U.S. Securities and Exchange
                        Commission Washington, D.C. 20549

                           Form 10-QSB/Amendment No. 1

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

               For  the quarterly period ended March 31, 2005

                                       OR

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

               For the transition period from _____ to _____

                         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)

Indicate by check mark whether the registrant (1) has filed all reports required
to be  filed by  Section  13 or 15(d) of the  Exchange  Act of 1934  during  the
preceding 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, 2005: 62,878,004


<PAGE>


Explanatory  Note.  Dragon  Pharmaceutical  is filing this amendment no.1 to its
quarterly  report for the quarter ended March 31, 2005 to restate  Oriental Wave
Holding Limited's financial  statements for the year ended December 31, 2004 and
Dragon's  financial  statements  for the quarterly  period ended March 31, 2005.
After   review   of  its   accounting   policies   and   applicable   accounting
pronouncements,  Dragon  believes  that the  reduction  of a  future  retirement
benefit  obligation  related  to the  acquisition  of a land use  right  from an
unrelated former state-owned  enterprise in China by Oriental Wave in July 2003,
should have been  accounted  for as a reduction to the recorded cost of the land
use right instead of as a  non-operating  gain from  extinguishment  of debt, as
previously disclosed in Oriental Wave's 2004 financial statements.

PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statement


                           DRAGON PHARMACEUTICAL INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004



                                    CONTENTS


PAGE     3          CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2005 (UNAUDITED)
                    AND DECEMBER 31, 2004

PAGE     4          CONSOLIDATED  STATEMENTS  OF  OPERATIONS  AND  COMPREHENSIVE
                    INCOME FOR THE THREE  MONTHS  ENDED  MARCH 31, 2005 AND 2004
                    (UNAUDITED)

PAGE     5          CONSOLIDATED  STATEMENTS  OF  STOCKHOLDERS'  EQUITY  FOR THE
                    PERIODS  ENDED MARCH 31, 2005  (UNAUDITED)  AND DECEMBER 31,
                    2004

PAGE     6          CONSOLIDATED  STATEMENTS  OF CASH FLOWS FOR THE THREE MONTHS
                    ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)

PAGES 7 TO 25       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



<PAGE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>

                                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS
                             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004


                                                    ASSETS
                                                    ------
                                                                                                   RESTATED              RESTATED
                                                                                                    (NOTE 18)            (NOTE 18)
                                                                                                 March 31, 2005         December 31,
                                                                               Note                (Unaudited)              2004
                                                                             ----------       ------------------      --------------
CURRENT ASSETS
    Cash and cash equivalents                                                              $          1,785,238    $        910,425
    Accounts receivable, net of allowances                                       2                    8,770,244           6,675,298
    Inventories, net                                                             3                   16,585,898          16,623,906
    Value added tax receivable                                                                                -             162,443
    Prepaid expenses                                                                                  1,154,013             911,228
                                                                                              ------------------      --------------
    Total Current Assets                                                                             28,295,393          25,283,300
                                                                                              ------------------      --------------

PROPERTY AND EQUIPMENT, NET                                                      4                   62,765,232          62,396,316

OTHER ASSETS
    Intangible assets, net                                                       6                    2,650,693             432,769
    Other receivables                                                                                 2,428,564           2,213,842
    Investments -cost                                                                                    12,077              12,077
                                                                                              ------------------      --------------
    Total Other Assets                                                                                5,091,334           2,658,688
                                                                                              ------------------      --------------
TOTAL ASSETS                                                                               $         96,151,959    $     90,338,304
------------                                                                                 ==================       ==============

                          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Accounts payable                                                                       $          4,766,797    $      3,047,485
    Accrued retirement benefits                                                  7                      114,432             114,432
    Other payables and accrued liabilities                                       8                   17,117,072          17,705,163
    Notes payable - short-term                                                   9                    5,033,816          12,884,057
    Due to related companies                                                    11                      627,889           4,660,984
                                                                                              ------------------      --------------
    Total Current Liabilities                                                                        27,660,006          38,412,121
                                                                                              ------------------      --------------
LONG-TERM LIABILITIES
    Long term accounts payable                                                  10                   21,904,603          21,873,147
    Long term retirement benefits                                                7                      841,713             870,321
    Notes payable - long-term                                                    9                   14,770,532           6,316,426
    Due to related companies                                                    11                            -           1,328,502
                                                                                              ------------------      --------------
    Total Long-Term Liabilities                                                                      37,516,848          30,388,396
                                                                                              ------------------      --------------

TOTAL LIABILITIES                                                                                    65,176,854          68,800,517
                                                                                              ------------------      --------------

COMMITMENTS AND CONTINGENCIES                                                                                                     -

STOCKHOLDERS' EQUITY
  Authorized: 200,000,000 common shares at par value of $0.001 each
  Issued and outstanding: 62,878,004 (December 31, 2004: 44,502,004)
  common shares                                                                                          62,878              44,502
  Additional paid-in capital                                                                         22,138,830          13,983,002
  Retained earnings
    Unappropriated                                                                                    1,240,756                  -
    Appropriated                                                                                      7,562,432           7,562,432
  Due from stockholder                                                                                 (29,791)             (52,149)
                                                                                              ------------------      --------------
       Total Stockholders' Equity                                                                    30,975,105          21,537,787
                                                                                              ------------------      --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                 $         96,151,959    $     90,338,304
------------------------------------------                                                    ==================      ==============

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

                                        3
<PAGE>

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

                                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                            AND COMPREHENSIVE INCOME
                         FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)



                                                                                             RESTATED
                                                                                             (NOTE 18)
                                                                                                2005                        2004
                                                                          Note              (Unaudited)                 (Unaudited)
                                                                       ----------       --------------------      ------------------

NET SALES                                                                 12         $           11,828,663    $          7,155,036

COST OF SALES                                                                                     8,619,484               3,957,103
                                                                                        --------------------      ------------------
GROSS PROFIT                                                                                      3,209,179               3,197,933
                                                                                        --------------------      ------------------

OPERATING EXPENSES
  Selling expense                                                                                 1,143,967                 808,902
  General and administrative expenses                                                             1,004,141                 422,030
  Depreciation and amortization                                                                     243,932                  12,458
                                                                                        --------------------      ------------------
  Total Operating Expenses                                                                        2,392,040               1,243,390
                                                                                        --------------------      ------------------

INCOME FROM OPERATIONS                                                                              817,139               1,954,543

OTHER INCOME (EXPENSE)
  Interest expense                                                                                (241,051)                 (14,615)
  Other income                                                                                       11,084                      -
  Funds Released by Chinese Government Liquidator                         13                        885,864                      -
  Other expense                                                                                    (35,534)                      -
                                                                                        --------------------      ------------------
       Total Other Income                                                                           620,363                 (14,615)
                                                                                        --------------------      ------------------
INCOME FROM OPERATIONS BEFORE TAXES                                                               1,437,502               1,939,928

INCOME TAX EXPENSE                                                       1(M)                     (196,746)                     -
                                                                                        --------------------      ------------------
NET INCOME                                                                                        1,240,756               1,939,928

OTHER COMPREHENSIVE INCOME
  Foreign currency translation loss                                                                       -                     -
                                                                                        --------------------      ------------------

COMPREHENSIVE INCOME                                                                 $            1,240,756    $          1,939,928
                                                                                        ====================      ==================
Net income per share - basic and diluted                                             $                 0.02    $               0.04
                                                                                        ====================      ==================
Weighted average number of shares outstanding during the period -
basic and diluted                                                                                60,427,871              44,502,004
                                                                                        ====================      ==================

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

                                        4
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
     FOR THE PERIODS ENDED MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

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


                                                                                 RESTATED       RESTATED
                                                                                 (NOTE 18)     (NOTE 18)
                                                               Additional     Unappropriated  Appropriated                RESTATED
                                          Common Stock           Paid-In        Retained        Retained     Due From    (NOTE 18)
                                      Shares        Amount       Capital         Earnings       Earnings    Stockholder    Total
                                    ----------    ---------   ------------    ------------    ------------  ----------- ------------
Balance, December 31, 2003,
adjusted for the effect of
recapitalization of reverse
acquisition (Note 5(B))             44,502,004    $ 44,502    $  7,841,363    $  6,054,864    $ 1,286,784   $ (228,148)  $14,999,365

Registered capital appropriation             -           -       6,141,639      (6,141,639)             -            -             -

Notes receivable - stockholders              -           -               -               -              -      175,999       175,999

Net income for the year ended
 December 31, 2004                           -           -               -       6,362,423              -            -     6,362,423

Transfer to retained earnings for
 appropriated statutory and staff
 welfare reserves                            -           -               -      (6,275,648)     6,275,648            -             -
                                    -----------   ---------   ------------    -------------   ------------  -----------  -----------

Balance, December 31, 2004           44,502,004   $ 44,502      13,983,002               -      7,562,432      (52,149)   21,537,787

Reverse acquisition  (Note 5(B))     18,376,000     18,376       5,740,370               -              -             -    5,758,746

Related party debt forgiveness                -          -       2,415,458               -              -             -    2,415,458

Notes receivable - stockholders               -          -               -               -              -        22,358       22,358

Net income for the three months
 ended March 31, 2005                         -          -               -       1,240,756              -            -     1,240,756
                                    -----------   ---------     ----------    -------------   -----------    ----------  -----------
Balance, March 31, 2005 (Unaudited)  62,878,004   $ 62,878     $22,138,830    $  1,240,756    $7,562,432     $(29,791)  $ 30,975,105
                                    ===========   =========    ===========    =============   ===========    ==========  ===========

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

</TABLE>

                                        5

<PAGE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>


                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
         FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)



                                                                                  RESTATED
                                                                                  (NOTE 18)
                                                                                    2005             2004
                                                                                -------------    -------------
ASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                    $  1,240,756     $ 1,939,928
     Adjustments to reconcile net income to net cash provided by (used in)
     operating activities:
     Depreciation and amortization                                                 1,410,985         377,881
     Allowance for doubtful accounts                                                  12,610         182,500
     Provision for excess and obsolete inventories                                   476,583               -
     Funds Released by Chinese Government Liquidator (note 13)                      (745,828)              -
   Changes in operating assets and liabilities, net of effect of reverse
     acquisition (Note 5(B)), (increase) decrease in:
     Accounts receivable                                                            (725,437)     (1,493,528)
     Inventories                                                                     146,990        (368,914)
     Value added tax receivable                                                      162,443               -
     Prepaid expenses                                                               (142,364)        (16,363)
     Other assets                                                                   (214,722)              -
     Deposits                                                                              -       1,166,953
   Increase (decrease) in:
     Accounts payable                                                                 90,780       8,290,203
     Other payables and accrued expenses                                             160,585      (3,942,683)
                                                                                --------------   -------------

        Net Cash Provided By (Used In) Operating Activities                        1,873,381       6,135,977
                                                                                --------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                               (782,134)    (13,148,687)
   Cash acquired in connection with reverse acquisition  (Note 5(B))               2,103,481               -
                                                                                --------------   -------------
     Net Cash Provided By (Used In) Investing Activities                           1,321,347     (13,148,687)
                                                                                --------------   -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from notes payable                                                       603,865       7,246,378
   Due to related companies                                                       (2,946,138)       (289,914)
   Due from stockholder                                                               22,358         228,148
                                                                                --------------   -------------
     Net Cash Provided By (Used In)  Financing Activities                         (2,319,915)      7,184,612
                                                                                --------------   -------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                            874,813         171,902
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                     910,425         515,791
                                                                                --------------   -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $  1,785,238     $   687,693
                                                                                ==============   =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest expense                                $    245,373     $    14,615
                                                                                ==============   =============
Cash paid during the period for income taxes                                    $    166,495     $         -
                                                                                ==============   =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During March 2005, $2,415,459 of loans payable to an entity related to a
director of the Company was converted into equity of the Company.


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

</TABLE>
                                       6


<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

     (A) Organization and Basis of Presentation

     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 Pharmaceutical 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  was  accounted  for as a
     reverse acquisition.

     Allwin was  incorporated  under the laws of the 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.
     Kailong is inactive  and Huaxin is in the  business of the  production  and
     sales  of  biopharmaceutical   products  in  China.  Allwin  Biotrade  Inc.
     ("Biotrade") was incorporated in the 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.

     Pursuant to a share  purchase  agreement,  dated June 11, 2004, the Company
     acquired 100% of the issued and outstanding shares of Oriental Wave Holding
     Limited  ("Oriental  Wave")  by  issuing  44,502,004  common  shares of the
     Company.  This  transaction  was completed on January 12, 2005 and has been
     accounted for as a reverse acquisition (See Note 5(B)).

     Oriental Wave was  incorporated in the British Virgin Islands on January 7,
     2003. Shanxi Weiqida  Pharmaceutical  Company Limited ("Shanxi Weiqida"), a
     People's  Republic of China limited  liability  company was incorporated on
     January 22, 2002.  Shanxi  Weiqida is  principally  engaged in research and
     development,  manufacturing,  and selling of pharmaceutical products in the
     People's Republic of China ("PRC").

     During  2003,  Shanxi  Weiqida's   shareholders  exchanged  100%  of  their
     ownership  of Shanxi  Weiqida for 50,000  shares of  Oriental  Wave under a
     reorganization  plan. The transfer was accounted for as a reorganization of
     entities under common control as the companies were  beneficially  owned by
     identical   shareholders  and  share  common   management.   The  financial
     statements  have  been  prepared  as if  the  reorganization  had  occurred
     retroactively.

                                       7
<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     The consolidated  financial  statements include the accounts of the Company
     and its 100% owned  subsidiaries:  Oriental Wave,  Shanxi Weiqida,  Allwin,
     Kailong,  Huaxin, Biotrade and Dragon Canada. All significant  intercompany
     balances and transactions have been eliminated in consolidation.

     (B) Use of Estimates

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

     (C) Cash Equivalents

     For purposes of the cash flow statements,  the Company considers all highly
     liquid investments with original  maturities of three months or less at the
     time of purchase to be cash equivalents.

     (D) Accounts Receivable

     The Company  extends  unsecured  credit to its  customers  in the  ordinary
     course of business but mitigates the associated risks by performing  credit
     checks and actively  pursuing past due accounts.  An allowance for doubtful
     accounts is established  and recorded based on  management's  assessment of
     the credit history with the customer and current relationships with them.

     (E) Investments

     During the twelve  months  ended  December  31,  2004,  the Company made an
     investment in a private company of $12,077. The investment  represents less
     than 1% of the total equity outstanding of the private company  outstanding
     as of March 31, 2005. The private company investment is carried at cost and
     written  down to  fair  market  value  when  indications  exist  that  this
     investment has other than  temporarily  declined in value.  As of March 31,
     2005, no impairment in the value of the investment has been recorded.

     (F) Inventories

     Inventories  are  stated at the lower of cost or market  value,  cost being
     determined on a first-in,  first-out method. The Company provides inventory

                                       8
<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     allowances based on excess and obsolete inventories  determined principally
     by customer demand and product expiration dates.

     (G) Property and Equipment

     Property and equipment are stated at cost, less  accumulated  depreciation.
     Expenditures for additions,  major renewals and betterments are capitalized
     and  expenditures  for  maintenance  and  repairs are charged to expense as
     incurred.

     Depreciation is provided on a straight-line  basis, less estimated residual
     value over the assets  estimated  useful lives.  The estimated useful lives
     are as follows:

         Buildings                                      50 Years
         Plant and machinery                            10 Years
         Motor vehicles                                 8 Years
         Furniture, fixtures and equipment              5 Years

     Land use rights are stated at cost, less accumulated amortization. The land
     use rights are amortized  over the term of the relevant  rights of 50 years
     from the date of acquisition.

     Depreciable  assets are reviewed for impairment  whenever events or changes
     in  circumstances  indicate that the carrying amount may not be recoverable
     based on projected  undiscounted  cash flows  associated with the assets. A
     loss is  recognized  for the  difference  between  the fair  value  and the
     carrying amount of the assets.  Fair value is determined  based upon market
     quote, if available, or is based on valuation techniques.

     (H) Fair Value of Financial Instruments

     The carrying  amount of the Company's  cash,  receivables  and payables and
     short-term  bank  loan  approximates  their  fair  value  due to the  short
     maturity of those instruments.

     (I) Intangible Assets

     Under the Statement of Accounting Standards ("SFAS") No. 142, "Goodwill and
     Other  Intangible  Assets",  all  goodwill  and certain  intangible  assets
     determined  to have  indefinite  lives  will not be  amortized  but will be
     tested for  impairment  at least  annually.  Intangible  assets  other than
     goodwill will be amortized over their useful lives of 10 years and reviewed
     for impairment in accordance with SFAS No. 144,  "Accounting for Impairment
     or Disposal of Long-Lived Assets".

     (J) Revenue Recognition

     The Company recognizes revenue from the sale of pharmaceutical  products at
     the time when  title to the  products  transfers,  the  amount is fixed and
     determinable,  evidence of an agreement exists,  and the customer bears the

                                       9

<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     risk of loss, net of estimated  provisions  for returns,  rebates and sales
     allowances.

     (K) Advertising Costs

     Advertising  costs are expensed as incurred.  Advertising  expense  totaled
     $981 and  $1,159  for the  three  months  ended  March  31,  2005 and 2004,
     respectively.

     (L) Research and Development

     Research and development  costs related to both present and future products
     are expensed as incurred.  Total  expenditures  on research and development
     charged to  selling,  general  and  administrative  expenses  for the three
     months   ended  March  31,  2005  and  2004  were   $12,310  and   $52,238,
     respectively.

     (M) Income Taxes

     The Company  accounts  for income  taxes under the  Statement  of Financial
     Accounting  Standards No. 109,  "Accounting  for Income Taxes"  ("Statement
     109").  Under  Statement  109,  deferred  tax  assets and  liabilities  are
     recognized  for the future tax  consequences  attributable  to  differences
     between the financial  statement  carrying  amounts of existing  assets and
     liabilities  and their  respective  tax  bases.  Deferred  tax  assets  and
     liabilities  are  measured  using  enacted  tax rates  expected to apply to
     taxable  income  in the  years in which  those  temporary  differences  are
     expected to be recovered  or settled.  Under  Statement  109, the effect on
     deferred tax assets and  liabilities of a change in tax rates is recognized
     in income in the period  that  includes  the  enactment  date.  The Company
     located its factories in a special economic region in China.  This economic
     region  allows  foreign  enterprises a two-year  income tax exemption  from
     central  government  tax  beginning  in the first year  after  they  become
     profitable  and a 50% income tax reduction  for the following  three years.
     The Company was approved as a wholly owned  foreign  enterprise  in October
     2002.

     (N) Foreign Currency Translation

     The  functional  currency of the Company is the Chinese  Renminbi  ("RMB").
     Transactions  denominated in currencies  other than RMB are translated into
     United  States  dollars  using period end  exchange  rates as to assets and
     liabilities and average exchange rates as to revenues and expenses. Capital
     accounts are translated at their historical exchange rates when the capital
     transaction occurred.  Net gains and losses resulting from foreign exchange
     translations are included in the statements of operations and stockholder's
     equity as other comprehensive gain (loss).

                                       10
<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     (O) Comprehensive Income

     The foreign currency translation gain or loss resulting from translation of
     the  financial  statements  expressed  in RMB to  United  States  Dollar is
     reported as other comprehensive  income in the statements of operations and
     stockholders' equity.

     (P) Segments

     The  Company  operates in three  reportable  segments,  Chemical  Division,
     Pharma Division and Biotech Division.

     (Q) Earnings Per Share

     Income 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  earnings per share, as determined  using the treasury
     method,  is equal to the basic income per share as common stock equivalents
     consisting  of  options  to  acquire   3,128,000  common  shares  that  are
     outstanding at March 31, 2005 are not significantly dilutive, however, they
     may be dilutive in future.

     (R) Reclassifications

     Certain  2004  balances  have  been  reclassified  to  conform  to the 2005
     presentation.

     (S) 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",  as  amended by SFAS No.  148  "Accounting  for
     Stock-based Compensation - Transition and Disclosure - An amendment of SFAS
     No. 123". 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.

     (T) Recent Accounting Pronouncements

     Statement of Financial  Accounting  Standards ("SFAS") No. 151,  "Inventory
     Costs - an amendment of ARB No. 43, Chapter 4 SFAS No. 152, "Accounting for
     Real Estate Time-Sharing Transactions - an amendment of FASB Statements No.
     66 and 67,"  and  SFAS No.  153,  "Exchanges  of  Non-monetary  Assets - an
     amendment of APB Opinion No. 29" were recently  issued.  SFAS No. 151, 152,

                                       11
<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     153 and 123 (revised 2004) have no current applicability to the Company and
     have no effect on the financial statements.

NOTE 2 ACCOUNTS RECEIVABLE

     Accounts  receivable  at March 31, 2005  (unaudited)  and December 31, 2004
     consisted of the following:

                                                March 31, 2005    December 31,
                                                  (Unaudited)         2004
                                                --------------    ------------

       Trade and other receivables              $  9,208,581      $  6,799,872
       Less: allowance for doubtful accounts         438,337           124,574
                                                --------------    ------------
       Accounts receivable, net                 $  8,770,244      $  6,675,298
                                                ==============    ============

     For the  periods  ended March 31,  2005 and 2004,  the Company  recorded an
     allowance for doubtful accounts of $12,610 and $182,500,  respectively,  in
     the Consolidated Statement of Operations.

NOTE 3  INVENTORIES

     Inventories at March 31, 2005  (unaudited)  and December 31, 2004 consisted
     of the following:

                                                   March 31, 2005  December 31,
                                                     (Unaudited)        2004
                                                   --------------  ------------
     Raw materials                                 $  4,064,998    $  4,287,604
     Work-in-progress                                10,855,610      10,994,088
     Finished goods                                   2,720,670       2,302,073
                                                    --------------  ------------
                                                     17,641,278      17,583,765
     Less: provision for obsolescence and impairment  1,055,380         959,859
                                                   --------------  ------------
                                                   $ 16,585,898    $ 16,623,906
                                                   ==============  ============

     For the  periods  ended March 31,  2005 and 2004,  the  Company  recorded a
     provision for obsolete  inventories of $476,583 and nil,  respectively,  in
     the Consolidated Statement of Operations.

                                       12
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

NOTE 4  PROPERTY AND EQUIPMENT

     The  following  is a summary of property  and  equipment  at March 31, 2005
     (unaudited) and December 31, 2004:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>
                                                        March 31, 2005 (Unaudited) RESTATED (NOTE 18)
                                                  ---------------------------------------------------------
                                                                        Accumulated            Net Book
                                                       Cost             Depreciation            Value
                                                  ---------------     -----------------     ---------------
     Plant and equipment                       $      42,770,616   $         4,384,223   $      38,386,393
     Land and buildings                               18,556,072               458,634          18,097,438
     Motor vehicles                                      737,560               164,687             572,873
     Furniture and office equipment                    2,942,351               819,419           2,122,932
     Leasehold improvements                            1,083,653             1,028,137              55,516
     Idle equipment                                      555,339               455,339             100,000
     Construction in progress                          3,430,080                     -           3,430,080
                                                  ---------------     -----------------     ---------------

                                               $      70,075,671   $         7,310,439   $      62,765,232
                                                  ===============     =================     ===============

                                                            December 31, 2004 RESTATED (NOTE 18)
                                                  ---------------------------------------------------------
                                                                        Accumulated            Net Book
                                                       Cost             Depreciation            Value
                                                  ---------------     -----------------     ---------------
     Plant and equipment                       $      41,154,014   $         2,293,918   $      38,860,096
     Land and buildings                               18,552,438               370,169          18,182,269
     Motor vehicles                                      611,261                55,166             556,095
     Furniture and office equipment                    2,499,188               392,511           2,106,677
     Construction in progress                          2,691,179                     -           2,691,179
                                                  ---------------     -----------------     ---------------

                                               $      65,508,080   $         3,111,764   $      62,396,316
                                                  ===============     =================     ===============

     Depreciation  expense  for  periods  ended the March 31,  2005 and 2004 was
     $1,280,960 and $362,785 respectively.

</TABLE>

                                       13
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

NOTE 5 ACQUISITIONS

     (A) Land Use Rights

     During July 2003, the Company acquired Land Use Rights and buildings from a
     government  liquidator in exchange for assuming certain future  employment,
     healthcare  and Land Use Rights  acquisition  costs of the  factory and its
     former employees. The agreement requires the Company to pay certain minimum
     wages and health care costs until the date of their employment,  retirement
     or death,  whichever  occurs first.  The maximum amount of the  liabilities
     assumed on the closing date was $8,897,685 which approximates the appraised
     value of the Land Use Rights  acquired.  The  Company  has  calculated  the
     related  asset value by computing  the  estimated  fair value of the future
     expected payments to the remaining  employees  assuming an interest rate of
     3% and has  recorded  the Land Use  Rights at  $3,332,907  (See Notes 7 and
     14(D)).  Subsequent to the  acquisition the Company rehired a number of the
     former  employees,  reducing the expected  future  payments  required.  The
     Company has accounted  for the reduction of the  obligation by reducing the
     amount of Land Use Rights recorded.

     The cost of Land Use Rights as at March 31, 2005 and  December  31, 2004 is
     as follows:

                                                        RESTATED      RESTATED
                                                        (NOTE 18)     (NOTE 18)
                                                        March 31,      December
                                                          2005         31, 2004
                                                     --------------  -----------


     Original Cost recorded                           $   3,332,907  $ 3,332,907
     Less: reduction of future accrued retirement
     benefit                                              1,135,238    1,135,238
                                                     --------------  -----------
     Cost of Land Use Rights                          $   2,197,669  $ 2,197,669
                                                     ==============  ===========

     The  Company  intends  to reduce  the Land Use  Rights  should  the  future
     payments  be further  reduced  due to  additional  former  employees  being
     rehired.

                                       14
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     (B) Oriental Wave Holding Limited

     The Company  completed the acquisition of Oriental Wave on January 12, 2005
     whereby the Company issued  44,502,004 common shares in exchange for all of
     the issued and  outstanding  shares of Oriental Wave. The  transaction  has
     been approved by the Company's shareholders and the regulatory authorities,
     who  also  approved  an  increase  in  the  authorized   share  capital  to
     200,000,000 common shares.

     This  transaction  resulted in the former  shareholders  of  Oriental  Wave
     owning 68.35% of the issued and  outstanding  shares of the combined entity
     at the  close  of the  transaction.  Accounting  principles  applicable  to
     reverse acquisition has been applied to record the acquisition.  Under this
     basis of accounting,  Oriental Wave is the acquirer and,  accordingly,  the
     consolidated  entity is  considered to be a  continuation  of Oriental Wave
     with the net  assets  of the  Company  deemed  to have  been  acquired  and
     recorded at its fair market value. The Statement of operations includes the
     results of  Oriental  Wave for the entire  period and those of the  Company
     from January 13, 2005 (unaudited).

     The net assets acquired were:

     Cash and short term securities                 $       2,103,481
     Accounts receivable                                    1,382,119
     Inventories                                              585,565
     Prepaid and deposits                                     100,421
                                                     -----------------
     Total Current Assets                                   4,171,586
     Fixed Assets                                             867,742
     Intangible and other assets, net                       2,349,222
                                                     -----------------
                           Total Assets                     7,388,550

      Less accounts payables and accrued liabilities       (1,629,804)
                                                     ------------------
      Net assets acquired                           $       5,758,746
                                                     =================

     A summarized  statement of  operations  for the Company for the twelve days
     ended January 12, 2005 is as follows:


     Sales                                          $        145,435
                                                     -----------------
     Gross Profit                                            109,059
                                                     -----------------
     Total operating expenses                                166,881
                                                     -----------------
     Loss for the period                            $        (57,822)
                                                     =================

                                       15
<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     NOTE 6 INTANGIBLE ASSETS

     The  Company  acquired  $603,865 in  licenses  from a company  related to a
     director  with  the  balance  being   recorded   pursuant  to  the  reverse
     acquisition of Oriental Wave (Note 5(B)).

     Intangible  assets  consist  of the  following  as of  March  31,  2005 and
     December 31, 2004:

                                         March 31,
                                           2005           December 31,
                                       (Unaudited)           2004
                                      -------------      -------------
     Licenses                         $   2,951,814       $   603,865
     Less: accumulated amortization         301,121           171,096
                                      -------------      -------------
                                      $   2,650,693       $   432,769
                                      =============      =============

     Amortization  expense  for the  periods  ended  March 31, 2005 and 2004 was
     $130,025, and $15,096, respectively.

NOTE 7  ACCRUED RETIREMENT BENEFITS

     During July 2003, the Company acquired land use rights and buildings from a
     government  liquidator.  The present value of accrued  expected  retirement
     benefits  related  to the land  costs is  recorded  at March  31,  2005 and
     December 31, 2004 as follows:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>
                                                                              March 31, 2005        December 31, 2004
                                                                               (Unaudited)
                                                                             -----------------      -------------------
     Total liabilities assumed at closing date                            $        8,897,685     $          8,897,685
     Less: net present value of liabilities not expected to be paid                5,564,778                5,564,778
                                                                             -----------------      -------------------
     Present value of expected liabilities                                         3,332,907                3,332,907
     Less: amounts paid and liabilities not expected to be paid                    2,376,762               2,348,154
                                                                             -----------------      -------------------
                                                                                     956,145                 984,753
     Less: current portion                                                          114,432                  114,432
                                                                             -----------------      -------------------
                                                                          $          841,713     $            870,321
                                                                             =================      ===================
</TABLE>

     Under the terms of the  contract  with the  liquidator,  the  Company  will
     remain  contingently  liable  for  these  liabilities  until  the  date  of
     retirement or re-employment for each employee (See Notes 5(A) and 14).

                                       16
<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004


NOTE 8 OTHER PAYABLES AND ACCRUED LIABILITIES

     Other  payables and accrued  liabilities at March 31, 2005 and December 31,
     2004 consist of the following:

                                               March 31,
                                                  2005              December 31,
                                               (Unaudited)               2004
                                            -----------------   ----------------
     Machinery and equipment payable        $   6,023,275       $    7,050,243
     Accrued expenses                           6,595,401            6,360,198
     Value added tax payables                     280,805                    -
     Income taxes payable                         196,746              166,495
     Other taxes payable                          109,994              121,054
     Deposits received from customers           3,910,851            4,007,173
                                            ---------------     ----------------
                                            $  17,117,072       $   17,705,163
                                            ===============     ================

NOTE 9  NOTES PAYABLE

     Balance at March 31, 2005 and December 31, 2004:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>

                                                                           March 31,
                                                                             2005              December 31,
                                                                           (Unaudited)           2004
                                                                         -----------------   --------------
     Note  payable  to a  bank,  interest  rate of  6.372%  per          $     420,290        $   420,290
        annum, guaranteed by a third party, due June 2005

     Note  payable  to a  bank,  interest  rate of  6.372%  per
        annum, guaranteed by a third party, due June 2005                      386,473            386,473

     Note  payable  to a  bank,  interest  rate of  8.874%  per
        annum, guaranteed by a third party, due July 2005                      603,865                  -

     Note  payable  to a  bank,  interest  rate of  6.138%  per
        annum, guaranteed by a third party, due November 2005                3,623,188          3,623,188

</TABLE>

                                       17
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>


     Note payable to a bank, interest rate of 6.039% per annum, secured by
        leasehold land and fixed assets, due
        April 2005                                                                      -                 8,454,106

     Note payable to a bank, interest rate of 6.039% per annum, secured by
        leasehold land and fixed assets, due
        April 2006                                                              1,811,594                          -

     Note payable to a bank,  interest rate of 5.76% per annum,
        guaranteed by a third party, due November 2006                          6,316,426                  6,316,426

     Note payable to a bank, interest rate of 6.039% per annum, secured by
        leasehold land and fixed assets, due
        April 2007                                                              6,642,512                          -

                                                                         -----------------       --------------------
                                                                               19,804,348                19,200,483
     Less current maturities                                                    5,033,816                12,884,057
                                                                         -----------------       --------------------
                                                                         $     14,770,532        $        6,316,426
                                                                         =================       ====================
     Maturities are as follows:

                                 Fiscal year ended December 31,
                                              2005                                               $        5,033,816
                                              2006                                                        8,128,020
                                              2007                                                        6,642,512
                                                                                                 -------------------
                                                                                                $       19,804,348
                                                                                                 ===================
</TABLE>

NOTE 10   LONG TERM ACCOUNTS PAYABLE

     Long term accounts payable balances at March 31, 2005 and December 31, 2004
     is the final  payment of  construction  contracts  which had been  finished
     through  December 31, 2004.  According  to the  contract  terms,  the final
     payments on the contracts will be settled as follows:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>

                                                                             March 31,
                                                                               2005                  December 31,
                                                                           (Unaudited)                  2004
                                                                        -------------------     --------------------
     Settlement Arrangement

     Accounts payable due 2006                                          $     21,904,603          $   21,873,147
                                                                       ===================     ====================
</TABLE>
                                       18
<PAGE>
                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

NOTE 11           DUE TO RELATED PARTIES

     The amounts due to related  party at March 31, 2005 and  December  31, 2004
     are unsecured and non-interest bearing:

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

                                                                          March 31, 2005               December 31,
                                                                           (Unaudited)                     2004
                                                                         -----------------       -------------------

     Due to a company owned by a stockholder and director due
        March 2006                                                      $         402,199        $        1,328,502

     Due to a company owned by a  stockholder  and director due
        March 2006                                                                225,690                 4,660,984
                                                                         -----------------       -------------------
                                                                                  627,889                5,989,486
     Less: current maturities                                                     627,899                4,660,984
                                                                         -----------------       -------------------
                                                                         $               -       $       1,328,502
                                                                         =================       ===================
</TABLE>

NOTE 12  SEGMENTS

     The Company  operates in three  reportable  segments,  the Pharma Division,
     Chemical  Division and Biotech  Division.  The  accounting  policies of the
     segments are the same as described in the summary of significant accounting
     policies.  The Company evaluates  segment  performance based on income from
     operations.  All  intercompany  transactions  between  segments  have  been
     eliminated. As a result, the components of operating income for one segment
     may not be comparable to another segment. The following is a summary of the
     Company's segment information for the periods ended March 31, 2005 and 2004
     and as of March 31, 2005 and December 31, 2004.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>
                                                     Chemical             Pharma             Biotech
                                                     Division            Division           Division              Total
                                                  ---------------     ---------------     --------------     ----------------
     2005
     Three months ended March 31, 2005 (Unaudited)
     Sales                                         $    5,704,033     $   5,320,771       $    803,859       $   11,828,663
     Gross profit                                          34,425         2,508,222            666,532            3,209,179
     Depreciation and amortization
     (RESTATED - NOTE 18)                               1,057,587           153,804            199,594            1,410,985

</TABLE>

                                       19
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

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

     As of March 31, 2005 (Unaudited)
     Total assets (RESTATED - NOTE 18)                 66,103,360        23,962,434          6,086,165           96,151,959
     Additions to long-lived assets                       757,262            18,452              6,420              782,134
     Intangible assets                                          -           417,672          2,233,021            2,650,693

     2004
     Three months ended March 31, 2004
     Sales                                          $     849,785     $   6,305,251       $          -       $    7,155,036
     Gross profit                                         328,173         2,869,760                  -            3,197,933
     Depreciation and amortization                        234,781           143,100                  -              377,881

     As of December 31, 2004
     Total assets (RESTATED - NOTE 18)                 66,726,390        23,611,914                  -           90,338,304
     Additions to long-lived assets                    27,295,156           852,773                  -           28,147,929
     Intangible assets                                          -           432,769                  -              432,769

</TABLE>

NOTE 13    OTHER INCOME - Funds Released by Chinese Government Liquidator

     In  July  2003,  the  Company,  through  Shanxi  Weiqida,  acquired  out of
     bankruptcy  the Land Use Rights of a state-owned  enterprise.  (Please also
     refer to Note 5(A)) After entering into this  transaction,  the Company was
     approached  by an unrelated  state agency to  administer  certain  benefits
     payable to former  employees of the agency (the  government  liquidator) as
     the Company had already  established an  infrastructure to make payments to
     these employees for settlement of liabilities  related to the  transaction.
     As a  result,  during  2004,  the  Company  received  $1,751,208  from  the
     government  liquidator,  for the  settlement  of  human  resources  related
     expenses of the bankrupt  enterprise.  As well, during the first quarter of
     2005,  a  separate  municipal  agency,  the  Datong  Municipal  Government,
     approved  the  transfer  of a fund with a balance  of  $140,036  originally
     reserved  for the  employee  housing  welfare  as  part of the  liquidation
     process of the state-owned enterprise.  The two agencies,  unrelated to the
     acquisition,  allowed the Company to retain the cash balance of $745,828 as
     well as the reserve of $140,036  as payment  for  services  provided by the
     Company.  As a result, the Company recorded other income of $885,864 during
     the current period to reflect the above transactions.

NOTE 14   COMMITMENTS AND CONTINGENCIES

     (A) Employee Benefits

     The full time  employees of the Company are  entitled to employee  benefits
     including  medical  care,  welfare  subsidies,  unemployment  insurance and
     pension  benefits  through a  Chinese  government  mandated  multi-employer
     defined  contribution  plan.  The  Company is  required to accrue for those

                                       20
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     benefits based on certain percentages of the employees' salaries. The total
     provision  for such  employee  benefits  was  $116,217 and $141,730 for the
     periods  ended  March  31,  2005 and 2004,  respectively.  The  Company  is
     required to make  contributions to the plans out of the amounts accrued for
     medical and pension benefits. The Chinese government is responsible for the
     medical benefits and the pension liability to be paid to these employees.

     (B) Loan Guarantee

     The Company has  guaranteed  bank loans to two  suppliers  in the amount of
     $181,000  (RMB1.5  million)  due on August 11, 2005 and  $2,415,000  (RMB20
     million) due on July 16, 2005.

     The Company has also issued a guarantee  to a bank as security for loans to
     a third party vendor of  $2,415,000  (RMB20  million) due on September  26,
     2007 and $3,623,000  (RMB30  million) due on October 27, 2007.  This vendor
     pledged assets  totaling  $8,484,000  (RMB70.2  million) to the Company for
     this guarantee.

     (C) Capital Commitments

     According to the Articles of Association of Shanxi Weiqida, the Company has
     to fulfill registered capital of $19,205,116 (RMB 159,018,360)  within five
     years from  December  16,  2003.  As of March 31,  2005,  the  Company  has
     fulfilled  $14,656,174 (RMB 121,353,123) of registered capital  requirement
     and has registered capital commitments of $4,548,942 (See Note 15(A)).

     (D) Contingent Employment Benefits

     During July 2003, the Company acquired land and buildings from a government
     liquidator in exchange for assuming certain future  employment,  healthcare
     and land acquisition costs of the factory and its former  employees.  Under
     the terms of the  contract  with the  liquidator,  the Company  will remain
     contingently  liable for these  liabilities  until the date of  retirement,
     re-employment or death for each employee. As of March 31, 2005, the Company
     has  rehired  651  former   employees,   207  employees  have  retired  and
     approximately  200 former  employees remain  unemployed.  If the Company is
     unable to provide  continued  employment to these  individuals,  it will be
     liable to pay each former employee approximately $49 per month until his or
     her date of retirement or death, whichever comes first (See Notes 5 & 7).

     (E) Operating Leases

     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$326,217) 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$127,000 to US$146,000) per annum until March 31, 2007. The

                                       21
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     Company decided to close the facility in Nanjing,  effective July 31, 2005,
     and build a new facility in Datong,  China at the site of the manufacturing
     facilities of Oriental Wave. The Company has  renegotiated  the termination
     of its lease, without penalty, though the Company may be required to pay up
     to approximately  RMB 600,000  ($72,500)  relating to severance and benefit
     costs  associated  with the closure.  Minimum  payments  required under the
     agreements are as follows:

                 2005                              $ 247,989
                 2006                                189,964
                 2007                                 47,844
        --------------------------------------------------------
                 Total                              $485,797
        ========================================================

     (F) Cell Line Development

     The Company has contracted with a European  Institute of  Biotechnology  to
     develop  a  high  yield  proprietary  cell  line  and  production   process
     technology for the Company.  Product from this advanced  technology will be
     used by the Company to enter the European market, once certain competitor's
     patents  expire.  The total cost of  development  will be  $648,800  (EUROS
     500,000) of which  $387,600  (EUROS  300,000)  remains  unpaid at March 31,
     2005.

NOTE 15   STOCKHOLDERS' EQUITY

     (A) Capital Contribution (See note 14(C))

     On January 31, 2005 Oriental Wave paid Shanxi Weiqida  $479,988 towards its
     registered capital requirement under Chinese law.

     On February 22, 2005 Oriental Wave paid Shanxi Weiqida $198,682 towards its
     registered capital requirement under Chinese law

     (B) Appropriated Retained Earnings

     Shanxi  Weiqida is  required  to make  appropriations  to  reserves  funds,
     comprising the statutory surplus reserve, statutory public welfare fund and
     discretionary surplus reserve,  based on after-tax net income determined in
     accordance with generally  accepted  accounting  principles of the People's
     Republic of China (the "PRC GAAP").  Appropriation to the statutory surplus
     reserve  should be at least 10% of the after tax net income  determined  in
     accordance  with  the PRC GAAP  until  the  reserve  is equal to 50% of the
     entities'  registered  capital.  Appropriations  to  the  statutory  public
     welfare  fund are at 5% to 10% of the after tax net  income  determined  in
     accordance  with  the  PRC  GAAP.  The  statutory  public  welfare  fund is
     established  for the purpose of  providing  employee  facilities  and other

                                       22

<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     collective benefits to the employees and is non-distributable other than in
     liquidation.  Appropriations to the discretionary  surplus reserve are made
     at the discretion of the Board of Directors.

     (C) Stock Options

     The Company did not grant any options  during the year ended  December  31,
     2004.  During the period ended March 31, 2005, the Company  granted options
     to its directors and employees to purchase  2,260,000  shares at a price of
     $1.18 per share (being the market price at the time),  expiring January 12,
     2010.  Options to purchase  1,460,000 shares were  exercisable  immediately
     with 400,000 options becoming available January 12, 2006 and the balance of
     400,000 options vesting on January 12, 2007.

     The  following  summarizes  stock option  information  for the period ended
     March 31, 2005:

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

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

     Options outstanding at December 31, 2003                          2,599,000                  $   2.04
     Forfeited                                                         (705,000)                  $   1.57
     Exercised                                                         (145,000)                  $   0.50
     ---------------------------------------------------------- ------------------------ -------------------------

     Options outstanding at December 31, 2004                          1,749,000                  $   2.36
     Granted                                                           2,260,000                  $   1.18
     Forfeited                                                         (881,000)                  $   2.93
     ---------------------------------------------------------- ------------------------ -------------------------
     Options outstanding at March 31, 2005                             3,128,000                  $   1.35
     ========================================================== ======================== =========================
</TABLE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <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        350,000        3.01          $ 0.68            325,000          $ 0.68

     $1.01 - $2.00       2,478000        4.55          $ 1.23          1,678,000          $ 1.25

     $3.01 - $4.00        300,000        0.62          $ 3.13            300,000          $ 3.13
                        ----------     --------       -------          ---------          ------
                        3,128,000        4.00          $ 1.35          2,303,000          $ 1.41
                        ==========     ========       ==========       =========          ======
</TABLE>

     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  and  directors  except if

                                       23
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     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 90%, and
     expected lives of  approximately  0 to 5 years.  The weighted  average fair
     value of the options granted during the period was $0.69.

     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 income:

     ------------------------------------------ --------------- ----------------
                                                      2005            2004
     ------------------------------------------ --------------- ----------------
     Net income for the period:
         - as reported                              $1,240,756       $1,939,928
         - pro-forma                                  $163,375       $1,939,928
     ------------------------------------------ ---------------- ---------------
     Basic and diluted income per share:
         - as reported                                   $0.02            $0.04
         - pro-forma                                     $0.00            $0.04
     ------------------------------------------ ----------------- --------------

NOTE 16  RELATED PARTY TRANSACTIONS

     See Notes 6 and 11.

NOTE 17  CONCENTRATIONS AND RISKS

     During the three months ended March 31, 2005, 85% of the Company's revenues
     were  derived  from  customers  located  in China and 99% of its assets are
     located in China. Comparatively,  100% of the Company's revenues during the
     three months ended March 31, 2004 were  derived from  customers  located in
     China and 100% of its assets were located in China.

NOTE 18  RESTATEMENT

     Oriental Wave determined that the  extinguishment of the Accrued Retirement
     Benefit that occurred in 2004 should have been accounted for as a reduction
     of the Land Use Rights  acquired  by  $1,135,238  rather  than as a gain as
     previously  recorded.  The Company has restated the financial statements to
     correct for this treatment as though the error was corrected as of June 30,
     2004, for all reductions in the Accrued  Retirement  Benefits that occurred
     throughout 2004, as if they were known of at that time.

                                       24
<PAGE>

                   DRAGON PHARMACEUTICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004

     This  reduction  in Land Use Rights also  resulted  in a  reduction  of the
     depreciation  expense in  subsequent  periods and will do so in the future.
     The changes to the financial statements are as follows:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>

                                                  As at March 31, 2005                     As at December 31, 2004
                                          --------------------------------------    -------------------------------------
                                                                   Previously                               Previously
                                                Restated             Reported             Restated            Reported
                                          -----------------    -----------------    -----------------    ----------------
      Current assets                         $28,295,393          $28,295,393          $25,283,300         $25,283,300
      Property and equipment                  62,765,232           63,883,442           62,396,316          63,520,202
      Other assets                             5,091,334            5,091,334            2,658,688           2,658,688
                                          -----------------    -----------------    -----------------    ----------------
      Total assets                           $96,151,959          $97,270,169          $90,338,304         $91,462,190
                                          =================    =================    =================    ================

      Liabilities                            $65,176,854          $65,176,854          $68,800,517         $68,800,517
                                          -----------------    -----------------    -----------------    ----------------
      Share capital                           22,201,708           22,201,708           14,027,504          14,027,504
      Retained earnings                        8,803,188            9,921,398            7,562,432           8,686,318
      Due from shareholder                      (29,791)             (29,791)             (52,149)            (52,149)
                                          -----------------    -----------------    -----------------    ----------------
      Total equity                            30,975,105           32,093,315           21,537,787          22,661,673
                                          -----------------    -----------------    -----------------    ----------------
      Total liabilities and equity           $96,151,959          $97,270,169          $90,338,304         $91,462,190
                                          =================    =================    =================    ================


                                                              Three months ended March 31, 2005
                                                         --------------------------------------------
                                                                                       Previously
                                                               Restated                 Reported
                                                         ------------------      --------------------
      Net Sales                                             $ 11,828,663               $11,828,663
      Cost of sales                                            8,619,484                 8,619,484
                                                         ------------------      --------------------
      Gross profit                                             3,209,179                 3,209,179
      Operating expenses                                       2,392,040                 2,397,716
                                                         ------------------      --------------------
      Income from operations                                     817,139                   811,463
      Other income (expenses)                                    620,363                   620,363
                                                         ------------------      --------------------
      Income before taxes                                      1,437,502                 1,431,826
      Income tax expense                                         196,746                   196,746
                                                         ------------------      --------------------
      Net income                                              $1,240,756               $ 1,235,080
                                                         ==================      ====================
      Net Income per share                                      $   0.02                  $   0.02
                                                         ==================      ====================
</TABLE>

                                       25
<PAGE>




      Item 6.   Exhibits.

                (a) Exhibits.

                    Exhibit No.

                    31.1   Certification by the Principal Executive Officer
                           Pursuant to Section 302 of the Sarbanes-Oxley Act.

                    31.2   Certification by the Principal Accounting Officer
                           Pursuant to Section 302 of the Sarbanes-Oxley Act.

                    32     Certification by the Principal Executive and
                           Financial Officers Pursuant to Section 906 of the
                           Sarbanes-Oxley Act.


                                       26
<PAGE>


                                   SIGNATURES

In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  has duly  caused this  amendment  no. to report on Form 10-QSB to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                           DRAGON PHARMACEUTICAL INC.
                                           (registrant)


Dated:   September 23, 2005                /s/ Garry Wong
                                           ---------------------------------
                                           Garry Wong
                                           Chief Financial Officer