SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549
                                   FORM 10-K/A
                                 AMENDMENT NO. 2

(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 $33,700,000

     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 October 15, 2003 the aggregate
market value of the common equity held by non-affiliates was $1,710,248.

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 October 15, 2003 there
were 45,861,242 shares outstanding

     Transitional Small Business Disclosure Format (check one):

Yes [  ]  No [X]


<PAGE>

                                     PART IV

ITEM 15. Exhibits, Financial Statement Schedules; Reports on Form 8-K

(a)  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 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 and 2001

     6.   Notes to Consolidated Financial Statements

(b)  Exhibits

31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                   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: October 22, 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: October 22, 2003                By /s/ Xue Jun Song
                                       ------------------------------
                                       Name: Xue Jun Song
                                       Title: Chief Executive Officer, Director

Dated: October 22, 2003                By /s/ Shu Hua Zhang
                                       ------------------------------
                                       Name: Shu Hua Zhang
                                       Title: Deputy General Manager, Director

Dated: October 22, 2003                By /s/ Wing Leung Lai
                                       ------------------------------
                                       Name: Wing Leung Lai
                                       Title: Chief Financial Officer, Director

Dated: October 22, 2003                By /s/ Man Fai Leung
                                       ------------------------------
                                       Name: Man Fai Leung
                                       Title: Director

Dated: October 22, 2003                By /s/ Qi Xue
                                       ------------------------------
                                       Name: Qi Xue
                                       Title: Director



<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 Statements of Income and Comprehensive Income        F-3

Notes 1 and 3 to Consolidated Financial Statements                F-4


<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors
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, 2002 and the related  consolidated
statements of income and  comprehensive  income,  stockholders`  equity and cash
flows for the year 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  audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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, 2002, and the consolidated
results of their operations and cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States.


Grobstein, Horwath & Company LLP

Sherman Oaks, California
March 31, 2003


                                      F-1

<PAGE>





                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
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 operation and comprehensive income, cash flows and stockholders'
equity for the year then 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, and the consolidated
results of their operations and cash flows for the year ended 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>






                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES


                           Consolidated Balance Sheets


                           December 25, 2002 and 2001

<TABLE>
<CAPTION>
                                                                               2002                      2001
                                                                            (US$'000)                  (US$'000)
                                                                       -----------------         ------------------
                                ASSETS
<S>                                                                    <C>                       <C>
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                                                                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 Asian 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 40,911,242 shares as of December 25, 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
                                                                       =================         ==================
</TABLE>

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





                                      F-3
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES


           Consolidated Statements of Income and Comprehensive Income


                 For the Years Ended December 25, 2002 and 2001

<TABLE>
<CAPTION>
                                                                      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
                                                             ==================         =================
</TABLE>

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






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

<S>                                  <C>          <C>       <C>         <C>       <C>          <C>       <C>          <C>
Balance at December 25, 2000             1,049    $ --      $               --    $             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, 2001                                 --                      --                  4,153                   4,153
                                 ----------------------      -----------------    -------------------    --------------------
Balance at December 25, 2002            40,911     $ 4      $            8,132    $             9,550    $             17,686
                                 ======================      =================    ===================    ====================
</TABLE>

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





                                      F-5
<PAGE>




                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES


                      Consolidated Statements of Cash Flows


                 For the Years Ended December 25, 2002 and 2001

<TABLE>
<CAPTION>

                                                              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                                                       (2,982)                3,784
    Purchases of property and equipment                               (978)               (2,663)
                                                      --------------------   -------------------
Net Cash Used in Investing Activities                               (4,683)                 (655)
                                                      --------------------   -------------------
</TABLE>




                                      F-6


<PAGE>




                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

                Consolidated Statements of Cash Flows (Continued)

                 For the Years Ended December 25, 2002 and 2001

<TABLE>
<CAPTION>

                                                             2002                  2001
                                                          (US$'000)             (US$'000)
                                                      -------------------    ------------------
<S>                                                     <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 an immediate parent
       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
         Stock issued in connection with investment
         banking and legal services                                  --                  3,134
</TABLE>

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





                                      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 is composed of
four wholly-owned  limited liability  companies,  incorporated under the laws of
the British  Virgin  Islands  (BVI).  The limited  liability  companies  are Mix
Creation Limited ("MC"), Rich Delta Limited ("RD"),  Noble Point Limited ("NP"),
and Keen General  Limited ("KG").  Each of the  wholly-owned  limited  liability
companies own a majority  interest in a contractual  joint venture in the PRC. A
contractual  joint  venture is an entity  established  between the  wholly-owned
subsidiary and another joint venture partner, with the rights and obligations of
each party governed by a contract. If the wholly-owned subsidiary 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
a de facto subsidiary and has been accounted for as a subsidiary of the Group.


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


                                      F-8
<PAGE>

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-9
<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-10
<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
                           Date of              Paid-Up                                         Principal
        Name            Incorporation           Capital              Ownership                 Activities
  ---------------     ------------------    --------------        ---------------     --------------------


<S>                    <C>                   <C>                      <C>             <C>
Mix Creation Limited     The British         US$1,500,000             100% (a)        Investment holding
("MC")                  Virgin Islands
                       November 7, 1997

Rich Delta Limited       The British         US$1,000,000             100% (a)        Investment holding
("RD")                 Virgin Islands
                       October 28, 1998

Noble Point Limited      The British         US$1,000,000             100% (a)        Investment holding
("NP")                 Virgin Islands
                       October 29, 1998

Keen General Limited     The British         US$1,500,000             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                  79.64% (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  79.64% 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-11
<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


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").


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.


In October 2001, the Financial  Accounting  Standards Board ("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  issues  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.


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 of 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:
      Allowance for
      doubtful
      accounts                      (415)                 (281)
                      ==================    ==================
                      $            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)
                          -------------------   -------------------
Others                    $               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>
                                                                         2002             2001
                                                                        -----            -----
<S>                                                                      <C>               <C>
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. 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)
                                                      -------------------   -------------------
<S>                                                   <C>                   <C>
Payable during the period:

    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>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)



NOTE 14 -- RELATED PARTY TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
<S>                                                           <C>                   <C>
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
                                                              ===================   ====================
</TABLE>




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





                                      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.  Xu 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>




NOTE 15-- SEGMENT INFORMATION (Continued)


Identifiable Assets

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

<CAPTION>

Interest Income

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

<CAPTION>

Interest Expense

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

<CAPTION>

Depreciation and Amortization

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

<CAPTION>

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

                                                                     2002                    2001
                                                                   (US$'000)              (US$'000)
                                                            --------------------    --------------------
<S>                                                         <C>                     <C>
                    Li Yi                                                      6 %                     7 %
                                                            ====================    ====================
                    Zhang Guo Quan                                             3 %                     5 %
                                                            ====================    ====================
</TABLE>



                                      F-26
<PAGE>


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