UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the Fiscal year ended December 25, 2009

OR

¨ 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	(IRS Employer Identification No.)
Incorporation or Organization)

10 Huangcheng Road (N), Longkou, Shandong Province, PRC

 (Address of Principal Executive Offices) (Zip Code)

(86 535) 8951-567

(Registrant’s telephone number, including area code)

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

Title of Each Class: Class A Common Stock, $ 0.0001 par value.

Name of Each Exchange on Which Registered: NYSE Amex.

Securities registered pursuant to Section 12(g) of the Exchange Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

Indicated by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨ No x

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 such filing requirements for past 90 days.  Yes x   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer    (Do not check if a smaller reporting company)  ¨	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of June 25, 2009 the aggregate market value of the voting and non-voting equity held by non-affiliates was approximately $11 million.

As of March 9, 2010, there were 90,241,559 shares of Class A Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

		PAGE
PART I
ITEM 1.	Business		1
ITEM 1A.	Risk Factors		3
ITEM 1B.	Unresolved Staff Comments		4
ITEM 2.	Properties		4
ITEM 3.	Legal Proceedings		4
ITEM 4	(Removed and Reserved)		4
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		5
ITEM 6.	Selected Financial Data		6
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		6
ITEM 7A.	Quantitative and Qualitative Disclosure About Market Risk		13
ITEM 8.	Financial Statements and Supplementary Data		13
ITEM 9.	Changes in and Disagreements with Accountants on Accounting  and Financial Disclosure		14
ITEM 9A(T).	Controls and Procedures		14
ITEM 9B.	Other Information		15
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance		16
ITEM 11.	Executive Compensation		18
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		19
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence		20
ITEM 14.	Principal Accounting Fees and Services		20
PART IV
ITEM 15.	Exhibits, Financial Statement Schedules		22
SIGNATURES			25
FINANCIAL STATEMENTS			F-1

Forward-Looking Information

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

Availability of SEC Filings

The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. The public may read and copy these materials at the Securities and Exchange Commission’s (“SEC”) Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding the Company and other companies that file materials with the SEC electronically. You may also obtain copies of the Company’s reports filed with the SEC, free of charge, on our website at http://www.newdragonasia.com.

PART I

ITEM 1. BUSINESS

OVERVIEW

New Dragon Asia Corp. and its subsidiaries (collectively, “New Dragon”, “NWD”, “the Company”, “we”, “us”, or “our”) are 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. We are headquartered in Shandong Province in the People’s Republic of China (“PRC” or “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 eight 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. We were incorporated in the State of Florida on March 18, 1999 under the name Bio-Aqua Systems, Inc.

OUR PRODUCTS AND PRODUCTION

We produce and market a broad range of wheat flour for use in bread, dumplings, noodles and confectionary products. Our flour products are marketed under the “Long Feng” brand name and sold throughout China 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.

In late 2005, we began producing two types of soybean products – soybean protein powder and soybean powder. These products are principally supplied to food and beverage manufacturers.

Our revenue by product category for the year ended December 25, 2009 was approximately 56% for flour products, 17% for instant noodles and 27% for soybean products.

	Year Ended December 25,
	2009		2008
	(In thousands)
Net revenue:
Instant noodles	$	3,913	$	13,234
Flour		12,982		27,008
Soybean		6,322		9,098
	$	23,217	$	49,340

For more information, please refer to Note 19 of the accompanying consolidated financial statements “Segment Information”.

We believe that we have developed a reputation in China for producing high quality food products. Our production plants operate at a high level of hygiene and efficiency and all of our plants are certified under the ISO9002 standards. Most of our “state of the art” manufacturing equipment is imported from Switzerland, Japan, and Korea. We also operate strict quality control systems, resulting in a favorable customer perception of the “Long Feng” brand.

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

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MARKETING AND SALES

Most of our products are regionally marketed and distributed throughout China. Our sales and marketing strategy focuses on maintaining our relationships with our distributors by holding annual sales order meetings and hosting regular distributor conferences.  We also believe that we have an excellent quality/price dynamic.

Our domestic distribution system is the key to our continued success in developing “Long Feng” as one of the leading brands in China. We have more than 200 points of distribution, of which 10 are our direct sales offices, spread over 27 provinces in China. The remaining 190 sales points are owned and managed by distributors. Most of our distributors have long-term relationships with us and are loyal and efficient vendors of our products.  During 2009, sales in China accounted for 89% of our instant noodle sales.

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

In addition to domestic sales, we also export noodles to other countries such as South Korea, Australia, Malaysia and Indonesia.  We also obtained HACCP (Hazard Analysis Critical Control Point) certification from CCIC Conformity Assessment Services Co. Ltd., a Chinese quality assurance examination authority, enabling the Company to begin exports of instant noodles and soybean powder to Europe. In early 2008, we began exporting noodles to Nigeria, Africa. During 2009, export sales accounted for approximately 11% of our instant noodle sales.

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.  We do not face substantial competition in the “high-quality” soybean powder market.

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:

- acquire additional locations to increase our production capacity; and

- build strategic alliances with multinational food groups to enhance product range and capitalize on our distribution network in China.

Plans for expansion of the existing plants are expected to be funded through current working capital from ongoing sales. Acquisitions of plants 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.

EMPLOYEES

We employ approximately 1,500 employees. All of them are located in the eight plants and our corporate office located in Shandong Province, Sichuan Province and Beijing. We have maintained good relationships with our employees and no major disputes have incurred since our inception.

GOVERNMENTAL REGULATIONS ON OUR OPERATIONS IN CHINA

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

We are subject to the PRC’s national Environmental Protection Law, which was enacted on December 26, 1989, as well as a number of other national and local laws and regulations regulating air, water, and noise pollution and setting pollutant discharge standards. Violation of such laws and regulations could result in warnings, fines, orders to cease operations, and even criminal penalties, depending on the circumstances of such violation. We believe that all manufacturing operations comply with applicable environmental laws, including those laws relating to air, water, and noise pollution.

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

THE CHINESE LEGAL SYSTEM

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

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

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

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

CURRENCY CONVERSION AND EXCHANGE

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 currency hedging transactions in connection with our operations.

CUSTOMERS

We have approximately 560 customers for our products. None of our customers individually accounts for more than 5% of our revenue.

We source our wheat and soybean from approximately 50 suppliers. None of the suppliers individually accounts for more than 5% of our purchases. Historically, our fourth quarter revenue is much higher than the other three quarters due to preparations for the Chinese New Year holiday, which begins in January or February.

ITEM 1A. RISK FACTORS

This information has been omitted based on our status as a smaller reporting company.

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2.  PROPERTIES.

Our corporate office is located in Shandong. Our eight manufacturing plants, at five locations in Shandong, Beijing and Chengdu, consist of 30 noodle production lines and flour milling lines, located in Yantai, Penglai, Longkou and Beijing. Manufacturing operations are vertically integrated, with the flour production utilized in the noodle manufacturing process. All of our manufacturing facilities have been awarded ISO9002 quality certification.  All of our properties are suitable and adequate for the purposes for which they are used in our business.

Facility	Address	Owned/Rented	Size (Sq meters)
Yantai Flour Mill, Yantai Noodle Factory & Soybean Plants	No. 10 Huancheng Road (N), Longkou, Shandong	Owned		41,268
Sanhe Noodle Factory*	1 Yanjiao Jing Ha Road (N), Beijing	Owned		26,274
Penglai Flour Mill	Xiao Men Town, Penglai, Shandong	Owned		16,715
Longyuan Plant	Donglai Street Lige Village East, Longkou, Shandong	Owned		12,029
Chengdu Plant	Chengdu Economic & Technical Development Zone, Chengdu, Sichuan	Owned		35,922

* The Sanhe plant was idle at December 25, 2009 and had not been in use the prior year. The Company had sold the property on December 29, 2008 for a total of $5.78 million.

ITEM 3. LEGAL PROCEEDINGS.

We are not a party to any material pending legal proceedings.

ITEM 4. (REMOVED AND RESERVED).

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET PRICES OF COMMON STOCK

Our Class A Common Stock is traded on NYSE Amex  under the symbol NWD. The high and low sale prices of the  Class A Common Stock as reported on NYSE Amex for the periods indicated are set forth on the table below.

	PRICE RANGE OF COMMON STOCK
	HIGH		LOW
Year Ended December 25, 2008:
First Quarter	$	1.09	$	0.67
Second Quarter	$	0.86	$	0.61
Third Quarter	$	0.68	$	0.31
Fourth Quarter	$	0.42	$	0.26
Year Ended December 25, 2009:
First Quarter	$	0.27	$	0.15
Second Quarter	$	0.22	$	0.15
Third Quarter	$	0.18	$	0.11
Fourth Quarter	$	0.16	$	0.12

SHAREHOLDERS

As of March 9, 2010, there were 90,241,559 shares of our Class A Common Stock outstanding and we had approximately 6,700 shareholders of record. American Stock Transfer & Trust Company is the registrar and transfer agent for our Class A Common Stock.

DIVIDEND POLICY

Under current PRC regulations, wholly foreign-owned enterprises and Sino-foreign equity joint ventures in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, these foreign-invested enterprises are required to set aside certain amounts of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends.

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

RECENT SALES OF UNREGISTERED SECURITIES

There were no sales of unregistered sales of equity securities during the fiscal year ended December 25, 2009.

ISSUER PURCHASES OF EQUITY SECURITIES

None.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth aggregate information regarding the Company’s equity compensation plans, including individual compensation arrangements, in effect as of December 25, 2009.

5

	Number of securities to be issued upon exercise of outstanding options, warrants, and rights (a)			Weighted - average exercise price of outstanding     options, warrants,     and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		6,000,000	(1)	$	1.82		—
Equity compensation plans not approved by security holders		—			—		—
Total		6,000,000		$	1.82		—

(1) Represents options to purchase 6,000,000 shares of our common stock issued to Peter Mak, the former CFO, pursuant to individual compensation arrangements.

ITEM 6. SELECTED FINANCIAL DATA

This information has been omitted based on our status as a smaller reporting company.

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

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

To supplement our consolidated financial statements presented in accordance with GAAP, we discuss our results in terms of financial measures that may be deemed to be “non-GAAP financial measures” under the rules and regulations of the Securities and Exchange Commission.  Our management believes that these measures provide meaningful information regarding the Company’s performance and liquidity by excluding certain expenses that may not be indicative of its core operating results and facilitate comparisons to its historical operations and competitors’ operating results.  To the extent such measures are not readily reconcilable to the comparable GAAP financial measures contained in its consolidated financial statements, we provide detailed reconciliations that permit investors to determine how such non-GAAP financial measures have been derived.

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

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 more than 200 key distributors and 16 regional offices in 27 Chinese provinces. We have eight manufacturing plants in the PRC with an aggregate production capacity of approximately 110,000 tons of flour and approximately 1.1 billion packets of instant noodles and 4,500 tons of soybean powder.

6

OPERATION PLAN

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:

- Acquire additional locations to increase our production capacity

- Build strategic alliances 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. Acquisitions of plants 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.

ESTABLISHMENT AND ACQUISITIONS

Longyuan Packaging Plant

On January 10, 2006, the Company established New Dragon Asia (Long Kou) Packing Materials Company Limited (“NDAPM”), a wholly-owned subsidiary in Longkou, Shandong Province. NDAPM is principally engaged in the manufacturing and sale of packing materials, with a registered capital of $3.60 million. During the year ended December 25, 2009, the Company has spent approximately $2.40 million on the construction at the new plant and has committed to further capital expenditures of $1.46 million for the completion of the plant. The construction was basically completed and was at the stage of acceptance examination and final settlement.

YEAR ENDED DECEMBER 25, 2009 COMPARED TO YEAR ENDED DECEMBER 25, 2008

Selected Information from the Consolidated Statements of Operations (in thousands)

	For the years ended December 25,
	2009			2008
Net revenue	$	23,217		$	49,340
Cost of goods sold		(24,518	)		(41,989	)
Gross (loss) profit		(1,301	)		7,351
Selling and distribution expenses		(944	)		(1,275	)
General and administrative expenses		(6,381	)		(3,896	)
Gain on fair value adjustments to embedded derivatives		177			2,047
VAT refund		59			60
Net loss		(11,103	)		(1,517	)

Net Revenue

Net revenue for the year ended December 25, 2009 was $ 23.22 million, a decrease of $26.12 million, or 52.94%, as compared to $49.34 million for the prior year. Revenues declined in all segments with instant noodles decreasing 70.43 %, flour products decreasing 51.93% and soybeans declining only 30.51%. The demand for our products decreased significantly and was responsible for 90% of the revenue decline. The price of our instant noodle also decreased and attributed to 10% of the revenue decline. Although the global economy is recovering, the level of recovery is different from country to country and industry to industry. As our products like flour, soybean powder and packing materials are upstream goods for the food industry, the recovery and growth of business is dependant on the recovery and growth of the downstream business to a great extent, which was reversing slowly. In addition, the overseas market has not recovered as strongly as the domestic Chinese market, which substantially affected our export sales and export price.

Cost of goods sold

For the year ended December 25, 2009, cost of goods sold was $24.52 million, a decrease of $17.47 million, or 41.61%, as compared to $41.99 million for 2008. The decrease was in line with the decrease in sales of our products.

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For the year ended December 25, 2009, as a percentage of revenue, cost of goods sold increased to 105.60% of sales as compared to 85.10% of sales for that of the prior year. For the year ended December 25, 2009, gross margin (loss) decreased to (5.60)% as compared to 14.90% for the prior year. The loss in 2009 is due to the significant reduction in sales and a sustained decline on our higher end noodle products, as a result of the weakened economy.

Selling and distribution expenses

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

For the year ended December 25, 2009, selling and distribution expenses decreased slightly 27.34% to $0.93 million from $1.28 million in 2008. The decrease was in line with the decrease in sales of our products.

General and administrative expenses

For the year ended December 25, 2009, general and administrative expenses increased $2.48 million to $6.38 million from $3.90 million of 2008. The increase was primarily due to bad debt provision for accounts receivables over 1 year and the stock-based compensation granted to the Chief Accounting Officer.

Gain/(loss) on Fair Value Adjustments to Embedded Derivatives

The Company issued Series A Redeemable Convertible Preferred Stock in July 2005, together with 3,157,895 warrants to purchase Class A Common Stock resulting in aggregate proceeds of $6 million. The Company also issued Series B Redeemable Convertible Preferred Stock in December 2005, together with 2,968,750 warrants to purchase Class A Common Stock resulting in aggregate proceeds of $9.5 million. The fair value of each instrument was recorded as a derivative liability on our balance sheet. The corresponding gain or loss, which was non-cash in nature, from changes in the fair values of these instruments was recorded in our statement of income.  For the year ended December 25, 2009, the gain in this regard was $0.18 million.  For the corresponding period of 2008, the gain in this regard was $2.05 million. The determination of the change in the value of the derivatives requires the use of a complex valuation model and can fluctuate significantly between periods based on changes in the price of our shares and the time remaining in the life of the underlying financial instruments. Increase in our stock’s market value increases the value of the derivative creating losses in our income statements and decrease in the stock’s market value reduces the value of the derivatives creating gains in our income statements.

VAT refund

VAT refund was $0.06 million for both of the year ended December 25, 2009 and 2008.

Net (Loss) Attributable to Common Shareholders

For the year ended December 25, 2009, net loss was $11.10 million, a decrease of $9.58 million, or 630.26% as compared to $1.52 million for 2008. As a percentage of revenue, net loss was 47.82% for the year ended December 25, 2009 as compared to 3.08% for the prior year.  The decrease was primarily due to (i) a reduction of revenue, which we attribute to the downturn in the economy in general, (ii) the year to year decrease of $1.87million in the gain on the fair value adjustment to embedded derivatives, and (iii) losses on disposal of spoiled raw material.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

On July 11, 2005, we issued 6,000 shares of Series A Preferred Stock, convertible into an aggregate of 6,315,789 shares of Class A Common Stock at a conversion price of $0.95 per share (subject to anti-dilution adjustments and interest payments), raising $6.0 million in gross proceeds.

On December 22, 2005, we issued 9,500 shares of Series B Preferred Stock, convertible into an aggregate of 5,937,500 shares of Class A Common Stock at a conversion price of $1.60 per share (subject to anti-dilution adjustments and interest payments), raising $9.5 million in gross proceeds.

The key terms of the Series A Preferred Stock and Series B Preferred Stock are as follows:

8

	Series A Preferred Stock	Series B Preferred Stock
Preferred Dividend	7% per annum, payable quarterly in arrears in cash or, at the Company’s option subject to satisfaction of certain conditions, shares of Class A Common Stock valued at 95% of the volume-weighted current market price.	7% per annum, payable quarterly in arrears in cash or, at the Company’s option subject to satisfaction of certain conditions, shares of Class A Common Stock valued at 95% of the volume-weighted current market price.
Redemption	July 11, 2010 Beginning on the 24th month following closing and each month thereafter, the Company shall redeem 1/37th of the face value of the Preferred Stock in either cash or Class A Common Stock valued at 90% of the volume-weighted current market price.	December 22, 2010 Beginning at the end of the 24th month following closing and on each third monthly anniversary of that date (quarterly) thereafter, the Company shall redeem 1/13th of the face value of the Preferred Stock in either cash or Class A Common Stock valued at 90% of the volume-weighted current market price.
Mandatory Conversion	The Company may at any time force the conversion of the Preferred Stock if the volume-weighted current market price of the Class A Common Stock exceeds 300% of the then applicable conversion price.	The Company may at any time force the conversion of the Preferred Stock if the volume-weighted current market price of the Class A Common Stock exceeds 200% of its price at issuance of the Preferred Stock.
Registration	The Company shall file to register the underlying Class A common shares within 30 days of the closing date and make its best efforts to have the Registration declared effective at the earliest date.  In the event such Registration is not continuously effective during the period such shares are subject to transfer restrictions under the U.S. federal securities laws, then (subject to certain exceptions) the holders are entitled to receive liquidated damages equal to 2.0% of the purchase price of the Preferred Stock per month.	The Company shall file to register the underlying Class A common shares with 30 days of the closing date and make its best efforts to have the Registration declared effective at the earliest date.  In the event such Registration is not continuously effective during the period such shares are subject to transfer restrictions under the U.S. federal securities laws, then (subject to certain exceptions) the holders are entitled to receive liquidated damages equal to 2.0% of the purchase price of the Preferred Stock per month.
Anti-dilution	In the event the Company issues, at any time while Preferred Stock are still outstanding, Common Stock or any type of securities giving rights to Common Stock at a price below the Issue Price, the Company agrees to extend full-ratchet anti-dilution protection to the investors.	In the event the Company issues, at any time while Preferred Stock are still outstanding, Common Stock or any type of securities giving rights to Common Stock at a price below the Issue Price, the Company agrees to extend full-ratchet anti-dilution protection to the investors.

As of December 25, 2009, the Company had long-term debt obligations that resulted from the mandatorily redeemable convertible preferred stock through December 2010 and the pre-determined annual fee charged by joint venture partners through August 2049 as follows:

	Payment Obligations By Period
	2010		2010		2011		2012		2013		Thereafter		Total
	(In thousands)
Redeemable convertible preferred stock	$	3,494	$	—	$	—	$	—	$	—	$	—	$	3,494
Pre-determined annual fee charged by joint venture partners		129		129		129		129		129		4,399		5,044
Total	$	3,623	$	129	$	129	$	129	$	129	$	4,399	$	8,538

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Reconciliation of the outstanding payment obligations of redeemable convertible preferred stock:

	(In thousands)
Aggregated balance as of the issue date	$	15,500
Partial redemption of Series A Preferred Stock in 2005		(1,900	)
Partial redemption of Series A and B Preferred Stock in 2006		(3,438	)
Partial redemption of Series A Preferred Stock in 2007		(728	)
Partial redemption of Series A and B Preferred Stock in 2008		(2,933	)
Partial redemption of Series A and B Preferred Stock in 2009		(3,007	)
	$	3,494

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary liquidity needs are for the purchase of inventories and funding accounts receivable and capital expenditures. Historically, the Company has financed its working capital requirements through a combination of internally generated cash and advances from related companies.

Our working capital decreased $19.98 million to $29.84 million at December 25, 2009 as compared to $49.82 million at December 25, 2008, which was primarily due to the disposal of the assets held for disposal, provision for bad debt and disposal of spoiled raw material.

Cash and cash equivalents were $3.44 million as of December 25, 2009, a decrease of $0.94 million from December 25, 2008. The Company believes that it has enough cash available and expects to have enough income and cash flow from operations to operate for the next 12 months.

Off-balance sheet arrangements

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

INFLATION AND CHANGING PRICES

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

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities.  We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimates are made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements.  We believe the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Revenue recognition

Our revenues are generated from sales of flour, soybean products and instant noodles. All of our revenue transactions contain standard business terms and conditions. We determine the appropriate accounting for these transactions after considering (1) whether a contract exists; (2) when to recognize revenue on the deliverables; and (3) whether all elements of the contract have been fulfilled and delivered. In addition, our revenue recognition policy requires an assessment as to whether collection is reasonably assured, which inherently requires us to evaluate the creditworthiness of our customers. Changes in judgments on these assumptions and estimates could materially impact the timing or amount of revenue recognition.

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Stock-Based Compensation

On December 16, 2004, the FASB issued SFAS 123R, “Share-Based Payment,” (now Accounting Standards Codification (“ASC”) Topic 718, “Compensation-Stock Compensation”) which replaces SFAS 123, “Accounting for Stock-Based Compensation” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” ASC 718 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. Under ASC 718, 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 ASC 718, 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 ASC 718 for the fiscal year beginning on December 26, 2005, and recorded the compensation expense for all unvested stock options.

Contractual joint ventures

A contractual joint venture is an entity established between the Company and another joint venture partner, with the rights and obligations of each party governed by a contract.  Currently, the Company has established three contractual joint ventures with three Chinese partners in China, with percentage of ownership ranging from 79.64% to 90%.  Pursuant to each Chinese joint venture agreement, each Chinese joint venture partner is entitled to receive a pre-determined annual fee and is not responsible for any profit or loss, regardless of the ownership in the contractual joint venture.  In view of such contracted profit sharing arrangement, the three contractual joint ventures are regarded as 100% owned by the Company.  Hence, the Company’s consolidated financial statements include the financial statements of the contractual joint ventures.

Recent accounting pronouncements

In April 2009, FASB issued FSP 115-2 and FSP 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (now codified within ASC 320, “Investments—Debt and Equity Securities”). ASC 320 provides greater clarity about the credit and noncredit component of an other-than-temporary impairment event and more effectively communicates when an other-than-temporary impairment event has occurred. ASC 320 amends the other-than-temporary impairment model for debt securities. The impairment model for equity securities was not affected. Under ASC 320, an other-than-temporary impairment must be recognized through earnings if an investor has the intent to sell the debt security or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost basis. This standard was effective for interim periods ending after June 15, 2009. The adoption of ASC 320 did not have a material impact on the Company's results of operations or financial position.

In April 2009, the FASB issued guidance on determining fair value when the volume and level of activity for an asset or liability has significantly decreased and identifying transactions that are not orderly (originally issued as FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, and subsequently codified within FASB ASC Topic 820). The guidance provides additional guidance to expand on the factors that should be considered in estimating fair value when there has been a significant decrease in market activity for an asset or liability. The guidance is effective for interim and annual periods ending after June 15, 2009. The adoption did not have any impact on the Company’s financial position or results of operations at the date of adoption.

In April 2009, FASB issued FSP 107-1 and Accounting Principles Board 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (now codified within ASC 825, “Financial Instruments”). ASC 825 requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. ASC 825 was effective for interim periods ending after June 15, 2009. The adoption of ASC 825 did not have a material impact on the Company's consolidated results of operations or financial position.

In May 2009, the FASB issued guidance on subsequent events (originally issued as SFAS 165, “Subsequent Events”, and subsequently codified into FASB ASC Topic 855). Topic 855 addresses the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. Topic 855 is effective for interim or annual periods ending after June 15, 2009. The adoption of Topic 855 did not have any impact on the Company’s financial position or results of operations at the date of adoption.

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Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC or Codification), “Generally Accepted Accounting Principles - Overall” (ASC Topic 105-10). The Codification established one source for all U.S. GAAP. The Codification supersedes, but does not change, all then-existing non-SEC accounting and reporting standards. Throughout this report, references provided to applicable portions of the Codification also include reference to the original FASB standard (SFAS), staff position (FSP) or consensus of the Emerging Issues Task Force (EITF).

In June 2009, the FASB issued SFAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (subsequently codified into FASB ASC Topic 105) which established the FASB ASC as the single source of authoritative accounting principles for U.S. GAAP issued by the FASB. The Codification supersedes all existing non-SEC accounting and reporting standards and subsequent to adoption, the FASB will issue new standards in the form of ASUs, and no longer as SFASs, FASB Staff Positions or Emerging Issues Task Force Abstracts. The Codification is effective for reporting periods ending on or after September 15, 2009. The adoption of the Codification did not have any impact on the Company’s financial position or results of operations at the date of adoption.

 In August 2009, FASB issued Accounting Standards Updates (“ASU”) 2009-5, “Fair Value Measurements and Disclosures - Measuring Liabilities at Fair Value”. ASU 2009-5 provides amendments to Subtopic 820-10, “Fair Value Measurements and Disclosures-Overall”, for the fair value measurement of liabilities. ASU 2009-5 clarifies that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value. ASU 2009-5 was effective for the Company for interim and annual periods ending after October 3, 2009. The adoption of ASU 2009-5 did not have a material impact on the Company's results of operations or financial position.

 In August 2009, FASB issued ASU 2009-4, “Accounting for Redeemable Equity Instruments—an Amendment to Section 480-10-S99”). ASU 2009-4 represents a SEC update to Section 480-10-S99, Distinguishing Liabilities from Equity. The adoption of guidance within ASU 2009-4 did not have an impact on the Company's results of operations or financial position.

In October, 2009, the FASB issued ASU 2009-15, “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing (amendments to ASC Topic 470, “Debt”)”, and provides guidance for accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt issuance.  At the date of issuance, a share-lending arrangement entered into on an entity’s own shares should be measured at fair value in accordance with Topic 820 and recognized as an issuance cost, with an offset to additional paid-in capital.  Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs.  The amendments also require several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement.  The effective dates of the amendments are dependent upon the date the share-lending arrangement was entered into and include retrospective application for arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009.   The Company is currently evaluating the potential impact of ASU 2009-15 on its financial statements.

In December 2009, FASB issued ASU 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets”. ASU 2009-16 amends the FASB ASC for the issuance of SFAS 166, “Accounting for Transfers of Financial Assets—an amendment of SFAS 140”. The amendments in ASU 2009-16 improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets. ASU 2009-16 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009.  The Company expects the adoption of ASU 2009-16 will have a material impact on the Company’s results of operations or financial position.

In December 2009, FASB issued ASU 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities”. ASU 2009-17 amends the FASB ASC for the issuance of SFAS 167, “Amendments to FASB Interpretation No. 46(R”). The amendments in ASU 2009-17 replace the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. ASU 2009-17 also requires additional disclosures about an enterprise's involvement in variable interest entities. ASU 2009-17 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company expects the adoption of ASU 2009-17 will not have a material impact on the Company’s results of operations or financial position.

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In January 2010, FASB issued ASU 2010-2, “Accounting and Reporting for Decreases in Ownership of a Subsidiary- a Scope Clarification”. ASU 2010-2 addresses implementation issues related to the changes in ownership provisions in the Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB ASC, originally issued as SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements”. Subtopic 810-10 establishes the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value. The gain or loss includes any gain or loss associated with the difference between the fair value of the retained investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction. ASU 2010-2 is effective for the Company starting January 3, 2010. The Company expects the adoption of ASU 2010-2 will not have a material impact on the Company's results of operations or financial position.

In January 2010, FASB issued ASU 2010-6, “Improving Disclosures about Fair Measurements". ASU 2010-6 provides amendments to subtopic 820-10 that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements and the presentation of separate information regarding purchases, sales, issuances and settlements for Level 3 fair value measurements. Additionally, ASU 2010-6 provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation and inputs and valuation techniques. ASU 2010-6 is effective for financial statements issued for interim and annual periods ending after December 15, 2010. The Company expects the adoption of ASU 2010-06 will not have a material impact on the Company’s results of operations or financial position.

In February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements”. ASU 2010-9 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements. ASU 2010-9 is effective for interim and annual periods ending after June 15, 2010. The Company expects the adoption of ASU 2010-06 will not have a material impact on the Company’s results of operations or financial position.

In March 2008, FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities” (now codified within ASC 815, “Derivatives and Hedging”). ASC 815 requires enhanced disclosures about an entity's derivative and hedging activities aimed at improving the transparency of financial reporting. ASC 815 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of ASC 815 did not have any impact on the Company's results of operations or financial position and no additional disclosure was required.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

This information has been omitted based on our status as a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

1. Reports of Independent Registered Public Accounting Firms.

2. Consolidated Balance Sheets as of December 25, 2009 and 2008.

3. Consolidated Statements of Operations for each of the two years in the period ended December 25, 2009 and 2008.

4. Consolidated Statements of Stockholders’ Equity and Comprehensive Income for each of the two years in the period ended December 25, 2009 and 2008.

5. Consolidated Statements of Cash Flows for each of the two years in the period ended December 25, 2009 and 2008.

6. Notes to Consolidated Financial Statements.

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

On January 9, 2009, the Company was notified that effective December 8, 2008, the personnel of Grobstein Horwath & Company LLP (“GHC”) have joined with Crowe Horwath LLP (“Crowe”) resulting in the resignation of  GHC as independent registered public accounting firm for the Company. Crowe was appointed as the Company’s new independent registered public accounting firm.  The audit reports of GHC on the financial statements of the Company as of and for the years ended December 25,  2007 and 2006 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.  The decision to engage Crowe was approved by the board of directors on January 15, 2009.  In connection with the audits of the Company’s financial statements for the fiscal year ended December 25, 2007 and 2006 and through the date of this Current Report, there were: (i) no disagreements between the Company and GHC on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of GHC, would have caused GHC to make reference to the subject matter of the disagreement in their reports on the Company’s financial statements for such years, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

On November 25, 2009, the Audit Committee Chairman of the Company was notified that the auditor-client relationship between the Company and Crowe had ceased due to Crowe’s resignation. The audit report of Crowe on the financial statements of the Company as of and for the year ended December 25,  2008 (Crowe did not audit any periods prior to such fiscal year) did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.  In connection with the audit of the Company’s financial statements for the fiscal year ended December 25, 2008 (Crowe did not audit any periods prior to such fiscal year), there were: (i) no disagreements between the Company and Crowe on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Crowe, would have caused Crowe to make reference to the subject matter of the disagreement in their report on the Company’s financial statements for such year, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

On December 21, 2009, the Company engaged Jimmy C.H. Cheung & Co. (“JCHC”) to serve as its independent auditor, effective December 21, 2009.  The decision to engage JCHC as the Company’s principal independent accountant was approved by the Audit Committee of the Company on December 21, 2009.

On February 3, 2010, the Company was notified that effective immediately, the US audit practice of JCHC had merged with Baker Tilly Hong Kong Limited (“BTHK”) resulting in the resignation of JCHC as independent registered public accounting firm for the Company. On February 5, 2010, the Chairman of the Audit Committee appointed BTHK as the Company’s new independent registered public accounting firm.  JCHC was recently appointed by the Company and did not provide an audit report on the financial statements of the Company as of and for the years ended December 25, 2009 and 2008.  During the Company’s most two recent fiscal years ended December 25, 2009 and 2008 and through February 8, 2010, there were: (i) no disagreements between the Company and JCHC on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of JCHC, would have caused JCHC to make reference to the subject matter of the disagreement in their reports on the Company’s financial statements for such years, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted  an evaluation of the effectiveness, as of December 25, 2008, of  the  design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information  required  to be disclosed  by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial  reporting and the preparation of financial statements for external purposes  in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

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(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.  Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the company.

Management has used the framework set forth in the report entitled Internal Control Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 25, 2009.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only our management report in this Annual Report. We are not required to include in our Annual Report an attestation report by our independent auditors under the Public Company Accounting Oversight Board, auditing Standard No. 2 until the filing of the Annual Report for the fiscal year ending December 25, 2010.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the fourth quarter of 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets forth certain information concerning each of our directors continuing in office and each of our current executive officers:

NAME	AGE	POSITION	DIRECTOR SINCE
Heng Jing Lu	58	Chairman	2003
Li Xia Wang	51	Director and Chief Executive Officer	2003
Ling Wang	45	Chief Accounting Officer	2003
Zhi Yong Jiang	43	Independent Non-Executive Director	2003
De Lin Yang	55	Independent Non-Executive Director	2003
Qi Xue	57	Independent Non-Executive Director	2003
Feng Ju Chen	54	Independent Non-Executive Director	2004

The business experience during at least the last five years of each of these individuals is as follows:

Mr. Heng Jing Lu, Chairman of the Company, graduated from The Shandong Institute of Economics in accounting and is a PRC qualified accountant. Before joining the Company on December 15, 2003, he had been working in the oil and grain industry for over 30 years.  Prior to joining the Company, he was the director of the Oil and Grain Bureau of Longkou, Shandong PRC where he had worked since 1975. He has extensive experience in the management of agricultural and food related enterprises and strategic planning. He is primarily responsible for business development and overall company management.

Ms. Li Xia Wang, director and Chief Executive Officer of the Company, graduated from The Shandong Institute of Economics in accounting and is a PRC qualified accountant. She joined the Longkou Oil & Grain Group Company in 1980 where she has remained, her last position being Deputy General Manager. She has over 20 years of extensive experience in the field of finance and accounting. She became a director of the Company on December 15, 2003, and its Chief Executive Officer in 2004.

Ms. Ling Wang, director and Chief Accounting Officer of the Company, graduated from Shandong Television Broadcast University in economics management. She has been working with the subsidiary of the Company since 1981 and her main responsibilities are in operation control and internal audit.

Mr. Zhi Yong Jiang, independent non-executive director of the Company since December 15, 2003, currently serves on the audit committee, acting as Chairman. He graduated from Yantai Oil & Grain College with a degree in finance & accounting. He had been working with Longkou Jinsheng Electronics Co. Ltd since 2000 and prior to joining the Company, his last position was Vice President of Longkou Soybean Food Co., Ltd. He has been working in the accounting and financing field for more than 19 years in different industries. He has extensive experience in the field of finance and accounting.

Mr. De Lin Yang, independent non-executive director of the Company since December 15, 2003, is currently the chairman of the Yantai Hong Yuan CPA, a public accounting firm. Mr. Yang graduated from Shandong Gan Bu Distance Learning University with a bachelor degree in Accounting. He joined the Longkou City Ceramics Factory as an accountant in 1975 and was promoted to Chief Accountant in 1982. From 1989 to 1999, Mr. Yang served as the deputy chairman of the Longkou City CPA. In 2000, Mr. Yang joined the Yantai Hong Yuan CPA as the deputy chairman and was promoted to the chairman of the firm in 2002.

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Mr. Qi Xue, independent non-executive director of the Company since March 15, 2003, graduated in 1987 from The Official Institute of Beijing Chemical Industry Management with a diploma of higher education specializing in industrial accounting. He is an associate member of The Chinese Institute of Certified Public Accountants. Since 1999, he has been the Principal of the Longkou Huayu Certified Public Accountants Co. Ltd.

Ms. Feng Ju Chen, independent non-executive director of the Company, graduated from Yantai University in business management and is a member of The Chinese Institute of Certified Public Accountants. She has been the accounting manager of the Audit Bureau of Longkou City for more than 20 years. She has extensive experience in the field of accounting and joined the Company as a director on April 15, 2004.

There are no family relationships between the directors and executive officers.

Code of Ethics

Our Board of Directors has adopted a Code of Conduct and Ethics (the “Code”) that applies to all of our employees, officers and directors. The Code covers compliance with law, fair and honest dealings with the Company, with competitors and with others, fair and honest disclosure to the public, and procedures for compliance with the Code. You can obtain a copy of the Code free of charge by sending a written request to the attention of Ms. Ling Wang, New Dragon Asia Corp., 10 Huangcheng Road (N), Longkou, Shandong Province, PRC.

Board Leadership Structure

Mr. Heng Jing Lu serves as the Chairman of the Board of Directors of our company.  Ms. Li Xia Wang serves as the Chief Executive Officer of our company.  We believe that the separation of the positions of principal executive officer and chairman of the board is in the best interest of our company and our stockholders because Mr. Lu focuses solely on board activities and oversees the management activities led by Ms. Wang, which is in line with the accepted corporate governance standards and practices.

Board Committees and Designated Directors

The Board of Directors has a Compensation Committee, a Nominating Committee and an Audit Committee.

Compensation Committee.   The Compensation Committee makes recommendations to the Board of Directors concerning salaries and incentive compensation for our officers, including our Chief Executive Officer, and employees and administers our stock option plans. Our Compensation Committee consists of Qi Xue, Feng Ju Chen and Zhi Yong Jiang. Compensation decisions during the fiscal year ended December 25, 2009 were made by all of the directors of the Committee. Each of the members of the Committee is independent and none has served as an officer or employee of the Company.

Nominating Committee.   Under the rules of NYSE Amex (on which our Class A Common Stock is listed for trading), nominees for our Board must be selected either by a nominating committee consisting entirely of independent directors or by a majority of the independent directors, acting pursuant to a standing resolution governing the nominating process. Given the size of our company and the significant committee responsibilities that many directors already have, we have chosen to assign this function to the independent directors rather than to a nominating committee. Consequently, our three independent directors, Qi Xue, Feng Ju Chen and Zhi Yong Jiang, are responsible for nominations. They act pursuant to a standing resolution. To date, the independent directors have not engaged any third parties to assist them in identifying candidates for the Board.

Among the tasks that our independent directors may undertake in this capacity are these:

- Identifying and selecting those persons who will be nominees for director.

- Considering factors relevant to the selection of nominees, including requirements of law, stock exchange listing standards, matters of character, judgment, business experience and areas of expertise, the diversity of the Board, and other factors.

- Recruiting appropriate candidates when necessary, and reviewing the qualifications of any candidates nominated by shareholders.

- Evaluating from time to time the size and composition of the Board and its committees.

- Evaluating the function and performance of the Board and its directors.

There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s board of directors.

17

Audit Committee.   The Audit Committee operates under a written charter. The Audit Committee consists of three directors, Qi Xue, Zhi Yong Jiang and Feng Ju Chen, each of whom meets the independence requirements and standards currently established by NYSE Amex and the SEC. In addition, the Board of Directors has determined that Mr. Qi Xue is an “audit committee financial expert” and “independent” as defined under the relevant rules of the SEC and NYSE Amex. The Audit Committee assists the Board of Directors in fulfilling its oversight of the quality and integrity of the Company’s financial statements and the Company’s compliance with legal and regulatory requirements. The Audit Committee is responsible for retaining (subject to stockholder ratification) and, as necessary, terminating, the independent auditors, annually reviewing the qualifications, performance and independence of the independent auditors and the audit plan, fees and audit results, and pre-approving audit and non-audit services to be performed by the auditors and related fees. The Audit Committee also oversees the performance of the Company’s internal audit and compliance functions.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common stock and other of our equity securities, on Forms 3, 4 and 5 respectively. Based on Company records and other information, we believe that all SEC filing requirements applicable to our directors and executive officers were complied with for the fiscal year ended December 25, 2009, except Ling Wang who did not timely file two Form 4s disclosing reportable transactions, which she later reported on Form 4s.

ITEM 11.   EXECUTIVE COMPENSATION.

Summary Compensation Table

Name and Principal Position	Year	Salary		Stock Awards			Option Awards		Total
		($)		($)			($)		($)
Li Xia Wang (i)	2009		20,000		—			—		20,000
Chief Executive Officer	2008		20,000		—			—		20,000
and Director
Ling Wang	2009		—	320,000		(ii)		—		320,000
Chief Accounting Officer	2008		—		—			—		—

(i) Li Xia Wang was promoted to CEO of the Company in 2004. She is a Chinese national. Her annual base salary is $20,000.

(ii) On May 5, 2009, we granted 2 million shares of our Class A Common Stocks to Ling Wang in connection with her employment agreement dated as of April 1, 2009 with the Company appointing Ms. Wang as the Company’s Chief Financial Officer. The closing sale price for our Class A Common Stock on May 5, 2009 was $0.16 per share.

Outstanding Equity Awards At Fiscal Year-end

Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date
Li Xia Wang		—		—
Peter Mak		6,000,000		—	$	1.82	February 12, 2010

Pension Benefits

We do not sponsor any qualified or non-qualified defined benefit plans.

Nonqualified Deferred Compensation

We do not maintain any non-qualified defined contribution or deferred compensation plans. Our Compensation Committee, which is comprised solely of “outside directors” as defined for purposes of Section 162(m) of the Code, may elect to provide our officers and other employees with non-qualified defined contribution or deferred compensation benefits if the Compensation Committee determines that doing so is in our best interests.

18

Compensation of Directors

We do not provide cash or other compensation to our directors for their services as members of the Board or for attendance at Board or committee meetings. However, our directors will be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of the Board and its committees.

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

The following table sets forth, as of March 9, 2010, certain information concerning the beneficial ownership of Common Stock by (i) each stockholder known to us to beneficially own five percent or more of our outstanding Common Stock; (ii) each director; (iii) each executive officer; and (iv) all of our executive officers and directors as a group, and their percentage ownership and voting power. As of March 9, 2010, there were 90,241,559 shares of Common Stock outstanding.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership			Percent of Class
New Dragon Asia Food Ltd. 10 Huangcheng Road (N), Longkou, Shandong Province, PRC		18,576,154			20.58	%
Heng Jing Lu† Chairman		18,576,154	(1)		20.58	%
Li Xia Wang† Chief Executive Officer and Director		-0-			*
Ling Wang† Chief Accounting Officer		-0-			*
Zhi Yong Jiang† Director		-0-			*
De Lin Yang† Director		-0-			*
Qi Xue† Director		-0-			*
Feng Ju Chen† Director
All Directors and Executive Officers (7 people)		18,576,154			20.58	%

* Less than one percent.

† Address of referenced person is c/o New Dragon Asia Corp. 10 Huangcheng Road (N), Longkou, Shandong Province, PRC.

(1) Represents shares owned by New Dragon Asia Food Ltd. Mr. Heng Jing Lu, our Chairman, is the holder of record and beneficial holder of 100% of the equity interests of New Dragon Asia Food Ltd.

Change in Control

There were no arrangements, known to the Company, including any pledge by any person of securities of the Company the operation of which may at a subsequent date result in a change in control of the Company.

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ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

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.  For a summary of certain related party transactions, please refer to Note 17 of the Consolidated Financial Statements under the heading “Related Party Transactions” for significant details. The comprehensive summary of information required by Item 13 is set forth in our Proxy Statement under the caption “certain relationships and related transactions” and is incorporated herein by this reference.

Director Independence

The NYSE Amex marketplace rules (the “NYSE Amex Rules”) require that a majority of our Board of Directors must be “independent” and no director qualifies as independent until the Board makes an affirmative determination to that effect. In making this determination about a director, the Board must affirmatively conclude that the director does not have a material relationship with us that would interfere with the exercise of his or her independent judgment in carrying out the responsibilities of a director. Under the NYSE Amex Rules, the Board considered, among other factors, the director’s current and historic relationships with us and our competitors, suppliers, customers and auditors, including compensation directly or indirectly paid to the director; the director’s professional and family relationships with management and other directors; the relationships that the director’s current and former employers may have with us; and the relationships between us and other companies of which the director may be a director or executive officer. The NYSE Amex Rules require that the independent directors meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive session.

As a result of this review, the Board has determined that the following directors, comprising a majority of the entire Board, are independent:  De Lin Yang, Qi Xue, Zhi Yong Jiang and Feng Ju Chen.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES.

Crowe Horwath LLP (“Crowe”) was our independent accountants for the fiscal year ending December 25, 2008 and the period from December 26, 2009 through November 25, 2009. On November 25, 2009, the Audit Committee Chairman of the Company was notified that the auditor-client relationship between the Company and Crowe had ceased due to Crowe’s resignation. The Audit Committee engaged Jimmy C.H. Cheung & Co. (“JCHC”) to serve as its independent auditor, effective December 21, 2009.

On February 3, 2010, the Company was notified that effective immediately, the US audit practice of JCHC had merged with Baker Tilly Hong Kong Limited (“BTHK”) resulting in the resignation of JCHC as independent registered public accounting firm for the Company. On February 5, 2010, the Chairman of the Audit Committee appointed BTHK as the Company’s new independent registered public accounting firm.  JCHC was recently appointed by the Company and did not provide an audit report on the financial statements of the Company as of and for the years ended December 25, 2009 and 2008.

Public Accountants’ fees

For fiscal years ended December 25, 2009 and 2008, fees for services provided by Crowe Horwath LLP were as follows:

	2009		2008
Audit Fees	$	61,000	$	228,471
Audit Related Fees		6,000		-
Tax Fees	$	-	$	9,000
All other fees		-		-

For fiscal year ended December 25, 2009, fees for services provided by Jimmy C.H. Cheung & Co. were as follows:

	2009
Audit Fees	$	120,000
Audit Related Fees		-
Tax Fees	$	-
All other fees		-

Audit Fees were for professional services rendered for the audit of the Company’s annual financial statements, the review of quarterly financial statements, and the preparation of statutory and regulatory filings. Audit-Related Fees relate to professional services rendered in connection with accounting consultations relating to SEC reviews on filings. Tax fees consist of fees billed for professional services for tax compliance, tax planning and tax advice. These services include assistance regarding federal, state and international tax compliance and planning, tax audit defense, and mergers and acquisitions.

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Pre-Approval Policies and Procedures

In accordance with the SEC’s auditor independence rules, the Audit Committee has established the following policies and procedures by which it approves in advance any audit or permissible non-audit services to be provided to the Company by its independent auditor.

Prior to the engagement of the independent auditor for any fiscal year’s audit, management submits to the Audit Committee for approval lists of recurring audit, audit-related, tax and other services expected to be provided by the auditor during that fiscal year. The Audit Committee adopts pre-approval schedules describing the recurring services that it has pre-approved, and is informed on a timely basis, and in any event by the next scheduled meeting, of any such services rendered by the independent auditor and the related fees.

The fees for any services listed in a pre-approval schedule are budgeted, and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year. The Audit Committee will require additional pre-approval if circumstances arise where it becomes necessary to engage the independent auditor for additional services above the amount of fees originally pre-approved. Any audit or non-audit service not listed in a pre-approval schedule must be separately pre-approved by the Audit Committee on a case-by-case basis.Every request to adopt or amend a pre-approval schedule or to provide services that are not listed in a pre-approval schedule must include a statement by the independent auditors as to whether, in their view, the request is consistent with the SEC’s rules on auditor independence.

The Audit Committee will not grant approval for:

- any services prohibited by applicable law or by any rule or regulation of the SEC or other regulatory body applicable to the Company;

- provision by the independent auditor to the Company of strategic consulting services of the type typically provided by management consulting firms; or

- the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the tax treatment of which may not be clear under the Internal Revenue Code and related regulations and which it is reasonable to conclude will be subject to audit procedures during an audit of the Company’s financial statements.

Tax services proposed to be provided by the auditor to any director, officer or employee of the Company who is in an accounting role or financial reporting oversight role must be approved by the Audit Committee on a case-by-case basis where such services are to be paid for by the Company, and the Audit Committee will be informed of any services to be provided to such individuals that are not to be paid for by the Company.

In determining whether to grant pre-approval of any non-audit services in the “all other” category, the Audit Committee will consider all relevant facts and circumstances, including the following four basic guidelines:

- whether the service creates a mutual or conflicting interest between the auditor and the Company;

- whether the service places the auditor in the position of auditing his or her own work;

- whether the service results in the auditor acting as management or an employee of the Company; and

- whether the service places the auditor in a position of being an advocate for the Company.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following are filed with this Annual Report:

(1)  The financial statements listed on the Financial Statements Table of Contents.

(2)  Not applicable.

(3)  The exhibits referred to below, which include the following managerial contracts or compensatory plans or arrangements:

o Amended and Restated Equity Incentive Plan

o Employment Agreement dated April 1, 2009 between New Dragon Asia Corp. and Ling Wang

(b) The exhibits listed on the Exhibit Index are filed as part of this Annual Report.

(c) Not applicable.

Exhibit Number	Description
2.1	Share Exchange Agreement dated as of December 18, 2001 (incorporated herein by reference from our filing on the Definitive Proxy 14/A filed on October 11, 2001).
3.1	Amended  Articles  of  Incorporation (incorporated herewith by reference to Exhibit 3.1 to our Definitive Proxy 14/A filed on October 11, 2001).
3.2	By-laws (incorporated herewith by reference to Exhibit 3.2 to our Definitive Proxy 14/A filed on October 11, 2001).
3.3	Certificate of Designations of Preferences, Rights and Limitations of the Series A 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 3.1 of our Form 8-K filed on July 12, 2005).
3.4	Certificate of Designations of Preferences, Rights and Limitations of the Series B 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 3.1 of our Form 8-K filed on December 23, 2005).
4.1	Subscription Agreement, dated September 4, 2003  (incorporated herewith by reference to Exhibit 4.1 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.2	Subscription Agreement, dated October 3, 2003 (incorporated herewith by reference to Exhibit 4.2 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.3	Common Stock Purchase Warrants for the September 4, 2003 Private Placement (incorporated herewith by reference to Exhibit 4.3 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.4	Common Stock Purchase Warrants for the October 3, 2003 Private Placement (incorporated herewith by reference to Exhibit 4.4 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.5	Form of Warrant issued to Midsummer Investment Ltd. and Islandia, L.P. (incorporated herewith by reference to Exhibit 4.1 to our Form 8-K filed on July 12, 2005).

22

4.6	Form of Warrant issued to Alliance Financial, LLC, Renaissance Advisors BVI, John F. Steinmetz, TN Capital Equities, Ltd. and Kathleen McDonnell (incorporated herewith by reference to Exhibit 4.2 to our Registration Statement on Form S-3 filed on August 11, 2005).
4.7	Securities Purchase Agreement, dated July 11, 2005, relating to the sale of the Series A 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 10.1 to our Form 8-K filed on July 12, 2005).
4.8	Registration Rights Agreement, dated July 11, 2005, by and among New Dragon Asia Corp. and the investors named therein (incorporated herewith by reference to Exhibit 10.2 to our Form 8-K filed on July 12, 2005).
4.9	Form of Warrant issued to Midsummer Investment Ltd. and Islandia, L.P. (incorporated herewith by reference to Exhibit 4.1 to our Form 8-K filed on December 23, 2005).
4.10	Form of Warrant issued to Alliance Financial, LLC, Renaissance Advisors, Inc., John F. Steinmetz, TN Capital Equities, Ltd. and Kathleen McDonnell (incorporated herewith by reference to Exhibit 4.2 to our Registration Statement on Form S-3 filed on January 20, 2006).
4.11	Securities Purchase Agreement, dated December 22, 2005, relating to the sale of the Series B 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 10.1 to our Form 8-K filed on December 23, 2005).
4.12	Registration Rights Agreement, dated December 22, 2005, by and among New Dragon Asia Corp. and the investors named therein (incorporated herewith by reference to Exhibit 10.2 to our Form 8-K filed on December 23, 2005).
4.13	Registration Rights Agreement, dated December 22, 2005, by and among New Dragon Asia Corp. and New Dragon Food Ltd. (incorporated herewith by reference to Exhibit 4.5 to our Registration Statement on Form S-3 filed on January 20, 2006).
10.1	Sino-Foreign Joint Venture Contract for the New Dragon Asia Flour (Yantai) Company Limited, dated June 1, 1999 (incorporated herewith by reference to Exhibit 10.1 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.2	Subcontracting Agreement, for the New Dragon Asia Flour (Yantai) Company Limited, dated June 26, 1999  (incorporated herewith by reference to Exhibit 10.2 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.3	Sino-Foreign Joint Venture Contract for the New Dragon Asia Food (Yanti) Company Limited, dated November 28, 1998  (incorporated herewith by reference to Exhibit 10.3 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.4	Subcontracting Agreement, for the New Dragon Asia Food (Yantai) Company Limited, dated December 26, 1998  (incorporated herewith by reference to Exhibit 10.4 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.5	Sino-Foreign Joint Venture Contract for the New Dragon Asia Food (Dalian) Company Limited, dated November 28, 1998 (incorporated herewith by reference to Exhibit 10.5 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.6	Subcontracting Agreement, for the New Dragon Asia Food (Dalian) Company Limited, dated December 26, 1998 (incorporated herewith by reference to Exhibit 10.6 to our Registration Statement on Form S-3 filed on October 3, 2003).

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10.7	Sino-Foreign Joint Venture Contract for the Sanhe New Dragon Asia Food Company Limited, dated November 28, 1998 (incorporated herewith by reference to Exhibit 10.7 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.8	Subcontracting Agreement, for the Sanhe New Dragon Asia Food Company Limited, dated December 26, 1998  (incorporated herewith by reference to Exhibit 10.8 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.9	Employment Agreement between New Dragon Asia Corp. and Peter Mak, dated November 2, 2004 (incorporated herewith by reference to Exhibit 10.9 to our Form 8-K filed on June 29, 2005).
10.10	Employment Supplement between New Dragon Asia Corp. and Peter Mak, dated June 22, 2005 (incorporated herewith by reference to Exhibit 10.9 to our Form 8-K filed on June 29, 2005).
10.11	Supplementary Agreement to Employment Agreement between New Dragon Asia Corp. and Peter Mak, dated January 20, 2006 (incorporated herewith by reference to Exhibit 10.10 to our Form 8-K filed on January 24, 2006).
10.12	Amended and Restated Equity Incentive Plan (incorporated herewith by reference to Exhibit C to our Definitive Information Statement on Schedule 14C filed on May 4, 2009).
10.13	Stock Option Agreement between New Dragon Asia Corp. and Peter Mak, dated December 13, 2006 (incorporated herewith by reference to Exhibit 10.1 to our Form 8-K filed on December 15, 2006).
10.14	Settlement Agreement and General Release between New Dragon Asia Corp and Berry-Shino Securities Inc., dated August 15, 2007 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on August 15, 2007).
10.15	Employment Agreement dated April 1, 2009 between New Dragon Asia Corp. and Ling Wang (incorporated herewith by reference to Exhibit 10.1 to our Registration Statement on Form S-8 filed on May 8, 2009).
21.1	Subsidiaries of New Dragon Asia Corp., filed herewith.
23.1	Consent of Baker Tilly Hong Kong Limited, Independent Registered Public Accounting Firm, filed herewith.
23.2	Consent of Crowe Horwath LLP, Independent Registered Public Accounting Firm, filed herewith.
31.1	Certification of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2	Certification of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  April 6, 2010	NEW DRAGON ASIA CORP.
	By:	/s/ Li Xia Wang
		Name: Li Xia Wang
		Title: Chief Executive Officer (Principal Executive
		Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: April 6, 2010	By:	/s/ Heng Jing Lu
		Name:	Heng Jing Lu
		Title:	Chairman
Dated:  April 6, 2010	By:	/s/ Li Xia Wang
		Name:	Li Xia Wang
		Title:	Chief Executive Officer (Principal Executive
			Officer)
Dated:  April 6, 2010	By:	/s/ Ling Wang
		Name:	Ling Wang
		Title:	Chief Financial Officer (Principal
			Financial and Accounting Officer)
Dated:  April 6, 2010	By:	/s/ De Lin Yang
		Name:	De Lin Yang
		Title:	Director
Dated:  April 6, 2010	By:	/s/ Zhi Yong Jiang
		Name:	Zhi Yong Jiang
		Title:	Director
Dated:  April 6, 2010	By:	/s/ Qi Xue
		Name:	Qi Xue
		Title:	Director
Dated:  April 6, 2010	By:	/s/ Feng Ju Chen
		Name:	Feng Ju Chen
		Title:	Director

25

NEW DRAGON ASIA CORP.

FINANCIAL STATEMENTS

TABLE OF CONTENTS

Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Balance Sheets as of December 25, 2009 and 2008	F-4
Consolidated Statements of Operations for the years ended December 25, 2009 and 2008	F-5
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 25, 2009 and 2008	F-6
Consolidated Statements of Cash Flows for the years ended December 25, 2009 and 2008	F-7
Notes to Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

New Dragon Asia Corp. and Subsidiaries

We have audited the accompanying consolidated balance sheet of New Dragon Asia Corp. and Subsidiaries (the “Company”) as of December 25, 2009 and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2009 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Dragon Asia Corp. and Subsidiaries as of December 25, 2009, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Hong Kong	/s/ Baker Tilly Hong Kong Limited
April 6, 2010

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

New Dragon Asia Corp. and Subsidiaries

We have audited the accompanying consolidated balance sheet of New Dragon Asia Corp. and Subsidiaries (the “Company”) as of December 25, 2008 and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2008 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Dragon Asia Corp. and Subsidiaries as of December 25, 2008, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the consolidated financial statements, in 2009 the Company changed the manner in which it accounts for non-controlling interests in subsidiaries. This change was made retrospectively to the 2008 financial statements.

Sherman Oaks, California	/s/ Crowe Horwath LLP
April 6, 2009 except for Note 3,
as to which the date is April 6, 2010

F-3

NEW DRAGON ASIA CORP. AND SUBSIDIARIES (“NWD”)

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	December 25, 2009			December 25, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	3,440		$	4,383
Accounts receivable, net		13,437			8,888
Deposits and prepayments, net		5,632			13,056
Inventories, net		14,466			27,124
Assets held for disposal		—			5,778
Total current assets		36,975			59,229
Property, machinery and equipment, net		30,263			20,139
Land use rights, net		4,332			4,529
Due from related companies		952			981
Total assets	$	72,522		$	84,878
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,808		$	4,980
Other payables and accruals		2,062			3,845
Taxes payable		186			294
Embedded derivatives at fair value		76			287
Total current liabilities		7,132			9,406
Due to shareholder		3,700			2,780
Due to joint venture partners		463			767
Total liabilities		11,295			12,953
Series A & B Redeemable Convertible Preferred Stock, $0.0001 par value: Authorized shares – 5,000,000 Issued and outstanding – 3,494 shares and 6,501 shares at December 25, 2009 and 2008, respectively		3,008			4,645
Commitments
Stockholders’ equity:
Class A Common Stock, $0.0001 par value:
Authorized shares – 102,000,000
Issued and outstanding – 86,364,229 in 2009 and 60,922,981 in 2008		8			6
Class B Common Stock, $0.0001 par value:
Authorized shares – 2,000,000 – none issued and outstanding		—			—
Additional paid-in capital		35,569			32,521
Deferred stock compensation		(75	)		—
Retained earnings		9,187			21,321
Accumulated other comprehensive income		13,405			13,310
Total NWD stockholders’ equity		58,094			67,158
Non-controlling interests		125			122
Total equity		58,219			67,280
Total liabilities and stockholders’ equity	$	72,522		$	84,878

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

F-4

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

	For the years ended December 25
	2009			2008
Net revenue	$	23,217		$	49,340
Cost of goods sold		(24,518	)		(41,989	)
Gross profit /(loss)		(1,301	)		7,351
Operating expenses:
Selling and distribution expenses		(944	)		(1,275	)
General and administrative expenses		(6,381	)		(3,896	)
Impairment reserves		—			(4,925	)
Loss from operations		(8,626	)		(2,745	)
Other income (expense):
Other income (expense)		(3,145	)		100
Interest income		82			36
Gain on fair value adjustments to embedded derivatives		177			2,047
VAT refund		59			60
Loss before income taxes and non-controlling interests		(11,453	)		(502	)
Benefit (provision) for income taxes		347			(1,205	)
Net loss		(11,106	)		(1,707	)
Net loss attributable to non-controlling interests		3			190
Net loss attributable to controlling interests	$	(11,103	)	$	(1,517	)
Accretion of redeemable preferred stock		(704	)		(1,196	)
Preferred stock dividends		(324	)		(534	)
Loss attributable to common stockholders	$	(12,131	)	$	(3,247	)
Earnings per common share
Basic	$	(0.17	)	$	(0.06	)
Diluted	$	(0.17	)	$	(0.06	)
Weighted average number of common shares outstanding
Basic		73,016			58,262
Diluted		73,016			58,262

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

F-5

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Amounts in the thousands)

	Class A Common Stock				Additional Paid-in		Deferred  Stock			Retained			Accumulated  Other Comprehensive			Total NWD Stockholders'		Non  Controlling						Comprehensive
	Shares		Amount		Capital		Compensation			Earnings			Income			Equity		Interests			Total Equity			Income
Balance at December 25, 2007		55,195	$	5	$	29,982	$	-		$	24,568		$	7,767	$	62,322		$	294		$	62,616
Net loss		-		-		-		-			(1,517	)		-		(1,517	)		(190	)		(1,707	)		(1,517	)
Accretion of Redeemable Preferred Stock		-		-		-		-			(1,196	)		-		(1,196	)		-			(1,196	)
Preferred Stock Dividends		-		-		-		-			(534	)		-		(534	)		-			(534	)
Foreign currency translation adjustment		-		-		-		-			-			5,543		5.543			18			5,561			5,543
Conversion of preferred stocks and related dividend payments made in Class A Common Stock		5,728		1		2,539		-			-			-		2,540			-			2,540
Balance at December 25, 2008		60,923		6		32,521		-			21,321			13,310		67,158			122		$	67,280			4,026
Net income (loss)		-		-		-		-			(11,106	)		-		(11,106	)		3			(11,103	)		(11,106	)
Accretion of Redeemable Preferred Stock		-		-		-		-			(704	)		-		(704	)		-			(704	)
Preferred Stock Dividends		-		-		-		-			(324	)		-		(324	)		-			(324	)
Foreign currency translation adjustment		-		-		-		-			-			95		95			-			95			95
Conversion of preferred stock and related dividend payments made in Class A Common Stock		20,441		2		2,748		-			-			-		2,750			-			2,750
Share-based compensation to CFO		2,000		—		300		(75	)		-			-		225			-			225
Balance at December 25, 2009		83,364	$	8	$	35,569	$	(75	)	$	9,187		$	13,405	$	58,094		$	125		$	58,219			(11,011	)

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

F-6

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	For the years ended December 25,
	2009			2008
Cash flows from operating activities:
Net loss	$	(11,106	)	$	(1,707	)
Adjustments to reconcile net income loss to net cashprovided by operating activities:
Allowance for doubtful accounts		1,541			229
Provision for inventory reserve		460			433
Property and equipment impairment		—			4,410
Provision for land use rights impairment		—			390
Impairment of goodwill		—			125
Depreciation and amortization of land use rights		1,788			1,955
Loss on sale of machinery and equipment		215			12
Gain on fair value adjustments to embedded derivatives		(177	)		(2,047	)
Stock-based compensation expense		225			—
Changes in operating assets and liabilities:
Accounts receivable		(6,073	)		700
Deposits and prepayments		7,781			(1	)
Inventories		12,215			(3,695	)
Due from related companies		30			(2	)
Accounts payable		(178	)		1,665
Other payables and accruals		(1,732	)		882
Taxes payable		(108	)		(3,256	)
Due to related companies		—			(36	)
Deferred tax asset		(350	)		—
Net cash provided by operating activities		4,531			57
Cash flows from investing activities:
Proceeds from sale of property, machinery and equipment		5,848			3
Purchases of property, machinery and equipment		(11,963	)		(1,172	)
Net cash used in investing activities		(6,115	)		(1,169	)
Cash flows from financing activities:
Payment for preferred stock redemption		—			(84	)
Proceeds from shareholder loan		916			1,189
(Repayment to) proceeds from joint venture partners		(305	)		444
Net cash provided by financing activities		611			1,549
Impact of foreign currency translation on cash		30			300
Net increase (decrease) in cash and cash equivalents		(943	)		737
Cash and cash equivalents at the beginning of the period		4,383			3,646
Cash and cash equivalents at the end of the period	$	3,440		$	4,383
Non-Cash Investing and Financing Activities
Conversion of preferred stock into common stock	$	3,007		$	1,947
Dividend payments on preferred stock in the form of common stock	$	376		$	593
Supplemental disclosure of cash flows information:
Income taxes paid	$	374		$	3,106

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

F-7

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS

New Dragon Asia Corporation, a 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 eight manufacturing plants in Yantai, Beijing, Penglai and Chengdu.

Details of the subsidiaries are as follows:

Name	Domicile and date of incorporation	Paid-in capital	Percentage of ownership			Principal activities
Mix Creation Limited (“MC”)	The British Virgin Islands November 7, 1997	US$1,500,000		100	%	Investment holding
Rich Delta Limited  (“RD”)	The British Virgin Islands October 28, 1998	US$1,000,000		100	%	Investment holding
Hero Treasure Limited (“HT”)	The British Virgin Islands April 19, 2004	US$1		100	%	Investment holding
Keen General Limited (“KG”)	The British Virgin Islands July 20, 1998	US$1,500,000		100	%	Investment holding
Delta Link Limited (“DL”)	The British Virgin Islands October 29, 1998	US$1		100	%	Investment holding
New Dragon Asia Flour (Yantai) Company Limited (“NDAFLY”)	The PRC August 13, 1999	RMB28,500,000		90	%(a)	Manufacture, marketing and distribution of flour
New Dragon Asia Food (Yantai) Company Limited (“NDAFY”)	The PRC December 24, 1998	RMB17,462,000		90	%(b)	Manufacture, marketing and distribution of instant noodles
New Dragon Asia Food (Sanhe) Company Limited (“NDAFS”)	The PRC December 25, 1998	RMB51,191,432		79.64	%(b)	Manufacture, marketing and distribution of instant noodles
Penglai New Dragon Jin Qiao Food Company Limited (“PNDJQ”)	The PRC December 5, 2003	US$850,000		100	%	Manufacture, marketing and distribution of flour
New Dragon Asia (Longkou) Packing Materials Company Limited (“NDALPM”)	The PRC January 10, 2006	US$3,600,000		100	%	Manufacture and sale of packing materials
New Dragon Asia (LongKou) Food Company Limited (“NDALS”)	The PRC March 17, 2005	RMB16,996,980		100	%	Manufacture, marketing and distribution of soybean products
Shandong Xinlongya Industry and Trade Company Limited (“SXDC”)	The PRC September 27, 2005	US$404,400		100	%	Marketing and distribution of instant noodles, flour and soybean products
New Dragon Asia Food (Chengdu) Company Limited (“NDAFC)	The PRC February 24, 2006	RMB17,430,000		90	%	Manufacture, marketing and distribution of instant noodles

F-8

(a) NDAFLY is a contractual joint venture established in the PRC to be operated for 50 years until August 13, 2049. In September 2000, MC contributed 90% of the registered capital to NDAFLY. Under the joint venture agreement dated June 1, 1999 and the supplemental agreement dated June 26, 1999, the Chinese joint venture partner is entitled to receive a pre-determined annual fee and is not responsible for any profit or loss of NDAFLY effective from June 26, 1999. In view of the profit sharing arrangement, NDAFLY is regarded as 100% owned by the Company. The annual fee has been charged to General and Administrative Expenses for the years ended December 25, 2009 and 2008.

(b) NDAFY and NDAFS are contractual joint ventures established in the PRC to be operated for 50 years until December 24, 2048. In March 1999, RD contributed 90% of the registered capital to NDAFY, while KG contributed 79.64% of the registered capital to NDAFS. Under the joint venture agreements dated November 28, 1998 and the supplemental agreement dated December 26, 1998, the PRC joint venture partner is entitled to receive a pre-determined annual fee and is not responsible for any profit or loss of NDAFY and NDAFS effective from December 26, 1998. In view of the profit sharing arrangements, NDAFY and NDAFS are regarded as 100% owned by the Company. The annual fees have been charged to General and Administrative Expenses for the years ended December 25, 2009 and 2008.

NOTE 2. BASIS OF PRESENTATION

The consolidated financial statements include the financial statements of New Dragon Asia Corp. and all of its wholly and majority owned subsidiaries (Note 1).  Intercompany balances and transactions have been eliminated in consolidation.

Accounting Standards Codification (“ASC”) Topic 810, “Consolidation of Variable Interest Entities” (formerly Standards of Financial Accounting Standards (“SFAS”) 167, “Amendments to FASB Interpretation No. 46(R))”  an investor with a majority of the variable interests (primary beneficiary) in a variable interest entity (“VIE”) to consolidate the entity.  A VIE is an entity in which the voting equity investors do not have a controlling financial interest or the equity investment at risk is insufficient to finance the entity’s activities without receiving additional subordinated financial support from other parties. VIEs are required to be consolidated by their primary beneficiaries if they do not effectively disperse risks among the parties involved.  The primary beneficiary of a VIE is the party that absorbs a majority of the entity’s expected losses or receives a majority of its expected residual returns.  The Company has completed a review of its investments in both non-marketable and marketable equity interests as well as other arrangements to determine whether it is the primarily beneficiary of any VIEs.  The review did not identify any VIEs.

The consolidated financial statements have been prepared in accordance with ASC Topic 810 in the United States.  These Consolidated Financial Statements for interim periods are unaudited.  In the opinion of management, the consolidated financial statements include all adjustments, consisting only of normal, recurring adjustments, necessary for their fair presentation.  The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be reported for the entire year.  The preparation of financial statements in conformity with ASC Topic 810 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  The Company regularly evaluates estimates and assumptions related to allowances for doubtful accounts, sales returns and allowance, and inventory reserves. Although management believes these estimates and assumptions are adequate and reasonable under the circumstances, actual results could differ from those estimates.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

The Company recognizes sales in accordance with the United States ASC Topic 605, “Revenue Recognition” (formerly Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition”).  The Company recognizes revenue when the following fundamental criteria are met:  (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured.  Revenue is not recognized until title and risk of loss is transferred to the customer, which occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have been met.  Provisions for discounts and returns are provided for at the time the related sales are recorded, and are reflected as a reduction of sales. The Company bases its estimates on historical experience taking into consideration the type of products sold, the type of customer, and the type of specific transaction in each arrangement.  Revenues represent the invoiced value of goods, net of value added tax (“VAT”).

F-9

The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.

All of the Company’s sales made in Mainland China are subject to the Mainland Chinese value-added tax at rates ranging from 13% to 17% (“output VAT”).  Such output VAT is payable after offsetting VAT paid by the Company on purchases (“input VAT”).

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

Shipping and Handling Costs

Shipping and handling costs are included in selling expenses for all periods presented. For the year ended December 25, 2009 and 2008, shipping and handling costs were all related to exports of noodle and included in selling expenses amounting to $0.09 million and $0.35 million.

Cash and cash equivalents

The Company considers cash on hand, deposits in banks, and short-term investments purchased with an original maturity date of three months or less to be cash and cash equivalents.

Accounting for Derivative Instruments

Derivatives are recorded on the Company’s balance sheet at fair value. These derivatives, including embedded derivatives in the Company’s Series A and B Redeemable Convertible Preferred Stock are separately valued and accounted for on the Company’s balance sheet.

The Company has determined that the conversion features of its redeemable convertible preferred stock and warrants to purchase common stock are derivatives that the Company is required to account for as if they were free-standing instruments.. The Company has also determined that it is required to designate these derivatives as liabilities in its financial statements. As a result, the Company reports the value of these embedded derivatives as current liabilities on its balance sheet and reports changes in the value of these derivatives as non-operating gains or losses on its statement of operations. The value of the derivatives is required to be recalculated (and resulting non-operating gains or losses reflected in the statement of operations and resulting adjustments to the associated liability amounts reflected on the balance sheet) on a quarterly basis, and is based on the market value of the Company’s common stock. Due to the nature of the required calculations and the large number of shares of the Company’s common stock involved in such calculations, changes in the Company’s common stock price may result in significant changes in the value of the derivatives and resulting gains and losses on the Company’s statement of operations.

The pricing models the Company uses for determining fair values of its derivatives are a combination of the Black-Scholes and Binomial Pricing Models. Valuations derived from this model are subject to ongoing internal and external review. The model uses market-sourced inputs such as interest rates and option volatilities. Selection of these inputs involves management’s judgment and may impact net earnings. The Company has obtained a valuation report from a valuation firm to support its estimates as of December 25, 2009 and 2008.

The consolidated financial statements also reflect additional non-operating gains and losses related to the classification of and accounting for: (1) the conversion features of the Series A and B Preferred Stock and associated warrants, (2) the amortization associated with the discount recorded with respect to the Series A and B Preferred Stock as a preferred stock dividend, and (3) the conversion features associated with the preferred stock issued by the Company and associated warrants.

Fair Value of Financial Instruments

The Company adopted ASC Topic 820, “Fair Value Measurements and Disclosure” (formerly SFAS 157, “Fair Value Measurements”) on January 1, 2008 to account for and record fair values of financial instruments. This ASC establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  The ASC establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

F-10

Level 1 - quoted prices (unadjusted) in active markets for identical asset or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives.

Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

Level 3 - unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models.

The Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety.

The following table presents the embedded derivatives, the Company’s only financial liabilities measured and recorded at fair value on the Company’s Consolidated Balance Sheets on a recurring basis and its level within the fair value hierarchy during the years ended December 25, 2009 and 2008:

(In thousands)	Fair Value
	Level 1		Level 2		Level 3		Total
Embedded derivative liabilities as of December 25, 2009	$	—	$	—	$	76	$	76
Embedded derivative liabilities as of December 25, 2008	$	—	$	—	$	287	$	287

Financial instruments

The carrying amounts for cash and cash equivalents, accounts receivable, deposits and prepayments, accounts payable, shareholder and joint venture partner debts, and other payables and accruals approximate their fair values because of their nature and respective duration.

Accounts receivable

Accounts receivable is stated at cost, net of an allowance for doubtful accounts. The Company provides for an allowance for doubtful accounts for those third party trade accounts that are not collected within one year.

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of trade receivables. However, concentrations of credit risk are limited due to the large number of customers comprising the Company’s customer base and their dispersion across different businesses and geographic areas. The Company monitors its exposure to credit losses and maintains an allowance for anticipated losses. Such losses historically have not been significant and have been within management’s expectations. To reduce credit risk, the Company performs periodic credit valuations of its customers.

Inventories valuation

Inventories are stated at the lower of cost, determined on a weighted average basis, or 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.

Property, machinery and equipment

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

F-11

The Company accounts for long-lived assets, such as property, machinery and equipment and purchased intangible assets with finite lives, in accordance with ASC Topic 360-10, “Impairment or Disposal of Long Lived Assets” (formerly SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”), which requires impairment losses to be recorded on long-lived assets used in operations when indications of impairment are present. Determination of recoverability is based on an estimate of undiscounted future cash follows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets that management expects to hold and use is based on the amount the carrying value exceeds the fair value of the assets.

Assessments of whether there has been a permanent impairment in the value of property, machinery and equipment are periodically performed by considering factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors.  The Company has made adequate provision for the impairment occurred as of December 25, 2009.

Land use rights

Land use rights are stated at cost, less accumulated amortization. Amortization is computed using the straight-line method over the contractual lives ranging from 27 to 50 years.

Income taxes

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes” (formerly SFAS 109,  “Accounting for Income Taxes” and FIN 48 “Uncertainty in Income Taxes”). Under this method, deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts and each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized when, in management’s opinion; it is more likely than not that some portion of the deferred tax assets will not be realized. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities. The Company accounts , for uncertainty in tax positions, under the requirement of ASC 740.

Operating leases

Operating leases represent those leases under which substantially all the risks and rewards of ownership of the leased assets remain with the lessors. Rental payments under operating leases are charged to expense on the straight-line basis over the period of the leases.

Comprehensive Income

The Company  reports and displays comprehensive income and its components in the consolidated financial statements. Accumulated other comprehensive income (loss) includes foreign currency translation adjustments.

Foreign currency translation

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 ASC Topic 830-20, “Foreign Currency Transactions” (formerly SFAS 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. Statements of Operations amounts have been translated using the average exchange rate for the year. At December 25, 2009, the revenues and expenses of the Company were translated to U.S. dollars based on an average rate of US$1.00 = RMB 6.8312 and the assets and liabilities of the Company maintained in Renminbi translated to U.S. dollars at US$1.00 = RMB 6.8283. The foreign currency translation adjustment of $13,405 and $13,310 have been reported as comprehensive income in the consolidated statement of stockholders’ equity and comprehensive income for 2009 and 2008.

F-12

Although the Chinese government regulations now allow convertibility of RMB for current account transactions, significant restrictions still remain.  Hence, such translations should not be construed as representations that RMB could be converted into U.S. dollars at that rate or any other rate.

Substantially all our revenue and expenses are denominated in RMB.  Our RMB cash inflows are sufficient to service our RMB obligations.  For financial reporting purposes, we use U.S. dollars.  The value of RMB against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions.  Any significant revaluation of RMB may materially affect our financial condition in terms of U.S. dollar reporting.

Earnings per share

The Company computes earnings per share (“EPS’) in accordance with ASC Topic 260, “Earnings per Share” (formerly SFAS 128, “Earnings per Share”).  Companies with complex capital structures are required to present basic and diluted EPS.  Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period.  Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later.  Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Approximately 27,091 dilutive shares on an “as converted” basis for the Redeemable Convertible Preferred stock for the year ended December 25, 2009 were excluded from the calculation of diluted earnings per share since their effect would have been anti-dilutive.  Approximately 29,667 dilutive shares on an “as converted” basis for the Redeemable Convertible Preferred stock for the year ended December 25, 2008 were excluded from the calculation of diluted earnings per share since their effect would have been anti-dilutive.

Warrants to purchase totaling 6,482,895 shares of Class A Common Stock at weighted average exercise price $1.4093 per share and options to purchase totaling 6,000,000 shares of Class A Common Stock at weighted average exercise price $1.82 per share were outstanding as of December 25, 2009 and 2008, but were excluded from the calculation of diluted earnings per share because the effects of stock warrants and stock options were anti-dilutive.

The calculation of diluted weighted average common shares outstanding for the year ended December 25, 2009 and 2008 is based on the average of the closing price of the Company’s common stock during such periods applied to warrants and options using the treasury stock method to determine if they are dilutive. The Redeemable Convertible Preferred stock is included on an “as converted “basis when these shares are dilutive.

The following table is a reconciliation of the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented (amounts in thousands, except per share data):

	Year Ended December 25,
	2009								2008
				Weighted								Weighted
				Average								Average
	Loss			Shares		Per-Share			Loss			Shares		Per-Share
Earnings per share – basic
Loss attributable to common stockholders	$	(12,131	)		73,016	$	(0.17	)	$	(3,247	)		58,262	$	(0.06	)
Effect of dilutive securities
Redeemable Convertible Preferred Stock		—			—					—			—
Options and Warrants		—			—					—			—
Earnings per share – diluted
Loss attributable to common stockholders	$	(12,131	)		73,016	$	(0.17	)	$	(3,247	)		58,262	$	(0.06	)

Stock-Based Compensation

The Company accounts for Stock Based Compensation  by  measuring  the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. For stock options, the Company used the Black-Scholes option-pricing model to estimate the fair value of the options at the date of grant.

Recent accounting pronouncements

In December 2008, FASB issued Staff Position (“FSP”) amends FAS 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This FSP is effective for fiscal years ending after December 15, 2009. The new standard expands disclosures for assets held by employer pension and other postretirement benefit plans. It will not affect the Company’s financial position or results of operations.

F-13

Effective January 1, 2009, the Company adopted FASB ASC 810-10-65 (formerly SFAS 160, “Non-controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51”), which amends previously issued guidance to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as equity. Among other requirements, this Statement requires that the consolidated net income attributable to the parent and the non-controlling interest be clearly identified and presented on the face of the consolidated income statement. The presentation and disclosure requirements of the ASC Topics have been applied retrospectively for all periods presented in the accompanying consolidated balance sheets, statements of operations and statements of cash flows. The adoption of this pronouncement resulted in a change in the description and presentation of “minority interest” to “non-controlling interest”. However there was no impact on the Company’s financial condition or net income (loss) attributable to stockholders for any periods presented.

In April 2009, FASB issued FSP 115-2 and FSP 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (now codified within ASC 320, “Investments—Debt and Equity Securities”). ASC 320 provides greater clarity about the credit and noncredit component of an other-than-temporary impairment event and more effectively communicates when an other-than-temporary impairment event has occurred. ASC 320 amends the other-than-temporary impairment model for debt securities. The impairment model for equity securities was not affected. Under ASC 320, an other-than-temporary impairment must be recognized through earnings if an investor has the intent to sell the debt security or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost basis. This standard was effective for interim periods ending after June 15, 2009. The adoption of ASC 320 did not have a material impact on the Company's results of operations or financial position.

In April 2009, the FASB issued guidance on determining fair value when the volume and level of activity for an asset or liability has significantly decreased and identifying transactions that are not orderly (originally issued as FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, and subsequently codified within FASB ASC Topic 820). The guidance provides additional guidance to expand on the factors that should be considered in estimating fair value when there has been a significant decrease in market activity for an asset or liability. The guidance is effective for interim and annual periods ending after June 15, 2009. The adoption did not have any impact on the Company’s financial position or results of operations at the date of adoption.

In April 2009, FASB issued FSP 107-1 and Accounting Principles Board 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (now codified within ASC 825, “Financial Instruments”). ASC 825 requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. ASC 825 was effective for interim periods ending after June 15, 2009. The adoption of ASC 825 did not have a material impact on the Company's consolidated results of operations or financial position.

In May 2009, the FASB issued guidance on subsequent events (originally issued as SFAS 165, “Subsequent Events”, and subsequently codified into FASB ASC Topic 855). Topic 855 addresses the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. Topic 855 is effective for interim or annual periods ending after June 15, 2009. The adoption of Topic 855 did not have any impact on the Company’s financial position or results of operations at the date of adoption.

Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC or Codification), “Generally Accepted Accounting Principles - Overall” (ASC Topic 105-10). The Codification established one source for all U.S. GAAP. The Codification supersedes, but does not change, all then-existing non-SEC accounting and reporting standards. Throughout this report, references provided to applicable portions of the Codification also include reference to the original FASB standard (SFAS), staff position (FSP) or consensus of the Emerging Issues Task Force (EITF).

In June 2009, the FASB issued SFAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (subsequently codified into FASB ASC Topic 105) which established the FASB ASC as the single source of authoritative accounting principles for U.S. GAAP issued by the FASB. The Codification supersedes all existing non-SEC accounting and reporting standards and subsequent to adoption, the FASB will issue new standards in the form of ASUs, and no longer as SFASs, FASB Staff Positions or Emerging Issues Task Force Abstracts. The Codification is effective for reporting periods ending on or after September 15, 2009. The adoption of the Codification did not have any impact on the Company’s financial position or results of operations at the date of adoption.

F-14

In August 2009, FASB issued Accounting Standards Updates (“ASU”) 2009-5, “Fair Value Measurements and Disclosures - Measuring Liabilities at Fair Value”. ASU 2009-5 provides amendments to Subtopic 820-10, “Fair Value Measurements and Disclosures-Overall”, for the fair value measurement of liabilities. ASU 2009-5 clarifies that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value. ASU 2009-5 was effective for the Company for interim and annual periods ending after October 3, 2009. The adoption of ASU 2009-5 did not have a material impact on the Company's results of operations or financial position.

 In August 2009, FASB issued ASU 2009-4, “Accounting for Redeemable Equity Instruments—an Amendment to Section 480-10-S99”). ASU 2009-4 represents a SEC update to Section 480-10-S99, Distinguishing Liabilities from Equity. The adoption of guidance within ASU 2009-4 did not have an impact on the Company's results of operations or financial position.

In October, 2009, the FASB issued ASU 2009-15, “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing (amendments to ASC Topic 470, “Debt”)”, and provides guidance for accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt issuance.  At the date of issuance, a share-lending arrangement entered into on an entity’s own shares should be measured at fair value in accordance with Topic 820 and recognized as an issuance cost, with an offset to additional paid-in capital.  Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs.  The amendments also require several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement.  The effective dates of the amendments are dependent upon the date the share-lending arrangement was entered into and include retrospective application for arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009.   The Company expects the adoption of ASU 2009-15 will have a material impact on the Company’s results of operations or financial position..

In December 2009, FASB issued ASU 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets”. ASU 2009-16 amends the FASB ASC for the issuance of SFAS 166, “Accounting for Transfers of Financial Assets—an amendment of SFAS 140”. The amendments in ASU 2009-16 improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets. ASU 2009-16 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009.  The Company expects the adoption of ASU 2009-16 will have a material impact on the Company’s results of operations or financial position.

In December 2009, FASB issued ASU 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities”. ASU 2009-17 amends the FASB ASC for the issuance of SFAS 167, “Amendments to FASB Interpretation No. 46(R”). The amendments in ASU 2009-17 replace the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. ASU 2009-17 also requires additional disclosures about an enterprise's involvement in variable interest entities. ASU 2009-17 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company expects the adoption of ASU 2009-17 will not have a material impact on the Company’s results of operations or financial position.

In January 2010, FASB issued ASU 2010-2, “Accounting and Reporting for Decreases in Ownership of a Subsidiary- a Scope Clarification”. ASU 2010-2 addresses implementation issues related to the changes in ownership provisions in the Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB ASC, originally issued as SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements”. Subtopic 810-10 establishes the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value. The gain or loss includes any gain or loss associated with the difference between the fair value of the retained investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction. ASU 2010-2 is effective for the Company starting January 3, 2010. The Company expects the adoption of ASU 2010-2 will not have a material impact on the Company's results of operations or financial position.

F-15

In January 2010, FASB issued ASU 2010-6, “Improving Disclosures about Fair Measurements". ASU 2010-6 provides amendments to subtopic 820-10 that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements and the presentation of separate information regarding purchases, sales, issuances and settlements for Level 3 fair value measurements. Additionally, ASU 2010-6 provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation and inputs and valuation techniques. ASU 2010-6 is effective for financial statements issued for interim and annual periods ending after December 15, 2010. The Company expects the adoption of ASU 2010-06 will not have a material impact on the Company’s results of operations or financial position.

In February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements”. ASU 2010-9 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements. ASU 2010-9 is effective for interim and annual periods ending after June 15, 2010. The Company expects the adoption of ASU 2010-06 will not have a material impact on the Company’s results of operations or financial position.

In March 2008, FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities” (now codified within ASC 815, “Derivatives and Hedging”). ASC 815 requires enhanced disclosures about an entity's derivative and hedging activities aimed at improving the transparency of financial reporting. ASC 815 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of ASC 815 did not have any impact on the Company's results of operations or financial position and no additional disclosure was required.

Business Acquisition and Combination

Longyuan Packaging Plant

On January 10, 2006, the Company established New Dragon Asia (Long Kou) Packing Materials Company Limited (“NDAPM”), a wholly-owned subsidiary in Longkou, Shandong Province. NDAPM is principally engaged in the manufacturing and sale of packing materials, with a registered capital of $3.60 million. During the year ended December 25, 2009, the Company has spent approximately $2.40 million on the construction at the new plant and has committed to further capital expenditures of $1.46 million for the completion of the plant.

NOTE 4. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

	December 25,  2009			December 25,  2008
	(In thousands)			(In thousands)
Accounts receivable	$	16,162		$	10,072
Less: Allowance for doubtful accounts		(2,725	)		(1,184	)
	$	13,437		$	8,888

The activity in the Company’s allowance for doubtful accounts is summarized as follows:

	December 25,  2009			December 25,  2008
	(In thousands)			(In thousands)
Balance at the beginning of the year	$	1,184		$	944
Add: provision during the year		1,551			308
Less: write-offs during the year		(10	)		(68	)
Balance at the end of the year	$	2,725		$	1,184

NOTE 5. DEPOSITS AND PREPAYMENTS

Deposits and prepayments consist of the following:

	December 25,  2009		December 25,  2008
	(In thousands)		(In thousands)
Deposits for raw materials	$	4,794	$	12,414
Prepayments and advances		913		642
	$	5,707	$	13,056

F-16

NOTE 6. INVENTORIES

Inventories consist of the following:

	December 25,  2009			December 25,  2008
	(In thousands)			(In thousands)
Raw materials (including packing materials)	$	13,488		$	26,047
Finished goods		1,490			1,642
		14,978			27,689
Less: Inventory reserve		(512	)		(565	)
	$	14,466		$	27,124

The activity in the Company’s provision for inventory reserve is summarized as follows:

	December 25,  2009			December 25, 2008
	(In thousands)			(In thousands)
Balance at the beginning of the year	$	565		$	96
Add: provision during the year		510			471
Less: write-offs during the year		(563	)		(2	)
Balance at the end of the year	$	512		$	565

NOTE 7. DUE FROM RELATED COMPANIES

Due from related companies consist of the following:

	December 25, 2009		December 25, 2008
	(In thousands)		(In thousands)
Xinlong Asia Food (Dalian) Co., Ltd.*		899		929
Xinlong Asia Food (Luoyang) Co., Ltd.*		53		52
Due from affiliated companies for sales	$	952	$	981

* Subsidiaries of Shandong Longfeng Group Company.

NOTE 8. PROPERTY, MACHINERY AND EQUIPMENT

Property, machinery and equipment consist of the following:

	Useful Life	December 25,  2009			December 25,  2008
	(In years)	(In thousands)			(In thousands)
Buildings	40	$	13,437		$	9,379
Machinery and equipment	5- 12		23,680			16,298
Construction in process			2,397			2,216
			39,514			27,893
Less: Accumulated depreciation and amortization			(9,251	)		(7,754	)
		$	30,263		$	20,139

Depreciation and amortization expense was approximately $1,581,000, and $1,847,000 for the years ended December 25, 2009 and 2008, respectively.

F-17

NOTE 9. LAND USE RIGHTS

Land use rights consist of the following:

	December 25,  2009				December 25,  2008
	(In thousands)				(In thousands)
Land use rights		$	5,256			$	5,250
Less: Accumulated amortization			(924	)			(721	)
		$	4,332			$	4,529

Private ownership of land is not allowed in Mainland China. Rather, entities acquire the right to use land for a designated term. As of December 25, 2009 and 2008, the land use rights consisted of six parcels of land located in Mainland China held under land use rights of 27 to 50 years through 2025 to 2047.

Amortization expense was approximately $203,000 and $335,000 for the years ended December 25, 2009 and 2008, respectively. Amortization expense in each of the next 5 years is expected to be $200,000.

NOTE 10. OTHER PAYABLES AND ACCRUALS

Other payables and accruals consist of the following:

	December 25,  2009		December 25,  2008
	(In thousands)		(In thousands)
Deposits from customers	$	465	$	591
Accruals for payroll, bonus and benefits		413		1,173
Utilities and accrued expenses		1,184		2,081
	$	2,062	$	3,845

NOTE 11. TAXATION

The PRC subsidiaries within the Company are subject to PRC income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they operate. The group companies that are incorporated under the International Business Companies Act of the British Virgin Islands are exempt from payment of the British Virgin Islands income tax.

For the years ended December 25, 2009 and 2008, substantially all of the Company’s income was generated in the PRC, which is subject to PRC income taxes at rates of 24% to 25%. Two of the PRC subsidiaries of the Company are eligible to be exempt from income taxes for a two-year period commencing with the year in which their operations are profitable and then subject to a 50% reduction in income taxes for the next three years, 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.

New Dragon Asia Corp. is a Florida corporation with wholly-owned operating subsidiaries. As a result, the Company is not subject to PRC tax for the activities at the Florida company level. Costs or expenses incurred at the Florida company level, such as the stock-based compensation and the amortization of financing costs and derivative accounting related to Series A Preferred Stock and Series B Preferred Stock, cannot be used to offset any income derived in the PRC when measuring the PRC income tax liabilities. As of December 25, 2009 and 2008, there were no material deferred tax assets or deferred tax liabilities. The deferred tax asset amounting to $350,000 relates to tax over payment for 2008 that will be applied against the tax provision for 2009 and beyond. The expenses of the United States company are not recoverable against future taxable income in the United States or the PRC and meet the definition of permanent differences for tax accounting purposes. The Company has never been audited by the taxing authority in the United States or the PRC. The Company believes that it has filed properly in all required jurisdictions.

F-18

A reconciliation of the provision for income taxes determined at the statutory average state and local income tax rate to the Company’s effective income tax rate is as follows:

	2009			2008
Expected tax provision (benefit)		(25	)%		(25	)%
Non deductible expenses:
Impairment for fixed assets and intangible assets		(1	)%		245	%
Change in fair value of derivatives		—			(102	)%
Expenses outside of China		2	%		42	%
Governmental tax rate effects:
Prepayment of income tax		27	%		—
Reduction for preferential tax rate		—			(17	)%
Impact of effective tax holiday and lower factory rates		—			97	%
Effective tax rate		3	%		240	%

Accounting for Uncertainty in Income Taxes

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax years ended December 31, 2009 and 2008, the tax years, which remain subject to examination by major tax jurisdictions (PRC) as of December 31, 2009.

We may from time to time be assessed interest or penalties by major tax jurisdictions. In the event we receive an assessment for interest and/or penalties, it will be classified in the financial statements as tax expense.

NOTE 12. REDEEMABLE CONVERTIBLE PREFERRED STOCK

On July 11, 2005, the Company issued 6,000 shares of Series A 7% Redeemable Convertible Preferred Stock (“Series A Preferred Stock”); initially convertible into an aggregate of 6,315,789 shares of Class A Common Stock at a conversion price of $0.95 per share, 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 per share 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 share were also issued. As of December 25, 2009, all of the warrants issued to the placement agent have been exercised cashless, and 5,601 shares of Series A Preferred Stock have been converted into 8,737,874 shares of Class A Common Stock.

On December 22, 2005, the Company issued 9,500 shares of Series B 7% Redeemable Convertible Preferred Stock (“Series B Preferred Stock”), initially convertible into an aggregate of 5,937,500 shares of Class A Common Stock at a conversion price of $1.60 per share, raising $9.5 million in gross proceeds. Six-year warrants to purchase an aggregate of 2,968,750 shares of Class A Common Stock at an exercise price of $1.76 per share were also issued to the investors. As part of the compensation to the placement agent, five-year warrants to purchase an aggregate of 356,250 shares of Class A Common Stock at an exercise price of $1.76 per share were also issued.  As of December 25, 2009, 6,405 shares of Series B Preferred Stock have been converted into 18,908,388 shares of Class A Common Stock, and no warrants have been exercised.

F-19

The key terms of the Series A Preferred Stock and Series B Preferred Stock are as follows:

	Series A Preferred Stock	Series B Preferred Stock
Preferred Dividend	7% per annum, payable quarterly in arrears in cash or, at the Company’s option subject to satisfaction of certain conditions, shares of Class A Common Stock valued at 95% of the volume-weighted current market price.	7% per annum, payable quarterly in arrears in cash or, at the Company’s option subject to satisfaction of certain conditions, shares of Class A Common Stock valued at 95% of the volume-weighted current market price.
Redemption	July 11, 2010 Beginning on the 24th month following closing and each month thereafter, the Company shall redeem 1/37th of the face value of the Preferred Stock in either cash or Class A Common Stock valued at 90% of the volume-weighted current market price.	December 22, 2010 Beginning at the end of the 24th month following closing and on each third monthly anniversary of that date (quarterly) thereafter, the Company shall redeem 1/13th of the face value of the Preferred Stock in either cash or Class A Common Stock valued at 90% of the volume-weighted current market price.
Mandatory Conversion	The Company may at any time force the conversion of the Preferred Stock if the volume-weighted current market price of the Class A Common Stock exceeds 300% of the then applicable conversion price.	The Company may at any time force the conversion of the Preferred Stock if the volume-weighted current market price of the Class A Common Stock exceeds 200% of its price at issuance of the Preferred Stock.
Registration	The Company shall file to register the underlying Class A common shares within 30 days of the closing date and make its best efforts to have the Registration declared effective at the earliest date.  In the event such Registration is not continuously effective during the period such shares are subject to transfer restrictions under the U.S. federal securities laws, then (subject to certain exceptions) the holders are entitled to receive liquidated damages equal to 2.0% of the purchase price of the Preferred Stock per month.	The Company shall file to register the underlying Class A common shares with 30 days of the closing date and make its best efforts to have the Registration declared effective at the earliest date.  In the event such Registration is not continuously effective during the period such shares are subject to transfer restrictions under the U.S. federal securities laws, then (subject to certain exceptions) the holders are entitled to receive liquidated damages equal to 2.0% of the purchase price of the Preferred Stock per month.
Anti-dilution	In the event the Company issues, at any time while Preferred Stock are still outstanding, Common Stock or any type of securities giving rights to Common Stock at a price below the Issue Price, the Company agrees to extend full-ratchet anti-dilution protection to the investors.	In the event the Company issues, at any time while Preferred Stock are still outstanding, Common Stock or any type of securities giving rights to Common Stock at a price below the Issue Price, the Company agrees to extend full-ratchet anti-dilution protection to the investors.

In connection with the issuance of the Redeemable Convertible Series A Preferred Stock and Series B Preferred Stock, the Company paid professional fees, placement agent fees and associated expenses amounting to $1.83 million since the issuance of the Redeemable Convertible Preferred Stocks. The Company also identified freestanding financial instruments included in the issuances that were required to be recorded as liabilities. These included the embedded conversion feature and warrants included in the Series A & B Preferred Stock issuances. The Company has evaluated the fair value of these liabilities using combination of the Black Scholes and Binomial Pricing Models. The summary of activity in the Series A & B Preferred Stock is as follows:

Redeemable Convertible Preferred Stock	Preferred shares		Balance
2008			(in thousands)
Series A		931	$	931
Series B		5,570		5,570
Less unamortized discount		-		(1,856	)
Balance December 25, 2008		6,501	$	4,645
2009
Series A		399	$	399
Series B		3,095		3,095
Less unamortized discount		-		(486	)
Balance December 25, 2009		3,494	$	3,008

F-20

Embedded derivatives relate to redeemable convertible preferred stock. We determined that the conversion features of our redeemable convertible preferred stock and warrants to purchase our common stock are derivatives that we are required to account for as freestanding instruments under U.S. GAAP. We have also determined that we are required to designate these derivatives as liabilities in our financial statements. As a result, we report the value of these embedded derivatives as current liabilities on our balance sheet and we report changes in the value of these derivatives as non-operating gains or losses on our statement of operations. The value of the derivatives is required to be recalculated (and resulting non-operating gains or losses reflected in our statement of operations and resulting adjustments to the associated liability amounts reflected on our balance sheet) on a quarterly basis, and is based on the market value of our common stock. Due to the nature of the required calculations and the large number of shares of our common stock involved in such calculations, changes in our common stock price may result in significant changes in the value of the derivatives and resulting gains and losses on our statements of operations. Our common stock price ranged from a low of $0.12 to a high $0.18 during last six months of 2009. We were required to report a change of $177 as gain on the embedded derivative liability in other income on our statement of operations for the year ended December 25, 2009 and a change of $2,047 as gain for 2008.

The pricing model we use for determining fair values of our derivatives is a combination of the Black Scholes and Binomial Pricing Models. Valuations derived from this model are subject to ongoing internal and external review. The model uses market-sourced inputs such as interest rates and option volatilities. Selection of these inputs involves management’s judgment and may impact net income. The Company has obtained a valuation report from a third-party valuation firm to support its estimates. The principal assumptions used to value these complex freestanding financial instruments were as follows:

	Warrants	Embedded Conversion Feature
Expected life (in years)	Remaining term at valuation date	Remaining Term to conversion or redemption date at each valuation date
Expected volatility	95% to 100%	95% to 105%
Risk-free interest rate	0.69% to 0.97%	0.02% to 0.41%
Dividend yield	0	0

The Company considered all of the other minor features of the conversion option associated with the Company’s Preferred shares, including adjustments for: (i) stock dividends and splits, (ii) the sale of the Company’s securities, (iii) the subsequent issuance of rights, options, or warrants to Common shareholders, and (iv) forced conversion and redemption features. We ultimately determined that these features were insignificant and did not have a material impact on the concluded values of the Series A and Series B Preferred Stock.

The changes in the derivative liabilities during the period are as follows:

Fair Value at December 25, 2007	$	2,493
Gain on change in value of derivatives during the period		(2,047	)
Conversion of 3,685 shares of Series A & B Preferred Stock to common stock during 2008		(159	)
Fair Value at December 25, 2008	$	287
Gain on change in value of derivatives during the period		(177	)
Conversion of 3,007 shares of Series A & B Preferred Stock to common stock during 2009		(34	)
Fair Value at December 25, 2009	$	76

NOTE 13. COMMON STOCK

During the years ended December 25, 2009 and 2008, 532 shares and 452 shares of Series A Preferred Stock have been converted into 2,916,525 shares and 962,402 shares of Class A Common Stock respectively.

During the years ended December 25, 2009 and 2008, 3,015 shares and 1,940 shares of Series B Preferred Stock have been converted into 13,973,033 shares and 4,029,105 shares of Class A Common Stock respectively.

The Company issued 2,000,000 Class A Common Shares to the CFO as annual compensation for the service term from April 1, 2009 to March 31, 2010. The market value of such common shares was $300,000. The Company recognized $225,000 as compensation expense for the year ended December 25, 2009. The remaining $75,000 has been recognized as a deferred stock compensation and will be charged to income on the straight-line basis over the remaining service term.

F-21

NOTE 14. WARRANTS

The following table summarizes activity regarding the Company’s outstanding warrants:

	Shares		Weighted Average Exercise Price
Outstanding at December 25, 2008		6,482,895		1.4093
Issued		—		—
Exercised		—		—
Expired		—		—
Outstanding at December 25, 2009		6,482,895		1.4093

The number of shares of Class A Common Stock issuable under warrants related to the private placements and respective exercise prices are summarized as follows:

	Shares of Class A Common Stock Issuable Under Warrants		Exercise Price
July 2005 private placement
6-year warrants		3,157,895	$	1.04
December 2005 private placement
6-year warrants		2,968,750		1.76
5-year warrants		356,250		1.76
Warrants exercisable at December 25, 2009		6,482,895

As of December 25, 2009, these warrants had no intrinsic value.

NOTE 15. STOCK-BASED COMPENSATION

The Company measures 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 used the Black-Scholes option-pricing model to estimate the fair value of the options at the date of grant.

On January 20, 2006, options to purchase 2,000,000 shares of Class A Common Stock were issued to an officer at an exercise price of $1.60 per share with a term of 6 years. The market price of the Class A Common Stock as of the grant date was $1.54 per share. The Company recorded compensation expense of $2,320,000 based on an estimated fair value of the options of $1.16 per share on January 20, 2006. The per share fair value of the stock options granted has been estimated using the Black-Scholes option-pricing model with the following assumptions:

	January 20, 2006
Life (years)		6
Dividend yield		None
Risk - free interest rate		4.36	%
Volatility		89	%

None of these options were exercised, and as of December 25, 2009, all of these options had expired as the employment contract with the officer expired.

On December 13, 2006, options to purchase an additional 6,000,000 shares of Class A Common Stock were granted to the same officer at an exercise price of $1.82 per share with a term of 10 years. The options were fully vested upon grant. The market price of the Class A Common Stock as of the grant date was $1.82 per share. The Company recorded compensation expense of $5,820,000 based on an estimated fair value of the options of $0.97 per share on December 13, 2006, the grant date. The per share fair value of the stock options granted has been estimated using the Black-Scholes option-pricing model with the following assumptions:

	December 13, 2006
Life (years)		10
Dividend yield		None
Risk - free interest rate		4.55	%
Volatility		50	%

F-22

As of December 25, 2009, these options were fully vested. According to the employment contract with the officer, all of these options will expire in January 2010, one year after the expiration of the employment contract.

The following table summarizes outstanding options as at December 25, 2009, related weighted average fair value and life information:

		Options Outstanding						Options Exercisable
Exercise Price Per Share		Number Outstanding at December 25, 2009		Weighted Average Fair Value		Weighted Average Remaining Life (Years)		Number Exercisable at December 25, 2009		Weighted Average Exercise Price
$	1.82		6,000,000	$	0.97		0.33		6,000,000	$	1.82

The Company has no future compensation expense to record from this option outstanding at December 25, 2009 because they were fully vested upon grant and compensation cost was recorded as of that date. As of December 25, 2009, the options had no intrinsic value.

The Company issued 2,000,000 Class A Common Shares to the CFO as annual compensation for the service term from April 1, 2009 to March 31, 2010. The market value of such common shares was $300,000. The Company recognized $225,000 as compensation expense for the year ended December 25, 2009. The remaining $75,000 has been recognized as a deferred stock compensation and will be charged to income on the straight-line basis over the remaining service term.

NOTE 16. COMMITMENTS

(a) Annual fees

Under the supplementary joint venture agreements, the Company has committed to pay predetermined annual fees of $129,000 to the Chinese joint venture partners for each of the years in the period from December 26, 1998 to 2049 as long as the joint venture continues to operate. As of December 25, 2009, total commitments under these arrangements were as follows (in thousands):

2010		129
2011		129
2012		129
2013		129
2014		129
Thereafter		4,399
Total	$	5,044

(b) Capital commitment

Capital commitments not provided in the consolidated financial statements include the followings (in thousands):

	2009		2008
Construction of factory premises	$	1,464	$	1,457

NOTE 17. 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.

F-23

Transactions between the New Dragon Asia Corp. and related companies are summarized below (in thousands):

	2009		2008
Pre-determined annual fees charged by joint venture partners:
Shandong Longfeng Group Company (a)	$	26	$	87
Shandong Longfeng Flour Company Limited (b)		47		43
	$	73	$	130
Rental income from a joint venture partner:
Shandong Longfeng Group Company	$	—	$	76

(a) Shandong Longfeng Group Company is a joint venture partner of the Company.

(b) Subsidiary(ies) of Shandong Longfeng Group Company.

Loans from the major shareholder New Dragon Asia Food Limited are for working capital are unsecured and bear no interest, is payable if requested, and funds are available. The Company and the major shareholder have agreed that no repayments will take place in 2010. The joint venture partner’s amounts are similar to the condition of New Dragon Asia Food Limited loans and no repayment is expected in 2010.

NOTE 18. CONDENSED GEOGRAPHIC FINANCIAL INFORMATION

Condensed balance sheet information as of December 25, 2009 consisted of the following (in thousands):

	Inside China		Outside China			Total
Assets
- Cash and cash equivalents	$	3,366	$	74		$	3,440
- Others		69,045		37			69,082
Total Assets		72,411		111			72,522
Liabilities		8,050		3,245			11,295
Non-controlling interests		125		—			125
Intercompany		14,360		(14,360	)		—
Equity		45,481		12,738			58,219

Assets located outside of China consist primarily of cash and cash equivalents and prepayment.  Liabilities located outside of China consist primarily of non-interest loans from the parent company.

Condensed statement of operation information for the year ended December 25, 2009 consisted of the following (in thousands):

	Inside China			Outside China			Total
Net revenue	$	23,217		$	—		$	23,217
Cost of goods sold		(24,518	)		—			(24,518	)
General and administrative expenses		(5,291	)		(1,090	)		(6,381	)
Loss from operation		(7,536	)		(1,090	)		(8,626	)
Other income (expenses)		(3,004	)		177			(2,827	)
Benefit for income taxes		347			—			347
Net loss		(10,190	)		(913	)		(11,103	)

See Note 23 for condensed parent company financial information.

Condensed balance sheet information as of December 25, 2008 consisted of the following (in thousands):

	Inside China		Outside China			Total
Assets
- Cash and cash equivalents	$	4,337	$	46		$	4,383
- Others		80,449		46			80,495
Total Assets		84,786		92			84,878
Liabilities		10,299		2,654			12,953
Non-controlling interests		122		—			122
Intercompany		14,343		(14,343	)		—
Equity		55,576		11,704			67,280

F-24

Assets located outside of China consist primarily of cash and cash equivalents and deposits.  Liabilities located outside of China consist primarily of preferred stock, net of the related beneficial conversion feature and fair value of the warrants.

Condensed statement of operation information for the year ended December 25, 2008 consisted of the following (in thousands):

	Inside China			Outside China			Total
Net revenue	$	49,340		$	—		$	49,340
Cost of goods sold		(41,989	)		—			(41,989	)
General and administrative expenses		(3,062	)		(834	)		(3,896	)
Loss from operation		(1,911	)		(834	)		(2,745	)
Other income		196			2,047			2,243
Provision for income taxes		(1,205	)		—			(1,205	)
Net loss		(1,000	)		(517	)		(1,517	)

NOTE 19. SEGMENT INFORMATION

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

	2009			2008
	(In thousands)
Net revenue:
Instant noodles	$	3,913		$	13,234
Flour		12,982			27,008
Soybean		6,322			9,098
	$	23,217		$	49,340
Income (loss) from operations:
Instant noodles	$	(1,773	)	$	(5,574	)
Flour		(5,087	)		3,106
Soybean		(1,766	)		(277	)
	$	(8,626	)	$	(2,745	)
Depreciation and amortization:
Instant noodles	$	783		$	1,034
Flour		370			716
Soybean		547			432
	$	1,700		$	2,182
Identifiable long-term assets:
Instant noodles	$	17,510		$	13,084
Flour		8,268			8,667
Soybean		9,769			3,898
	$	35,547		$	25,649

NOTE 20. MAJOR CUSTOMERS

No single customer accounted for more than 5% of sales for the years ended December 25, 2009 and 2008.

F-25

NOTE 21. RETIREMENT PLAN

As stipulated by the regulations of the PRC government, companies operating in the PRC have defined contribution retirement plans for their employees. The PRC government is responsible for the pension liability to these retired employees. Commencing from January 1, 2002, the Company was required to make specified contributions to the state-sponsored retirement plan at 20% of the basic salary cost of their staff. Each of the employees of the PRC subsidiaries is required to contribute 6% of his/her basic salary. For the years ended December 25, 2009 and 2008, contributions made by the Company were approximately $648,000 and $446,000, respectively.

NOTE 22. CONDENSED U.S. PARENT COMPANY FINANCIAL INFORMATION

BASIS OF PRESENTATION

These condensed parent company financial statements have been prepared in accordance with Rule 12-04 of Regulation S-X. New Dragon Asia Corp. is a holding company that conducts its operations through its subsidiaries, which are more fully described in Note 1.

The parent company financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the only exception being that the parent company accounts for its subsidiaries using the equity method.  Refer to the footnotes to the consolidated financial statements presented above for additional information and disclosures with respect to these financial statements.

F-26

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONDENSED PARENT COMPANY BALANCE SHEETS

(Amounts in thousands, except share data)

	December 25,  2009			December 25,  2008
ASSETS
Current assets:
Cash and cash equivalents	$	74		$	46
Other receivable		20			20
Deferred expenses, net		17			26
Total current assets		111			92
Investment in and advances to subsidiaries		64,714			74,814
Total assets	$	64,825		$	74,906
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Other payables and accruals	$	796		$	762
Dividend payable on preferred shares		61			114
Embedded derivatives at fair value		76			287
Total current liabilities		933			1,163
Due to New Dragon Asia Food Limited		2,790			1,940
Total liabilities		3,723			3,103
Series A & B Redeemable Convertible Preferred Stock, $0.0001 par value:
Authorized shares – 5,000,000
Issued and outstanding – 3,494 shares and 6,501 shares at December 25, 2009 and 2008, respectively		3008			4,645
Commitments
Stockholders’ equity:
Class A Common Stock, $0.0001 par value:
Authorized shares – 102,000,000
Issued and outstanding – 83,364,229 in 2009 and 60,922,981 in 2008		8			6
Class B Common Stock, $0.0001 par value:
Authorized shares – 2,000,000 – none issued and outstanding		—			—
Additional paid-in capital		35,569			32,521
Deferred stock compensation		(75	)		—
Retained earnings		9,187			21,321
Accumulated other comprehensive income		13,405			13,310
Total stockholders’ equity		58,094			67,158
Total liabilities and stockholders’ equity	$	64,825		$	74,906

F-27

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONDENSED PARENT COMPANY STATEMENTS OF OPERATIONS

(Amounts in thousands)

	For the years ended December 25,
	2009			2008
General and administrative expenses	$	(1,090	)	$	(834	)
Loss from operations		(1,090	)		(834	)
Other income:
Gain on fair value adjustments to embedded derivatives		177			2,047
Total parent only gain (loss)		(913	)		1,212
Equity in subsidiary earnings, net of taxes		(10,190	)		(2,729	)
Net loss	$	(11,103	)	$	(1,517	)
Accretion of redeemable preferred stock		(704	)		(1,196	)
Preferred stock dividends		(324	)		(534	)
Loss attributable to common stockholders	$	(12,131	)	$	(3,247	)

F-28

 NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONDENSED PARENT COMPANY STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	For the years ended December 25,
	2009			2008
Cash flows from operating activities:
Total parent only gain (loss)	$	(913	)	$	1,212
Adjustments to reconcile total parent only gain (loss) to net cash used in operating activities:
Gain on fair value adjustments to embedded derivatives		(177	)		(2,047	)
Stock-based compensation expense		225			—
Changes in operating assets and liabilities:
Other receivable		9			3
Other payables and accruals		34			(30	)
Net cash used in operating activities		(822	)		(862	)
Cash flows from investing activities:
Investment and advances to subsidiaries		26			(292	)
Net cash provided by (used in) investing activities		26			(292	)
Cash flows from financing activities:
Preferred Stock Dividends		—			(84	)
Increase in due to parent company		850			850
Net cash provided by financing activities		850			766
Foreign currency translation adjustment		26			293
Net increase (decrease) in cash and cash equivalents		28			(95	)
Cash and cash equivalents at the beginning of the period		46			141
Cash and cash equivalents at the end of the period	$	74		$	46

F-29

EXHIBIT INDEX

Exhibit Number	Description
2.1	Share Exchange Agreement dated as of December 18, 2001 (incorporated herein by reference from our filing on the Definitive Proxy 14/A filed on October 11, 2001).
3.1	Amended  Articles  of  Incorporation (incorporated herewith by reference to Exhibit 3.1 to our Definitive Proxy 14/A filed on October 11, 2001).
3.2	By-laws (incorporated herewith by reference to Exhibit 3.2 to our Definitive Proxy 14/A filed on October 11, 2001).
3.3	Certificate of Designations of Preferences, Rights and Limitations of the Series A 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 3.1 of our Form 8-K filed on July 12, 2005).
3.4	Certificate of Designations of Preferences, Rights and Limitations of the Series B 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 3.1 of our Form 8-K filed on December 23, 2005).
4.1	Subscription Agreement, dated September 4, 2003  (incorporated herewith by reference to Exhibit 4.1 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.2	Subscription Agreement, dated October 3, 2003 (incorporated herewith by reference to Exhibit 4.2 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.3	Common Stock Purchase Warrants for the September 4, 2003 Private Placement (incorporated herewith by reference to Exhibit 4.3 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.4	Common Stock Purchase Warrants for the October 3, 2003 Private Placement (incorporated herewith by reference to Exhibit 4.4 to our Registration Statement on Form S-3 filed on October 3, 2003).
4.5	Form of Warrant issued to Midsummer Investment Ltd. and Islandia, L.P. (incorporated herewith by reference to Exhibit 4.1 to our Form 8-K filed on July 12, 2005).
4.6	Form of Warrant issued to Alliance Financial, LLC, Renaissance Advisors BVI, John F. Steinmetz, TN Capital Equities, Ltd. and Kathleen McDonnell (incorporated herewith by reference to Exhibit 4.2 to our Registration Statement on Form S-3 filed on August 11, 2005).
4.7	Securities Purchase Agreement, dated July 11, 2005, relating to the sale of the Series A 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 10.1 to our Form 8-K filed on July 12, 2005).
4.8	Registration Rights Agreement, dated July 11, 2005, by and among New Dragon Asia Corp. and the investors named therein (incorporated herewith by reference to Exhibit 10.2 to our Form 8-K filed on July 12, 2005).
4.9	Form of Warrant issued to Midsummer Investment Ltd. and Islandia, L.P. (incorporated herewith by reference to Exhibit 4.1 to our Form 8-K filed on December 23, 2005).
4.10	Form of Warrant issued to Alliance Financial, LLC, Renaissance Advisors, Inc., John F. Steinmetz, TN Capital Equities, Ltd. and Kathleen McDonnell (incorporated herewith by reference to Exhibit 4.2 to our Registration Statement on Form S-3 filed on January 20, 2006).

4.11	Securities Purchase Agreement, dated December 22, 2005, relating to the sale of the Series B 7% Convertible Preferred Stock (incorporated herewith by reference to Exhibit 10.1 to our Form 8-K filed on December 23, 2005).
4.12	Registration Rights Agreement, dated December 22, 2005, by and among New Dragon Asia Corp. and the investors named therein (incorporated herewith by reference to Exhibit 10.2 to our Form 8-K filed on December 23, 2005).
4.13	Registration Rights Agreement, dated December 22, 2005, by and among New Dragon Asia Corp. and New Dragon Food Ltd. (incorporated herewith by reference to Exhibit 4.5 to our Registration Statement on Form S-3 filed on January 20, 2006).
10.1	Sino-Foreign Joint Venture Contract for the New Dragon Asia Flour (Yantai) Company Limited, dated June 1, 1999 (incorporated herewith by reference to Exhibit 10.1 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.2	Subcontracting Agreement, for the New Dragon Asia Flour (Yantai) Company Limited, dated June 26, 1999  (incorporated herewith by reference to Exhibit 10.2 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.3	Sino-Foreign Joint Venture Contract for the New Dragon Asia Food (Yanti) Company Limited, dated November 28, 1998  (incorporated herewith by reference to Exhibit 10.3 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.4	Subcontracting Agreement, for the New Dragon Asia Food (Yantai) Company Limited, dated December 26, 1998  (incorporated herewith by reference to Exhibit 10.4 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.5	Sino-Foreign Joint Venture Contract for the New Dragon Asia Food (Dalian) Company Limited, dated November 28, 1998 (incorporated herewith by reference to Exhibit 10.5 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.6	Subcontracting Agreement, for the New Dragon Asia Food (Dalian) Company Limited, dated December 26, 1998 (incorporated herewith by reference to Exhibit 10.6 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.7	Sino-Foreign Joint Venture Contract for the Sanhe New Dragon Asia Food Company Limited, dated November 28, 1998 (incorporated herewith by reference to Exhibit 10.7 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.8	Subcontracting Agreement, for the Sanhe New Dragon Asia Food Company Limited, dated December 26, 1998  (incorporated herewith by reference to Exhibit 10.8 to our Registration Statement on Form S-3 filed on October 3, 2003).
10.9	Employment Agreement between New Dragon Asia Corp. and Peter Mak, dated November 2, 2004 (incorporated herewith by reference to Exhibit 10.9 to our Form 8-K filed on June 29, 2005).
10.10	Employment Supplement between New Dragon Asia Corp. and Peter Mak, dated June 22, 2005 (incorporated herewith by reference to Exhibit 10.9 to our Form 8-K filed on June 29, 2005).
10.11	Supplementary Agreement to Employment Agreement between New Dragon Asia Corp. and Peter Mak, dated January 20, 2006 (incorporated herewith by reference to Exhibit 10.10 to our Form 8-K filed on January 24, 2006).
10.12	Amended and Restated Equity Incentive Plan (incorporated herewith by reference to Exhibit C to our Definitive Information Statement on Schedule 14C filed on May 4, 2009).
10.13	Stock Option Agreement between New Dragon Asia Corp. and Peter Mak, dated December 13, 2006 (incorporated herewith by reference to Exhibit 10.1 to our Form 8-K filed on December 15, 2006).

10.14	Settlement Agreement and General Release between New Dragon Asia Corp and Berry-Shino Securities Inc., dated August 15, 2007 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on August 15, 2007).
10.15	Employment Agreement dated April 1, 2009 between New Dragon Asia Corp. and Ling Wang (incorporated herewith by reference to Exhibit 10.1 to our Registration Statement on Form S-8 filed on May 8, 2009).
21.1	Subsidiaries of New Dragon Asia Corp., filed herewith.
23.1	Consent of Baker Tilly Hong Kong Limited, Independent Registered Public Accounting Firm, filed herewith.
23.2	Consent of Crowe Horwath LLP, Independent Registered Public Accounting Firm, filed herewith
31.1	Certification of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2	Certification of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.