**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: September 25, 2005
  or
  o
                TRANSITION
                    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 incorporation or organization)
              (IRS
                  Employer Identification Number)
 
 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 x No
o
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-12 of the Exchange Act): Yes o No
x
 
 Check
        whether the registrant is a shell company (as defined in Rule 12b-2 of the
        Exchange Act). Yes o No
x
 
 The
        number of shares of Class A Common Stock outstanding as of November 4, 2005
        was
        47,282,953.
  1
 
 **NEW
        DRAGON ASIA CORP.**
 
 **FORM
        10-Q**
 
 **FOR
        THE QUARTERLY PERIOD ENDED SEPTEMBER 25, 2005**
 ****
 **TABLE
        OF CONTENTS**
 
 Page**PART
                    I:**
                **FINANCIAL
                    INFORMATION**ITEM
                    1.
                Consolidated
                    Financial Statements:Consolidated
                    Balance Sheets as of September 25, 2005 (unaudited) and December
                    25, 2004
                
                3Consolidated
                    Statements of Income (unaudited) for the three months ended September
                    25,
                    2005 and 2004 and the nine months ended September 25, 2005 and
                    2004
                
                4Consolidated
                    Statements of Stockholders’ Equity and Comprehensive Income as of
                    September 25, 2005 (unaudited) and December 25, 2004
                
                5Consolidated
                    Statements of Cash Flows (unaudited) for the nine months ended
                    September
                    25, 2005 and 2004
                
                6Notes
                    to Consolidated Financial Statements (unaudited)
                
                7ITEM
                    2.
                Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operations
                
                13ITEM
                    3.
                Quantitative
                    and Qualitative Disclosures About Market Risk
                
                24ITEM
                    4.
                Controls
                    and Procedures
                
                25**PART
                    II:**
                **OTHER
                    INFORMATION**ITEM
                    1.
                Legal
                    Proceedings
                
                26ITEM
                    2.
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                
                26ITEM
                    3.
                Defaults
                    Upon Senior Securities
                
                26ITEM
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                
                26ITEM
                    5.
                Other
                    Information
                
                26ITEM
                    6.
                Exhibits
                
                27**SIGNATURES**
                
                28**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)**
 **September
                    25,**
                
                **December
                    25,****2005**
                
                **2004**(Unaudited)**ASSETS**Current
                    assets:Cash
                    and cash equivalents
                
                $
                4,637
                
                $
                219Accounts
                    receivable, net
                
                
                6,596
                
                
                6,414Deposits
                    and prepayments, net
                
                
                5,838
                
                
                2,520Inventories,
                    net
                
                
                5,611
                
                
                3,990Due
                    from related companies
                
                
                842
                
                
                1,183Total
                    current assets
                
                
                23,524
                
                
                14,326Property,
                    machinery and equipment, net
                
                
                18,584
                
                
                16,098Land
                    use rights, net
                
                
                3,847
                
                
                3,822Total
                    assets
                
                $
                45,955
                
                $
                34,246**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**Current
                    liabilities:Accounts
                    payable
                
                $
                2,754
                
                $
                2,696Other
                    payables and accruals
                
                
                1,979
                
                
                1,898Taxes
                    payable
                
                
                1,679
                
                
                1,491Due
                    to related companies
                
                
                163
                
                
                831Total
                    current liabilities
                
                
                6,575
                
                
                6,916Due
                    to parent company
                
                
                248
                
                
                303Due
                    to joint venture partners
                
                
                123
                
                
                110Mandatorily
                    redeemable convertible preferred stock, net ofissuance
                    costs of $2,557
                
                
                3,443
                
                
                --Total
                    liabilities
                
                
                10,389
                
                
                7,329Minority
                    interests
                
                
                124
                
                
                82Stockholders'
                    equity:Share
                    capital
                
                
                5
                
                
                4Additional
                    paid-in capital
                
                
                14,156
                
                
                9,909Retained
                    earnings
                
                
                20,509
                
                
                16,922Accumulated
                    other comprehensive income
                
                
                772
                
                
                --Total
                    stockholders’ equity
                
                
                35,442
                
                
                26,835Total
                    liabilities and stockholders' equity
                
                $
                45,955
                
                $
                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**
                  **September
                    25,**
                
                **Nine
                    months ended**
                  **September
                    25,****2005**
                
                **2004**
                
                **2005**
                
                **2004**Net
                    sales
                
                $
                11,645
                
                $
                9,886
                
                $
                28,920
                
                $
                25,831Cost
                    of goods sold
                
                
                (9,488
                )
                
                (7,958
                )
                
                (23,862
                )
                
                (21,009
                )Gross
                    profit
                
                
                2,157
                
                
                1,928
                
                
                5,058
                
                
                4,822Selling
                    and distribution expenses
                
                
                (149
                )
                
                (198
                )
                
                (431
                )
                
                (822
                )General
                    and administrative expenses
                
                
                (360
                )
                
                (686
                )
                
                (1,338
                )
                
                (1,811
                )Income
                    from operations
                
                
                1,648
                
                
                1,044
                
                
                3,289
                
                
                2,189Other
                    income (expense):Interest
                    expense
                
                
                (292
                )
                
                (1
                )
                
                (293
                )
                
                (73
                )Interest
                    income
                
                
                4
                
                
                --
                
                
                4
                
                
                13Other
                    expense
                
                
                (207
                )
                
                (315
                )
                
                (204
                )
                
                (486
                )VAT
                    refund
                
                
                928
                
                
                807
                
                
                1,723
                
                
                1,419Income
                    before taxes
                
                
                2,081
                
                
                1,535
                
                
                4,519
                
                
                3,062Provision
                    for income taxes
                
                
                (381
                )
                
                (346
                )
                
                (892
                )
                
                (1,004
                )Income
                    before minority interests
                
                
                1,700
                
                
                1,189
                
                
                3,627
                
                
                2,058Minority
                    interests
                
                
                (73
                )
                
                3
                
                
                (40
                )
                
                11Net
                    income
                
                $
                1,627
                
                $
                1,192
                
                $
                3,587
                
                $
                2,069Earnings
                    per common shareBasic
                
                $
                0.04
                
                $
                0.03
                
                $
                0.08
                
                $
                0.05Diluted
                
                $
                0.03
                
                $
                0.03
                
                $
                0.07
                
                $
                0.05Weighted
                    average number ofcommon
                    shares outstandingBasic
                
                
                45,768
                
                
                45,061
                
                
                45,296
                
                
                45,061Diluted
                
                
                50,333
                
                
                45,061
                
                
                48,468
                
                
                45,061
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  4
 
 **NEW
        DRAGON ASIA CORP. AND SUBSIDIARIES**
 
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
        INCOME**
 
 **(Amounts
        in thousands, unaudited)**
 Class
                    A Common Stock
                
                Additional
                    Paid-in Capital
                
                Retained
                    Earnings
                
                Accumulated
                    Other Comprehensive Income
                
                Total
                    Stockholders' Equity
                
                Comprehensive
                    IncomeShares
                
                AmountBalance
                    at December 25, 2004
                
                
                45,061
                
                $
                4
                
                $
                9,909
                
                $
                16,922
                
                $
                -
                
                $
                26,835
                
                $
                -Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                3,587
                
                
                -
                
                
                3,587
                
                
                3,587Stock-based
                    compensation
                
                
                -
                
                
                -
                
                
                105
                
                
                -
                
                
                -
                
                
                105
                
                
                -Foreign
                    currency translation adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                772
                
                
                772
                
                
                772Issuance
                    costs related to preferred stock liability
                
                
                -
                
                
                -
                
                
                2,215
                
                
                -
                
                
                -
                
                
                2,215
                
                
                -Issuance
                    of common stock upon exercise of warrants related to 2003 and
                    2005 private
                    placements
                
                
                2,122
                
                
                1
                
                
                1,927
                
                
                -
                
                
                -
                
                
                1,928
                
                
                -Balance
                    at September 25, 2005
                
                
                47,183
                
                $
                5
                
                $
                14,156
                
                $
                20,509
                
                $
                772
                
                $
                35,442
                
                $
                4,359
  5
 
 **NEW
        DRAGON ASIA CORP. AND SUBSIDIARIES**
 
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 **(Amounts
        in thousands, unaudited)**
 **Nine
                    months ended**
                  **September
                    25,****2005**
                
                **2004****Cash
                    flows from operating activities:**Net
                    income
                
                $
                3,587
                
                $
                2,069Adjustments
                    to reconcile net income to net cash provided by
                  operating
                    activities:Allowance
                    for doubtful accounts
                
                
                5
                
                
                256Depreciation
                    and amortization
                
                
                917
                
                
                933Gain
                    on sale of property, machinery and equipment
                
                
                (21
                )
                
                (15
                )Amortization
                    of issuance costs of preferred stock liability
                
                
                196
                
                
                --Minority
                    interests
                
                
                42
                
                
                (11
                )Stock-based
                    compensation
                
                
                105
                
                
                --Changes
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                (187
                )
                
                478Deposits
                    and prepayments
                
                
                (3,269
                )
                
                (932
                )Inventories
                
                
                (1,621
                )
                
                (217
                )Amounts
                    due from related companies
                
                
                341
                
                
                (1,181
                )Accounts
                    payable
                
                
                58
                
                
                (415
                )Other
                    payables and accruals
                
                
                81
                
                
                1,175Taxes
                    payable
                
                
                188
                
                
                650Amounts
                    due to related companies
                
                
                (668
                )
                
                (725
                )Net
                    cash provided by (used in) operating activities
                
                
                (246
                )
                
                2,065**Cash
                    flows from investing activities:**Proceeds
                    from sale of property, machinery and equipment
                
                
                33
                
                
                1,971Purchases
                    of property, machinery and equipment
                
                
                (3,330
                )
                
                (1,977
                )Proceeds
                    from sale of land use rights
                
                
                --
                
                
                295Purchases
                    of land use rights
                
                
                (110
                )
                
                (225
                )Net
                    cash provided by (used in) investing activities
                
                
                (3,407
                )
                
                64**Cash
                    flows from financing activities:**Proceeds
                    from issuance of mandatorily redeemable convertible preferred
                    stock
                
                
                6,000
                
                
                --Payments
                    of costs related to issuance of preferred stock
                
                
                (538
                )
                
                --Proceeds
                    from short-term borrowings
                
                
                --
                
                
                603Repayments
                    of short-term borrowings
                
                
                --
                
                
                (3,121
                )Due
                    to parent company
                
                
                (55
                )
                
                (149
                )Due
                    to joint venture partners
                
                
                13
                
                
                (1,187
                )Proceeds
                    from issuance of common stock upon exercise of warrants
                
                
                1,879
                
                
                --Capital
                    contribution from minority interests
                
                
                --
                
                
                124Net
                    cash provided by (used in) financing activities
                
                
                7,299
                
                
                (3,730
                )Foreign
                    currency translation adjustment
                
                
                772
                
                
                --Net
                    increase (decrease) in cash and cash equivalents
                
                
                4,418
                
                
                (1,601
                )Cash
                    and cash equivalents at the beginning of the period
                
                
                219
                
                
                1,783Cash
                    and cash equivalents at the end of the period
                
                $
                4,637
                
                $
                182**Non-cash
                    Investing and Financing Activities**Beneficial
                    conversion feature on issuance of preferred stock
                
                $
                568
                
                $
                --Fair
                    value discount of warrants attached to issuance of preferred
                    stock
                
                $
                1,647
                
                $
                --Receivable
                    for common stock issued upon exercise of warrants
                
                $
                49
                
                $
                --
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  6
 
 **NEW
        DRAGON ASIA CORP. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **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 six 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
        accruals, necessary for their fair presentation. Interim results are not
        necessarily indicative of results to be 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.
 
 **NOTE
        3. ACCOUNTS RECEIVABLE**
 
 Accounts
        receivable consisted of the following (in thousands):
  **September
                    25,**
                  **2005**
                
                **December
                    25,**
                  **2004****(Unaudited)**Accounts
                    receivable
                
                $
                7,376
                
                $
                7,189Less:
                    Allowance for doubtful accounts
                
                
                (780
                )
                
                (775
                )$
                6,596
                
                $
                6,414
  7
 
 **NOTE
        4. DEPOSITS AND PREPAYMENTS**
 
 Deposits
        and prepayments consisted of the following (in thousands):
 **September
                    25,**
                  **2005**
                
                **December
                    25,**
                  **2004****(Unaudited)**Deposits
                    and prepayments
                
                $
                5,937
                
                $
                2,627Less:
                    Allowance for doubtful accounts
                
                
                (99
                )
                
                (107
                )$
                5,838
                
                $
                2,520
 
 **NOTE
        5. INVENTORIES**
 
 Inventories
        consisted of the following (in thousands):
 **September
                    25,**
                  **2005**
                
                **December
                    25,**
                  **2004****(Unaudited)**Raw
                    materials (including packing materials)
                
                $
                4,827
                
                $
                2,812Finished
                    goods
                
                
                1,295
                
                
                1,7256,122
                
                
                4,537Less:
                    Provision for inventory obsolescence
                
                
                (511
                )
                
                (547
                )$
                5,611
                
                $
                3,990
 
 **NOTE
        6. PROPERTY, MACHINERY AND EQUIPMENT**
 
 Property,
        machinery and equipment consisted of following (in thousands):
 
 **September
                    25,**
                  **2005**
                
                **December
                    25,**
                  **2004****(Unaudited)**Buildings
                
                $
                10,118
                
                $
                9,415Machinery
                    and equipment
                
                
                14,553
                
                
                11,94024,651
                
                
                21,355Less:
                    Accumulated depreciation and amortization
                
                
                (6,067
                )
                
                (5,257
                )$
                18,584
                
                $
                16,098
 
 **NOTE
        7. LAND USE RIGHTS**
 
 Land
        use
        rights consisted of the following (in thousands):
 **September
                    25,**
                  **2005**
                
                **December
                    25,**
                  **2004****(Unaudited)**Land
                    use rights
                
                $
                4,542
                
                $
                4,432Less:
                    Accumulated amortization
                
                
                (695
                )
                
                (610
                )$
                3,847
                
                $
                3,822
 
 8
 **NOTE
        8. OTHER PAYABLES AND ACCRUALS**
 
 Other
        payables and accruals consisted of the following (in thousands):
 **September
                    25,**
                  **2005**
                
                **December
                    25,**
                  **2004****(Unaudited)**Deposits
                    from customers
                
                $
                469
                
                $
                554Accruals
                    for staff salaries, bonus and benefits
                
                
                237
                
                
                515Utilities
                    and accrued expenses
                
                
                1,273
                
                
                829$
                1,979
                
                $
                1,898
 
 **NOTE
        9. CONVERTIBLE PREFERRED STOCK**
 
 On
        July
        11, 2005, the Company issued 6,000 shares of Mandatorily Redeemable Series
        A 7%
        Convertible Preferred Stock (“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 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 also 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. Of
        the
        warrants issued to the placement agent, 277,368 were exercised cashlessly
        and
        101,579 shares have not yet been exercised.
 
 Under
        Statement of Financial Accounting Standards (“SFAS”) No. 150 “Accounting for
        Certain Financial Instruments with Characteristics of Both Liabilities and
        Equity”, the Preferred Stock is 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.
 
 In
        relation to the issuance of the Preferred Stock, the Company paid professional
        fees, placement agent fees and associated expenses amounting to $538,000
        and
        incurred non-cash expenses totaling $2,215,000 related to the beneficial
        conversion feature and the fair value of warrants attached to the issuance
        of
        the Preferred Stock. These issuance costs were recorded by the Company as
        a
        contra-account to the preferred stock liability on the balance sheet and
        are
        being amortized over the term of the Preferred Stock through interest expense
        using the effective interest method. For the three months ended September
        25,
        2005, $196,000 of amortized issuance costs were charged to interest
        expense.
 
 **NOTE
        10. SHARE CAPITAL**
 
 The
        Company is authorized to issue 107,000,000 shares of capital stock with a
        par
        value of $0.0001 each, 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 September 25, 2005 and December 25, 2004, the following shares
        of
        capital stock were issued and outstanding:
 **September
                    25,**
                  **2005**
                
                **December
                    25,**
                  **2004****(Unaudited)**Class
                    A Common Stock
                
                
                47,182,953
                
                
                45,061,242Class
                    B Common Stock
                
                
                --
                
                
                --Preferred
                    Stock
                
                
                6,000
                
                
                --47,188,953
                
                
                45,061,242
  9
 
 **NOTE
        11. WARRANTS**
 
 During
        the quarter ended September 25, 2005, warrant holders relating to the September
        2003 and October 2003 private placement transactions exercised their warrants
        to
        purchase 1,650,000 and 300,000 shares of Class A Common Stock at exercise
        prices
        of $0.99 to $0.979, respectively. Accordingly, the excess of the exercise
        price
        over the par value of the Common Stock (amounting to $1,927,000), was recorded
        as additional paid-in capital.
 
 As
        of
        September 25, 2005, warrants relating to the October 2003 private placement
        transactions to purchase 125,000 shares of Class A Common Stock were
        outstanding, of which the exercise price is $0.979. Additionally, there are
        six-year warrants to purchase 3,157,895 shares of Class A Common Stock at
        an
        exercise price of $1.04 and five-year warrants to purchase 378,947 shares
        of
        Class A Common Stock at an exercise price of $1.20 associated with the issuance
        of the Preferred Stock (See Note 9). 3,259,474 of these warrants have not
        yet
        been exercised.
 
 **NOTE
        12. SHARE - BASED PAYMENT**
 
 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 services received
        in
        exchange for an award of equity instruments based on the grant-date fair
        value
        of the award. The Company adopted the requirements of SFAS No.123R for the
        fiscal year 2005. As all the stock options as of December 25, 2004 were fully
        vested, no compensation charges were recorded in fiscal 2005 for these
        outstanding options. For stock options granted during the year, the Company
        used
        the Black-Scholes option-pricing model to estimate the fair value of the
        options
        at the date of grant using the following assumptions:
 **June
                    22, 2005**Life
                    (years)
                
                
                10Annual
                    dividend per share
                
                
                NoneRisk
                    - free interest rate
                
                
                3.6
                %Expected
                    volatility
                
                
                40
                %
 
 
 In
        November 2004, options to purchase 400,000 shares of 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 per share. As of September 25, 2005, none of these options were
        exercised.
 
 On
        June
        22, 2005, options to purchase an additional 600,000 shares of Class A Common
        Stock were issued to the same 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 per share. As of September 25, 2005, none of these options
        were exercised.
 **Shares
                    to be**
                  **Purchased**
                
                **Weighted
                    Average**
                  **Exercise
                    Price**Options
                    outstanding at December 25, 2003
                
                
                --
                
                $
                --Granted
                    on November 2, 2004
                
                
                400,000
                
                
                1.00Options
                    outstanding at December 25, 2004
                
                
                400,000
                
                
                1.00Granted
                    on June 22, 2005
                
                
                600,000
                
                
                1.20Options
                    outstanding at September 25, 2005
                
                
                1,000,000
                
                $
                1.12
 
 Accordingly,
        the Company recorded compensation expense of $105,000 based on the fair value
        of
        the options granted on June 22, 2005.
  10
 
 **NOTE
        13. ACCUMULATED OTHER COMPREHENSIVE INCOME**
  On
        July 21, 2005, the People’s Bank of China announced
        an upward adjustment in the Renminbi exchange rate against the U.S. dollar
        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
        functional currency of the Company is the Chinese Renminbi. However, the
        Company
        reports in U. S. dollars. The financial statements of the Company’s foreign
        subsidiaries have been translated into U.S. dollars in accordance with SFAS
        No.
        52, “Foreign Currency Translation”. All asset and liability accounts have been
        translated using the exchange rate in effect at the balance sheet date. Equity
        accounts have been translated at their historical exchange rates when the
        capital transaction occurred. Income statement amounts have been translated
        using the average exchange rate for the year. The revenues and expenses of
        the
        Company were translated to U. S. dollars at US$1.00 = RMB 8.1667 and the
        assets
        and liabilities of the Company maintained in Renminbi translated to U. S.
        dollars at US$1.00 = RMB 8.10. The foreign currency translation adjustment
        of
        $772,000 has been reported as comprehensive income in the consolidated statement
        of stockholders’ equity and comprehensive income.
 
 **NOTE
        14. EARNINGS PER SHARE**
 
 The
        Company follows 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 stock issuances. 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 and warrants.
 
 **NOTE
        15. 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 (in thousands):
 **Three
                    months ended**
                  **September
                    25,**
                
                **Nine
                    months ended**
                  **September
                    25,****2005**
                
                **2004**
                
                **2005**
                
                **2004****(Unaudited)**
                
                **(Unaudited)**
                
                **(Unaudited)**
                
                **(Unaudited)****Pre-determined
                    annual fee charged by joint venture partners:**Shandong
                    Longfeng Group Company
                
                $
                27
                
                $
                27
                
                $
                81
                
                $
                81**Rental
                    income from a joint venture partner**Shandong
                    Longfeng Group Company
                
                $
                16
                
                $
                16
                
                $
                48
                
                $
                48
 
 The
        amounts due from and due to related companies are unsecured, non-interest
        bearing and repayable upon demand. Balances are the result of normal commercial
        transactions.
  11
  **NOTE
        16. 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 are 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
        September 25, 2005 and December 25, 2004, there were no material deferred
        tax
        assets or deferred tax liabilities.
 
 **NOTE
        17. RECLASSIFICATIONS**
 
 Certain
        prior period comparative figures have been reclassified to conform to the
        current period presentation.
  12
  **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 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. Readers should carefully review
        the
        risks described in other documents we file 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.
 
 **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” and 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
        our sales made in China are subject to 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 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
        November 2004, the Financial Accounting Standards Board (“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 expect the adoption of SFAS No. 151 to have a material impact on our
        financial statements.
 
 13
 
 ***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 over 200 key distributors and
        16
        regional offices in 27 Chinese provinces. We have six 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 and
        4,500
        tons of Soybean powder.
 
 ***Operations***
 
 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.
 
 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
        South 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 the “Long Feng” brand as one of the leading domestic brands in China.
        We have more than 200 points of distribution in China, which 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 small retail 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 in
        the
        region, including South Korea, Australia, Malaysia, Indonesia. Export sales
        accounted for approximately 8%, of our instant noodle sales for the first
        nine
        months of fiscal 2005, compared with 5% for the same period in fiscal
        2004.
 
 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 the Long Feng brand, as well as our commitment
        to
        international quality standards.
  14
 
 ***Strategy***
 
 Our
        strategy for growth 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 growth 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
 
 Plans
        for
        expansion of the existing plants are expected to be funded through current
        working capital from ongoing sales. A significant plant acquisition will
        require
        an additional infusion of 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 of Assets***
 
 ***Soy
        Bean Plant Lease***
 
 On
        July
        28, 2005, we acquired the plant and machinery utilized for the production
        for
        soybean-derived products from a state-owned enterprise in Shandong. The facility
        had originally been operated by the Company under a 10-year lease agreement
        signed on April 27, 2005, which was cancelled upon our acquisition of the
        facility in July of this year. We commenced our soybean product business
        on
        September 1, 2005. We supply soybean powder in China to customers including
        Coca-Cola Shanghai.
 
 ***Competition***
 
 The
        flour
        industry in the PRC 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 in the PRC 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.
 
 ***Employees***
 
 We
        have
        approximately 1,500 employees. All of them are located in the six plants
        and the
        Shenzhen office. We have maintained good relationships with our employees
        and no
        major disputes have incurred since our inception.
 
 ***Currency
        Conversion***
 
 Substantially
        all our revenues and expenses are denominated in the Chinese Renminbi. However,
        we use the United States dollar for financial reporting purposes. The value
        of
        Chinese Renminbi against the United States dollar and other currencies may
        fluctuate as a result of changes in two countries’ economic conditions. To date,
        we have not engaged in any hedging transactions in connection with our
        operations.
  15
  ***Results
        of Operations***
 
 The
        following table sets forth, for the periods indicated, certain operating
        information expressed in U.S. dollars (in
        thousands) :
  **Nine
                  months ended**
                **September
                  25,**
              
              **Three
                  months ended**
                **September
                  25,**2005
              
              2004
              
              2005
              
              2004Revenues
              
              $
              28,920
              
              $
              25,831
              
              $
              11,645
              
              $
              9,886Cost
                  of goods sold
              
              
              23,862
              
              
              21,009
              
              
              9,488
              
              
              7,958Gross
                  Profit
              
              
              5,058
              
              
              4,822
              
              
              2,157
              
              
              1,928General
                  and administrative expenses
              
              
              1,338
              
              
              1,811
              
              
              360
              
              
              686Income
                  before income tax
              
              
              4,519
              
              
              3,062
              
              
              2,081
              
              
              1,535Provision
                  for income
                  tax
              
              
              892
              
              
              1,004
              
              
              381
              
              
              346Net
                  Income
              
              
              3,587
              
              
              2,069
              
              
              1,627
              
              
              1,192
 
 ***Nine
        Months Ended September 25, 2005 Compared to Nine Months Ended September 25,
        2004***
 
 ***Revenue***
 
 Revenue
        for the nine months ended September 25, 2005 was $28,920,000, representing
        an
        increase of $3,089,000, or12%, from $25,831,000 for the nine months ended
        September 25, 2004. The increase was primarily due to the growth in market
        demand for flour and instant noodles and the addition of the soybean products
        business.
 
 ***Gross
        Profit***
 
 As
        a
        percentage of revenue, gross profit decreased to 17% in the nine months ended
        September 25, 2005 from 19% in the corresponding period in 2004. The decrease
        was primarily due to 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 $431,000 for the nine months ended September
        25,
        2005, representing a decrease of $391,000, or 48%, from $822,000 for the
        corresponding period of 2004. The decrease was primarily due to cost controls
        implemented in early 2005.
 
 As
        a
        percentage of revenue, selling and distribution expenses decreased to 1%
        in the
        nine months ended September 25, 2005 from 3% in the corresponding period
        in 2004
        as a result of cost controls implemented in early 2005. To control costs,
        the
        Company has proposed more effective staffing of our facilities, restricted
        traveling costs and developed a more efficient sales methodology.
 
 ***General
        and Administrative Expenses***
 
 General
        and administrative expenses decreased $473,000, or 26%, to $1,338,000 for
        the
        nine months ended September 25, 2005 as compared to $1,811,000 for the nine
        months ended September 25, 2004. The decrease was primarily the result of
        cost
        controls implemented in early 2005. To control costs, the Company has
        implemented more effective staffing of our facilities and more effective
        use of
        office equipment and resources.
 
 ***VAT
        Refunds***
 
 VAT
        refunds increased $304,000 to $1,723,000 for the nine months ended September
        25,
        2005 as compared to $1,419,000 for the nine months ended September 25, 2004.
        This increase was primarily due to the tax refund from the
        local tax
        authority.
 
 16
 
 ***Net
        Income***
 
 Net
        income increased $1,518,000, or 73%, to $3,587,000 for the nine months ended
        September 25, 2005 as compared to $2,069,000 for nine months ended September
        25,
        2004. Such increase was primarily due to the growth in the market demand
        for
        flour and instant noodles as well as the VAT refunds.
 
 As
        a
        percentage of revenue, net income increased to 12% for the nine months ended
        September 25, 2005 as compared to 8% for the nine months ended September
        25,
        2004. The increase was primarily due to the increase in revenue, effective
        implementation of cost controls and the VAT refunds.
 
 ***Three
        Months Ended September 25, 2005 Compared to Three Months Ended September
        25,
        2004***
 
 ***Revenue***
 
 Revenue
        for the quarter ended September 25, 2005 was $11,645,000, representing an
        increase of $1,759,000, or 18%, from $9,886,000 for the quarter ended September
        25, 2004. The increase was primarily due to the growth in market demand for
        flour and instant noodles and the addition of the soybean products
        business.
 
 ***Gross
        Profit***
 
 As
        a
        percentage of revenue, gross profit decreased to 19% for the quarter ended
        September 25, 2005 from 20% for the quarter ended September 25, 2004. The
        decrease was primarily due to 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 $149,000 for the quarter ended September 25,
        2005, representing a decrease of $49,000 from $198,000 for the corresponding
        quarter of 2004. The decrease was primarily due to cost controls implemented
        in
        early 2005.
 
 As
        a
        percentage of revenue, selling and distribution expenses decreased to 1%
        in the
        third quarter of 2005 from 2% in the corresponding period in 2004 as a result
        of
        cost controls implemented in early 2005. To control costs, the Company has
        proposed more effective staffing of our facilities, restricted traveling
        costs
        and developed a more efficient sales methodology.
 
 ***General
        and Administrative Expenses***
 
 General
        and administrative expenses decreased $326,000, or 48%, to $360,000 for the
        quarter ended September 25, 2005 as compared to $686,000 for the quarter
        ended
        September 25, 2004. The decrease was primarily the result of cost controls
        implemented in early 2005. To control costs, the Company has implemented
        more
        effective staffing of our facilities and more effective use of office equipments
        and resources.
 
 ***VAT
        Refunds***
 
 VAT
        refund increase $121,000 to $928,000 for the quarter ended September 25,
        2005 as
        compared to $807,000 for the quarter ended September 25, 2004. This increase
        was
        primarily due to the tax refund from the local tax
        authority.
 
 ***Net
        Income***
 
 Net
        income increased $435,000, or 36% to $1,627,000 for the quarter ended September
        25, 2005 as compared to $1,192,000 for the quarter ended September 25, 2004.
        Such increase was primarily due to the earnings contribution of the soybean
        plant , effective implementation of cost controls as well as the VAT refunds.
 
 As
        a
        percentage of revenue, net income increased to 14% for the quarter ended
        September 25, 2005 as compared to 12% for the quarter ended September 25,
        2004.
        The increase was primarily due to the contribution of the soybean plant and
        the
        VAT refunds.
 
 17
 
 ***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 collections from customers and advances from related companies.
 
 Our
        working capital increased $9,539,000 to $16,949,000 at September 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, the proceeds from the issuance
        of
        $6 million mandatorily convertible preferred stock (“Preferred Stock”) and
        improved collections of receivables during the nine months ended September
        25,
        2005.
 
 Cash
        and
        cash equivalents were $4,637,000 as of September 25, 2005, an increase of
        $4,418,000 from December 25, 2004, such increase was mainly due to the increase
        in revenue, the proceeds from the issuance of Preferred Stock and proceeds
        received upon the exercise of warrants.
 
 Net
        cash used in operating activities for the nine months ended
        September
        25, 2005 was $246,000, which was due to the changes in operating assets and
        liabilities resulting from the utilization by customers of deposits and
        prepayments. Net cash provided by financing activities of $7,299,000 for
        the
        nine months ended September 25, 2005, was mainly due to the proceeds from
        the
        issuance of Preferred Stock and the exercise of warrants.
 
 Net
        cash
        used in investing activities for the nine months ended September 25, 2005
        was
        $3,407,000, which was mainly due to the purchases of soybean
        facilities.
 
 In
        July
        2005, we completed a private placement of our securities pursuant to which
        we
        received net proceeds of approximately $5,299,183 after
        payment of a fee to the placement agent and other offering
        expenses.
 
 ***Contractual
        Obligations***
 
 As
        of
        September 25, 2005, we had operating leases for manufacturing and warehouse
        facilities expiring at various dates through March 2031. As of September
        25,
        2005, we had no significant capital leases. Future minimum rental commitments
        under operating leases are as follows:
 Years
                    ending December 25
                
                Operating
                    lease obligations
                  (in
                    thousands)2005
                    (three months remaining)
                
                $
                312006
                
                
                1232007
                
                
                1232008
                
                
                1232009
                
                
                123Thereafter
                
                
                139Total
                
                $
                662
 
 ***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 FASB issued 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 154 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.
 
 18
 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.
        The
        adoption of SFAS No. 153 did not 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 value 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 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. 123R for the fiscal year beginning on
        December 26, 2004, and recorded the compensation expense for all unvested
        stock
        options existing prior to the adoption in the first quarter of
        2005.
 
 **RISKS
        RELATED TO OUR CLASS A COMMON STOCK**
 
 We
        have
        never declared or paid any dividends on our Class A Common Stock. The
        declaration and payment in the future of any cash or stock dividends on the
        Class A Common Stock will be at the discretion of our Board of Directors
        and
        will depend upon a variety of factors, including our ability to service our
        outstanding indebtedness, if any, and to pay dividends on securities ranking
        senior to the Class A Common Stock, including the shares of our outstanding
        Series A Preferred Stock, our future earnings, if any, capital requirements,
        financial condition and such other factors as our Board of Directors may
        consider to be relevant from time to time. We do not expect to declare or
        pay
        any dividends on our Class A Common Stock in the foreseeable
        future.
 
 We
        are
        controlled by our major shareholder, which is controlled by our Chairman,
        Mr.
        Lu. Ms. Ling Wang, our Vice President and a director, is the holder of record
        of
        100% of the equity interests of Long Feng Food Overseas Ltd. ("Long Feng
        Food"),
        which in turn owns 100% of the equity interests of New Dragon Pacific Holding
        Ltd., which in turn holds 100% of the equity interests of New Dragon Asia
        Food
        Ltd. By virtue of an understanding with Ms. Wang, Mr. Lu has sole voting
        and
        dispositive control over the shares of Long Feng Food and, accordingly, has
        sole
        voting and dispositive control of the shares of us held by New Dragon Asia
        Food
        Ltd., which is our majority shareholder. As a result, Mr. Lu through this
        shareholder, effectively exercises control over all matters requiring
        shareholder approval, including the election of directors and approval of
        significant corporate transactions. This concentration of ownership might
        also
        have the effect of delaying or preventing a change in control of us that
        may not
        be viewed as beneficial by other shareholders.
 
 **RISKS
        RELATED TO OUR BUSINESS**
 
 ***Our
        business may experience adverse effects from competition in the noodle, flour
        and soybean product markets.***
 
 The
        noodle, flour and soybean product markets in the PRC are highly competitive.
        Competition in these markets takes many forms, including the following:
  -
                establishing
                    favorable brand recognition;
 -
                developing
                    products sought by consumers;
  -
                implementing
                    appropriate pricing;
 -
                providing
                    strong marketing support; and
 -
                obtaining
                    access to retain outlets and sufficient shelf space.
  19
 
 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 wheat, soybeans 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 certain of 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, the government’s 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.
 
 ***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.
  20
 
 ***We
        have limited business insurance coverage.***
 
 The
        insurance industry in China is still in an early stage of development. Insurance
        companies in China offer limited business insurance coverage. As a result,
        we do
        not have any business liability insurance coverage for our operations. Moreover,
        while business disruption insurance is available, management has 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 is limited due to the
        large
        number of customers comprising our customer base, and their dispersion across
        China. 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 and, if our recent acquisition of a
        soybean business proves successful, our acquisition strategy may expand to
        include future acquisitions of soybean business. 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.
 
 **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 the PRC 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.
 
 21
 
 ***Economic
        reform policies or nationalization could result in a total investment loss
        in
        our Class A 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.
 
 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
        Chinese legal system is not fully developed and has inherent uncertainties
        that
        could limit the legal protections available to investors.***
 
 The
        Chinese 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 People’s Republic of China, 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 Chinese 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.***
 
 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.
  22
 ***We
        may experience an impact of the United States Foreign Corrupt Practices Act
        on
        our business.***
 
 We
        are
        subject to the United States Foreign Corrupt Practices Act, which generally
        prohibits Unites 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 cannot assure you, 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.
 
 ***Impact
        of governmental regulation on our operations.***
 
 We
        may be
        subjected to liability for product safety that could lead to a product recall.
        Our operations and properties are subject to regulation by various Chinese
        government entities and agencies. As a producer of food products, our operations
        are subject to production, packaging, quality, labeling and distribution
        standards. Our production and distribution facilities are also subject to
        various local environmental laws and workplace regulations.
 
 We
        believe that our current legal and environmental compliance programs adequately
        address such concerns and that we are in compliance with applicable laws
        and
        regulations. However, compliance with, or any violation of, current and future
        laws or regulations could require material expenditures or otherwise adversely
        effect our business and financial results.
 
 We
        may be
        liable if the consumption of any of our products cause injury, illness or
        death.
        We may also be required to recall certain of our products that become
        contaminated or are damaged. We are not aware of any material product liability
        judgment against us. However, a product liability judgment of a product recall
        could have a material adverse effect on our business or financial
        results.
 
 ***It
        may be difficult to serve us with legal process or enforce judgments against
        our
        management or us.***
 
 All
        of
        our assets are located in China. In addition, all of our directors and officers
        are non-residents of the United States, and all, or substantial portions
        of the
        assets of such non-residents, are located outside the United States. As a
        result, it may not be possible to effect service of process within the United
        States upon such persons. Moreover, there is doubt as to whether the courts
        of
        China would enforce:
 
 -
              judgments
                  of United States courts against us, our directors or our officers
                  based on
                  the civil liability provisionsof
                  the securities laws of the United States or any state;
                  or
 -
              in
                  original actions brought in China, liabilities against non-residents
                  or us
                  based upon the securities laws of the United States or any
                  state.
 
 ***The
        Chinese government could change its policies toward private enterprise or
        even
        nationalize or expropriate it, which could result in the total loss of your
        investment.***
 
 Our
        business is subject to significant political and economic uncertainties and
        may
        be adversely affected by political, economic and social developments in China.
        Over the past several years, the Chinese government has pursued economic
        reform
        policies including the encouragement of private economic activity and greater
        economic decentralization. The Chinese government may not continue to pursue
        these policies or may significantly alter them to our detriment from time
        to
        time with little, if any, prior notice. Changes in policies, laws and
        regulations or in their interpretation or the imposition of confiscatory
        taxation, restrictions on currency conversion, restrictions or prohibitions
        on
        dividend payments to shareholders, devaluations of currency or the
        nationalization or other expropriation of private enterprises could have
        a
        material adverse effect on our business. Nationalization or expropriation
        could
        even result in the total loss of our investment in China and in the total
        loss
        of your investment.
 
 ***If
        relations between the United States and China worsen, our stock price may
        decrease and we may have difficulty accessing U.S. capital
        markets.***
 
 At
        various times during recent years, the United States and China have had
        significant disagreements over political and economic issues. Controversies
        may
        arise in the future between these two countries. Any political or trade
        controversies between the United States and China, whether or not directly
        related to our business, could adversely affect the market price of our Class
        A
        Common Stock and our ability to access U.S. capital markets.
  23
  
 ***The
        Chinese economic, political and social conditions as well as government policies
        could affect our business.***
 
 All
        of
        our business, assets and operations are located in China. The economy of
        China
        differs from the economies of most developed countries in many respects,
        including:
 
 -
              government
                  involvement
 -
              level
                  of development
 -
              growth
                  rate
 -
              control
                  of foreign exchange; and
 -
              allocation
                  of resources
 
 The
        economy of China has been transitioning from a planned economy to a more
        market-oriented economy. Although in recent years the Chinese government
        has
        implemented measures emphasizing the utilization of market forces for economic
        reform, the reduction of state ownership of productive assets and the
        establishment of sound corporate governance in business enterprises, a
        substantial portion of productive assets in China is still owned by the Chinese
        government. In addition, the Chinese government continues to play a significant
        role in regulating industry by imposing industrial policies. It also exercises
        significant control over China’s economic growth through the allocation of
        resources, controlling payment of foreign currency-denominated obligations,
        setting monetary policy and providing preferential
        treatment to particular industries or companies.
 
 The
        economy of China has experienced significant growth in the past 20 years,
        but
        growth has been uneven both geographically and among various sectors of the
        economy. The Chinese government has implemented various measures from time
        to
        time to control the rate of economic growth. Some of these measures benefit
        the
        overall economy of China, but may have a negative effect on us. For example,
        our
        operating results and financial condition may be adversely affected
        by:
 
 -
              changes
                  in the rate or method of taxation
 -
              imposition
                  of additional restrictions on currency conversion and remittances
                  abroad
 -
              reduction
                  in tariff or quota protection and other import restrictions;
                  and
 -
              changes
                  in the usage and costs of state-controlled transportation
                  services
 
 ***Fluctuations
        in the value of the Chinese Renminbi relative to foreign currencies could
        affect
        our operating results.***
 
 Substantially
        all our revenues and expenses are denominated in the Chinese Renminbi. However,
        we use the United States dollar for financial reporting purposes. The value
        of
        Chinese Renminbi against the United States dollar and other currencies may
        fluctuate and is affected by, among other things, changes in China’s political
        and economic conditions. The Chinese government recently announced that it
        is
        valuing the exchange rate of the Chinese Renminbi against a number of
        currencies, rather than just exclusively to the United States dollar. Although
        the Chinese government has stated its intention to support the value of the
        Chinese Renminbi, we cannot assure you that the government will not revalue
        it.
        As our operations are primarily in China, any significant revaluation of
        the
        Chinese Renminbi may materially and adversely affect our cash flows, revenues
        and financial condition. For example, to the extent that we need to convert
        United States dollars into Chinese Renminbi for our operations, appreciation
        of
        this currency against the United States dollar could have a material adverse
        effect on our business, financial condition and results of operation.
        Conversely, if we decide to convert our Chinese Renminbi into United States
        dollars for other business purposes and the United States dollar appreciates
        against this currency, the United States dollar equivalent of the Chinese
        Renminbi would be reduced. To date, we have not engaged in any hedging
        transactions in connection with our operations.
 
 **Item
        3. Quantitative and Qualitative Disclosures about Market Risk.**
 
 We
        do not
        have significant market risk and we do not use financial instruments in the
        normal course of business that are subject to changes in financial market
        conditions.
 
 ***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.
 
 24
 
 **Item
        4. Controls and Procedures.**
 
 ***Evaluation
        of Disclosure Controls and Procedures***
 
 Under
        the
        supervision and with the participation of the Company’s management, including
        our principal executive officer and the principal accounting officer, the
        Company 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 the end of the
        period
        covered by this report (the “Evaluation Date”). Based on this evaluation, the
        Company’s principal executive officer and principal accounting officer concluded
        as of the Evaluation Date that the Company’s 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 to the Company, including our consolidated subsidiaries, and was
        made
        known to them by others within those entities, particularly during the period
        when this report was being prepared.
 
 ***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 September 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 2006.
  25
 
 **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 6,000 shares of Series A 7% Mandatorily Redeemable
        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
        also
        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 in cash was paid to the placement agent.
        The proceeds of the private placement were used to acquire a soybean processing
        factory and the remainder was and will continue to be used for general working
        capital purposes and may be used for potential future acquisitions.
 
 **Item
        3. Defaults Upon Senior Securities.**
 
 None.
 
 **Item
        4. Submission of Matters to a Vote of Security Holders.**
 
 On
        July
        8, 2005, we sought and obtained the written consent, in lieu of a meeting
        of
        stockholders, of the holder of 78% of our outstanding voting stock, approving
        the terms of a proposed private placement involving the potential issuance,
        at
        below market price, of greater than 19.999% of our shares of Class A Common
        Stock outstanding immediately prior to the private placement which was completed
        on July 11, 2005. Further information relating to the matter is stated in
        the
        Company’s Definitive Information Statement on Schedule 14C, filed with the SEC
        on July 26, 2005.
 
 **Item
        5. Other Information.**
 
 None.
  26
 
 **Item
        6. Exhibits.**
 
 Exhibit
                  Number
              
              Description31.1
              
              Certification
                  of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-15(E)
                  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-15(E)
                  of
                  the Securities Exchange Act of 1934, as adopted pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 2002, filed herewith.32.1
              
              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.
 
  27
 
 **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.**Dated:
                November 9, 2005
              By:
              */s/
                Li Xia Wang*Name:
              Li
                Xia WangTitle:
              Chief Executive Officer
 Dated:
                November 9, 2005
              By:
              */s/
                Peter Mak*Name:
              Peter
                MakTitle:
              Chief Financial Officer
 
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