on our  audits.  The
financial statements of China Continental,  Inc. and subsidiaries as of December
31, 1998 and 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 financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating the 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, 2000, and the results of its operations
and its cash flows for the year ended  December 31,  2000,  in  conformity  with
accounting principles generally accepted in the United States of America.



                                                     Thomas Leger & Co., L.L.P.




Houston, Texas
March 26, 2001

<PAGE>

          CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                CONSOLIDATED BALANCE SHEETS
         December 31, 1999 and December 31, 2000
<TABLE>

                                     ASSETS
                                                                  December 31,
                                               ------------------------------------------------
                                                   1999               2000               2000
                                                   HK$                 HK$               US$
                                               -----------         -----------        ---------
<S>                                           <C>                  <C>              <C>

CURRENT ASSETS
  Cash and bank balances                        6,743,618          59,415,056        7,666,459
  Trade receivables, net of provisions of
  HK$O at December 31, 1999 and 2000           57,433,900          17,830,189        2,300,670
 Inventory                                              -          25,966,037        3,350,456
 Other receivable                                   8,540                   -                -
                                            -------------     ---------------   --------------
TOTAL CURRENT ASSETS                           64,186,058         103,211,282       13,317,585
DEPOSIT ON INVESTMENT IN LAND HOLDING
COMPANY                                     1,323,966,245                   -                -
FIXED ASSETS                                    3,026,841          21,886,792        2,824,102
INTEREST IN ASSOCIATED
 COMPANIES, net of accumulated
amortization of HK$8,984, 000                  57,956,574                   -                -
LAND LEASE RIGHTS, net of
 accumulated amortization of
HK$17,883,681 at December 31,2000                       -       1,260,799,546      162,683,812
WATER RESOURSES                                         -         198,081,376       25,558,887
AMOUNTS DUE FROM RELATED
 COMPANIES                                     10,164,655                   -                -
OTHER ASSETS                                    5,000,000                   -                -
                                            -------------     ---------------   --------------
TOTAL ASSETS                                1,464,300,373       1,583,978,996      204,384,386
                                            =============     ===============   ==============
</TABLE>

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

                                      F-3

<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)
                     December 31, 1999 and December 31, 2000
                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>

                                                                       December 31,
                                                   ----------------------------------------------
                                                     1999                2000              2000
                                                     HK$                 HK$                US$
                                                   --------            ---------         --------
<S>                                              <C>                 <C>               <C>

CURRENT LIABILITIES
   Bank overdrafts                                  3,955,635                  -                 -
   Bank import loans                                2,988,375                  -                 -
   Secured bank loan                                  134,845                  -                 -
   Income taxes payable                           118,448,796                  -                 -
   Amounts due to directors                        25,969,348                 74                12
   Amounts due to related parties                   4,508,262          8,876,268         1,145,323
   Accounts payable and accrued liabilities        21,931,631          1,403,987           181,159
                                                  -----------        -----------        ----------
TOTAL CURRENT LIABILITIES                         177,936,892         10,280,329         1,326,494
LONG-TERM LIABILITIES
   Secured bank loan -                              9,647,634                  -                 -
                                                  -----------        -----------        ----------
TOTAL LIABILITIES                                 187,584,526         10,280,329         1,326,494
                                                  -----------        -----------        ----------
STOCKHOLDERS' EQUITY
   Common stock, par value US$0.001 per share:
   Authorized:
   1,000,000,000 shares;
   Issued and outstanding
   99,000,000 and 230,000,000
   as of December 31, 1999 and 2000,
    respectively                                      767,690          1,789,425           230,894
   Additional paid-in capital                     438,310,094        531,262,285        68,549,972
   Retained earnings                              837,638,063      1,040,646,957       134,277,027
                                                -------------      -------------      ------------
TOTAL STOCKHOLDERS' EQUITY                      1,276,715,847      1,573,698,667       203,057,893
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY                                          1,464,300,373      1,583,978,996       204,384,387
                                                =============      =============      ============

</TABLE>
       The accompanying notes are an integral part of these consolidated
                              financial statements.

                                      F-4
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                  Years Ended December 31, 1998, 1999 and 2000
<TABLE>

                                                             Year Ended December 31,
                                             -------------------------------------------------------------
                                              1998              1999               2000             2000
                                               HK$               HK$                HK$              US$
                                             -------           -------           ---------        --------
<S>                                          <C>                <C>           <C>              <C>

SALES                                             -                 -         45,518,868       5,873,403
COST OF SALES                                     -                 -           (353,774)        (45,648)
                                       -------------     -------------      -------------     -----------
GROSS PROFIT                                      -                 -         45,165,094       5,827,755
DEPRECIATION AND                                  -                 -
    AMORTIZATION                                  -                 -        (18,638,398)     (2,404,955)
SELLING AND ADMINISTRATIVE                        -                 -
   EXPENSES                                       -                 -         (3,041,195)       (392,413)
OTHER INCOME                                      -                 -            392,277          50,616
                                       -------------     -------------      -------------     -----------
INCOME FROM CONTINUING OPERATIONS                 -                 -         23,877,778       3,081,004
DISCONTINUED OPERATIONS
    Income from operations
    of divested entities less
    applieable income taxes of
HK$22,399,318 and HK$24,128,390
for 1998 and 1999 respectively          108,554,985       130,239,653         42,665,339       5,505,204
NET GAIN ON DISPOSAL OF ASSOCIATED
    COMPANIES AND
    INVESTMENTS IN SUBSIDIARIES             795,995        88,591,608        136,465,777      17,608,488
                                       -------------     -------------      -------------     -----------
NET INCOME                              109,350,980       218,831,261        203,008,894      26,194,696
                                       =============     =============      =============     ===========

</TABLE>

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

                                       F-5
<PAGE>


                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                  Years Ended December 31, 1998, 1999 and 2000
<TABLE>

                                                          Year Ended December 31,
                                        --------------------------------------------------------------
                                           1998          1999               2000              2000
                                           HK$            HK$               HK$                US$
                                        ----------     ---------         ----------        -----------
<S>                                     <C>            <C>               <C>               <C>

INCOME PER COMMON SHARE
BASIC
Income from continuing operations             -             -               0.23              0.03
ncome from discontinued operations         1.73          1.72               0.42              0.06
Gain on disposals                          0.02          1.16               1.34              0.17
                                    ------------   ------------     -------------     -------------
                                           1.75          2.88               1.99              0.26
                                    ============   ============     =============     =============
AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING
Basic                                62,568,767    75,904,110        102,230,137       102,230,137
                                    ============   ============     =============     =============
</TABLE>

       The accompanying notes are an integral part of these consolidated
                              financial statements.
                                      F-6
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  Years Ended December 31, 1998, 1999 and 2000
<TABLE>

                                                              Additional
                                              Share            paid-in           Retained
                                             capital           capital           earnings             Total
                                               HK$               HK$               HK$                 HK$
                                             ---------       ------------      ------------       ------------
<S>                                          <C>             <C>               <C>                <C>

Balance at December 31, 1997                  202,800         13,356,985        532,900,224         546,460,009
Issuance of 40,000,000 shares
 on February 10, 1998 at
 US$1.00 per share                            309,200        309,326,204                  -         309,635,404
Issuance of 1,400,000 shares
 on August 12, 1998 at
 US$.50 per share                              10,822          5,400,178                  -           5,411,000
Issuance of 1,600,000 shares
on September 30, 1998 at
 US$.42 per share                              12,368          5,250,737                  -           5,263,105
Assumption of liabilities
 on December 31, 1998 and
 contribution to capital                            -         17,534,193                  -          17,534,193
Deemed dividend to
 Mr. Chan Kwai Chui                                 -                  -        (23,444,402)        (23,444,402)
Net income                                          -                  -        109,350,980         109,350,980
                                            ----------      -------------      -------------       -------------
Balance at December 31, 1998                  535,190        350,868,297        618,806,802         970,210,289
Issuance of 30,000,000 shares
 on October 9, 1999 at
 US$0.37 per share                            232,500         86,730,000                  -          86,962,500
Assumption of liabilities
 on December 31, 1999 and
 contribution to capital                            -            711,797                  -             711,797
Net income                                          -                  -        218,831,261         218,831,261
                                            ----------      -------------      -------------       -------------
Balance at December 31, 1999                  767,690        438,310,094        837,638,063       1,276,715,847
                                            ----------      -------------      -------------       -------------
Issuance of 131,000,000 shares on
 December 23, 2000 at US$0.091975 -per
 share                                      1,021,735         92,952,191                  -          93,973,926
Net income                                          -                  -        203,008,894         203,008,894
                                            ----------      -------------      -------------       -------------
Balance at December 31, 2000                1,789,425        531,262,285      1,040,646,957       1,573,698,667
                                            ==========      =============     ==============      ==============

</TABLE>

       The accompanying notes are an integral part of these consolidated
                              financial statements.
                                      F-7
<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 1998, 1999 and 2000
<TABLE>


                                                                    Year Ended December 31,
                                                  -------------------------------------------------------------
                                                    1998               1999              2000             2000
                                                     HK$                HK$               HK$              US$
                                                  ---------           --------         ---------        --------
<S>                                              <C>                 <C>              <C>              <C>

CASH FLOWS FROM OPERATING
 ACTIVITIES:
Net income                                      109,350,980        218,831,261       203,008,894       26,194,696
Adjustments to reconcile net income to
 net cash provided by operating activities:
   Depreciation and amortization                 37,514,686         30,203,531        18,638,398        2,404,955
   Provision for doubtful debts and
    diminution in values of investments
    and associated companies                      5,280,608          5,231,361                 -                -
   Share of gains of associated companies          (795,995)                 -                 -                -
  Gain on disposal of subsidiaries                        -        (88,591,608)     (136,435,773)     (17,604,615)
(Income) loss allocated to minority interest    (16,388,692)        12,642,937                 -                -
Stock issued for public relation services         5,411,000                  -                 -                -
(Increase)/decrease in assets:
    Inventories                                           -                  -        (3,324,528)        (428,971)
    Trade receivables                           (36,167,309)       (12,972,409)       39,603,711        5,110,156
    Prepayments and deposits                       (598,127)           580,238                 -                -
    Amounts due from related companies           (2,186,764)          (454,342)                -                -
    Amounts due from associated companies           262,249         (2,380,923)                -                -
    Amounts due from directors                   (2,102,195)         1,079,397                 -                -
Increase/(decrease) in liabilities:
    Amounts due to directors                      8,712,447         15,425,445        (5,678,494)        (732,709)
    Amounts due to related parties                 (724,021)          (483,797)        4,368,006          563,614
    Accounts payable and accrued liabilities     14,974,220         (6,421,135)      (20,527,644)      (2,648,728)
    Income taxes payable                         22,780,444         23,155,052                 -                -
                                             ---------------      -------------     -------------     ------------
Net cash provided by operating activities       145,323,531        196,503,952        99,652,570       12,858,398
                                             ---------------      -------------     -------------     ------------
</TABLE>

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

                                      F-8

<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                  Years Ended December 31, 1998, 1999 and 2000
<TABLE>

                                                              Year Ended December 31,
                                                ---------------------------------------------------------------
                                                 1998                1999               2000              2000
                                                  HK$                 HK$                HK$              US$
                                                -------             --------          ---------         -------
<S>                                             <C>           <C>                  <C>                 <C>

CASH FLOWS FROM
 INVESTING ACTIVITIES
  Deposit on investment in land                        -      (1,237,003,745)                 -                -
  Purchase of water sources                            -                   -        (46,981,132)      (6,062,083)
  Purchase of fixed assets                        (2,736)                  -                  -                -
  Proceeds from disposal of subsidiaries               -         771,462,855                  -                -
                                             -------------    ---------------      -------------     ------------
Net cash used in investing activities             (2,736)       (465,540,890)       (46,981,132)      (6,062,083)
                                             -------------    ---------------      -------------     ------------
CASH FLOWS FROM FINANCING
 ACTIVITIES
  Net (repayments) under
    bank import loans                         (6,890,020)           (600,140)                 -                -
  Net repayements of bank loans                  (89,656)           (112,729)                 -                -
  Advances of bank overdrafts                     71,983              69,407                  -                -
                                             -------------    ---------------      -------------     ------------
  Net cash provided by(used in)
 financing activities                         (6,907,693)           (643,462)                 -                -
                                             -------------    ---------------      -------------     ------------
NET (DECREASE)INCREASE IN
 CASH AND BANK BALANCES                      138,413,102        (269,680,400)        52,671,438        6,796,315
Cash and bank balances, at beginning
 of period                                   138,010,916         276,424,018          6,743,618          870,144
                                             -------------    ---------------      -------------     ------------
Cash and bank balances, at end of period     276,424,018           6,743,618         59,415,056        7,666,459
                                             =============    ===============      =============     ============
SUPPLEMENTARY CASH FLOWS
 DISCLOSURES:
1.  Interest paid                              1,275,217           1,834,429                  -                -
                                             =============    ===============      =============     ============
    Income taxes paid                            256,629             973,338                  -                -
                                             =============    ===============      =============     ============
</TABLE>


2.  The deposit on investment in land in 1999 has been reclassified in 2000

                                       HK$
                                   ------------
              Land lease rights   1,278,683,227
              Fixed assets           22,641,509
              Inventories            22,641,509
                                  1,323,966,245


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

                                      F-9
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                  Years Ended December 31, 1998, 1999 and 2000

SUPPLEMENTARY CASH FLOWS
 DISCLOSURES:

3.   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:

                                                                       HK$
                                                                      -----
              Fixed assets                                          3,026,841
              Interest in associated companies                        830,256
              Amount due from related companies                    10,164,655
              Other                                                 5,008,540
              Bank overfrafts                                      (3,955,635)
              Bank import loans                                    (2,988,375)
              Income taxes payable                               (118,448,796)
              Amounts due to directors                            (20,290,780)
              Secured bank loan                                    (9,782,479)
                                                                 --------------
                                                                 (136,435,773)
                                                                 ==============

4.   The non-cash portion of the purchase of Famous Goal International Ltd is as
     follows:

                                                                      HK$
                                                                    --------
              30% interest in Megaway Development Ltd              57,126,318
              131,000,000 shares of China Continental Inc.         93,973,926
                                                                 -------------
                                                                  151,100,244

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

                                      F-10
<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, and its principal activity is a 100% investment
in Sun's International Holdings Limited (Sun's International), a holding company
for investments in operating  companies.  Sun 's International  was incorporated
under the laws of the British Virgin Islands.

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),  High Glad  Industries  Limited  (struck off in
1998),  Prime  Hill  Investment  Limited  (disposed  of  in  2000),  Prime  View
Industrial  Limited (disposed of in 2000),  Danbury Inc.,  Winkler Holdings Inc.
(struck  off in 1998),  Wealthy  Asia  Limited  (disposed  of in October  1999),
Battonic  Company  Limited and its  operation  East  Wu-Zhu-Mu-Qin  Banner Green
Demonstration  Farm (acquired in 1999);  Famous Goal  International  Ltd and its
holdings  in water  resources  (acquired  in  2000);  (hereinafter  collectively
together with the Company referred to as the "Group").

Danbury Inc. was primarily engaged in the sale of automatic  production lines on
a  turn-key  basis and  related  consulting  fees to  various  customers  in the
People's Republic of China (the "PRC"). This company, along with certain dormant
companies, has also made investments in PRC enterprises through the formation of
associated  companies with various PRC parties.  Danbury Inc., ceased operations
in 2000.  Billion  Pearl  Investments  Limited was  primarily  an  importer  and
reseller of raw materials to an  associated  company.  Billion Pear  Investments
Limited was disposed of during  2000.  Wealthy  Asia  Limited,  through a wholly
owned  subsidiary,  owned  51%  of a  joint  venture  known  as  Chengde  Dafeng
Agriculture  and Animal  Husbandry  Co.,  Ltd.,  which was  established to run a
breeding  center to propagate Boer goats and other  livestock  breeds.  Battonic
Company  Limited,   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 Hong Kong which are  prepared  in  accordance  with the
accounting principles generally accepted in Hong Kong.

The  following  material  adjustments  were  made to  present  the  consolidated
financial statements to conform with US GAAP:

     -    reversal of the  revaluation  surplus,  and the related  depreciation,
          arising from the revaluation of leasehold land and buildings.

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  and  majority   owned   subsidiaries.   All  material
inter-company balances and transactions have been eliminated on consolidation.

                                      F-11
<PAGE>

3.   SUMMARY OF PRINCIPAL ACCOUTNTING POLICIES (Continued)

(b)  Associated companies
     --------------------

An associated company is a company, not being a subsidiary, over which the Group
is in a position to exercise significant influence.

The Group's share of the post  -acquisition  results of associated  companies is
included in the  consolidated  statements  of income under the equity  method of
accounting.  The Group's  interests in  associated  companies  are stated in the
consolidated  balance  sheets at cost plus the Group's  share of the  associated
companies  post-  acquisition  results  and  capital   transactions,   less  any
provisions for other than temporary diminutions in values.

(c)  Cash and cash equivalents
     -------------------------

The Group 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.

At  December  31,  1999 and 2000,  cash and cash  equivalents  included  foreign
currency  deposits  equivalent to HK$6,694,810  (US$863,846),  and HK$59,415,056
(US$7,666,459), respectively.

(d)  Inventory
     ----------

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

(e)  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%

(f)  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%

(g)  Income taxes
     ------------

Income taxes are determined  under the liability method as required by Statement
of Financial Accounting Standard No.109, "Accounting for Income Taxes".

                                      F-12
<PAGE>

3.   SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)


(h)  Foreign currency translation
     ----------------------------

Foreign currency  transactions  denominated in foreign currencies are translated
into Hong Kong dollars ("HK$") at the respective  applicable  rates of exchange.
Monetary assets and liabilities denominated in foreign currencies are translated
into HK$ at the  applicable  rate of  exchange at the  balance  sheet date.  The
resulting  exchange gains or losses are credited or charged to the statements of
income.

Translation  of amounts  from HK$ into  United  States  dollars  ("US$") for the
convenience  of the  reader  has been made at the  single  rate of  exchange  on
December 31, 2000 of US$1.00 : HK$7.75.  No  representation is made that the HK$
amounts  could  have  been,  or could  be,  converted  into US$ at that  rate on
December 31, 2000 or at any other date.

The associated companies maintain their books and accounting records in Renminbi
(the  "RMB").  For  the  purpose  of  accounting  for the  Group's  attributable
interests in the net assets and results of the joint ventures, the RMB financial
statements  of the  associated  companies  were  translated  into HK$  using the
current rate method whereby all assets and  liabilities  are translated into HK$
at the  applicable  rate of exchange  prevailing  at the  balance  sheet date as
quoted by the People's Bank of China.  Income and expense items were  translated
at the average rates as quoted by the People's Bank of China.

(i)  Revenue recognition
     -------------------

Revenue from the sale of machinery and equipment,  livestock, forage grasses and
raw materials is recognized when the merchandise is delivered to the customer.

Revenue  from the sale of the  production  line on a  turn-key  basis,  which is
normally  completed within a period of eight to twelve months,  is recognized in
full in the year when the installation of the production line is completed.  The
installation  of  a  production  line  is  considered   complete  when  all  the
significant costs have been incurred and all the machinery and equipment for the
production line have been delivered and installed.

Revenue for design,  training and  consultancy  services is recognized  when the
service is rendered.

(j)  Retirement benefits
     -------------------

The Group participates 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
Group 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.

Contributions  made to the  Retirement  Plan during the year ended  December 3l,
1998, 1999 and 2000, were HK$57,546, HK$l3,923 and HK$O, respectively.

                                      F-13
<PAGE>

3.   SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)

(k)  Earnings per share
     ------------------

Effective  December  31,  1998,  the  Company  adopted  Statement  of  Financial
Accounting  Standard (" SFAS ") No . 128,  "Earnings Per Share",  which requires
the Company to change the method used to compute  earnings per share ("EPS") and
to restate all prior periods  presented.  The  presentation of primary and fully
diluted EPS has been  replaced with basic and diluted EPS,  respectively.  Basic
earnings  per share is  computed  using the  weighted  average  number of common
shares  outstanding  during the period.  The computation of diluted earnings per
share would include the dilutive effect of securities that could be exercised or
converted into common stock.  The Company has not entered into any  transactions
that would have a dilutive effect upon EPS.

(l)  Segment reporting
     -----------------

In December 1999, the Company adopted SFAS No. 131, " Disclosures About Segments
of an  Enterprise  and  Related  Information".  The  adoption  of this  standard
requires that  reportable  segments are reported  consistent with how management
assesses  segment  performance.  This statement  requires  disclosure of certain
information  by reportable  segment,  geographic  area and major  customer.  See
"Segment  Information",  for further information.  As a result, the Company will
separately  report  information  on  the  following  three  operating  segments:
automatic  production  lines on a turn-key  basis,  raw  material  importer  and
reseller and breeding center operations.  In determining the operating income of
each  segment,  certain  general and  corporate  expenses  are not  allocated to
operating segments.

(m)  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.

(n)  Reclassification
     ----------------

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

                                      F-14
<PAGE>


                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSILIDATED FINANCIAL STATEMENTS

4.      FINANCIAL INCOME/(EXPENSES), NET

                                                     Year Ended Decmeber 31,
                                                  ------------------------------
                                                     1998               1999
                                                      HK$                HK$
                                                  -----------         ----------
           Interest income                          157,629            890,625
           Interest expense                      (1,359,620)        (1,834,429)
           Bank charges                             (73,226)            35,742
                                                ------------        ------------
                                                 (1,275,217)          (979,546)
                                                ============        ============
5.         OTHER INCOME(EXPENSES), NET
                                                     Year Ended Decmeber 31,
                                                   ---------------------------
                                                     1998      1999      2000
                                                     HK$       HK$       HK$
                                                   -------   --------   -------
            Commission and miscellaneous income   3,615,700    4,630          -
            Foreign exchange gains/(losses), net   (826,195) (72,123)   392,277
                                                  ---------  --------   -------
                                                  2,789,505  (67,493)   392,277
                                                  =========  ========   =======
6.         GAIN (LOSS) DISPOSAL
             OF INVESTMENT IN SUBSIDIARIES
                                                     Year Ended Decmeber 31,
                                                  -----------------------------
                                                     1999               2000
                                                      HK$                HK$
                                                  -----------       -----------
            Wealthy Asia Limited                  88,591,608                 -
            Billion Pearl Investments Limited              -        27,217,513
            Prime View Industrial Limited                  -       (20,563,595)
            Prime Hill Investment Limited                  -        15,287,588
            Danbury Inc.                                           118,478,800
                                                 -----------      ------------
                                                  88,591,608       136,465,777
                                                 ===========      ============
                                      F-15
<PAGE>

7.   INCOME TAXES

The companies in the Group operate in several  jurisdictions  and may be subject
to taxes in those  jurisdictions.  Details of the related  provision  for income
taxes are as follows:


                                                     Year Ended December 31,
                                             -----------------------------------
                                                1998                  1999
                                                 HK$                   HK$
                                             ------------         --------------
    Income/(loss) before income taxes:
    Hong Kong                               (6,332,226)           (8,396,983)
    PRC                                    121,693,832           238,713,697
                                          --------------        ---------------
                                           115,361,606           230,316,714
                                          ==============        ===============
     Income tax provision:
     Current:
     Hong Kong                                 102,270                 9,698
     PRC                                    22,297,048            24,118,692
                                          --------------        ---------------
                                            22,399,318            24,128,390
                                          ==============        ===============


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 Group
will  distribute  in the future,  and  capital  gains  arising  from the Group'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 16.5% on their  estimated  taxable income for the year. No companies are
carrying on operations in Hong Kong at December 31, 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 the  Battonic  Co.,  Ltd,
operations for the next five years.

At December  31, 1999 income tax payables  included  foreign  currency  payables
equivalent to HK$118,448,796 (US$15,283,716).

                                      F-16

<PAGE>

7.   INCOME TAXES (continued)

A reconciliation between the actual income tax expense and income taxes computed
by applying the statutory  Hong Kong tax rates to the income before income taxes
is as follows:


                                                  December 31,
                                       -----------------------------------
                                         1998                      1999
                                          HK$                       HK$
                                       ---------                 ---------
 Statutory Hong Kong tax rates           16.5%                     16.5%

 Computed expected tax expense     19,034,665                38,002,257

 Increase (Decrease) resulting from
PRC tax at a different composite
tax rate                              944,644               (14,732,455)
Adjustments for expense items which
are not deductible for profits tax
purposes:
Share of (gain) loss in and provisions
for diminutions in values of associated
companies                             (63,680)                       -
Other provisions                    2,483,689                  530,971
Others                                      -                  327,617
                                   ------------            ------------
                                   22,399,318              24, 128,390

Undistributed  earnings  of the  Company's  non-U.S.  subsidiaries  amounted  to
approximately  HK$1,040,646,957 at December 31, 2000. Because those earnings are
considered to be indefinitely invested, no provision for United States corporate
income taxes on those earnings has 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,
2000 was  approximately  HK$350,000,000  (US$45,161,291).

8. FIXED  ASSETS

                                                       Year Ended December 31,
                                                    1999                   2000
                                                     HK$                    HK$
                                                   -------              --------

Cost:
Leasehold land and buildings,
located in Hong Kong (1)                          4,239,231                   -
Machinery and equipment                                   -          22,641,509
Furniture and fixtures                              700,826                   -
Office equipment                                    603,484                   -
Motor vehicles                                    1,244,030                   -
                                                 -----------        ------------
                                                  6,787,571          22,641,509

Less: accumulated depreciation                   (3,760,730)           (754,717)
                                                 -----------        ------------
Net book value                                    3,026,841          21,886,792
                                                 ===========        ============

(1)  Pledged.

                                      F-17
<PAGE>

9.   INTERESTS IN ASSOCIATED COMPANIES

                                                       December 31, 1999
                                                               HK$
                                                       ------------------

             Unlisted investments, at cost                 73,145,120
             Share of post-acquisition gains, net           1,909,454
             Write off for diminutions in values           (8,114,000)
             Accumulated amortization                      (8,984,000)

                                                           57,956,574
              Due to associated companies, net                      -
                                                          ------------
                                                           57,956,574

             Movement in provisions for diminutions in values:
                     Balance at beginning of year           8,114,000
             Provisions for diminutions in value                    -
                                                          ------------
                     Balance at December 31,1999           8, 114,000
                                                          ============

During the year ended December 31, 2000,  the company  exchanged its interest in
Megaway  Development  Limited,  as part of the  consideration  to acquire a 100%
interest in Famous Goal International Limited. The other interests in associated
companies has been disposed of namely,  Billion Pearl Investments Limited, Prime
Hill Investment Limited and Prime View Industrial Limited.  The Group's share of
the  post-acquisition  gains of associated companies was HK$795,995 for the year
ended December 3l, 1998.

                                      F-18
<PAGE>

10.  ACQUISITIONS AND DISPOSITIONS (Continued)

On December 23, 1997, Sun's  International  acquired a 56.5% interest in Wealthy
Asia Limited (WAL) for US$52,000,000 (HK$403,364,486) in cash from Mr. Brian Ko.
WAL had simultaneously  acquired 100% of Megaway  Agriculture Co. Ltd. (Megaway)
from Mr.  Harry Ho for  US$92,000,000  (HK$713,644,828),  with a cash payment of
US$72,800,000  which was settled on December 31, 1997 and a verbal  agreement to
remit the remainder at some future date.  The remainder was settled on March 18,
1999 through the receipt of 9,900,000 newly issued shares of China  Continental,
Inc. common stock.

The following amounts represent the initial recording of this transaction:

                                             Asset (Liability) HK$
                                             ---------------------
      Land lease rights                          1,358,514,000
      Due from Harry Ho                             39,525,000
      Due to Brian Ko                             (309,635,404)
      Minority Interest                           (685,039,110)
                                                 --------------
      Cash Paid                                    403,364,486
                                                 ==============

On February 10, 1998, Sun's International  acquired the remaining 43.5% interest
in WAL from Mr. Brian Ko via the issuance of an additional  40,000,000 shares of
stock in China Continental,  Inc. of which 9,900,000 shares were issued directly
to  Megaway  Resort  Development  Ltd.,  a  company  owned  by Mr.  Harry Ho and
incorporated in Western Samoa.

The principal  asset of Megaway is a 51% interest in Chengde Dafeng  Agriculture
and Animal  Husbandry  Co.,  Ltd.  (Chengde),  a  Sino-Singapore  joint  venture
incorporated in the PRC on December 3, 1997. Mr. Ho, through his prior ownership
of Megaway,  was an original party to the joint venture,  with the remaining 49%
interest being held by entities associated with the Chinese government.  Chengde
has been  established to run a breeding center to propagate Boer goats and other
livestock breeds.  Chengde's  principal asset is 20,000 hectares or 49,400 acres
of grassland located  approximately 250 kilometers north of Beijing, in the PRC.
Based upon an independent  appraisal  dated July 30, 1999 by American  Appraisal
Hong  Kong   Limited,   the  value  of  100%  of   Chengde   is   US$181,000,000
(HK$l,402,750,000) as of December 31, 1997.

On October 4, 1999,  Sun's  International  sold its 100%  interest  in WAL to an
unrelated  third  party  for a  consideration  of  approximately  HK$773,127,341
(US$l00,000,000) .

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

         Cash disposed of with sale of subsidiary       HK$     1,664,486
         Accounts receivable                                    1,338,318
         Prepayments, deposits and other                        1,214,953
         Amounts due from directors                            39,525,000
         Land lease rights, net                               613,158,926
         Income taxes payable                                   (627, 103)
         Accounts payable and accrued liabilities                (267,099)
                                                            --------------
         Net                                                  656,007,481
                                                            ==============

                                      F-19

<PAGE>

9.   ACQUISITIONS AND DISPOSITIONS (continued)

On October  9,1999,  the Company  initiated  the purchase of a 100%  interest in
Battonic Co., Ltd. for a consideration of  US$100,000,000  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 Dongwu Demonstration Farm (Dongwu). Dongwu has been
established to run a breeding center to propagate Boer goats and other livestock
breeds.  Dongwu'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.  Based upon an independent  appraisal  dated October
20,  1999  by  Vigers  Hong  Kong  Limited,  the  value  of 100%  of  Dongwu  is
US$361,772,645 (HK$2,803,738,000).

Had the  30,000,000  shares of common  stock  been  outstanding  throughout  the
periods  presented,  earnings  per share  would  have been HK$1 .22 for the year
ended December 31, 1998.

In the PRC, an investment such as Dongwu is not legally  transferable  until all
of  the  appropriate   levels  of  governmental   authority  have  approved  the
transaction.  However,  according to an outside  legal  opinion  obtained by the
Company, governmental procedures for the official change have commenced and such
procedures  are in  accordance  with the  relevant  PRC laws and the transfer of
title ownership is deemed to be achievable through the commenced procedures.  At
December 31, 2000,  this  investment  had not yet been  properly  approved.  The
Company has taken  possession  and  commenced  operation  of the  property.  The
company is confident  that all  necessary  approvals  will be  obtained.  In the
unlikely  event that the  transaction  is not  approved,  the company would take
steps to rescind the shares issued and to recover the cash deposit.

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  (HK$57,126,318),  and 131,000,000  shares of
stock in the Company. The shares were valued at US$12,048,712

Had the  131,000,000  shares of common  stock been  outstanding  through out the
periods presented, earnings per share would have been HK$.48, HK$.95 and HK$.88,
for 1998, 1999 and 2000 respectively.

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. It can be used to produce bottled natural
mineral water.

10.  BANK LOANS

The  import  loans  with  banks  carry  interest  at  1%  above  the  Hong  Kong
prime-lending  rate.  (weighted  average  of 9.5% per annum as of  December  31,
1999).  The import loans are usually repaid in three to six months,  which is in
accordance with the terms of the agreement.

The bank overdrafts carry interest at 3% above the Hong Kong prime-lending rate.

The Company  borrowed and in turn loaned  HK$9,984,864  to a company  owned by a
director,  Mr. Chan Kwai Chiu,  in  conjunction  with his purchase of a personal
residence.  The mortgage loan is secured by the  residence and other  properties
owned by Mr. Chan Kwai Chiu with a cost of HK$17,800,000.  The balance remaining
as of  December  31,1999  was  HK$9,782,479.  Upon  disposal  of  Billion  Pearl
Investments  Limited,  all bank loans have been transferred to the vendor of the
disposed subsidiary.

                                      F-20
<PAGE>

11.  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,  1999,  approximately  24%, 18% and 49% of the amounts due from
related  companies  were due from New Skyland  Industrial  Ltd.,  Billion  Pearl
International  Limited and New Skyland International Ltd.,  respectively.  These
amounts have been fully reserved for at December 31, 1999.

At December 31, 2000, there is no amount due from related company.

The Group does not have the policy of requiring collateral.

(iii) Amounts due from and to directors (See "Additional  related party balances
and transactions")

(iv)  Deposit on  investment  in  landholding  company  (See  "Acquisitions  and
dispositions")

12.  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) Bank import loans

The carrying amount of short-term bank loans approximates the fair value because
of the short maturity of these instruments.

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

                                      F-21
<PAGE>

13.  CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

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

Effective  July 1, 1997,  sovereignty  over Hong Kong was  transferred  from the
United Kingdom to the PRC, and Hong Kong became a Special  Administrative Region
of the PRC  ("SAR").  As  provided  in the Basic Law of the Hong Kong SAR of the
PRC, the Hong Kong SAR wil1 have full economic autonomy and its own legislative,
legal and judicial systems for 50 years. The Group's management does not believe
that the transfer of sovereignty over Hong Kong has had an adverse impact on the
Company's  financial  and  operating  environment.  There  can be no  assurance,
however,  that changes in political or other  conditions will not result in such
an adverse impact.

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.

14.  FOREIGN CURRENCY EXCHANGE

The  Group  has   substantial   transactions   with  customers  and  significant
investments  in  associated  companies in the PRC.  Both the  customers  and the
associated  companies  may settle  their debts and  distribute  their  dividends
outside  the PRC.  The  remittances  are  subject to control  because RMB is not
freely convertible into foreign  currencies.  The majority of the Company's bank
balances as of December  31, 1999 and 2000 were in RMB.  The amount of debts due
from  customers  in the PRC  subject to control  amounted to  HK$57,433,900  and
HK$59,410,906 at December 31, 1999 and 2000, respectively .

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
into Hong  Kong  dollars  or 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 suppliers invoices, shipping documents and signed contracts.

15.  ADDITIONAL RELATED PARTY BALANCES AND TRANSACTIONS

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

                                      F-22
<PAGE>

16.  CONTINGENCIES AND COMMITMENTS


During 1998, the Company  entered into an agreement with an unrelated  entity to
provide public relations and promotional services for the Company. In accordance
with the  agreement  the entity was issued  stock for all services  provided.  A
portion of the agreement is contingent  upon the firm's ability to raise capital
and obtain a listing for the Company on certain  stock  exchanges  in the United
States.  Attainment  of these  goals  could  result in the  issuance of up to an
additional 1.6 million shares of common stock to the firm.

17.  SEGMENT INFORMATION

The  Company  performs  in the  four  following  operating  segments:  Automatic
production lines on a turn-key basis, raw material,  breeding center  operations
and forage  grass  agriculture.  In  determining  the  operating  income of each
segment, certain other expenses such as income taxes, administrative, financial,
other  (income)  expense  and shares of gains of  associated  companies  are not
allocated to operating segments.

The following  table  reflects the results of the segments  consistent  with the
Company's management system.


                                                 Year Ended December 31
                                           ----------------------------------
                                          1998           1999          2000
                                           HK$            HK$           HK$
                                          ------         ------       -------
   Sales
   Automatic production lines         254,247,430     282,361,440  65,652,600
   Raw materials                       12,353,242       5,192,312           -
   Breeding center                     18,506,627      13,719,626           -
   Forage grass agriculture                     -               -  45,518,868
                                     --------------  ------------- ----------

   Total sales                        285,107,299     301,273,378 111,171,468

   Operating Income (Loss)
   Automatic Production lines         160,358,850     179,668,390  42,673,800
   Raw materials                        1,689,518      (5,088,072)          -
   Breeding Center                    (30,651,824)    (19,249,017)          -
   Forage grass agriculture                     -               -  26,490,737
                                     --------------- ------------- ----------
   Total operating income             131,396,544     155,331,301 69, 164,537
   Less: General corporate expenses    15,127,221       9,341,156   3,013,696
   Financial expense                    1,275,217         979,546           -
   Other (income) expense              (2,789,505)    (88,524,115)(18,379,254)
   Share of gains of associated
   Companies                             (795,995)              -           -
                                     --------------- ------------- ----------
   Amortization of investment premium   3,218,000       3,218,000           -
                                     --------------- ------------- ----------
   Income before income taxes         115,361,606     230,316,714  84,530,095
                                     =============== ============= ==========

                                      F-23
<PAGE>


                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.      SEGMENT INFORMATION (continued)
<TABLE>

Operating Segment Data
                                       Identifiable         Capital           Depreciation
                                         Assets           Expenditures       & Amortization
                                           HK$                HK$                 HK$
                                       -------------      -------------      ---------------
<S>                                  <C>                <C>                 <C>

Year ended December 31, 1998:
Automatic production lines             346,447,370                  -                   -
Raw materials                              728,610                  -                   -
Breeding center                      1,327,305,671                  -          33,962,849
                                    ---------------      -------------       -------------
Other                                            -              2,736             333,837
                                    ---------------      -------------       -------------
                                     1,674,481,651              2,736          34,296,686
                                    ---------------      -------------       -------------
Year ended December 31, 1999:
Automatic production lines              64,128,710                  -                   -
Raw materials                               41,612                  -                   -
Breeding center                                  -                  -          26,856,493
Other                                            -                  -             129,038
                                    ---------------      -------------       -------------
                                        64,170,322                  -          26,985,531
                                    ---------------      -------------       -------------
Year ended December 31, 2000:
Automatic production lines              59,401,266                  -                   -
Raw materials                                    -                  -                   -
Breeding center                                  -                  -                   -
Forage gross agriculture             1,326,492,204                  -          18,638,398
Other                                            -        198,081,376                   -
                                    ---------------      -------------       -------------
                                     1,385,893,470        198,081,376          18,638,398
                                    ---------------      -------------       -------------
</TABLE>

Reconciliation to Total Assets As Reported
<TABLE>
                                                               Year Ended December, 31
                                                    -------------------------------------------------
                                                      1998                1999                2000
                                                       HK$                 HK$                 HK$
                                                    ---------           ----------          ---------
<S>                                                 <C>                 <C>                 <C>

ASSETS:
Total reportable segments - identifiable assets   1,674,481,651       64,170,322       1,385,893,470
Unallocated amounts:
   Cash                                                   8,096            7,196               4,150
   Water Sources                                              -                -         198,081,376
   Deposit on investment in land                              -    1,323,966,245                   -
   Prepayments, deposits and other receivables        3,235,373            8,540                   -
   Due from related parties                          50,605,247       10,164,655                   -
   Plant and other property and equipment             3,155,880        3,026,841                   -
   Interests in associated companies                 60,852,081       57,956,574                   -
   Other                                              5,000,000        5,000,000                   -
                                                  -------------    -------------      ---------------
Total Consolidated Assets                         1,797,338,328    1,464,300,373       1,583,978,996
                                                  =============    =============      ===============

</TABLE>

                                      F-24
<PAGE>


17.  SEGMENT INFORMATION (continued)

Much of the Group's activities did consist of assembling and sales of production
lines on a  turn-key  basis.  Substantially  all the  Group's  sales are made to
customers in the PRC.

      Sales by Major Customers                         Sales
                                        ----------------------------------------
                                               Year Ended December 31,
                                        ----------------------------------------
                                         1998            1999              2000
                                          HK$             HK$               HK$
                                        -------         -------           ------
    Kin Heng Xin Investment &
     Development Company Limited      83,414,430      81,396,900              -
     Shenzhen San Gao Enterprises
      Company Limited (Shenzhen)      88,276,600     118,253,540     65,652,600
     Chit Tat Industrial Development
       Limited                        82,556,400      82,711,000              -
     Others                           30,859,869               -              -
                                      ----------     ------------   ------------
                                     285,107,299     282,361,440     65,652,600

The sales from forage grass agriculture are also made to customer in the PRC. In
2000, all sales  (HK$45,165,094) were made to Beijing Feng Ren Quality Livestock
Company Limited.  At December 31, 2000, the account receivable from Beijing Feng
Ren is HK$17,830,038.

                                      F-25

<PAGE>


18.  ADDITIONAL NON-CASH TRANSACTIONS

     1998
     ----
     On August 12, 1998,  1,400,000  shares of stock were issued in exchange for
     public relation  services.  The stock was issued at US$.50 per share, which
     approximates  trading  value at that date.  Total public  relation  service
     expense recorded in relation to this transaction was HK$5,411,000.

     On  September  30,  1998,  1,600,000  shares  of stock  were  issued to two
     directors  of the  Company  to settle  amounts  due to them.  The stock was
     issued at US$.42 per share; which approximates  trading value at that date.
     The total reduction to due to directors in relation to this transaction was
     HK$5,263,105.

     Mr. Harry Ho,  assumed on December 31, 1998,  pursuant to a signed  written
     agreement  with  the  Company,   HK$17,534,193  of  the  Company's  accrued
     liabilities. Mr. Ho then contributed his assumption of those liabilities to
     additional paid-in capital.

     During 1998,  High Glad Industries  Limited filed for  dissolution  (strike
     off) in Hong  Kong.  In  order to file  for  strike  off,  all  assets  and
     liabilities  must be removed from the books.  The following  non-cash items
     were transferred to a Company director, Mr. Chan Kwai Chiu.



                                                                      HK$

            Other assets  - deposit                             (2,000,000)
            Amounts due to Mr. Chan Kwai Chiu                    1,326,777
            Accounts payable and accrued expenses                  673,223
                                                                 -----------
                                     Total                               -
                                                                 ===========

     1999
     ----
     Mr. Chan Kwai Chiu,  stockholder  and director of the  Company,  assumed on
     December  31 ,  1999,  pursuant  to a  signed  written  agreement  with the
     Company,  HK$711,797 of the Company's  accrued  liabilities.  Mr. Chan Kwai
     Chiu then  contributed  his  assumption of those  liabilities to additional
     paid-in capital.

                                      F-26