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


                                   Form 10-QSB



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

     For the quarterly period ended June 30, 2001

     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)



                        543 Granville Street, Suite 1200
                           Vancouver, British Columbia
                                 Canada V6C 1X8
                    (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 June 30, 2001:  16,831,000

<PAGE>2

Part 1.  Financial Information

Item 1.  Financial Statements

<PAGE>3

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Consolidated Balance Sheet
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------
                                                                       June 30,              December 31,
                                                                         2001                   2000
---------------------------------------------------------------------------------------------------------
<S>                                                                <C>                    <C>
ASSETS

Current
  Cash and cash equivalents                                           $  2,275,152           $  4,092,702
  Restricted funds                                                       2,939,955              2,247,613
  Accounts receivable                                                      952,903              1,166,876
  Inventories                                                              762,893                474,041
  Prepaid and deposits                                                     253,264                 96,934
---------------------------------------------------------------------------------------------------------
Total current assets                                                     7,184,167              8,078,166

Fixed assets                                                             2,526,343              2,330,349

Investment in Hepatitis B vaccine project - related party                4,000,000              4,000,000

Refundable investment deposits - related party                             372,000                372,000

Licence and permit                                                       3,542,105              3,766,315
---------------------------------------------------------------------------------------------------------
Total assets                                                          $ 17,624,615           $ 18,546,830
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Current
  Bank loans                                                          $  3,304,976           $  2,198,280
  Accounts payable and accrued liabilities                               1,284,825              1,435,820
---------------------------------------------------------------------------------------------------------
Total current liabilities                                                4,589,801              3,634,100
---------------------------------------------------------------------------------------------------------
Minority interests                                                         759,681                929,265
---------------------------------------------------------------------------------------------------------
Commitment (Note 13)

Stockholders' Equity

Share capital
  Authorized:  50,000,000 common shares at
    par value of $0.001 each
  Issued and outstanding:  16,831,000 common shares
    (December 31, 2000 - 16,700,000)                                        16,831                 16,700

Additional paid in capital                                              20,118,241             20,000,897

Accumulated other comprehensive (loss)                                     (22,499)               (25,588)

Accumulated deficit                                                     (7,837,440)            (6,008,544)
---------------------------------------------------------------------------------------------------------
Total stockholders' equity                                              12,275,133             13,983,465
---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                            $ 17,624,615           $ 18,546,830
=========================================================================================================

</TABLE>

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

<PAGE>4


DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

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

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

<S>                                 <C>          <C>        <C>              <C>        <C>              <C>          <C>
Balance, December 31, 1999           10,735,000   $ 10,735   $ 15,690,734                  $ (3,262,750)   $  50,049   $ 12,488,768

Issued 4,258,000 common shares
  previously allotted                 4,258,000      4,258         (4,258)                            -            -              -

Additional share issuance costs
  to 4,258,000 common shares
  issued                                                 -         (5,247)                            -            -         (5,247)

Exercise stock options for cash         107,000        107         53,393                             -            -         53,500

Exercise warrants for cash            1,600,000      1,600      2,498,400                             -            -      2,500,000

Allotted 250,000 common shares
  at $6.25 per share                          -          -      1,562,500                             -            -      1,562,500

Stock option compensation                     -          -        205,375                             -            -        205,375

Other comprehensive income
 - foreign currency translation               -          -              -        (75,637)             -      (75,637)       (75,637)

Comprehensive income
 - net (loss) for the period                  -          -              -     (2,745,794)    (2,745,794)           -     (2,745,794)
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss)                                                 $ (2,821,431)
                                                                            ============
Balance, December 31, 2000           16,700,000   $ 16,700   $ 20,000,897                  $ (6,008,544)   $ (25,588)  $ 13,983,465
=========================================================================                  ========================================

</TABLE>

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

<PAGE>5

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

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

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

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

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

Other comprehensive income
 - foreign currency translation               -          -              -          3,089              -        3,089          3,089

Comprehensive (loss)
 - net (loss) for the period                  -          -              -     (1,828,896)    (1,828,896)           -     (1,828,896)

Stock option compensation                     -          -         51,975              -              -            -         51,975
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive (loss)                                                        $ (1,825,807)
                                                                            ============
Balance, June 30, 2001               16,831,000   $ 16,831   $ 20,118,241                  $ (7,837,440)   $ (22,499)  $ 12,275,133
=========================================================================                  ========================================

</TABLE>

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

<PAGE>6

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Consolidated Statement of Operations
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


<TABLE>
<CAPTION>

                                          Three Months      Three Months    Six Months      Six Months
                                             Ended             Ended          Ended           Ended
                                            June 30,          June 30,       June 30,        June 30,
                                              2001              2000           2001            2000
-------------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>             <C>             <C>
Sales                                      $    602,341    $    797,127    $  1,266,755    $  1,458,912

Cost of sales                                   155,726         167,536         302,647         266,401
-------------------------------------------------------------------------------------------------------
Gross profit                                    446,615         629,591         964,108       1,192,511

Selling, general and
  administrative expenses                    (1,288,609)       (741,005)     (2,414,416)     (1,213,658)

Depreciation of fixed assets and
  amortization of licence and
  permit and land-use right                    (154,515)       (214,819)       (308,329)       (303,052)

Research expenses                               (26,537)         (7,004)        (66,737)         (7,004)

New market development                            9,709               0         (90,171)        (12,081)

Provision for doubtful debts                    (42,000)        (22,142)        (78,825)        (46,180)

Loan interest expense                           (38,313)        (24,434)        (72,306)        (49,905)

Stock-based compensation                              0               0         (51,975)       (188,365)
-------------------------------------------------------------------------------------------------------
Operating loss                               (1,093,650)       (379,813)     (2,118,651)       (627,734)

Interest income                                  54,985         195,273         120,243         219,325
-------------------------------------------------------------------------------------------------------
Loss before minority interest                (1,038,665)       (184,540)     (1,998,408)       (408,409)

Minority interest                                65,952          15,543         169,512           4,632
-------------------------------------------------------------------------------------------------------
Net (loss) for the period                  $   (972,713)   $   (168,997)   $ (1,828,896)   $   (403,777)
=======================================================================================================
(Loss) per share
      Basic and diluted                    $      (0.06)   $      (0.01)   $      (0.11)   $      (0.03)
=======================================================================================================
Weighted average number of
  common shares outstanding
      Basic and diluted                      16,717,657      12,966,298      16,717,657      12,966,298
=======================================================================================================

</TABLE>

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

<PAGE>7


DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Consolidated Statement of Cash Flows
Six months ended June 30, 2001 and 2000
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

<TABLE>
<CAPTION>
                                                                          2001                2000
------------------------------------------------------------------------------------------------------
<S>                                                                <C>                  <C>
Cash flows from (used in) operating activities
   Net (loss) for the period                                          $ (1,828,896)       $   (403,777)
   Adjustments to reconcile net loss to
     net cash used in operating activities:
     - stock-based compensation expense                                     51,975             188,365
     - depreciation of fixed assets and amortization of
          licence and permit and land-use right                            308,329             303,052
     - minority interests                                                 (169,512)             (4,632)
     - provision for doubtful debts                                         78,825              46,180
  Changes in non-cash working capital items:
     - accounts receivable                                                 135,148            (289,265)
     - inventories                                                        (288,852)           (146,302)
     - prepaid expenses and deposits                                      (156,330)           (467,377)
     - accounts payable and accrued liabilities                           (150,995)           (724,142)
------------------------------------------------------------------------------------------------------
                                                                        (2,020,308)         (1,497,898)
------------------------------------------------------------------------------------------------------
Cash flows used in investing activities
  Purchase of fixed assets                                                (275,875)           (318,708)
  Increase in restricted funds                                            (692,342)           (200,500)
  Additional cost of licence                                                     -            (250,000)
------------------------------------------------------------------------------------------------------
                                                                          (968,217)         (2,569,208)
------------------------------------------------------------------------------------------------------
Cash flows from financing activities
  Loan proceeds                                                          1,106,696           1,411,140
  Proceeds from issuance of shares                                          65,500           1,018,250
  Proceeds from shares subscribed and allotted
    in prior period, net of issuance costs                                       -           8,611,603
  Funds contributed by minority shareholders                                     -             403,380
------------------------------------------------------------------------------------------------------
                                                                         1,172,196          11,444,373
------------------------------------------------------------------------------------------------------
Foreign exchange (gain) loss on cash
  held in foreign currency                                                  (1,221)              2,895
------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
  and cash equivalents                                                  (1,817,550)          7,380,162

Cash and cash equivalents, beginning of period                           4,092,702             617,262
------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                              $  2,275,152        $  7,997,424
======================================================================================================

</TABLE>

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

<PAGE>8

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(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").  Kailong  and  Huaxin  are  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
June 30, 2001
(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
          Land improvements                      10 years
          Leasehold improvements                 Term of lease (10 years)
          Production equipment                   10 years

     (d)  Foreign Currency Transactions

          The  parent  company,   Allwin,  Kailong  and  Huaxin  maintain  their
          accounting records in their functional currencies (i.e., U.S. dollars,
          U.S. dollars,  Renminbi Yuan, and Renminbi Yuan,  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)  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
June 30, 2001
(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  expensed  advertising  costs as  incurred.  There were no
          advertising expenses incurred by the Company for the period ended June
          30, 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

          In 1998, the Company  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
June 30, 2001
(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 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 licence
          and permit,  the discounted cash flows method is used to arrive at the
          estimated fair value of such licence and permit.

     (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 June 30, 2001,  cash  equivalents  consist of  commercial
          papers and redeemable term deposits.

<PAGE>12

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


2.   Significant Accounting Policies (continued)

     (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
          2,957,000 stock options and 400,000  warrants  outstanding at June 30,
          2001 are anti-dilutive, however, they may be dilutive in future.

<PAGE>13

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


2.   Significant Accounting Policies (continued)

     (q)  New Accounting Pronouncements

          (i)  The  Financial  Accounting  Standards  Board  ("FASB") has issued
               Interpretation  No. 44 in March  2000,  which  addresses  certain
               practice issues  regarding  Accounting  Principles  Board ("APB")
               Opinion No. 25,  Accounting  for Stock Issued to  Employees.  The
               effective date of the interpretation was July 1, 2000.

               If the terms of an option  (originally  accounted  for as a fixed
               option)  are  modified  during  the  option  term to  change  the
               exercise price directly,  the modified option should be accounted
               for as a variable  option.  Variable grant  accounting  should be
               applied to the modified option from the date of the  modification
               until the date of exercise.  Consequently,  the final measurement
               of compensation expense would occur at the date of exercise.  The
               cancellation of an option and the issuance of a new option with a
               lower exercise price shortly thereafter (e.g., within six months)
               to the same  individual  should  be  considered  in  substance  a
               modified (variable) option.

               The Company has no such  modified  option and,  accordingly,  the
               pronouncement  would have nil effect on the  Company's  financial
               statements.

          (ii) In June 1998,  the Financial  Accounting  Standards  Board issued
               SFAS No. 133, "Accounting for Derivative  Instruments and Hedging
               Activities".  SFAS No. 133 requires  companies  to recognize  all
               derivatives  contracts  as either  assets or  liabilities  in the
               balance  sheet and to  measure  them at fair  value.  If  certain
               conditions are met, a derivative may be  specifically  designated
               as a hedge, the objective of which is to match the timing of gain
               or  loss   recognition  on  the  hedging   derivative   with  the
               recognition  of (I) the  changes  in the fair value of the hedged
               asset or liability  that are  attributable  to the hedged risk or
               (ii) the earnings  effect of the hedged  forecasted  transaction.
               For a derivative not designated as a hedging instrument, the gain
               or loss is recognized in income in the period of change. SFAS No.
               133  is  effective  for  all  fiscal  quarters  of  fiscal  years
               beginning after June 15, 2000.

               Historically,  the  Company  has  not  entered  into  derivatives
               contracts  either  to hedge  existing  risks  or for  speculative
               purposes.  Accordingly,  the Company does not expect  adoption of
               the new  standards  on  July 1,  2000  to  affect  its  financial
               statements.

<PAGE>14

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

3.   Restricted Funds

<TABLE>
<CAPTION>
                                                                    June 30,      December 31,
                                                                      2001            2000
        ------------------------------------------------------- --------------- ---------------
<S>                                                              <C>             <C>
        Term deposits held as collateral against bank loans         $2,939,955      $1,736,328

        Restricted for use in acquisition of fixed assets             -                511,285
        ------------------------------------------------------- --------------- ---------------
                                                                    $2,939,955      $2,247,613
        ======================================================= =============== ===============

</TABLE>

4.   Accounts Receivable

<TABLE>
<CAPTION>
                                                                     June 30,        December 31,
                                                                       2001              2000
        ---------------------------------------------------- ------------------ ---------------
<S>                                                                <C>              <C>
        Trade receivable                                              $832,269         $996,100

        Allowance for doubtful accounts                               (119,530)         (40,663)
        ---------------------------------------------------- ------------------ ---------------
                                                                       712,738          955,437

        Other receivable                                               240,165          211,439
        ---------------------------------------------------- ------------------ ---------------
                                                                      $952,903       $1,166,876
        ==================================================== ================== ===============

</TABLE>

5.   Inventories

<TABLE>
<CAPTION>
                                                                      June 30,       December 31,
                                                                        2001             2000
        ---------------------------------------------------- ------------------ ---------------
<S>                                                                 <C>               <C>
        Raw materials                                                 $123,286          $72,033

        Finished goods                                                 262,073          391,469

        Work in progress                                               377,535           10,539
        ---------------------------------------------------- ------------------ ---------------
                                                                      $762,893         $474,041
        ==================================================== ================== ===============

</TABLE>

<PAGE>15

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

6.   Fixed Assets


<TABLE>
<CAPTION>
                                                               June 30, 2001
                                             --------------------------------------------------
                                                                Accumulated        Net book
                                                  Cost         depreciation         value
        ------------------------------------ --------------- ------------------ ---------------
<S>                                               <C>                 <C>            <C>
        Motor vehicles                            $ 100,355           $ 24,215       $  76,139
        Office equipment and furniture              247,568             78,770         168,798
        Leasehold improvements                      953,708            175,873         777,835
        Production and lab equipment              1,921,672            418,102       1,503,570
        ------------------------------------ --------------- ------------------ ---------------
                                                 $3,223,303           $696,960      $2,526,343
        ==================================== =============== ================== ===============

</TABLE>

<TABLE>
<CAPTION>
                                                             December 31, 2000
                                             --------------------------------------------------
                                                                Accumulated        Net book
                                                  Cost         depreciation         value
        ------------------------------------ --------------- ------------------ ---------------
<S>                                            <C>               <C>             <C>
        Motor vehicles                            $ 100,309           $ 15,752        $ 84,557
        Office equipment and furniture              202,242             57,746         144,496
        Leasehold improvements                      952,364            119,234         833,130
        Production and lab equipment              1,598,360            330,194       1,268,166
        ------------------------------------ --------------- ------------------ ---------------
                                                 $2,853,275           $522,926      $2,330,349
        ==================================== =============== ================== ===============

</TABLE>

     For the  six-month  period  ended  June  30,  2001,  depreciation  expenses
     totalled $79,881 (June 30, 2000 - $40,618). All fixed assets are located in
     China.


7.   Investment in Hepatitis B Vaccine Project - Related Party

     (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
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


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

     (a)  Pursuant to an amended  agreement  dated March 22, 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.

8.   Refundable Investment deposits - Related Party

<TABLE>
<CAPTION>

                                                                     June 30,       December 31,
                                                                       2001              2000
        ----------------------------------------------------- ---------------- ----------------
<S>                                                            <C>                 <C>
        Guanzhou Recomgen Biotech Co. Ltd.
        - Tissue Plasminogen Activator ("TPA") Project               $400,000          $400,000

        Less:  Valuation allowance                                    (28,000)          (28,000)
        ----------------------------------------------------- ---------------- ----------------
                                                                     $372,000          $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.  Subsequent to the year-end,
     due to financial market and economic conditions, the Company decided not to
     proceed  with the  funding  and the  acquisition.  In  accordance  with the
     agreement,  Guanzhou  Recomgen  and its  principals  agreed to  refund  the
     $400,000 before September 30, 2001.

<PAGE>17

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)

9.   Bank Loans

<TABLE>
<CAPTION>
                                                                        June 30,    December 31,
                                                                          2001          2000
        ------------------------------------------------------------ ------------ --------------
<S>                                                                 <C>             <C>
        RMB 3,000,000, bearing interest at 5.85% per annum and due
        on July 31, 2001                                                $362,520       $362,354

        RMB 2,000,000, bearing interest at 5.85% per annum and due
        on August 15, 2001                                               241,680        241,570

        RMB 7,800,000, bearing interest at 5.265% per annum and
        due on January 31, 2002.  The loan is secured by the term
        deposit                                                          942,553

        RMB 4,000,000, bearing interest at 5.02% per annum and due
        on August 18, 2001.  The loan is secured by the term
        deposit                                                          483,360              -

        RMB 1,400,000 bearing interest at 5.58% per annum and due
        on July 26, 2001.  The loan is secured by the term deposit       169,176              -

        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                                                          277,932              -

        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       380,646              -

        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       447,109              -

        RMB 7,800,000, bearing interest at 5.85% per annum and due
        on January 26, 2001.  The loan is secured by the term
        deposit                                                                -        942,120

        RMB 4,000,000 bearing interest at 5.58% per annum and due
        on June 11, 2001.  The loan is secured by the term deposit             -        483,138

        RMB 1,400,000, bearing interest at 5.58% per annum and due
        on June 11, 2001.  The loan is secured by the term deposit             -        169,098
        ---------------------------------------------------------------------------------------
        Total                                                         $3,304,976     $2,198,280
        =======================================================================================

</TABLE>

     The weighted average interest rate was 5.32% for the six-month period ended
     June 30, 2001 and 5.79% for the six-month period ended June 30, 2000.

<PAGE>18

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


10.  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 June 30,  2001,  the parent  company,  Kailong  and Huaxin  have
          estimated   losses,   for  tax   purposes,   totalling   approximately
          $3,133,000,  which  may be  applied  against  future  taxable  income.
          Accordingly,  there is no tax  expense  charged  to the  Statement  of
          Operations  for the period  ended June 30,  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>
<CAPTION>
                                                                   2001                2000
               ----------------------------------------- ------------------- -------------------
<S>                                                            <C>                 <C>
               Tax losses carried forward                      $  1,290,000        $    427,000
               Stock-based compensation                              17,700              64,000
               Less: valuation allowance                         (1,307,700)           (491,000)
               --------------------------------------------------------------------------------
                                                               $          -        $          -
               ================================================================================

</TABLE>

          A reconciliation  of the federal statutory income tax to the Company's
          effective income tax rate is as follows:

<TABLE>
<CAPTION>
                                                                   2001                2000
               -------------------------------------------------------------------------------
<S>                                                               <C>                 <C>
               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
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


11.  Stock Options and Warrants

     (a)  Stock Options Plans

          The Company  charged $51,975 and $188,365,  for the six-month  periods
          ended  June 30,  2001 and 2000,  respectively,  to  income  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.  During the period ended
          June 30, 2001, there were options granted entitling the option holders
          to acquire  20,000  shares at a price of $1.80  expiring  November 30,
          2001, and 125,000 shares at a price of $1.80 expiring May 31, 2006.

          The  following is a summary of the employee  stock option  information
          for the period ended June 30, 2001:

<TABLE>
<CAPTION>

                                                                         Weighted Average
                                                               Shares      Exercise Price
          ------------------------------------------------------------------------------
<S>                                                      <C>                <C>
          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                                             145,000          $  1.80
          Forfeited                                          (100,000)         $  3.12
          Exercised                                          (131,000)         $  0.50
          ------------------------------------------------------------------------------
          Options outstanding at June 30, 2001              2,957,000          $  1.93
          ==============================================================================

</TABLE>


                 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      2.79      $   0.50       1,243,000     $   0.50
  $1.01 - $2.00     145,000      4.30      $   1.80         145,000     $   1.80
  $2.01 - $3.00      60,000      3.36      $   2.50          60,000     $   2.50
  $3.01 - $4.00   1,495,000      4.36      $   3.13        1,495,000    $   3.13
                  -------------------      --------       ----------    --------
                  2,957,000      3.83      $   1.93        2,943,000    $   1.94
                  =========     =====      ========       ==========    ========

<PAGE>20

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


11.  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:

                                                   Six months ended June 30,
                                                     2001           2000
     -----------------------------------------------------------------------

     Net (loss) for the period:
     - as reported                                $(1,828,896)  $   (403,777)
     - pro-forma                                   (1,829,480)    (1,212,819)
     -----------------------------------------------------------------------
     Basic and diluted (loss) per share:
     - as reported                                     $(0.11)        $(0.03)
     - pro-forma                                       $(0.11)        $(0.09)
     -----------------------------------------------------------------------

     (b)  Warrants

          Share purchase warrants outstanding as at June 30, 2001:

            Number         Underlying     Exercise Price
          of Warrants        Shares         Per Share        Expiry Date
          -----------      ----------     --------------     -----------
            400,000           400,000         $3.00          November 24, 2002

<PAGE>21

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2001
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)


12.  Related Party Transactions

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

                                               Six months ended June 30,
                                                   2001          2000
          -------------------------------------------------------------

          Management fees                          $60,000      $36,000
          =============================================================

     (b)  see Notes 8 and 9.

13.  Commitment

     The Company has entered into an operating  lease  agreement with respect to
     Huaxin's production plant in Nanjing,  China for an amount of RMB 3,000,000
     (approximately  US$362,490) per annum until June 11, 2009. Minimum payments
     required under the agreement are as follows:

     2001                                      1,500,000              181,260
     2002                                      3,000,000              362,520
     2003                                      3,000,000              362,520
     2004                                      3,000,000              362,520
     2005                                      3,000,000              362,520
     2006                                      3,000,000              362,520
     2007 - 2009                               7,375,000              891,196
     ------------------------------------------------------------------------
     Total                                RMB 23,875,000         US$2,885,056
     ========================================================================

14.  Comparative Figures

     Certain 2000 comparative figures have been reclassified to conform with the
     financial statement presentation adopted for 2001.

<PAGE>22

Item 2.  Management's Discussion and Analysis or Plan 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, 2000.

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 Biotech 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 calendar 1999.

On March 30, 2000, the Allwin Newtech (a wholly-owned subsidiary of the Company)
entered  into an  agreement  to increase  its equity  interest in Sanhe  Kailong
Bio-pharmaceutical  Co.,  Ltd. from 75% to 95%. The Company paid $250,000 and is
committed to issue  250,000  common shares to increase its equity  interest.  To
date, due to administrative  delays, the shares have not yet been issued but are
represented as common shares allotted on the Company's financial statements.

Results of Operations

Revenues.  Revenue  results  primarily  from the sale of EPO in China by Huaxin.
Revenue for the three-month period ending June 30, 2001 was $602,341 compared to
$797,127  for the  three-month  period  ending  June 30,  2000.  Revenue for the
six-month period ending June 30, 2001 was $1,266,755  compared to $1,458,912 for
the six-month  period ending June 30, 2000.  Cost of sales for the  three-months
ended June 30, 2001 of $155,726 is  attributed  to the  production  costs of the

<PAGE>23

pharmaceutical  products.  The cost of sales for the three-months ended June 30,
2000 was $167,536. Cost of sales for the six-months ended June 30, 2001 and June
30, 2000 were $302,647 and $266,401 respectively.

Interest  income is related  primarily to interest  earned on cash received from
the private  placement of common stock received during the last quarter of 1999.
Interest income for the three-months  period and the six-month period ended June
30, 2001 was $54,985 and  $120,243  compared to $195,273  and  $219,325  for the
three-month  period and the six-month period ended June 30, 2000,  respectively.
Interest  income has  decreased  as the cash balance has  decreased  through the
funding of operations.

Expenses.  Total operating  expenses for the  three-months  ended June 30, 2001,
were  $1,540,265.  The major  expense  incurred  in the  second  quarter of 2001
related to the selling of pharmaceutical products and represented  approximately
27% of total  expenses.  The remaining  major expense items are  represented  by
administrative expenses.

Significant operating expenses for the three-months ended June 30, 2001 included
auditing  and  accounting  expense  of  $33,525,  consulting  fees of  $105,402,
investor  relations  of  $246,452,  loan  interest of $38,313,  rent of $86,638,
salaries and benefits of $106,073,  $84,991 in travel costs and management  fees
of $69,146.  Management  fees include $42,000 paid to two directors for services
during the second quarter of 2001.

Other  significant   expenses  for  the  second  quarter  of  2001  include  the
depreciation of fixed assets and amortization of license and permit and land-use
rights of $154,515.

Comparatively,  total  operating  expenses  for the second  quarter of 2000 were
$1,009,404.  Selling  expenses  represented 48% total operating  expenses during
this  period.  Other major  expenses  for the  three-months  ended June 30, 2000
included the depreciation of fixed assets and amortization of intangible  assets
of  $133,927,  bad debt write offs of  $22,142,  loan  interest  of $24,434  and
management  fees of  $32,146,  including  management  fees of $18,000  paid to a
director for services rendered during the period.

Total  operating   expenses  for  the  six-months  ended  June  30,  2001,  were
$3,082,759.  The major expense incurred in the second quarter of 2001 related to
the selling of  pharmaceutical  products and  represented  approximately  32% of
total   expenses.   The  remaining   major  expense  items  are  represented  by
administrative expenses.

Significant  operating  expenses for the six-months ended June 30, 2001 included
auditing  and  accounting  expense  of  $82,848,  bad debt write offs of $78,825
consulting fees of $227,725,  investor  relations of $274,166,  loan interest of
$72,306, rent of $157,968, salaries and benefits of $204,315, $119,376 in travel
costs and management  fees of $104,271.  Management fees include $60,000 paid to
two directors for services during the six-months ended June 30, 2001.

<PAGE>24

Other  significant   expenses  for  the  second  quarter  of  2001  include  the
depreciation  of fixed  assets of and  amortization  of  license  and permit and
land-use  rights of $308,329 new market  development  of $90,171 and stock based
compensation of $51,975.

Comparatively,  total operating  expenses for the six-months ended June 30, 2000
were  $1,820,245.  Selling  expenses  represented 44% total  operating  expenses
during this period Other major expenses for the  six-months  ended June 30, 2000
included the depreciation of fixed assets and amortization of intangible  assets
of $303,052, bad debt write offs of $46,180, loan interest of $49,909,  salaries
and benefits of $120,235,  stock based  compensation  of $188,365 and management
fees of $56,146,  including  management  fees include $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  of  $972,713  and  a
comprehensive  loss of  $1,038,665  for the  three-month  period ending June 30,
2001.  Calculated  in the  comprehensive  loss  for the  period  was a  minority
interest loss of $65,952.

The  Company's  net loss for the  three-month  period ended June 30,  2000,  was
$168,997,  which includes a minority interest loss of $15,543. The comprehensive
loss for the same period was $184,540.

Dragon had a net loss of $1,828,896 and a  comprehensive  loss of $1,998,408 for
the six-month period ending June 30, 2001.  Calculated in the comprehensive loss
for the period was a minority interest loss of $169,512.

The Company's net loss for the six-month period ended June 30, 2000, was
$403,777, which includes a minority interest loss of $4,632. The comprehensive
loss for the same period was $408,409.

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 the
six-months ended June 30, 2001. The loss per share for the three-month period
and the six-month period ending June 30, 2001, was $0.06 and $0.11 respectively.
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

<PAGE>25

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.

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 June 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.

As of June 30, 2001, the Company had $2,275,000 in unrestricted  cash available.
This cash, and the $8,000,000 raised from a private placement (announced June 4,
2001)  after  quarter  end,  will be used to fund  the  ongoing  operations  and
research and development of the Company for the next 2 years.

PART II. OTHER INFORMATION

Items 1, 2, 3, 4 and 5

None.

Item 6.

(a)  Exhibit 27. Financial Data Schedule

(b)  Reports on 8-K

None.

<PAGE>26
                                   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 PHARMACEUTICALS INC.
                                     (registrant)


Dated:  August 17, 2001              /s/  DR. KEN CAI
                                     Dr. Ken Cai
                                     Chairman of the Board and Chief Financial
                                     Officer (and authorized to sign on behalf
                                     of the registrant)