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, 2002

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

                          Commission File No. 33-3276-D

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

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

    Room 1801-02 Evening Newspaper Mansion, 358 Nanjing Road, Tianjin, P.R.C.
    -------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant Telephone Number, Included Area Code: 011-86-22-2750-1802

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

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

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

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

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

     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-K.
[X]

     The issuer revenues for its most recent fiscal year were $16,518,072.

     As of  December  31,  2002,  280,070,000  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 OTC
Bulletin Board, was approximately $1,245,750

                       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

<PAGE>

                                TABLE OF CONTENTS
                                     PART I
                                                                         PAGE
      ITEM 1.     DESCRIPTION OF BUSINESS                                   4
      ITEM 2.     PROPERTIES                                                5
      ITEM 3.     LEGAL PROCEEDINGS                                         5
      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE
                  OF SECURITY HOLDERS                                       5
PART II
       ITEM 5.    MARKET FOR COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS                               6
       ITEM 6.    SELECTED FINANCIAL DATA                                   6
       ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION              8
       ITEM 7A    QUANTITATIVE AND QUALIFICATION DISCLOSURE
                  ABOUT MARKET RISK                                        12
       ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY
                  DATA                                                     12
       ITEM 9.    CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE                                 12
       PART III
       ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT       12
       ITEM 11.   EXECUTIVE COMPENSATION                                   14
       ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT                                    14
       ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS           15
       ITEM 14.   CONTROLS AND PROCEDURES                                  15

PART IV
      ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTINGS
                  ON FORM 8-K                                              16

      SIGNATURES                                                           16

      ITEM 16.                                                             16

      CERTIFICATIONS                                                       17


                           FORWARD LOOKING STATEMENTS

This  annual  report  contains  certain  forward-looking  statements  within the
meaning of the federal  securities  laws.  These  include  statements  about our
expectations,  beliefs,  intentions  or  strategies  for the  future,  which  we
indicate by words or phrases such as "anticipate,"  "expect,"  "intend," "plan,"
"will," "we believe," "the Company believes,"  "management believes" and similar
language.  The forward-looking  statements are based on our current expectations
and are subject to certain risks, uncertainties and assumptions, including those
set forth in the discussion under "Description of Business," including the "Risk
Factors" described in that section, and "Management's Discussion and Analysis or
Plan of  Operation."  Our actual  results  may differ  materially  from  results
anticipated in these  forward-looking  statements.  We base our  forward-looking
statements on information currently available to us, and we assume no obligation
to update them.

                                     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" of this Form 10-K.

The Company

     China  Continental,  Inc. (the "Company" or "CCI") focuses on the planting,
harvesting and sale of forage grass.

     The Company's  operations  are based at its East Wu Bio-Tech Farm. The farm
comprises  approximately  406 square kilometers or slightly more than 251 square
miles.  It is located in East  Ujimqin  Qi, in Inner  Mongolia  in the  People's
Republic  of China  (PRC).  East Ujimqi Qi is an  agricultural  based area where
livestock (beef, cattle, goats and sheep) and dairy are the primary agricultural
products.  The Company became a US listed public company via a reverse merger in
February, 1995.

Business

     The Company's primary focus has been on the planting,  cultivating and sale
of forage grass.

     Xilinguole Grassland, where the forage grass base is located, is one of the
best-preserved  and most valued  natural areas in The PRC.  "Xilinguole  Prairie
Nature  Protection  Zone" was accepted by UNESCO as a unit in "MAB" in 1987.  In
1997, it was  designated as The PRC's State Nature  Protection  Zone. The forage
grass base of CCI is located in the Wulagai  Development  Zone in the  northeast
section of the Xilinguole  Prairie  (46(cent)X16i  46(cent)X40iN,  119(cent)X00i
119(cent)X21iE).  It is free from pollution  because of its remote  location and
sparse  population.  The soil is still  untilled,  which makes it one of the few
green virgin grasslands in the world.

     With the increased meat consumption by Chinese residents, there has been an
increased  demand for China's  forage  grasses.  It has been  necessary to plant
specialized  forage  grass  like  alfalfa  and green  millet to  address  market
demands.  These  grass  types are not only  types of fodder  favored by cows and
sheep,  but improve the soil,  which makes them  preferable as a domestic forage
grass planting.  The consumption of milk and milk products by residents of China
has also been  increasing,  contributing  to an  increasing  demand  for  forage
grasses.

     In 2002, the Company's harvested 78,750 tons of green naked oats which sold
for $96 per ton,  7,500 tons of green millet which sold for $96 per ton,  16,800
tons of alfalfa  which sold for $180 per ton and  39,000  tons of natural  grass
which sold for $72 per ton. The bulk of this year's  harvest of grasses was sold
to Beijing Fengrun Fine Breed Husbandry

                                       4
<PAGE>

     China  Continental  is planning to leverage  its  technologies,  scientific
planting methods and modern management  techniques to establish one of The PRC's
largest  grassland  areas and  expects to utilize  American  machinery  and high
quality  imported seeds.  The Company has spent  approximately  $11 million of a
non-recurring  nature to  improve  the  quality of the land and  increasing  the
productivity  of  high  quality  planted  grasses.   It  is  expected  that  the
productivity will continue to improve in the coming years.

     The initial  phase of the plan is to increase  the acreage of high  quality
forage grass to approximately 36,500 hectares by 2004. If this goal is achieved,
the  total  yearly   production  of  high  quality   forage  grasses  should  be
approximately 200,000 metric tons.

Employees

     As of December 31, 2002, the Company employed an administrative  staff of 8
people and a technical and sales staff of approximately  40 persons,  all in the
PRC.

Competition

     The  market  for  forage  grass is  currently  in  imbalance,  with  demand
exceeding  supply.  This strong  demand for forage grass is expected to continue
for the next several years. The market for forage grass is highly  fragmented in
the PRC.  To  date,  there  has been no  significant  price  competition  in our
markets, but price competition may become a factor in the future.

ITEM 2.  PROPERTIES

     The  Company  principal   administrative   office,   marketing,   technical
facilities  and  supporting  teams are  located  in  1801-02  Evening  Newspaper
Mansion,  358 Nanjing Road,  Tianjin,  People's  Republic of China which is on a
lease term of three years at a monthly rental of approximately US$2,400.

     East Wu Bio-Tech  Farm, is located in the People's  Republic of China.  The
total farm area is approximately  406 square  kilometers or 251 square miles. It
is located in Dong Ujimqin Qi, which is in Inner Mongolia, 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

                                       5
<PAGE>

                                     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.

                               2003                       2002
                         High         Low         High              Low

First Quarter            0.19         0.06        0.13              0.06
Second Quarter           0.11         0.03        0.13              0.06
Third Quarter            0.05         0.01        0.09              0.06
Fourth Quarter           0.04         0.01        0.13              0.06

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

Holders

      At December 31, 2002 there were approximately 3,260 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.

                                       6
<PAGE>
<TABLE>

                                       Year          Year      Year         Year         Year
                                       Ended         Ended     Ended        Ended        Ended
                                       Dec 31        Dec 31    Dec 31       Dec 31       Dec 31
                                        2002          2001      2000        1999          1998
                                      ---------    ---------  ---------    ---------    ---------
<S>                                  <C>          <C>          <C>         <C>           <C>

Income Statement Data:
Automatic production lines                 0             0         0         36,434       32,806
Raw materials                              0             0         0            670        1,594
Breeding center                            0         9,398         0          1,770        2,388
Forage grass                           16,518       12,138     5,873              0            0
                                    ----------    ---------  ---------     ---------     --------
Total sales                            16,518       21,316     5,873         38,874       36,788
Cost of sale                           14,034        5,323        45         14,674       14,284
                                    ----------    ---------  ---------     ---------     --------
Gross profit                            2,484       15,993     5,828         24,200       22,504
Impairment loss on water resources    (25,559)           0         0              0            0
Depreciation of fixed assets           (7,587)      (7,210)   (2,405)        (3,897)      (4,841)
Selling and administrative expenses      (557)        (414)     (393)        (1,205)      (2,395)
(Provision) Recovery for
doubtful accounts                           0            0        (1)          (675)        (681)
Financial income (expenses), net            0            0         0           (126)        (165)
Other income (expenses) net                 2            0        51             (9)         360
Consulting expenses                         0       (1,000)        0              0            0
Gain on disposal of Subsidiaries            0            0    17,608         11,431            0
Income from discontinued operation          0            0     5,505              0            0
Share of income/ (loss) of
associated companies                        0            0         0              0          103
                                     ---------    ---------  ---------     ---------    --------
Income before income tax              (31,217)       7,369    26,195         29,719       14,885
Income taxes                                0            0         0          3,114        2,890
                                     ---------    ---------  ---------     ---------    --------
Income before minority interest       (31,217)       7,369    26,195         26,605       11,995
                                     ---------    ---------  ---------     ---------    --------
Minority interest                           0            0         0          1,631        2,114
                                     ---------    ---------  ---------     ---------    --------
Net income                            (31,220)       7,369    26,195         28,236       14,109
                                     ---------    ---------  ---------     ---------    --------
Net income per share                    (0.12)        0.03      0.26           0.38         0.23
                                     =========    =========  =========     =========    ========
Weighted average shares
outstanding (in millions)             265,581      232,289   102,230         75,904       62,306
                                     =========    =========  =========     =========    ========
</TABLE>



                                       7
<PAGE>
<TABLE>

                                        Year       Year        Year        Year          Year
                                        Ended      Ended       Ended       Ended         Ended
                                        Dec 31     Dec 31      Dec 31      Dec 31        Dec 31
                                         2002       2001        2000        1999          1998
                                       --------   --------    --------    --------      ---------
<S>                                   <C>        <C>          <C>         <C>            <C>

Balance Sheet Data at period end
Working Capital (deficit)               18,930     26,301      11,991     (14,678)       35,938
                                      ---------   --------   --------    ---------      --------
Total Assets                           182,588    212,869     204,384     188,941       253,269
                                      ---------   --------   --------    ---------      --------
Long-term Liabilities                        0          0           0       1,245         1,261
                                      ---------   --------   --------    ---------      --------
Shareholders Equity                    180,839    211,506     203,058     164,737       128,543
                                      ---------   --------   --------    ---------      --------
</TABLE>

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

This  annual  report  contains  certain  forward-looking  statements  within the
meaning of the federal  securities  laws.  These  include  statements  about our
expectations,  beliefs,  intentions  or  strategies  for the  future,  which  we
indicate by words or phrases such as "anticipate,"  "expect,"  "intend," "plan,"
"will," "we believe," "the Company believes,"  "management believes" and similar
language.  The forward-looking  statements are based on our current expectations
and are subject to certain risks, uncertainties and assumptions, including those
set forth in the discussion under "Description of Business," including the "Risk
Factors" described in that section, and "Management's Discussion and Analysis or
Plan of  Operation."  Our actual  results  may differ  materially  from  results
anticipated in these  forward-looking  statements.  We base our  forward-looking
statements on information currently available to us, and we assume no obligation
to update them.

Twelve Months Ended  December 31, 2002 Compared to Twelve Months Ended  December
31, 2001

Revenues

     Revenues  decreased by $4,798,000 or 22.50% to  $16,518,000  for the twelve
months ended  December  31, 2002 from US  $21,316,000  for the prior year.  This
decrease is attributable to the discontinuation of sales of breeding stock which
generated $7,590,000 for the twelve months ended December 31, 2001.

Cost of Sales

     Costs of Sales of represents the cost of seeds,  salaries and wages paid to
workers for the harvesting and sale of forage grass, and land improvement  costs
of a  recurring  nature.  Cost of sales  increased  by  $8,711,000  or 163.6% to
$14,034,000  from $5,323,000 for the year ended December 31, 2001. This increase
resulted  from  land  improvement  costs  deemed  of a  recurring  nature  of
approximately $11,180,000 which were charged to the current period.

                                       8
<PAGE>


Impairment Loss On Water Resources

     The  impairment  loss  represents  the  diminution  in value  of the  water
resources.  Because  the water  source  will not be  commercialized  in the near
future, its value as a business asset was impaired.

Depreciation and Amortization

     Depreciation and  amortization  increased by $377,000 or 5.2% to $7,587,000
for the year  ended  December  31,  2002 from  $7,210,000  for the  prior  year.
Depreciation   and  amortization  is  taken  on  the  land  use  right  of  East
Wu-Zhu-Mu-Qin banner demonstration Farm and is charged rateably over a period of
twenty-five  years. The increase in depreciation and amortization  resulted from
the addition of permanent land  improvements of  approximately  $11,199,000 made
during 2002 which are being depreciated over the remaining period of the lease.

Selling and Administrative Expenses

     Selling and  administrative  expenses include salaries of company personnel
and general corporate overhead.  Selling and administrative expense increased by
$143,000  or  34.54% to  $557,000  for the year  ended  December  31,  2002 from
$414,000  for the  prior  year.  The  increase  resulted  because  of  increased
operations at the Company's facilities.

Consulting

     The consulting  expense of $1,000,000 was incurred for services rendered in
connection with corporate  re-engineering  and management  consulting during the
year ended  December 31, 2001. No such expenses were incurred for the year ended
December 31, 2002

Net Loss

     As a result of the  foregoing,  the Company  incurred a loss of $31,217,000
from  continued  operations  for the year ended  December 31, 2002 compared to a
profit of $7,369,000  for the prior year.  The loss resulted from the impairment
of the water  resources of $25,559,000  and the charge for the land  improvement
costs of $11,180,000.

Twelve Months Ended  December 31, 2001 compared to Twelve Months Ended  December
31, 2000

Revenues

     Revenues from continuing  operations increased by US $15,443,000 or 262.95%
to US  $21,316,000  for the  twelve  months  ended  December  31,  2001  from US
$5,873,000 for the prior year. This increase is attributable to the initial sale
of goats who received embryos, and from the first sales of forage grasses.

Cost of Sales

     Costs of Sales represents the purchase price of embryos and recipients, and
salaries and wages paid to workers for the  harvesting and sale of forage grass.
Cost of sales  increased by US $5,278,000  to US $5,323,000  from US $45,000 for
the prior year. The increase in the cost of sales is attributable to the sale of
forage grass and because there was no purchase of embryos or recipients in 2000.

                                       9
<PAGE>

Amortization of Fixed Assets

     Amortization expense increased by US $4,805,000 or 199.79% to US $7,210,000
for the year ended  December 31, 2001 from US $2,405,000 for the prior year. The
increase is attributable to a full year of depreciation  and amortization of the
East Wu facility compared only to a quarter in 2000

Selling and Administrative Expenses

     Selling and  administrative  expenses include salaries of company personnel
and general corporate overhead.  Selling and administrative expense increased by
US $ 22,000 or 5.6% to US $414,000 for the year ended December 31, 2001 compared
to US $392,000  for the prior year.  The increase  resulted  from an increase in
business at the company's facilities.

Consulting

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

Other income

     The Company had no other income for the year ended  December 31, 2001,  but
had other income of $50,616 for the year ended  December 31, 2000.  In addition,
these were also other income from operations of divested  entities.  The Company
had no income from  divested  entities  for the year ended  December  31,  2001,
because all divestitures were completed during the year ended December 31, 2000.
For the year ended  December 31, 2000,  the Company had income from operation of
divested entities totaling $5,509,077.

Gain on Disposal of Associated Companies and Investments in Subsidiaries

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

     As a  result  of  the  foregoing,  the  Company's  income  from  continuing
operations  totaled $7,368,519 for the year ended December 31, 2001, an increase
of $4,287,516  or 139.20% from the  $3,081,003  for the year ended  December 31,
2000. Earnings per share remained at $0.03 for the year ended December 31, 2001,
the same for the year ended December 31, 2000. Although there was an increase in
earnings,  per share income did not increase  because of an increased  number of
shares issued and outstanding.

                                       10
<PAGE>

Liquidity and Capital Resources

     At December  31,  2002,  the Company  had working  capital of  $18,588,000,
including a cash balance of US  $13,883,000.  This compares to a working capital
of $26,300,000 and a cash balance of $11,331,000 at December 31, 2001.

     Net cash provided by operating  activities  increased to  $11,938,000  from
$5,013,000 for the prior year.  Although the Company's  income  decreased from a
profit of USD7,369,000 to a loss of USD31,217,000, this was more than offset but
a non-cash charge of USD25,559,000 for the impairment of the water resources,  a
small  increase in  depreciation  and  amortization,  and changes in the current
accounts.

     The Company  used  $9,850,000  in investing  activities  for the year ended
December 31, 2002 compared to $1,349,000  for the year ended  December 31, 2001.
The increase is entirely  attributable to expenditures for land  improvements in
the year ended December 31, 2002,  USD(11,199,000) which was partially offset by
the refund of a deposit USD(1,349,000) made in the year ended December 31, 2001.

     The Company had USD464,000 of cash provided from  financing  activities for
the year-ended  December 31, 2002 compared to $0 for the year ended December 31,
2001. The cash provided for the year-ended  December 31, 2002 came from the sale
of  shares  USD(400,000)  and  from  a  capital  contribution  of a  shareholder
USD(64,000).

     The Company's business has historically not been capital intensive. In most
years internally  generated funds were sufficient to fund the Company operations
and financial its growth.  Cash generated  from earnings and available  lines of
credit have historically  provided sufficient liquidity to meet ordinary capital
requirements.   Management  anticipates  that  cash  generated  from  operations
combined with current  working  capital and available  credit lines will provide
sufficient  liquidity to meet ordinary  capital  requirements in the PRC for the
foreseeable future.  However,  the use of the Company's cash has been restricted
by the Company's Chief Executive Officer to uses in the PRC.  Therefore,  if the
Company is to pay its non-PRC  expenses,  it will have to raise additional funds
from the sale of its shares or from third party loans.

Impact of inflation

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

Certain Factors Affecting Certain Future Operating Results

a)       Revised Corporate Business

                                       11
<PAGE>

     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  and the sale of breeding  stock.  The Company has now moved away from
this line of business into planting and sales of forage grass in China.  Because
of the Company's inexperience with this industry,  there is no guaranty that its
future  results  will  equal  those  of the  past or that  the  Company  will be
profitable in this industry.

b)       Country Risk

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

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                50       Chairman of the Board and Chief
                                          Executive Officer
     Jian Sheng Wei              57       Chief Financial Officer/Secretary
                                          And Director
     Malcolm Roy Brandon         57       Technical Director
     Zhang Cheng Zhang           62       Director
     Shujing Li                  41       Director

                                       12
<PAGE>

     Each Director is serving a one-year term that expires after the next annual
meeting of the Company's shareholders, or until their successors are elected and
qualified  Executive  Officers  of the  Company  are elected by and serve at the
discretion of the Board of Directors. As of the date of this report, none of the
officers or directors  of the Company have filed the Forms  specified by Section
16a of the Exchange Act.

     Mr.  Jia Ji Shang,  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 more  than 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,  bioengineering  and biotechnology  throughout the Far East Region and in
North America.

     Mr. Jian Sheng Wei, is the Business  Director,  Chief Financial Officer and
Secretary of the Company. Mr. Wei holds a Bachelor's Degree in civil engineering
and a Master in Business Administration.  He has over 30 years experience in the
operation,  research and management of the agriculture  and husbandry  industry.
Mr. Wei has  established  breeding  centers and large-scale  slaughterhouses  in
Inner  Mongolia and Hubei  Province.  Mr. Wei  specializes  in animal  husbandry
operation  and is  responsible  in the  development  of business in the Far East
Region, South Africa, Australia and North America.

     Mr.  Malcolm Roy Brandon,  is the Technical  Director for 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 from the  University of Sydney.  He has more than 26 years of experience
in basic  research,  development and production of biological  products.  He has
been a visiting professor at Oxford University and Michigan State University and
he has 102 patents on his research.

     Professional  Zhong  Cheng  Zhang,  is a Director of the  Company.  He is a
leader in  animal  biology  and has  contributed  in  maintaining  the  Peoples'
Republic  of China's  highly  competitive  research  work in this  field.  He is
conducting  eight  research  projects for the  Government  and has over 30 years
experience in  biotechnology.  He has  published  over 60 research  papers,  and
books.  He has also  received two  honorary  awards from China  Agriculture  and
Husbandry institute for best thesis of the year.

                                       13
<PAGE>

     Mr. Shujing Li, is a Director of the Company.  He received his Doctorate in
Agriculture  Science from China Agricultural  University.  He is responsible for
developing,  researching and supplying technologies in agricultural genetics. He
established state owned project "95", a project employing  agricultural genetics
to improve the  quality of existing  foodstuff.  He has  published  more than 20
research papers.  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.

ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth all compensation  paid for services rendered
during  the last  three  fiscal  years by the  Company  to its  chief  executive
officers and the remaining most highly paid executive officer who earn more than
USD100,000 for the three fiscal years ended December 31, 2002

Names of individuals         Year            Salary           Bonus
--------------------        ------          --------         -------
Jai Ji Shang (1)             2000                0               0
                             2001                0               0
                             2002                0               0

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  programs or plans to its officers.
The  Company  does not pay  fees or  other  compensation  to its  directors  for
attending meeting or special assignments.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth as of December 31, 2002 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
Name and Address            Beneficial Ownership          Percentage
of Beneficial Owner              Shares                    of Class
--------------------        ---------------------         -----------
Shang Jia Ji (1)                 33,000,000                 12.80%
Clever Boy Limited (1)           52,825,000                 20.48%
                                ------------               --------
All officers and directors
  as a group (one)               85,825,000                 33.28%
                                ============               ========

(1)  Address for all persons and entities is at Room.  1801-02 Evening Newspaper
     Mansion, 358 Nanjing Road, Tianjin, PRC

                                       14
<PAGE>

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. As of December 31,2002 an amount of $586,877 was due to
Mr. Jia Ji Shang, a director of the Company.  Moreover, an amount of US $424,034
was due to two former  officers  of the  Company at  December  31, 2001 had been
settled during the year ended December 31, 2002.

     East Wu Farm  acquired  3,000 and 2,000  goat  embryos  and  services  from
Eternal technology Group, Ltd. ("Eternal"),  a related company, for $600,000 and
$425,000 in November,  2001 and December,  2000.  East Wu Farm's 3,000 and 2,000
goats  with   implanted   embryos  were  sold  in  March  2002  and  march  2001
approximately  $2,349,000  and  $1,687,000  respectively.  One of the  Company's
officers, directors and major shareholder owns approximately 38% of Eternal.

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

ITEM 14. CONTROLS AND PROCEDURES

(a)  Evaluation  of  disclosure  controls and  procedures.  Our chief  executive
     officer and our chief financial officer, after evaluating the effectiveness
     of the Company's  "disclosure  controls and  procedures" (as defined in the
     Securities  Exchange Act of 1934 Rules  13a-14(c) and  15-d-14(c))  as of a
     date (the "Evaluation  Date") within 90 days before the filing date of this
     quarterly  report,  have  concluded  that as of the  Evaluation  Date,  our
     disclosure  controls and  procedures  were  adequate and designed to ensure
     that material information relating to us and our consolidated  subsidiaries
     would be made known to them by others within those entities.

(b)  Changes in  internal  controls.  There were no  significant  changes in our
     internal  controls  or to  our  knowledge,  in  other  factors  that  could
     significantly  affect our disclosure controls and procedures  subsequent to
     the Evaluation Date.

                                       15
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Exhibits
            None
(b)      Report on Form 8-K
            None

ITEM 16. PRINCIPAL ACCOUNTANT FEES
                                      Year-Ended               Year-Ended
                                  December 31, 2002        December 31, 2001
                                  -----------------        -----------------
Audit Fees                             $ 72,000               $ 60,000
Total Fees                             $ 72,000               $ 60,000

                                   SIGNATURES

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

                                        CHINA CONTINENTAL, INC.


                                        /s/ JiaJi Shang
                                        ------------------------------------
Dated: May 15, 2003                     JiaJi Shang, Chief Executive Officer


                                       /s/ Jian Sheng Wei
                                       ---------------------------------------
Dated: May 15, 2003                    Jian Sheng Wei, Chief Financial Officer

  Name                          Title                            Date
--------                      ----------                      ---------

/s/JiaJi Shang             Chief Executive Officer            May 15, 2003
------------------------   and Director
JiaJi Shang

/s/Jian Sheng Wei          Chief Financial Officer            May 15, 2003
------------------------
Jian Sheng Wei

/s/Malcolm Roy Brandon     Director                           May 15, 2003
------------------------
Malcolm Roy Brandon

/s/Zhang Cheng Zhang       Director                           May 15, 2003
------------------------
Zhang Cheng Zhang

/s/ Shujing Li             Director                           May 15, 2003
------------------------
Shujing Li

                                       16
<PAGE>

                  CERTIFICATION OF CHIEF EXECUTIVE OFFICER PER
                      SECTION 302 OF THE SARBANES-OXLEY ACT

I, JiaJi Shang, certify that:

1.   I have reviewed  this annual report on the Form 10-K of China  Continental,
     Inc.

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report.

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in the  Exchange  Act Rules  13a-14 and 15d-14) for the  registrant  and we
     have:

a)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

b)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

c)   presented in this quarterly report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

a)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:                                   /s/ JiaJi Shang
                                        JIAJI SHANG
                                        CHIEF EXECUTIVE OFFICER AND CHAIRMAN

                                       17
<PAGE>


                  CERTIFICATION OF CHIEF EXECUTIVE OFFICER PER
                      SECTION 302 OF THE SARBANES-OXLEY ACT

I, Jiansheng Wei, certify that:

1.   I have reviewed  this annual  report on the Form 10-K of China  Continental
     Inc.

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report.

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in the  Exchange  Act Rules  13a-14 and 15d-14) for the  registrant  and we
     have:

a)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

b)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

c)   presented in this quarterly report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

a)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:                             /s/ Jiansheng Wei
                                      JIANSHENG WEI
                                      CHIEF FINANCIAL OFFICER

                                       18
<PAGE>


                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         Pages

  Report of Independent Auditors                                          F-2
  Consolidated Balance Sheets as of December 31, 2002 and 2001          F-3-4
  Consolidated Statements of Income for the years ended December 31,
  2002, 2001 and 2000                                                     F-5
  Consolidated Statements of Changes in Stockholders' Equity for
  the years ended December 31, 2002,  2001, and 2000                      F-6
  Consolidated Statements of Cash Flows for the years ended
  December 31, 2002,2001 and 2000                                       F-7-8
  Notes to Financial Statements                                        F-9-14

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders
of China Continental, Inc. (the "Company")
and subsidiaries (collectively China Continental,
Inc. the "Group")


We  have  audited  the  accompanying   consolidated   balance  sheets  of  China
Continental,   Inc.  (the  "Company")  and  subsidiaries   (collectively   China
Continental, Inc. the "Group") as of December 31, 2002 and 2001, and the related
consolidated  statements  of  income,  consolidated  statements  of  changes  in
stockholders'  equity,  and consolidated  statements of cash flows for the years
ended  December 31, 2002,  2001 and 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

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, 2002 and 2001, and the results of its
operations  and its cash flows for the years ended  December 31, 2002,  2001 and
2000 in conformity with accounting  principles  generally accepted in the United
States of America.



Houston, Texas
May 12, 2003

<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2002 AND 2001

                                     ASSETS

                                                              December 31,
                                                         2002              2001
                                                          US$               US$
                                                        -------           ------

CURRENT ASSETS
  Cash and bank balances                           $ 13,883,246     $ 11,330,717
  Trade receivables                                   6,796,200                -
  Third parties                                               -        4,568,675
   Related company                                            -        1,715,663
   Deposit and prepays                                        -       10,048,193
                                                    ------------    ------------
TOTAL CURRENT ASSETS                                 20,679,446       27,663,248
FIXED ASSETS                                          2,239,805        2,531,954
LAND LEASE RIGHTS, net of
  accumulated amortization of US$16,143,468 and
  US$9,225,520 at December 31,2002 and 2001         148,847,916      155,765,864
LAND IMPROVEMENTS, net of
   amortization of US$381,393 at December 31, 2002   10,821,308                -
WATER RESOURCES                                               -       25,558,887
Deposit for improvements                                      -        1,349,093
                                                   ------------     ------------
TOTAL ASSETS                                      $ 182,588,475    $ 212,869,046
                                                   ============     ============

                                      F-2
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)
                      LIABILITIES AND STOCKHOLDERS' EQUITY

                           DECEMBER 31, 2002 AND 2001

                                                           December 31,
                                                      2002             2001
                                                      US$               US$
                                                     -----            -------

CURRENT LIABILITIES
   Account payable to related company              $ 542,485        $ 508,782
   Amounts due to directors                          589,308          229,210
   Amounts due to related parties                     25,806          424,034
   Accounts payable and accrued liabilities          591,725          200,608
                                                   ---------        ----------
TOTAL CURRENT LIABILITIES                          1,749,324        1,362,634
                                                   ---------        ----------
TOTAL LIABILITIES                                  1,749,324        1,362,634
                                                   ---------        ----------
STOCKHOLDERS' EQUITY
   Common stock, par value US$0.001 per share:
   1,000,000,000 shares authorized:
   335,070,000 issued and outstanding as of
    December 31, 2002, and 312,894,000 issued
    and outstanding at  December 31, 2001            312,894

   Additional paid-in capital                     70,130,305       69,602,972
   Treasury stock                                    (55,000)         (55,000)
   Retained earnings                             110,428,082      141,645,546
                                                 -----------      ------------
TOTAL STOCKHOLDERS' EQUITY                       180,839,151      211,506,412
                                                 -----------      ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY                                         $ 182,588,475    $ 212,869,046
                                                 ===========      ============

                                      F-3
<PAGE>

                        CONSOLIDATED STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
<TABLE>

                                                                        Year Ended December 31,
                                                           2002               2001               2000
                                                            US$                US$                US$
<S>                                                     <C>               <C>                <C>


SALES                                                 $ 16,518,072       $ 21,315,658        $ 5,873,403
COST OF SALES                                           14,033,735          5,323,244             45,648
GROSS PROFIT                                             2,484,337         15,992,414          5,827,755
IMPAIRMENT LOSS ON WATER SOURCES                         25,558,88                  -                  -
DEPRECIATION AND AMORTIZATION                            7,587,584          7,210,097          2,404,955
SELLING AND ADMINISTRATIVE EXPENSES                        413,788            392,413
CONSULTING                                                       -          1,000,000                  -
OTHER INCOME                                                 1,875                  -             50,616
INCOME (LOSS) FROM CONTINUING OPERATIONS               (37,368,519)         3,081,003
DISCONTINUED OPERATIONS
    Income from operations of divested entities                                                5,509,077
NET GAIN ON DISPOSAL OF ASSOCIATED
    COMPANIES AND
    INVESTMENTS IN SUBSIDIARIES                                  -                  -         17,604,615
NET INCOME (LOSS)                                    $ (31,217,464)       $ 7,368,519       $ 26,194,695
                                                      =============        ===========       ===========
INCOME PER COMMON SHARE
BASIC AND DILUTED
Income (loss) from continuing operations                     (0.12)              0.03               0.03
Income from discontinued operations                              -                  -               0.05
Gain on disposals                                                -                  -               0.18
                                                           $ (0.12)            $ 0.03             $ 0.26
                                                      =============        ===========       ===========
AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING
Basic and diluted                                      265,581,123 (1)    232,288,521 (1)    102,230,137
                                                      =============        ===========       ===========
</TABLE>

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

                                      F-4
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  Years ended December 31, 2002, 2001 AND 2000
<TABLE>

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

Balance at December 31, 1999                  99,894       $ 56,554,972      $     -     $ 108,082,331     $164,737,197
Issuance of 131,000,000 shares on
 December 23, 2000 at US$0.091975 per
 share                                       131,000         11,995,000            -                -        12,126,000
Net income                                         -                  -            -       26,194,696        26,194,696
                                            ---------       ------------     --------     ------------     -------------
Balance at December 31, 2000                 230,894         68,549,972            -      134,277,027       203,057,893
Issuance of 55,000,000 shares
 on November 19, 2001 at par                  55,000                  -      (55,000)               -                 -
Issuance of 2,000,000 shares  for services
 on November 19, 2001 at US$.04
 per share                                     2,000             78,000            -                -            80,000
Issuance of 25,000,000 shares for services
 on December 14, 2001 at
 US$.04 per share                             25,000            975,000                                       1,000,000
Net income                                         -                  -            -        7,368,519         7,368,519
                                            ---------       ------------     --------     ------------     -------------
Balance at December 31, 2001                 312,894         69,602,972      (55,000)     141,645,546       211,506,412
Issuance of 20,000,000 shares @0.02
for settlement of payable                     20,000            380,000            -                -           400,000
Issuance of 2,870,000 shares @0.03
for legal services                             2,870             83,230            -                -            86,100
Contribution from a shareholder                    -             64,103            -                -            64,103
Net loss for the year                              -                  -            -      (31,219,858)      (31,219,858)
                                            ---------       ------------     --------     ------------     -------------
Balance at December 31, 2002                 335,764       $ 70,130,305    $ (55,000)   $ 110,425,688     $ 180,836,757
                                            =========       ============     ========     ============     =============
</TABLE>
                                      F-5
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
<TABLE>

                                                             2002                2001                 2000
                                                              US$                 US$                  US$
                                                           ---------            --------             --------
<S>                                                   <C>                   <C>                   <C>

CASH FLOWS FROM OPERATING
 ACTIVITIES:

Net income (loss)                                    $ (31,217,464.00)      $ 7,368,519.00       $ 26,194,696.00

Adjustments to reconcile net income to
 net cash provided by operating activities:

   Depreciation and amortization                            7,587,584           7,210,096              2,404,955

   Impairment loss on water sources                        25,558,887

   Issuance of shares for services                             86,100            1,080,00                      -

   Gain on disposal of subsidiaries                                 -                   -            (17,604,615)
(Increase) decrease in assets:
    Inventories                                                     -           3,350,456               (428,971)
    Trade receivables third parties                        (2,227,525)         (2,268,005)            (5,110,156)
    Prepayments and deposits                               10,048,193          (10,048,19)                     -
    Trade receivables from related companies                1,715,663           (1,715,66)                     -
Increase (decrease) in liabilities:
    Accounts payable to related company                        33,703            (260,604)              (769,386)
    Amounts due to directors                                  360,098             229,200               (732,709)
    Amounts due to related parties                             65,875              48,096               (375,937)
    Accounts payable and accrued liabilities                  391,117              19,449                170,165
    Income taxes payable                                            -                   -             (2,648,728)
                                                        --------------         ------------          -------------
Net cash provided by operating activities                  12,402,231           5,013,351             12,858,398
                                                        --------------         ------------          -------------
</TABLE>
                                      F-6
<PAGE>

                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                  YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
<TABLE>

                                                              Year Ended December 31,
                                                  2002                 2001                2000
                                                   US$                 US$                  US$
                                                 ------              --------             -------
<S>                                            <C>                <C>                <C>


CASH FLOWS FROM
 INVESTING ACTIVITIES
  Land improvement                            (11,198,795)                  -                  -
  Deposit                                       1,349,093          (1,349,093)                 -
  Purchase of water sources                             -                   -         (6,000,000)
  Purchase of fixed assets                              -                   -            (62,083)
                                             -------------        ------------       ------------
Net cash used in investing activities          (9,849,702)         (1,349,093)        (6,062,083)
CASH FLOWS FROM
 FINANCING ACTIVITIES
  Insurance of shares                             400,000                   -                  -
  Contribution of additional paid-in
  capital from a shareholder                       64,103                   -                  -
Net cash provided by financing activities         464,103                   -                  -
NET INCREASE IN

CASH AND BANK BALANCES                          2,552,529           3,664,258          6,796,315
Cash and bank balances, at beginning
 of period                                     11,330,717           7,666,459            870,144
                                             ------------         ------------       ------------
Cash and bank balances, at end of period      $13,883,246         $11,330,717        $ 7,666,459
                                             ============         ============       ============

</TABLE>
                                      F-7
<PAGE>


                    CHINA CONTINENTAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2002


1.   ORGANIZATION AND PRINCIPAL ACTIVITIES

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

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

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


2.   BASIS OF PRESENTATION

     The  consolidated  financial  statements  are prepared in  accordance  with
     generally accepted  accounting  principles in the United States of America.
     This basis of accounting differs from that used in the statutory  financial
     statements  of  the  subsidiaries  in  the  PRC.  There  were  no  material
     adjustments.  Certain balances in the prior year have been  reclassified to
     conform to the presentation used in the current year.


3.   SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

     Basis of consolidation

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

                                      F-8
<PAGE>

     Economic and political risks

     The  Company  faces a  number  of  risks  and  challenges  since  its  main
     operations are in the PRC.

     Cash and cash equivalents

     The Company considers cash and cash equivalents to include cash on hand and
     demand  deposits  with banks with an original  maturity of three  months or
     less.

     The Company maintains no accounts in the United States of America. All cash
     and cash  equivalents,  approximately  $13,883,246,  was  restricted by the
     Company for operations in the PRC.

     Accounts receivable

     No allowance  for doubtful  accounts has been  established,  as  management
     believes all amounts are collectible.

     Inventory

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


     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%

     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%

     Land improvements

     Land improvements are being amortized over a 20 year period.

                                      F-9
<PAGE>

     Income taxes

     The company  accounts for income taxes under SFAS No. 109,  "Accounting for
     Income Taxes," which requires an asset and liability  approach to financial
     accounting  and  reporting  for income taxes.  The  difference  between the
     financial  statement and tax basis of assets and  liabilities is determined
     annually. Deferred income tax assets and liabilities are computed for those
     differences that have future tax consequences using the current enacted tax
     laws and rates that apply to the  periods  in which  they are  expected  to
     affect taxable income. Valuation allowances are established,  if necessary,
     to reduce  the  deferred  tax asset to the  amount  that will  assure  full
     realization.  Income tax expense is the  current tax payable or  refundable
     for the period plus or minus the net change in the  deferred tax assets and
     liabilities.

     Foreign currency translation

     The  Companies  maintain  their  books and  accounting  records in Renminb:
     ("RMB") the PRC's  currency.  Translation  of amounts  from RMB into United
     States  dollars  ("US$")  has been made at the single  rate of  exchange of
     US$1.00:RMB7.75.  No  representation  is made that RMB amounts have been or
     could be, converted into US$ at that rate.

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

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

     Revenue recognition

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

     Research and development

     Research and development costs are charged to operations as incurred.

     Employees benefits

     Mandatory  contributions  are made to the Government's  health,  retirement
     benefit and unemployment schemes at the statutory rates in force during the
     period,  based on gross  salary  payments.  The cost of these  payments  is
     charged to the statement of income in the same period as the related salary
     cost.
                                      F-10
<PAGE>

     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.

     Earnings Per Share

     The Company has adopted Statement of Financial Accounting Standards NO. 128
     ("SFAS  128"),  "Earnings Per Share."  Under SFAS 128,  basic  earnings per
     share is computed by dividing  income  available to common  shareholders by
     the  weighted-average  number of common  shares  assumed to be  outstanding
     during the period of  computation.  Diluted  earnings per share is computed
     similar  to  basic  earnings  per  share  except  that the  denominator  is
     increased to include the number of additional common shares that would have
     been  outstanding if the potential common shares had been issued and if the
     additional   common  shares  were   dilutive.   Average  number  of  shares
     outstanding do not include 55,000,000 shares issued November 19, 2001 which
     are  included in the  financial  statement as treasury  stock.  The Company
     received the shares back in 2002 and is nullifying the transaction.

     Recent pronouncements

     In July 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 146, Accounting for Costs Associated with Exit or Disposal  Activities.
     SFAS 146 addresses financial  accounting and reporting for costs associated
     with exit or disposal  activities and nullifies  Emerging Issues Task Force
     ("EITF")  Issue  No.  94-3,  Liability  Recognition  for  Certain  Employee
     Termination Benefits and Other Costs to Exit an Activity (including Certain
     costs  Incurred in a  Restructuring).  SFAS 146 requires  recognition  of a
     liability for a cost associated with an exit or disposal  activity when the
     liability  is  incurred,  as opposed to when the entity  commits to an exit
     plan under EITF No. 94-3. SFAS 146 is to be applied  prospectively  to exit
     or disposal activities  initiated after December 31, 2002. The Company does
     not believe  that the  adoption of SFAS 146 will have a material  effect on
     the Company's financial position, results of operations, or cash flows.

     In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
     Obligations".  The statement addresses  financial  accounting and reporting
     for  obligations  associated  with the  retirement  of tangible  long-lived
     assets  and  the  associated  asset  retirement  costs.  The  statement  is
     effective  for the Company in fiscal 2003.  The Company does not expect the
     adoption  of SFAS 143 to have a  material  impact on the  Company's  future
     results of operations or financial position.

     In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
     or Disposal of Long-Lived Assets".  This statement supersedes SFAS No. 121,
     "Accounting  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
     Assets to be Disposed of", and the accounting  and reporting  provisions of
     APB Opinion 30, "Reporting the Results of
                                      F-11
<PAGE>

     Operations - Reporting  the Effects of Disposal of a Segment of a Business,
     and   Extraordinary,   Unusual  and   infrequently   Occurring  Events  and
     Transactions",  for the disposal of a segment of a business.  The statement
     is effective for the Company in fiscal 2002.

     In April, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
     Nos.  4, 44, and 64,  Amendment  of FASB  Statement  No. 13, and  Technical
     Corrections.  SFAS 145  eliminates  the  requirement  to classify gains and
     losses from  extinguishments  of  indebtedness as  extraordinary,  requires
     certain  lease  modifications  to be treated  the same as a  sale-leaseback
     transaction,  and makes  other  non-substantive  technical  corrections  to
     existing  pronouncements.  SFAS 145 is effective for fiscal years beginning
     after May 15,  2002,  with  earlier  adoption  encouraged.  The  Company is
     required to adopt SFAS 145  effective  January  2003.  The Company does not
     believe  that the  adoption of SFAS 145 will have a material  effect on the
     Company's financial position, results of operations, or cash flows.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation  -  Transition  and  Disclosure".  SFAS  148  amends  SFAS 123
     "Accounting for Stock-Based  Compensation," to provide  alternative methods
     of  transition  for a voluntary  change to the fair value  based  method of
     accounting for stock-based  employee  compensation.  In addition,  SFAS 148
     amends  the  disclosure  requirements  of  SFAS  123 to  require  prominent
     disclosures  in both  annual and  interim  financial  statements  about the
     method of accounting for stock-based  employee  compensation and the effect
     of the method used on reported  results.  SFAS 148 is effective  for fiscal
     years beginning after December 15, 2002. The interim disclosure  provisions
     are effective for financial  reports  containing  financial  statements for
     interim  periods  beginning  after  December 15, 2002. The Company does not
     expect the adoption of SFAS 148 to have a material  effect on our financial
     position, results of operations, or cash flows.

4.   FIXED ASSETS

                                                      Year Ended December 31,
                                                     2002               2001
                                                     US$                US$
      Cost
             Machinery and equipment          $    2,921,485       $  2,921,485
             Less : accumulated depreciation        (681,680)          (389,531)

             Net book value                   $    2,239,805         $2,531,954

                                      F-12
<PAGE>


     5.   WATER RESOURCES AND IMPAIRMENT LOSS

                                                       Year Ended December 31,
                                                     2002                   2001
                                                      US$                    US$
          Cost                                $    25,558,887     $  25,558,887
          Less : Impairment  loss                 (25,558,887)                -
                                                  -----------       ------------
          Net book value                      $         -         $  25,558,887
                                                  ===========       ============

     The  impairment  loss  represents  the diminution in value of the Company's
     water resources.


     6.   ACQUISITIONS AND DISPOSITIONS
                                                                US$
                Fixed assets                                $ 390,568
                Interest in associated companies              107,130
                Amount due from related companies           1,311,566
                Other                                         646,263
                Bank overdrafts                              (510,409)
                Bank import loans                            (385,597)
                Income taxes payable                      (15,283,716)
                Amounts due to directors                   (2,618,165)
                Secured bank loan                          (1,262,255)
                                                        ---------------
                                                        $ (17,604,615)
                                                        ===============

     On December 23, 2000 the Company  initiated the purchase of a 100% interest
     in Famous Goal  International  Limited for a consideration of US$6,000,000,
     exchange of the Company's  Megaway  interest was valued at US$7,432,887 and
     131,000,000  shares of stock in the  Company.  The  shares  were  valued at
     US$12,126,000.  The principal assets of Famous Goal  International  Limited
     are 2.6  square  kilometers  of land with two water  resources  located  in
     Wulagai  Development  District  northwest  of Xi Lin Gol  Meng.  The  water
     resources can be used to produce bottled water. (See Note 5).

     Had the 131,000,000 shares of common stock been outstanding through out the
     periods presented, earnings per share would have been US$0.13 in 2000.

                                      F-13
<PAGE>

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

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

7.   INCOME TAXES

     The Companies operated in several  jurisdictions prior to the year 2002 and
     may be subject to taxes in those jurisdictions.

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

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

     Those  companies  carrying on  operations  in Hong Kong are subject to Hong
     Kong profits tax on their income arising in or derived from Hong Kong after
     adjusting  for  income  and  expense  items  which  are not  assessable  or
     deductible  for profits tax  purposes.  As such,  current  income taxes are
     calculated  at a  statutory  tax rate of 16.5% on their  estimated  taxable
     income for the year.  No companies  are carrying on operations in Hong Kong
     at December 31, 2002 and 2001.

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

                                      F-14
<PAGE>

     Undistributed  earnings of the Company's non-U.S.  subsidiaries amounted to
     approximately  $110,425,688 and $142,725,546 at December 31, 2002 and 2001.
     Because those  earnings are  considered  to be  indefinitely  invested,  no
     provision for United States corporate income taxes have been provided. Upon
     distribution  of those earnings in the form of dividends or otherwise,  the
     Company  would  be  subject  to  United  States   corporate  income  taxes.
     Unrecognized  deferred  United  States  corporate  income tax in respect of
     these   undistributed   earnings  at   December   31,  2002  and  2001  was
     approximately $37,500,000 and $49,000,000, respectively.

8.   CONCENTRATION OF CREDIT RISKS

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

     (i)  Cash deposits

     The Group places it cash deposits with an international bank.

     (ii) Amounts due from related companies

     At December 31, 2001, there is US$1,715,663 due from a related company. The
     Group does not have a policy of requiring collateral.

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

9.   FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of financial instruments are set out as follows

     (i)  Cash deposits

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

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

     (iii)Accounts  payable and amounts due to related  companies  and directors
          are stated at their book value which approximates their fair value.
                                      F-15
<PAGE>

     10.  CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS


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

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


     11.  ADDITIONAL RELATED PARTY BALANCES AND TRANSACTIONS

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

     Dong Wu Farm  acquired  3,000 and 2,000  goat  embryos  and  services  from
     Eternal, a related company, for US$600,000 and US$425,000 in November, 2001
     and  December,  2000.  Dong Wu Farm's 3,000 and 2,000 goats with  implanted
     embryos  were  sold  in  March  2002  and  March,  2001  for  approximately
     US$2,349,000 and US$1,687,000 respectively.

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

     12.  CONTINGENCIES AND COMMITMENTS

     During September,  2001 the Dong Wu Farms entered into three contracts with
     Inner  Mongolia Sai Ri Ji He Husbandry  Co. Ltd. The  contracts are for the
     construction of fences, roads and the preparation of fields for planting in
     the spring of 2002. The roads and fences  estimated cost are  US$4,180,000.
     The cost for preparation of the fields is approximately US$20,096,000.  The
     contracting company required a deposit of approximately US$11,397,0000.  As
     of December 31, 2002 all commitments have been fulfilled.

                                      F-16