<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549
                                   FORM 10-KSB

(Mark One)

[x]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
        OF 1934.

For the fiscal year ended December 25, 2002

OR

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

For the transition period from                      to

                             Commission file Number

                              NEW DRAGON ASIA CORP.
                              ---------------------
                 (Name of Small Business Issuer in Its Charter)

              Florida                               88-0404114
 ----------------------------               ---------------------------------
 (State or other Jurisdiction             (I.R.S. Employer  Identification No.)
         of Incorporation)

        Room 1304, 13/F Wing On Centre,
              111 Connaught Road
              Central, Hong Kong
          ---------------------------                  -----------
    (Address of Principal Executive Offices)           (Zip Code)

                                 (852) 2815-9892
                               ------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

                                                    Name of Each Exchange
          Title of Each Class                        on Which Registered
             Common Stock                                   Amex

          -------------------                       ---------------------

     Securities registered under Section 12(g) of the Exchange Act:


                                ----------------
                                (Title of Class)


<PAGE>


     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for past 90 days.

Yes [X]  No [  ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained  to the  best  of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated  by  reference  in Part  III of this  Form
10-SKB. [x]

     State issuer's revenue for its most recent fiscal year $33,704,000

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity as sold, or the average bid and asked price of such common equity,  as of
a  specified  date  within the past 60 days.  As of April 8, 2003 the  aggregate
market value of the common equity held by non-affiliates was $1,718,246.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest  practicable date. As of December 25, 2002 there
were 40,911,242 shares outstanding.

     Transitional Small Business Disclosure Format (check one):

Yes [  ]  No [X]



<PAGE>

<TABLE>
<CAPTION>
                              NEW DRAGON ASIA CORP.
                                   FORM 10-KSB
                                TABLE OF CONTENTS
                               --------------------

                                                                                                  PAGE
                                                   PART I                                       --------
<S>               <C>                                                                            <C>

Item 1.        Description of Business                                                             1

Item 2.        Description of Properties                                                           8

Item 3.        Legal Proceedings                                                                   9

Item 4.        Submission of Matters of a Vote of Security Holders                                 9

                                                  PART II
Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters               9

Item 6.        Management's Discussion and Analysis of Financial Condition and Results of
               Operations                                                                          10

Item 7.        Financial statements                                                                12

Item 8.        Changes in and Disagreements with Accountants on Accounting and Financial
               Disclosure                                                                          13

                                                  PART III
Item 9.        Directors and Executive Officers, Promoters and Control Persons; Compliance
               with Section 16(a) of the Exchange Act                                              13

Item 10.       Executive Compensation                                                              15

Item 11.       Security Ownership of Certain Beneficial Owners and Management and Related
               Stock Matters                                                                       15

Item 12.       Certain Relationships and Related Transactions                                      16

Item 13.       Exhibits, List and Reports on Form 8-K                                              21

Item 14.       Controls and Procedures                                                             21

Signatures                                                                                         22

Financial Statements                                                                               F1


</TABLE>


<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

     This  Annual  Report  on  Form  10-KSB  contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, and Section 21E
of the Securities Exchange Act of 1934. These statements relate to future events
or  the  Company's  future  financial  performance. The Company has attempted to
identify  forward-looking  statements  by  terminology  including "anticipates",
"believes",  "expects",  "can",  "continue",  "could",  "estimates",  "expects",
"intends",  "may",  "plans",  "potential",  "predict", "should" or "will" or the
negative  of  these  terms or other comparable terminology. These statements are
only  predictions, uncertainties and other factors, including the risks outlined
under  Business  Risks  contained in Part 1 of this Annual Report that may cause
the Company's actual results, levels of activity, performance or achievements to
be materially different from any future results, levels or activity, performance
or  achievements  expressed  or implied by these forward-looking statements. For
all  of  these  predictions  and  forward-looking  statements.



     Although  the  Company  believes  that the  expectations  reflected  in the
forward-looking  statements are reasonable,  the Company cannot guarantee future
results,   levels  of  activity,   performance  or  achievements.   The  Company
expectations  are as of the date this Form 10-KSB is filed, and the Company does
not intend to update any of the  forward-looking  statements after the date this
Annual  Report on Form  10-KSB is filed to confirm  these  statements  to actual
results, unless required by law.


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS


     Certain statements we make in this Annual Report on Form 10-KSB (as well as
in other public filings, our web site, press releases,  and oral statements made
by  Company  management  and/or  representatives),   constitute  forward-looking
statements,  which  are  subject  to risks  and  uncertainties.  Forward-looking
statements include information concerning:


     our belief concerning future sales and net earning growth;

     our belief concerning the growth of our cash flow;

     our ability to reduce  selling,  general and  administrative  expenses as a
     percentage of net sales;

     our  belief  that we have  sufficient  positive  cash flow to  support  our
     working capital needs, capital expenditures and debt service requirements;

     our planned development, including capital expenditures; and

     our future  results of operations,  including  sales and earnings per share
     growth.


     You should understand that the following  important factors, in addition to
those  discussed  elsewhere in this Annual Report and in the documents  that are
incorporated by reference (and in our other public filings,  press releases, and
oral statements made by Company management and/or representatives),  could cause
actual   results   to  differ   materially   from  those   experienced   in  the
forward-looking statements.


<PAGE>

OVERVIEW

Company History

     New  Dragon  Asia  Corp.,  formerly  Bio-Aqua  Systems,   Inc.,  a  Florida
corporation,  was  incorporated  in March  1999 as a holding  company to acquire
Tepual,  S.A., a Chilean corporation (the "Company or company").  Until business
operations  were  suspended,  Tepual,  S.A.  was in the business of research and
development  and sales of vaccine  products and production  and control  systems
related to animal  nutrition  and health.  The Company  also sold,  brokered and
provided  technical  advice  in the  production  of meals  for feed  used by the
aquaculture,  poultry and cattle farming  industries.  In addition,  the company
acquired  75% of Krisel,  S.A. in 2000,  a krill  fishing  company  operating in
Uruguay. Bio-Aqua's historical and current operations will sometimes be referred
to as "Tepual operations" throughout this filing. Due to lack of working capital
Bio Aqua suspended all of its operations  early last year. On August 7, 2001, it
was announced that it would seek to divest its current  operations and acquire a
new operating company with the goal of enhancing shareholder value.

<PAGE>

     On December 13, 2001 we entered into a Share Exchange  Agreement  with, Max
Rutman,  Flagship Import Export LLC, a Nevada limited  liability company and New
Dragon  Asia Food  Limited,  a company  organized  under the laws of the British
Virgin  Islands.  Pursuant to the Share  Exchange  Agreement,  we  acquired  the
"Acquisition"  from New Dragon Asia Food Limited all of its equity  interests of
four  companies  organized  under the laws of the British Virgin Islands (each a
"Subsidiary" and, collectively the "Subsidiaries") each of which in turn hold an
interest  in a separate  sino-foreign  joint  venture,  which  equity  interests
constituted  all  of  the  issued  and  outstanding   equity  interests  of  the
Subsidiaries  in  exchange  for  37,963,263   shares  of  common  stock  of  the
Registrant.

     Upon the closing of the acquisition,  Max Rutman,  Nestor Lagos Pedro Sayes
and Oscar Cornejo  resigned from the board of directors and on December 14, 2001
Xue Jun Song, Man Fai Leung,  Shu Hua Zhang and Wing Leung Lai became members of
our board of  directors.  The  directors  then elected Xue Jun Song as the Chief
Executive  Officer,  Shu Hua Zhang as the Deputy General  Manager and Wing Leung
Lai as the Chief Financial Officer.


                                        1

<PAGE>

     As a result of the acquisition  the registrant  continued the operations of
New Dragon Asia Food Limited. All operations of New Dragon Asia Food Limited are
conducted through a Sino Joint Venture discussed below. A report on Form 8-K was
filed with the  Securities  and  Exchange  Commission  on December 27, 2001 with
respect to the acquisition.


OVERVIEW OF NEW DRAGON ASIA FOOD LIMITED

     The New Dragon Asia Food Group was established in 1952 under the name "Long
Feng  Foods",  as a grain and oil processing enterprise in the Shandong Province
of the People's Republic of China ("PRC" or "China") and developed as one of the
Province's  leading  flour  millers.  Long Feng developed into the leading flour
milling  group in China. In 1992 Long Feng established a manufacturing operation
for instant noodles as the Chinese market for "convenience foods" was entering a
prolonged  growth  phase. Through rapid increases in capacity and maintenance of
consistent  quality,  Long Feng has established itself as one of China's leading
manufacturers  of  flour and instant noodles with seven manufacturing plants and
nationwide  distribution.

     In 1998, the Hong Kong based New World Industrial  Holdings Ltd.,  together
with one of the  largest  Hong  Kong food  groups  formed a Sino  Foreign  Joint
Venture  under the name "New Dragon Asia Food  Limited" to acquire a controlling
interest  in  seven  of Long  Feng's  largest  manufacturing  subsidiaries.  The
objective  of this  venture  was to  combine  Long  Feng's  China  manufacturing
capabilities  and distribution  network with the New World  Industrial  Holdings
Ltd's  financial  strength  with  the  joint  venture  partner's  food  industry
management  expertise and to capitalize on the rapid growth potential  available
for the Chinese fast food industry, both within China and internationally.

     New  Dragon  Asia  Food  Limited  combined  four of its  largest  and  most
profitable  joint  ventures  as the "New Dragon  Asia Food  Group".  These joint
ventures  are located in Dalian,  Yantai and Sanhe and are listed as follows:

          o    New Dragon Asia Flour (Yantai) Company Limited

          o    New Dragon Asia Food (Yantai) Company Limited

          o    New Dragon Asia Food (Dalian) Company Limited

          o    Sanhe New Dragon Asia Food Company Limited

     Headquartered  in the  Shandong  Province,  management  of New Dragon  also
operates  sales and  corporate  offices  in Hong Kong.  Management  draws on the
unique  combination of China food  manufacturing  experience,  together with the
marketing and branding skills of the Hong Kong partners.

     Our core business is twofold:- (1) the milling,  sale  and  distribution of
flour and related  products,  (2) the  production of instant  noodles,  which we
market and sell under regional brands through  supermarkets and food stores. Our
principal brand is "Long Fengi". On a consolidated basis,  management  estimated
the Long Feng brand to be one of the top brands in China instant food industry.

                                       2
<PAGE>


INDUSTRY BACKGROUND

     "Fast food" in the form of instant  noodles was introduced to China in the
early 1980's  following the  commencement  of the market  economy in 1979.  With
rapidly rising income and living  standards and rapid growth of the urban middle
class, demand for quality convenience food grew rapidly.

     The increasing  market for instant  noodles,  a staple "fast food" in Asia,
has attracted  foreign  producers from Japan,  Korea and Taiwan.  While this has
generated  increased  competition  for high  end  manufacturers,  more  popular,
national  brand names such as Long Feng are well  entrenched  and are increasing
both sales and market  share as less  efficient  local  brands are  absorbed  or
eliminated.  In a  national  survey  taken in 2001,  average  annual  per capita
consumption of instant noodles in China was 15 packets compared with 80 in Korea
and 44 in Japan.  Management believes that growth potential in the China market,
as consumers become increasingly affluent, is considerable.

     Consumption of instant noodles in China has increased  dramatically as more
women enter the work force.  Further,  sharply  higher sales at airports,  train
stations and bus stations throughout the country reflect increasing business and
leisure travel by the rapidly expanding middle class.

     Products

        o  Flour

     We  produce  and  market a broad  range of wheat  flour  for use in  bread,
dumplings, noodles and confectionary.  Our flour products are marketed under the
"Long Feng" brand name and sold  throughout  the country at both  wholesale  and
retail levels.  At the end of 2002, our product was split  approximately 60% for
flour products and 40% for instant noodles.

        o  Noodles

     We provide a wide range of instant noodles  products to our customers.  Our
products can be separated  into two broad  categories  for selling and marketing
purposes:  packet  noodles  for home  preparation  and cup  noodles  for instant
consumption.

     Product Quality

     Long Feng has a reputation for producing  some of the highest  quality food
products in China. Our production plants operate to the highest level of hygiene
and efficiency and are certified at the ISO9002 level. Most of our :state of the
art" equipment is imported from  Switzerland,  Japan and Korea.  We also operate
strict quality control systems,  resulting in a favorable customer perception of
the "Long Feng" brand.





                                        3


<PAGE>


     Production

     Flour  and  water are the two main  ingredients  used to  produce a quality
noodle  product.  To  produce  our  noodles,  we mix flour  with water and other
ingredients  and then extrude or roll the mixture into the desired  shape of the
noodle.  The mixture then travels  through a series of  state-of-the-art  dryers
before being stabilized at room temperature. After stabilization the noodles are
steamed and cooked in deep fryers, cooled and then mixed with various seasonings
and  freeze  dried  additives  such as  chicken,  vegetables  or beef  which are
prepared  from raw  ingredients  in a separate  building  within our  production
complex. The finished product is then packed, palletized and shipped.

     We own and operate our manufacturing plants, which have an annual aggregate
production  capacity of  approximately  175,000  tons of flour  products  and in
excess of 110 million packets of instant noodles.

     Transportation and Distribution

     Our  distribution  system is a key to our  continued  success in developing
"Long Feng" as the leading  domestic brand in China.  We have over 216 points of
distribution  of which 16 are direct sales offices,  spread over 27 provinces in
China.  Most of our distributors  have long-term  relationships  with us and are
loyal and efficient vendors of our products.

     Rural  distribution  operations are  facilitated by a large fleet of trucks
owned by the New Dragon  Asia Food Group  which  carry  products  bound for both
wholesale and retail customers in outlying areas.

     Raw Materials

     The noodle's  primary  ingredient is flour,  which is extracted  from wheat
through a milling process.  A certain  percentage of our flour needs are sourced
from  within the group with  occasional  purchases  of high  quality  wheat from
Australia  and Canada.  Wheat  sourced by our milling  operating  from  Shandong
province is generally  regarded as being the highest quality available in China.
Other ingredients such as flavorings and additives are manufactured or processed
within the group.


MARKETING AND SALES

     In China,  marketing  and  promotion  costs for  manufactured  products are
generally  absorbed  by the  distributor  and  the  cost  covered  in the  price
ex-factory.  As the China  market  has yet to be  developed  into a  "nationwide
branded image" market,  most products are regionally  marketed and  distributed.
Our sales and marketing strategy revolves  principally around maintaining strong
distribution relationships,  continuously innovating with products and improving
on our quality/price dynamic.


COMPETITION

     The  instant  noodle  segment is highly  competitive.  We  compete  against
well-established  companies, and many smaller companies. Our largest competitors
are the Master Kang and President groups,  both based in Taiwan. We believe that
we were one of the largest local  manufacturers of noodles and flour in terms of
production in China in 2002.


                                        4

<PAGE>

     Competition in the flour industry is also very keen.  Based on our customer
orientated  strategy and  continuous  improvement  of  production  process,  the
management believes the Company remains as a leading flour producer.

CUSTOMERS

     Our primary customer base for both our flour products and noodles is in the
rural areas  throughout  China,  where our brand has long been recognized as the
highest quality available for the price. This market is growing rapidly as rural
incomes  increase.  Brand loyalty is strongest in this sector.  In contrast with
our major  competitors,  "Master  Kang"  and  "President",  which  are  focused
predominately in the more developed and competitive urban markets,  our strength
in the rapidly growing rural areas is underpinning our growth.

REGULATION

     We are  subject,  from  time to  time,  to  various  laws  and  regulations
administered  by  various  state and local  government  bodies  relating  to the
operation of our  production  facilities.  We believe that we are in  compliance
with  all  governmental  laws  and  regulations  related  to  our  products  and
facilities,  and we do not expect to make any material  expenditure in 2003 with
respect to compliance with any such regulations.

STRATEGY

     Our strategy is to capitalize on our strong brand name and pursue strategic
partnerships  and  acquisitions  that will enhance our  economies of scale.  The
following are some of the key elements of our business strategy:

     o    Increase the quantity of our products in rural distribution centers

     o    Continue to enhance our distributor relationships

     o    Continuously  improve  product quality and diversify our product range
          with higher value added products

     o    Build strategic joint venture  relationships  with  multinational food
          groups  to  enhance   product  range  and   capitalize  on  our  China
          distribution network

     o    Strengthen the training of our employees

     o    Implement the use of technical software to increase labor efficiency

EMPLOYEES

     We  employ   approximately  1,400  employees.   The  Company  believes  its
relationships with its employees are good.


AVAILABLE INFORMATION


     The Company files annual reports on Form 10-KSB,  quarterly reports on Form
10-QSB,  current  reports on Form 8-K and proxy and  information  statements and
amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of
the  Securities  Exchange Act of 1934, as amended.  The public may read and copy
these  materials at the SEC's Public  Reference  Room at 450 Fifth  Street,  NW,
Washington,  D.C. 20549.  The public may obtain  information on the operation of
the public  reference  room by calling the SEC at  1-800-SEC-0330.  The SEC also
maintains  a  website  (http://www.sec.gov)  that  contains  reports,  proxy and
information  statements  and other  information  regarding the Company and other
companies that file materials with the SEC  electronically.  You may also obtain
copies  of  reports  filed  with the SEC,  free of  charge,  on our  website  at
http://www.newdragonasia.com


                                        5


<PAGE>


GOVERNMENTAL REGULATION OF OUR OPERATIONS IN CHINA


     All of our subsidiary companies operate from facilities that are located in
China.   Accordingly,   our   subsidiaries'   operations  must  conform  to  the
governmental regulations and rules of China.


     The Chinese Legal System


     The practical effect of the People's  Republic of China legal system on our
business  operations  in China can be viewed from two separate  but  intertwined
considerations.  First,  as a matter of  substantive  law, the Foreign  Invested
Enterprise laws which are applied to our operation in China provide  significant
protection from government  interference.  In addition, these laws guarantee the
full  enjoyment of the benefits of corporate  Articles and  contracts to Foreign
Invested  Enterprise  participants.  These laws,  however,  do impose  standards
concerning  corporate  formation  and  governance,  which are not  qualitatively
different  from the  General  Corporation  Laws of the  States.  Similarly,  the
People's Republic of China accounting laws mandate accounting  practices,  which
are mostly  consistent with US Generally  Accepted  Accounting  Principles.  The
China accounting laws require that an annual  "statutory  audit" be performed in
accordance  with People's  Republic of China  accounting  standards and that the
books of account of Foreign  Invested  Enterprises  are maintained in accordance
with  Chinese  accounting  laws.  Article 14 of the  People's  Republic of China
Wholly Foreign-Owned  Enterprise Law requires a Wholly Foreign-Owned  Enterprise
to submit certain periodic fiscal reports and statements to designated financial
and tax authorities, at the risk of business license revocation.

     Second,  while the enforcement of substantive  rights may appear less clear
than United  States  procedures,  the Foreign  Invested  Enterprises  and Wholly
Foreign- Owned Enterprises are Chinese registered companies which enjoy the same
status as other Chinese  registered  companies in  business-to-business  dispute
resolution.  Because the terms of the respective Articles of Association provide
that all business disputes pertaining to Foreign Invested  Enterprises are to be
resolved by the  Arbitration  Institute of the Stockholm  Chamber of Commerce in
Stockholm, Sweden applying Chinese substantive law, the Chinese minority partner
in our joint venture companies will not assume a privileged  position  regarding
such  disputes.  Any award  rendered  by this  arbitration  tribunal  is, by the
express  terms  of  the  respective  Articles  of  Association,  enforceable  in
accordance  with  the  "United   Nations   Convention  on  the  Recognition  and
Enforcement  of Foreign  Arbitral  Awards  (1958)."  Therefore,  as a  practical
matter,  although no assurances can be given, the Chinese legal  infrastructure,
while  different in operation  from its United  States  counterpart,  should not
present  any  significant  impediment  to  the  operation  of  Foreign  Invested
Enterprises.


                                        6

<PAGE>


     Economic Reform Issues

     Although  the  majority  of  productive  assets  in China  are owned by the
Chinese  government,  in the past several years the government  has  implemented
economic reform measures that emphasize  decentralization  and encourage private
economic activity. Because these economic reform measures may be inconsistent or
ineffectual, there are no assurances that:

     o    We will be able to capitalize on economic reforms;

     o    The Chinese  government  will continue its pursuit of economic  reform
          policies;

     o    The economic policies, even if pursued, will be successful;

     o    Economic policies will not be significantly altered from time to time;
          and

     o    Business  operations  in China will not become  subject to the risk of
          nationalization.

     Negative  impact upon economic  reform  policies or  nationalization  could
result in a total investment loss in our common stock.

     Since 1979,  the Chinese  government  has reformed  its  economic  systems.
Because many reforms are unprecedented or experimental,  they are expected to be
refined and improved.  Other  political,  economic and social  factors,  such as
political  changes,  changes in the rates of economic  growth,  unemployment  or
inflation,  or in the  disparities in per capita wealth  between  regions within
China, could lead to further readjustment of the reform measures.  This refining
and readjustment process may negatively affect our operations.

     Over the last few years, China's economy has registered a high growth rate.
Recently, there have been indications that rates of inflation have increased. In
response,  the Chinese  government has taken  measures to curb this  excessively
expansive  economy.  These  measures  have included  devaluation  of the Chinese
currency,  the Renminbi,  restrictions on the  availability of domestic  credit,
reducing the  purchasing  capability  of certain of its  customers,  and limited
re-centralization  of  the  approval  process  for  purchases  of  some  foreign
products.  These  austerity  measures  alone may not succeed in slowing down the
economy's  excessive  expansion or control  inflation,  and may result in severe
dislocations in the Chinese economy. The Chinese government may adopt additional
measures to further combat inflation,  including the establishment of freezes or
restraints on certain  projects or markets.  These measures may adversely affect
our manufacturing company's operations.

     To date reforms to China's economic system have not adversely  impacted our
operations  and  are  not  expected  to  adversely  impact   operations  in  the
foreseeable  future;  however,  there can be no  assurance  that the  reforms to
China's economic system will continue or that we will not be adversely  affected
by changes in China's political,  economic, and social conditions and by changes
in policies of the Chinese government,  such as changes in laws and regulations,
measures  which may be introduced to control  inflation,  changes in the rate or
method of taxation, imposition of additional restrictions on currency conversion
and  remittance  abroad,  and  reduction in tariff  protection  and other import
restrictions.

                                        7

<PAGE>




     China's Accession into the WTO

     On November 11,  2001,  China signed an agreement to become a member of the
World Trade  Organization  sometimes  referred to as the WTO, the  international
body that sets most  trade  rules,  further  integrating  China  into the global
economy and  significantly  reducing  the  barriers to  international  commerce.
China's  membership  in the WTO was  effective on December  11, 2001.  China has
agreed upon its accession to the WTO to reduce tariffs and non-tariff  barriers,
remove  investment  restrictions,  provide trading and  distribution  rights for
foreign firms. The tariff rate reductions and other  enhancements will enable us
to  develop  better  investment  strategies.  In  addition,  the  WTO's  dispute
settlement  mechanism provides a credible and effective tool to enforce members'
commercial rights.  Also, with China's entry to the WTO, it is believed that the
relevant  laws on foreign  investment in China will be amplified and will follow
common practices.


ITEM 2. DESCRIPTION OF PROPERTIES

     Our corporate headquarters are located in Hong Kong. Our four manufacturing
plants  occupy  over  71,397  sq.  meters  of  facilities  with  over 29  noodle
production  lines  and a  175,000  tons  p.a.  flour  milling  facility  with  3
production  lines,  located  in  Dalian,   Beijing  and  Yantai.   Manufacturing
operations are vertically integrated,  with the flour production utilized in the
noodle manufacturing process. Most of New Dragon's manufacturing facilities have
been awarded ISO9002 quality certification.

<TABLE>
<CAPTION>



                                                                                        RENTAL       ANNUAL
FACILITY                                     ADDRESS                   RENTAL BEGIN     EXPIRE    RENTAL (US$)    AREA ((C)O)
---------------                    --------------------------             ------        ------       ------       --------
<S>                                            <C>                          <C>           <C>         <C>           <C>

Flour Mill,                No.10 Huangcheng Road(N),                         -            -            -            25,345
Noodle Factory,            Longkou, Shandong, P.R.C.
Condiment Factory

Noodle Factory             1 Yanjiao Jing ha Road(N),                        -            -            -            26,274
                           Beijing, P.R.C.

Noodle Factory             11 Dunhuang Street,                               -            -            -             6,363
                           Shahekou Zone, Dalian
                           Liaoning Province, P.R.C.

Flour Mill                 Wang Ling Po Village,                       11/18/01      03/18/10        6,988           6,594
                           Taian City, Shandong Province
                           P.R.C.

Flour Mill                 290 Zhen Xing Steet,                        01/01/02      12/31/05       66,265           5,772
                           Xinsian City, Shandong Province
                           P.R.C.

Flour Packaging            Fuhao Village, Xu Xin Zhuang                03/18/01      03/18/31        1,204           1,049
                           Town, Tong Zhou District,
                           Beijing, P.R.C.
                                        8
</TABLE>

<PAGE>


ITEM 3. LEGAL PROCEEDINGS


     We are not a party  to any  pending  or to the best of our  knowledge,  any
threatened legal proceedings.  None of our directors, officers or affiliates, or
owner of  record or of more than five  percent  (5%) of our  securities,  or any
associate of any such  director,  officer or security  holder is a party adverse
ours or have a  material  interest  adverse  to ours  in  reference  to  pending
litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters  submitted to a vote of security  holders  during the
quarter ended December 31, 2002.


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) Market Prices of Common Stock

     Our common stock is traded on the American  Stock Exchange under the symbol
i(degree)NWDi+/-. The high and low bid prices of the common stock as reported on
AMEX for the time periods indicated are set forth on the table below.

                                                         PRICE RANGE
                                                 ------------------------------
                                                     HIGH                LOW
                                                 ---------------- -------------
  FISCAL YEAR ENDED DECEMBER 25, 2001
  First Quarter                                   $      0.65        $    0.18
  Second Quarter                                  $      0.28        $    0.20
  Third Quarter                                   $      1.20        $    0.21
  Fourth Quarter                                  $      3.04        $    0.81

  FISCAL YEAR ENDED DECEMBER 25, 2002
  First Quarter                                   $      2.30        $    1.16
  Second Quarter                                  $      2.20        $    1.20
  Third Quarter                                   $      1.94        $    0.35
  Fourth Quarter                                  $      1.04        $    0.30

(b) Shareholders

     Our common shares are issued in registered  form.  American Stock Transfer,
Brooklyn, New York, is the registrar and transfer agent for our common stock. As
of March 15, 2003, there were 40,911,242  shares of our common stock outstanding
and we had approximately 500 shareholders of record.

                                        9


<PAGE>


(c) Dividends

     We have never  declared or paid any cash  dividends on our common stock and
we do not anticipate  paying any cash dividends in the  foreseeable  future.  We
currently  intend to retain future earnings,  if any, to finance  operations and
the expansion of its business.  Any future  determination  to pay cash dividends
will be at the  discretion  of the board of directors and will be based upon our
financial  condition,   operating  results,  capital  requirements,   plans  for
expansion,  restrictions  imposed by any  financing  arrangements  and any other
factors that the board of directors deems relevant.


       On  December  13,  2001 we  issued   37,963,263 in  connection  with  the
acquisition  from New Dragon  Asia Food  Limited.  The shares  were  issued in a
private  placement  pursuant to Section 4(2) of  Securities  Act. A Form 8-K was
filed on December 27, 2001 related to this private placement.



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

 The following is  management's  discussion and analysis of certain  significant
factors which have affected the Company's  consolidated  financial  position and
consolidated  operating  results during the periods included in the accompanying
consolidated financial statements,  as well as information relating to the plans
of current management.

OVERVIEW

     On December 13, 2001, the Company  entered into a Share Exchange  Agreement
with, Max Rutman, Flagship Import Export LLC, a Nevada limited liability company
and New Dragon  Asia Food  Limited,  a company  organized  under the laws of the
British Virgin Islands. Pursuant to the Share Exchange Agreement, on December 3,
2001 (the "Closing"), the Company acquired from New Dragon Asia Food Limited all
of its  equity  interests  of four  companies  organized  under  the laws of the
British   Virgin   Islands   (each  a   "Subsidiary"   and,   collectively   the
"Subsidiaries")   each  of  which  in  turn  hold  an  interest  in  a  separate
Sino-foreign joint venture, which equity interests constituted all of the issued
and outstanding  equity interests of the Subsidiaries in exchange for 37,963,263
shares  of  common  stock  of  the  Registrant.  At  the  closing,  the  Company
transferred  all of its assets to Mr. Rutman and Mr.  Rutman  assumed all of the
Company's  liabilities.  As  such,  the  following  discussion  relates  to  the
consolidated financial results of New Dragon Asia Limited only.

     The  consolidated   financial  statements  are  presented  in  US  dollars.
Transactions  and monetary  assets  denominated in currencies  other than the US
dollars are  translated  into US dollars at the respective  applicable  exchange
rates.  Monetary  assets and  liabilities  denominated  in other  currencies are
translated  into US dollars at the  applicable  rate of  exchange at the balance
sheet  date.  There  are no  material  exchange  differences  as a result of the
stability of the Renminbi ("RMB") during the periods covered by the consolidated
financial statements.

RESULTS OF OPERATIONS

     The Company  generated  revenues of $33.7 million for the fiscal year ended
December 25, 2002,  which was a $3.6 million or 12% increase  from $30.1 million
for the fiscal year ended  December  25,  2001.  This  increase is the result of
increased  sales of instant  noodles in two of New  Dragon's  joint  ventures in
Dalian and Yantai, and an increase in the sale of flour products of $2.7 million
in New Dragon's  flour  production  joint venture in Shandong which has expanded
its product line. The Company is currently operating at or near full capacity in
both flour and noodle  production in the peak season.  Acquisition of additional
capacity in the future will facilitate continued sales growth.


<PAGE>
     The  Company's  sale  promotion  programs  have  resulted in an increase in
selling  and  distribution  expenses  of  89%. Selling and distribution expenses
increased  from  $  548 thousands for the fiscal year ended December 25, 2001 to
$1.2  million  for  the  fiscal  year  ended  December  25,  2002.  General  and
administrative expenses decreased by $ 740 thousand mainly due to the collection
of  previously  written off accounts receivable and current year reallocation of
various  general  and  administrative expenses into cost of sales. Income before
non-recurring  item  and  provision for income taxes for the year ended December
25,  2002  was $4.8 million, an increase of 3% over the 2001 fiscal year result.

     Net income was $4.2  million or $0.1 per share on a fully  diluted  basis.
This  represents  an  increase  of 380% from the net income of $ 866 thousand in
2001.  This  increase  is  mainly  due  to  a one-time charge taken last year in
connection with the issuance of 1.3 million shares of common stock issued to our
advisers in connection with the acquisition from New Dragon Asia Food Limited on
December  13,  2001.  The  charge  is based on a discount to the average ten-day
closing  bid  price  of  our  stock  prior  to  December  13,  2001.

     Financial Condition, Liquidity, Capital Resources

     Net cash  provided by the operating  activities  of the Company  during the
year ended December 25, 2002 was $5.6 million  arising  primarily from increased
net income and an increase in accounts payable.

     Inflation  and  Changing  Prices

     The  Registrant  does not foresee any adverse  effects on its earnings as a
result of inflation or changing prices.


APPLICATION  OF  CRITICAL  ACCOUNTING  POLICIES

     The  preparation  of  the  Company's   financial   statements  and  related
disclosures in conformity with generally accepted  accounting  principles in the
United States  requires  management to make  estimates and judgments that affect
the  reported  amounts of assets and  liabilities,  revenues  and  expenses  and
related disclosures of contingent assets and liabilities.  On an on-going basis,
management  evaluates  the  estimates  and  assumptions  based  upon  historical
experience and various other factors and circumstances. Management believes that
the Company's  estimates and assumptions are reasonable under the  circumstance;
however,  actual  results may vary from these  estimates and  assumptions  under
different future circumstances. Management has identified the following critical
accounting  policies  that affect the more  significant  judgments and estimates
used in the preparation of the Company's consolidated financial statements.

Contractual   Joint  Ventures  -  A  contractual  joint  venture  is  an  entity
established between the Group and another joint venture partner, with the rights
and  obligations  of each party  governed by a contract.  If the Group owns more
than 50% of the joint  venture and is able to govern and  control its  financial
and  operating  policies  and its board of  directors,  such  joint  venture  is
considered  as a de  facto  subsidiary  and is  accounted  for as a  subsidiary.
Revenue  Recognition - The Group  recognizes  sales in accordance with SEC Staff
Accounting  Bulletin No. 101,  "Revenue  Recognition  in Financial  Statements".
Sales  represent  the invoiced  value of goods,  net of value added tax ("VAT"),
supplied to customers,  and are recognized upon delivery of goods and passage of
title.

All of the Group's sales made in Mainland China are subject to Mainland  Chinese
value-added tax at rates ranging from 13% to 17% ("output VAT"). Such output VAT
is payable after  offsetting  VAT paid by the Group on purchases  ("input VAT").

Inventories  -  Inventories  are  stated at the lower of cost,  determined  on a
weighted average basis, and net realizable value. Costs of work-in-progress  and
finished  goods are composed of direct  material,  direct labor and an attribute
portion of manufacturing overhead. Net realizable value is the estimated selling
price, in the ordinary course of business,  less estimated costs to complete and
dispose.

<PAGE>
ITEM 7. FINANCIAL STATEMENTS

(a) Financial Statements

The following financial statements are set forth at the end hereof.

     1.   Independent Auditors` Reports

     2.   Consolidated  Balance Sheets of New Dragon Asia Corp. and Subsidiaries
          as of December 25, 2002 and 2001

     3.   Consolidated  Statements of  Income and Comprehensive Income of New
          Dragon Asia Corp.  and Subsidiaries  for the years ended  December
          25, 2002 and December 25, 2001

     4.   Consolidated  Statements  of Stockholder Equity of New
          Dragon Asia Corp. and Subsidiaries For the years ended December 25,
          2002 and 2001

     5.   Consolidated  Statements  of Cash Flows of New Dragon  Asia Corp.  and
          Subsidiaries  for the years ended  December  25, 2002, 2001

     6.   Notes to Consolidated Financial Statements


                                       12

<PAGE>



ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     Effective, August 1, 2002, the Company dismissed Spear, Safer, Harmon & Co.
("SSHC"),  as the Company's independent auditors. Effective August 13, 2002, the
Company  engaged Grobstein, Horwath & Company, LLP ("GH&C") as the Company's new
independent auditors. The dismissal of SSHC and the engagement of GH&C were each
approved  by  the  Company's  Board  of  Directors.

       Prior to the  engagement  of GH&C,  neither the Company nor anyone on its
behalf  consulted  with  such  firm  regarding  the  application  of  accounting
principles  to a specified transaction, either completed or uncompleted, or type
of  audit opinion that might be rendered on the Company's consolidated financial
statements.

       SSHC  audited  the  Company's  financial  statements  for the period from
December  26,  2000  to  December  25,  2001  and reviewed the Company's interim
financial statements through March 25, 2002. SSCH's independent Auditors` report
as  of December 31, 2001 for this period did not contain an adverse opinion or a
disclaimer  of  opinion,  nor  was  the  report  qualified  or  modified  as  to
uncertainty,  audit  scope  or  accounting  principles.

       During the  period  from  inception  to August  21,  2002,  there were no
disagreement  with  SSHC  on  any  matter of accounting principles or practices,
financial  statement  disclosure,  or  auditing  scope  or  procedure,  which
disagreements,  if  not  resolved to the satisfaction of SSHC, would have caused
such  firm  to  make  reference  to  the  subject matter of the disagreements in
connection  with  its  independent  auditors`  report on the Company's financial
statements.  In  addition,  there  were  no  such events as described under Item
304(a)(1)(IV)(B)  of  Regulation  S-B during the period from inception to August
12,  2002.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT


     The  following  table  and text  sets  forth  the names and ages of all our
directors and executive officers and the key management personnel as of December
25, 2002.  Our Board of  Directors  is  comprised of only one class.  All of the
directors  will serve until the next annual  meeting of  stockholders  and until
their  successors  are elected and  qualified,  or until  their  earlier  death,
retirement,  resignation or removal.  Executive officers serve at the discretion
of the Board of  Directors,  and are appointed to serve until the first Board of
Directors meeting following the annual meeting of stockholders. Also provided is
a brief  description  of the business  experience of each director and executive
officer  and the key  management  personnel  during  the past five  years and an
indication of directorships  held by each director in other companies subject to
the reporting requirements under the Federal securities laws.


          NAME                    AGE               POSITION HELD
-------------------------     -----------   ----------------------------------
  Xue Jun Song                     54       Chief Executive Officer, Director
  Wing Leung Lai                   46       Chief Financial Officer, Director
  Shu Hua Zhang                    40       Deputy General Manager, Director
  Man Fai Leung                    45       Independent Non-executive Director
  Qi Xue                           51       Independent Non-executive Director


                                       13


     Mr. Xue Jun Song is our  chairman.  He is the  founder of the group and has
over 19 years experience in the food business.  He is primarily  responsible for
business development and overall company management.  He is a member of National
Food Industry  Entrepreneurs'  Council and a committee  member of China National
Food Industry Association.

     Mr. Wing Leung Lai has served as chief  financial  officer since  September
2000.  He  received  his  bachelor  degree in  Banking  and  Insurance  from the
University of North Wales,  Bangor,  in the United Kingdom,  a masters degree in
Business  Administration from the University of East Asia in Macau and a masters
degree in Accounting from the University of New South Wales in Australia.  He is
a fellow member of the CPA  Australia  and an associate  member of the Hong Kong
Society of Accountants. From 1990 to 1998, Mr. Lai served as finance director of
Albatronics  (Far East) Co.,  Ltd.  and was the  finance  director  of Ying Wing
Holdings Ltd. from 1998 to 1999.

     Ms. Shu Hua Zhang has served as deputy  general  manager for accounting and
administration  since September 2000. She graduated from Shandong  Central Radio
and TV  University  with a higher  diploma  in  Business  Management.  She is an
associate member of The Chinese Institute of Certified Public  Accountants.  She
served  as the  assistant  director  of the  Yantai  Dongfang  Certified  Public
Accountants Co. Ltd. from 1988 to 2000.

     Mr. Man Fai Leung graduated from Manchester  Polytechnic in the U.K. with a
bachelors  degree  in  accounting  and  finance  and a masters  degree  from the
University of New South Wales in Australia in professional accounting.  He is an
associate  member of the Hong Kong Society of Accountants and the CPA Australia.
Since 1995, he is an executive  director and financial  controller of the Lerado
Group (Holding) Company Ltd.

     Mr. Qi Xue  graduated  from The  Official  Institute  of  Beijing  Chemical
Industry Management with high diploma of industrial accounting in 1987. He is an
associate member of The Chinese Institute of Certified Public Accountants. Since
1999, he is the Principal of the Longkou Huayu Certified Public  Accountants Co.
Ltd.

     Directors  receive no  compensation  for serving on the Board of Directors,
but are reimbursed for any out-of-pocket expenses, if any, incurred in attending
board meetings.


     There are no family  relationships  between  the  directors  and  executive
officers.

SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
our  executive  officers  and  directors  and persons who own more than 10% of a
registered  class of our  equity  securities  to file  with the  Securities  and
Exchange  Commission  initial  statements  of beneficial  ownership,  reports of
changes in ownership and annual  reports  concerning  their  ownership of common
stock  and other of our  equity  securities,  on Forms 3, 4 and 5  respectively.
Executive officers,  directors and greater than 10% shareholders are required by
Commission  regulations  to furnish the Company with copies of all Section 16(a)
reports they file. To the best of our  knowledge  (based solely upon a review of
the Form 3, 4 and 5 filed), no officer,  director or 10% beneficial  shareholder
failed to file on a timely  basis any reports  required by Section  16(a) of the
Securities Exchange Act of 1934, as amended. 14


<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

     The following  table sets forth the  compensation  paid during fiscal years
ended December 25, 2000, 2001 and 2002 to our Chief Executive  Officer.  None of
our executive officers received compensation in excess of $100,000.

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE

                                                 ANNUAL COMPENSATION                          LONG-TERM COMPENSATION
                                      ------------------------------------------
                                                                                       AWARDS         PAYOUTS
                                                                                       -------        -------
                                                            OTHER                    SECURITIES
                                                            ANNUAL     RESTRICTED    UNDERLYING         LTIP        ALL OTHER
  NAME AND PRINCIPAL                 SALARY    BONUS     COMPENSATION    STOCK        OPTIONS/        PAYOUTS     COMPENSATION
       POSITION            YEAR        ($)       ($)         ($)       AWARD(S)($)    SARS (#)          ($)            ($)
   ---------------        ------     ------     ------    ----------  ----------      --------        --------     ----------
<S>                        <C>         <C>        <C>         <C>          <C>          <C>             <C>           <C>

Xue Jun Song               2002         -         -           -            -              -              -              -
                          -----       -----     -----       -----        -----          -----          -----          -----
Xue Jun Song               2001         -         -           -            -              -              -              -
                          -----       -----     -----       -----        -----          -----          -----          -----
Xue Jun Song               2000         -         -           -            -              -              -              -
                          -----       -----     -----       -----        -----          -----          -----          -----
</TABLE>


     We do not  maintain,  nor have we  maintained  in the  past,  any  employee
benefit plans. No executive officer has been granted stock options.

<TABLE>
<CAPTION>

                                          OPTION GRANTS IN LAST FISCAL YEAR

                             Number of      Percent of Total
                             Securities      Options Granted
                             Underlying      to Employees in   Exercise or Base   Market Price on
          Name            Options Granted      Fiscal Year           Price           Grant Date      Expiration Date
-----------------------  ------------------ ----------------- ----------------- ------------------- ------------------
<S>        <C>                  <C>                <C>                <C>                <C>                  <C>

Xue Jun Song                    --                 --                 --                --                 --


               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES

                                                                                                Value of Unexercised
                                                                       Number of Unexercised        in The Money
                                                                       Securities Underlying       Option/SARS at
                                                                       Options/SARS at FY-End        FY-End ($)
                           Shares Acquired on           Value             (#) Exercisable/          Exercisable/
NAME                          Exercise (#)          Realized ($)           Unexercisable            Unexercisable
-------------------- -------------------------- -------------------   ------------------------ ------------------------

Xue Jun Song                       --                    --                     --                       --

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                        EQUITY COMPENSATION PLAN INFORMATION

                                                                                             Number of securities
                                                                                            remaining available for
                                Number of securities to be        Weighted-average           future issuance under
                                  issued upon exercise of         exercise price of        equity compensation plans
                                   outstanding options,         outstanding options,         (excluding securities
                                    warrants and rights          warrants and rights       reflected in column (a))
        Plan Category                       (a)                          (b)                          (c)
-----------------------------   ---------------------------- -------------------------- -----------------------------
<S>                                         <C>                         <C>                             <C>

Equity compensation plans                   N/A                          N/A                          N/A
   approved by security
   holders

Equity compensation plans not               N/A                          N/A                          N/A
   approved by security
   holders

Total                                   ___________                  ___________                  ___________
</TABLE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth the number of our common  shares  owned by
record,  or to our knowledge, beneficially, by each of our Officers or Directors
and  by each person owning five percent or more of our outstanding shares, as of
December  25,  2002.  The  percentage  ownership is based upon 40,911,242 shares
outstanding  on  December  31,  2002.

     Each person listed below has personal and sole beneficial  ownership of the
shares of common stock listed with their name:


                                            TOTAL NUMBER         PERCENTAGE
               NAME                          OF SHARES           OWNERSHIP
-------------------------------            ----------------    --------------
New Dragon Asia Food Ltd.                     35,183,754               86%
All Directors and Executive                          -0-               --
Officers (5 persons)


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Parties  are  considered  to be  related  if one party  has the  liability,
directly or  indirectly,  to control  the other  party or  exercise  significant
influence over the other party in making  financial and  operational  decisions.
Parties are also  considered to be related if they are subject to common control
or common  significant  influence.  As used in this section the term Group shall
mean New Dragon and each of its subsidiaries.

The particulars of significant related party transactions are summarized below:

<TABLE>
<CAPTION>

                                                               2002                     2001
                                                             (US$'000)                (US$'000)
                                                      ---------------------  ------------------------
<S>                                                           <C>                        <C>
Sale of finished goods to:-
    A joint venture partner, Shandong
    Longfeng Group Company                             $              419      $                 83

    Related Parties:-
    Zhang Guo Quan(5)                                                 980                         -
    Penglai Jinhai Food Company Limited(4)                            344                         -
    Longkou City Longfeng Colour Printing Packing                       7                         -
    Factory (3)(6)
    Shandong Longfeng Group Trading Company(1)                          2                         -
    Sanhe (Yantai) Food Company Limited(1)                              1                         -
    Shandong Longfeng Penglai Flour Company Limited(3)                  -                        62
    New Dragon Asia Food (Luoyang) Company Limited(2)                   -                         1
                                                      ---------------------  ------------------------
                                                       $            1,753      $                146
                                                      =====================  ========================



                                       16

<PAGE>

                                                                2002                    2001
                                                             (US$'000)                (US$'000)
                                                      ---------------------  ------------------------
Purchase of raw materials from:-
    A joint venture partner, Shandong
    Longfeng Group Company                            $                 8    $                    -
    Related Parties:-
    Longkou City Longfeng Colour Printing Packing                     907                       688
    Factory(3)(6)
    Longkou City Longfeng Carton Packing Factory(3)(6)                710                       424
    Sanhe (Yantai) Food Company Limited(1)                             19                        48
    New Dragon Asia Food (Chengdu) Company Limited(2)                  11                         -
    New Dragon Asia Food (Luoyang) Company Limited(2)                   1                         -
    New Dragon Asia Food (Yueyang) Company Limited(2)                   1                         -
    Shandong Longfeng Penglai Flour Company Limited(3)                  -                       924
    Xinxiang Guoliang Flour Company Limited(5)                          -                        37
                                                      ---------------------  ------------------------
                                                      $             1,657    $                2,121
                                                      =====================  ========================

                                                                         2002                      2001
                                                                      (US$'000)                 (US$'000)
                                                               -----------------------   -----------------------
Pre-determinded annual fee charged by joint venture partners:
 Shandong Longfeng Group Company                                $               78         $              78
 Shandong Longfeng Flour Company Limited                                        36                        36
                                                              ========================   =======================
                                                                $              114         $             114
                                                              ========================   =======================


</TABLE>
                                       17
<PAGE>


                                2002                  2001
                             (US$'000)             (US$'000)
                        -------------------- --------------------
Interest income earned
from short-term advances
to an immediate parent
company:
  New Dragon Asia
  Food Limited          $               188   $                67
                        -------------------- --------------------
Interest expenses paid to a joint venture partner:
  Shandong Longfeng
  Group Company         $                18   $                18
                        -------------------- --------------------
Rental income from joint venture partner:
  Shandong Longfeng
  Group Company         $                64   $                64
                        -------------------- --------------------

Summary of related party balances is as follows:


                                2002                  2001
                             (US$'000)             (US$'000)
                        -------------------- --------------------
Due to an immediate
parent company, net
consisting of:
  New Dragon Asia
  Food Limited          $             5,782   $             7,044
                        -------------------- --------------------



     The net  amount  due to New  Dragon  Asia Food  Limited  is  unsecured  and
non-interest   bearing,   except  for  an  amount  due  from  that   Company  of
approximately $3,538,000 which bears interest at 6% per annum.


         During the year,  some machinery was acquired from New Dragon Asia Food
Limited at a consideration of $796,000.


                                       18
<PAGE>
<TABLE>
<CAPTION>

                                                                        2002                2001
                                                                     (US$'000)            (US$'000)
                                                              -------------------- --------------------
<S>                                                                    <C>                   <C>
Due to joint venture partners, net, consisting of:
 Shandong Longfeng Group Company                                 $         3,762     $           4,311
 Shandong Longfeng Flour Company Limited                                   1,809                 1,770
                                                              -------------------- --------------------
                                                                           5,571                 6,081
                                                              -------------------- --------------------

</TABLE>

     The amounts due to joint venture  partners are  unsecured and  non-interest
bearing, except for an amount due to Shandong Longfeng Group Company of $280,723
which bears interest at 6.48% per annum.



                                       2002                  2001
                                    (US$'000)             (US$'000)
                               -------------------- ---------------------
D Due from related
companies consisting of:
  Sanhe New Dragon Food
  Process Company Limited(1)   $                --   $                19
  Shandong City Longfeng
  Soybean Food Company
  Limited (1)                                   --                    22
  New Dragon Asia Food
  (Yueyang) Company Limited
  (2)                                          329                   329
  New Dragon Asia Food
  (Luoyang) Company Limited
  (2)                                          791                   783
  New Dragon Asia Food
  (Chengdu) Company Limited
  (2)                                          551                   551
  Penglai Jinhai Food                          372                    --
  Company Limited(4)
  Shandong Longfeng Group                       12                    --
  Trading Company(1)
  Shandong Longfeng Oceanic
  Foodstuff Company                             10                    --
  Limited(1)
  Zhang Guo Quan(5)                            434                    --
                               -------------------- ---------------------
   Total                       $             2,499   $             1,704
                               ==================== =====================


     The amounts due from  related  companies  are  unsecured  and  non-interest
bearing, and are repayable on demand.



                                       5
<PAGE>

                                       2002                  2001
                                     (US$'000)             (US$'000)
                               -------------------- ---------------------
Due to related companies
  consisting of:
  Dalian Mei Long Food
  Company Limited(3)            $                --   $             1,052
   ongfeng Food Company
  Limited(3)                                    133                   169
  Longkou City Longfeng
  Colour Printing Packing
  Factory(3)(6)                                 463                   123
  Longkou City Longfeng
  Carton Packing Factory(3)(6)                   --                    30
  New Dragon Asia Food
   (Luoyang) Co Ltd(2)                            6                    --
  Ningbo Hai Fu Sheng(4)                          2                    --
  Penglai Jinhai Food Company
    Limited(4)                                    2                    --
  Sanhe Senji Food Technology
    Development Company
    Limited(1)                                  120                    --
  Sanhe (Yantai) Food Company
   Limited(1)                                    76                   220
  Shandong Longfeng Penglai
  Flour Company Limited(3)                       --                   722
  Yantai Mei Long Oil and
  Food Company Limited(3)                        --                 1,468
                               -------------------- ---------------------
                                $               802   $             3,784
                               ==================== =====================

     The amounts due to related  Companies are unsecured,  non-interest  bearing
and are repayable on demand.

     The bank  facilities  of the  Group  are  secured  by  corporate  guarantee
provided by Shandong Longfeng Group Company, a joint venture partner.

     (1)  Shandong  Longfeng  Group  Company has a beneficial  interest in these
     companies.

     (2) These companies are wholly owned  subsidiaries of NDAFL.

     (3) Mr. Xue Jun Song, a director of each of the companies, has a beneficial
     interest in these companies.

     (4)  Mr.  Zhen  Gu  Song,  the  son  of  Mr. Xue Jun Song, has a beneficial
     interest  in  these  companies.

     (5) Lessor of one of our sub-contracted factories.

     (6)  Mr.  Xue  Jun  Song ceased to be a director of SHANDONE LONGFENG GROOP
     COMPANY  on  January  7,  2002.

      In the opinion of the directors of each of the Group companies,  the above
related party transactions were carried out in the usual course of business.



<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON 8K

(a)   The following is a list of exhibits  filed as a part of this Annual Report
      on Form  10-KSB.  Where so  indicated  by  footnote,  exhibits  which were
      previously filed are incorporated by reference.

<TABLE>
<CAPTION>

     Exhibit
      Number                                           Description
--------------                                        --------------
<S>                                                      <C>

2.1                 Share  Exchange  Agreement  dated as of December  18,  2001,
                    incorporated  herein  by  reference  from our  filing on the
                    Definitive Proxy 14/A filed on October 11, 2001

3.1                 Revised Articles of Incorporation

3.2                 Bylaws,  incorporated  herein by reference from our filing on the Definitive Proxy
                    14/A filed on October 11, 2001

23.1                Consent of Spear, Safer, Harmon & Co.

99.1                Certification of Chief Executive  Officer and Chief Financial  Officer pursuant to
                    18 U.S.C.  1350 as adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                    2002
----------
</TABLE>

 * Filed herewith.

(b)   Form 8-K filed on December 27, 2001,  regarding the  acquisition  from New
      Dragon Asia Food Limited.

(c)   Form 8-K filed on August 16, 2002 as amended by Form 8-K/a filed on August
      28, 2002, regarding change in auditors.

ITEM 14. CONTROLS AND PROCEDURES

         Our Chief  Executive  Officer and our Chief  Financial  Officer,  after
evaluation  of  the  effectiveness  of  the  Company's  disclosure  controls and
procedures (as defined in US Exchange Act Rules 13a-14(c)) within 90 days of the
date  of  this  Form 10-KSB, have concluded that, as of such date, the Company's
disclosure  controls  and  procedures  were  effective  to  ensure that material
information  relating to the Company was made known to them by others within the
Company, particularly during the period in which this 10-KSB was being prepared.

         There were no significant changes in the Company's internal controls or
in other factors that could  significantly  affect these controls  subsequent to
the date our Chief Executive  Officer and our Chief Financial  Officer completed
their  evaluation,  nor were  there any  significant  deficiencies  or  material
weaknesses in the Company's internal controls requiring corrective actions.


<PAGE>
                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       NEW DRAGON ASIA CORP.

Dated: April 9, 2003                   By /s/ Xue Jun Song
                                       ------------------------------
                                       Name: Xue Jun Song
                                       Title: Chief Executive Officer

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.

Dated: April 9, 2003                   By /s/ Xue Jun Song
                                       ------------------------------
                                       Name: Xue Jun Song
                                       Title: Chief Executive Officer, Director

Dated: April 9, 2003                   By /s/ Shu Hua Zhang
                                       ------------------------------
                                       Name: Shu Hua Zhang
                                       Title: Deputy General Manager, Director

Dated: April 9, 2003                   By /s/ Wing Leung Lai
                                       ------------------------------
                                       Name: Wing Leung Lai
                                       Title: Chief Financial Officer, Director

Dated: April 9, 2003                   By /s/ Man Fai Leung
                                       ------------------------------
                                       Name: Man Fai Leung
                                       Title: Director

Dated: April 9, 2003                   By /s/ Qi Xue
                                       ------------------------------
                                       Name: Qi Xue
                                       Title: Director



<PAGE>



                                  CERTIFICATION
I, Xue Jun Song, certify that:

1.    I have reviewed this report on Form 10-KSB of New Dragon Asia Corp.

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

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

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

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

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

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

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

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

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

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

                                                        /S/  XUE JUN SONG
                                                        ------------------------
April 9, 2003                                           Xue Jun Song
                                                        Chief Executive Officer



<PAGE>


                                  CERTIFICATION
I, Wing Leung Lai, certify that:

1.    I have reviewed this report on Form 10-KSB of New Dragon Asia Corp.

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

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

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

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

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

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

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

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

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

6.    The  registrant's  other  certifying  officer and I have indicated in this
      report whether or not there were significant  changes in internal controls
      or in other  factors that could  significantly  affect  internal  controls
      subsequent  to the  date of our  most  recent  evaluation,  including  any
      corrective  actions with regard to significant  deficiencies  and material
      weaknesses.
                                                     /s/ Wing Leung Lai
                                                    ------------------------
April 9, 2003                                        Wing Leung Lai
                                                     Chief Financial Officer

<PAGE>

TABLE OF CONTENTS
-----------------

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

                              FINANCIAL STATEMENTS

                           DECEMBER 25, 2002 AND 2001



                                    CONTENTS

                                                                  PAGE
                                                                -------
Independent Auditors` Report of Grobstein, Horwath &
Company LLP                                                       F-1

Independent Auditors` Report of Spear, Safer, Harmon & Co.        F-2


Consolidated Balance Sheets                                       F-3

Consolidated Statements of Income and Comprehensive
Income                                                            F-4

Consolidated Statements of Stockholders`
Equity                                                            F-5

Consolidated Statements of Cash Flows                       F-6 - F-7

Notes to Consolidated Financial Statements                 F-8 - F-27




<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
New Dragon Asia Corp. and Subsidiaries


We  have audited the accompanying consolidated balance sheets of New Dragon Asia
Corp.  and  Subsidiaries  as  of  December 25, 2002 and the related consolidated
statements  of  Income  and  Comprehensive Income, stockholders` equity and cash
flows  for the years then ended. These consolidated financial statements are the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United  States.  Those  standards  require  that we plan and  perform the
audits to obtain reasonable  assurance about whether the consolidated  financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  financial  statement  presentation.  We believe that our audits and the
report of other auditors provide a reasonable basis for our opinion.

In our  opinion,  based on our  audits  and the  report of other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material respects,  the consolidated financial position of New Dragon Asia Corp.
and Subsidiaries as of December 25, 2002 and the  consolidated  results of their
operations and cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.



Grobstein, Horwath & Company LLP

March 31, 2003


                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Stockholders
New Dragon Asia Corp. and Subsidiaries

We have audited the accompanying  consolidated  balance sheet of New Dragon Asia
Corp. and  Subsidiaries  as of December 25, 2001,  and the related  consolidated
statements of operations and comprehensive  income, cash flows and stockholders'
equity  for the year ended  December  25,  2001.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of New
Dragon Asia Corp. and  Subsidiaries  as of December 25, 2001 in accordance  with
accounting principles generally accepted in the United States of America.

Spear, Safer, Harmon & Co.


Miami Florida


April 12, 2002






                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES


                           Consolidated Balance Sheets


                           December 25, 2002 and 2001

                                                                               2002                      2001
                                                                            (US$'000)                  (US$'000)
<S>                            <C>                                             <C>                             <C>

                                ASSETS                               ----------------------    ---------------------
Current Assets:
    Cash and cash equivalents                                          $             628         $            1,293
    Restricted cash                                                                  181                          -
    Accounts receivable, net                                                       7,328                      5,110
    Other receivables, deposits and prepayments                                    1,066                      1,409
    Inventories                                                                    5,202                      5,327
    Due from related companies                                                     2,499                      1,704
                                                                     ----------------------    ---------------------
                                        Total Current Assets                      16,904                     14,843
    Property, machinery and equipment, net                                        19,340                     19,508
    Land use rights, net                                                           4,110                      4,220
    Investment                                                                         -                         72
                                                                     ----------------------    ---------------------
    Total Assets                                                       $          40,354         $           38,643
                                                                     ======================    =====================
                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
    Short-term borrowings                                              $           3,614         $            3,554
    Accounts payable                                                               4,728                      3,440
    Other payables and accruals                                                    1,282                        738
    Taxes payable                                                                    889                        469
    Due to related companies                                                         802                      3,784
                                                                     ----------------------    ---------------------
    Total Current Liabilities                                                     11,315                     11,985
    Due to New Dragon Asia Food Limited                                            5,782                      7,044
    Due to joint venture partners                                                  5,571                      6,081
                                                                     ----------------------    ---------------------
    Total Liabilities                                                             22,668                     25,110
                                                                     ----------------------    ---------------------
    Stockholders' Equity:
    Common stock, par value US$0.0001; authorized - 107,000,000
    shares; outstanding and fully paid - 40,911,242 shares as of
    December 25, 2002 and 2001                                                         4                          4
    Additional paid-in capital                                                     8,132                      8,132
    Retained earnings                                                              9,550                      5,397
                                                                     ----------------------    ---------------------
    Total Stockholdersi- Equity                                                   17,686                     13,533
                                                                     ----------------------    ---------------------
    Total Liabilities and
    Stockholders' Equity                                               $          40,354         $           38,643
                                                                     ======================    =====================

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

</TABLE>

                                      F-3
<PAGE>

<TABLE>
<CAPTION>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES


           Consolidated Statements of Income and Comprehensive Income


                 For the Years Ended December 25, 2002 and 2001

                                                                      2002                      2001
                                                                   (US$'000)                 (US$'000)
                                                           ------------------------   -----------------------
<S>                                                                    <C>                        <C>

Net Sales                                                    $           33,704         $          30,135
Cost of Goods Sold                                                      (27,596 )                 (24,092 )
                                                           ------------------------   -----------------------
Gross Profit                                                              6,108                     6,043

Operating Expenses:
         Selling and distribution expenses                               (1,161 )                    (613 )
         General and administrative expenses                               (601 )                  (1,341 )
                                                           ------------------------   -----------------------
Income from Operations                                                    4,346                     4,089
Other Income and Expenses:
                  Interest expense                                         (265 )                    (200 )
                  Interest income                                           194                        88
                  Other income                                              487                       642
                                                           ------------------------   -----------------------
Income Before Non-recurring Item and Provision for Income
Taxes                                                                     4,762                     4,619
Non-recurring Costs of Share Exchange                                        --                    (3,134 )
                                                           ------------------------   -----------------------
Income Before Provision for Income Taxes                                  4,762                     1,485
Provision for Income Taxes                                                 (609 )                    (619 )
                                                           ------------------------   -----------------------
Net Income and Comprehensive Income                          $            4,153         $             866
                                                           ========================   =======================
Basic and Diluted Earnings Per Common Share                  $             0.10         $            0.02
                                                           ========================   =======================
Weighted Average Shares Used to Compute Basic and Diluted
Net Income per Common Share                                              40,911                    40,911
                                                           ========================   =======================

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

</TABLE>


                                      F-4
<PAGE>
                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                 For the Years Ended December 25, 2002 and 2001

<TABLE>
<CAPTION>

                                            Class A
                                             Common                Additional                                      Total
                                             Stock                  Paid-In                Retained             Stockholders'
                                   No.of shares      Amount         Capital                Earnings               Equity
                                    (000)          (US-OOO)        (US-000)               (US-000)               (US-000)
                                  -------------- -----------  ---------------------  --------------------   -----------------------

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


Balance at December 25, 2000              1049   $  --           $          --        $         4,544           $       4,544

Conversion of Bio Aqua Shares            1,700      --                       2                     --                       2

Issuance of Common Stock in
  Connection with:

   Exchange agreement                   35,184       4                   4,996                    (13)                  4,987

      Consulting, investment
      banking and legal
      services                           2,978      --                   3,134                     --                   3,134

Net Income for the Year Ended
  December 25, 2001                                 --                      --                    866                     866
                                  -------------- -----------  ---------------------  --------------------   -----------------------

Balance at December 25, 2001            40,911       4                   8,132                  5,397                  13,533

Net Income for the Year Ended
  December 25, 2002                                 --                      --                  4,153                   4,153
                                  -------------- -----------  ---------------------  --------------------   -----------------------
Balance at December 25, 2002            40,911     $ 4          $        8,132         $        9,550            $     17,686
                                  ============== ===========  =====================  =====================  =======================


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

</TABLE>

                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES


                      Consolidated Statements of Cash Flows


                 For the Years Ended December 25, 2002 and 2001


                                                              2002                   2001
                                                            (US$'000)              (US$'000)
                                                      ---------------------- ------------------------
<S>                                                            <C>                   <C>
Cash Flows from Operating Activities:
    Net income                                        $              4,153   $                 866
    Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
         Depreciation and amortization                                1,251                  1,264
         Stock issued in connection with investment
         services                                                        --                  3,134
         Provision for bad debts                                        134                     87
         Loss on disposal of machinery and equipment                      5                      4
         Sources and (uses) of cash from changes in
         operating assets and liabilities:
           Accounts receivable                                       (2,352)                (2,460)
           Other receivables, deposits and
           Prepayments                                                  343                   (197)
           Inventories                                                  125                    655
           Accounts Payable                                           1,288                 (1,498)
           Other payables and accruals                                  544                    309
           Tax payables                                                 420                 (1,314)
                                                      ---------------------- ------------------------
Net Cash Provided by Operating Activities                             5,911                    850
                                                      ---------------------- ------------------------

Cash Flows from Investing Activities:
    Increase in amounts due from related companies                    (795)               (1,704)
    Decrease (increase) in investment                                   72                   (72)
    Increase (decrease) in amounts due to related
    companies                                                       (2,972)                3,784
    Purchases of property and equipment                               (978)               (2,663)
                                                      ---------------------- ------------------------
Net Cash Used in Investing Activities                              ( 4,683)                ( 655)
                                                      ====================== ========================


</TABLE>

                                      F-6
<PAGE>

<TABLE>
<CAPTION>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

                Consolidated Statements of Cash Flows (Continued)

                 For the Years Ended December 25, 2002 and 2001


                                                       2002                  2001
                                                     (US$'000)             (US$'000)
                                                 ---------------------- ------------------------
<S>                 <C>                                <C>                       <C>

Cash Flows from Financing Activities:
    Issuance of common stock                                     --                 4,989
    Increase in restricted cash                                (181)                   --
    Proceeds from short-term borrowings                       6,988                    --
    Payments on short-term borrowings                        (6,928)                  (33)
    Decrease in due to New Dragon Asia Food limited
    company                                                  (1,262)               (9,756)
    Increase (decrease) in due to joint venture
    partners                                                   (510)                4,883
                                                 ---------------------- ------------------------
Net Cash (Used in) Provided by
Financing Activities                                         (1,893)                   83
                                                 ---------------------- ------------------------
Net Change in Cash and Cash Equivalents                        (665)                  278

Beginning Cash and Cash Equivalents                           1,293                 1,015
                                                 ---------------------- ------------------------
Ending Cash and Cash Equivalents                 $              628     $           1,293
                                                 ====================== ========================
Supplemental  disclosures
of cash Flow  information:
Cash paid during the year for:
     Interest                                    $              292     $             125
     Income taxes                                               426                   132
Non cash investing and financing activities:
     Conversion of outstanding Bio Aqua shares                   --                     2
     Issuance of common stock in connection with
     exchange agreement                                          --                 5,000




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

</TABLE>

                                      F-7
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES


                   Notes to Consolidated Financial Statements


                     Years Ended December 25, 2002 and 2001


NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS


New Dragon Asia Corp.  (formerly  Bio-Aqua  Systems,  Inc.) and its subsidiaries
(the "Group" or "NDAC"), a United States  corporation  incorporated in the State
of  Florida,  is  principally  engaged  in  the  manufacturing,   marketing  and
distribution  of instant  noodles  and flour in the  People's  Republic of China
("PRC").  NDAC has its  principal  offices  in Hong  Kong.  The group of NDAC is
composed of four limited liability companies, incorporated under the laws of the
British Virgin Islands (BVI).


Prior to December  2001,  Bio-Aqua  Systems,  Inc.  ("Bio-Aqua")  owned majority
interests in Tepual,  S.A. and Krisel,  S.A., Chilean  corporations  principally
engaged in the business of (1) research, consulting,  development and control of
the  production  of meals for feed used by the  aquaculture,  poultry and cattle
farming  industries,  (2) sales of vaccine  products,  and (3) krill  fishing in
Uruguay.


Due to lack of working capital,  Bio-Aqua suspended all of its operations during
2001.  On August 7,  2001,  it was  announced  that it would  seek to divest its
current  operations  and  acquire  a new  operating  company  with  the  goal of
enhancing shareholder value.


On December 13, 2001  Bio-Aqua  entered  into a Share  Exchange  Agreement  (the
"Exchange  Agreement")  with Max Rutman,  Flagship  Import  Export LLC, a Nevada
limited liability company and New Dragon Asia Food Limited,  a company organized
under  the  laws  of the  British  Virgin  Islands.  Pursuant  to  the  Exchange
Agreement, Bio-Aqua acquired from New Dragon Asia Food Limited all of its equity
interests  in four  companies  organized  under the laws of the  British  Virgin
Islands (each a "Subsidiary" and, collectively the "Subsidiaries") each of which
in turn holds an interest in a separate sino-foreign joint venture, which equity
interests  constituted all of the issued and outstanding equity interests of the
Subsidiaries  in  exchange  for  37,963,263   shares  of  common  stock  of  the
Registrant.


Upon the closing of the share exchange,  Max Rutman,  Nestor Lagos,  Pedro Sayes
and Oscar Cornejo  resigned from the board of directors and on December 14, 2001
Xue Jun Song, Man Fai Leung,  Shu Hua Zhang and Wing Leung Lai became members of
Bio-Aqua's board of directors.  The directors then elected Wing Leung Lai as the
Chief Financial Officer, Shu Hua Zhang as the Deputy General Manager and Xue Jun
Song as the Chief Executive Officer.


As conditions  of the Exchange  Agreement,  the Company  amended its Articles of
Incorporation to:

   1)Change the name of the Company to New Dragon Asia Corp.

   2)Convert all the previously existing Class A and Class B common stock into a
     single class of common stock.

   3)Increase its authorized capital stock to 107,000,000 shares.

   4)Max Rutman  (through his ownership  interest in Flagship Import Export LLC)
     and Atik S.A., owners of all of the previously existing 1,700,000 shares of
     the Class B common stock, agreed to convert their Class B shares to Class A
     common stock.

In connection with the terms and provisions of the Exchange Agreement,  Bio-Aqua
issued  1,335,912 shares of restricted  common stock to investment  advisors and
attorneys in  connection  with services  rendered to effectuate  the exchange of
shares. At the date of issuance of the shares,  the AMEX market quotation of the
stock  was  $3.00  per  share.  NDAC  has  included  these  costs  approximating
$3,134,000  in other  expenses in the  accompanying  statement  of  consolidated
income and comprehensive  income for the year ended December 25, 2001,  computed
by  applying  a 20%  discount  to the above  AMEX  market  quotation  due to the
restricted nature of the stock.

                                      F-8
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)


The Group is subject to, among others, the following operating risks:


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


In addition, all of the Group's revenue is denominated in Renminbi ("RMB") which
must be converted into other currencies  before  remittance out of the PRC. Both
the  conversion  of RMB into foreign  currencies  and the  remittance of foreign
currencies abroad require the approval of the PRC government.


OPERATING  RISK -- The Group  conducts its  manufacturing  and sales  operations
through joint  ventures  established  between the Group and certain PRC parties.
Any deterioration of these strategic relationships may have an adverse effect on
the operations of the Group.


CONCENTRATION  OF CREDIT RISK --  Concentrations  of credit risk with respect to
customer receivables are limited due to the large number of customers comprising
the Group's customer base, and their dispersion across the PRC. In addition, the
Group performs ongoing credit evaluations of each customer's financial condition
and maintains reserves for potential credit losses. Such losses in the aggregate
have not exceeded management's expectations.



                                      F-9
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)



NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)


Details of the companies comprising the Group are as follows:


<TABLE>
<CAPTION>

                                                                   Percentage of
                         Domicile and                             Equity Interest
                           Date of              Paid-Up           Attributable to               Principal
        Name            Incorporation           Capital              the Group                 Activities
-------------------  ---------------------  -----------------   ------------------- ----------------------------

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

Mix Creation Limited     The British             US$1                 100% (a)        Investment holding
("MC")                  Virgin Islands
                       November 7, 1997

Rich Delta Limited       The British             US$1                 100% (a)        Investment holding
("RD")                  Virgin Islands
                       October 28, 1998

Noble Point Limited      The British             US$1                 100% (a)        Investment holding
("NP")                 Virgin Islands
                       October 29, 1998

Keen General Limited     The British             US$1                 100% (a)        Investment holding
("KG")                 Virgin Islands
                        July 20, 1998

New Dragon Asia            The PRC                RMB                   90% (b)       Manufacture, marketing and
Flour                  August 13, 1999        28,000,000                              distribution of flour
(Yantai) Company
Limited
("NDAFLY")

New Dragon Asia Food       The PRC                RMB                   90% (c)       Manufacture, marketing and
(Yantai) Company       December 24, 1998       17,462,000                             distribution of instant
Limited                                                                               noodles
("NDAFY")

New Dragon Asia Food       The PRC                RMB                   90% (c)       Manufacture, marketing and
(Dalian) Company       December 28, 1998       17,430,000                             distribution of instant
Limited                                                                               noodles
("NDAFD")

Sanhe New Dragon           The PRC                RMB                   80% (c)       Manufacture, marketing and
Asia                   December 25, 1998       51,191,432                             distribution of instant
Food Company Limited                                                                  noodles
("SNDAF")


</TABLE>

(a)   MC, RD, NP and KG are wholly owned by New Dragon Asia Corp.

(b)  NDAFLY is a contractual joint venture established in the PRC to be operated
     for 50 years until August 13, 2049. In September  2000, MC contributed  90%
     of the  registered  capital to NDAFLY.  Under the joint  venture  agreement
     dated June 1, 1999 and the supplemental  agreement dated June 26, 1999, the
     Chinese  joint  venture  partner is  entitled  to receive a  pre-determined
     annual  fee and all  profits  or loss,  net of  annual  fees from the joint
     venture are to be allocated to NDAFLY effective from June 26, 1999. In view
     of the profit sharing  arrangement  NDAFLY is regarded as 100% owned by the
     Group. The minority interest  component has been included as a component of
     General and  Administrative  Expenses for the years ended December 25, 2002
     and 2001.

(c)  NDAFY,  NDAFD and SNDAF are contractual  joint ventures  established in the
     PRC to be operated for 50 years until  December 24, 2048. In March 1999, RD
     and NP  contributed  90% of the  registered  capital  to NDAFY  and  NDAFD,
     respectively,  while KG contributed 80% of the registered capital to SNDAF.
     Under  the  joint  venture  agreements  dated  November  28,  1998  and the
     supplemental  agreement  dated  December  26, 1998,  the PRC joint  venture
     partner  is  entitled  to  receive a  pre-determined  annual fee and is not
     responsible for any profit or loss of NDAFY, NDAFD and SNDAF effective from
     December 26, 1998. In view of the profit sharing arrangements, NDAFY, NDAFD
     and SNDAF are regarded as 100% owned by the Group.

                                      F-10
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)



NOTE 2 -- BASIS OF PRESENTATION


The  consolidated   financial  statements  include  the  consolidated  financial
statements of MC and its subsidiary (NDAFLY),  RD and its subsidiary (NDAFY), NP
and its  subsidiary  (NDAFD)  and KG and its  subsidiary  (SNDAF),  as they  are
enterprises  controlled  by  NDAC.  All  significant  intra-group  balances  and
transactions have been eliminated in consolidation.


The  consolidated   financial   statements  were  prepared  in  accordance  with
accounting principles generally accepted in the United States ("U.S. GAAP"). The
preparation  of financial  statements  in  conformity  with U.S.  GAAP  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  the disclosure of contingent  assets and liabilities as
of the date of the financial statements and the reported amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.  U.S.  GAAP  differs  from  that  used  in  the  statutory  financial
statements of the major operating subsidiaries of the Group, which were prepared
in accordance with the relevant  accounting  principles and financial  reporting
regulations  applicable  to joint  venture  enterprises  as  established  by the
Ministry of Finance of the PRC. Certain accounting  principles  stipulated under
U.S. GAAP are not applicable in the PRC.


NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Contractual  Joint  Ventures  --  A  contractual  joint  venture  is  an  entity
established between the Group and another joint venture partner, with the rights
and  obligations  of each party  governed by a contract.  If the Group owns more
than 50% of the joint  venture and is able to govern and  control its  financial
and  operating  policies  and its board of  directors,  such  joint  venture  is
considered as a de facto subsidiary and is accounted for as a subsidiary.


Revenue  Recognition -- The Group  recognizes sales in accordance with SEC Staff
Accounting  Bulletin No. 101,  "Revenue  Recognition  in Financial  Statements."
Sales  represent  the invoiced  value of goods,  net of value added tax ("VAT"),
supplied to customers,  and are recognized upon delivery of goods and passage of
title.


All of the  Group's  sales made in Mainland  China are  subject to the  Mainland
Chinese  value-added tax at rates ranging from 13% to 17% ("output  VAT").  Such
output  VAT is  payable  after  offsetting  VAT paid by the  Group on  purchases
("input VAT").


                                      F-11
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)



Deposits  or advance  payments  from  customers  prior to  delivery of goods and
passage of title of goods are recorded as deposits from customers.


Advertising  -- The costs of  advertising  are expensed in the year in which the
advertising  first takes  place.  Total  advertising  expense was  approximately
$13,821 and $5,000 for the years ended December 25, 2002 and 2001, respectively.


Use of Estimates - The  preparation  of  consolidated  financial  statements  in
accordance with accounting  principles  generally  accepted in the United States
requires management to make estimates and assumptions  relating to the reporting
of assets and liabilities,  the disclosure of contingent  assets and liabilities
and the reported  amounts of revenues and expenses during the reporting  period.
Actual results could differ from those estimates.


Cash and Cash Equivalents -- Highly liquid  investments with a maturity of three
months or less at the time of acquisition are considered to be cash equivalents.


                                      F-12

<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)





NOTE 3-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Financial  Instruments -- The Group accounts for financial instruments under the
provisions of SFAS No. 133:  "Accounting for Derivative  Instruments and Hedging
Activities",  which  requires  that  all  derivative  financial  instruments  be
recognized in the consolidated financial statements and maintained at fair value
regardless of the purpose or intent for holding  them.  Changes in fair value of
derivative financial instruments are either recognized periodically in income or
stockholders'  equity (as a component  of  comprehensive  income),  depending on
whether  the  derivative  is being  used to hedge  changes in fair value or cash
flows.  The  adoption of SFAS 133 did not have a material  impact on the Group's
consolidated  financial  position or its results of operations because the Group
does not currently hold any derivative financial instruments and does not engage
in hedging  activities.  The  carrying  amounts  for cash and cash  equivalents,
restricted  cash,   accounts   receivable,   other  receivables,   deposits  and
prepayments,   short-term  borrowings,  accounts  payable,  other  payables  and
accruals  approximate  their fair values  because of the short maturity of those
instruments.


Inventories  --  Inventories  are stated at the lower of cost,  determined  on a
weighted average basis, and net realizable value.  Work-in-progress and finished
goods  are  composed  of  direct  material,   direct  labor  and  a  portion  of
manufacturing  overhead. Net realizable value is the estimated selling price, in
the ordinary course of business, less estimated costs to complete and dispose.


Property, Machinery,  Equipment, Land Use Rights and Construction-in-Progress --
Property, machinery, equipment, land use rights and construction in progress are
stated at cost. Major  expenditures for betterments and renewals are capitalized
while  ordinary  repairs  and  maintenance   costs  are  expensed  as  incurred.
Depreciation  and amortization is provided using the  straight-line  method over
the estimated useful lives of the assets after taking into account the estimated
residual value. The estimated useful lives are as follows:


  Land use rights                     27 to 50 years
  Buildings                           40 to 50 years
  Machinery and equipment             12 years
  Furniture and office equipment      5 years
  Motor vehicles                      5 years

Construction-in-progress  represents  land costs as well as  factory  and office
buildings  under  construction.   The  Group  capitalizes  interest  during  the
construction  phase  of  qualifying  assets  in  accordance  with  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 34,  "Capitalization  of Interest
Cost." No interest  was  capitalized  during 2002 and 2001 and the  construction
paid was minimal.


Impairment  of  Long-Lived Assets - The Group tests its investment in long-lived
assets,  including  property,  machinery,  equipment,  land  use  rights,
construction-in-progress, long-term prepaid assets and intangible assets subject
to  periodic  amortization  for  recoverablilty  whenever  events  or changes in
circumstances  indicate  the  net  carrying  amount  may  not  be  recoverable.

Income Taxes -- The Group accounts for income taxes under the provisions of SFAS
No. 109,  "Accounting for Income Taxes",  which requires recognition of deferred
tax assets and liabilities  for the expected  future tax  consequences of events
that have been included in the consolidated financial statements or tax returns.
Deferred income taxes are provided using the liability  method and is recognized
for all significant  temporary  differences between the income tax and financial
statement bases of assets and liabilities.


Operating  Leases  --  Operating  leases  represent  those  leases  under  which
substantially all the risks and rewards of ownership of the leased assets remain
with the lessors.  Rental payments under operating leases are charged to expense
on the straight-line basis over the period of the relevant leases.

                                      F-13
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Foreign Currency Translation -- The functional currency of the Group is Renminbi
("RMB").  Transactions denominated in foreign currencies are translated into RMB
at the unified exchange rates quoted by the People's Bank of China prevailing at
the dates of the  transactions.  Monetary assets and liabilities  denominated in
foreign currencies are translated into RMB using the applicable unified exchange
rates  prevailing  at the  balance  sheet date.  There are no material  exchange
differences  as a result of the stability of the RMB during the periods  covered
by the consolidated financial statements.


Translations of amounts from Renminbi ("RMB") into United States dollars ("US$")
were at US $1.00 = RMB 8.3 for the years ended  December  25, 2002 and 2001.  No
representation  is made that the Renminbi  amounts could have been, or could be,
converted into United States dollars at that rate or at any other rate.


Earnings  Per Share -- Basic  earnings  per common  rate  ("EPS") is computed in
accordance  with  SFAS  No.128:"Earnings  Per  Share"  by  dividing  net  income
available to common stockholders by the weighted-average number of common shares
outstanding  for the period.  Diluted  earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised or converted  into common  stock.  As of December 25, 2002,  the
diluted share base  excludes  incremental  shares  relating to stock options and
warrants since their effect was anti-dilutive.  The  weighted-average  number of
common shares  outstanding for computing basic EPS was 40,911,242 for both years
ended December 25, 2002 and 2001.


Recently Issued Accounting Standards --


(a)  In  July  2001,  The FASB issued SFAS No. 141: "Business Combinations", and
SFAS No. 142: "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
the  purchase  method  of  accounting  be  used  for  all  business combinations
initiated  after  June  30,  2001.  Use  of  the  pooling-of-interests method is
prohibited after that date. SFAS No. 142 changes the accounting for goodwill and
intangible  assets  with  indefinite  lives  from  an  amortization method to an
impairment-only  approach and requires intangible assets with finite lives to be
amortized over their useful lives. Thus, amortization of goodwill and intangible
assets with indefinite lives will cease upon adoption of the statement. SFAS No.
142 is required to be applied in fiscal years beginning after December 15, 2001.
Upon  the  adoption  of  SFAS  No. 142, the Group will not amortize goodwill and
instead  will  conduct  an annual impairment test of the remaining goodwill. The
Group  does  not  expect that the adoption of SFAS No. 141, or SFAS No. 142 will
have  a  significant  immediate  impact on the financial condition or results of
operations  of  the  Group.


(b) In  October  2001,  the  FASB  issued  SFAS  No.  144:  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets." SFAS No.144 amends accounting and
reporting  standards  for the disposal of segments of a business  and  addresses
various  issued  related to the  accounting  for the  impairment  or disposal of
long-lived assets. The provisions of SFAS No. 144 are effective for fiscal years
beginning  after December 15, 2001. The adoption of SFAS No. 144 is not expected
to have a material impact on the Group's consolidated financial statements.


(c) In April 2002, the FASB issued SFAS No.145:  "Rescission of FASB  Statements
No. 4, 44 and 64, Amendment of FASB Statement No.13, and Technical Corrections."
This SFAS made  revisions  to the  accounting  for  gains  and  losses  from the
extinguishment  of debt,  rescinded  SFAS  No.44,  and  required  certain  lease
modifications that have economic effects similar to sale-leaseback  transactions
be accounted for in the same manner as sale-leaseback transactions. The Group is
required to and will adopt SFAS No.145 on January 1, 2002.  The adoption of SFAS
No.145 is not  expected to have a material  impact on the  Group's  consolidated
financial statements.


(d) In June 2002, the FASB issued SFAS No. 146: "Accounting for Costs Associated
with Exit or Disposal  Activities." SFAS No. 146 addresses financial  accounting
and  reporting  for  costs  associated  with  exit or  disposal  activities  and
nullifies  Emerging  Issues  Task  Force  ("EITF")  Issue No.  94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity  (including Certain Costs Incurred in a  Restructuring)."  SFAS No. 146
requires  that a  liability  for a cost  associated  with an  exit  or  disposal
activity  be  recognized  when  the  liability  is  incurred.   This  SFAS  also
established  that fair value is the  objective  for initial  measurement  of the
liability.  The  provisions  of SFAS No. 146 are  effective for exit or disposal
activities  that are initiated  after  December 31, 2002.  The Group adopted the
provisions of SFAS No. 146 effective December 25, 2002.


                                      F-14
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)





NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(e) In December 2002, the FASB issued SFAS No. 148:  "Accounting for Stock-Based
Compensation-Transition  and Disclosure-an Amendment of FASB Statement No. 123."
SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based  Compensation," to
provide  alternative  methods of transition  for a voluntary  change to the fair
value based method of  accounting  for  stock-based  employee  compensation.  In
addition,  SFAS No. 148 amends the  disclosure  requirements  of SFAS No. 123 to
require prominent  disclosures in both annual and interim  financial  statements
about the method of accounting for  stock-based  employee  compensation  and the
effect  of the  method  used  on  reported  results.  The  Company  adopted  the
disclosure provisions of SFAS No. 148 effective December 25, 2002.


(f) In  November  2002,  the FASB  issued  Interpretation  No. 45:  "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  including  Indirect
Guarantees  of  Indebtedness  of  Others  ("FIN45")."  FIN45  elaborates  on the
existing disclosure requirements for most guarantees,  including loan guarantees
such as standby letters of credit.  It also clarifies that at the time a company
issues a guarantee, the company must recognize an initial liability for the fair
market  value of the  obligations  it  assumes  under  that  guarantee  and must
disclose that  information in its interim and annual financial  statements.  The
initial recognition and measurement  provisions of FIN 45 apply on a prospective
basis to guarantees  issued or modified  after  December 31, 2002. The Group has
implemented  the  disclosure  provisions  of  FIN 45 in its  December  25,  2002
consolidated financial statements.


(g) In January 2003, the FASB issued  Interpretation  No. 46:  "Consolidation of
Variable Interest Entities (an interpretation of ARB No. 51) ("FIN 46")." FIN 46
addresses  consolidation by business  enterprises of certain  variable  interest
entities,  commonly referred to as special purpose  entities.  The Group will be
required to implement the other  provisions of FIN 46 in 2003.  The Company does
not believe that FIN 46 will have a material impact on its financial statements.


Reclassifications  - Certain amounts in the fiscal 2001  consolidated  financial
statements have been reclassified to conform to the fiscal 2002 presentation.


NOTE 4 -- ACCOUNTS RECEIVABLE


Accounts receivable consisted of the following at December 25:


                       2002                  2001
                     (US$'000)             (US$'000)

                -------------------  --------------------
Accounts
receivable      $            7,743    $            5,391

Less:                         (415)                 (281)
Allowance for
doubtful
accounts
                -------------------  --------------------
                 $            7,328    $            5,110
                ===================  ====================

                                      F-15
<PAGE>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 5 -- OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS


As of December 25, other receivables, deposits and prepayments were as follows:

                                  2002                  2001
                               (US$'000)              (US$'000)
                        ----------------------  ----------------------

  Others                $                 481     $              418
Vendor deposits for the
purchase of:
  Raw materials                           424                    495
  Machinery and
  equipment                                11                    137
Prepayments for
construction work                          60                    202
Advances to:
Staff (a)                                  88                    148
  Unrelated third
  parties (a)                               2                      9
                        ----------------------  ----------------------
                         $              1,066   $              1,409
                        ======================  ======================

(a)   Advances  to staff  and  unrelated  parties  are  unsecured,  non-interest
      bearing and without predetermined repayment terms.


NOTE 6 -- INVENTORIES


Inventories consisted of the following at December 25:

                               2002                 2001
                            (US$'000)            (US$'000)
                     --------------------- ----------------------
Raw materials          $            2,981   $             2,793
Finished goods                      2,221                 2,534
                     --------------------- ----------------------
                       $            5,202   $             5,327
                     ===================== ======================

                                      F-16
<PAGE>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 7 -- PROPERTY, MACHINERY AND EQUIPMENT, AND CONSTRUCTION-IN-PROGRESS


Property, machinery and equipment, and construction-in-progress consisted of the
following at December 25:

                                 2002                 2001
                              (US$'000)            (US$'000)
                         --------------------- -------------------
                         $                     $
Buildings                              9,623                9,055
Machinery and equipment               12,816               12,462
Furniture and office
equipment                                158                  144
Motor vehicles                           592                  525
Construction-in-progress                 169                  212
                         --------------------- -------------------
                                      23,358               22,398
Less:  Accumulated
depreciation                          (4,018)              (2,890)
                         --------------------- -------------------
Property, plant and
equipment, net           $            19,340   $           19,508
                         ===================== ===================


Depreciation expense was approximately  $1,141,000 and $1,095,000 as of December
25, 2002 and 2001, respectively.


NOTE 8 -- LAND USE RIGHTS

Land use rights consists of the following at December 25:


                         2002                  2001
                      (US$'000)             (US$'000)
                 -------------------- ---------------------
Land use rights  $             4,575   $             4,575

Less:
Accumulated
amortization                    (465)                 (355)

                 -------------------- ---------------------
Land use
rights, net      $             4,110   $             4,220
                 ==================== =====================

Private  ownership of land is not allowed in Mainland  China.  Rather,  entities
acquire the right to use land for a designated term. As of December 25, 2002 and
2001, the land use rights  consisted of four parcels of land located in Mainland
China  with  a  net  book  value  of  approximated   $4,110,000  and  $4,220,000
respectively, held under land use rights of 27 to 50 years through 2025 to 2047.

Amortization expense was approximately  $110,000 and $169,000 as of December 25,
2002 and 2001, respectively.


                                      F-17
<PAGE>



                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)



NOTE 9 -- SHORT-TERM BORROWINGS


Short-term borrowings consisted of the following at December 25:

                       2002                 2001
                    (US$'000)            (US$'000)
               -------------------- ---------------------
Bank loans     $             3,012  $             3,554
Bills
payable                        602                   --
               -------------------- ---------------------
               $             3,614  $             3,554
               ==================== =====================

Bank loans are secured by corporate  guarantees  provided by a PRC joint venture
partner,  and bear interest at prevailing  lending rates in the PRC ranging from
6.05% to 7.02% per annum for the year ended December 25, 2002.


Bills  payable are a form of bank  borrowings  with payment due within 180 days,
and are  interest  bearing  unless they become  trust  receipt  loans which bear
interest  at 0.05% per day.  The bills  payable  are  secured  by  pledged  bank
deposits of approximately $181,000.


NOTE 10 -- OTHER PAYABLES AND ACCRUALS


Other payables and accruals consisted of the following at December 25:

                                  2002                  2001
                               (US$'000)             (US$'000)
                         --------------------- ---------------------
Other Payables            $               743   $               209
Deposits from customers                   315                   362
Accruals for:
  Staff welfare                            18                    50
  Staff salaries and
  bonus                                    50                    10
  Operating expenses                      105                    67
  Property taxes                           51                    40
                         --------------------- ---------------------
                          $             1,282   $               738
                         ===================== =====================

NOTE 11 -- TAXATION


The PRC  subsidiaries  within the Group are  subject  to PRC income  taxes on an
entity basis on income arising in or derived from the tax  jurisdiction in which
they  operate.   The  Group's   companies  that  are   incorporated   under  the
International  Business  Companies Act of the British  Virgin Islands are exempt
from payment of the British Virgin Islands income tax.

For the years ended December 25, 2002 and 2001, substantially all of the Group's
Income was  generated in the PRC by NDAFLY,  NDAFY,  NDAFD and SNDAF (the "Joint
Venture"),  which are subject to PRC income  taxes at rates  ranging from 27% to
33% (24% to 30% state income tax and 3% local  income tax).  The Group is exempt
from state income taxes and local income taxes for a two-year  period  ending on
December 25, 1999 and then subject to a 50% reduction in state income taxes, and
a full exemption from local income taxes for the following three years ending on
December 25, 2003.

                                      F-18
<PAGE>



                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 11 -- TAXATION (Continued)


As of December 25, 2002 and 2001,  there do not exist any material  deferred tax
assets or deferred tax liabilities.


A  reconciliation  of the provision for income taxes determined at the statutory
average state and local income tax rate to the Group's effective income tax rate
is as follows:
<TABLE>
<CAPTION>
<S>                                                                        <C>           <C>

                                                                         2002             2001
                                                                        -----            -----
Statutory income tax, average rate                                        28%               30%
Impact of effective tax holiday discussed above                           (15)             (23)
Various differences, especially as they related to expenses of
   share exchange                                                           -               20%
                                                                        ------           ------

Effective rate                                                            13%               27%
                                                                        ======           =======

</TABLE>


NOTE 12 -- COMMON STOCK


Prior to the  execution of the Exchange  Agreement,  Bio Aqua was  authorized to
issue  100,000,000  shares of Class A common stock;  2,000,000 shares of Class B
common stock and  5,000,000  shares of  preferred  stock.  Immediately  upon the
exchange  taking  place,  all Class A and Class B shares were  converted  into a
single  class of  common  stock.  Currently  the  Group is  authorized  to issue
107,000,000  shares of common stock and 5,000,000  shares of preferred stock all
at $ .0001 par value.


As  of  December  25,  2002  and 2001 the Group had approximately 40,911,242 and
40,911,242  shares  of  common  stock  issued  and  outstanding respectively. No
preferred  stock  has  been  issued.


NOTE 13 -- COMMITMENTS


Lease  Commitments -- The Group leases  manufacturing  and warehouse  facilities
under  operating  leases which expire at various  dates  through  March 2031. At
December 25, 2002, the Group's  future  minimum lease  payments under  operating
leases were as follows:

                                                   (US$'000)
                                              ---------------------
    2003                                      $                77
    2004                                                       75
    2005                                                       75
    2006                                                       10
    2007                                                        9
    Thereafter                                                 44
                                              ---------------------
                                              $               290
                                              =====================

Total lease  expense for the years ended  December 25, 2002 and 2001 was $74,000
and $2,000, respectively.



                                      F-19
<PAGE>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 13 -- COMMITMENTS (CONTINUED)


Annual Fees -- Under the supplementary joint venture  agreements,  the Group has
committed to pay  predetermined  annual fees of  $114,000 to the Chinese joint
venture  partners for each of the years in the period from  December 26, 1998 to
2049.  As  of  December  25,  2002  and  2001,  total  commitments  under  these
arrangements were as follows:
<TABLE>
<CAPTION>

                                                              2002                  2001
                                                           (US$'000)             (US$'000)
                                                    ---------------------  ----------------------
Payable during the period:
<S>                                                            <C>                  <C>

    Within one year                                   $               114   $               114

    Over one year but not exceeding two years                         114                   114

    Over two years but not exceeding three years                      114                   114

    Over three years but not exceeding four years                     114                   114

    Over four years but not exceeding five years                      114                   114

    Over five years                                                 4,696                 4,810
                                                    ---------------------  ----------------------
                                                      $             5,266   $             5,380
                                                    =====================  ======================
</TABLE>

NOTE 14 -- RELATED PARTY TRANSACTIONS


Parties are  considered to be related if one party has the ability,  directly or
indirectly,  to control the other party or exercise  significant  influence over
the other party in making financial and operational decisions.  Parties are also
considered  to be  related  if they are  subject  to  common  control  or common
significant influence.


Particulars of significant  transactions between the Group and related companies
are summarized below:
<TABLE>
<CAPTION>

                                                                      2002                  2001
                                                                   (US$'000)              (US$'000)
                                                             --------------------- ---------------------
<S>                                                                      <C>                     <C>

  Sale of finished goods to:
    A joint venture partner, Shandong Longfeng Group Company  $               419   $                 83
    Related parties:
    Zhang Guo Quan(5)                                                         980                     --
    Penglai Jinhai Food Company Limited(4)                                    344                     --
    Longkou City Longfeng Colour Printing Factory(3)(6)                         7                     --
    NNew Dragon Asia Food (Luoyang) Company Limited (2)                        --                      1
    Shandong Longfeng Group Trading Company(1)                                  2                     --
    Sanhe (Yantai) Food Company Limited(1)                                      1                     --
    Shandong Longfeng Penglai Flour Company Limited(3)                         --                     62
                                                             --------------------- ---------------------
                                                              $             1,753   $                146
                                                             ===================== =====================

</TABLE>

                                      F-20
<PAGE>
<TABLE>
<CAPTION>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

<S>                                                                           <C>                  <C>
                                                                      2002                  2001
                                                                   (US$'000)              (US$'000)
                                                             --------------------- ---------------------
NOTE 14 -- RELATED PARTY TRANSACTIONS (CONTINUED)

Purchase of raw materials from:
  A joint venture partner, Shandong Longfeng Group Company    $                 8   $                 --
  Related parties:
    Sanhe (Yantai) Food Company Limited(1)                                     19                     48
    Shandong Longfeng Penglai Flour Company Limited (3)                        --                    924
    Longkou City Longfeng Colour Printing Packing
    Factory(3)(6)                                                             907                    688
    Longkou City Longfeng Carton Packing Factory(3)(6)                        710                    424
    New Dragon Asia Food (Yueyang) Company Limited(2)                           1                     --
    Xinxiang Guo Liang Flour Company Limited(5)                                --                     37
  New Dragon Asia Food (Chengdu) Company Limited(2)                            11                     --
  New Dragon Asia Food (Luoyang) Company Limited(2)                             1                     --
                                                             ---------------------- --------------------
                                                              $             1,657   $              2,121
                                                             ====================== ====================


                                    2002                  2001
                                 (US$'000)             (US$'000)
                           --------------------- ----------------------
Pre-determined annual fee
charged by joint
venture partners:
  Shandong Longfeng Group
  Company                   $                78   $                78
  Shandong Longfeng Flour
  Company Limited                            36                    36
                           --------------------- ----------------------
                            $               114   $               114
                           ===================== ======================
Interest income earned
from short-term advances
 to an immediate parent company:
  New Dragon Asia Food
  Limited                   $               188   $                67
                           ===================== ======================
Interest expenses paid to
a joint venture partner:
  Shandong Longfeng Group
  Company                   $                18   $                18
                           ===================== ======================
Rental income from joint
venture partner:
  Shandong Longfeng Group
  Company                   $                64   $                64
                           ===================== ======================


</TABLE>

                                      F-21
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 14 -- RELATED PARTY TRANSACTIONS (CONTINUED)


Summary of related party balances is as follows:


                                   2002                  2001
                                (US$'000)             (US$'000)
                           -------------------- ------------------
  Due to New Dragon
  Asian Food Limited       $             5,782   $        7,044
                           ==================== ==================

The net amount due to New Dragon Asia Food Limited is unsecured and non-interest
bearing, except for an amount due from that Company of approximately  $3,538,000
which bears interest at 6% per annum.


During the year,  machinery  was acquired from New Dragon Asia Food Limited at a
cost of $796,000.


                                        2002                  2001
                                     (US$'000)             (US$'000)
                               --------------------- ---------------------
Due to joint venture
partners consisting of:
  Shandong Longfeng Group
  Company                       $             3,762   $             4,311
  Shandong Longfeng Flour
  Company Limited                             1,809                 1,770
                                -------------------- ---------------------
                                $             5,571   $             6,081
                                ==================== =====================


                                      F-22
<PAGE>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)




NOTE 14 -- RELATED PARTY TRANSACTIONS (CONTINUED)


The  amounts  due to joint  venture  partners  are  unsecured  and  non-interest
bearing, except for an amount due to Shandong Longfeng Group Company of $280,723
which bears interest at 6.48% per annum.


                                             2002                  2001
                                           (US$'000)             (US$'000)
                                      -------------------- --------------------
Due from related companies
consisting of:
   Sanhe New Dragon Food Process
   Company Limited(1)                 $               --    $               19
   Shandong City Longfeng Soybean
   Food Company Limited (1)                           --                    22
   New Dragon Asia Food (Yueyang)
   Company Limited (2)                               329                   329
   New Dragon Asia Food (Luoyang)
   Company Limited (2)                               791                   783
   New Dragon Asia Food (Chengdu)
   Company Limited (2)                               551                   551
 Penglai Jinhai Food Company                         372                    --
  Limited(4)
 Shandong Longfeng Group Trading                      12                    --
  Company(1)
 Shandong Longfeng Oceanic                            10                    --
  Foodstuff Company Limited(1)
 Zhang Guo Quan(5)                                   434                    --
                                      -------------------- --------------------
                                      $            2,499    $            1,704
                                      ==================== ====================


                                      F-23
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 14 -- RELATED PARTY TRANSACTIONS (CONTINUED)


The amounts due from related  companies are unsecured and non-interest  bearing,
and are repayable on demand.


                                    2002                  2001
                                 (US$'000)             (US$'000)
                           ---------------------- ----------------------
Due to related companies
consisting of:
  Dalian Mei Long Food
  Company Limited(3)        $                --   $             1,052
  Longkou City Longfeng
  Colour Printing Packing
  Factory(3)(6)                             463                   123
  Longkou City Longfeng
  Carton Packing
  Factory(3)(6)                              --                    30
  Shandong Longfeng
  Penglai Flour Company
  Limited                                    --                   722
  Longfeng Food Company
  Limited (3)                               133                   169
   ew Dragon Asia Food
    (Luoyang) Company
  N Limited(2)                                6                    --
  Ningbo Hai Fu Sheng(4)                      2                    --
   englai Jinhai Food
  P Company Limited(4)                        2                    --
  Yantai Mei Long Oil and
  Food Company Limited (3)                   --                 1,468
  Sanhe (Yantai) Food
  Company Limited(1)                         76                   220
 Sanhe Senji Food
  Technology Development
  Company Limited(1)                        120                    --
                           ---------------------- ----------------------
                            $               802   $             3,784
                           ====================== ======================

The amounts due to related Companies are unsecured, non-interest bearing and are
repayable on demand.



                                      F-24
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)



NOTE 14 -- RELATED PARTY TRANSACTIONS (CONTINUED)


The bank facilities of the Group are secured by corporate  guarantee provided by
Shandong Longfeng Group Company, a joint venture partner.

(1)  Shandong  Longfeng  Group  Company  has  a  beneficial  interest  in  these
     companies.

(2)  These  companies  are wholly  owned  subsidiaries  of New Dragon Asian Food
     Limited.

(3)  Mr.  Xue Jun Song,  a  director  of each the  companies,  has a  beneficial
     interest in these companies.

(4)  Mr.  Zhen Gu Song,  is the son of Mr. Xue Jun  Song,  and has a  beneficial
     interest in these companies.

(5)  Lessor of one of our sub-contracted factories.

(6)  Mr. Xue Jun Song ceased to be a director of Shandong Longfeng Group Company
     on January 7, 2002.

In the  opinion  of the  directors  of each of the  Group  companies,  the above
related party transactions were carried out in the usual course of business.


NOTE 15 -- SEGMENT INFORMATION


The Group  classifies  its  products  into two core  business  segments,  namely
instant  noodles  and  flour.  In view  of the  fact  that  the  Group  operates
principally in Mainland China, no geographical segment information is presented.


Net Sales


                      2002                  2001
                   (US$'000)             (US$'000)
              --------------------- --------------------
Instant
noodles       $            10,847   $             9,990
Flour                      22,857                20,145
              --------------------- --------------------
              $            33,704   $            30,135
              ===================== ====================

Income from Operations

                                            2002                    2001
                                          (US$'000)              (US$'000)
                                  ---------------------- -----------------------
         Instant noodles           $              1,621    $              1,574
         Flour                     $              2,725    $              2,515
                                  ---------------------- -----------------------
                                   $              4,346    $              4,089
                                  ====================== =======================

                                      F-25
<PAGE>

<TABLE>
<CAPTION>
                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 15-- SEGMENT INFORMATION (Continued)



Identifiable Assets
<S>                                                                 <C>                      <C>

                                                                     2002                    2001
                                                                   (US$'000)              (US$'000)
                                                           ---------------------- -----------------------
                    Instant noodles                         $             18,390    $             17,869
                    Flour                                   $              9,543    $              9,104
                                                           ---------------------- -----------------------
                                                            $             27,933    $             26,973
                                                           ====================== =======================

Interest Income

                                                                     2002                    2001
                                                                   (US$'000)              (US$'000)
                                                           ---------------------- -----------------------
                    Instant noodles                         $                192    $                 78
                    Flour                                   $                  2    $                 10
                                                           ---------------------- -----------------------
                                                            $                194    $                 88
                                                           ====================== =======================

Interest Expense

                                                                     2002                    2001
                                                                   (US$'000)              (US$'000)
                                                           ---------------------- -----------------------
                    Instant noodles                         $                 18    $                 27
                    Flour                                   $                247    $                173
                                                           ---------------------- -----------------------
                                                            $                265    $                200
                                                           ====================== =======================

Depreciation and Amortization

                                                                     2002                    2001
                                                                   (US$'000)              (US$'000)
                                                           ---------------------- -----------------------
                    Instant noodles                         $                703    $                794
                    Flour                                   $                548    $                470
                                                           ---------------------- -----------------------
                                                            $              1,251    $              1,264
                                                           ====================== =======================

Major Customers -- Details of individual  customers  accounting for more than 5%
of the Group's sales are as follows:

                                                                     2002                    2001

                                                           ---------------------- -----------------------
                    Li Yi                                                  6 %                     7 %
                                                           ---------------------- -----------------------
                    Zhang Guo Quan                                         3 %                     5 %
                                                           ====================== =======================

</TABLE>

                                      F-26
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


NOTE 15-- SEGMENT INFORMATION (Continued)


Major  Suppliers  -- Details  of  suppliers  accounting  for more than 5% of the
Group's purchases are as follows:
<TABLE>
<CAPTION>
<S>                  <C>                                             <C>                     <C>

                                                                     2002                    2001

                                                              ---------------------- ----------------------
                    Longkou City Food Collect and Store
                    Control Center                                             2 %                    15 %
                                                              ---------------------- ----------------------
                    Hui Town Food Institute Yu Lain Food
                    Control Centre                                             2 %                     5 %
                                                              ====================== ======================

</TABLE>

NOTE 16 -- RETIREMENT PLAN


As stipulated by the regulations of the PRC  government,  companies of the Group
operating  in the PRC have  defined  contribution  retirement  plans  for  their
employees.  The PRC government is responsible for the pension liability to these
retired  employees.  Commencing  January 1, 2002, the Group was required to make
specified  contributions  to the  state-sponsored  retirement plan at 20% of the
basic salary cost of their staff.  Each of the employees of the PRC subsidiaries
is  required  to  contribute  6% of  his/her  basic  salary.  For the year ended
December 25, 2002 and 2001,  contributions  made by the Group were approximately
$97,000 and $118,000 respectively.


NOTE 17 -- SUBSEQUENT EVENTS


There was a closure of the Xinxiang facility in January,  2003 due to the end of
subcontracting  agreement.  The operation and facilities were transferred to the
Group's  subcontracted  factory in Xinxian.  The  business of the  subcontracted
factory will be carried out by the Group's other subcontracted factory.


                                      F-27
<PAGE>