| **DRAGON                INTERNATIONAL GROUP CORP.**                                         |
|---------------------------------------------------------------------------------------------|
| (Exact                name of small business issuer as specified in                charter) |

| Nevada                                                                                      |   | 98-0177646                                                        |
|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| (State                or other jurisdiction ofincorporation                or organization) |   | (I.R.S.                EmployerIdentification                No.) |

| No.                  201 Guangyuan Road, District C Investment Pioneering Park                  Jiangbei, |
|-----------------------------------------------------------------------------------------------------------|
| Ningbo,                  China 315033                                                                     |
| (Address                  of principal executive offices)                                                 |
|                                                                                                      |
|                                                                                                      |
| (86)                  21-56689332                                                                         |
| (Issuer's                  telephone number)                                                              |
|                                                                                                      |
|                                                                                                      |
| Bldg                  14 Suite A09, International Trading Center,                                         |
| 29                  Dongdu Road Ningbo, China 315000                                                      |
| (Former                  name, former address and former fiscal year,                                     |
| if                  changed since last report)                                                            |

----

----

| **Item              1.**                                        | **Financial              Statements**                                                                                      |                                                                                                                                         |
|-----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                            |                                                                                                                            |                                                                                                                                         |   |
|                                                            | 1)                                                                                                                              | Consolidated              condensed balance sheet (unaudited) as of September              30, 2007                                     | 2 |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
|                                                            | 2)                                                                                                                              | Consolidated              condensed statements of operations (unaudited) for              the three months ended September 30, 2007 and 2006 | 3 |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
|                                                            | 3)                                                                                                                              | Consolidated              condensed statements of cash flows (unaudited) for the              three months ended September 30, 2007 and 2006 | 4 |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
|                                                            | 4)                                                                                                                              | Notes              to consolidated condensed financial statements (unaudited)                                                                | 5 |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
| **Item              2.**                                        | **Management’s              Discussion and Analysis of Financial Condition and              Results of Operations**  | 14                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
| **Item              3.**                                        | **Controls              and Procedures**                                                                                   | 19                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |
| **Item              3A(T).**                                    | **Controls              and Procedures**                                                                                        | 20                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
| **PART                II. OTHER INFORMATION**    |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
|                                                            |                                                                                                                            |                                                                                                                                         |   |
| **Item              1.**                                        | **Legal              Proceedings**                                                                                    | 21                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |
| **Item              2.**                                        | **Unregistered              Sales of Equity Securities and Use of Proceeds**                                                    | 21                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |
| **Item 3.**                                                     | **Defaults Upon Senior              Securities**                                                                                | 21                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |
| **Item              4.**                                        | **Submission              of Matters to a Vote of Security Holders**                                                            | 21                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |
| **Item              5.**                                        | **Other              Information**                                                                                              | 22                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |
| **Item              6.**                                        | **Exhibits**                                                                                                                    | 22                                                                                                                                           |
|                                                            |                                                                                                                            |                                                                                                                                         |
| **SIGNATURES**                                                  |                                                                                                                            | 23                                                                                                                                           |

----

| CURRENT                            ASSETS:                                                                                                                                                                             |   |   |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|
|      Cash                                                                                                                                                                                     |   | $      | 337,223    |   |
|      Accounts                            receivable (net of allowance for doubtful accounts of                            $186,046)                                                           |   |   | 7,686,491  |   |
|      Inventories                                                                                                                                                                              |   |   | 2,928,465  |   |
|      Advances                            on purchases                                                                                                                                         |   |   | 6,257,807  |   |
|                               Other receivables                                                                                                                                                    |   |   | 54,421     |   |
|                                 Cash-restricted                                                                                                                                                    |   |   | 266,042    |   |
|                               Note receivable                                                                                                                                                      |   |   | 159,625    |   |
|      Prepaid                            expenses and other current assets                                                                                                                     |   |   | 849,922    |   |
|                                                                                                                                                                                                                   |   |   |       |   |
|          Total                            Current Assets                                                                                                                  |   |   | 18,539,996 |   |
|                                                                                                                                                                                                                   |   |   |       |   |
|                                                                                                                                                                                                                        |   |   |            |   |
| Property                            and equipment - net                                                                                                                                                                |   |   | 3,005,161  |   |
| Land                            use rights - net                                                                                                                                                                       |   |   | 2,615,955  |   |
| Intangible                            assets - net                                                                                                                                                                     |   |   | 301,069    |   |
|                                                                                                                                                                                                                   |   |   |       |   |
|          Total                            Assets                                                                                                                          |   | $      | 24,462,181 |   |
|                                                                                                                                                                                                                   |   |   |       |   |
| LIABILITIES                            AND STOCKHOLDERS' EQUITY                                                                                                                                                        |
|                                                                                                                                                                                                                   |   |   |       |   |
| CURRENT                            LIABILITIES:                                                                                                                                                                        |   |   |       |   |
|      Notes                            payable - current portion                                                                                                                               |   | $      | 4,009,513  |   |
|      Accounts                            payable                                                                                                                                              |   |   | 6,181,195  |   |
|      Accrued                            expenses                                                                                                                                              |   |   | 357,999    |   |
|      Advances                            from customers                                                                                                                                       |   |   | 141,694    |   |
|      Income                            tax payable                                                                                                                                            |   |   | 1,572,585  |   |
|                               Other payables                                                                                                                                                       |   |   | 2,302,731  |   |
|      Liability                            in connection with acquisition                                                                                                                      |   |   | 573,022    |   |
|      Due                            to related party                                                                                                                                          |   |   | 341,626    |   |
|                                                                                                                                                                                                                   |   |   |       |   |
|          Total                            Current Liabilities                                                                                                             |   |   | 15,480,365 |   |
|                                                                                                                                                                                                                   |   |   |       |   |
|                                                                                                                                                                                                                   |   |   |       |   |
| Minority                            Interest                                                                                                                                                                           |   |   | 679,428    |   |
|                                                                                                                                                                                                                   |   |   |       |   |
| STOCKHOLDERS'                            EQUITY:                                                                                                                                                                       |   |   |       |   |
|      Preferred                            stock ($.001 Par Value; 25,000,000 Shares Authorized:                            (No shares issued                            and outstanding)      |   |   | -          |   |
|      Common                            stock ($.001 Par Value; 200,000,000 Shares Authorized;                            96,363,982 shares                            issued and outstanding) |   |   | 96,364     |   |
|      Additional                            paid-in capital                                                                                                                                    |   |   | 9,335,763  |   |
|      Accumulated                            deficit                                                                                                                                           |   |   | (1,293,525 | ) |
|      Deferred                            compensation                                                                                                                                         |   |   | (420,551   | ) |
|      Other                            comprehensive income - foreign currency                                                                                                                 |   |   | 584,337    |   |
|                                                                                                                                                                                                                   |   |   |       |   |
|          Total                            Stockholders' Equity                                                                                                            |   |   | 8,302,388  |   |
|                                                                                                                                                                                                                   |   |   |       |   |
|          Total                            Liabilities and Stockholders' Equity                                                                                            |   | $      | 24,462,181 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | For                    the three Months EndedSeptember                    30, |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 2007                                                                          |       |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |
| NET                    REVENUES                                                                                                                            |   | $                                                                             | 7,929,498  |   |   | $ | 4,832,984 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| COST                    OF                    SALES                                                                                                        |   |                                                                          | 7,331,333  |   |   |   | 4,460,470 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| GROSS                    PROFIT                                                                                                                            |   |                                                                          | 598,165    |   |   |   | 372,514 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| OPERATING                    EXPENSES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| Stock-based                    consulting                    expenses                                                                                                               |   |                                                                          | 86,878     |   |   |   | 86,878 |   |
| Selling                    expenses                                                                                                                                                 |   |                                                                          | 192,308    |   |   |   | 114,833 |   |
| General                    and                    administrative                                                                                                                    |   |                                                                          | 234,339    |   |   |   | 313,360 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| Total                    Operating                    Expenses                                                                                                                                                              |   |                                                                          | 513,525    |   |   |   | 515,071 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| INCOME                    (LOSS) FROM OPERATIONS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                          | 84,640     |   |   |   | (142,557 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| OTHER                    INCOME (EXPENSE):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                          |       |   |   |   |   |   |
| Other                    income                                                                                                                                                     |   |                                                                          | 60,051     |   |   |   | 93,663 |   |
| Debt                    issuance                    costs                                                                                                                           |   |                                                                          | (2,657     | ) |   |   | - |   |
| Interest                    (expense)                                                                                                                                               |   |                                                                          | (79,491    | )  |   |   | (33,432 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| Total                    Other Income                    (Expense)                                                                                                                                                          |   |                                                                          | (22,097    | ) |   |   | 60,231 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| INCOME                    (LOSS) BEFORE INCOME                    TAXES                                                                                    |   |                                                                          | 62,543     |   |   |   | (82,326 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| INCOME                    TAXES                                                                                                                            |   |                                                                          | (90,898    | ) |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| NET                    LOSS BEFORE MINORITY                    INTEREST                                                                                    |   |                                                                          | (28,355    | ) |   |   | (82,326 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| MINORITY                    INTEREST IN INCOME OF SUBSIDIARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                          | (75,870    | ) |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| NET LOSS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                          | (104,225   | ) |   |   | (82,326 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| OTHER                    COMPREHENSIVE INCOME:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                          |       |   |   |   |   |   |
| Unrealized                    foreign currency                    translation                                                                                                       |   |                                                                          | 98,779     |   |   |   | 83,054 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| COMPREHENSIVE (LOSS)                    INCOME                                                                                                        |   | $                                                                             | (5,446     | ) |   | $ | 728 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| NET                    LOSS PER COMMON SHARE – BASIC AND DILUTED                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $                                                                             | (0.00      | ) |   | $ | (0.00 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                          |       |   |   |   |   |   |
| WEIGHTED                    COMMON SHARES OUTSTANDING – BASIC AND DILUTED                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                          | 96,363,982 |   |   |   | 64,532,069 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | For                    the three Months EndedSeptember                    30, |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2007                                                                          |       |   | 2006 |   |
| CASH                    FLOWS FROM OPERATING ACTIVITIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                          |       |   |   |   |
| Net                    loss                                                                                                                                                            |   | $                                                                             | (104,225   | ) |   | $ | (82,326 | ) |
| Adjustments                    to reconcile net loss                    to net cash used in operating Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                          |       |   |   |   |   |   |
| Depreciation                    and                    amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                          | 121,573    |   |   |   | 94,884 |   |
| Stock-based                    compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                          | 86,878     |   |   |   | 86,878 |   |
| Allowance                    for doubtful                    accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                          | (20,408    | ) |   |   | 152,412 |   |
| Minority                    interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          | 75,870     |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| Changes                    in assets and                    liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                          |       |   |   |   |   |   |
| Accounts                    receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                          | (344,178   | ) |   |   | 23,983 |   |
| Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                          | (830,611   | ) |   |   | 1,094,545 |   |
| Prepaid                    and other current                    assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                          | (781,197   | ) |   |   | (2,626,547 | ) |
| Other                    receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          | -          |   |   |   | 3,284 |   |
|  Increase                    in notes                    receivable                                                                                                               |   |                                                                          | 286,288    |   |   |   | - |   |
| Advances                    to                    employees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                          | 25,618     |   |   |   | - |   |
| Advances                    on                    purchases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                          | (2,090,774 | ) |   |   | 308,005 |   |
| Other                    assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                          | (12,630    | ) |   |   | 12,787 |   |
| Accounts                    payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                          | 3,022,509  |   |   |   | 923,959 |   |
|  Tax                    payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                          | 175,468    |   |   |   |   |   |
|  Other                    payables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                          | (204,247   | ) |   |   |   |   |
| Accrued                    expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                          | (117,524   | ) |   |   | (93,902 | ) |
| Advances                    from                    customers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                          | 116,339    |   |   |   | (20,974 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| NET                    CASH USED IN OPERATING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                          | (595,251   | ) |   |   | (123,012 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| CASH                    FLOWS FROM INVESTING ACTIVITIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                          |       |   |   |   |   |   |
| Due                    to related                    parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                          | -          |   |   |   | (5,976 | ) |
| Decrease                    in restricted                    cash                                                                                                                      |   |                                                                          | -          |   |   |   | 9,660 |   |
| Capital                    expenditures                                                                                                                                                |   |                                                                          | (229,269   | ) |   |   | (165,061 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| NET                    CASH FLOW (USED IN) PROVIDED BY INVESTING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                          | (229,269   | ) |   |   | (161,377 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| CASH                    FLOWS FROM FINANCING ACTIVITIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                          |       |   |   |   |   |   |
| Proceeds                    from notes                    payable                                                                                                                      |   |                                                                          | 63,135     |   |   |   | 67,000 |   |
| Repayment                    of notes                    payable                                                                                                                       |   |                                                                          | -          |   |   |   | (63,157 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| NET                    CASH FLOWS PROVIDED BY FINANCING ACTIVITITES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                          | 63,135     |   |   |   | 3,843 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| EFFECT                    OF EXCHANGE RATE ON                    CASH                                                                                    |   |                                                                          | 66,089     |   |   |   | 76,736 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| NET                    DECREASE IN                    CASH                                                                                               |   |                                                                          | (695,296   | ) |   |   | (203,810 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| CASH                    – Beginning of                    year                                                                                     |   |                                                                          | 1,032,519  |   |   |   | 466,272 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| CASH                    – End of                    period                                                                                         |   | $                                                                             | 337,223    |   |   | $ | 262,462 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                          |       |   |   |   |   |   |
| SUPPLEMENTA                    CASH FLOW INFORMATION:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                          |       |   |   |   |   |   |
| Cash                    paid for:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                          |       |   |   |   |   |   |
| Interest                                                                                                                                                                                                        |   | $                                                                             | 79,492     |   |   | $ | 33,432 |   |
| Income                    taxes                                                                                                                                                                                 |   | $                                                                             | -          |   |   | $ | 1,651 |   |

----

**DRAGON          INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES          TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER          30, 2007**

**NOTE            1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING            POLICIES**

| ·                       | Dragon                International Group., a Florida corporation (“Dragon Florida”) is a wholly                owned subsidiary of Dragon Nevada.  Dragon Nevada acquired a                100% interest in Dragon Florida in October                2004. |
|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                       | Ningbo                Dragon International Trade Co., Ltd., (“Ningbo Dragon”).  Ningbo                Dragon is a wholly owned subsidiary of Dragon Florida.  Dragon                Florida acquired a 70% interest in Ningbo Dragon in June 2004 and                the                remaining 30% interest in December                2004. |
|------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                         | Ningbo                  City Jiangdong Yonglongxin Special Paper co., Ltd. (“Yonglongxin”) was                  created as a wholly owned subsidiary of Ningbo Dragon in November                  1999.  Xianyang Naite Research and Development Center (“R&D                  Center”), a wholly owned subsidiary of Yonglongxin, was acquired by                  Yonglongxin in August 2005. |
|--------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                       | Ningbo                Dragon Packaging Technology Co., Ltd., (“Dragon Packaging”) is a wholly                owned subsidiary of Ningbo Dragon.  Ningbo Dragon acquired a                100% interest in Dragon Packaging in June                2005. |
|------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                       | Hangzhou                Yongxin Paper Co., Ltd., (“Yongxin”) is a 60% owned subsidiary of Ningbo                Dragon.  The 60% interest was acquired in July                2005. |
|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                       | Shanghai                JinKui Packaging Material Co., Ltd. (“JinKui”) is a wholly owned                subsidiary of Dragon Nevada.  Dragon Nevada acquired a 100%                interest in JinKui in June 2006. |
|------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                         | Wellton                  International Fiber Corp. (“Wellton”) is a 51% owned subsidiary of Dragon                  Nevada.  Dragon Nevada acquired a 51% interest in Wellton in                  June 2007.  On September 28, 2007, the Company entered into an                  agreement to acquire the remaining 49% of Wellton not already owned.                   This transaction is expected to close on or before December 1,                  2007. |
|--------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE          1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES          (CONTINUED)**

----

**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE            1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            (CONTINUED)**

*Accounting for the      Impairment or Disposal of Long-Lived Assets, *

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**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE      1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES      (CONTINUED)**

**NOTE      2 - INVENTORIES**

| Raw              materials  |   | $      | 504,579   |   |
|-----------------------------|--------|--------|-----------|--------|
| Finished              goods |   |   | 2,423,886 |   |
|                        |   | $      | 2,928,465 |   |

**NOTE      3 - LAND USE RIGHTS**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | Three                Month Period Ended September                30, |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2007                                                                 |      |
| Land                Use Rights (estimated remaining life of 46 years)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $                                                                    | 2,747,469 |   |
| Less:  Accumulated                Amortization                                                                                      |   |                                                                 | (131,514  | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                                                    | 2,615,955 |   |

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**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE      4 - NOTES PAYABLE**

| Notes                  payable to Bank of Agriculture, due on June 26, 2008.  Interest                  only payable monthly at a rate of 7.23%.  Secured by the assets                  of Dragon Packaging                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $      | 1,665,614     |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Notes                  payable to Bank of Agriculture, due on June 21, 2008. Interest                  only                  payable monthly at a rate of 7.23%.  Secured by the assets of                  Dragon Packaging                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 866,120       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Notes                  payable to Bank of Agriculture, due on June 15, 2008. Interest                  only                  payable monthly at a rate of 7.88%.  Secured by a third party,                  Yangke Co., Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 266,498       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Notes                  payable to Bank of Agriculture, due on June 15, 2008 Interest only                  payable                  monthly at a rate of 7.88%.  Secured by a third party, Yangke                  Co., Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 266,498       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Notes                payable to Bank of Agriculture.  Interest only.  Secured by                assets of Dragon Packaging.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | 133,249       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Notes                payable to Bank of Agriculture.  Interest only.  Secured by                assets of Dragon Packaging.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |  133,249 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Bank                  guaranteed note to Bank of Transportation, due on November 16,                  2007.                  Non-interest bearing.  Secured by cash deposit of 50% of face value                  of the note.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 173,224       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Notes                  payable to Bank of Transportation, due on November 15, 2007. Non-interest                  bearing.  Secured by cash deposit of 50% of face value of the                  note.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 266,498       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Bank                  guaranteed note to Bank of Transportation, due December 5, 2007.                  Non-interest bearing.  Secured by cash deposit of 50% of the                  face value of the note.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 26,650        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Bank                  guaranteed note to Bank of Transportation, due on December 5, 2007.                  Non-interest bearing. Secured by cash deposit of 50% of the face                  value of                  the note.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 68,913        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Notes                  Payable to two shareholders, Interest only payable annually at                  a rate of                  8%, $100,000 due on January 10, 2008 and $43,000 due on April 11,                  2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   | 143,000       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Total                                                                                                                                                                |   |   | 4,009,513     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Less                  current                  Portion                                                                                                               |   |   | (4,009,513    | )      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |          |   |
| Long-Term                  Portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | -             |   |

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**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE      5 - STOCKHOLDERS' EQUITY**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | Shares |       |   | WeightedAverageExercise                Price |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |       |   |                                         |   |
| Outstanding                at July 1, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 43,315,282 |   |                                         | $      | 0.145 |   |
| Granted                                                                                                                                     |   |   | -          |   |                                         |   | - |   |
| Exercised                                                                                                                                   |   |   | -          |   |                                         |   | - |   |
| Forfeited                                                                                                                                   |   |   | -          |   |                                         |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |       |   |                                         |   |   |   |
| Outstanding                at September 30,                2007                                                                             |   |   | 43,315,282 |   |                                         | $      | 0.145 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |       |   |                                         |   |   |   |
| Warrants                exercisable at end of                period                                                                         |   |   | 43,315,282 |   |                                         | $      | 0.145 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |       |   |                                         |   |   |   |
| Weighted-average                fair value of warrants granted during the period                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | -          |   |                                         |   | - |   |

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**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE      5 - STOCKHOLDERS' EQUITY (CONTINUED)**

|   Warrants                  Outstanding and Exercisable |   |
|-------------------------------------------------------------------|--------|
|                                                              |   | Weighted |   |   |   |   |   |
|                                                              |   | Average |   | Weighted |   | Weighted |   |
| Range                  of                                         |   | Remaining |   | Average |   | Average |   |
| Exercise                                                          |   | Contractual |   | Exercise |   | Exercise |   |
| Prices                                                            |   | Shares |   | Life                  (Years) |   | Price |   |
| $0.300                                                            |   | 150,000 |   | 2.78 |   | $  0.30 |   |
| $0.150                                                            |   | 32,851,276 |   | 3.60 |   | $  0.15 |   |
| $0.125                                                            |   | 10,000,006 |   | 4.34 |   | $0.125 |   |
| $0.010                                                            |   | 314,000 |   | 3.03 |   | $  0.01 |   |

**NOTE      6 - OPERATING RISK**

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**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE      6 – OPERATING RISK (CONTINUED)**

**NOTE      7 – RECENT ACCOUNTING PRONOUNCEMENTS**

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**DRAGON        INTERNATIONAL GROUP CORP. AND SUBSIDIARIES**

**NOTES        TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2007**

**NOTE      7 – RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)**

**NOTE        8 – SUBSEQUENT EVENT**

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|   | · | Dragon                  International Group., a Florida corporation (“Dragon Florida”) is a wholly                  owned subsidiary of Dragon Nevada.  Dragon Nevada acquired a                  100% interest in Dragon Florida in October                  2004. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ningbo                  Dragon International Trade Co., Ltd., (“Ningbo Dragon”).  Ningbo                  Dragon is a wholly owned subsidiary of Dragon Florida.  Dragon                  Florida acquired a 70% interest in Ningbo Dragon in June 2004 and                  the                  remaining 30% interest in December                  2004. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ningbo                    City Jiangdong Yonglongxin Special Paper co., Ltd. (“Yonglongxin”) was                    created as a wholly owned subsidiary of Ningbo Dragon in November                    1999.  Xianyang Naite Research and Development Center (“R&D                    Center”), a wholly owned subsidiary of Yonglongxin, was acquired by                    Yonglongxin in                    August 2005. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ningbo                  Dragon Packaging Technology Co., Ltd., (“Dragon Packaging”) is a wholly                  owned subsidiary of Ningbo Dragon.  Ningbo Dragon acquired a                  100% interest in Dragon Packaging in June                  2005. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hangzhou                  Yongxin Paper Co., Ltd., (“Yongxin”) is a 60% owned subsidiary of Ningbo                  Dragon.  The 60% interest was acquired in July                  2005. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Shanghai                  JinKui Packaging Material Co., Ltd. (“JinKui”) is a wholly owned                  subsidiary of Dragon Nevada.  Dragon Nevada acquired a 100%                  interest in JinKui in June 2006. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Wellton                  International Fiber Corp. (“Wellton”) is a 51% owned subsidiary of Dragon                  Nevada.  Dragon Nevada acquired a 51% interest in Wellton in                  June 2007. On September 28, 2007, the Company entered into an agreement                  to                  acquire the remaining 49% of Wellton not already owned.  This                  transaction is expected to close on or before December 1,                  2007. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (i)    a                    description of the conclusions of our principal executive and                    principal                    financial officers, or persons performing similar functions,                    regarding the                    effectiveness of our disclosure controls and procedures (as defined                    in                    Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as                    of the end of the period covered by the report, based on the                    evaluation of                    these controls and procedures required by paragraph (b) of Rule                    13a-15 or                    Rule 15d-15 under the Exchange Act;                    and |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
|   | (ii)   a                    report of management on the small business issuer's internal                    control over                    financial reporting; as well as changes in our internal control                    over                    financial reporting identified in connection with its evaluation                    that                    occurred during our last fiscal quarter that has materially affected,                    or                    is reasonably likely to materially affect, our internal control                    over                    financial reporting. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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