**UNITED
        STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**




**Washington,
      D.C. 20549**





**FORM
      10-Q**





x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      quarterly period ended: June 25, 2005





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





Commission
      File Number:




**NEW
      DRAGON ASIA CORP.**


(Exact
      name of Registrant as specified in its charter)





FLORIDA
            88-0404114(State
                or other jurisdiction of Number)
            (IRS
                Employer Identification incorporation or
                organization)








Suite
                2808,International Chamber of Commerce TowerFuhua
                Three Road,Shenzhen, PRC
            518048(Address
                of Principal Executive Offices)
            (Zip
                Code)





(86
      755) 8831
      2115


(Registrant's
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports) and (2) has been subject to filing requirements for the
      past 90 days. Yes xNo o




Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-12 of the Exchange Act): Yes oNo x





The
      number of shares of Common Stock outstanding as of July 31, 2005 was 45,061,242.








**NEW
      DRAGON ASIA CORP.**


****


**FORM
      10-Q**


****


**FOR
      THE QUARTERLY PERIOD ENDED JUNE 25, 2005**


****


**TABLE
      OF CONTENTS**





Page**PART
                I:**
            **FINANCIAL
                INFORMATION**ITEM
                1.
            Consolidated
                Financial Statements:Consolidated
                Balance Sheets as ofJune
                25, 2005 (unaudited) and December 25, 2004
            
            3Consolidated
                Statements of Income (unaudited) for the three months endedJune
                25, 2005 and 2004 and the six months ended June 25, 2005 and
                2004
            
            4Consolidated
                Statements of Cash Flows (unaudited) for thesix
                months ended June 25, 2005 and 2004
            
            5Notes
                to Consolidated Financial Statements (unaudited)
            
            6ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            11ITEM
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            22ITEM
                4.
            Controls
                and Procedures
            
            23**PART
                II:**
            **OTHER
                INFORMATION**ITEM
                1.
            Legal
                Proceedings
            
            24ITEM
                2.
            Changes
                in Securities and Use of Proceeds
            
            24ITEM
                3.
            Defaults
                Upon Senior Securities
            
            24ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            24ITEM
                5.
            Other
                Information
            
            24ITEM
                6.
            Exhibits
                and Reports on Form 8-K
            
            25**SIGNATURES**
            
            26**EXHIBITS**








-2-


**PART
      I: FINANCIAL INFORMATION**





**Item
      1. Consolidated Financial Statements.**





**NEW
      DRAGON ASIA CORP. AND SUBSIDIARIES**




**CONSOLIDATED
      BALANCE SHEETS**


**(Amounts
      in thousands, except share data)**


**June
                25,**
            
            **December
                25,****2005**
            
            **2004**(Unaudited)**ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            1,053
            
            $
            219Accounts
                receivable, net
            
            
            6,232
            
            
            6,414Deposits
                and prepayments, net
            
            
            3,527
            
            
            2,520Inventories,
                net
            
            
            5,478
            
            
            3,990Due
                from related companies
            
            
            822
            
            
            1,183Total
                current assets
            
            
            17,112
            
            
            14,326Property,
                machinery and equipment, net
            
            
            15,575
            
            
            16,098Land
                use rights, net
            
            
            3,766
            
            
            3,822Total
                assets
            
            $
            36,453
            
            $
            34,246**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            2,557
            
            $
            2,696Other
                payables and accruals
            
            
            2,368
            
            
            1,898Taxes
                payable
            
            
            1,656
            
            
            1,491Due
                to related companies
            
            
            152
            
            
            831Total
                current liabilities
            
            
            6,733
            
            
            6,916Due
                to parent company
            
            
            1,187
            
            
            303Due
                to joint venture partners
            
            
            88
            
            
            110Total
                liabilities
            
            
            8,008
            
            
            7,329Minority
                interests
            
            
            50
            
            
            82Stockholders'
                equity:Preferred
                Stock, par value $0.0001; 5,000,000 shares authorized; no shares
                issued
                and outstanding
            
            
            --
            
            
            --Common
                stock, par value $0.0001; 102,000,000 shares authorized; 45,061,242
                shares
                of Class A CommonStock
                issued and outstanding at June 25, 2005 and December 25, 2004; no
                shares
                of Class B Common Stock issued and outstanding;
            
            
            4
            
            
            4Additional
                paid-in-capital
            
            
            9,909
            
            
            9,909Retained
                earnings
            
            
            18,482
            
            
            16,922Total
                stockholders’ equity
            
            
            28,395
            
            
            26,835Total
                liabilities and stockholders' equity
            
            $
            36,453
            
            $
            34,246


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






-3-


**NEW
      DRAGON ASIA CORP. AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF INCOME**


**(Amounts
      in thousands, except per share data; unaudited)**


**Three
                months ended**
              **June
                25,**
            
            **Six
                months ended**
              **June
                25,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Revenue
            
            $
            8,993
            
            $
            8,547
            
            $
            17,275
            
            $
            15,945Cost
                of goods sold
            
            
            (7,584
            )
            
            (6,986
            )
            
            (14,374
            )
            
            13,051Gross
                profit
            
            
            1,409
            
            
            1,561
            
            
            2,901
            
            
            2,894Selling
                and distribution expenses
            
            
            (561
            )
            
            (235
            )
            
            (682
            )
            
            (624
            )General
                and administrative expenses
            
            
            (405
            )
            
            (464
            )
            
            (978
            )
            
            (1,125
            )Income
                from operations
            
            
            443
            
            
            862
            
            
            1,241
            
            
            1,145Other
                income (expenses):Interest
                expense
            
            
            (1
            )
            
            (33
            )
            
            (1
            )
            
            (72
            )Interest
                income
            
            
            --
            
            
            1
            
            
            --
            
            
            13Other
                income
            
            
            796
            
            
            113
            
            
            798
            
            
            441Income
                before taxes
            
            
            1,238
            
            
            943
            
            
            2,038
            
            
            1,527Provision
                for income taxes
            
            
            (258
            )
            
            (412
            )
            
            (511
            )
            
            (658
            )Income
                before minority interests
            
            
            980
            
            
            531
            
            
            1,527
            
            
            869Minority
                interests
            
            
            (8
            )
            
            8
            
            
            33
            
            
            8Net
                income
            
            $
            972
            
            $
            539
            
            $
            1,560
            
            $
            877Basic
                and diluted earnings percommon
                share
            
            $
            0.02
            
            $
            0.01
            
            $
            0.03
            
            $
            0.02Weighted
                average commonshares
                outstanding
            
            
            45,061
            
            
            45,061
            
            
            45,061
            
            
            45,061


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





-4-


**NEW
      DRAGON ASIA CORP. AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Amounts
      in thousands, unaudited)**


**Six
                months ended**
              **June
                25,****2005**
            
            **2004****Cash
                flows from operating activities:**Net
                income
            
            $
            1,560
            
            $
            877Adjustments
                to reconcile net income to net cash provided by
              operating
                activities:Minority
                interest
            
            
            (32
            )
            
            (8
            )Depreciation
                and amortization
            
            
            582
            
            
            614Loss/(Gain)
                on sale of machinery and equipment
            
            
            3
            
            
            (15
            )Allowance
                for doubtful accounts
            
            
            49
            
            
            (57
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            133
            
            
            767Deposits
                and prepayments
            
            
            (1,007
            )
            
            (330
            )Inventories
            
            
            (1,488
            )
            
            (106
            )Accounts
                payable
            
            
            (139
            )
            
            (370
            )Other
                payables and accruals
            
            
            470
            
            
            1,150Decrease
                (increase) in amounts due from related companies
            
            
            361
            
            
            (973
            )(Decrease)
                  increase in amounts due to related companies
            
            
            (679
            )
            
            --Taxes
                payable
            
            
            165
            
            
            382Net
                cash provided by (used in)operating activities
            
            
            (22
            )
            
            1,931**Cash
                flows from investing activities:**Proceeds
                from disposal of property, machineryand equipment
            
            
            2
            
            
            2,266Purchases
                of property, machinery and equipment
            
            
            (8
            )
            
            (2,151
            )Net
                cash provided by (used in) investing activities
            
            
            (6
            )
            
            115**Cash
                flows from financing activities:**Proceeds
                from short-term borrowings
            
            
            --
            
            
            602Repayments
                of short-term borrowings
            
            
            --
            
            
            (2,036
            )Due
                to parent company
            
            
            884
            
            
            (876
            )Due
                to joint venture partners
            
            
            (22
            )
            
            (1,201
            )Capital
                contribution fromminority
                interest
            
            
            --
            
            
            124Net
                cashprovided
                by (used in) financing activities
            
            
            862
            
            
            (3,387
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            834
            
            
            (1,341
            )Cash
                and cash equivalents at the beginning of the period
            
            
            219
            
            
            1,783Cash
                and cash equivalents at the end of the period
            
            $
            1,053
            
            $
            442


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








-5-


**NEW
      DRAGON ASIA CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Amounted
      in thousands, except share data; unaudited)**





**NOTE
      1. ORGANIZATION AND NATURE OF OPERATIONS**





New
      Dragon Asia Corp., 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 and soybean-derived products,
      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.





**NOTE
      2. BASIS OF PRESENTATION**





The
      accompanying consolidated financial statements include the accounts of New
      Dragon Asia Corp. and its subsidiaries. All significant intra-group balances
      and
      transactions have been eliminated on consolidation. These financial statements
      are unaudited. However, in the opinion of management, the consolidated financial
      statements include all adjustments, consisting of only normal, recurring
      adjustments, necessary for their fair presentation. Interim results are not
      necessarily indicative of results expected for a full year. The accompanying
      unaudited consolidated financial statements have been prepared in accordance
      with the instructions for Form 10-Q and, therefore, do not include all
      information and footnotes necessary for a complete presentation of the
      operations, financial position and cash flows of the Company in conformity
      with
      generally accepted accounting principles. These statements should be read in
      conjunction with the Company’s Annual Report on Form 10-K for the year ended
      December 25, 2004.




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 amount
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the dates of the financial statements and the reported amounts of revenues
      and
      expenses during the reporting periods. Although management believes these
      estimates and assumptions are adequate, actual results could differ from the
      estimates and assumptions used. 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 in the PRC. Certain accounting
      principles stipulated under U.S. GAAP are not applicable in the
      PRC.




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




-6-


On
      July
      21, 2005, the People’s Bank of China announced an upward adjustment on Renminbi
      exchange rate against U.S. dollars of 2%. The
      exchange rate of the Renminbi will be valued against a number of currencies,
      rather than just **** exclusively to
      the United States dollar. The
      Company considers such adjustment as having minimal impact on its operations
      and
      financial results.





**NOTE
      3. ACCOUNTS RECEIVABLE**





Accounts
      receivable consisted of the following:




**June
                25,**
              **2005**
            
            **December
                25, 2004****(Unaudited)**Accounts
                receivable
            
            $
            7,056
            
            $
            7,189Less:
                Allowance for doubtful accounts
            
            
            (824
            )
            
            (775
            )$
            6,232
            
            $
            6,414





**NOTE
      4. INVENTORIES**





Inventories
      consisted of the following:




**June
                25,**
              **2005**
            
            **December
                25, 2004****(Unaudited)**Raw
                materials (including packing materials)
            
            $
            4,798
            
            $
            2,812Finished
                goods
            
            
            1,216
            
            
            1,7256,014
            
            
            4,537Less:
                Provision for inventory obsolescence
            
            
            (536
            )
            
            (547
            )$
            5,478
            
            $
            3,990





**NOTE
      5. PROPERTY, MACHINERY AND EQUIPMENT**





Property,
      machinery and equipment consisted of following:





**June
                25,**
              **2005**
            
            **December
                25, 2004****(Unaudited)**Buildings
            
            $
            9,259
            
            $
            9,415Machinery
                and equipment
            
            
            12,088
            
            
            11,94021,347
            
            
            21,355Less:
                Accumulated depreciation and amortization
            
            
            (5,772
            )
            
            (5,257
            )$
            15,575
            
            $
            16,098








-7-


**NOTE
      6. LAND USE RIGHTS**





Land
      use
      rights consisted of the following:





**June
                25,**
              **2005**
            
            **December
                25,**
              **2004****(Unaudited)**Land
                use rights
            
            $
            4,432
            
            $
            4,432Less:
                Accumulated amortization
            
            
            (666
            )
            
            (610
            )$
            3,766
            
            $
            3,822


**NOTE
      7.** **OTHER PAYABLES AND ACCRUALS**




Other
        payables and accruals consisted of the following:


**June
                25**
              **2005**
            
            **December
                25,**
              **2004****(Unaudited)**Deposits
                from customers
            
            $
            301
            
            $
            554Accruals
                for staff salaries, bonus and benefits
            
            
            338
            
            
            515Utilities
                and accrued expenses
            
            
            1,729
            
            
            829$
            2,368
            
            $
            1,898





**NOTE
      8. 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.





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 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 operated and are also entitled
      to partial tax refunds from those tax bureaus.





As
      of
      June 25, 2005 and December 25, 2004, there were no material deferred tax assets
      or deferred tax liabilities.





**NOTE
      9. COMMON STOCK**





Currently
      the Company is authorized to issue 107,000,000 shares of capital stock, of
      which
      100,000,000 shares are Class A Common Stock, 2,000,000 shares are Class B Common
      Stock and 5,000,000 shares are Preferred Stock. As of June 25, 2005, there
      were
      45,061,242 Class A common shares issued and outstanding. No shares of Class
      B
      Common Stock or Preferred Stock were issued and outstanding.








-8-


**NOTE
      10. EARNINGS PER SHARE**




The
      Company follows Statement of Financial Accounting Standards (“SFAS”) No.128,
“Earnings Per Share”, which establishes standards for the computation,
      presentation and disclosure requirements for basic and diluted earnings per
      share for entities with publicly held common shares and potential common stocks.
      Basic earnings per share are computed by dividing net income by the weighted
      average number of common shares outstanding. In computing diluted earnings
      per
      share, the weighted average number of shares outstanding is adjusted to reflect
      the effect of potentially dilutive securities, such as stock
      options.




**NOTE
      11. 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 Company and related companies are
      summarized below:





**Three
                months ended**
              **June
                25**
            
            **Six
                months ended**
              **June
                25****2005**
            
            **2004**
            
            **2005**
            
            **2004****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)****Pre-determined
                annual fee charged by joint venture partners:**Shandong
                LongfengGroup
                Company
            
            $
            27
            
            $
            27
            
            $
            54
            
            $
            54**Rental
                income from a joint venture partner**Shandong
                LongfengGroup
                Company
            
            $
            16
            
            $
            16
            
            $
            32
            
            $
            32





The
      amounts due from and due to related companies are unsecured, non-interest
      bearing and repayable upon demand. Balances are derived from normal commercial
      transactions.





**NOTE
      12. STOCK - BASED COMPENSATION**




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123R, “Share-Based Payment *”* ,
      which
      established 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.




In
      November 2004, options to purchase 400,000 Class A Common Stock were issued
      to
      an officer at an exercise price of $1.00 per share with a term of 10 years.
      The
      market price of the Class A Common Stock as of the grant date was $0.64. As
      of
      June 25, 2005, no options were exercised.




-9-


On
      June
      22, 2005, options to purchase 600,000 Class A Common Stock were issued to the
      officer at an exercise price of $1.20 per share with a term of 10 years. The
      market price of the Class A Common Stock as of the grant date was $1.00. As
      of
      June 25, 2005, no options were exercised.




The
      Company used the Black-Scholes option-pricing model to estimate the fair value
      of the options with the following assumptions:





**As
                of the grant date****June
                22,**
            ****
            **November
                2,**
            ********
            ****
            **2005**
            ****
            **2004**Life
                (years)
            
            
            10
            
            
            10Annual
                dividend per share
            
            
            None
            
            
            NoneRisk-
                free interest rate
            
            
            3
            %
            
            3
            %Expected
                volatility
            
            
            50
            %
            
            50
            %





Accordingly,
      the Company recorded compensation expenses based on the fair value of the
      options granted in November 2, 2004 and June 22, 2005 ,
      respectively.




**NOTE
      13. SUBSEQUENT EVENTS**





On
      July
      11, 2005, the Company issued shares of Series A 7% Convertible Preferred Stock
      initially convertible into an aggregate of 6,315,789 shares of Class A Common
      Stock at a conversion price of $0.95, raising $6.0 million in gross proceeds.
      Six-year warrants to purchase an aggregate of 3,157,895 shares of Class A Common
      Stock at an exercise price of $1.04 were issued to the investors. As part of
      the
      compensation to the placement agent, five-year warrants to purchase an aggregate
      of 378,947 shares of Class A Common Stock at an exercise price of $1.04 were
      also issued.




Under
      SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics
      of Both Liabilities and Equity”, the Preferred Stock will be recorded by the
      Company as a liability since it is an unconditional obligation that must be
      either redeemed for cash or settled by issuing shares of Common
      Stock.




On
      July
      21, 2005, the People’s Bank of China announced an upward adjustment on Renminbi
      exchange rate against U.S. dollars of 2%. The
      exchange rate of the Renminbi will be valued against a number of currencies,
      rather than just **** exclusively to
      the United States dollar. The
      Company considers such adjustment as having minimal impact on its operations
      and
      financial results.





**NOTE
      14. RECLASSIFICATIONS**





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





-10-


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.**





In
      addition to historical information, the matters discussed in this Form 10-Q
      contain forward-looking statements that involve risks or uncertainties.
      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 filed 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. Readers should carefully review
      the
      risks described in other documents we filed from time to time with the
      Securities and Exchange Commission, including the Annual Report on Form 10-K
      for
      the fiscal year ended December 25, 2004, the Quarterly Reports on Form 10-Q
      filed by the Company and Current Reports on Form 8-K (including any amendments
      to such reports). References in this filing to the “Company”, “Group”, “we”,
“us”, and “our” refer to New Dragon Asia Corp. and its subsidiaries.




**Critical
      Accounting Policies**




The
      methods, estimates and judgments we use in applying our most critical accounting
      policies have a significant impact on the results we report in our financial
      statements. The U.S. Securities and Exchange Commission, or SEC, has defined
      critical accounting policies as those that are most important to the portrayal
      of our financial condition and results of operations and require us to make
      our
      most difficult and subjective judgments, often as a result of the need to make
      estimates of matters that are inherently uncertain. Based on this definition,
      our critical policies include revenue recognition, allowance for doubtful
      accounts, sales returns and allowances, asset impairment, and inventory
      valuation including product obsolescence. We believe that we consistently apply
      judgments and estimates and such consistent application results in financial
      statements and accompanying notes that fairly represent all periods presented.
      However, any factual errors or errors in these judgments and estimates may
      have
      a material impact on our statement of operations and financial
      conditions.





Management
      believes that the following reflect the more critical accounting policies that
      currently affect our financial condition and results of operations.








-11-


***Contractual
      Joint Ventures*** -
      A
      contractual joint venture is an entity established between us and another joint
      venture partner, with the rights and obligations of each party governed by
      a
      contract. If we own more than 50% of the joint venture and are 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*** - We
      recognize sales in accordance with Securities and Exchange Commission (SEC)
      Staff Accounting Bulletin (“SAB”) 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
      our 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 us on purchases (“input VAT”).





***Inventories*** -
      Inventories are started 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
      November 2004, the FASB issued Statement of Financial Accounting Standard (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.





**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 and
      soybean-derived products, 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 200+ key distributors and 16
      regional offices in 27 Chinese provinces. We have five manufacturing plants
      in
      the PRC with an aggregate annual production capacity of approximately 110,000
      tons of flour and approximately 1.1 billion packets of instant
      noodles.





**Operation**





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.





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.





-12-


We
      believe that we have 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 manufacturing equipment is imported from Switzerland, Japan and
      Korea. We also use strict quality control systems, resulting in what we believe
      to be a favorable customer perception of the “Long Feng” brand.





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.





We
      believe our distribution system is the key to our continued success in
      developing “Long Feng” as one of the leading domestic brands in China. We have
      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.





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 very strong in this sector. In addition, we
      sell to supermarkets located in urban areas.





In
      addition to domestic sales, we export noodles to other countries such as Korea,
      Australia, Malaysia, Indonesia, etc. During fiscal 2004 and the first six months
      of fiscal 2005, export sales accounted for approximately 5% and 8% respectively,
      of our instant noodle sales.





We
      also
      receive orders for flour from certain KFC Corporation locations in China and
      KFC’s intermediary suppliers. 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 our commitment to international
      standards.





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 the “Master Kang” brand manufactured by Tingyi (Cayman Island)
      Holdings Corporation and the “President” brand manufactured by Uni-President
      Group, both based in Taiwan. Both are focused predominately in the more
      developed and competitive urban markets.





**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







-13-


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**





***Soy
      Bean Plant Lease***





On
      April
      27, 2005, we entered into a 10-year lease agreement for plant and machinery
      utilized for the production for soybean-derived products from a state-owned
      enterprise in Shandong. We commenced our soybean business on July 1, 2005.





**Results
      of Operations**





***Revenue***





Revenue
      for the six months ended June 25, 2005 was $17,275,000, representing an increase
      of $1,330,000, or 8.3%, from $15,945,000 for the six months ended June 25,
      2004.
      Revenue for the quarter ended June 25, 2005 was $8,993,000, representing an
      increase of $446,000, or 5.2%, from $8,547,000 for the quarter ended June 25,
      2004. The increase in both periods was primarily due to the growth in market
      demand for flour.





***Gross
      Profit***





As
      a
      percentage of revenue, gross profit decreased to 16.8% in the six months ended
      June 25, 2005 from 18.1% in the corresponding period in 2004. Gross
      profit decreased to 15.7% in the second quarter of 2005 from 18.3% in
      the
      corresponding period in 2004 as a result of an increase in the price of packing
      materials.





***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.





Selling
      and distribution expenses were $682,000 for the six months ended June 25, 2005,
      representing an increase of $58,000 or 9.3% from $624,000 for the corresponding
      period of 2004. Such expenses were $561,000 for the quarter ended June 25,
      2005,
      representing an increase of $326,000 from $235,000 for the corresponding quarter
      of 2004. The increase in both periods was primarily due to an increase in
      promotional expenses in several key city markets.





As
      a
      percentage of revenue, selling and distribution expenses remained at 3.9% in
      the
      six months ended June 25, 2005 and the corresponding period in 2004. Such
      expenses increased to 6.2% in the first quarter of 2005 from 2.7% in the
      corresponding period in 2004 as a result of an increase in promotional expenses
      in several key city markets, which did not yet impact revenues.






-14-


***General
      and Administrative Expenses***





General
      and administrative expenses decreased $147,000 or 13.1%, to $978,000 for the
      six
      months ended June 25, 2005 as compared to $1,125,000 for the six months ended
      June 25, 2004. Such expenses decreased $59,000, or 12.7%, to $405,000 for the
      quarter ended June 25, 2005 as compared to $464,000 for the quarter ended June
      25, 2004. The decrease in both periods was primarily the result of cost controls
      implemented in early 2004.





***Other
      income (expenses)***





Other
      income increased $357,000 to $798,000 for the six months ended June 25, 2005
      as
      compared to $441,000 for the six months ended June 25, 2004. Such income
      increased $683,000 to $796,000 for the quarter ended June 25, 2005 as compared
      to $113,000 for the quarter ended June 25, 2004. This was primarily due to
      the
      tax refund.





***Net
      Income***





Net
      income increased $683,000, or 77.9% to $1,560,000 for the six months ended
      July
      25, 2005, as compared to $877,000 for six months ended July 25, 2004. Such
      net
      income increased $449,000, or 83.3% to $988,000 for the quarter ended June
      25,
      2005 as compared to $539,000 for the quarter ended June 25, 2004. Such increase
      in both periods was primarily due to the revenue growth and the earnings
      contribution of the new plants.





As
      a
      percentage of revenue, net income increased to 9.0% for the six months ended
      June 25, 2005, as compared to 5.5% for the six months ended June 25, 2004.
      Such
      net income increased to 11.0% for the quarter ended June 25, 2005 as compared
      to
      6.3% for the quarter ended June 25, 2004. The increase was primarily due to
      the
      increase in revenue.





**Liquidity
      and Capital Resources**





Our
      primary liquidity needs are to purchase inventories and fund accounts receivable
      and capital expenditures. We have financed our working capital requirements
      through a combination of internally generated cash and advances from related
      companies.





Our
      working capital increased $2,969,000 to $10,379,000 at June 25, 2005 as compared
      to $7,410,000 at December 25, 2004. The increase was primarily due to the growth
      and profitability of the business and improved collections of receivables during
      the six months ended June 25, 2005.





Cash
      and
      cash equivalents were $1,053,000 as of June 25, 2005, an increase of $834,000
      from December 25, 2004, such increase was mainly due to the increase in revenue.





Net
      cash used in operating activities for the six months ended June
      25,
      2005 was $22,000, which was due to the changes in operating assets and
      liabilities. Net cash provided by financing activities of $862,000 in the six
      months ended June 25, 2005, which was mainly due to the increase in the payables
      to our parent company.






-15-


In
      July
      2005, we completed a private placement of our securities pursuant to which
      we
      received net proceeds of approximately $5,486,500 after payment of a commission
      to the placement agent and other offering expenses.





**Contractual
      Obligations**





As
      of
      June 25, 2005, we had operating leases for manufacturing and warehouse
      facilities expiring at various dates through March 2031. As of June 25, 2005,
      we
      had no significant capital leases. Future minimum rental commitments under
      operating leases are as follows:





**Payment
                due by period****Less
                than**
              **1
                year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than 5 years**
            
            **Total**Operating
                lease obligations
            
            
            123,000
            
            
            369,000
            
            
            123,000
            
            
            47,000
            
            
            662,000





**Off-Balance
      Sheet Arrangements**





We
      do not
      have any special purpose entities or off-balance sheet financing
      arrangements.





**Recent
      Accounting Pronouncements**





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 154, “ Accounting
      Changes and Error Corrections ”.
      SFAS
      No. 154 changes the requirements for the accounting for and reporting
      of a
      change in accounting principle. In addition, it carries forward without change
      the guidance contained in APB Opinion No. 20 for reporting the correction of
      an
      error in previously issued financial statements and a change in accounting
      estimate. SFAS No. 154 requires retrospective application to prior periods’
      financial statements of changes in accounting principle in most circumstances.
      The provisions of SFAS 1542 are effective in fiscal years beginning after
      December 15, 2005. The Company plans to prospectively adopt SFAS No. 154
      at
      the beginning of fiscal 2006.





In
      December 2004, the FASB issued SFAS No. 153 “ Exchanges of Non-monetary Assets -
      an amendment of APB Opinion No. 29”. SFAS No. 153 replaces the exception from
      fair value measurement in APB Opinion No. 29 for non-monetary exchanges of
      similar productive assets with a general exception from fair value measurement
      for exchanges of non-monetary assets that do not have commercial substance.
      A
      non-monetary exchange has commercial substance if the future cash flows of
      the
      entity are expected to change significantly as a result of the exchange. SFAS
      No. 153 is effective for all interim periods beginning after June 15, 2005.
      We
      do not believe the adoption of SFAS No. 153 will have a material impact on
      our
      financial statements.





On
      December 16, 2004, the FASB issued SFAS No. 123R, “Share-Based
      Payment”, which replaces SFAS No. 123, “Accounting for Stock-Based
      Compensation” and supercedes APB Opinion No. 25, “Accounting for Stock
      Issued to Employees.” SFAS No. 123R requires all share-based payments to
      employees, including grants of employee stock options, to be recognized in
      the
      financial statements based on the grant date fair va lue
      of
      the award. SFAS No. 123R was to be effective for interim or annual reporting
      periods beginning on or after June 15, 2005, but in April 2005 the SEC issued
      a
      rule that will permit most registrants to implement SFAS No. 123R at the
      beginning of their next fiscal year, instead of the next reporting period as
      required by SFAS No. 123R. The pro forma disclosures previously permitted under
      SFAS No. 123 no






-16-


longer
      will be an alternative to financial statement recognition. Under SFAS No. 123R,
      we must determine the appropriate fair value model to be used for valuing
      share-based payments, the amortization method for compensation cost and the
      transition method to be used at date of adoption. The transition methods include
      prospective and retroactive adoption options. Under the retroactive options,
      prior periods may be restated either as of the beginning of the year of adoption
      or for all periods presented. The prospective method requires that compensation
      expense be recorded for all unvested stock options and restricted stock at
      the
      beginning of the first quarter of adoption of SFAS No. 123R, while the
      retroactive methods would record compensation expense for all unvested stock
      options and restricted stock beginning with the first period restated. We have
      adopted the requirements of SFAS No. 123 for the fiscal year beginning on
      January 1, 2005, and we expect that the adoption of SFAS No. 123R will have
      no
      material impact on our financial statements.





In
      November 2004, the FASB issued 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
      September 2004, the Emerging Issues Task Force (“EITF”) Issue
      No. 04-08, “The Effect of Contingently Convertible Debt on Diluted Earnings
      per Share.” EITF Issue No. 04-08 was issued stating that contingently
      convertible debt should be included in diluted earnings per share computations
      regardless of whether the market price trigger has been met. EITF Issue No.
      04-08 is effective for reporting periods ending after December 15, 2004. The
      adopted EITF 02-14 will have no material impact on our financial statements.





**RISKS
      RELATED TO OUR BUSINESS**





In
      addition to the other information in this report, the following factors should
      be considered carefully in evaluating our business and prospects. THE FOLLOWING
      MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
      FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL
      OR
      OTHERWISE. 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:





***Our
      business may experience adverse effects from competition in the noodle and
      flour
      product markets.***





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





Ÿ
            establishing
                favorable brand recognition;


Ÿ
            developing
                products sought by consumers;


Ÿ
            implementing
                appropriate pricing;


Ÿ
            providing
                strong marketing support; and


Ÿ
            obtaining
                access to retain outlets and sufficient shelf
                space.






-17-


Many
      of
      our competitors are larger and have greater financial resources, including
      our
      primary competitors, the manufactures of each of the brand names “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 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
      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.





-18-


***We
      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 our
      corporate and brand image.





***We
      have limited business insurance coverage.***





The
      insurance industry in China is still in an 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 maintain 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 us
      that
      we 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.




-19-


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






-20-


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, 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.***




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.




-21-


***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.





**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk.**





We
      are
      exposed to changes in financial market conditions in the normal course of
      business due to our 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 U.S. dollar. Exchange rate fluctuations may adversely affect the value,
      in
      U.S. dollar terms, of our net assets and income derived from its operations
      in
      the PRC.





On
      July
      21, 2005, the People’s Bank of China announced an upward adjustment on Renminbi
      exchange rate against U.S. dollars of 2%. The
      exchange rate of the Renminbi will be valued against a number of currencies,
      rather than just **** exclusively to
      the United States dollar. We
      consider such adjustment as having minimal impact on its operations and
      financial results.





**Interest
      Rate Risk**





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





-22-


**Item
      4. Controls and Procedures.**





**Evaluation
      of Disclosure Controls and Procedures**





As
      of
      June 25, 2005, under the supervision and with the participation of management,
      including our Chief Executive Officer and Chief Financial Officer, we have
      evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures pursuant to Rule 13a-15(b) promulgated under the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon
      that evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that, as of June 25, 2005, the disclosure controls and procedures
      were
      effective in ensuring that material information relating to the Company
      (including its consolidated subsidiaries) required to be disclosed by us in
      the
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms.





**Change
      in Internal Controls**





There
      were no significant changes in our internal controls or in the other factors
      that could significantly affect our internal controls over financial reporting
      during the three months ended June 25, 2005.





**Other
      Information**





In
      August
      2004, we appointed a consulting firm to assist the management team to strengthen
      and to document our 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.





-23-


**PART
      II: OTHER INFORMATION**








**Item
      1. Legal Proceedings.**





None.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





On
      July
      11, 2005, we issued shares of Series A 7% Convertible Preferred Stock initially
      convertible into an aggregate of 6,315,789 shares of Class A Common Stock at
      a
      conversion price of $0.95, raising $6.0 million in gross proceeds. Six-year
      warrants to purchase an aggregate of 3,157,895 shares of Class A Common Stock
      at
      an exercise price of $1.04 were issued to the investors. As part of the
      compensation to the placement agent, five-year warrants to purchase an aggregate
      of 378,947 shares of Class A Common Stock at an exercise price of $1.04 were
      also issued. In addition to the securities issued, a fee of $360,000 was paid
      to
      the placement agent. The proceeds were used to acquire a soybean processing
      factory and will continue to be used for general working capital purposes and
      potential future acquisitions.





**Item
      3. Defaults Upon Senior Securities.**





None.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





On
      May 3,
      2005, we held our Annual Meeting of Stockholders in New York. At the meeting,
      seven directors were elected based on the following votes:




Name
            
            For
            
            Against
            
            WithheldHeng
                Jing LU
            
            
            44,084,857
            
            
            0
            
            
            67,700Li
                Xia WANG
            
            
            44,088,257
            
            
            0
            
            
            64,300Ling
                WANG
            
            
            44,086,257
            
            
            0
            
            
            66,300De
                Lin YANG
            
            
            44,084,857
            
            
            0
            
            
            67,700Zhi
                Yong JIANG
            
            
            44,088,857
            
            
            0
            
            
            63,700Qi
                XUE
            
            
            44,088,857
            
            
            0
            
            
            63,700Feng
                Ju CHEN
            
            
            44,080,057
            
            
            0
            
            
            72,500





Furthermore,
      the selection of Grobstein Horwath & Company LLP as our independent
      registered accountants for the year ending December 25, 2005 was ratified with
      44,116,322 votes in favor, 10,500 votes against and 25,725 votes
      withheld.





**Item
      5. Other Information.**





None.





-24-


**Item
      6. Exhibits.**








Exhibit
              Number
            
            Description2.1
            
            Share
                Exchange Agreement dated as of December 18, 2001 (incorporated herein
                by
                reference from our filing on the Definitive Proxy 14/A filed on October
                11, 2001).3.1
            
            Amended
                Articles of Incorporation (incorporated herewith by reference to
                Exhibit
                3.1 to our Definitive Proxy 14/A filed on October 11,
                2001).3.2
            
            By-laws
                (incorporated herewith by reference to Exhibit 3.2 to our Definitive
                Proxy
                14/A filed on October 11, 2001).4.1
            
            Subscription
                Agreement, dated September 4, 2003 (incorporated herewith by reference
                to
                Exhibit 4.1 to our Registration Statement on Form S-3 filed on October
                3,
                2003).4.2
            
            Subscription
                Agreement, dated October 3, 2003 (incorporated herewith by reference
                to
                Exhibit 4.2 to our Registration Statement on Form S-3 filed on October
                3,
                2003).4.3
            
            Common
                Stock Purchase Warrants for the September 4, 2003 Private Placement
                (incorporated herewith by reference to Exhibit 4.3 to our Registration
                Statement on Form S-3 Filed on October 3, 2003).4.4
            
            Common
                Stock Purchase Warrants the October 3, 2003 Private Placement
                (incorporated herewith by reference to Exhibit 4.4 to our Registration
                Statement on Form S-3 filed on October 3, 2003).10.1
            
            Sino-Foreign
                Joint Venture Contract for the New Dragon Asia Flour (Yantai) Company
                Limited, dated June 1, 1999 (incorporated herewith by reference to
                Exhibit
                10.1 to our Registration Statement on Form S-3 filed on October 3,
                2003).10.2
            
            Subcontracting
                Agreement, for the New Dragon Asia Flour (Yantai) Company Limited,
                dated
                June 26, 1999(incorporated
                herewith by reference to Exhibit 10.2 to our Registration Statement
                on
                Form S-3 filed on October 3, 2003).10.3
            
            Sino-Foreign
                Joint Venture Contract for the New Dragon Asia Food (Yantai) Company
                Limited, dated November 28, 1998 (incorporated herewith by reference
                to
                Exhibit 10.3 to our Registration Statement on Form S-3 filed on October
                3,
                2003).10.4
            
            Subcontracting
                Agreement, for the New Dragon Asia Food (Yantai) Company Limited,
                dated
                December 26, 1998 (incorporated here with by reference to Exhibit
                10.4 to
                our Registration Statement on Form S-3 filed on October 3,
                2003).10.5
            
            Sino-Foreign
                Joint Venture Contract for the New Dragon Asia Food (Dalian) Company
                Limited, dated November 28, 1998 (incorporated herewith by reference
                to
                Exhibit 10.5 to our Registration Statement on Form S-3 filed on October
                3,
                2003).10.6
            
            Subcontracting
                Agreement, for the New Dragon Asia Food (Dalian) Company Limited,
                dated
                December 26, 1998 (incorporated herewith by reference to Exhibit
                10.6 to
                our Registration Statement on Form S-3 filed on October 3,
                2003).10.7
            
            Sino-Foreign
                Joint Venture Contract for the Sanhe New Dragon Asia Food Company
                Limited,
                dated November 28, 1998 (incorporated herewith by reference to Exhibit
                10.7 to our Registration Statement on Form S-3 filed on October 3,
                2003).10.8
            
            Subcontracting
                Agreement, for the Sanhe New Dragon Asia Food Company Limited, dated
                December 26, 1998(incorporated herewith by reference to Exhibit 10.8 to our Registration
                Statement on Form S-3 filed on October 3, 2003).23.1
            
            Consent
                of Grobstein, Horwath & Company LLP, Independent Registered Public
                Accounting Firm(incorporated herewith by reference to Exhibit 23.1 to our Amendment
                No. 2
                to Annual Report on Form 10-K/A filed on June 28,
                2005).31.1
            
            Certification
                of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of
                the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002, filed herewith.31.2
            
            Certification
                of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A)
                of
                the Securities Exchange Act of 1934, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002, filed herewith32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                18
                U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
                herewith.








-25-


**SIGNATURES**




In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant caused this report to be signed on its behalf by the undersigned
      thereunto duly authorized.





**NEW
              DRAGON ASIA CORP.**Date: August
              5, 2005
            By:
            /s/ Li
              Xia WangName: 
                Li Xia Wang
              Title:    Chief Executive
                Officer


Date: August
                5, 2005
              By:
              /s/ Peter
                MakName: 
                  Peter Mak
                Title:    Chief Financial
                  Officer





-26-