<PAGE> 1
                   U.S. Securities and Exchange Commission
                            Washington, D.C. 20549

                                  Form 10-Q



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

        For the quarterly period ended March 31, 2002

        Commission file number   0-27937


                              DRAGON PHARMACEUTICAL INC.
        (Exact name of small business issuer as specified in its charter)


               Florida                                 65-0142474
  (State or other jurisdiction of           (IRS Employer Identification No.)
   incorporation or organization)


                        1055 West Hastings Street, Suite 1900
                            Vancouver, British Columbia
                                  Canada V6E 2E9
                      (Address of principal executive offices)

                                  (604) 669-8817
                            (Issuer's telephone number)


                     (Former address if changed since last report)


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

Number of shares of common stock outstanding as of March 31, 2002:  20,331,000

<PAGE> 2

Part 1.  Financial Information

Item 1.  Financial Statements


<PAGE> 3
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

<TABLE>
<S>                                                                     <C>                             <C>

------------------------------------------------------------------------------------------------------------------------------------
                                                                March 31, 2002                  December 31, 2001
------------------------------------------------------------------------------------------------------------------------------------

ASSETS

Current
  Cash and short term securities                                $    5,791,160                  $     9,446,084
  Accounts receivable                                                1,813,412                        1,309,686
  Inventories                                                        1,110,936                        1,095,860
  Prepaid and deposits                                                 270,431                          140,340
------------------------------------------------------------------------------------------------------------------------------------
Total current assets                                                 8,985,939                       11,991,970

Fixed assets                                                         2,534,096                        2,534,609

Investment in Hepatitis B vaccine project - related party            3,790,000                        3,790,000

Refundable investment deposits - related party                               -                          372,000

Patent rights - related party                                          500,000                                -

Licence and permit                                                   3,889,721                        3,316,458
----------------------------------------------------------------------------------------------------------------------------------
Total assets                                                    $   19,699,756                  $    22,005,037
==================================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Current
  Bank loans                                                    $    2,609,168                  $     2,887,345
  Accounts payable and accrued liabilities                           1,130,522                        1,318,938
  Management fees payable - related parties                             25,833                          234,000
----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                            3,765,523                        4,440,283
----------------------------------------------------------------------------------------------------------------------------------
Minority interests                                                           -                          688,539
----------------------------------------------------------------------------------------------------------------------------------

Commitments (Note 13)

Stockholders' Equity

Share capital
  Authorized:  50,000,000 common shares at
    par value of $0.001 each
  Issued and outstanding:  20,331,000 common shares
    (December 31, 2000 - 16,700,000)                                   20,331                           20,331

Additional paid in capital                                         26,624,741                       26,624,741

Accumulated other comprehensive (loss)                                (29,112)                         (25,008)

Accumulated deficit                                               (10,681,727)                      (9,743,849)
----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity                                         15,934,233                       16,876,215
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                      $  19,699,756                   $   22,005,037
==================================================================================================================================

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

</TABLE>

<PAGE> 4


DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


<TABLE>
<S>                                 <C>              <C>             <C>         <C>        <C>         <C>                 <C>
                                                                                                         Accumulated
                                                                                 Compre-                     other           Total
                                           Common stock            Additional    Hensive                     compre-         Stock-
                                    --------------------------      paid-in      Income       Deficit       hensive         holders'
                                       Shares     Amount            capital      (loss)   accumulated        income          equity
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2000        16,700,000  $ 16,700   $20,000,897             -     $  (6,008,544)   $   (25,588)    $ 13,983,465

Exercise of stock options for
cash                                 131,000       131        65,369             -                 -              -           65,500

Issuance of common stock pursuant
to a private placement at $2.00
per share, net of share issuance
costs of $490,000 in September     3,500,000     3,500     6,506,500             -                 -              -        6,510,000

Other comprehensive income
 - foreign currency translation            -         -             -           580                 -            580             580

Comprehensive (loss)
 - net (loss) for the year                 -         -             -    (3,735,305)       (3,735,305)             -       3,735,305)

Stock option compensation                  -         -        51,975             -                 -              -          51,975
------------------------------------------------------------------------------------------------------------------------------------

Comprehensive (loss)                                                   $(3,734,725)
                                                                       ==============

Balance, December 31, 2001       20,331,000    $20,331   $26,624,741                    $( 9,743,849)     $ (25,008)    $ 16,876,215
====================================================================================================================================

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


<PAGE> 5
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
<TABLE>
<S>                             <C>             <C>             <C>
                                                                                                            Accumulated
                                                                                 Compre-                      other          Total
                                  Common stock                   Additional      hensive                      compre-        Stock-
                              --------------------------          paid-in         income       Deficit        hensive       holders'
                                Shares       Amount               capital          (loss)    accumulated      income         equity
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001   20,331,000    $   20,331       $   26,624,741            -     $ (9,743,849)    $(25,008)   $16,876,215

Other comprehensive income
 - foreign currency
   translation                        -                -                  -       (4,104)              -       (4,104)       (4,104)

Comprehensive (loss)
 - net (loss) for the year            -                -                  -     (937,878)       (937,878)           -      (937,878)
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive (loss)                                                           $(941,982)
                                                                              =============

Balance, March 31, 2002      20,331,000    $  20,331        $   26,624,741                  $(10,681,727)    $(29,112) $(15,934,233)
==============================================================================              ========================================
</TABLE>

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

<PAGE> 6


DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 2002 and 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

<TABLE>
<S>                                                     <C>                             <C>
                                                           2002                         2001
------------------------------------------------------------------------------------------------------------------------------
Sales                                           $        1,372,808        $           664,414

Cost of sales                                              190,524                    146,920
------------------------------------------------------------------------------------------------------------------------------

Gross profit                                             1,182,284                    517,494

Selling, general and
  administrative expenses                               (1,096,460)                (1,125,808)

Depreciation of fixed assets and
  amortization of licence and permit                      (181,658)                  (153,814)

Net write off of land-use right and fixed assets            (1,225)                         -

Research and development expenses                         (755,572)                   (40,200)

New market development                                     (52,588)                   (99,880)

Provision for doubtful debts                               (25,856)                   (36,826)

Loan interest expense                                      (40,410)                   (33,993)

Stock-based compensation                                         -                    (51,975)
------------------------------------------------------------------------------------------------------------------------------

Operating loss                                            (971,485)                (1,025,002)

Interest income                                             33,607                     65,259
------------------------------------------------------------------------------------------------------------------------------

Loss before minority interest                             (937,878)                  (959,743)

Minority interest                                                -                    103,560
------------------------------------------------------------------------------------------------------------------------------

Net (loss) for the period                        $        (937,878)        $         (856,183)
==============================================================================================================================

(Loss) per share
      Basic and diluted                          $           (0.05)        $            (0.05)
==============================================================================================================================

Weighted average number of
  common shares outstanding
      Basic and diluted                                 20,331,000                 16,701,233
==============================================================================================================================
</TABLE>

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

<PAGE> 7


DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2002 and 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

<TABLE>
<S>                                                          <C>                     <C>

                                                              2002                     2001
-----------------------------------------------------------------------------------------------------------------------------

Cash flows from (used in) operating activities
   Net (loss) for the year                          $       (937,878)        $      (856,183)
   Adjustments to reconcile net loss to
     net cash used in operating activities:
     - stock-based compensation expense                            -                  51,975
     - depreciation of fixed assets and amortization of
          licence and permit                                 181,658                 197,323
     - minority interests                                          -                (103,560)
     - net write off of land-use right and fixed assets        1,225                       -
     - provision for doubtful debts                           25,856                  36,826
  Changes in non-cash working capital items:
     - accounts receivable                                  (557,582)                101,974
     - inventories                                           (15,076)               (148,974)
     - prepaid expenses and deposits                        (130,091)                (19,465)
     - accounts payable and accrued liabilities             (188,416)                (76,005)
     - management fees payable - related parties            (208,167)                      -
-----------------------------------------------------------------------------------------------------------------------------

                                                          (1,828,471)               (816,089)
-----------------------------------------------------------------------------------------------------------------------------

Cash flows used in investing activities
  Purchase of fixed assets                                   (44,392)               (327,932)
  (Increase) decrease in restricted funds                    299,985                (192,357)
  Acquisition of Patent rights                              (500,000)                      -
  Acquisition of balance of Huaxin                        (1,400,000)                      -
  Refundable investment deposits                             400,000                       -
-----------------------------------------------------------------------------------------------------------------------------

                                                          (1,244,407)               (520,289)
-----------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities
  Loan proceeds                                             (278,177)                277,842
  Proceeds from issuance of shares, net of issuance costs          -                   3,000
-----------------------------------------------------------------------------------------------------------------------------

                                                            (278,177)                280,842
-----------------------------------------------------------------------------------------------------------------------------

Foreign exchange (gain) loss on cash
  held in foreign currency                                    (3,884)                    506
-----------------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and
  and cash equivalents                                    (3,354,939)             (1,055,030)

Cash and cash equivalents, beginning of period             6,306,129               4,092,702
-----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period           $       2,951,190        $      3,037,672
=============================================================================================================================
</TABLE>

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

<PAGE> 8


DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
--------------------------------------------------------------------------------
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

1. Nature of Business

     The Company was formed on August 22, 1989 as First Geneva  Investments Inc.
     under the laws of the State of  Florida.  The  Company  changed its name to
     Dragon  Pharmaceuticals  Inc.  on  August  31,  1998.  Pursuant  to a share
     exchange  agreement,  dated July 29, 1998, the Company acquired 100% of the
     issued and outstanding shares of Allwin Newtech Ltd.  ("Allwin") by issuing
     7,000,000  common shares of the Company.  This transaction is accounted for
     as a reverse acquisition.

     Allwin  was  incorporated  under  the laws of  British  Virgin  Islands  on
     February  10,  1998.  Pursuant  to  a  Sino-Foreign   Co-operative  Company
     Contract,  dated April 18, 1998, Allwin and a Chinese  corporation formed a
     limited  liability  company  under the Chinese law,  named as Sanhe Kailong
     Bio-pharmaceutical Co., Ltd. ("Kailong"), located in Hebei Province, China.
     Allwin has a 95%  interest  in Kailong.  Pursuant  to another  Sino-foreign
     Co-operative  Company  Contract,  dated July 27, 1999, Allwin completed the
     acquisition of a 75% interest in Nanjing Huaxin Bio-pharmaceutical Co. Ltd.
     ("Huaxin"). In January 2002, the Company acquired the balance of Huaxin for
     $1,400,000.  Kailong is inactive  and Huaxin is in the business of research
     and development,  production and sales of pharmaceutical products in China.
     Allwin Biotrade Inc. ("Biotrade) was incorporated under the laws of British
     Virgin   Islands  on  June  6,  2000  for  the  purpose  of  marketing  and
     distributing    biopharmaceutical    products    outside   China.    Dragon
     Pharmaceuticals (Canada) Inc. ("Dragon Canada") was incorporated in British
     Columbia,  Canada on September 15, 2000 for the purpose of researching  and
     developing new biopharmaceutical products.

2. Significant Accounting Policies

(a) Basis of Consolidation

     (i) These  consolidated  financial  statements  include the accounts of the
     Company and its subsidiaries,  Allwin, Kailong, Huaxin, Biotrade and Dragon
     Canada. All inter-company transactions and balances have been eliminated.

     (ii) Under the terms of Sino-Foreign Joint Venture Contract, Huaxin's board
     of directors  consists of five directors of which the Company has the right
     to select three directors  including the chairman.  Except for (1) amending
     Huaxin's articles of association; (2) liquidating Huaxin; (3) increasing or
     decreasing Huaxin's registered capital; (4) mortgaging Huaxin's assets; and
     (5)  merging  Huaxin,  which  transactions  require  unanimous  approval by
     Huaxin's  board,  the Company  controls  Huaxin in the  ordinary  course of
     business.  Because  the  Company has a  controlling  financial  interest in
     Huaxin,  and  controls  Huaxin's  operations  in  the  ordinary  course  of
     business,  the  Company has  accounted  for Huaxin  using the  consolidated
     method of accounting as opposed to using the equity method.

<PAGE> 9

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

2. Significant Accounting Policies (continued)

     (b) Principles of Accounting

     These financial  statements are stated in US Dollars and have been prepared
     in accordance with accounting  principles  generally accepted in the United
     States.

     (c) Fixed Assets

     Depreciation  is based on the  estimated  useful lives of the assets and is
     computed using the straight-line method. Fixed assets are recorded at cost.
     Depreciation is provided over the following useful lives:

        Motor vehicle                                  10 years
        Lab equipment                                   8 years
        Office equipment and furniture                  5 years
        Leasehold improvements                          Term of lease (10 years)
        Production equipment                           10 years

     (d) Foreign Currency Transactions

          The parent  company,  Allwin,  Kailong,  Huaxin,  Biotrade  and Dragon
          Canada  maintain  their   accounting   records  in  their   functional
          currencies (i.e., U.S. dollars, U.S. dollars,  Renminbi Yuan, Renminbi
          Yuan, U.S. dollars and Canadian dollars respectively).  They translate
          foreign currency  transactions  into their functional  currency in the
          following manner.

          At the transaction date, each asset, liability, revenue and expense is
          translated  into the  functional  currency by the use of the  exchange
          rate in effect at that date.  At the period end,  monetary  assets and
          liabilities are translated  into the functional  currency by using the
          exchange rate in effect at that date. The resulting  foreign  exchange
          gains and losses are included in operations.

     (e) Foreign Currency Translations

          Assets and liabilities of the foreign  subsidiaries  (whose functional
          currency is Renminbi  Yuan or Canadian  dollars) are  translated  into
          U.S.  dollars at exchange  rates in effect at the balance  sheet date.
          Revenue and expenses are translated at average exchange rate. Gain and
          losses from such translations are included in stockholders' equity, as
          a component of other comprehensive income.

<PAGE> 10

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

2. Significant Accounting Policies (continued)

     (f) Accounting Estimates

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

     (g) Advertising Expenses

          The Company  expenses  advertising  costs as  incurred.  There were no
          advertising  expenses  incurred by the Company during the period ended
          March 31, 2002 and 2001.

     (h) Income Taxes

          The Company has adopted  Statement of Financial  Accounting  Standards
          ("SFAS") No. 109,  "Accounting  for Income Taxes",  which requires the
          Company  to  recognize  deferred  tax  liabilities  and assets for the
          expected  future tax  consequences of events that have been recognized
          in the  Company's  financial  statements  or  tax  returns  using  the
          liability  method.  Under this method,  deferred tax  liabilities  and
          assets are determined based on the temporary  differences  between the
          financial  statements  and tax bases of assets and  liabilities  using
          enacted tax rates in effect in the years in which the  differences are
          expected to reverse.

     (i) Comprehensive Income

          The  Company  has  adopted  SFAS  No.  130,  "Reporting  Comprehensive
          Income",  which  establishes  standards  for  reporting and display of
          comprehensive  income,  its components and accumulated  balances.  The
          Company  is   disclosing   this   information   on  its  Statement  of
          Stockholders'  Equity.  Comprehensive  income  comprises equity except
          those  resulting  from  investments  by owners  and  distributions  to
          owners. SFAS No. 130 did not change the current accounting  treatments
          for components of comprehensive income.

<PAGE> 11

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

2. Significant Accounting Policies (continued)

     (j) Financial Instruments and Concentration of Risks

          Fair value of financial  instruments  are made at a specific  point in
          time,  based on  relevant  information  about  financial  markets  and
          specific financial  instruments.  As these estimates are subjective in
          nature,  involving uncertainties and matters of significant judgement,
          they cannot be determined with  precision.  Changes in assumptions can
          significantly affect estimated fair values.

          The  carrying  value  of cash  and cash  equivalents,  term  deposits,
          accounts  receivable,   bank  loans,   accounts  payable  and  accrued
          liabilities  approximate  their fair value  because of the  short-term
          nature of these  instruments.  The  Company  places  its cash and cash
          equivalents  with high  credit  quality  financial  institutions.  The
          Company routinely maintains balances in a financial institution beyond
          the insured amount.  As of March 31, 2002, the Company had deposits of
          $45,000 above insured limits.

          The Company is operating in China,  which may give rise to significant
          foreign currency risks from  fluctuations and the degree of volatility
          of  foreign  exchange  rates  between  U.S.  dollars  and the  Chinese
          currency  RMB.  Financial  instruments  that  potentially  subject the
          Company to  concentration  of credit risk consist  principally of cash
          and trade receivables, the balances of which are stated on the balance
          sheet.  The Company places its cash in high credit  quality  financial
          institutions.  Concentration  of  credit  risk with  respect  to trade
          receivables are limited due to the Company's'  large number of diverse
          customers  in  different  locations  in China.  The  Company  does not
          require collateral or other security to support financial  instruments
          subject to credit risk.

     (k) Licence and Permit

          Licence  and  permit,  in  relation  to the  production  and  sales of
          pharmaceutical  products in China,  is  amortized  on a  straight-line
          basis over ten years.

          The carrying  value of licence and permit is reviewed by management at
          least annually and impairment  losses, if any, are recognized when the
          expected  non-discounted  future operating cash flows derived from the
          related product  licence  acquired are less than the carrying value of
          such licence and permit. In the event of an impairment in the value of
          the licence and permit,  the  discounted  cash flows method is used to
          arrive at the estimated fair value of such licence and permit.

<PAGE> 12

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

2. Significant Accounting Policies (continued)

     (l) Cash and Cash Equivalents

          Cash equivalents  usually consist of highly liquid  investments  which
          are readily  convertible  into cash with maturities of three months or
          less.  As at March 31, 2002,  cash  equivalents  consist of commercial
          papers and redeemable term deposits.

     (m) Inventories

          Inventories are stated at the lower of cost and replacement  cost with
          respect  to raw  materials  and the  lower of cost and net  realizable
          value with respect to finished goods.  Cost includes direct  material,
          direct labour and  overheads.  Cost is calculated  using the first-in,
          first-out  method.  Net realizable  value  represents the  anticipated
          selling price less further costs for completion and distribution.

     (n) Revenue Recognition

          Sales revenue is recognized upon the delivery of goods to customers.

     (o) Stock-based Compensation

          The Company  adopted the  disclosure-only  provisions  of Statement of
          Financial  Accounting  Standards No. 123 (SFAS 123),  "Accounting  for
          Stock-based Compensation".  SFAS 123 encourages, but does not require,
          companies to adopt a fair value based method for  determining  expense
          related to stock-based compensation.  The Company continues to account
          for stock-based  compensation  issued to employees and directors using
          the intrinsic value method as prescribed under  Accounting  Principles
          Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees"
          and related Interpretations.

     (p) Loss Per Share

          Loss per share is computed using the weighted average number of shares
          outstanding  during the  period.  The  Company  adopted  SFAS No. 128,
          "Earnings  per  share".  Diluted  loss per share is equal to the basic
          loss per share because common stock equivalents  consisting of options
          to acquire  2,969,500 common shares and warrants to acquire  3,200,000
          common   shares   that  are   outstanding   at  March  31,   2002  are
          anti-dilutive, however, they may be dilutive in future.

<PAGE> 13

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

2. Significant Accounting Policies (continued)

     (q) New Accounting Pronouncements

          In  June  2001,  the  Financial   Accounting  Standards  Board  issued
          Statement  of  Financial  Accounting  Standards  No.  141 (SFAS  141),
          Business  Combinations.  SFAS 141 applies to all business combinations
          initiated  after June 30,  2001.  The SFAS 141 applies to all business
          combinations  accounted  for using the  purchase  method for which the
          date of  acquisition  is July 1, 2001, or later.  The adoption of SFAS
          141 will not have an impact on the Company's financial statements.

          In  June  2001,  the  Financial   Accounting  Standards  Board  issued
          Statement  of  Financial  Accounting  Standards  No.  142 (SFAS  142),
          Goodwill and Other Intangible  Assets.  The provisions of SFAS 142 are
          required to be applied  starting  with fiscal  years  beginning  after
          December 15, 2001 with earlier application permitted for entities with
          fiscal years  beginning  after March 15, 2001  provided that the first
          interim  financial  statements  have not been previously  issued.  The
          Statement  is required to be applied at the  beginning of the entity's
          fiscal  year and to be applied to all  goodwill  and other  intangible
          assets  recognized  in its  financial  statements  to that  date.  The
          adoption  of SFAS  142  will  not  have  an  impact  on the  Company's
          financial statements.

          In August  2001,  the  Financial  Accounting  Standards  Board  issued
          Statement of Financial  Accounting Standards No. 143 (SFAS 143), Asset
          Retirement Obligations.  SFAS 143 establishes accounting standards for
          recognition  and  measurement  of a liability  for the costs of assets
          retirement obligations. Under SFAS 143, the costs of retiring an asset
          will be recorded as a liability when the retirement  obligation arises
          and will be  amortized  to  expense  over the life of the  asset.  The
          adoption  of SFAS  143  will  not  have  an  impact  on the  Company's
          financial statements.

          In October,  2001,  the Financial  Accounting  Standards  Board issued
          Statement  of  Financial  Accounting  Standards  No.  144 (SFAS  144),
          Accounting for the Impairment or Disposal of Long-lived  Assets.  SFAS
          144 supersedes  SFAS 121,  Accounting for the Impairment of Long-lived
          Assets and  Long-lived  Assets to be Disposed  Of, and APB Opinion 30,
          Reporting  the  Results  of  Operations  -  Reporting  the  Effects of
          Disposal of a Segment of a Business,  and  Extraordinary,  Unusual and
          Infrequently  Occurring  Events and  Transactions,  for  segments of a
          business to be disposed  of. SFAS 144 is  effective  for fiscal  years
          beginning  after  December 15, 2001. The adoption of SFAS 144 will not
          have an impact on the Company's financial statements.

<PAGE> 14

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

3.   Restricted Funds

<TABLE>
        <S>                                                                     <C>             <C>

         ------------------------------------------------------------------- ------------------- -------------------
                                                                                 March 31, 2002   December 31, 2001
         ------------------------------------------------------------------- ------------------- -------------------

         Term deposits held as collateral against bank loans                         $2,839,970          $3,139,955
         Cash and cash equivalents                                                    2,951,190           6,306,129
         ------------------------------------------------------------------- ------------------- -------------------

         Cash and short term securities                                              $5,791,160          $9,446,084
         =================================================================== =================== ===================


4.   Accounts Receivable

         ------------------------------------------------------------------ -------------------- -------------------
                                                                                 March 31, 2002   December 31, 2001
         ------------------------------------------------------------------ -------------------- -------------------

         Trade receivable                                                            $1,776,194           $1,225,455

         Allowance for doubtful accounts                                               (151,823)             (97,982)
         ------------------------------------------------------------------ -------------------- -------------------

                                                                                      1,624,371            1,127,473

         Other receivable                                                               189,041              182,213
         ------------------------------------------------------------------ -------------------- -------------------

                                                                                     $1,813,412           $1,309,686
         ================================================================== ==================== ===================


5.   Inventories

         ------------------------------------------------------------------ -------------------- -------------------
                                                                                 March 31, 2002   December 31, 2001
         ------------------------------------------------------------------ -------------------- -------------------

         Raw materials                                                                 $146,105             $173,687

         Finished goods                                                                 173,271              179,871

         Work in progress                                                               791,560              742,302
         ------------------------------------------------------------------ -------------------- -------------------

                                                                                     $1,110,936           $1,095,860
         ================================================================== ==================== ===================
</TABLE>


<PAGE> 15

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

6.   Fixed Assets
<TABLE>
         <S>                                            <C>                   <C>                    <C>

         -------------------------------------------- --------------------------------------------------------------
                                                                             March 31, 2002
                                                      --------------------------------------------------------------
                                                                               Accumulated            Net book
                                                             Cost             depreciation             value
         -------------------------------------------- ------------------- ---------------------- -------------------

         Motor vehicles                                   $100,317                $35,674             $64,643
         Office equipment and furniture                    335,348                101,616             233,732
         Leasehold improvements                            998,404                248,691             749,713
         Production and lab equipment                    2,039,274                553,266           1,486,008
         -------------------------------------------- ------------------- ---------------------- -------------------

                                                        $3,473,343               $939,247          $2,534,096
         ============================================ =================== ====================== ===================


         -------------------------------------------- --------------------------------------------------------------
                                                                            December 31, 2001
                                                      --------------------------------------------------------------
                                                                               Accumulated            Net book
                                                             Cost             depreciation             value
         -------------------------------------------- ------------------- ---------------------- -------------------

         Motor vehicles                                   $100,329                $31,657             $68,672
         Office equipment and furniture                    267,104                 85,935             181,169
         Leasehold improvements                            990,940                221,652             769,288
         Production and lab equipment                    2,020,137                504,657           1,515,480
         -------------------------------------------- ------------------- ---------------------- -------------------

                                                        $3,378,510               $843,901          $2,534,609
         ============================================ =================== ====================== ===================

          For the three  months  ended  March 31,  2002,  depreciation  expenses
          totalled  $95,675  (2001 - $84,755).  The majority of fixed assets are
          located in China.


7.   Investment in Hepatitis B Vaccine Project - Related Party

         ----------------------------------------------------------------- -------------------- --------------------
                                                                                March 31, 2002    December 31, 2001
         ----------------------------------------------------------------- -------------------- --------------------

         Hepatitis B Vaccine Project                                                $4,000,000           $4,000,000

         Less:  Valuation allowance                                                   (210,000)            (210,000)
         ----------------------------------------------------------------- -------------------- --------------------

                                                                                    $3,790,000           $3,790,000
         ================================================================= ==================== ====================
</TABLE>

(a)  Pursuant to an agreement dated October 6, 2000, the Company paid $4,000,000
     for the  acquisition  of certain  assets  and  technology  relating  to the
     production  of  Hepatitis  B vaccine.  The vendor of the  transaction  is a
     company named Alphatech Bioengineering Limited,  incorporated in Hong Kong,
     and one of the two  shareholders  of which is a director and senior officer
     of the Company.

<PAGE> 16

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

7. Investment in Hepatitis B Vaccine Project - Related Party (continued)

     (b)  Pursuant to an amended agreement dated June 5, 2001, in the event that
          the  Company  failed  to find a joint  venture  partner,  establish  a
          production  facility for the vaccine  project or sell the project to a
          third  party  within  nine  months  from  the  date  of  this  amended
          agreement,  Dr.  Longbin  Liu, a senior  officer  and  director of the
          Company  and  one  of  the  shareholders  of  Alphatech,   demands  to
          repurchase the project from the Company.  The repurchase price will be
          $4.0 million payable as follows:

          (i)  $500,000 at the date of repurchase; and

          (ii) the balance to be paid within eighteen (18) months of the date of
               repurchase  with  interest at 6% per annum.  The interest will be
               accrued from six months after the date of repurchase.

               Subsequent to March 31, 2002,  the Company  decided not to pursue
               the Project and Dr. Liu demanded to repurchase the Project on the
               agreed terms.


8.   Refundable Investment deposits - Related Party
<TABLE>
<S>                                                                           <C>               <C>

         ----------------------------------------------------------------- -------------------- --------------------
                                                                                March 31, 2002    December 31, 2001
         ----------------------------------------------------------------- -------------------- --------------------

         Guanzhou Recomgen Biotech Co. Ltd.
         - Tissue Plasminogen Activator ("TPA") Project                                     -              $400,000

         Less:  Valuation allowance                                                         -               (28,000)
         ----------------------------------------------------------------- -------------------- --------------------

                                                                                            -              $372,000
         ================================================================= ==================== ====================
</TABLE>

     During the year 2000,  the  Company  paid  $400,000  to  Guanzhou  Recomgen
     Biotech Co. Ltd. ("Guanzhou  Recomgen"),  a company  incorporated in China,
     for the  funding of its TPA  research  and  development  programs  with the
     intention of acquiring the technology. Guanzhou Recomgen is controlled by a
     senior  officer and a director of the Company.  The Company  decided not to
     proceed with the funding and the  acquisition  due to financial  market and
     economic conditions and the $400,000 was repaid in January 2002.


9. Patent Rights - Related Party

     Pursuant to an agreement dated January 14, 2002, the Company entered into a
     Patent Development Agreement with the President and a company controlled by
     the  President  entitling  the Company to acquire  one patent  filed in the
     United  States  related  to  the  discovery  of  a  new  gene  or  protein.
     Consideration for the right to acquire the patent was payment of US$500,000
     and the  issuance  of warrants to acquire  1,000,000  common  shares of the
     Company  at a price of $2.50  per share  for a period  of five  years.  The
     patent may be  acquired  prior to January 14,  2005 at no  additional  cost
     other than the reasonable legal costs of obtaining the patent.

<PAGE> 17

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
10.  Bank Loans

<TABLE>
<S>                                                                                <C>             <C>
         ------------------------------------------------------------------------- --------------- ------------------
                                                                                   March 31, 2002  December 31, 2001
         ------------------------------------------------------------------------- --------------- ------------------

         RMB 7,800,000, bearing interest at 5.265% per annum and due on January
         31, 2003. The loan is secured by the term deposit.                              $942,200           $942,312

         RMB 4,000,000, bearing interest at 5.265% per annum and due on August
         20, 2002.  The loan is secured by the term deposit.                              483,178            483,238

         RMB 1,400,000 bearing interest at 5.265% per annum and due on July 26,
         2002.  The loan is secured by the term deposit.                                  169,113            169,133

         RMB 2,300,000 bearing interest at 5.265% per annum and due on January
         18, 2002. The loan is secured by the term deposit.                                     -            277,862

         RMB 3,150,000 bearing interest at 5.265% per annum and due on April 4,
         2002.  The loan is secured by the term deposit.                                  380,504            380,550

         RMB 3,700,000 bearing interest at 5.265% per annum and due on June 19,
         2002.  The loan is secured by the term deposit.                                  446,941            446,995

         RMB 1,555,000 bearing interest at 5.265% per annum and due on January
         31, 2003. The loan is secured by the term deposit.                               187,232            187,255
         ------------------------------------------------------------------------- --------------- ------------------

         Total                                                                         $2,609,168         $2,887,345
         ========================================================================= =============== ==================
</TABLE>

     The  weighted  average  interest  rate was  5.265%  and 5.48% for the three
     months ended March 31, 2002 and 2001.

<PAGE> 18

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

11. Income Taxes

(a)  Kailong  and Huaxin are  subject  to income  taxes in China on its  taxable
     income as reported in its  statutory  accounts at a tax rate in  accordance
     with the relevant income tax laws  applicable to Sino-foreign  equity joint
     venture enterprises. However, pursuant to the same income tax laws, Kailong
     and Huaxin are fully  exempt from income tax for five years  starting  from
     their first  profit-making  year followed by a 15% corporation tax rate for
     the next three years.

          Allwin is not subject to income taxes.

          As at March 31,  2002,  the parent  company,  Kailong  and Huaxin have
          estimated   losses,   for  tax   purposes,   totalling   approximately
          $6,175,000,  which  may be  applied  against  future  taxable  income.
          Accordingly,  there is no tax  expense  charged  to the  Statement  of
          Operations  for the three  months  ended March 31, 2002 and 2001.  The
          potential  tax  benefits  arising  from  these  losses  have  not been
          recorded  in the  financial  statements.  The  Company  evaluates  its
          valuation allowance requirements on an annual basis based on projected
          future operations.  When circumstances change and this causes a change
          in  management's  judgement  about the  realizability  of deferred tax
          assets,  the  impact  of the  change  on the  valuation  allowance  is
          generally reflected in current income.

(b)  The tax effect of  temporary  differences  that give rise to the  Company's
     deferred tax asset (liability) are as follows:

<TABLE>
<S>                                                                             <C>               <C>

                  ----------------------------------------------------------- ------------------- -------------------
                                                                                  March 31, 2002   December 31, 2001
                  ----------------------------------------------------------- ------------------- -------------------

                  Tax losses carried forward                                          $2,100,000          $1,850,000
                  Stock-based compensation                                                     -              17,700
                  Less: valuation allowance                                           (2,100,000)         (1,867,700)
                  ----------------------------------------------------------- ------------------- -------------------

                                                                                       $       -          $         -
                  =========================================================== =================== ===================

          A reconciliation  of the federal statutory income tax to the Company's
          effective  income tax rate,  for the three months ended March 31, 2002
          and 2001, is as follows:

                  ----------------------------------------------------------- ------------------- -------------------
                                                                                       2002                2001
                  ----------------------------------------------------------- ------------------- -------------------

                  Federal statutory income tax rate                                     34%                 34%
                  Change in valuation allowance                                        (34%)               (34%)
                  ----------------------------------------------------------- ------------------- -------------------

                  Effective income tax rate                                              -                   -
                  =========================================================== =================== ===================
</TABLE>

<PAGE> 19

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

12. Stock Options and Warrants

     (a) Stock Options Plans

          The Company  charged  $51,975 to income  during the three months ended
          March 31, 2001 due to the exercise price of the vested options granted
          being  below  fair  value  of the  Company's  stock on the date of the
          grant.  There were no options  granted  during the three  months ended
          March 31, 2002.

          Subsequent  to March  31,  2002,  the  Company  cancelled  options  to
          purchase  187,500  shares at a price of $3.125  per share and  granted
          options to purchase 920,000 shares at a price of $1.70 per share.

          The  following is a summary of the employee  stock option  information
          for the period ended March 31, 2002:

<TABLE>
                  <S>                                                         <C>               <C>

                  ------------------------------------------------------ ------------------ ------------------------
                                                                                                Weighted Average
                                                                              Shares             Exercise Price
                  ------------------------------------------------------ ------------------ ------------------------

                  Options outstanding at December 31, 1999                   1,520,000            $   0.58
                  Granted                                                    1,737,500            $   3.31
                  Forfeited                                                   (107,500)           $   7.00
                  Exercised                                                   (107,000)           $   0.50
                  ------------------------------------------------------ ------------------ ------------------------
                  ------------------------------------------------------ ------------------ ------------------------

                  Options outstanding at December 31, 2000                                        $   1.89
                  Granted                                                      195,000            $   1.79
                  Forfeited                                                   (137,500)           $   2.93
                  Exercised                                                   (131,000)           $   0.50
                  ------------------------------------------------------ ------------------ ------------------------

                  Options outstanding at December 31, 2001
                       and March 31, 2002
                                                                             2,969,500              $ 1.92
                  ====================================================== ================== ========================
</TABLE>
<TABLE>
<S>                   <C>                                                <C>

                      Options Outstanding                                 Options Exercisable
------------------------------------------------------------------- ----------------------------------
                                     Weighted
                                      Average         Weighted                           Weighted
     Range of                        Remaining         Average                           Average
     Exercise         Number        Contractual       Exercise           Number          Exercise
      Prices       Outstanding         Life             Price          Exercisable        Price
------------------------------------------------------------------- ----------------------------------
     $0.01 - $1.00     1,257,000           2.04       $   0.50          1,243,000        $   0.50

     $1.01 - $2.00       175,000           4.33       $   1.79            175,000        $   1.79

     $2.01 - $3.00        60,000           2.61       $   2.50             60,000        $   2.50

     $3.01 - $4.00     1,477,500           3.6        $   3.13          1,477,500        $   3.13
                       -------------------------     -------------      ----------      -------------
                       2,969,500           2.97        $   1.92         2,955,500        $   1.93
                       ===============     =====     =============      ==========      =============
</TABLE>

<PAGE> 20

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

12. Stock Options and Warrants (continued)

          The  Company  accounts  for  its  stock-based   compensation  plan  in
          accordance  with APB Opinion No. 25,  under which no  compensation  is
          recognized in connection with options  granted to employees  except if
          options  are  granted  with a strike  price  below  fair  value of the
          underlying stock. The Company adopted the disclosure requirements SFAS
          No. 123,  Accounting for Stock-Based  Compensation.  Accordingly,  the
          Company is required to  calculate  and present the pro forma effect of
          all awards granted.  For disclosure  purposes,  the fair value of each
          option  granted to an employee  has been  estimated  as of the date of
          grant using the Black-Scholes  option pricing model with the following
          assumptions:  risk-free  interest  rate of 5.5%,  dividend  yield  0%,
          volatility of 89%, and expected lives of  approximately  0 to 5 years.
          Based on the  computed  option  values and the  number of the  options
          issued, had the Company recognized compensation expense, the following
          would have been its effect on the Company's net loss:

<TABLE>
<S>                                                                             <C>                 <C>

                  ------------------------------------------------------------ ------------------ ------------------
                                                                                  March 31, 2002     March 31, 2001
                  ------------------------------------------------------------ ------------------ ------------------

                  Net (loss) for the period:
                  - as reported                                                       $(937,878)         $(856,183)
                  - pro-forma                                                          (937,878)          (856,767)
                  ------------------------------------------------------------ ------------------ ------------------

                  Basic and diluted (loss) per share:
                  - as reported                                                          $(0.05)            $(0.05)
                  - pro-forma                                                            $(0.05)            $(0.05)
                  ------------------------------------------------------------ ------------------ ------------------
</TABLE>

     (b) Warrants


        Share purchase warrants outstanding as at December 31, 2001:

        Number          Underlying      Exercise Price
    of Warrants           Shares           Per Share          Expiry Date
    -----------         ----------      --------------        -----------
      400,000             400,000           $3.00            November 24, 2002
    3,500,000           1,750,000           $2.00            September 13, 2003
       50,000              50,000           $1.70            November 15, 2004
    1,000,000           1,000,000           $2.50            January 14, 2007


<PAGE> 21

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

13. Related Party Transactions

(a) The Company incurred the following expenses to two directors of the Company:

<TABLE>
<S>                                                                                <C>              <C>

                  --------------------------------------------------------------- ----------------- ----------------
                                                                                    March 31, 2002   March 31, 2001
                  --------------------------------------------------------------- ----------------- ----------------

                  Management fees                                                      $57,500          $18,000
                  =============================================================== ================= ================

</TABLE>


     (b)  Pursuant to an agreement  dated January 14, 2002, the Company  entered
          into a Project  Development  Agreement  with the  President  and Chief
          Executive  Officer of the Company  (the  "President")  to continue the
          research and  development  of G-CSF and Insulin for the  Company.  The
          Company will make payment for the development of G-CSF as follows:

          (i)  US$500,000 to be provided at the  commencement of the research in
               the G-CSF Project;

          (ii) US$500,000 to be provided when  cell-line and related  technology
               is established and animal experimentation  commences in the G-CSF
               Project; and

          (iii)US$300,000 to be provided  when a permit for clinical  trials for
               G-CSF has been issued by the State Drug  Administration  of China
               ("SDA"); and

          (iv) US$200,000  to be provided  when a new drug  license for G-CSF is
               issued to Dragon by the SDA.

          (v)  US$500,000  to be paid as a bonus if the SDA  issues the new drug
               license for G-CSF to Dragon before January 14, 2004.

               The Company will make payment for the  development  of Insulin as
               follows:

          (i)  US$750,000 to be provided by at the  commencement of the research
               in the Insulin Project;

          (ii) US$750,000 to be provided when  cell-line and related  technology
               is  established  and  animal  experimentation  commences  in  the
               Insulin Project;

          (iii)US$300,000 to be provided  when a permit for clinical  trials for
               Insulin has been issued by the SDA; and

          (iv) US$200,000  to be provided when a new drug license for Insulin is
               issued to Dragon by the SDA.

          (v)  US$500,000  to be paid as a bonus if the SDA  issues the new drug
               license for Insulin to Dragon before January 14, 2005.

<PAGE> 22

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

13. Related Party Transactions (continued)

     (a) For both the G-CSF and Insulin Projects:

          (i)  If the Company elects to cease development of the project it will
               forfeit any payments made and lose ownership of the Project,  but
               it will not be obligated to make any further  payments toward the
               Project;

          (ii) if an application for permit for clinical trials is not submitted
               within three years with  respect to the G-CSF  Project by or four
               years with  respect to the Insulin  Project or if the SDA rejects
               the Project for technical or scientific reasons or If development
               of the Project is terminated by the President, then the President
               will refund to the Company all amounts paid,  without interest or
               deduction, with respect to the Project with in six months

     (c) see Notes 7,8, and 9 also.


14. Commitments

     The Company has entered into  operating  lease  agreements  with respect to
     Huaxin's production plant in Nanjing,  China for an amount of RMB 2,700,000
     (US$326,000)   per  annum   until  June  11,   2009,   and  the   Company's
     administrative   offices  in  Vancouver  for  an  amount   escalating  from
     CDN$200,000 to CDN$230,000 (US$126,000 to US$145,000) per annum until March
     31, 2007. Minimum payments required under the agreements are as follows:

        2002                                        $347,837
        2003                                         452,312
        2004                                         467,023
        2005                                         468,104
        2006                                         471,345
        2007 - 2009                                  833,574
        -----------------------------------------------------
        Total                                   US$3,040,195
        -----------------------------------------------------

15. Comparative Figures

     Certain 2001 comparative  figures have been  reclassified to conform to the
     financial statement presentation adopted for 2002.


<PAGE> 23


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operation

The  following  discusses  the  Company's  financial  condition  and  results of
operations based upon the Company's consolidated financial statements which have
been prepared in accordance with generally accepted  accounting  principles.  It
should be read in conjunction  with the Company's  financial  statements and the
notes thereto and other  financial  information  included in the Company's  Form
10-KSB for the fiscal year ended December 31, 2001.

Overview

The Company (or  "Dragon")  was formed on August 22, 1989,  under the name First
Geneva Inc. First Geneva  Investment's  business was to evaluate  businesses for
possible  acquisition.  On July 28, 1998, First Geneva Investment entered into a
share exchange agreement with Allwin Newtech.  Allwin Newtech was formed in 1998
for the purpose of  developing  and marketing  pharmaceutical  drugs for sale in
China. Prior to the acquisition of Allwin Newtech,  First Geneva Investments had
no operations.  On September 21, 1998, First Geneva Investments changed its name
to Dragon Pharmaceutical Inc.

On  July  27,  1999,   Dragon   acquired  a  75%  interest  in  Nanjing   Huaxin
Biopharmaceuticals  Co. Ltd.  ("Huaxin"),  which  manufactures EPO in China. The
Company  increased  the  efficiencies  in the  production  of EPO by improving a
proprietary  high-yield  mammalian cell line and  "vectoring  process" which has
been  developed  by  Dragon.  The  Company   successfully   achieved  commercial
production during the last quarter of calendar1999.  In January 2002 the Company
purchased the balance of Huaxin for $1,400,000.

On September 6, 2000 Dragon  incorporated  Allwin  Biotrade  Inc.  ("Biotrade").
Biotrade  was  incorporated  for  the  purpose  of  marketing  and  distributing
biopharmaceutical   products   outside  China.  On  September  15,  2000  Dragon
incorporated  Dragon  Pharmaceuticals  (Canada) Inc. ("Dragon  Canada").  Dragon
Canada was  incorporated  for the  purpose of  researching  and  developing  new
biopharmaceutical products.

Results of Operations

Revenues.  Revenue  is  generated  from the sale of EPO in China by  Huaxin  and
throughout the developing world by Biotrade.  Revenue for the three-month period
ending March 31, 2002 was  $1,372,808  compared to $664,414 for the  three-month
period  ending March 31, 2001.  Sales in and outside of China were  $525,308 and
$847,500,  respectively during the three-month period ending March 31, 2002. All
sales during the three-month period ending March 31, 2001 were in China. Cost of
sales for the three-months ended March 31, 2002 of $190,524 is attributed to the
production  costs of the  pharmaceutical  products.  The  cost of sales  for the
three-months ended March 31, 2001 was $146,920.

Interest  income is related  primarily to interest  earned on cash received from
the private  placement of common stock received during the third quarter of 2001
and the last quarter of 1999. Interest income for the three-months period ending
March 31, 2002 was $33,607 compared to $65,259 for the three-month  period ended
March 31, 2001.  Interest income has decreased as the cash balance has decreased
through the funding of operations.

Expenses.  Total operating  expenses for the  three-months  ended March 31, 2002
were $2,153,768.  The major expenses  incurred in the first quarter of 2002 were
research  and  development  expenses  of $755,572  and the  selling  expenses of
$477,196 representing 35% and 22% of total expenses, respectively. The remaining
major expense items are represented by administrative expenses.

<PAGE> 24

Significant  operating  expenses  for the  three-months  ended  March  31,  2002
included consulting fees of $148,737, loan interest of $40,410, rent of $61,546,
salaries and benefits of $141,686,  $78,390 in travel costs and management  fees
of $76,193.  Management  fees  include  $57,500  incurred to two  directors  for
services during the first quarter of 2002.

Other significant expenses for the fist quarter of 2002 include the depreciation
of fixed assets and  amortization  of license and permit and land-use  rights of
$181,658.

Comparatively,  total  operating  expenses  for the first  quarter  of 2001 were
$1,542,496.  Selling  expenses  represented 37% total operating  expenses during
this period.  Other major  expenses for the  three-month  period ended March 31,
2001 included the  depreciation  of fixed assets and  amortization of intangible
assets of $153,814, consulting fees of $122,323, bad debt write offs of $36,826,
loan interest of $33,993,  rent of $71,330,  salaries of $95,242 and  management
fees of $35,125,  including  management  fees of $18,000  paid to a director for
services rendered during the period.

Overall,  expenditures  have increased in 2001 over 2000 levels due to increased
personnel and activity levels.

Net and Comprehensive  Loss.  Dragon had a net loss and a comprehensive  loss of
$937,878 for the three-months ended March 31, 2002.

The  Company's  net loss for the  three-month  period ended March 31, 2001,  was
$959,743,  which includes a minority interest share of the loss of $103,560. The
comprehensive loss for the same period was $856,183.

Basic and Diluted Net Loss Per Share

The  Company's net loss per share has been computed by dividing the net loss for
the  period  by  the  weighted  average  number  of  shares  outstanding  during
three-months ended March 31, 2002. The loss per share for the three-month period
ended March 31,  2002 was $0.05.  Common  stock  issuable  upon the  exercise of
common stock  options and common stock  warrants have been excluded from the net
loss per share calculations as their inclusion would be anti-dilutive.

Liquidity and Capital Resources

Dragon is a development stage pharmaceutical and  biotechnological  company that
has commenced the manufacture and marketing of pharmaceutical  products in China
through  its 75% equity  interest in Nanjing  Huaxin  Biotech.  Previously,  the
Company has raised funds through equity financings to fund its operations and to
provide  working  capital.  The Company may finance  future  operations  through
additional equity financings.

On October 14, 1999, the Company  entered into  securities  purchase  agreements
with two investors located in Hong Kong. Under the terms of this agreement,  the
investors purchased,  in the aggregate,  600,000 shares of common stock at $2.50
per share, with the Company raising in the aggregate $1.5 million.

<PAGE> 25

On December 31, 1999, the Company closed a private placement raising $10,645,000
through the issue of  4,258,000  shares of common  stock at a price of $2.50 per
share.   $600,000  of  the  gross  proceeds  from  the  December  1999  offering
represented the conversion of the outstanding debt by the lenders into shares of
common stock of the Company at a price of $2.50 per share.

One million  common  shares were issued  through the  exercise of warrants  that
expired on  September  30,  2000.  These  warrants  were issued to  shareholders
through the  acquisition  of Allwin  Newtech on August 17, 1998.  Gross proceeds
from the exercise of the warrants were $1,000,000.

On September 14, 2001, the Company closed a private placement raising $7,000,000
through the issue of  3,500,000  shares of common  stock at a price of $2.00 per
share.

As of March 31, 2002, the Company had $5,791,160 in unrestricted cash available,
and working capital of $5,220,416. This cash and working captial will be used to
fund the ongoing  operations and research and development of the Company for the
next 21 months.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk,  primarily  related to foreign  exchange.
The Company  maintains its  accounting  records in their  functional  currencies
(i.e., U.S.  dollars,  Renminbi Yuan, and Canadian dollars  respectively).  They
translate foreign currency  transactions  into their functional  currency in the
following manner.

At  the  transaction  date,  each  asset,  liability,  revenue  and  expense  is
translated  into the  functional  currency  by the use of the  exchange  rate in
effect at that date.  At the period end,  monetary  assets and  liabilities  are
translated into the functional  currency by using the exchange rate in effect at
that date.  The  resulting  foreign  exchange  gains and losses are  included in
operations.

The following  table sets forth the  percentage of the Company's  administrative
expense by currency for the years ended  December 31, 2000 and 2001 and quarters
ended March 31, 2001 and 2002.

By Currency

                        December 31, 2001           December 31, 2002
                        -----------------           ------------------

U.S. Dollar                    22%                       31%

Canadian Dollar                 0%                       12%

Renminbi yuan                  78%                       57%

Total                         100%                      100%


<PAGE> 26
                         March 31, 2001              March 31, 2002
                        ----------------           ------------------

U.S. Dollar                    36%                       41%

Canadian Dollar                 0%                       13%

Renminbi yuan                  64%                       45%

Total                         100%                      100%




Such  administrative  expense by currency may change from time to time. Further,
the Company incurred expenses in China of $427,000 and $503,000 for the quarters
ended March 31, 2001 and 2002, respectively, all of which were paid in RMB.

The Company has not entered  into any  material  foreign  exchange  contracts to
minimize  or  mitigate  the  effects of  foreign  exchange  fluctuations  on the
Company's  operations.  The Company  exchanges United States dollars to fund its
Chinese  operations.  Based on prior years, the Company does not believe that it
is subject to material foreign exchange fluctuations,  however, no assurance can
be given that this will not occur in the future.

As disclosed in Note 10 to the Company's financial  statements,  the Company has
entered into a series of loans in the aggregate outstanding amount of $2,609,168
as of March 31, 2002.  The  weighted  average  interest  rate was 5.265% for the
three  months  ended March 31,  2002.  Some of these loans are due  beginning on
April 4, 2002 and ending on January 31, 2003. To the extent that there may be an
increase in interest  rates during this period,  the Company  could be adversely
affected.

PART II. OTHER INFORMATION

Items 1, 2, 3, 4, 5 and 6

None.

<PAGE> 27

Signatures

In accordance with the requirements 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

                                        DRAGON PHARMACEUTICAL INC.
                                        (registrant)

Dated:   May 13, 2002                   /s/ Matthew Kavanagh
                                        ----------------------------------------
                                        Matthew Kavanagh
                                        Director of Finance and Corporate
                                        Compliance and Corporate Secretary
                                        (Authorized to sign on behalf of the
                                        registrant)