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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549



---



FORM 10-KSB/A

(Mark One)

|      |  |                                                                                     
|----- |  | ------------------------------------------------------------------------------------
|[X]   |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.     
|     
|      |  | For the fiscal year ended December 31, 2001                                         
|     
|      |  | 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 of Incorporation)                       |  | (I.R.S. Employer Identification No.)
|                                                                    
|Room 1304, 13/F Wing On Center
111 Connaught Road
Central, Hong Kong |  |                                     
|(Address of Principal Executive Offices)                             |  | (Zip Code)                          

(604) 438-3598

---

(Issuers Telephone Number, Including Area Code)


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

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange
on Which Registered
|                    |  |                                          
|                   
|                    |  |                                          
|                   
|                    |  |                                          

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

Common Stock

---

(Title of Class)




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(Title of Class)






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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. $30.3 million

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
May 29, 2002 the aggregate market value of the voting and
non-voting common equity held by non-affiliates was $5,748,559 based
on a closing bid price of $1.95.

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 31, 2001
there were 40,911,242 shares outstanding

Transitional Small Business Disclosure Format (check one):

Yes [   ]       No [   ]





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|           |                               |                                   |  |  |  |  |  | 
|---------- | ----------------------------- | --------------------------------- |  |  |  |  |  | 
|           | ITEM 7. FINANCIAL STATEMENTS.
|SIGNATURES
|           |                               | CONSOLIDATED FINANCIAL STATEMENTS



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NEW DRAGON ASIA CORP.

FORM 10-KSB/A


INDEX


|                             |  |      |     | 
|---------------------------- |  | ---- | --- | 
|                             |  | Page
|                             |  |     
|PART II                     
|                            
|Item 7. Financial Statements |  |      | 10  | 
|                            
|Signatures                   |  |      | 14  | 
|                            
|Financial Statements         |  |      | F-1 | 





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ITEM 7. FINANCIAL STATEMENTS.

(a) Financial Statements

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, 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 our common
stock.

As a result of the
share exchange the Company continued the operations of New
Dragon Asia Food Limited. A report on Form 8-K
was filed with the Securities and Exchange Commission on December 27, 2001 with
respect to the share exchange.

Arthur Andersen
& Co. of Hong Kong (Andersen) are the former auditors
for the New Dragon Asia Food Limited. As a result of recent events, Andersen
declined the Companys request to re-issue their audit report for our fiscal year ended
December 31, 2000 for inclusion in the Companys 10-KSB filing for the fiscal year ended
December 31, 2001. As such, pursuant to the guidance given in the Temporary
Final Rule and Final Rule: Requirements for Arthur Andersen LLP Auditing
Clients, Release Nos. 33-8070, 34-45590; 35-27503; 39-2395; IA-2018; IC-25464;
FR-62; File No. S7-03-02 (collectively, the
Release), the Company filed its Form
10-KSB with the Securities and Exchange Commission on April 16, 2002 with unaudited numbers for the
fiscal year ended December 31, 2000. As required by Part 1 of
the Release, the Company is filing as an amendment to the
Companys
Form 10-KSB, which contains the audited financial statements
of the Company, as of December 31, 2000. The financial statements filed
herewith, do not contain any material change from the unaudited financial
statements filed with the Commission on April 16, 2002.

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



| | 1. |  | Report of Independent Auditors for the fiscal year ended
December 31, 2000.                                    
| | -- |  | ---------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Combined Balance Sheet of New
Dragon Asia Food Group as of December 31, 2000.                                  
|
| | 3. |  | Combined Statements of Operations of New Dragon Asia Food
Group for the year ended December 31, 2000.          
|
| | 4. |  | Combined Statements of Changes in Stockholders Equity of
New Dragon Asia Food Group through December 31,
2000.
|
| | 5. |  | Combined Statements of Cash Flows of New Dragon Asia Food
Limited Group for the year December 31, 2000.        
|
| | 6. |  | Notes to Combined Financial
Statements.                                                                        





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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: May 30, 2002 | By                                                          | /s/  XUE JUN SONG
|                    |                                                            
|                    | Name: Xue Jun Song
Title: Chief Executive Officer, Director

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: May 30, 2002 | By | /s/  XUE JUNG
SONG                                           
|                    |    |                                                              
|                    |    | Name: Xue Jun Song
Title: Chief Executive Officer, Director  
|                   
|Dated: May 30, 2002 | By | /s/  SHU HUA
ZHANG                                           
|                    |    |                                                              
|                    |    | Name: Shu Hua Zhang
Title: Deputy General Manager, Director  
|                   
|Dated: May 30, 2002 | By | /s/  WING
LEUNG LAI                                          
|                    |    |                                                              
|                    |    | Name: Wing Leung Lai
Title: Chief Financial Officer, Director
|                   
|Dated: May 30, 2002 | By | /s/  MAN FAI
LEUNG                                           
|                    |    |                                                              
|                    |    | Name: Man Fai Leung
Title: Director                          

2



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NEW DRAGON ASIA FOOD GROUP

COMBINED FINANCIAL STATEMENTS

DECEMBER 25, 2000





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NEW DRAGON ASIA FOOD GROUP

COMBINED FINANCIAL STATEMENTS

DECEMBER 25, 2000

CONTENTS

|                                                           |  |        |  | 
|---------------------------------------------------------- |  | ------ |  | 
|                                                           |  | Page  
|                                                           |  |       
|                                                          
|Independent Auditors Report                               |  | 1     
|                                                          
|Combined Balance Sheet                                     |  | 2     
|                                                          
|Combined Statements of Operations and Comprehensive Income |  | 3     
|                                                          
|Combined Statements of Changes in Stockholders Equity     |  | 4     
|                                                          
|Combined Statements of Cash Flows                          |  | 5  6 
|                                                          
|Notes
to Combined Financial Statements                     |  | 7  22





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INDEPENDENT AUDITORS REPORT

To the Stockholders
New Dragon Asia Food Limited

We have audited the accompanying combined balance sheet of New Dragon Asia
Food Group (the Company) as of December 25, 2000, and the
related combined statements of operations and comprehensive income, cash
flows and stockholders equity for the year ended December 25, 2000. These
combined financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these combined
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 combined
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of New
Dragon Asia Food Group as of December 25, 2000 in accordance
with accounting principles generally accepted in the United States of America.

Miami, Florida
May 29, 2002





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NEW DRAGON ASIA FOOD GROUP

Combined Balance Sheet

December 25, 2000
(US$000)

|                                                                                    |                                             |                            |        |       |        | 
|----------------------------------------------------------------------------------- | ------------------------------------------- | -------------------------- | ------ | ----- | ------ | 
|A S S E T S                                                                         |                                             |                            |        |      
|                                                                                   
|Current Assets:                                                                     |                                             |                            |        |      
|                                                                                    | Cash and bank deposits                      |                            | $      | 1,015 |       
|                                                                                    | Accounts receivable                         |                            |        | 2,737 |       
|                                                                                    | Other receivables, deposits and prepayments |                            |        | 746   |       
|                                                                                    | Inventories                                 |                            |        | 5,982 |       
|                                                                                    |                                             |                            |        |      
|                                                                                    |                                             | Total Current Assets       |        |       | 10,480 | 
|Property, machinery and equipment, net                                              |                                             |                            | 22,333 |      
|Prepaid rental expense                                                              |                                             |                            | 466    |      
|                                                                                    |                                             |                            |        |      
|                                                                                    |                                             | $                          | 33,279 |      
|                                                                                    |                                             |                            |        |      
|                                                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY                                               
|                                                                                   
|Current Liabilities:                                                                |                                             |                            |        |      
|                                                                                    | Short-term borrowings                       |                            | $      | 3,587 |       
|                                                                                    | Accounts payable                            |                            |        | 4,938 |       
|                                                                                    | Other payables and accruals                 |                            |        | 429   |       
|                                                                                    | Value Added tax payable                     |                            |        | 1,783 |       
|                                                                                    |                                             |                            |        |      
|                                                                                    |                                             | Total Current Liabilities  |        |       | 10,737 | 
|Due to an immediate parent company                                                  |                                             |                            | 16,800 |      
|Due to joint venture partners                                                       |                                             |                            | 1,198  |      
|                                                                                    |                                             |                            |        |      
|                                                                                    |                                             | Total Liabilities          |        |       | 28,735 | 
|                                                                                    |                                             |                            |        |      
|Stockholders Equity:                                                               |                                             |                            |        |      
|                                                                                    | Common stock                                |                            |        |      |       
|                                                                                    | Additional Paid-In Capital                  |                            |        |      |       
|                                                                                    | Retained earnings                           |                            |        | 4,544 |       
|                                                                                    |                                             |                            |        |      
|                                                                                    |                                             | Total Stockholders Equity |        |       | 4,544  | 
|                                                                                    |                                             |                            |        |      
|                                                                                    |                                             | $                          | 33,279 |      
|                                                                                    |                                             |                            |        |      
|                                                                                   
|The accompanying notes are an
integral part of these combined financial statements.

2



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NEW DRAGON ASIA FOOD GROUP

Combined Statement of Operations and Comprehensive Income

Year Ended December 25, 2000
(US$000)

|                                       |                  |   |         |      |  
|-------------------------------------- | ---------------- | - | ------- | ---- | -
|Net Sales                              |                  | $ | 31,532  |     
|Cost of Goods Sold                     |                  |   | (25,426 | )   
|                                       |                  |   |         |     
|Gross Profit                           |                  |   | 6,106   |     
|Selling and Distribution Expenses      |                  |   | (1,520  | )   
|General and Administrative Expenses    |                  |   | (995    | )   
|                                       |                  |   |         |     
|Income from Operations                 |                  |   | 3,591   |     
|Other Income and Expenses:             |                  |   |         |     
|                                       | Interest Expense |   |         | (225 | )
|                                       | Interest Income  |   |         | 161  |  
|                                       | Other Income     |   |         | 22   |  
|                                       |                  |   |         |     
|Income Before Provision for Income Tax |                  |   | 3,549   |     
|Provision for Taxation                 |                  |   |        |     
|                                       |                  |   |         |     
|Net Income and Comprehensive Income    |                  | $ | 3,549   |     
|                                       |                  |   |         |     

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

3



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NEW DRAGON ASIA FOOD GROUP

Combined Statement of Changes in Stockholders Equity

Year Ended December 25, 2000

|                                                                                    |  |              |   |           |  |               |   |           |  |   |       |  |  |       |       | 
|----------------------------------------------------------------------------------- |  | ------------ | - | --------- |  | ------------- | - | --------- |  | - | ----- |  |  | ----- | ----- | 
|                                                                                    |  |              |   |           |  |               |   |           |  |   |       |  |  | Total
|                                                                                    |  | Common
Stock |   | Retained  |  | Stockholders
|                                                                                    |  |              |   | Earnings  |  | Equity       
|                                                                                    |  | Shares       |   | (US$000) |  | (US$000)     |   | (US$000)
|                                                                                    |  |              |   |           |  |               |   |          
|Balance at December 25, 1999
(unaudited)                                            |  |              | 4 |           |  |               |  |           |  | $ | 995   |  |  | $     | 995   | 
|Net Income                                                                          |  |              |  |           |  |               |  |           |  |   | 3,549 |  |  |       | 3,549 | 
|                                                                                    |  |              |   |           |  |               |   |           |  |   |       |  |  |       |       | 
|Balance at December 25, 2000                                                        |  |              | 4 |           |  | $             |  |           |  | $ | 4,544 |  |  | $     | 4,544 | 
|                                                                                    |  |              |   |           |  |               |   |           |  |   |       |  |  |       |       | 
|                                                                                   
|The accompanying notes are an
integral part of these combined financial statements.

4



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NEW DRAGON ASIA FOOD GROUP

Combined Statement of Cash Flows

Year Ended December 25, 2000
(US$000)

|                                                                                    |                                                                                   |                                                   |                                             |       |       |        |  
|----------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------- | ----- | ----- | ------ | -
|Cash Flows from Operating Activities:                                               |                                                                                   |                                                   |                                             |      
|                                                                                    | Net income                                                                        |                                                   | $                                           | 3,549 |      
|                                                                                    | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                   |                                             |       |      
|                                                                                    |                                                                                   | Amortization of land use rights                   |                                             |       | 92    |       
|                                                                                    |                                                                                   | Loss on disposal of machinery and equipment       |                                             |       | 605   |       
|                                                                                    |                                                                                   | Depreciation of property, machinery and equipment |                                             |       | 1,060 |       
|                                                                                    |                                                                                   | (Increase) decrease in operating assets:          |                                             |       |       |       
|                                                                                    |                                                                                   |                                                   | Accounts receivable, net                    |       |       | (1,289 | )
|                                                                                    |                                                                                   |                                                   | Other receivables, deposits and prepayments |       |       | (74    | )
|                                                                                    |                                                                                   |                                                   | Inventories                                 |       |       | (560   | )
|                                                                                    |                                                                                   |                                                   | Prepaid rental expense                      |       |       | 20     |  
|                                                                                    |                                                                                   | Increase (decrease) in operating liabilities:     |                                             |       |       |       
|                                                                                    |                                                                                   |                                                   | Accounts payable                            |       |       | 1,257  |  
|                                                                                    |                                                                                   |                                                   | Other payables and accruals                 |       |       | 80     |  
|                                                                                    |                                                                                   |                                                   | Value
Added tax payable                     |       |       | 746    |  
|                                                                                    |                                                                                   |                                                   |                                             |      
|                                                                                    |                                                                                   |                                                   | 5,486                                       |      
|                                                                                    |                                                                                   |                                                   |                                             |      
|Cash Flows from Investing Activities:                                               |                                                                                   |                                                   |                                             |      
|                                                                                    | Acquisition of property, machinery and equipment                                  |                                                   |                                             | (588  | )    
|                                                                                    | Deposits for purchase of property and equipment                                   |                                                   |                                             | 82    |      
|                                                                                    | Prepayments for construction in progress                                          |                                                   |                                             | (7    | )    
|                                                                                    |                                                                                   |                                                   |                                             |      
|Net Cash used in Investing Activities                                               |                                                                                   |                                                   | (513                                        | )    
|                                                                                    |                                                                                   |                                                   |                                             |      
|                                                                                   
|The accompanying notes are an
integral part of these combined financial statements.

5



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NEW DRAGON ASIA FOOD GROUP

Combined Statement of Cash Flows (Continued)

Year Ended December 25, 2000
(US$000)

|                                                                                    |                                                |   |        |         |  
|----------------------------------------------------------------------------------- | ---------------------------------------------- | - | ------ | ------- | -
|Cash Flows from Financing Activities:                                               |                                                |   |        |        
|                                                                                    | New short-term borrowings                      |   | $      | 3,200   |  
|                                                                                    | Repayment of short-term borrowings             |   |        | (2,151  | )
|                                                                                    | Increase in due to an immediate
parent company |   |        | 7,584   |  
|                                                                                    | Decrease in due to joint venture
Partners      |   |        | (14,253 | )
|                                                                                    |                                                |   |        |        
|Net Cash used in Financing Activities                                               |                                                |   | (5,620 | )      
|                                                                                    |                                                |   |        |        
|Net Decrease in Cash and Bank Deposits                                              |                                                |   | (647   | )      
|Cash and Bank Deposits  Beginning of Year                                          |                                                |   | 1,662  |        
|                                                                                    |                                                |   |        |        
|Cash and Bank Deposits  End of Year                                                |                                                | $ | 1,015  |        
|                                                                                    |                                                |   |        |        
|Supplemental disclosures of cash flow information:                                  |                                                |   |        |        
|Cash paid during the year for:                                                      |                                                |   |        |        
|                                                                                    | Interest                                       |   | $      | 225     |  
|                                                                                    | Income taxes                                   |   |        |        |  
|                                                                                   
|The accompanying notes are an
integral part of these combined financial statements.

6



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NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements

Year Ended December 25, 2000

NOTE 1  ORGANIZATION AND NATURE OF OPERATIONS

New Dragon Asia Food Group (the Group or
NDAF), is principally engaged in the manufacturing, marketing and
distribution of instant noodles and flour in the Peoples Republic of
China (PRC). NDAF has its principal offices in Hong Kong. The
group of NDAF is composed of four limited liability companies,
incorporated under the laws of the British Virgin Islands (BVI) and
four sino-foreign joint ventures.

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
approvals 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 country. 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 projections.

7



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NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 1  ORGANIZATION AND NATURE OF OPERATIONS (Continued)

Details of the companies comprising the Group are as follows:

|                                                          |  |                                             |  |                |  |                 |         |            |  |                                                           
|--------------------------------------------------------- |  | ------------------------------------------- |  | -------------- |  | --------------- | ------- | ---------- |  | ----------------------------------------------------------
|                                                          |  |                                             |  |                |  | Percentage of   |         |           
|                                                          |  | Domicile and                                |  |                |  | Equity Interest |         |           
|                                                          |  | Date of                                     |  | Paid-Up        |  | Attributable to |         | Principle 
|Name                                                      |  | Incorporation                               |  | Capital        |  | the Group       |         | Activities
|                                                          |  |                                             |  |                |  |                 |         |           
|Mix Creation Limited
(MC) (a)                           |  | The British Virgin Islands
November 7, 1997 |  | US$1           |  |                 | 100%    |            |  | Investment holding                                        
|                                                         
|New Dragon Asia Flour
(Yantai) Company Limited
(NDAFLY) |  | The PRC
August 13, 1999                     |  | RMB
28,000,000 |  |                 | 90% (b) |            |  | Manufacture, marketing
and distribution of flour          
|                                                         
|Rich Delta Limited
(RD) (a)                             |  | The British Virgin Islands
October 28, 1998 |  | US$1           |  |                 | 100%    |            |  | Investment holding                                        
|                                                         
|New Dragon Asia Food
(Yantai) Company Limited
(NDAFY)   |  | The PRC
December 24, 1998                   |  | RMB
17,462,000 |  |                 | 90% (c) |            |  | Manufacture, marketing
and distribution of
instant noodles
|                                                         
|Noble Point Limited
(NP) (a)                            |  | The British Virgin Islands
October 29, 1998 |  | US$1           |  |                 | 100%    |            |  | Investment holding                                        
|                                                         
|New Dragon Asia Food
(Dalian) Company Limited
(NDAFD)   |  | The PRC
December 25, 1998                   |  | RMB
17,430,000 |  |                 | 90% (c) |            |  | Manufacture, marketing
and distribution of
instant noodles
|                                                         
|Keen General Limited
(KG) (a)                           |  | The British Virgin Islands
July 20, 1998    |  | US$1           |  |                 | 100%    |            |  | Investment holding                                        
|                                                         
|Sanhe New Dragon Asia
Food Company Limited
(SNDAF)      |  | The PRC
December 25, 1998                   |  | RMB
51,191,432 |  |                 | 80% (c) |            |  | Manufacture, marketing
and distribution of
instant noodles



|(a) |  | MC, RD, NP and KG are wholly owned by New Dragon Asia
Food Limited (NDAFL) a company incorporated in the British
Virgin Islands. NDAFL is 51% owned by New Dragon International
Investment Limited and 49% owned by Long Feng Food (Overseas)
Company Limited, both incorporated in the British Virgin Islands,
through a number of intermediate holding companies.                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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 is not responsible for any profit or loss to NDAFLY
effective from June 26, 1999. In view of the profit sharing
arrangement NDAFLY is regarded as 100% owned by the Group.

8



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NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 1  ORGANIZATION AND NATURE OF OPERATIONS (Continued)



|(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 partners are 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.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 2  BASIS OF PRESENTATION

The combined 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 NDAFL. All
significant intra-group balances and transactions have been eliminated
in combination.

The combined financial statements were prepared in accordance with accounting
principles generally accepted in the United States of America (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 report 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.

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NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Sales made in the PRC are subject to VAT 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).

Advertising  The costs of advertising are expensed in the year in
which the advertising first takes place. Total advertising expenses
were approximately $61,000 for the year ended December 25, 2000.

Cash Equivalents  Highly liquid investments with maturity of three
months or less at the time of acquisition are considered cash
equivalents.

Inventories  Inventories are stated at the lower of cost, 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.

Property, Machinery and Equipment and Construction-in-Progress 
Property, machinery and equipment 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 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 years to 50 years
|Buildings                      |  | 40 years            
|Machinery and equipment        |  | 12 years            
|Furniture and office equipment |  | 5 years             
|Motor vehicles                 |  | 5 years             

Construction-in-progress represents costs of land
use rights 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
2000.

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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment  The Group accounts for property, machinery and equipment
and construction-in-progress in accordance with SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed Of
which requires impairment loss to be recognized on the long-lived
assets when the sum of expected future cash flows (undiscounted and
without interest charges) resulting from the use of the asset and its
eventual disposition is less than the carrying amount of the asset.
Otherwise, an impairment loss is not recognized. Measurement of the
impairment loss for long-lived assets is based on the fair value of
the asset.

Income Taxes  The Group accounts for income tax 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
financial statements or tax returns. Deferred income tax is provided
using the liability method and is recognized for all significant
temporary differences between the tax and financial statements 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 expenses on a straight-line basis over the
period of the relevant leases.

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. The resulting exchange
differences are included in the determination of income.

Translations of amounts from Renminbi (RMB) into United States
dollars (US$) were at US $1.00 = RMB 8.3 for the year ended December
25, 2000. 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.

Comprehensive Income  The Group has adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income which
requires the Group to report all changes in equity during a period,
except for those resulting from investment by owners and distribution
to owners, in the financial statements for the period in which they
are recognized. The Group has disclosed comprehensive income, which
encompasses net income, in the statements of operations and
comprehensive income.

11



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NEW DRAGON ASIA FOOD GROUP

Notes to Combined 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 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 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 following method and assumption was used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value.

Cash and bank deposits and short-term bank loans are stated at their
carrying amounts which
approximates fair value due to the short maturity of those
instruments.

NOTE 4  ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at December 25, 2000:

|                                |  |           |       |  
|------------------------------- |  | --------- | ----- | -
|                                |  | (US$'000)
|                                |  |          
|Total receivables               |  | $         | 2,931 |  
|Allowance for doubtful accounts |  |           | (194  | )
|                                |  |           |       |  
|                                |  | $         | 2,737 |  
|                                |  |           |       |  

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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 5  OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

As of December 25, 2000 other receivables, deposits and prepayments
were as follows:

|                                         |                            |   |           |     | 
|---------------------------------------- | -------------------------- | - | --------- | --- | 
|                                         |                            |   | (US$'000)
|                                         |                            |   |          
|Vendor deposits for the purchase of:     |                            |   |           |    
|                                         | Raw materials              |   | $         | 67  | 
|                                         | Machinery and equipment    |   |           | 7   | 
|Prepayments for construction work        |                            |   | 125       |    
|Prepaid rental expenses, current portion |                            |   | 20        |    
|Advances to:                             |                            |   |           |    
|                                         | Staff(a)                   |   |           | 82  | 
|                                         | Unrelated third parties(a) |   |           | 445 | 
|                                         |                            |   |           |    
|                                         |                            | $ | 746       |    
|                                         |                            |   |           |    



|(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, 2000:

|               |  |           |       | 
|-------------- |  | --------- | ----- | 
|               |  | (US$'000)
|               |  |          
|Raw materials  |  | $         | 3,308 | 
|Finished goods |  |           | 2,674 | 
|               |  |           |       | 
|               |  | $         | 5,982 | 
|               |  |           |       | 

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NEW DRAGON ASIA FOOD GROUP

Notes to Combined 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, 2000:

|                                          |  |           |        |  
|----------------------------------------- |  | --------- | ------ | -
|                                          |  | (US$'000)
|                                          |  |          
|Land use rights(a)                        |  | $         | 4,039  |  
|Buildings                                 |  |           | 8,696  |  
|Machinery and equipment                   |  |           | 10,836 |  
|Furniture and office equipment            |  |           | 138    |  
|Motor vehicles                            |  |           | 447    |  
|Construction-in-progress                  |  |           | 164    |  
|                                          |  |           |        |  
|                                          |  |           | 24,320 |  
|Accumulated depreciation and
amortization |  |           | (1,987 | )
|                                          |  |           |        |  
|Property, plant and equipment, net        |  | $         | 22,333 |  
|                                          |  |           |        |  



|(a) |  | Land and buildings are located in the PRC, where
private ownership of land is not allowed. Rather, entities
acquire the rights to use land for a designated term. As of
December 25, 2000, the Group possessed rights to use three parcels
of land for periods ranging from 40 to 50 years; through 2025 to
2047.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depreciation expense was approximately $1,060,000 as of December 25,
2000.

NOTE 8  SHORT-TERM BORROWINGS

The Group had banking facilities of approximately
US$3,419,000 for short term loans which were fully utilized as of
December 25, 2000.

Short-term borrowings consisted of the following at December 25, 2000:

|                    |  |           |       | 
|------------------- |  | --------- | ----- | 
|                    |  | (US$'000)
|                    |  |          
|Bank loans(a)       |  | $         | 3,419 | 
|Other borrowings(b) |  |           | 168   | 
|                    |  |           |       | 
|                    |  | $         | 3,587 | 
|                    |  |           |       | 

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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 8  SHORT-TERM BORROWINGS (Continued)



|(a) |  | 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 5.12% to 6.44% per annum
for the year ended December 25, 2000.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Other borrowings are unsecured, non-interest bearing
and without pre-determined repayment terms.                                                                                                                            

NOTE 9  OTHER PAYABLES AND ACCRUALS

Other payables and accruals consisted of the following at December 25,
2000:

|                                      |                          |   |           |     | 
|------------------------------------- | ------------------------ | - | --------- | --- | 
|                                      |                          |   | (US$'000)
|                                      |                          |   |          
|Accruals for:                         |                          |   |           |    
|                                      | Staff welfare            |   | $         | 112 | 
|                                      | Staff salaries and bonus |   |           | 46  | 
|                                      | Operating expenses       |   |           | 14  | 
|                                      | Property tax             |   |           | 27  | 
|Payables for construction-in-progress |                          |   | 85        |    
|Deposits from customers               |                          |   | 61        |    
|Others                                |                          |   | 84        |    
|                                      |                          |   |           |    
|                                      |                          | $ | 429       |    
|                                      |                          |   |           |    

NOTE 10  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 year ended December 25, 2000, substantially all of the
Groups income was generated in the PRC by NDAFLY, NDAFY, NDAFD and
SNDAF, which are subject to PRC income taxes at
rates ranging from 27% to 33% (24% to 30% income tax and 3% local
income tax). They were exempt from state income tax and local income
tax for two years starting from December 26, 1998, and then they
are subject to
a 50% reduction in state income tax and a full exemption of local
income tax for the following three years.

15



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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 10  TAXATION (Continued)

As of December 25, 2000, there do not exist any material deferred tax
assets or deferred tax credits.

A reconciliation of income tax at the statutory rate to the Groups
effective tax rates is as follows:

|                                   |  |  |     |  
|---------------------------------- |  |  | --- | -
|Statutory income tax, average rate |  |  | 30  | %
|Impact of preferential rate        |  |  | (30 | )
|                                   |  |  |     |  
|Effective rate                     |  |  |    | %
|                                   |  |  |     |  

NOTE 11  COMMON STOCK

As of December 25, 2000, common stock represents the issued and outstanding shares of
MC, RD, NP and KG.

NOTE 12  COMMITMENTS

Annual Fees  Under the supplementary joint venture agreements, the
Group has committed to pay predetermined annual fees to the Chinese
joint venture partners for the period from December 26, 1998 to 2049.
As of December 25, 2000, total commitments under these arrangements
are as follows:

|                           |                                               |   |           |       | 
|-------------------------- | --------------------------------------------- | - | --------- | ----- | 
|                           |                                               |   | (US$'000)
|                           |                                               |   |          
|Payable during the period: |                                               |   |           |      
|                           | Within one year                               |   | $         | 115   | 
|                           | Over one year but not exceeding
two years     |   |           | 115   | 
|                           | Over two years but not exceeding
three years  |   |           | 115   | 
|                           | Over three years but not exceeding
four years |   |           | 115   | 
|                           | Over four years but not exceeding
five years  |   |           | 115   | 
|                           | Over five years                               |   |           | 5,163 | 
|                           |                                               |   |           |      
|                           |                                               | $ | 5,738     |      
|                           |                                               |   |           |      

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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 13  RELATED PARTY 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.

Particulars of significant transactions between the Group and related
companies for the year ending December 25, 2000 are summarized below:

|                                |                                                           |                                                     |     |           |    | 
|------------------------------- | --------------------------------------------------------- | --------------------------------------------------- | --- | --------- | -- | 
|                                |                                                           |                                                     |     | (US$'000)
|                                |                                                           |                                                     |     |          
|Sale of finished goods to:      |                                                           |                                                     |     |          
|                                | A joint venture partner, Shandong
Long Feng Group Company |                                                     | $   | 1         |   
|                                | Related parties:                                          |                                                     |     |           |   
|                                |                                                           | New Dragon Asia Food (Yueyang)
Company Limited(2)   |     |           | 29 | 
|                                |                                                           | New Dragon Asia Food (Luoyang)
Company Limited(2)   |     |           | 57 | 
|                                |                                                           | New Dragon Asia Food (Chengdu)
Company Limited(2)   |     |           | 8  | 
|                                |                                                           |                                                     |     |          
|                                |                                                           | $                                                   | 95  |          
|                                |                                                           |                                                     |     |          
|Purchase of raw materials from: |                                                           |                                                     |     |          
|                                | A joint venture partner, Shandong
Long Feng Group Company |                                                     | $   | 264       |   
|                                | Related parties:                                          |                                                     |     |           |   
|                                |                                                           | Shandong Long Feng Penglai Flour
Company Limited(1) |     |           | 4  | 
|                                |                                                           |                                                     |     |          
|                                |                                                           | $                                                   | 268 |          
|                                |                                                           |                                                     |     |          

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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 13  RELATED PARTY TRANSACTIONS (Continued)

|                                                                            |                                          |   |           |    | 
|--------------------------------------------------------------------------- | ---------------------------------------- | - | --------- | -- | 
|                                                                            |                                          |   | (US$'000)
|                                                                            |                                          |   |          
|Pre-determined annual fee charged by
joint venture partners:                |                                          |   |           |   
|                                                                            | Shandong Long Feng Group Company         |   | $         | 79 | 
|                                                                            | Shandong Long Feng Flour Company
Limited |   |           | 36 | 
|                                                                            |                                          |   |           |   
|                                                                            |                                          | $ | 115       |   
|                                                                            |                                          |   |           |   
|Interest income earned from short-term
advances to a joint venture partner: |                                          |   |           |   
|                                                                            | Shandong Long Feng Group Company         |   | $         | 56 | 
|                                                                            |                                          |   |           |   
|Rental expense charged by a joint venture
partner:                          |                                          |   |           |   
|                                                                            | Shandong Long Feng Flour
Company Limited |   | $         | 19 | 
|                                                                            |                                          |   |           |   

Summary of related party balances at December 25, 2000 is as follows:

|                                                        |                              |  |           |        | 
|------------------------------------------------------- | ---------------------------- |  | --------- | ------ | 
|                                                        |                              |  | (US$'000)
|                                                        |                              |  |          
|Due to an immediate parent company,
net, consisting of: |                              |  |           |       
|                                                        | New Dragon Asia Food Limited |  | $         | 16,800 | 
|                                                        |                              |  |           |       

18



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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial
Statements (Continued)

NOTE 13  RELATED PARTY TRANSACTIONS (Continued)

|                                             |                                  |  |           |       | 
|-------------------------------------------- | -------------------------------- |  | --------- | ----- | 
|                                             |                                  |  | (US$'000)
|                                             |                                  |  |          
|Due to joint venture partners consisting
of: |                                  |  |           |      
|                                             | Shandong Long Feng Group Company |  | $         | 1,198 | 
|                                             |                                  |  |           |      

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 Long Feng Group Company, a joint venture partner.



|(1) |  | Mr. Song Xue Jun, a director of each of the Group
companies, has beneficial interest in these companies.
|--- |  | --------------------------------------------------------------------------------------------------------
|   
|(2) |  | These companies are wholly owned subsidiaries of NDAFL,
the immediate parent company.                   

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.

Taxes  The Group did not properly report certain of its tax
obligations in Mainland China during the year ended December 25, 2000.
As a consequence, the Group may be subject to additional surcharge or
penalties as a result of the unpaid taxes in accordance with tax laws
in the PRC, of which the amount cannot be reasonably estimated and is
not recorded in the financial statements as of December 25, 2000. In
addition, the holding companies of the Group, namely New Dragon
International Investment Limited and Long Feng Food (Overseas) Company
Limited, have agreed to indemnify the Group against any liabilities
which may arise as a result of the above surcharges or penalties which
are not recorded in the financial statements of the Group.

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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 14  SEGMENT INFORMATION

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

Net Sales

|                |  |           |        | 
|--------------- |  | --------- | ------ | 
|                |  | (US$000)
|                |  |          
|Instant noodles |  | $         | 13,415 | 
|Flour           |  |           | 18,117 | 
|                |  |           |        | 
|                |  | $         | 31,532 | 
|                |  |           |        | 

Income from Operations

|                |  |           |       | 
|--------------- |  | --------- | ----- | 
|                |  | (US$000)
|                |  |          
|Instant noodles |  | $         | 2,378 | 
|Flour           |  |           | 1,213 | 
|                |  |           |       | 
|                |  | $         | 3,591 | 
|                |  |           |       | 

Identifiable Assets

|                |  |           |        | 
|--------------- |  | --------- | ------ | 
|                |  | (US$000)
|                |  |          
|Instant noodles |  | $         | 19,067 | 
|Flour           |  |           | 14,212 | 
|                |  |           |        | 
|                |  | $         | 33,279 | 
|                |  |           |        | 

Other

Interest Income

|                |  |           |     | 
|--------------- |  | --------- | --- | 
|                |  | (US$000)
|                |  |          
|Instant noodles |  | $         | 34  | 
|Flour           |  |           | 127 | 
|                |  |           |     | 
|                |  | $         | 161 | 
|                |  |           |     | 

20



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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 14  SEGMENT INFORMATION (Continued)

Interest Expense

|                |  |           |     | 
|--------------- |  | --------- | --- | 
|                |  | (US$'000)
|                |  |          
|Instant noodles |  | $         | 76  | 
|Flour           |  |           | 149 | 
|                |  |           |     | 
|                |  | $         | 225 | 
|                |  |           |     | 

Depreciation and Amortization

|                |  |           |       | 
|--------------- |  | --------- | ----- | 
|                |  | (US$'000)
|                |  |          
|Instant noodles |  | $         | 763   | 
|Flour           |  |           | 389   | 
|                |  |           |       | 
|                |  | $         | 1,152 | 
|                |  |           |       | 

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

|            |  |  |   |  
|----------- |  |  | - | -
|Fu Jun Chun |  |  | 6 | %
|            |  |  |   |  

Major Suppliers  Details of suppliers accounting for more than 5% of
the Groups purchases are as follows:

|                                                   |  |  |    |  
|-------------------------------------------------- |  |  | -- | -
|Longkou City Food Collect and
Store Control Center |  |  | 10 | %
|                                                   |  |  |    |  
|Henan Xinxiang Northbound of the
Nation Storeroom  |  |  | 6  | %
|                                                   |  |  |    |  

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##### Table of Contents



NEW DRAGON ASIA FOOD GROUP

Notes to Combined Financial Statements (Continued)

NOTE 15  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 December 26,
1998, the Group was required to make specified contributions to the
state-sponsored retirement plan at 23% of the basic salary cost of
their staff. Each of the employees of the PRC subsidiaries is
required to contribute 5% of their basic salary, with the maximum
amount of contribution by each of the employees to be at the rate of
8%. For the year ended December 25, 2000, contributions made by the Group were approximately US$104,000.

NOTE 16  SUBSEQUENT EVENTS

Share Exchange  On December 13, 2001 New Dragon Asia Food Limited, a
company organized under the laws of the British Virgin Islands,
entered into a share exchange agreement with Bio-Aqua Systems, Inc., a
Florida Corporation. Pursuant to the Share Exchange Agreement,
Bio-Aqua Systems, Inc. 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 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.

As conditions of the Share Exchange Agreement, the
Bio-Aqua Systems, Inc. amended its
Articles of Incorporation to, among others, change the name of
Bio-Aqua Systems, Inc. to New Dragon Asia
Corp.

Acquisition  Subsequent to December 25,
2000, New Dragon Asia Corp. agreed to acquire
Shangdong Long Feng Peng Lai Flour Co. Ltd. (Shangdong) a flour
milling operation located in Shangdong, China. Shangdong produces
wheat flour, principally for domestic sale within China.

22