UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)
(X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

      FOR THE FISCAL YEAR ENDED DECEMBER 25, 2004

                                       OR

(_)   TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

      FOR THE TRANSITION PERIOD FROM ________ TO ________

                        COMMISSION FILE NUMBER: 001-15046

                              NEW DRAGON ASIA CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              FLORIDA                                      88-0404114
  (STATE OR OTHER JURISDICTION OF                        (IRS EMPLOYER
   INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NUMBER)

                   36/F, NEWS BUILDING, 2 SHEN NAN ZHONG ROAD,
                              SHENZHEN, PRC, 518027
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                               (86 755) 2595-1100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

        SECURITIES REGISTERED PURSUANT SECTION 12(b) OF THE EXCHANGE ACT:
                                      NONE.

        SECURITIES REGISTERED PURSUANT SECTION 12(g) OF THE EXCHANGE ACT:
                        COMMON STOCK, $ 0.0001 PAR VALUE

<PAGE>

Indicate by check mark 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 [_]

Indicate  by check  mark if there  is no  disclosure  of  delinquent  filers  in
response to Item 405 of  Regulation  S-K 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-K. [X]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).

Yes [_]   No [X]

State  issuer's  revenue  for its most recent  fiscal  year:  approximately  $39
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 the
last  business day of the  registrant's  most recently  completed  second fiscal
quarter.  As of June 25, 2004 the  aggregate  market value of the common  equity
held by non-affiliates was approximately $7.9 million.

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date.  As of March 23, 2005,  there were
45,061,242 common shares outstanding.

Portions of the registrant's  definitive proxy statement (the "Proxy Statement")
related to the 2004 annual meeting of shareholders are incorporated by reference
into Part III of this Form 10-K.

<PAGE>

                              NEW DRAGON ASIA CORP.
                                    FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 25, 2004

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
                                     PART I

ITEM 1.   Business                                                            1

ITEM 2.   Properties                                                          5

ITEM 3.   Legal Proceedings                                                   5

ITEM 4.   Submission of Matters of a Vote of Security Holders                 5


                                     PART II

ITEM 5.   Market for Registrant's Common Equity and Related Stockholder
          Matters                                                             6

ITEM 6.   Selected Financial Data                                             7

ITEM 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operation                                                7

ITEM 7A.  Quantitative and Qualitative Disclosure About Market Risk          17

ITEM 8.   Financial Statements and Supplementary Data                        18

ITEM 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure                                               18

ITEM 9A.  Controls Procedures                                                18

ITEM 9B   Other Information                                                  19


                                    PART III

ITEM 10.  Directors and Executive officers of the Registrant                 19

ITEM 11.  Executive Compensation                                             19

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management
          and Related Stockholder Matters                                    19

ITEM 13.  Certain relationships and Related Transactions                     19

ITEM 14.  Principal Accountant Fees and Services                             19


                                     PART IV

ITEM 15.  Exhibits, List and Reports on Form 8-K                             19

SIGNATURES                                                                   21

FINANCIAL STATEMENTS                                                        F-1


                                      -i-
<PAGE>

This Annual Report on Form 10-K contains  forward-looking  statements within the
meaning of Section  27A of the  Securities  Act of 1933,  and Section 21E of the
Securities Exchange Act of 1934. These statements relate to future events or the
Company's  future financial  performance.  The Company has attempted to identify
forward-looking  statements by terminology including "anticipates",  "believes",
"expects", "can", "continue", "could", "estimates", "expects", "intends", "may",
"plans",  "potential",  "predict",  "should" or "will" or the  negative of these
terms or other comparable  terminology.  These statements are only  predictions,
uncertainties  and other  factors,  including the risks  outlined under Business
Risks  contained  in Part 1 of this Annual  Report that may cause the  Company's
actual results, levels of activity, performance or achievements to be materially
different  from  any  future  results,   levels  or  activity,   performance  or
achievements expressed or implied by these forward-looking statements.  Although
the Company  believes  that the  expectations  reflected in the  forward-looking
statements are reasonable,  the Company cannot guarantee future results,  levels
of activity, performance or achievements. The Company expectations are as of the
date this Form 10-K is filed,  and the Company  does not intend to update any of
the forward-looking statements after the date this Annual Report on Form 10-K is
filed to confirm these statements to actual results, unless required by law.

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


                                      -ii-
<PAGE>

                                     PART I

ITEM 1.   BUSINESS

1.1   OVERVIEW

New Dragon Asia Corp.  ("NWD" or the  "Company") is one of the largest flour and
instant noodle  producers in Northern China.  Our core business is twofold:  (1)
the milling,  sale and distribution of flour and related  products,  and (2) the
production of instant  noodles,  which we market and sell through  distributors,
supermarkets  and food stores.  Our  principal  brand is "Long Feng".  Long Feng
brand has been awarded the designation of a "Famous Brand" in China.

Our business  was  established  in 1952 under the name "Long Feng  Foods",  as a
grain  and oil  processing  enterprise  in the  Shandong  Province  of China and
developed as one of China's leading flour mills. In 1992, Long Feng  established
a manufacturing  operation for instant noodles in Shandong as the Chinese market
for  "convenience  foods" was entering a prolonged  growth phase.  Through rapid
increases in capacity and maintenance of consistent high quality,  Long Feng has
established itself as one of China's leading  manufacturers of flour and instant
noodles with seven manufacturing plants and nationwide distribution.

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

On December 13, 2001, NWD closed a reverse merger with Bio-Aqua Systems, Inc., a
Florida corporation, which is listed on the American Stock Exchange. As a result
of the  transaction,  NWD 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 in
the People's  Republic of China ("PRC" or "China"),  in exchange for  37,963,263
shares of common stock of the Company.

As a result of the  acquisition,  the Company  continued  the  operations of the
sino-foreign  joint  ventures.  Headquartered  in the  Shandong  Province,  PRC,
management of New Dragon also operates a corporate office in Shenzhen.

1.2   OUR PRODUCTS AND PRODUCTION

We produce and market a broad range of wheat flour for use in bread,  dumplings,
noodles and  confectionary  products.  Our flour products are marketed under the
"Long Feng" brand name and sold  throughout  the country at both  wholesale  and
retail levels.


                                      -1-
<PAGE>

We  provide a wide  range of  instant  noodle  products  to our  customers.  Our
products can be separated  into two broad  categories  for selling and marketing
purposes:  (i)  packet  noodles  for home  preparation  and (ii)  snacks and cup
noodles for outdoor convenience.

Our product breakdown for the year ended December 25, 2004 was approximately 67%
for flour products and 33% for instant noodles.

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

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

We own and  operate  our  manufacturing  plants  which have an annual  aggregate
production  capacity of  approximately  110,000  tons of flour  products  and in
excess of 1.1 billion packets of instant noodles.

1.3   MARKETING AND SALES

Most of our products are  regionally  marketed  and  distributed.  Our sales and
marketing strategy focuses on maintaining strong distribution relationships with
annual sales order meetings and regular distributor conferences and an excellent
quality/price dynamic.

The  Company's  distribution  system  is the  key to its  continued  success  in
developing  "Long  Feng" as one of the  leading  domestic  brands in China.  The
Company  has more than 200  points of  distribution  of which 10 are our  direct
sales offices, spread over 27 provinces in China. The remaining 190 sales points
are owned and managed by distributors.  Most of our distributors  have long-term
relationships with us and are loyal and efficient vendors of our products.

Our  primary  customer  base for both our flour  products  and  instant  noodles
consists of stores in the rural areas throughout China,  where, we believe,  our
brand has long been recognized as the highest  quality  available for the price.
The rural market is rapidly growing  benefiting from increases in rural consumer
income.  We believe that brand loyalty is strongest in this sector.  The Company
also sells to supermarkets mainly in urban areas.

In  addition to  domestic  sales,  the  Company  also  exports  noodles to other
countries such as Korea, Australia,  Malaysia,  Indonesia,  etc. In 2004, export
sales accounted for approximately 5% of our instant noodle sales.


                                      -2-
<PAGE>

The Company also received orders from certain KFC Corporation locations in China
and KFC's  intermediary  suppliers  for flour.  KFC  requires  rigorous  quality
control  standards of at least the ISO9002  level.  We believe that these orders
highlight the brand reputation and quality of Long Feng as well as the Company's
commitment to international standards.

1.4   COMPETITION

The flour industry is very  competitive.  Our largest  competitors  are Shandong
Guang  Rao Ban Qiu Flour and  Hebei Wu De Li Flour in the  Northern  market  and
Shenzhen Nanshun Flour in the Southern market.

The  instant  noodle  segment is also  highly  competitive.  We compete  against
well-established  foreign  companies,  and many smaller  companies.  Our largest
competitors are "Master Kang" and  "President",  both based in Taiwan.  Both are
focused predominately in the more developed and competitive urban markets.

1.5   STRATEGY

Our  strategy is to  capitalize  on our strong  brand name and pursue  strategic
partnerships  and  acquisitions  that will enhance our sales.  The following are
some of the key  elements of our  business  strategy:  - Expand  export  sales -
Continue to enhance our distributor  relationships - Continue to improve product
quality and diversify our product range with higher value-added products - Build
strategic joint venture  relationships with multinational food groups to enhance
product range and capitalize on our China distribution network

1.6   EMPLOYEES

We employ  approximately  1,500  employees.  We believe our  relations  with our
employees are generally  good and we have no  collective  bargaining  agreements
with any labor unions.

1.7   GOVERNMENTAL REGULATIONS ON OUR OPERATIONS IN CHINA

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

We are subject to various laws and  regulations  administered  by various  local
government  bodies  relating to the operation of our production  facilities.  We
believe that we are in compliance  with all  governmental  laws and  regulations
related to our products and facilities.

We are  subject  to the  People's  Republic  of China's  national  Environmental
Protection  Law,  which was enacted on December 26, 1989, as well as a number of
other national and local laws and regulations  regulating air, water,  and noise


                                      -3-
<PAGE>

pollution and setting pollutant discharge standards.  Violation of such laws and
regulations could result in warnings,  fines,  orders to cease  operations,  and
even criminal  penalties,  depending on the circumstances of such violation.  We
believe  that  all  manufacturing  operations  are  compliance  with  applicable
environmental  laws,  including  those laws  relating to air,  water,  and noise
pollution.

THE CHINESE LEGAL SYSTEM

The  practical  effect of the People's  Republic of China's  legal system on our
business  operations  in China can be viewed from two separate  but  intertwined
considerations.

First,  as a matter of substantive  law, the Foreign  Invested  Enterprise  laws
provide significant protection from government interference.  In addition, these
laws  guarantee  the full  enjoyment of the  benefits of corporate  Articles and
contracts to Foreign Invested Enterprise  participants.  These laws, however, do
impose standards  concerning  corporate formation and governance,  which are not
qualitatively different from the General Corporation Laws of the several states.
Therefore,  as a practical matter, a Foreign Invested Enterprise needs to retain
or have  ready  access  to a local  Chinese  law  firm  for  routine  compliance
purposes.

Similarly,  the People's  Republic of China  accounting laws mandate  accounting
practices,  which are not co-existent with U.S.  Generally  Accepted  Accounting
Principles.  The China accounting laws require that an annual  "statutory audit"
be performed in accordance with People's Republic of China accounting  standards
and that the books of account of Foreign Invested  Enterprises are maintained in
accordance with Chinese  accounting laws. Article 14 of the People's Republic of
China  Wholly  Foreign-Owned  Enterprise  Law  requires  a Wholly  Foreign-Owned
Enterprise  to  submit  certain   periodic  fiscal  reports  and  statements  to
designated  financial  and tax  authorities,  at the  risk of  business  license
revocation.  As a practical matter, a Foreign Invested  Enterprise must retain a
local  Chinese  accounting  firm  that has  experience  with  both  the  Chinese
standards  and U.S.  Generally  Accepted  Accounting  Principles.  This  type of
accounting  firm can serve the dual  function of performing  the annual  Chinese
statutory  audit and  preparing  the  Foreign  Invested  Enterprise's  financial
statements  in a  form  acceptable  for an  independent  U.S.  certified  public
accountant  to issue an audit  report  in  accordance  with  Generally  Accepted
Accounting Auditing Standards.

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


                                      -4-
<PAGE>

CURRENCY CONVERSION AND EXCHANGE

The   currency  in  China  is   designated   as  the   Renminbi.   Although  the
Renminbi/United  States dollar exchange rate has been  relatively  stable in the
past twenty  years there can be no  assurance  that the  exchange  rate will not
become volatile or that the Renminbi will not be officially devalued against the
United States dollar by direction of the Chinese government.

Exchange  rate  fluctuations  may  adversely  affect our  financial  performance
because of our foreign  currency  denominated  assets and  liabilities,  and may
reduce the value,  translated  or converted,  as  applicable  into United States
dollars, of our net fixed assets, our earnings and our declared dividends. We do
not engage in any hedging activities in order to minimize the effect of exchange
rate risks.

ITEM 2.   PROPERTIES

Our  corporate  office is located in  Shenzhen.  Our five  manufacturing  plants
consist of 29 noodle  production  lines and 2 flour  milling  lines,  located in
Yantai, Penglai and Beijing. Manufacturing operations are vertically integrated,
with the flour production utilized in the noodle manufacturing  process. Most of
our manufacturing facilities have been awarded ISO9002 quality certification.

<TABLE>
<CAPTION>
                                                                         OWNED/               SIZE
             FACILITY                        ADDRESS                     RENTED           (SQ METERS)
     -----------------------    ---------------------------------   -----------------   -----------------
<S>                             <C>                                 <C>                      <C>
     Yantai Flour Mill &        No. 10 Huangcheng Road (N),              Owned               25,345
     Yantai Noodle Factory      Longkou, Shandong

     Sanhe Noodle Factory       1 Yanjiao Jing Ha Road (N),              Owned               26,274
                                Beijing

     Penglai Flour Mill         Xiao Men Town, Penglai, Shandong         Owned               33,330

     Longyuan Plant             Huangcheng Beihuan Road,                 Rented              35,000
                                Longkou, Shandong                   ($ 0.1 million
                                                                      per annual)
</TABLE>


ITEM 3.   LEGAL PROCEEDINGS

We are not a  party  to any  pending  or,  to the  best  of our  knowledge,  any
threatened legal proceedings.


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

There were no matters submitted to a vote of security holders during the quarter
ended December 25, 2004.


                                      -5-
<PAGE>

                                     PART II


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

5.1   MARKET PRICES OF COMMON STOCK

Our common stock is traded on the American  Stock Exchange under the symbol NWD.
The high and low bid prices of the common stock as reported on AMEX for the time
periods indicated are set forth on the table below.

                                        PRICE RANGE OF COMMON STOCK
                                   -------------------------------------
                                         HIGH                  LOW
                                   ------------------    ---------------
   Fiscal 2003:
       First Quarter                    $ 0.43               $ 0.15
       Second Quarter                   $ 0.97               $ 0.24
       Third Quarter                    $ 1.65               $ 0.50
       Fourth Quarter                   $ 0.95               $ 0.55

   Fiscal 2004:
       First Quarter                    $ 1.18               $ 0.74
       Second Quarter                   $ 1.10               $ 0.50
       Third Quarter                    $ 0.82               $ 0.55
       Fourth Quarter                   $ 0.93               $ 0.61


5.2   SHAREHOLDERS

As of  March  23,  2005,  there  were  45,061,242  shares  of our  common  stock
outstanding and we had  approximately  2,400  shareholders  of record.  American
Stock Transfer,  Brooklyn, New York, is the registrar and transfer agent for our
common stock.

5.3   DIVIDENDS

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

5.4   RECENT SALES OF UNREGISTERED SECURITIES

There were no sales of common stock during the year ended December 25, 2004


                                      -6-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The following selected  consolidated  financial data of the Company is presented
as of and for the years  ended  December  25,  2004,  2003,  2002 and 2001.  The
selected financial data should be read in conjunction with the Company's audited
Consolidated  Financial  Statements  and the  notes  thereto,  and  Management's
Discussion and Analysis of Financial Condition and Results of Operations.

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 25,
                                              -----------------------------------------------------
                                                 2004          2003         2002          2001
                                              ------------ -------------------------- -------------
                                                      (IN THOUSAND, EXCEPT PER SHARE DATA)
<S>                                              <C>           <C>          <C>           <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Net Sales                                        $ 39,221      $ 30,773     $ 33,704      $ 30,135
Operating expenses:
  Selling and distribution                          1,178         1,330        1,161           613
  General and administrative                        1,611         2,398          601         1,341
Income from operations                              4,545         2,193        4,346         4,089
Income before tax and minority interests            5,900         3,174        4,762         4,619
Net income                                          4,645         2,727        4,153           866
Earnings per share:
  Basic and diluted                                  0.10          0.06         0.10          0.02
Weighted average common shares outstanding:
  Basic and diluted                                45,061        42,108       40,911        40,911

CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents                             219         1,783          628         1,293
Total assets                                       34,246        34,357       40,354        38,643
Total stockholders' equity                         26,835        22,190       17,686        13,533
</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

This  report  includes   forward-looking   statements.   Generally,   the  words
"believes,"   "anticipates,"   "may,"  "will,"  "should,"   "expect,"  "intend,"
"estimate,"  "continue,"  and similar  expressions  or the  negative  thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set  forth in this  report  or  other  reports  or  documents  we file  with the
Securities and Exchange  Commission from time to time,  which could cause actual
results or outcomes to differ  materially from those  projected.  Undue reliance
should not be placed on these forward-looking  statements which speak only as of
the date  hereof.  We undertake no  obligation  to update these  forward-looking
statements.

The following  discussion and analysis should be read in conjunction  with "Item
6.  Selected  Consolidated   Financial  Data"  and  our  consolidated  financial
statements  and the  related  notes  thereto  and  other  financial  information
contained elsewhere in this Form 10-K.


                                      -7-
<PAGE>

OVERVIEW

Headquartered in Shandong Province, PRC, New Dragon Asia Corp. is engaged in the
milling, sale and distribution of flour and related products,  including instant
noodles, to retail and wholesale  customers  throughout China. With a well known
brand name called LONG FENG, we market our well-established product line through
a countrywide  network of more than 200 key distributors and 16 regional offices
in 27 Chinese provinces.  We have five  manufacturing  plants in the PRC with an
aggregate  production  capacity  of  approximately  110,000  tons of  flour  and
approximately 1.1 billion packets of instant noodles.

OPERATION PLAN

Our current strategies are:

      o     to expand our customer base and production lines and

      o     to acquire  additional  plants with regional  brand  recognition  to
            increase our market share in China.

Plans for  expansion  of the existing  plants are expected to be funded  through
current  working  capital from ongoing  sales.  A significant  acquisition  will
require  additional  funds in the form of debt or equity,  or a  combination  of
both. However, there can be no assurance these funds will be available.

SIGNIFICANT ESTABLISHMENT, ACQUISITION AND DISPOSAL

THE LONGYUAN PLANT

In March 2004, we established  the Longyuan Plant together with a third party in
order to support our growth in the flour and instant  noodles  businesses and to
add additional revenue streams. The Longyuan Plant is engaged in the manufacture
and sale of packing material. We own 55% of the equity of the Longyuan Plant

THE DALIAN PLANT

The Dalian Plant was established  ten years ago and its facilities  needed to be
overhauled  completely  in  order  to meet PRC  environmental  requirements.  In
consideration  of the costs that would be incurred and the past  performance  of
the  operation,  management  decided  to  temporarily  cease its  operations  in
December  2003 in view of the fact that the local market can be satisfied by the
Yantai Plant. In May 2004, a sale agreement was signed with an independent buyer
where the buyer acquired the assets and certain liabilities of the Dalian Plant.
The loans made by the owners were not assumed in the  transaction  and remain as
liabilities  of the  Company.  Accordingly,  the Company has  recorded a gain on
disposal of approximately US$162,000 of the loans in the second quarter of 2004.
On December 25, 2004, the Company sold its equity interest in the Dalian company
together with its holding  company,  Noble Point Limited,  to its parent company
and assumed the outstanding  loan due to the parent company,  at a consideration
of US$20,000 which approximates the net asset value in aggregate after the


                                      -8-
<PAGE>

assignment  of the loan.  Management  believes  that the  disposal of the Dalian
operation  will improve the Company's  profitability  in the future and will not
result in no further liabilities to the Company.

THE PENGLAI PLANT

On May 25, 2004, the Company completed an asset purchase  agreement with a third
party to purchase  property,  machinery and equipment,  and land use rights of a
flour  mill  in  Penglai,   Shandong  Province,   (the  "Penglai  Plant")  at  a
consideration  of  approximately  $1.3 million.  The  acquisition of the Penglai
Plant will expand the Company's  production  capacity by  approximately  30% and
contribute  additional  sales in coming  years.  It currently  serves the North,
Northeast and Central regions of China.

7.1   YEAR ENDED DECEMBER 25, 2004 COMPARED TO YEAR ENDED DECEMBER 25, 2003

RESULTS OF OPERATIONS

REVENUE

Revenue for the year ended December 25, 2004 was $39.2  million,  an increase of
$8.5 million,  or 27.7%,  as compared to $30.7 million for the prior year.  This
increase was primarily due to organic revenue growth, recovery from the negative
effects of Severe Acute  Respiratory  Syndrome,  or SARS in 2003 and the revenue
contribution  of $1.0 million and $0.3  million from the Longyuan  Plant and the
Penglai Plant, respectively.

COST OF GOODS SOLD

For the year ended December 25, 2004,  cost of goods sold was $31.9 million,  an
increase of $7.1  million,  or 29%, as compared to $24.8  million for 2003.  The
increase was primarily to support the growth in related revenue.

For the year ended December 25, 2004, as a percentage of revenue,  cost of goods
sold  increased  slightly  to 81.3% as  compared  to 80.8% for that of the prior
year,  which  represents a stable gross margin of 19%.

SELLING AND DISTRIBUTION EXPENSES

Selling and distribution expenses consist primarily of salaries, commissions and
associated  employee benefits,  travel expenses of sales and marketing personnel
and promotional expenses.

For the  year  ended  December  25,  2004,  selling  and  distribution  expenses
decreased  11% to $1.2  million  from $1.3  million in 2003.  The  decrease  was
primarily due to cost savings from the closure of six sales offices.

GENERAL AND ADMINISTRATIVE EXPENSES

For the year ended  December  25,  2004,  general  and  administrative  expenses
decreased  $0.8 million to $1.6 million from $2.4 million of 2003.  The decrease
was primarily due to cost control and provisions  written-back  on allowance for
doubtful accounts and inventory.


                                      -9-
<PAGE>

OTHER INCOME (EXPENSES)

Other income  increased $0.2 million to $1.4 million for the year ended December
25, 2004 as compared to $1.2 million for the year ended December 25, 2003,  this
was  primarily  due to the  tax  refund  from  the  municipal  government  as an
encouragement for foreign investment which is recurring in nature.

NET INCOME

For the year ended December 25, 2004, net income was $4.6 million,  or $0.10 per
share, an increase of $1.9 million, or 70% as compared to $2.7 million for 2003.
The  increase  was  primarily  due  to  the  revenue  growth  and  the  earnings
contribution of the new plants.

For the year ended  December 25, 2004,  as a percentage  of revenue,  net income
increased  to  11.8%  as  compared  to 8.9%  for  that of the  prior  year.  The
significant  increase was primarily due to the improvement in expense  controls,
and the recovery from the prior negative effects of SARS in 2003.

OFF BALANCE SHEET ARRANGEMENTS

We have never entered into any off-balance sheet financing arrangements and have
never established any special purpose entities.  We have not guaranteed any debt
or commitments  of other  entities or entered into any options on  non-financial
assets.

7.2   YEAR ENDED DECEMBER 25, 2003 COMPARED TO YEAR ENDED DECEMBER 25, 2002

The  Company  generated  revenues  of $30.8  million  for the fiscal  year ended
December 25, 2003,  which was a $2.9 million or 8.7% decrease from $33.7 million
for the fiscal year ended  December  25, 2002.  The  Company's  operations  were
adversely  affected by the  decrease in consumer  demand for retail  commodities
caused by widespread public concerns over the outbreak of SARS, during the year.

There was a substantial  increase in the gross profit margin as the gross profit
for the fourth  quarter of 2003 increased by $1 million over the same period for
the prior year.  The increase is mainly due to the result of a change in product
sales mix and an increase in demand for our products at the end of the third and
fourth quarter of 2003.

The Company  exported  over  80,000,000  packets of noodles to Korea during 2003
which  accounted  for 3% of our instant  noodle  sales.  We have also  commenced
selling our products to  supermarkets  located in urban areas.  Taken  together,
this is expected to lengthen the collection of the receivables of the Company.

Selling and  distribution  expenses  increased  from $1.2 million for the fiscal
year ended  December 25, 2002 to $1.3 million for the fiscal year ended December
25, 2003 due to increased  transportation  costs  associated with more stringent
weight load restrictions.  General and administrative expenses increased by $1.8


                                      -10-
<PAGE>

million primarily due to expenses associated with the closure of three factories
and the write off of inventory  and  deferred  expenses,  as well as  additional
provisions for obsolete inventory and doubtful accounts.

Net income for 2003 was $2.7  million,  or $0.06 per share,  compared  with $4.2
million in 2002.  The 35% decrease in net income was mainly due to the impact of
SARS and closure of our plants.


7.3   CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

As of December 25, 2004, the Company had operating leases for  manufacturing and
warehouse  facilities  expiring  at various  dates  through  March  2031.  As of
December 25, 2004, the Company had no significant capital leases. Future minimum
rental commitments under operating leases are as follows:

<TABLE>
<CAPTION>
                                                       PAYMENT DUE BY PERIOD
                               ----------------------------------------------------------------------
                                LESS THAN     1-3 YEARS      3-5 YEARS    MORE THAN 5      TOTAL
                                  1 YEAR                                     YEARS
                               ------------- -------------  ------------- ------------- -------------
<S>                               <C>           <C>            <C>           <C>           <C>
Operating lease obligations       123,000       123,000        123,000       47,000        662,000
                               ============= =============  ============= ============= =============
</TABLE>


7.4   FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES

The  Company's  primary  liquidity  needs are to purchase  inventories  and fund
accounts  receivable  and capital  expenditures.  The Company has  financed  its
working capital requirements through a combination of internally generated cash,
short-term borrowings and advances from related companies.

The Company's working capital increased $5.3 million to $7.4 million at December
25, 2004 as compared to $2.1  million at December  25,  2003.  The  increase was
primarily  due to the growth and  profitability  of the  business  and  improved
collections of receivables during the year ended December 25, 2004.

Cash and cash  equivalents were $0.2 million as of December 25, 2004, a decrease
of $1.6 million  from that of December 25, 2003.  The decrease was mainly due to
the repayment of short-term borrowings.

Net cash provided by operating  activities  for the year ended December 25, 2004
was $3.7 million which was  attributable to the growth and  profitability of the
business  and  changes in  operating  assets and  liabilities.  Net cash used in
financing  activities  decreased  $6.6 million to $2.1 million in the year ended
December 25, 2004 as compared to $8.7 million for 2003. The primary use of funds
in financing activities in the year ended December 25, 2004 was the repayment of
short-term bank borrowings and settlement of related company balances.

7.5   INFLATION AND CHANGING PRICES

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


                                      -11-
<PAGE>

7.6   CRITICAL ACCOUNTING POLICIES

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

CONTRACTUAL   JOINT  VENTURES  -  A  contractual  joint  venture  is  an  entity
established  between the Company and another  joint  venture  partner,  with the
rights and obligations of each party governed by a contract. If the Company 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 Company 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  Company's  sales made in  Mainland  China are  subject  to  Mainland
Chinese  value-added tax at rates ranging from 13% to 17% ("output  VAT").  Such
output VAT is payable  after  offsetting  VAT paid by the  Company on  purchases
("input VAT").

INVENTORIES  -  Inventories  are  stated at the lower of cost,  determined  on a
weighted average basis, and net realizable value. Costs of work-in-progress  and
finished goods are composed of direct material, direct labor and an attributable
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.

In December 2003, the FASB issued Interpretation No. 46R ("FIN 46R"), a revision
to FIN 46, "Consolidation of Variable Interest Entities". FIN 46R clarifies some
of the provisions of FIN46 and exempts certain  entities from its  requirements.
FIN 46R is effective at the end of the first  interim  period ending after March
15, 2004.  Entities  that have adopted FIN 46 prior to this  effective  date can
continue to apply the  provisions of FIN 46 until the effective date of Fin 46R.
The  adoption of FIN 46R did not have any effect on our  consolidated  financial
statements.

In November 2004, the FASB issued  Statement of Financial  Accounting  Standards
(SFAS) No. 151,  Inventory  Costs,  which  clarifies the accounting for abnormal
amounts of idle facility expense,  freight, handling costs, and wasted material.
SFAS No. 151 will be effective for inventory  costs incurred during fiscal years
beginning  after June 15,  2005.  We do not believe the adoption of SFAS No. 151
will have a material impact on our financial statements.

In December 2004, the FASB issued SFAS No. 123(R),  Share-Based  Payment,  which
establishes  standards for  transactions in which an entity exchanges its equity
instruments  for goods or services.  This  standard  requires a public entity to
measure the cost of  employee  services  received  in  exchange  for an award of
equity  instruments  based  on the  grant-date  fair  value of the  award.  This
eliminates  the exception to account for such awards using the intrinsic  method
previously allowable under APB Opinion No. 25. SFAS No. 123(R) will be effective
for interim or annual reporting  periods beginning on or after June 15, 2005. We
do not believe the adoption of SFAS No.  123(R) will not have a material  impact
on our financial statements.

7.7   RISKS FACTORS RELATED TO OUR BUSINESS

In  addition  to the other  information  in this annual  report,  the  following
factors should be considered  carefully in evaluating the Company's business and
prospects.  THE FOLLOWING  MATTERS,  AMONG OTHERS,  MAY HAVE A MATERIAL  ADVERSE
EFFECT ON THE BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR
PROSPECTS,  FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY
STATEMENT IN THE CONTEXT OF A  FORWARD-LOOKING  STATEMENT OR STATEMENTS SHALL BE
DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT
OR STATEMENTS. We are subject to, among others, the following risks:

RISKS ASSOCIATED WITH OUR BUSINESS.

OUR BUSINESS MAY RESULT IN ADVERSE  EFFECTS FROM  COMPETITION  IN THE NOODLE AND
FLOUR PRODUCT MARKETS.


                                      -12-
<PAGE>

The noodle and flour  product  markets are highly  competitive.  Competition  in
these markets takes many forms, including the following:

     o   establishing favorable brand recognition;
     o   developing products sought by consumers;
     o   implementing appropriate pricing;
     o   providing strong marketing support; and
     o   obtaining access to retain outlets and sufficient shelf space.

Many of our  competitors  are  larger  and  have  greater  financial  resources,
including our primary competitors, Master Kang and President. We may not be able
to compete  successfully  with such  competitors.  Competition could cause us to
lose our market share,  increase  expenditures or reduce pricing,  each of which
could have a material adverse effect on our business and financial results.

AN INABILITY TO RESPOND  QUICKLY AND  EFFECTIVELY TO NEW TRENDS WOULD  ADVERSELY
IMPACT OUR COMPETITIVE POSITION.

Our failure to maintain the superiority of our technological  capabilities or to
respond effectively to technological  changes could adversely affect our ability
to retain existing business and secure new business.  We will need to constantly
seek out new products and develop new solutions to maintain in our portfolio. If
we are unable to keep current with new trends, our competitors'  technologies or
products may render us noncompetitive and our products obsolete.

INCREASES IN PRICES OF MAIN  INGREDIENTS  AND OTHER  MATERIALS  COULD  ADVERSELY
AFFECT OUR BUSINESS.

The main ingredients that we use to manufacture our products are flour and eggs.
We also use paper products,  such as corrugated cardboard,  as well as films and
plastics, to package our products.  The prices of these materials have been, and
we expect them to continue to be, subject to  volatility.  We may not be able to
pass price  increases in these  materials onto our customers which could have an
adverse effect on our financial results.

WE ARE  SUBJECT  TO  RISKS  ASSOCIATED  WITH  JOINT  VENTURES  AND  THIRD  PARTY
AGREEMENTS.

We conduct our milling and sales operations  through joint ventures  established
with certain Chinese parties. Any deterioration of these strategic relationships
may have an adverse effect on our operation. Changes in laws and regulations, or
their interpretation,  or the imposition of confiscatory taxation,  restrictions
on currency conversion,  imports and sources of supply, devaluations of currency
or the  nationalization or other expropriation of private enterprises could have
a material  adverse effect on our business,  results of operations and financial
condition.  Under  its  current  leadership,  the  Chinese  government  has been
pursuing  economic reform policies that encourage  private economic activity and
greater  economic  decentralization.  There is no assurance,  however,  that the
Chinese  government will continue to pursue these policies,  or that it will not
significantly alter these policies from time to time without notice.

We may have limited legal recourse under Chinese law if disputes arise under our
agreements  with joint  ventures or third  parties.  The Chinese  government has
enacted  some  laws and  regulations  dealing  with  matters  such as  corporate


                                      -13-
<PAGE>

organization and governance,  foreign investment,  commerce, taxation and trade.
However, their experience in implementing, interpreting and enforcing these laws
and regulations is limited,  and our ability to enforce  commercial claims or to
resolve commercial  disputes is unpredictable.  If our new business ventures are
unsuccessful,  or other adverse circumstances arise from these transactions,  we
face the risk that the parties to these  ventures may seek ways to terminate the
transactions,  or, may hinder or prevent us from accessing important information
regarding the financial and business operations of these acquired companies. The
resolution  of these  matters  may be subject to the  exercise  of  considerable
discretion by agencies of the Chinese  government,  and forces  unrelated to the
legal  merits  of  a   particular   matter  or  dispute  may   influence   their
determination.  Any rights we may have to  specific  performance,  or to seek an
injunction  under Chinese law, in either of these cases,  are severely  limited,
and without a means of recourse by virtue of the Chinese legal system, we may be
unable to prevent these  situations from  occurring.  The occurrence of any such
events could have a material adverse effect on our business, financial condition
and results of operations.

THE COMPANY  MAY BE SUBJECT TO PRODUCT  LIABILITY  CLAIMS AND  PRODUCT  RECALLS,
WHICH COULD NEGATIVELY IMPACT ITS PROFITABILITY.

We sell food  products  for human  consumption,  which  involves  risks  such as
product  contamination or spoilage,  product tampering and other adulteration of
food products.  We may be subject to liability if the  consumption of any of its
products  causes  injury,  illness or death.  In addition,  we will  voluntarily
recall products in the event of contamination  or damage. A significant  product
liability  judgment or a widespread  product  recall may  negatively  impact our
profitability   for  a  period  of  time  depending  on  product   availability,
competitive  reaction and consumer attitudes.  Even if a product liability claim
is unsuccessful or is not fully pursued, the negative publicity  surrounding any
assertion that company  products caused illness or injury could adversely affect
our reputation with existing and potential customers and its corporate and brand
image.

WE HAVE LIMITED BUSINESS INSURANCE COVERAGE.

The  insurance  industry  in China is still in its early  stage of  development.
Insurance companies in China offer limited business  insurance.  As a result, we
do not  have any  business  liability  insurance  coverage  for our  operations.
Moreover,  while business disruption insurance is available,  we have determined
that the risks of  disruption  and cost of the insurance are such that we do not
require it at this time. Any business disruption, litigation or natural disaster
might result in substantial costs and diversion of resources.

WE HAVE A LIMITED CONCENTRATION OF CREDIT RISK.

Concentration  of credit risk with respect to customer  receivables  are limited
due to the large number of customers  comprising  our customer  base,  and their
dispersion across the PRC. In addition, we perform 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.

WE MAY EXPERIENCE RISKS RESULTING FROM OUR PLANS FOR EXPANSION.

We have acquired  several  companies and  businesses and may continue to acquire
companies in the future. Entering into an acquisition entails many risks, any of
which  could  harm  our  business,  including:  (a)  diversion  of  management's
attention  from other business  concerns;  (b) failure to integrate the acquired
company with our existing business; (c) additional operating expenses not offset
by  additional  revenue;  and (d)  dilution  of our stock as a result of issuing
equity securities.

If we are  unable  to  implement  our  acquisition  strategy,  we  may  be  less
successful in the future. A key component of our growth strategy is accomplished
by acquiring  additional flour and noodle  factories.  While there are many such
companies,  we may not always be able to identify and acquire  companies meeting
our acquisition criteria on terms acceptable to us.  Additionally,  financing to
complete  significant  acquisitions  may not always be available on satisfactory
terms.  Further,  our acquisition strategy presents a number of special risks to


                                      -14-
<PAGE>

us that it would not  otherwise  contend  with absent such  strategy,  including
possible  adverse effects on our earnings after each  acquisition,  diversion of
management's  attention from our core business due to the special attention that
a particular  acquisition may require,  failure to retain key acquired personnel
and risks associated with unanticipated events or liabilities arising after each
acquisition,  some or all of which could have a material  adverse  effect on our
business, financial condition and results of operations.

RISKS ASSOCIATED WITH DOING BUSINESS IN THE PEOPLE'S REPUBLIC OF CHINA.

WE ARE  SUBJECT TO THE RISKS  ASSOCIATED  WITH DOING  BUSINESS  IN THE  PEOPLE'S
REPUBLIC OF CHINA.

As most of our  operations  are  conducted in the PRC, the Company 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.  Our 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.

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

      -     We will be able to capitalize on economic reforms;

      -     The Chinese  government will continue its pursuit of economic reform
            policies;  -  The  economic  policies,  even  if  pursued,  will  be
            successful;

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

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

Economic reform policies or  nationalization  could result in a total investment
loss in our common stock.

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

Over the last few years,  China's  economy has  registered  a high growth  rate.
Recently, there have been indications that rates of inflation have increased. In
response,  the Chinese  government has taken  measures to curb this  excessively
expansive economy.  These  measures include  restrictions on the availability of
domestic credit, reducing the purchasing capability of certain of its customers,
and limited  re-centralization  of the  approval  process for  purchases of some
foreign  products.  The  Chinese  government  may adopt  additional  measures to


                                      -15-
<PAGE>

further combat  inflation,  including the establishment of freezes or restraints
on  certain  projects  or  markets.  These  measures  may  adversely  affect our
manufacturing operations.

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

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

THE PRC LEGAL SYSTEM IS NOT FULLY DEVELOPED AND HAS INHERENT  UNCERTAINTIES THAT
COULD LIMIT THE LEGAL PROTECTIONS AVAILABLE TO INVESTORS.

The  PRC  legal  system  is  a  system  based  on  written  statutes  and  their
interpretation by the Supreme People's Court. Prior court decisions may be cited
for  reference  but  have  limited  precedential  value.  Since  1979,  the  PRC
government has been  developing a comprehensive  system of commercial  laws, and
considerable  progress has been made in introducing laws and regulations dealing
with economic  matters such as foreign  investment,  corporate  organization and
governance,  commerce,  taxation and trade. Two examples are the promulgation of
the Contract Law of the PRC to unify the various  economic  contract laws into a
single code,  which went into effect on October 1, 1999,  and the Securities Law
of the PRC, which went into effect on July 1, 1999. However,  because these laws
and  regulations  are  relatively  new,  and  because of the  limited  volume of
published cases and their non-binding nature,  interpretation and enforcement of
these laws and regulations involve uncertainties.  In addition, as the PRC legal
system develops,  changes in such laws and regulations,  their interpretation or
their enforcement may have a material adverse effect on our business operations.

ENFORCEMENT OF REGULATIONS IN CHINA MAY BE INCONSISTENT.

Although the Chinese  government  has  introduced  new laws and  regulations  to
modernize its securities and tax systems on January 1, 1994,  China does not yet
possess a  comprehensive  body of business  law. As a result,  the  enforcement,
interpretation  and  implementation  of regulations may prove to be inconsistent
and it may be difficult to enforce contracts.

WE MAY EXPERIENCE LENGTHY DELAYS IN RESOLUTION OF LEGAL DISPUTES.


                                      -16-
<PAGE>

As China has not developed a dispute resolution mechanism similar to the Western
court system, dispute resolution over Chinese projects and joint ventures can be
difficult and there is no assurance  that any dispute  involving our business in
China can be resolved expeditiously and satisfactorily.

WE MAY EXPERIENCE AN IMPACT OF THE UNITED STATES FOREIGN  CORRUPT  PRACTICES ACT
ON OUR BUSINESS.

Compliance  with the Foreign Corrupt  Practices Act could  adversely  impact our
competitive position;  failure to comply could subject us to penalties and other
adverse  consequences.  We are  subject to the  United  States  Foreign  Corrupt
Practices Act, which generally  prohibits  United States companies from engaging
in bribery or other prohibited  payments to foreign officials for the purpose of
obtaining or retaining  business.  Foreign  companies,  including  some that may
compete with us, are not subject to these prohibitions.  Corruption,  extortion,
bribery,  pay-offs, theft and other fraudulent practices occur from time-to-time
in mainland  China.  We have  attempted to implement  safeguards  to prevent and
discourage such practices by our employees and agents. We can make no assurance,
however,  that our employees or other agents will not engage in such conduct for
which we might be held  responsible.  If our employees or other agents are found
to have engaged in such  practices,  we could suffer severe  penalties and other
consequences that may have a material adverse effect on our business,  financial
condition and results of operations.

WE MAY EXPERIENCE A RISK OF REVENUE REDUCTION DUE TO CURRENCY CONVERSIONS.

Most of our revenue is  denominated  in Renminbi  which must be  converted  into
other  currencies  before  remittance  out of the PRC.  Both the  conversion  of
Renminbi into foreign currencies and the remittance of foreign currencies abroad
require  approval  of the  PRC  government.  To the  extent  future  revenue  is
denominated  in  foreign  currencies,  we would be subject  to  increased  risks
relating  to  foreign  currency  exchange  rate  fluctuations  that could have a
material  adverse affect on our financial  condition and operating  results.  To
date, we have not engaged in any hedging  transactions  in  connection  with our
operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in financial market conditions in the normal course of
business due to its use of certain financial instruments.  Market risk generally
represents the risk that losses may occur in the values of financial instruments
as a result of movements in interest rates and equity prices.

CURRENCY FLUCTUATIONS AND FOREIGN CURRENCY RISK

The majority of our  operations  are  conducted in the PRC except for some minor
export  business and limited  overseas  purchases of raw materials.  Most of our
sales and purchases are conducted within the PRC in Chinese Renminbi. Hence, the
effect  of the  fluctuations  of  exchange  rate is  considered  minimal  to our
operation.

Substantially  all of our revenues and  expenses  are  denominated  in Renminbi,
which is the  official  currency  of China.  However,  we use the United  States
dollar for  financial  reporting  purposes.  Conversion of Renminbi into foreign
currencies is regulated by The People's Bank of China through a unified floating
exchange rate system.  Although the PRC  government  has stated its intention to
support the value of Renminbi, there can be no assurance that such exchange rate
will not again become  volatile or that Renminbi will not devalue  significantly
against the US dollar.  Exchange  rate  fluctuations  may  adversely  affect the
value,  in US dollar  terms,  of the our net assets and income  derived from its
operations in the PRC.


                                      -17-
<PAGE>

INTEREST RATE RISK

The  Company  does  not  have  significant  interest  rate  risk,  as  our  debt
obligations are primarily short-term in nature, with fixed interest rates.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements and the footnotes thereto are included in the
section beginning on page F-1.

1. Report of Independent Registered Public Accounting Firm
2. Consolidated Balance Sheets as of December 25, 2004 and 2003
3. Consolidated  Statements of Income for each of the three years ended December
   25, 2004
4. Consolidated  Statements of Stockholders'  Equity for each of the three years
   ended December 25, 2004
5. Consolidated  Statements  of Cash  Flows for each of  the three  years  ended
   December 25, 2004
6. Notes to Consolidated Financial Statements

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

There were no changes in or  disagreements  with  accountants  on accounting and
financial disclosure.

ITEM 9A.   CONTROL PROCEDURES

(a)  Under  the  supervision  and  with  the  participation  of our  management,
     including our chief executive officer and the chief financial  officer,  we
     conducted an evaluation of the effectiveness of the design and operation of
     its disclosure  controls and procedures,  as defined in Rules 13a-15(e) and
     15d-15(e)  under the  Securities  Exchange Act of 1934,  as of December 25,
     2004, the end of the period covered by this report (the "Evaluation Date").
     Based on this evaluation,  our chief executive  officer and chief financial
     officer  concluded as of the Evaluation  Date that our disclosure  controls
     and procedures were effective such that the material  information  required
     to be included in our Securities and Exchange Commission ("SEC") reports is
     recorded,  processed,  summarized  and  reported  within  the time  periods
     specified in SEC rules and forms relating us,  including our  consolidating
     subsidiaries,  and was made known to them by others within those  entities,
     particularly during the period when this report was being prepared.

(b)  Additionally, there were no significant changes in our internal controls or
     in other factors that could significantly  affect these controls subsequent
     to the Evaluation Date. We have not identified any significant deficiencies
     or material  weaknesses in our internal controls,  and therefore there were
     no corrective actions taken.


                                      -18-
<PAGE>

ITEM 9B.   OTHER INFORMATION

(a)  In August  2004,  the  Company  appointed a  consulting  firm to assist the
     management  team to  strengthen  and to document the internal  controls and
     processes  with the objective of full  compliance  with the  Sarbanes-Oxley
     Act. This project is scheduled to be completed in late 2005.

                                    PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  required by Item 10 is set forth in the Proxy  Statement under
the  caption  "Election  of  Directors"  and  is  incorporated  herein  by  this
reference.

ITEM 11.   EXECUTIVE COMPENSATION

The  information  required by Item 11 is set forth in the Proxy  Statement under
the  caption  "Executive  Compensation"  and  is  incorporated  herein  by  this
reference.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The  information  required by Item 12 is set forth in the Proxy  Statement under
the caption "Security Ownership of Certain Beneficial Owners and Management" and
is incorporated herein by this reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by Item 13 is set forth in the Proxy  Statement under
the caption "certain relationships and related transactions" and is incorporated
herein by this reference.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  information  required under by Item 14 is set forth in the Proxy  Statement
under the caption  "Principal  accountant fees and services" and is incorporated
herein by this reference.

                                    PART IV

ITEM 15.   EXHIBITS AND REPORTS ON FORM 8-K

(a)       Exhibits

    The  following  exhibits  are  filed  as part  of,  or are  incorporated  by
    reference in, this Annual Report on Form 10-K.

       EXHIBIT NO.       DESCRIPTION
       -----------       -----------

          31.1           Certification pursuant to Rule 13a-14


                                      -19-
<PAGE>

          31.2           Certification pursuant to Rule 13a-14

          32.1           Certification of Chief Executive Officer pursuant to
                         Section 906 of the Sarbanes - Oxley Act of 2002

          32.2           Certification of Chief Financial Officer pursuant to
                         Section 906 of the Sarbanes - Oxley Act of 2002

(b) Reports on Form 8-K

    The following reports on Form 8-K were filed during 2004:

      o     Form 8-K (item 12), filed on May 10, 2004,  covering a press release
            announcing  our  financial  results for the quarter  ended March 25,
            2004.

      o     Form 8-K (item  5.02),  filed on November 8, 2004,  covering a press
            release  announcing  the departure and  appointment of the Company's
            Chief Financial Officer.


                                      -20-
<PAGE>

                                   SIGNATURES

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

                                                  NEW DRAGON ASIA CORP.


Dated: March 23, 2005                             By /s/ Heng Jing Lu
                                                  ------------------------------
                                                  Name: Heng Jing Lu
                                                  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: March 23, 2005                          By /s/ Heng Jing Lu
                                               ------------------------------
                                               Name: Heng Jing Lu
                                               Title: Chief Executive Officer
                                                      & Director


Dated: March 23, 2005                          By /s/ Peter Mak
                                               ------------------------------
                                               Name: Peter Mak
                                               Title: Chief Financial Officer


Dated: March 23, 2005                          By /s/ Li Xia Wang
                                               ------------------------------
                                               Name: Li Xia Wang
                                               Title: Director


Dated: March 23, 2005                          By /s/ Ling Wang
                                               ------------------------------
                                               Name: Ling Wang
                                               Title: Director


                                      -21-
<PAGE>

Dated: March 23, 2005                          By /s/ De Lin Yang
                                               ------------------------------
                                               Name: De Lin Yang
                                               Title: Director


Dated: March 23, 2005                          By /s/ Zhi Yong Jiang
                                               ------------------------------
                                               Name: Zhi Yong Jiang
                                               Title: Director


Dated: March 23, 2005                          By /s/ Qi Xue
                                               ------------------------------
                                               Name: Qi Xue
                                               Title: Director


Dated: March 23, 2005                          By /s/ Feng Ju Chen
                                               ------------------------------
                                               Name: Feng Ju Chen
                                               Title: Director




                                      -22-

<PAGE>

                              NEW DRAGON ASIA CORP.

                              FINANCIAL STATEMENTS

                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----

                                                                             F-1
Report of Independent Registered Accounting Firm

Consolidated Balance Sheets as of December 25, 2004 and 2003                 F-2

Consolidated Statements of Income for each of the three years ended
December 25, 2004                                                            F-3

Consolidated Statements of Stockholders' Equity for each of the three years
ended December 25, 2004                                                      F-4

Consolidated Statements of Cash Flows for each of the three years ended
December 25, 2004                                                            F-5

Notes to Consolidated Financial Statements                                   F-6


<PAGE>

                REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM


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

We have audited the accompanying  consolidated balance sheets of New Dragon Asia
Corp. and Subsidiaries  (the "Company") as of December 25, 2004 and 2003 and the
related consolidated  statements of income,  stockholders` equity and cash flows
for  each of the  three  years  ended  December  25,  2004.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (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 consolidated  financial statement
presentation.  We believe  that our audits  provide 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, 2004 and 2003,  and the
consolidated  results of their  operations  and cash flows for each of the three
years ended December 25, 2004 in conformity with accounting principles generally
accepted in the United States of America.

GROBSTEIN, HORWATH & COMPANY LLP

Sherman Oaks, California
February 4, 2005


<PAGE>


                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                              DECEMBER 25,   DECEMBER 25,
                                                                 2004            2003
                                                               ----------     ----------
<S>                                                            <C>            <C>
                                ASSETS

Current Assets:
    Cash and cash equivalents                                  $      219     $    1,783
    Accounts receivable, net                                        6,414          6,936
    Deposits and prepayments, net                                   2,520          1,282
    Inventories, net                                                3,990          2,763
    Due from related companies                                      1,183            124
                                                               ----------     ----------
      Total current assets                                         14,326         12,888

Property, machinery and equipment, net                             16,098         17,471
Land use rights, net                                                3,822          3,998
                                                               ----------     ----------
      Total assets                                             $   34,246     $   34,357
                                                               ==========     ==========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Short-term borrowings                                      $       --     $    2,845
    Accounts payable                                                2,696          4,565
    Other payables and accruals                                     1,898          1,234
    Taxes payable                                                   1,491            921
    Due to related companies                                          831          1,202
                                                               ----------     ----------
      Total current liabilities                                     6,916         10,767

Due to New Dragon Asia Food Limited                                   303            196
Due to joint venture partners                                         110          1,204
                                                               ----------     ----------
      Total liabilities                                             7,329         12,167
                                                               ----------     ----------

Minority interests                                                     82             --
                                                               ----------     ----------
Stockholders' equity:
    Common stock, par value $0.0001; 107,000,000 shares
      authorized; 45,061,242 shares issued and outstanding
      at December 25, 2004 and 2003                                     4              4
    Additional paid-in capital                                      9,909          9,909
    Retained earnings                                              16,922         12,277
                                                               ----------     ----------
      Total stockholders' equity                                   26,835         22,190
                                                               ----------     ----------
      Total liabilities and stockholders' equity               $   34,246     $   34,357
                                                               ==========     ==========
</TABLE>

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

                                      F-2
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED DECEMBER 25,
                                                --------------------------------------------------------
                                                       2004                  2003                2002
                                                ----------------    ----------------    ----------------
<S>                                                 <C>                    <C>                 <C>
Net sales                                           $    39,221            $ 30,773            $ 33,704
Cost of goods sold                                      (31,887)            (24,852)            (27,596)
                                                ----------------    ----------------    ----------------
Gross profit                                              7,334               5,921               6,108
Selling and distribution expenses                        (1,178)             (1,330)             (1,161)
General and administrative expenses                      (1,611)             (2,398)               (601)
                                                ----------------    ----------------    ----------------
Income from operations                                    4,545               2,193               4,346
Other income (expenses):
  Interest expense                                          (72)               (249)               (265)
  Interest income                                             3                   4                 194
  Other income, net                                       1,424               1,226                 487
                                                ----------------    ----------------    ----------------
Income before provision for income taxes and
  minority interests                                      5,900               3,174               4,762

Provision for income taxes                               (1,296)               (447)               (609)
                                                ----------------    ----------------    ----------------
Income before minority interests                          4,604               2,727               4,153
Minority interests                                           41                  --                  --
                                                ----------------    ----------------    ----------------
Net income                                              $ 4,645             $ 2,727             $ 4,153
                                                ================    ================    ================
Basic and diluted earnings per common share             $  0.10              $ 0.06              $ 0.10
                                                ================    ================    ================
Weighted average common shares outstanding               45,061              42,108              40,911
                                                ================    ================    ================
</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 STOCKHOLDERS' EQUITY

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              COMMON STOCK           ADDITIONAL                      TOTAL
                                      -------------------------       PAID-IN       RETAINED     STOCKHOLDERS'
                                        SHARES         AMOUNT         CAPITAL       EARNINGS         EQUITY
                                      ----------     ----------     ----------     ----------    -------------

<S>                                       <C>        <C>            <C>            <C>            <C>
Balance at December 25, 2001              40,911     $        4     $    8,132     $    5,397     $   13,533

Net income for the year ended
  December 25, 2002                           --             --             --          4,153          4,153
                                      ----------     ----------     ----------     ----------     ----------

Balance at December 25, 2002              40,911              4          8,132          9,550         17,686

Issuance of common stock in
  connection with:
   Private placement in September          3,300             --          1,405             --          1,405
   Private placement in October              850             --            372             --            372

Net income for the year ended
  December 25, 2003                           --             --             --          2,727          2,727
                                      ----------     ----------     ----------     ----------     ----------

Balance at December 25, 2003              45,061              4          9,909         12,277         22,190

Net income for the year ended
  December 25, 2004                           --             --             --          4,645          4,645
                                      ----------     ----------     ----------     ----------     ----------

Balance at December 25, 2004              45,061     $        4     $    9,909     $   16,922     $   26,835
                                      ==========     ==========     ==========     ==========     ==========
</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 CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                FOR THE YEARS ENDED DECEMBER 25,
                                                              -----------------------------------
                                                                 2004         2003         2002
                                                              ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                    $   4,645    $   2,727    $   4,153
Adjustments to reconcile net income to net cash provided by
operating activities:
    Provision for doubtful accounts                                (218)         578          134
    Depreciation and amortization                                 1,187        1,425        1,251
    Gain on disposal of PRC subsidiary                             (162)          --           --
    Loss (gain) on disposal of machinery and equipment              199         (346)           5
    Minority interests                                              (41)          --           --
    Changes in operating assets and liabilities:
        Accounts receivable                                         735         (186)      (2,352)
        Deposits and prepayments                                 (1,242)        (216)         343
        Inventories                                              (1,313)       2,439          125
        Accounts payable                                         (1,583)        (163)       1,288
        Other payables and accruals                                 920          (48)         544
        Taxes payable                                               573           32          420
                                                              ---------    ---------    ---------
    Net cash provided by operating activities                     3,700        6,242        5,911
                                                              ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in amounts due from related companies          (706)       2,357         (795)
Decrease (increase) in investment                                    --           --           72
Decrease (increase) in amounts due to related companies            (371)         400       (2,982)
Purchases of property, machinery and equipment                   (2,207)         (92)        (978)
Proceeds from disposal of property, machinery and equipment         126          994           --
                                                              ---------    ---------    ---------
    Net cash (used in) provided by  investing activities         (3,158)       3,677       (4,683)
                                                              ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock                               --        1,777           --
Decrease (increase) in restricted cash                               --          181         (181)
Proceeds from short-term borrowings                                  --        4,325        6,988
Payments on short-term borrowings                                (2,676)      (5,094)      (6,928)
Increase (decrease) in due to parent company                      1,127       (5,586)      (1,262)
Decrease in due to joint venture partners                          (681)      (4,367)        (510)
Capital contribution from minority interests                        124           --           --
                                                              ---------    ---------    ---------
    Net cash used in provided by financing activities            (2,106)      (8,764)      (1,893)
                                                              ---------    ---------    ---------
Net change in cash and cash equivalents                          (1,564)       1,155         (665)
Cash and cash equivalents at the beginning of the year            1,783          628        1,293
                                                              ---------    ---------    ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR              $     219    $   1,783    $     628
                                                              =========    =========    =========
Supplemental disclosures of cash flows information:
Cash paid during the year for:
    Interest                                                  $      72    $     249    $     292
                                                              =========    =========    =========
    Income taxes                                              $      10    $     380    $     426
                                                              =========    =========    =========
</TABLE>


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


                                      F-5
<PAGE>

                     NEW DRAGON ASIA CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   (AMOUNTED IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1.  ORGANIZATION AND NATURE OF OPERATIONS

New Dragon Asia  Corporation,  a United States  corporation  incorporated in the
State of Florida, is principally  engaged in the milling,  sale and distribution
of flour  and  related  products,  including  instant  noodles,  to  retail  and
wholesale customers  throughout China through its foreign  subsidiaries in China
(collectively the "Company"). The Company is headquartered in Shandong Province,
the People's Republic of China ("PRC") and has its corporate office in Shenzhen,
and five manufacturing plants in Yantai, Beijing and Penglai.

Details of the subsidiaries are as follows:

<TABLE>
<CAPTION>
                                     DOMICILE AND DATE         PAID-IN        PERCENTAGE OF
            NAME                      OF INCORPORATION         CAPITAL          OWNERSHIP       PRINCIPAL ACTIVITIES
--------------------------------    ----------------------  ---------------  ----------------  -----------------------

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

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

Keen General Limited                The British               US$1,500,000      100% (a)       Investment holding
("KG")                              Virgin Islands
                                    July 20,1998

New Dragon Asia Flour (Yantai)      The PRC                  RMB28,500,000       90% (b)       Manufacture, marketing
Company limited                     August 13, 1999                                            and distribution of
("NDAFLY")                                                                                     flour

New Dragon Asia Food (Yantai)       The PRC                  RMB17,462,000       90% (c)       Manufacture, marketing
Company Limited                     December 24,1998                                           and distribution of
("NDAFY")                                                                                      instant noodles

New Dragon Asia Food (Sanhe)        The PRC                  RMB51,191,432     79.64% (c)      Manufacture, marketing
Company Limited                     December 25, 1998                                          and distribution of
("NDAFS")                                                                                      instant noodles

Penglai New Dragon Jin Qiao Food    The PRC                     US$850,000      100% (d)       Manufacture, marketing
Company Limited                     December 5,2003                                            and distribution of
("PNDJQ")                                                                                      flour

Longkou City Longyuan Packing       The PRC                   RMB2,280,000       55% (e)       Manufacture and sale of
Materials                           March 2004                                                 packing materials
Company Limited
("LCLPM")
</TABLE>

                                       F-6
<PAGE>

(a)  MC, RD and KG are wholly owned by the Company.

(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
     Company.  The minority interest  component has been included as a component
     of General and  Administrative  Expenses  for the years ended  December 25,
     2004, 2003 and 2002.

(c)  NDAFY and NDAFS are contractual joint ventures established in the PRC to be
     operated  for  50  years  until  December  24,  2048.  In  March  1999,  RD
     contributed  90% of the registered  capital to NDAFY,  while KG contributed
     79.64%  of the  registered  capital  to  NDAFS.  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 and NDAFS  effective  from  December 26, 1998.  In view of the profit
     sharing  arrangements,  NDAFY and NDAFS are  regarded  as 100% owned by the
     Company.

(d)  PNDJQ is a wholly owned subsidiary of MC established in the PRC.

(e)  LCLPM is a 55% owned  subsidiary of NDAFY  established  in the PRC in March
     2004.  The remaining 45% equity is owned by Longkou City Longyuan  Factory,
     our Chinese joint venture partner.


NOTE 2.   BASIS OF PRESENTATION

The  consolidated   financial  statements  include  the  consolidated  financial
statements  of New  Dragon  Asia Corp.  and its  subsidiaries.  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 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  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 Company,  which
were  prepared  in  accordance  with  the  relevant  accounting  principles  and
financial reporting regulations applicable to joint venture enterprises as


                                      F-7
<PAGE>

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 Company recognizes sales in accordance with the United States Securities and
Exchange  Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 104, "Revenue
Recognition."  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  Company'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  Company 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.

CASH AND CASH EQUIVALENTS

The  Company  considers  cash  on  hand,   deposits  in  banks,  and  short-term
investments  purchased with an original maturity date of three months or less to
be cash and cash equivalents. The carrying amounts reflected in the consolidated
balance sheets for cash and cash equivalents  approximate the fair values due to
the short maturities of these instruments.

FINANCIAL INSTRUMENTS

The  Company  accounts  for  financial   instruments  under  the  provisions  of
Statements of Financial  Accounting  Standards ("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  Company's  consolidated  financial  position  or its
results of operations because the Company does not currently hold any derivative
financial  instruments and does not engage in hedging  activities.  The carrying
amounts  for  cash and  cash  equivalents,  accounts  receivable,  deposits  and
prepayments,   short-term  borrowings,  accounts  payable,  other  payables  and
accruals  approximate  their fair values  because of the short maturity of those
instruments.


                                      F-8
<PAGE>

ACCOUNTS RECEIVABLE

Accounts  receivable is stated at cost, net of allowance for doubtful  accounts.
Based on current practice in the PRC,  management  provides for an allowance for
doubtful accounts equivalent to those accounts that are not collected within one
year.

Financial instruments, which potentially subject the Company to concentration of
credit risk, consist primarily of trade receivables.  However, concentrations of
credit risk are  limited due to the large  number of  customers  comprising  the
Company's  customer  base and their  dispersion  across  different  business and
geographic  areas.  The  Company  monitors  its  exposure  to credit  losses and
maintains  an allowance  for  anticipated  losses.  To reduce  credit risk,  the
Company performs credit checks on certain customers.

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 an  attributable  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.
Management has provided an allowance for obsolescence.

PROPERTY, MACHINERY AND EQUIPMENT

Property,   machinery  and  equipment  is  stated  at  cost,  less   accumulated
depreciation and  amortization.  Depreciation and amortization is computed using
the  straight-line  method over the estimated useful lives of the related assets
that range from 5 to 50 years.  Leasehold  improvements  are amortized using the
straight-line  method over the estimated useful life of the asset or the term of
the lease,  whichever is shorter.  Costs for normal repairs and  maintenance are
expensed to operations as incurred,  while renewals and major refurbishments are
capitalized.

Assessments  of whether  there has been a permanent  impairment  in the value of
property,  machinery  and equipment are  periodically  performed by  considering
factors such as expected future operating income, trends and prospects,  as well
as the effects of demand,  competition  and other economic  factors.  Management
believes no permanent impairment has occurred.

LAND USE RIGHTS

Land use rights are stated at cost, less accumulated amortization.  Amortization
is computed  using the  straight-line  method over the  estimated  useful  lives
ranging from 27 to 50 years. In accordance with SFAS No.142, "Goodwill and Other
Intangible   Assets,"  intangible  assets  with  finite  lives  are  subject  to
amortization,  and  impairment  reviews are  performed in  accordance  with SFAS
No.144,  "Accounting  for the  Impairment or Disposal of Long-Lived  Assets." No
event has occurred that would trigger an impairment  assessment of the Company's
intangible assets with finite lives.

ADVERTISING EXPENSES

Advertising expenses are expensed in the period when incurred.

INCOME TAXES

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting  for Income  Taxes".  Under this method,  deferred  income taxes are
recognized  for the estimated tax  consequences  in future years of  differences
between the tax bases of assets and liabilities  and their  financial  reporting

                                      F-9
<PAGE>

amounts  and each  year-end  based on  enacted  tax  laws  and  statutory  rates
applicable  to the  periods  in which the  differences  are  expected  to affect
taxable  income.  Valuation  allowances are  established to reduce  deferred tax
assets to the amount expected to be realized when, in management's  opinion,  it
is more likely than not that some portion of the deferred tax assets will not be
realized. The provision for income taxes represents current taxes payable net of
the change during the period in deferred tax 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.

FOREIGN CURRENCY TRANSLATION

The  functional  currency  of the  Company  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 RMB into United States dollars  ("US$") were at US
$1.00 = RMB 8.3 for each of the years ended December 25, 2004, 2003 and 2002. 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 share ("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.



                                      F-10
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

(a)  In December  2003,  the FASB issued  Interpretation  No. 46R ("FIN 46R"), a
     revision to FIN 46, "Consolidation of Variable Interest Entities".  FIN 46R
     clarifies some of the provisions of FIN46 and exempts certain entities from
     its  requirements.  FIN 46R is  effective  at the end of the first  interim
     period ending after March 15, 2004. Entities that have adopted FIN 46 prior
     to this effective date can continue to apply the provisions of FIN 46 until
     the  effective  date of Fin 46R.  The  adoption of FIN 46R did not have any
     effect on our consolidated financial statements.

(b)  In  November  2004,  the FASB  issued  Statement  of  Financial  Accounting
     Standards (SFAS) No. 151,  Inventory Costs,  which clarifies the accounting
     for abnormal amounts of idle facility expense, freight, handling costs, and
     wasted  material.  SFAS  No.  151 will be  effective  for  inventory  costs
     incurred  during  fiscal years  beginning  after June 15,  2005.  We do not
     believe  the  adoption  of SFAS No. 151 will have a material  impact on our
     financial statements.

(c)  In December  2004, the FASB issued SFAS No.  123(R),  Share-Based  Payment,
     which  establishes  standards for transactions in which an entity exchanges
     its equity  instruments  for goods or services.  This  standard  requires a
     public entity to measure the cost of employee services received in exchange
     for an award of equity  instruments  based on the grant-date  fair value of
     the award.  This  eliminates the exception to account for such awards using
     the intrinsic  method  previously  allowable under APB Opinion No. 25. SFAS
     No.  123(R)  will be  effective  for  interim or annual  reporting  periods
     beginning on or after June 15, 2005. We do not believe the adoption of SFAS
     No. 123(R) will not have a material impact on our financial statements.


RECLASSIFICATION FROM PRIOR YEAR AUDITED FINANCIAL STATEMENTS

Certain prior year comparative  figures have been reclassified to conform to the
current year presentation.


NOTE 4.   ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:

                                                   DECEMBER 25,     DECEMBER 25,
                                                       2004             2003
                                                   -----------      -----------

           Accounts receivable                     $     7,189      $     7,929
           Less: Allowance for doubtful accounts          (775)            (993)
                                                   -----------      -----------
                                                   $     6,414      $     6,936
                                                   ===========      ===========


NOTE 5.   DEPOSITS AND PREPAYMENTS

Deposits and prepayments consist of the following:

                                                   DECEMBER 25,     DECEMBER 25,
                                                       2004             2003
                                                   -----------      -----------

           Deposits for raw materials              $     2,291      $     1,508
           Advances to staff                                33               63
           Others                                          303               11
           Less: Allowance for deposits                   (107)            (300)
                                                   -----------      -----------
                                                   $     2,520      $     1,282
                                                   ===========      ===========

  Advances to staff are unsecured, non-interest bearing and repayable on demand.


                                      F-11
<PAGE>

NOTE 6.   INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
                                                               DECEMBER 25,     DECEMBER 25,
                                                                   2004             2003
                                                               -----------      -----------
<S>                                                            <C>              <C>
           Raw materials (including packing materials)         $     2,812      $     2,222
           Finished goods                                            1,725            1,123
                                                               -----------      -----------
                                                                     4,537            3,345
           Less: Provision for inventory obsolescence                 (547)            (582)
                                                               -----------      -----------
                                                               $     3,990      $     2,763
                                                               ===========      ===========
</TABLE>

NOTE 7.  PROPERTY, MACHINERY AND EQUIPMENT

Property, machinery and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                               DECEMBER 25,     DECEMBER 25,
                                                                   2004             2003
                                                               -----------      -----------
<S>                                                            <C>              <C>
           Buildings                                           $     9,415      $     9,551
           Machinery and equipment                                  11,940           12,818
                                                               -----------      -----------
                                                                    21,355           22,369
           Less: Accumulated depreciation and amortization          (5,257)          (4,898)
                                                               -----------      -----------
                                                               $    16,098      $    17,471
                                                               ===========      ===========
</TABLE>

Depreciation  and  amortization  expense was  approximately  $1,187,  $1,314 and
$1,141 for the years ended December 25, 2004, 2003 and 2002, respectively.


NOTE 8   LAND USE RIGHTS

Land use rights consisted of the following:

<TABLE>
<CAPTION>
                                                               DECEMBER 25,     DECEMBER 25,
                                                                   2004             2003
                                                               -----------      -----------
<S>                                                            <C>              <C>
           Land use rights                                     $     4,432      $     4,575
           Less: Accumulated amortization                             (610)            (577)
                                                               -----------      -----------
                                                               $     3,822      $     3,998
                                                               ===========      ===========
</TABLE>

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, 2004 and
2003, the land use rights consisted of three parcels of land located in Mainland
China with a net book value of  approximately  $3,822 and $3,998,  respectively,
held under land use rights of 27 to 50 years through 2025 to 2047.


                                      F-12
<PAGE>

Amortization  expense was  approximately $103, $112 and $110 for the years ended
December 25, 2004, 2003 and 2002, respectively.

NOTE 9.   SHORT-TERM BORROWINGS

Short-term borrowings consisted of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 25,   DECEMBER 25,
                                                                  2004           2003
                                                              -----------    -----------
<S>                                                           <C>            <C>
           Bank loans                                         $       --     $    2,518
           Bills payable                                              --            327
                                                              ----------     ----------
                                                              $       --     $    2,845
                                                              ==========     ==========
</TABLE>

Bank loans were secured by corporate  guarantees provided by a PRC joint venture
partner and a third party and bore interest at  prevailing  lending rates in the
PRC ranging from 6.01% to 6.435% per annum and were fully repaid during the year
ended December 25, 2004.

Bills payable are a form of bank borrowing with payment due within 180 days.


NOTE 10  OTHER PAYABLES AND ACCRUALS

Other payables and accruals consisted of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 25,   DECEMBER 25,
                                                                  2004           2003
                                                              -----------    -----------
<S>                                                           <C>            <C>
           Deposits from customers                            $      554     $      612
           Accruals for staff salaries, bonus and benefit            515            510
           Utilities and accrued expenses                            829            112
                                                              ----------     ----------
                                                              $    1,898     $    1,234
                                                              ==========     ==========
</TABLE>


NOTE 11.  TAXATION

The PRC  subsidiaries  within the Company 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 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, 2004, 2003 and 2002,  substantially  all of the
Company's  income was generated in the PRC, which is subject to PRC income taxes
at  rates  ranging  from  24% to a  statutory  rate  of  33%.  Two  of  the  PRC


                                      F-13
<PAGE>

subsidiaries  of the Company will be eligible to be exempt from income taxes for
a two-year period and then subject to a 50% reduction in income taxes,  starting
from their first profitable year. Several PRC subsidiaries  receive preferential
tax rates in regions in which they operate and are also  entitled to partial tax
refunds from those tax bureaus.

As of December 25, 2004, 2003 and 2002, there are not 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 Company's  effective  income tax
rate is as follows:

                                                 2004      2003      2002
                                                ------    ------    ------

           Statutory income tax                    33%       33%       33%
           Reduction for preferential tax rate     (9)       --        --
           Impact of effective tax holiday         --       (21)      (21)
           Various differences                     (2)        2         1
                                                ------    ------    ------
           Effective rate                          22%       14%       13%
                                                ======    ======    ======


NOTE 12.   COMMON STOCK

On September 4, 2003, the Company issued 3,300,000 shares of common stock for an
aggregate  purchase  amount of  $1,650,000  or $0.50 per share.  The shares were
issued pursuant to an exemption  provided by Section 4(2) of the Securities Act.
The purchasers  were also issued  warrants to purchase  1,650,000  shares of the
Company's  common  stock  which have a term of 5 years at an  exercise  price of
$0.99 per share. As of December 25, 2004, no warrants were exercised.

On October 7, 2003,  the Company  issued  850,000  shares of common stock for an
aggregate purchase amount of $425,000 or $0.50 per share. The shares were issued
pursuant to an  exemption  provided by Section 4(2) of the  Securities  Act. The
purchasers were also issued warrants to purchase 850,000 shares of the Company's
common  stock  which have a term of 5 years and an  exercise  price of $0.98 per
share. As of December 25, 2004, no warrants were exercised.

Transaction  costs  related to the private  placements  amounted to $298,000 and
have been presented as a reduction of the proceeds from the sale of shares.

No preferred stock has been authorized or issued.


                                      F-14
<PAGE>

NOTE 13.   COMMITMENTS

LEASE COMMITMENTS

The Company leases manufacturing and warehouse facilities under operating leases
which expire at various  dates  through  March 2031.  At December 25, 2004,  the
Company's future minimum lease payments under operating leases were as follows:

           YEARS ENDING DECEMBER 25,
           -------------------------
               2005                       $    123
               2006                            123
               2007                            123
               2008                            123
               2009                            123
               Thereafter                       47
                                        -----------
                     Total                $    662
                                        ===========

Total lease  expenses  were $187,  $46 and $74 for the years ended  December 25,
2004, 2003 and 2002, respectively.

ANNUAL FEES

Under the supplementary joint venture  agreements,  the Company has committed to
pay predetermined  annual fees of $108 to the Chinese joint venture partners for
each of the years in the period from  December 26, 1998 to 2049.  As of December
25, 2004, total commitments under these arrangements were as follows:

           Payable during the period:
             Within one year                                    $     108
             Over one year but not exceeding two years                108
             Over two year but not exceeding three years              108
             Over three year but not exceeding four years             108
             Over four year but not exceeding five years              108
             Over five years                                        4,234
                                                               ----------
               Total                                            $   4,774
                                                               ==========


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 New Dragon Asia Corp. and
related companies are summarized below:

                                      F-15
<PAGE>

<TABLE>
<CAPTION>
                                                                  2004      2003      2002
                                                                -------    ------    ------
<S>                                                             <C>        <C>       <C>
Sale of finished goods to:
  A joint venture partner, Shandong Longfeng Group Company      $     2    $   --    $  419
  Related parties                                                    33       113     1,334
                                                                -------    ------    ------
                                                                $    35    $  113    $1,753
                                                                =======    ======    ======

Sale of machinery to Shandong Longfeng Group Company            $    --    $  993    $   --
                                                                =======    ======    ======

Purchasing of raw materials from:
  A joint venture partner, Shandong Longfeng Group Company      $    --    $   --    $    8
  Related parties                                                   914     1,344     1,649
                                                                -------    ------    ------
                                                                $   914    $1,344    $1,657
                                                                =======    ======    ======

Pre-determined annual fee charged by joint venture partners:
  Shandong Longfeng Group Company                               $    72    $   78    $   78
  Shandong Longfeng Flour Company Limited                            36        36        36
                                                                -------    ------    ------
                                                                $   108    $  114    $  114
                                                                =======    ======    ======

Interest income from short-term advances to parent company      $    --    $   --    $  188
                                                                =======    ======    ======

Interest expenses paid to a joint venture partner:
  Shandong Longfeng Group Company                               $     3    $   17    $   18
                                                                =======    ======    ======

Rental expenses paid to related companies                       $   120    $   --    $   --
                                                                =======    ======    ======

Rental income from a joint venture partner:
  Shandong Longfeng Group Company                               $    64    $   64    $   64
                                                                =======    ======    ======
</TABLE>

A summary of related party balances is as follows:

                                                DECEMBER 25,   DECEMBER 25,
                                                    2004           2003
                                                -----------    -----------
Due to parent company                            $     303      $     196
                                                 ---------      ---------

Due to joint venture partners, consisting of:
  Shandong Longfeng Group Company                    1,027          1,034
  Shandong Longfeng Flour Company Limited             (917)           170
                                                 ---------      ---------
                                                 $     110      $   1,204
                                                 =========      =========

Due from related companies                       $   1,183      $     124
                                                 =========      =========

Due to related companies                         $     831      $   1,202
                                                 =========      =========

The amounts due to parent  company and joint  venture  partners  are  unsecured,
non-interest bearing and repayable upon demand.


                                      F-16
<PAGE>

NOTE 15.   DISPOSAL OF SUBSIDIARY

On December 20,  2004,  the Company  sold its 100%  shareholding  in Noble Point
Limited ("NP") which in turn owned a 90% equity interest in New Dragon Asia Food
(Dalian) Company limited  ("NDAFD"),  to its parent company and assumed its loan
due to the parent company, at a consideration of US$20,000 which approximates to
the net asset value of NP and NDAFD in  aggregate  after the  assignment  of the
loan. NP had no business other than the investment holding in NDAFD whilst NDAFD
had ceased business in December 2003.


NOTE 16.   SEGMENT INFORMATION

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

Net Sales
                                        2004        2003       2002
                                      -------     -------     -------
           Instant noodles            $12,909     $11,702     $10,847
           Flour                       26,312      19,070      22,857
                                      -------     -------     -------
                                      $39,221     $30,773     $33,704
                                      =======     =======     =======

Income from Operations
                                        2004        2003        2002
                                      -------     -------     -------
           Instant noodles            $   607     $   296     $ 1,621
           Flour                        3,938       1,897       2,725
                                      -------     -------     -------
                                      $ 4,545     $ 2,193     $ 4,346
                                      =======     =======     =======
Interest Income
                                         2004        2003        2002
                                      -------     -------     -------
           Instant noodles            $     2     $     2     $   192
           Flour                            1           2           2
                                      -------     -------     -------
                                      $     3     $     4     $   194
                                      =======     =======     =======


                                      F-17
<PAGE>

Interest Expenses
                                        2004        2003        2002
                                      -------     -------     -------
           Instant noodles            $     6     $    22     $    18
           Flour                           66         227         247
                                      -------     -------     -------
                                      $    72     $   249     $   265
                                      =======     =======     =======

Depreciation and Amortization
                                        2004        2003        2002
                                      -------     -------     -------
           Instant noodles            $   587     $   867     $   703
           Flour                          600         557         548
                                      -------     -------     -------
                                      $ 1,187     $ 1,424     $ 1,251
                                      =======     =======     =======

Identifiable Long-term Assets
                                        2004        2003
                                      -------     -------
           Instant noodles            $12,031     $14,001
           Flour                        7,889       7,468
                                      -------     -------
                                      $19,920     $21,469
                                      =======     =======


NOTE 17.   MAJOR CUSTOMERS

No single customer  accounted for more than 5%, 5% and 6% of sales for the years
ended December 25, 2004, 2003 and 2002, respectively.


NOTE 18.   RETIREMENT PLAN

As stipulated by the regulations of the PRC government, companies of the Company
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 Company 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,  2004,  2003 and  2002,  contributions  made by the  Company  were
approximately $122, $151 and $97, respectively.

NOTE 19.   OTHER INCOME

Other income consists  primarily of VAT tax credits of  approximately  1478, 699
and 0 for the years ended December 25, 2004, 2003 and 2002, respectively.


                                      F-18