UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: ~~September~~March 25, ~~2010~~2011

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

For the transition period from to

Commission File Number: 001-15046

NEW DRAGON ASIA CORP.

(Exact name of Registrant as specified in its charter)

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

10 Huangcheng Road (N), Longkou, Shandong Province, PRC	265701
(Address of Principal Executive Offices)	(Zip Code)

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)

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 the past 90 days. Yes x No ¨o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).* Yes ¨o No ¨ o *The registrant has not yet been phased into the interactive data requirements.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨o Accelerated Filer ¨o Non-Accelerated Filer (Do not check if a smaller reporting company) ¨o 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 ¨o No x

The number of shares of Class A Common Stock outstanding as of ~~October~~April 3130, ~~2010~~2011 was 100,000,000.

NEW DRAGON ASIA CORP.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~MARCH 25, ~~2010~~2011

TABLE OF CONTENTS

			~~Page~~	Page
PART I:	~~FINANCIAL INFORMATION~~	FINANCIAL INFORMATION	3
ITEM 1.	~~Consolidated Financial Statements:~~	Financial Statements	3
	Consolidated Balance Sheets as of September 25, 2010 (unaudited) and December 25, 2009		3
		Consolidated Balance Sheets as of March 25, 2011 (unaudited) and December 25, 2010		3
	Consolidated Statements of Operations (unaudited) for the three months and nine months ended September 25, 2010 and 2009		4
		Consolidated Statements of Operations (unaudited) for the three months ended March 25, 2011 and 2010		4
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the nine months ended September 25, 2010 (unaudited) and the year ended December 25, 2009		5
		Consolidated Statements of Stockholders’ Equity and Comprehensive Income (unaudited) for the three months ended March 25, 2011 and the year ended December 25, 2010		5
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 25, 2010 and 2009		6
		Consolidated Statements of Cash Flows (unaudited) for the three months ended March 25, 2011 and 2010		6
	~~Notes to Consolidated Financial Statements (unaudited)~~	Notes to Consolidated Financial Statements (unaudited)	7	7
ITEM 2.	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19	18
ITEM 3.	~~Quantitative and Qualitative Disclosures About Market Risk~~	Quantitative and Qualitative Disclosures About Market Risk	28	25
ITEM 4T.	Controls and Procedures		28
ITEM 4.		Controls and Procedures		25
PART II:	~~OTHER INFORMATION~~	OTHER INFORMATION	29
ITEM 1.	~~Legal Proceedings~~	Legal Proceedings	29	26
ITEM 1A.	~~Risk Factors~~	Risk Factors	29	26
ITEM 2.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	Unregistered Sales of Equity Securities and Use of Proceeds	29	26
ITEM 3.	~~Defaults Upon Senior Securities~~	Defaults Upon Senior Securities	29	26
ITEM 4.	~~[Removed and Reserved]~~	(Removed and Reserved)	29	26
ITEM 5.	~~Other Information~~	Other Information	29	26
ITEM 6.	~~Exhibits~~	Exhibits	29	26
SIGNATURES			32	29
EXHIBITS

PART I: FINANCIAL INFORMATION

Item 1. ~~Consolidated~~ Financial Statements.

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	September 25, 2010			December 25, 2009
	March 25, 2011			December 25, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	35,~~185~~575		$	32,~~440~~756
Accounts receivable, net		1312,~~242~~830			13,~~437~~519
Deposits and prepayments, net		69,~~866~~453			511,~~632~~523
Inventories, net		108,~~566~~705			1410,~~466~~847
Total current assets		3336,~~859~~563			3638,~~975~~645
Property, machinery and equipment, net		2726,~~751~~612			3026,~~263~~619
Land use rights, net		42,~~297~~619			42,~~332~~595
Due from related companies		~~933~~55			~~952~~54
Total assets	$	6665,~~840~~849		$	7267,~~522~~913
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	63,~~158~~335		$	45,~~808~~773
Other payables and accruals		2,~~427~~363			2,~~062~~473
Taxes payable		~~130~~160			~~186~~169
Embedded derivatives, at fair value		~~110~~597			76678
Total current liabilities		86,~~825~~455			79,~~132~~093
Due to shareholder		34,~~749~~290			34,~~700~~031
Due to joint venture partners		~~527~~462			~~463~~438
Total liabilities		1311,~~101~~207			1113,~~295~~562
Series A and B Redeemable Convertible Preferred Stock, $0.0001 par value: Authorized shares - 5,000,000 Issued and outstanding –1,742 shares and 3,494 shares at September 25, 2010 and December 25, 2009, respectively		1,720			3,008
Series A and B Redeemable Convertible Preferred Stock, $0.0001 par value: Authorized shares - 5,000,000 Issued and outstanding –1,742 shares and 1,742 shares at March 25, 2011 and December 25, 2010, respectively		1,742			1,742
Commitments
Stockholders’ equity:
Class A Common Stock, $0.0001 par value: Authorized shares - 100,000,000 Issued and outstanding – 100,000,000 at September 25, 2010 and 83,364,229 at December 25, 2009		10			8
Class A Common Stock, $0.0001 par value: Authorized shares - 100,000,000 Issued and outstanding – 100,000,000 at March 25, 2011 and 100,000,000 at December 25, 2010		9			9
Class B Common Stock, $0.0001 par value: Authorized shares - 2,000,000 Issued and outstanding – none		—--			—--
Additional paid-in capital		37,~~277~~275			3537,~~569~~275
Deferred stock compensation		—			(75	)
Retained earnings		(775	)		(221	)
Retained earnings		(31	)		9,187
Accumulated other comprehensive income		16,262			15,418
Accumulated other comprehensive income		14,638			13,405
Total NWD stockholders’ equity		52,771			52,481
Total stockholders’ equity		51,894			58,094
Non-controlling interest		129			128
Non-controlling interest		125			125
Total equity		52,900			52,609
Total equity		52,019			58,219
Total liabilities and stockholders’ equity	$	65,849		$	67,913
Total liabilities and stockholders’ equity	$	66,840		$	72,522

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

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three months ended September 25,						Nine months ended September 25,
	Three months ended March 25,
	2010			2009			2010			2009
	2011			2010
Net revenue	$	56,~~450~~883		$	6,~~290~~046		$	~~18,043~~		$	~~15,883~~
Cost of goods sold		(56,~~373~~388	)		(6,~~560~~023	)		~~(18,006~~	)		~~(18,591~~	)
Gross profit (loss)		77495			~~(270~~23	)		37			~~(2,708~~	)
Selling and distribution expenses		(~~164~~247	)		(~~230~~177	)		~~(588~~	)		~~(597~~	)
General and administrative expenses		(~~2,569~~836	)		(~~413~~2,092	)		~~(7,872~~	)		~~(2,021~~	)
Loss from operations		(~~2,656~~588	)		(~~913~~2,246	)		~~(8,423~~	)		~~(5,326~~	)
Other income (expense):
Interest income		1			4			2			6
Other expenses		(17	)		(334	)
Other income (expense)		68			(512	)		(381	)		(604	)
Interest income		1			--
Gain (loss) on fair value adjustments to embedded derivatives		(102	)		(11	)		(51	)		162
Gain on fair value adjustments to embedded derivatives		81			10
VAT refund		—			—			—			15
Loss before income taxes and non-controlling interests		(523	)		(2,570	)
Loss before income taxes		(2,689	)		(1,432	)		(8,853	)		(5,747	)
Provision for income taxes		(1	)		(1	)
Benefit (provision) for income taxes		—			(1	)		(1	)		348
Net loss		(524	)		(2,571	)
Net loss		(2,689	)		(1,433	)		(8,854	)		(5,399	)
Net loss attributable to non-controlling interest		1			--
Net loss attributable to Non-controlling interest		—			—			—			2
Net loss attributable to controlling interest	$	(523	)	$	(2,571	)
Net loss attributable to Controlling interest	$	(2,689	)	$	(1,433	)	$	(8,854	)	$	(5,397	)
Accretion of Redeemable Preferred Stock		--			(117	)
Accretion of Redeemable Preferred Stock		(68	)		(164	)		(260	)		(570	)
Preferred Stock Dividends		(30	)		(48	)
Preferred Stock Dividends		(21	)		(74	)		(104	)		(262	)
Loss attributable to common stockholders	$	(553	)	$	(2,736	)
Loss attributable to common stockholders	$	(2,778	)	$	(1,671	)	$	(9,218	)	$	(6,229	)
Earnings per common share
Loss per common share
Basic	$	(0.006	)	$	(0.03	)
Basic	$	( 0.03	)	$	(0.02	)	$	( 0.10	)	$	( 0.09	)
Diluted	$	(0.006	)	$	(0.03	)
Diluted	$	( 0.03	)	$	(0.02	)	$	( 0.10	)	$	( 0.09	)
Weighted average number of common shares outstanding
Weighted average number of common shares outstanding
Basic		100,000			89,248
Basic		99,751			76,961			95,358			70,259
Diluted		100,000			89,248
Diluted		99,751			76,961			95,358			70,259

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

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME ~~(LOSS)~~

(Amounts in thousands~~, unaudited~~)

	Class A Common Stock Shares Amount				Additional Paid-in Capital		Deferred Stock Compensation			Retained Earnings			Accumulated Other Comprehensive Income		Total NWD Stockholders’ Equity			Non Controlling Interests		Total Equity			Comprehensive Income (loss)
													Accumulated		Total
Balance at December 25, 2008		60,923	$	6	$	32,521	$	-		$	21,321		$	13,310	$	67,158		$	122	$	67,280		$	4,026
	Class A Common				Additional		Deferred						Other		NWD			Non
Net loss		-		-		-		-			(11,106	)		-		(11,106	)		3		(11,103	)		(11,106	)
	Stock		Shares		Paid-in		Stock			Retained			Comprehensive		Stockholders’			Controlling		Total			Comprehensive
Accretion of Redeemable Preferred Stock		-		-		-		-			(704	)		-		(704	)		-		(704	)		-
	Amount				Capital		Compensation			Earnings			Income		Equity			Interests		Equity			Income
Preferred Stock Dividends		-		-		-		-			(324	)		-		(324	)		-		(324	)		-
Balance at December 25, 2009		83,364	$	8	$	35,569	$	(75	)	$	9,187		$	13,405	$	58,094		$	125	$	58,219		$	(11,011	)
Foreign currency translation adjustment		-		-		-		-			-			95		95			-		95			95
Net loss		-		-		-		-			(9,011	)		-		(9,011	)		3		(9,008	)		(9,011	)
Conversion of preferred stock and related dividend payments made in Class A Common Stock		20,441		2		2,748		-			-			-		2,750			-		2,750			-
Accretion of Redeemable Preferred Stock		-		-		-		-			(282	)		-		(282	)		-		(282	)		-
Share-based compensation to CFO		2,000		-		300		(75	)		-			-		225			-		225			-
Preferred Stock Dividends		-		-		-		-			(115	)		-		(115	)		-		(115	)		-
Balance at December 25, 2009		83,364		8		35,569		(75	)		9,187		$	13,405	$	58,094		$	125		58,219		$	(11,011	)
Foreign currency translation adjustment		-		-		-		-			-			2,013		2,013			-		2,013			2,013
Net loss		-		-		-		-			(8,854	)		-		(8,854	)		-		(8,854	)		(8,854	)
Conversion of preferred stock and related dividend payments made in Class A Common Stock		16,636		1		1,706		-			-			-		1,707			-		1,707			-
Accretion of Redeemable Preferred Stock		-		-		-		-			(260	)		-		(260	)		-		(260	)		-
Preferred Stock Dividends		-		-		-		-			(104	)		-		(104	)		-		(104	)		-
Foreign currency translation adjustment		-		-		-		-			-			1,233		1,233			-		1,233			1,233
Conversion of preferred stock and related dividend payments made in Class A Common Stock		16,636		2		1,708		-			-			-		1,710			-		1,710			-
Share-based compensation to CFO		-		-		-		75			-			-		75			-		75			-
Balance at September 25, 2010		100,000	$	10	$	37,277	$	-		$	(31	)	$	14,638	$	51,894		$	125	$	52,019		$	(7,621	)
Balance at December 25, 2010		100,000	$	9	$	37,275	$	-		$	(221	)	$	15,418	$	52,481		$	128	$	52,609		$	(6,998	)
Net loss		-		-		-		-			(524	)		-		(524	)		1		(523	)		(524	)
Preferred Stock Dividends		-		-		-		-			(30	)		-		(30	)		-		(30	)		-
Foreign currency translation adjustment		-		-		-		-			-			844		844			-		844			844
Balance at March 25, 2011（Unaudited）		100,000	$	9	$	37,275	$	-		$	(775	)	$	16,262	$	52,771		$	129	$	52,900		$	320

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

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, unaudited)

	Nine months ended September 25,
	Three months ended March 25,
	2010			2009
	2011			2010
Cash flows from operating activities:
Net loss	$	(~~8,854~~523	)	$	(52,~~399~~571	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for doubtful accounts		~~6,137~~562			941,460
Provision for inventory reserve		913			~~2,257~~25
Depreciation and amortization of property, machinery, equipment and land use rights		1,512			1,319
Depreciation and amortization of land use rights		522			412
Loss on sale of machinery and equipment		~~263~~--			~~203~~120
Loss/(gain) on fair value adjustments to embedded derivatives		51			(162	)
Gain on fair value adjustments to embedded derivatives		(81	)		(10	)
Stock based compensation expense		75			150
Stock-based compensation expense		--			75
Non-controlling interests		(1	)		--
Changes in operating assets and liabilities:
Accounts receivable		~~(5,868~~280	)		(41,~~643~~939	)
Deposits and prepayments		(12,~~191~~183	)		~~6,497~~77
Inventories		32,~~950~~233			51,~~213~~562
Due from related companies		24			30
Accounts payable		(2,478	)		210
Accounts payable		1,315			236
Other payables and accruals		(168	)		69
Other payables and accruals		393			(1,611	)
Taxes payable		(11	)		190
Taxes payable		(56	)		325
Net cash provided by (used in) operating activities		2,531			(320	)
Deferred tax asset		(4	)		(350	)
Net cash (used in) provided by operating activities		(2,244	)		4,159
Cash flows from investing activities:
Purchases of property, machinery and equipment		(75	)		(11,546	)
Proceeds from sale of property, machinery and equipment		--			15
Proceeds from sale of property, machinery and equipment		1,286			5,848
Purchases of property, machinery and equipment		(22	)		(5	)
Net cash provided by (used in) investing activities		~~1,211~~(22	)		~~(5,698~~10	)
Cash flows from financing activities:
Proceeds from shareholder loan		28208			~~664~~32
Proceeds from joint venture partners		6118			8813
Net cash provided by financing activities		89226			~~752~~45
Impact of foreign currency translation on cash		~~689~~84			~~(346~~217	)
Net decrease in cash and cash equivalents		(255	)		(1,133	)
Net increase (decrease) in cash and cash equivalents		2,819			(48	)
Cash and cash equivalents at beginning of period		3,440			4,383
Cash and cash equivalents at the beginning of period		2,756			3,440
Cash and cash equivalents at end of period	$	3,185		$	3,250
Cash and cash equivalents at the end of period	$	5,575		$	3,392
Non-Cash Investing and Financing Activities
Conversion of preferred stock into common stock	$	~~1,752~~--		$	~~2,255~~752
Dividend payments on preferred stock in the form of common stock	$	~~144~~--		$	~~302~~64
Supplemental disclosure of cash flows information:
Income taxes paid		1			--

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

NEW DRAGON ASIA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~

NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS

New Dragon Asia Corp., a corporation incorporated in the State of Florida (collectively with its subsidiaries, the “Company,” “we,” “us,” or “our”), 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. The Company is headquartered in Shandong Province in the People’s Republic of China (“PRC” or “China”) and has its eight manufacturing plants in Yantai, Beijing, Chengdu, and Penglai.

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))” ~~requires~~ 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.

~~These Consolidated~~The ~~Financial~~consolidated ~~Statements~~financial ~~for~~statements ~~interim~~have ~~periods~~been ~~are unaudited and were~~ prepared in accordance with ~~accounting~~ASC ~~principles~~Topic ~~generally~~810. These ~~accepted~~Consolidated inFinancial ~~the United~~Statements ~~States~~for ~~and~~interim ~~the~~periods ~~rules~~are ~~and regulations of the Securities and Exchange Commission~~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.

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 ~~for income statement purposes~~. Hence, ~~The~~the Company ~~consolidates~~’s consolidated financial statements ofinclude the ~~contractual~~financial ~~joint~~statements ~~ventures and accounts for the portion~~ of the contractual joint ventures ~~not wholly-owned by the Company as non-controlling interest~~.

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 Company has also recorded a derivative for the effect of having issued shares in excess of the authorized shares.

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.7

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, and (2) the amortization associated with the discount recorded with respect to the Series A and B Preferred Stock as a preferred stock dividend.

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:

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 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.

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 derivative, the Company only financial assets measured and recorded at fair value on the Company’s Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy during the period ended ~~September~~March 25, ~~2010~~2011 and ~~2009~~2010:

(In thousands)	Fair Value
	Level 1			Level 2			Level 3			Total
Embedded derivative liabilities as of September 25, 2010		$	—		$	—		$	110		$	110
Embedded derivative liabilities as of March 25, 2011		$	--		$	--		$	597		$	597
Embedded derivative liabilities as of September 25, 2009		$	—		$	—		$	99		$	99
Embedded derivative liabilities as of March 25, 2010		$	--		$	--		$	62		$	62

NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS

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 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 into and out of Level 1 and Level 2 fair value measurements and the presentation of separate information regarding purchases, sales, issuances and settlements on a gross basis in the reconciliation of 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 annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The adoption of ASU 2010-6 will not have a material impact on the Company’s results of operations or financial position.8

In ~~February~~ January 2010, FASB issued ASU 2010-96, “~~Subsequent~~Improving ~~Events~~Disclosures ~~(Topic~~about ~~855)~~Fair ~~Amendments to Certain Recognition and Disclosure Requirements”~~Measurements". ASU 2010-96 ~~amends disclosure~~provides ~~requirements~~amendments ~~within~~to ~~Subtopic~~subtopic ~~855~~820-10. Anthat ~~entity~~require ~~that~~separate isdisclosure anof ~~SEC~~significant ~~filer is~~transfers ~~not~~into ~~required~~and toout ~~disclose~~of Level 1 and Level 2 fair value measurements and the ~~date~~presentation ~~through~~of ~~which~~separate ~~subsequent~~information ~~events~~regarding ~~have~~purchases, ~~been evaluated~~sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. ~~This~~Additionally, ~~change~~ASU ~~alleviates~~2010-6 ~~potential~~provides ~~conflicts~~amendments ~~between~~to ~~Subtopic~~subtopic ~~855~~820-10 ~~and~~ that clarify existing disclosures about the ~~SEC's~~level ~~requirements~~of disaggregation and inputs and valuation techniques. ASU 2010-96 is effective for ~~interim~~financial ~~and~~statements issued for annual reporting periods ~~ending~~after beginning after ~~June~~December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning December 15, 2010. The ~~Company expects the~~ adoption of ASU 2010-96 will not have a material impact on the Company’s results of operations or financial position.

In ~~March~~ February 2010, FASB issued ASU 2010-119 “~~Derivatives~~Subsequent ~~and~~Events ~~Hedging~~ (Topic ~~815~~855) ~~Scope Exception~~Amendments ~~Related~~ to ~~Embedded~~Certain ~~Credit~~Recognition ~~Derivatives~~and Disclosure Requirements”. ASU 2010-119 ~~clarifies~~amends ~~the type~~disclosure ofrequirements ~~embedded~~within ~~credit~~Subtopic ~~derivative that is exempt from embedded derivative bifurcation requirements~~855-10. ~~Only~~An ~~one~~entity ~~form of embedded credit derivative qualifies for the exemption—one~~ that is ~~related~~an ~~only~~SEC tofiler ~~the~~is ~~subordination~~not ofrequired ~~one financial instrument~~ to ~~another.~~disclose Asthe adate ~~result,~~through ~~entities~~which ~~that~~subsequent events have ~~contracts~~been ~~containing~~evaluated. ~~an embedded~~This ~~credit~~change ~~derivative~~alleviates ~~feature~~potential inconflicts abetween ~~form~~Subtopic ~~other~~855-10 ~~than~~and ~~such subordination may need to separately account for~~ the ~~embedded~~SEC's ~~credit derivative feature~~requirements. ~~The amendments~~ASU in2010-9 ~~this~~is ~~Update are~~ effective for ~~each~~interim ~~reporting~~and ~~entity~~annual atperiods ~~the beginning~~ending ~~of its first fiscal quarter beginning~~ after June 15, 2010. ~~Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update.~~ The ~~Company expects the~~ adoption of ASU 2010-119 will not have a material impact on the Company’s results of operations or financial position.

In March 2010, FASB issued ASU 2010-11 “Derivatives and Hedging (Topic 815) Scope Exception Related to Embedded Credit Derivatives”. ASU 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Only one form of embedded credit derivative qualifies for the exemption—one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The adoption of ASU 2010-11 will not have a material impact on the Company’s results of operations or financial position.

In April 2010, FASB issued ASU 2010-13 “Compensation-Stock Compensation (Topic 718) Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades”. ASU 2010-13 addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this Update should be effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The guidance should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings for all outstanding awards as of the beginning of the fiscal year in which the amendments are initially applied. The Company expects the adoption of ASU 2010-13 will not have a material impact on the Company’s results of operations or financial position.

In April 2010, FASB issued ASU 2010-18 “Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset (A consensus of the FASB Emerging Issues Task)”. ASU 2010-18 clarifies that modifications of loans that are accounted for within a pool under Subtopic 310-30, which provides guidance on accounting for acquired loans that have evidence of credit deterioration upon acquisition, do not result in the removal of those loans from the pool even if the modification would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The amendments do not affect the accounting for loans under the scope of Subtopic 310-30 that are not accounted for within pools. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40. The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The Company expects the adoption of ASU 2010-18 will not have a material impact on the Company’s results of operations or financial position.

In July 2010, FASB issued ASU 2010-20 “Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses”. ASU 2010-20 improves the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting period ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The Company expects the adoption of ASU 2010-20 will not have a material impact on the Company’s results of operations or financial statements.

In August 2010, FASB issued ASU 2010-21 “Accounting for Technical Amendments to Various SEC Rules and Schedules. Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies”. ASU 2010-21 amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. The Company expects the adoption of ASU 2010-21 will not have a material impact on the Company’s results of operations or financial statements.

In August 2010, FASB issued ASU 2010-22 “Accounting for Various Topics-Technical Corrections to SEC paragraphs (SEC Update)”. ASU 2010-22 amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics. The Company expects the adoption of ASU 2010-22 will not have a material impact on the Company’s results of operations or financial statements.

NOTE 4. CONDENSED BALANCE SHEET INFORMATION

Condensed balance sheet information as of ~~September~~March 25, ~~2010~~2011 consisted of the following (in thousands, unaudited):

Inside China

Outside China

Total

Assets

- Cash and cash equivalents

35,~~151~~562

3413

35,~~185~~575

- Others

6360,~~610~~254

4520

6360,~~655~~274

Total assets

6665,~~761~~816

7933

6665,~~840~~849

Liabilities, excluding Series A and B Redeemable Convertible Preferred Stock

96,~~513~~174

35,~~588~~033

1311,~~101~~207

Equity

3840,~~367~~286

1312,~~652~~614

52,~~019~~900

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

Condensed statement of operation information for the ~~nine~~three months ended ~~September~~March 25, ~~2010~~ 2011 consisted of the following (in thousands, unaudited):

	Inside China			Outside China			Total
Net revenue	$	186,~~043~~883		$	—--		$	186,~~043~~883
Cost of goods sold		(186,~~006~~388	)		—--			(186,~~006~~388	)
General and administrative expenses		(~~7,418~~582	)		(~~454~~254	)		(~~7,872~~836	)
Loss from operations		(~~7,969~~334	)		(~~454~~254	)		(~~8,423~~588	)
Provision for income taxes		(1	)		—--			(1	)
Other income (expense)		(~~379~~16	)		~~(51~~81	)		~~(430~~65	)
Net loss attributable to controlling interest		(~~8,349~~350	)		(~~505~~173	)		(~~8,854~~523	)

The Company does not believe that providing additional information regarding cash flows is meaningful to the reader, in light of the nature of the assets and operations located inside China and outside China.

NOTE 5. ~~LOSS~~EARNINGS PER SHARE

The Company computes earnings per share (“EPS’) in accordance generally accepted accounting principles. 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 28,953 dilutive shares on an “as converted” basis for the Redeemable Convertible Preferred stock for the ~~three~~year ~~and nine months~~ ended ~~September~~March 25, ~~2010~~2011 were excluded from the calculation of diluted earnings per share since their effect would have been anti-dilutive. Approximately 2523,~~266~~192 dilutive shares on an “as converted” basis for the Redeemable Convertible Preferred stock for the ~~three~~year ~~and nine months~~ ended ~~September~~March 25, ~~2009~~2010 were excluded from the calculation of diluted earnings per share since their effect would have been anti-dilutive.

The calculation of diluted weighted average common shares outstanding for the three ~~and~~ ~~nine~~ months ended ~~September~~March 25, ~~2010~~2011 and ~~2009~~2010 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, unauidted):

		Three Months Ended September 25,
	Three Months Ended March 25,
		2010											2009
	2011											2010
					Weighted	~~Weighted~~										Weighted	~~Weighted~~
					Average	~~Average~~										Average	~~Average~~
	Loss	~~Loss~~			Shares	~~Shares~~		Per-Share	~~Per-Share~~			Loss	~~Loss~~			Shares	~~Shares~~		Per-Share	~~Per-Share~~
Loss per share – basic
Earnings per share – basic
Loss available to common stockholders		$	(~~2,778~~553	)			99100,~~751~~000		$	(0.03006	)		$	(12,~~671~~736	)			7689,~~961~~248		$	(0.0203	)
Effect of dilutive securities
Redeemable convertible preferred stock			—--				—--							—--				—--
Options and warrants			—--				—--							—--				—--
Loss per share – diluted		$	(2,778	)			99,751		$	( 0.03	)		$	(1,671	)			69,742		$	(0.02	)
Earnings per share – diluted		$	(553	)			100,000		$	(0.006	)		$	(2,736	)			89,248		$	(0.03	)

	Nine Months Ended September 25,
	2010								2009
				Weighted								Weighted
				Average								Average
	Loss			Shares		Per-Share			Loss			Shares		Per-Share
Loss per share – basic
Loss available to common stockholders	$	(9,218	)		95,358	$	(0.10	)	$	(6,229	)		70,259	$	(0.09	)
Effect of dilutive securities
Redeemable convertible preferred stock		—			—					—			—
Options and warrants		—			—					—			—
Loss per share – diluted	$	(9,218	)		95,358	$	(0.10	)	$	(6,229	)		70,259	$	(0.09	)

NOTE 6. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (in thousands):

	September 25, 2010			December 25, 2009
	March 25, 2011			December 25, 2010
	(Unaudited)
Accounts receivable	$	2220,~~001~~245		$	1620,~~162~~689
Less: Allowance for doubtful accounts		(87,~~759~~415	)		(27,~~725~~170	)
	$	1312,~~242~~830		$	13,~~437~~519

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

	September 25, 2010			December 25, 2009
	March 25, 2011			December 25, 2010
	(Unaudited)
Balance at the beginning of the period	$	27,~~725~~170		$	12,~~184~~725
Add: provision during the period		~~6,188~~650			14,~~551~~609
Less: write-offs during the period		(~~154~~405	)		(10164	)
Balance at the end of the period	$	87,~~759~~415		$	27,~~725~~170

NOTE 7. DEPOSITS AND PREPAYMENTS

Deposits and prepayments consisted of the following (in thousands):

	September 25, 2010		December 25, 2009
	March 25, 2011		December 25, 2010
	(Unaudited)
Deposits for raw materials	$	57,~~555~~413	$	48,~~794~~417
Prepayments and advances		1,~~311~~818		~~838~~2,849
	$	6,866	$	5,632
Land lease prepayment		222		257
	$	9,453	$	11,523

NOTE 8. INVENTORIES

Inventories consisted of the following (in thousands):

	September 25, 2010			December 25, 2009
	March 25, 2011			December 25, 2010
	(Unaudited)
Raw materials (including packing materials)	$	97,~~627~~748		$	139,~~488~~360
Finished goods		~~1,066~~977			1,~~490~~494
		10,693			14,978
		8,725			10,854
Less: Inventory reserve		(~~127~~20	)		(~~512~~7	)
	$	108,~~566~~705		$	1410,~~466~~847

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

	September 25, 2010			December 25, 2009
	March 25, 2011			December 25, 2010
	(Unaudited)
Balance at the beginning of the period	$	~~512~~7		$	~~565~~512
Add: provision during the period		1013			~~510~~17
Less: write-offs during the period		~~(395~~--	)		(~~563~~522	)
Balance at the end of the period	$	~~127~~20		$	~~512~~7

NOTE 9. DUE FROM RELATED COMPANIES

Due from related companies consisted of the following (in thousands):

	September 25, 2010		December 25, 2009
	March 25, 2011		December 25, 2010
	(Unaudited)
Xinlong Asia Food (Dalian) Co., Ltd.*		879		899
Xinlong Asia Food (Luoyang) Co., Ltd.*	$	55	$	54
Xinlong Asia Food (Luoyang) Co., Ltd.*		54		53
Due from related companies for sales	$	55	$	54
Due from related companies for sales	$	933	$	952

* Subsidiaries of Shandong Longfeng Group Company.

NOTE 10. PROPERTY, MACHINERY AND EQUIPMENT

Property, machinery and equipment consisted of following (in thousands):

Useful Life

~~September~~March 25, ~~2010~~2011

December 25, ~~2009~~2010

(In years)

(Unaudited)

Buildings

13,~~626~~867

13,~~437~~701

Machinery and equipment

5 - 12

22,~~850~~948

2322,~~680~~687

Construction in process

~~1,176~~474

~~2,397~~400

37,652

39,514

37,289

36,788

Less: Accumulated depreciation and amortization

(910,~~901~~677

)

(910,~~251~~169

)

2726,~~751~~612

3026,~~263~~619

Depreciation and amortization expense was approximately $~~490~~508,000, ~~$396,000,~~and $1386,~~382,~~000 ~~and $1,167,000~~ for the three ~~and nine~~ months ended ~~September~~March 25, ~~2010~~2011 and ~~2009 respectively~~2010.

NOTE 11. LAND USE RIGHTS

Land use rights consisted of the following (in thousands):

	September 25, 2010			December 25, 2009
	March 25, 2011			December 25, 2010
	(Unaudited)
Land use rights	$	53,~~334~~250		$	53,~~256~~206
Less: Accumulated amortization		(~~1,037~~631	)		(~~924~~611	)
	$	42,~~297~~619		$	42,~~332~~595

Amortization expense was approximately $4414,000, ~~$59,000, $130,000~~ and $~~152~~26,000 for the three ~~and~~ ~~nine~~ months ended ~~September~~March 25, ~~2010~~2011 and ~~2009 respectively~~2010.

NOTE 12. OTHER PAYABLES AND ACCRUALS

Other payables and accruals consisted of the following (in thousands):

	September 25, 2010		December 25, 2009
	March 25, 2011		December 25, 2010
	(Unaudited)
Deposits from customers	$	~~907~~770	$	~~465~~613
Accruals for payroll, bonus and benefits		~~284~~293		~~413~~519
Utilities and accrued expenses		1,~~236~~300		1,~~184~~341
	$	2,~~427~~363	$	2,~~062~~473

NOTE 13. 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 ~~September~~March 25, ~~2010~~2011, all of the warrants issued to the placement agent have been exercised cashless, and all ~~of 6,000 shares of~~ Series A Preferred Stock have been converted into 12,881,540 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 ~~September~~March 25, 2 2011,~~010~~ 8, ~~7,758~~881 shares of Series B Preferred Stock have been converted into 30 31,~~485~~306,~~866~~750 shares of Class A Common Stock, and no warrants have been exercised.

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.
	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.	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 Stock. 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:13

Redeemable Convertible Preferred Stock	Preferred shares		Balance
			(in thousand)
2009
Series A		399	$	399
Series B		3,095		3,095
Less unamortized discount		-		(486	)
Balance December 25, 2009		3,494	$	3,008
2010
Series A		—	$	—
Series B		1,238		1,238
Less: unamortized discount				(22	)
Add: adjustment for quarterly redemption reversion		504		504
Balance September 25, 2010		1,742	$	1,720

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
			(in thousands)
2010
Series A		--	$	--
Series B		1,742		1,742
Less: unamortized discount		--		(1,065	)
Add: adjustment for quarterly redemption reversion		--		1,065
Balance December 25, 2010		1,742	$	1,742
Balance March 25, 2011(Unaudited)		1,742	$	1,742

The $1,742 includes a liability for shares issued on conversion that exceeded the authorized shares of approximately $1,023, an amount equal to their face value if they hadn’t been converted. Derivatives related to the excess shares are included in the derivative liability.

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. We were required to report a change of $81 and $10 as gain on the embedded derivative liability in other income on our statement of operations for the three months ended March 25, 2011 and 2010, respectively.

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. We were required to report a change of $102,000 and $51,000 as loss on the embedded derivative liability in other income on our statement of operations for the three and nine months ended September 25, 2010, a change of $11,000 as loss and a change of $162,000 as gain on the embedded derivative liability in other income on our statement of operations for the three and nine months ended September 25, 2009, respectively.

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
	Embedded Conversion Feature
Expected life (in years)	Remaining Term to conversion or redemption date at each valuation date	~~Remaining term at valuation date~~	~~Remaining Term to conversion or redemption date at each valuation date~~
Expected volatility	196.61%	~~105% to 115%~~	~~105%~~
Risk-free interest rate	0.09%	~~0.23% to 0.26%~~	~~0.12%~~
Dividend yield	0	0	0

The Company considered all of the other minor features of the conversion option associated with the Company’s ~~Series A and Series B~~ Preferred ~~Stock~~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, 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
Loss on change in value of derivatives during the period		51619
Conversion of 1,752 shares of Series A & B Preferred Stock to common stock during 2010		(17	)
Fair Value at September 25, 2010	$	110
Fair Value at December 25, 2010	$	678
Gain on change in value of derivatives during the period		(81	)
Fair Value at March 25, 2011(Unaudited)	$	597

~~NOTE~~ Note 14. Void ~~COMMON~~Share ~~STOCK~~Issuances in 2010

During 2010, 19,509,894 shares of the ~~nine~~Company’s ~~months~~Class ~~ended~~A ~~September~~common ~~25,~~stock ~~2010~~were ~~and~~issued ~~2009,~~in ~~399~~excess of the Company's Articles of Incorporation. Such shares are void under Florida law and ~~399~~are ~~shares~~not entitled to vote at meetings of ~~Series~~ Aour ~~Preferred~~stockholders ~~Stock~~or ~~have~~to ~~been~~any ~~converted~~other ~~into~~rights 4of a stockholder of the Company. In addition,~~143,666~~ any shareholder holding such void shares ~~and~~is 2entitled to recover their value from the Company unless the Company is able to replace the void share with a valid share. As of March 25,~~177~~ 2011,~~967 shares~~ ofthis ~~Class~~obligation Aresults ~~Common~~in ~~Stock~~a potential commitment to buy back shares amounting to approximately $800,000, ~~respectively~~plus the expenses associated with administering such claims. The Company has recorded the liability in the Redeemable Convertible Preferred Stock account where the shares were converted from and that contractual obligation could not be satisfied except with redemption or conversion to valid shares,

~~During~~ Accordingly, the ~~nine~~Company ~~months~~has ~~ended~~proposed ~~September~~in ~~25,~~the ~~2010~~shareholders’ ~~and~~meeting ~~2009,~~scheduled 1to be held on May 13,~~353~~ 2011 to increase the authorized shares ~~and~~to 1119,~~857~~509,894 in order to cover the excess shares of ~~Series~~issued. BShould ~~Preferred~~the ~~Stock~~shareholders’ ~~have~~resolution ~~been~~be ~~converted~~not ~~into~~approved, 11the Company might need to buy from the market 19,~~136~~509,~~072~~894 shares ~~and 10~~amounting to approximately $800,~~133,031~~000 ~~shares~~using the latest market price of ~~Class~~$0.04 Aper ~~Common~~share. ~~Stock,~~The ~~respectively~~Company has provided a derivative for the variability of the stock price for the voided shares.

Upon completion of the amendments to its Articles, the Company expects to complete the over-due redemption of the Series B Redeemable Convertible Preferred Stock with additional shares of Class A common stock, to the extent permitted by the terms thereof.

NOTE 15. ~~WARRANTS~~COMMON STOCK

During the three months ended March 25, 2011 and 2010, 0 shares and 133 shares of Series A Preferred Stock have been converted into 0 shares and 1,129,666 shares of Class A Common Stock, respectively.

During the three months ended March 25, 2011 and 2010, 0 shares and 619 shares of Series B Preferred Stock have been converted into 0 shares and 5,255,800 shares of Class A Common Stock, respectively.

NOTE 16. WARRANTS

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

	Shares		Weighted Average Exercise Price
Outstanding at December 25, 2009		6,482,895		1.4093
Outstanding at December 25, 2010		6,126,645		1.3889
Issued		—--		—--
Exercised		—--		—--
Expired		—--		—--
Outstanding at September 25, 2010		6,482,895		1.4093
Outstanding at March 25, 2011(Unaudited)		6,126,645		1.3889

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		Exercise
	Shares of Class A Common Stock Issuable Under Warrants		Exercise Price
	Issuable Under Warrants		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 March 25, 2011(Unaudited)		6,126,645
Warrants exercisable at September 25, 2010		6,482,895

As of ~~September~~ March 25, ~~2010~~2011, these warrants had no intrinsic value.

NOTE 16 17. 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.

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 fair value of such common shares was $300,000. The Company recognized $~~225~~75,000 as compensation expense for the ~~year~~three months ended ~~December~~March 25, ~~2009~~2010. ~~and~~No ~~$75,000~~stock-based compensation occurred for the ~~nine~~three months ended ~~September~~March 25, ~~2010~~2011.

NOTE 17 18. 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.

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

	Three months ended September 25,				Nine months ended September 25,
	Three months ended March 25,
	2010		2009		2010		2009
	2011		2010
Pre-determined annual fee charged by joint venture partners:
	(Unaudited)		(Unaudited)
Shandong Longfeng Group Company (a)	$	6	$	6	$	20	$	20
Pre-determined annual fee charged by joint venture partners:
Shandong Longfeng Flour Company Limited (b)		13		12		36		35
Shandong Longfeng Group Company (a)	$	7	$	7
	$	19	$	18		56		55
Shandong Longfeng Flour Company Limited (b)		12		11
	$	19	$	18

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

(b) ~~Shandong~~ ~~Longfeng~~Subsidiaries ~~Flour Company Limited is a subsidiary~~ of Shandong Longfeng Group Company.

AsLoans ~~of September 25, 2010, loans~~ from the Company’s major shareholder New Dragon Asia Food Limited ~~of $3,749,000~~ are for working capital, are unsecured and bear no interest, and are payable if requested, and funds are available. The Company and the major shareholder have agreed that no repayments will take place in ~~2010~~ 2011. The joint venture partner’s amounts are similar to the condition of New Dragon Asia Food Limited loans and no repayment is expected in 2011.

AsNOTE ~~of September 25, 2010, the amounts due to the Company’s joint venture partners of $527,000 are also unsecured and bear no interest, and no repayment is expected in 2010~~19. TAXATION

As of September 25, 2010, the amounts due from the Company’s related companies of $933,000 are unsecured, bear no interest and no fix terms of repayment.

NOTE 18. TAXATION

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

Substantially all of the Company’s income was generated in the PRC, which is subject to PRC income taxes at rates ranging from 24% to a statutory rate of 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 ~~September~~March 25, ~~2010~~2011 and December 25, ~~2009~~2010, there were no material deferred tax assets or deferred tax liabilities. 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.

NOTE 19 20. COMPREHENSIVE INCOME

The following table summarizes the comprehensive income for the ~~nine~~three months ended ~~September~~ March 25, ~~2010~~2011 and ~~2009~~2010 (in thousands, unaudited):

	September 25, 2010			September 25, 2009
	March 25, 2011			March 25, 2010
Net loss	$	(~~8,854~~524	)	$	(52,~~397~~571	)
Foreign currency translation adjustment		~~1,233~~844			9519
Comprehensive loss	$	~~(7,621~~320	)	$	(52,~~302~~552	)

NOTE 20 21. 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.

	For the three months ended September 25,						For the nine months ended September 25,
	For the three months ended March 25, (unaudited)
	2010			2009			2010			2009
	2011			2010
	(US$'000)			(US$'000)			~~(US$'000)~~			~~(US$'000)~~
Net revenue
Instant noodles		12,~~497~~197			~~929~~1,012			~~3,569~~			~~2,994~~
Flour		3,~~321~~137			3,~~286~~329			~~11,038~~			~~8,641~~
Soybean		~~632~~1,549			21,~~075~~705			~~3,436~~			~~4,248~~
		5,450			6,290			18,043			15,883
		6,883			6,046
Loss from operation
Income (loss) from operations
Instant noodles		(~~360~~140	)		(~~397~~577	)		~~(1,387~~	)		~~(2,854~~	)
Flour		(~~2,297~~587	)		(~~232~~1,610	)		~~(5,984~~	)		~~(1,395~~	)
Soybean		1139			(~~284~~59	)		~~(1,052~~	)		~~(1,077~~	)
		(2,656	)		(913	)		(8,423	)		(5,326	)
		(588	)		(2,246	)
Depreciation and amortization
Instant noodles		~~245~~230			~~209~~188			~~696~~			~~653~~
Flour		~~106~~118			6490			~~308~~			~~307~~
Soybean		~~183~~204			~~182~~134			~~508~~			~~359~~
		534			455			1,512			1,319
		552			412

	September 25,		December 25,
	March 25,		December 25,
	2010		2009
	2011, (unaudited)		2010
	(US$'000)		(US$'000)
Identifiable long-term assets
Instant noodles		1512,~~624~~059	$	1712,~~510~~096
Flour		7,~~571~~215		87,~~268~~225
Soybean		910,~~786~~012		9,~~769~~947
		32,981		35,547
		29,286	$	29,268

NOTE 21. COMMITMENTS AND CONTINGENCIES

Void Share Issuances in 2010

During the first nine months of 2010, 8,142,409 shares of the Company’s Class A common stock were issued in excess of the Company's Articles of Incorporation. Subsequent to September 25, 2010, a further 11,367,485 were issued in excess of the Company’s Articles of Incorporation. Such shares are void under Florida law and are not entitled to vote at meetings of our stockholders or to any other rights of a stockholder of the Company. In addition, any shareholder holding such void shares is entitled to recover their value from the Company unless the Company is able to replace the void share with a valid share. As of November 15, 2010, this obligation results in a potential commitment to buy back shares amounting to approximately $800,000, plus the expenses associated with administering such claims.

Accordingly, the Company has proposed in the coming shareholders’ meeting to increase the authorized shares to 119,509,894 in order to cover the excess shares issued. Should the shareholders’ resolution not be approved, the Company might need to buy from the market 19,509,894 shares amounting to approximately $800,000 using the latest market price of $0.04 per share. The over issuance of shares at September 25,2010 resulted from a conversion of Preferred stock on July 5,2010. For financial statement purposes the Company has presented the equivalent shares of preferred stock as still outstanding and accounted for the unexercisable conversion feature as part of the derivative liability.

The Company has also planned to propose a reverse split of its Class A common stock at a ratio of 100 for 1. If the reverse split were approved by the shareholders’ meeting, the total amount of outstanding common shares would reduce and the stock price would increase accordingly. However, there is no assurance that the reverse split will be approved. As such, the Company has not retroactively reflected the reverse split in the financial statements as at September 25, 2010.

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

In addition to historical information, the matters discussed in this Form 10-Q contain forward-looking statements that involve risks or uncertainties. Generally, the words "believes," "anticipates," "may," "will," "should," "expect," "intend," "estimate," "continue," and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements. Readers should carefully review the risks described in other documents we file from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 25, ~~2009~~2010, the Quarterly Reports on Form 10-Q filed by the Company and Current Reports on Form 8-K (including any amendments to such reports) ~~filed by the Company~~. References in this filing to the “Company”, “Group”, “we”, “us”, and “our” refer to New Dragon Asia Corp. and its subsidiaries.

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.

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.

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.

Accounting for Derivative Instruments

1918

Share-Based Payment

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 supersedes 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.

Allowance for Doubtful Accounts

Management provides for an allowance for doubtful accounts for those third party trade accounts that are not collected within one year. We base our estimate (one year) on historical experience and on continuous monitoring of customers’ credit and settlement. We believe we have reasonable basis for making judgments on the allowance for doubtful accounts.

We normally grant up to 90 days credit to our customers. We monitor our allowance for doubtful accounts on a monthly basis.

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.

Recent Accounting Pronouncements

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 into and out of Level 1 and Level 2 fair value measurements and the presentation of separate information regarding purchases, sales, issuances and settlements on a gross basis in the reconciliation of 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 annual reporting periods after beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning December 15, 2010. The adoption of ASU 2010-066 will not have a material impact on the Company’s results of operations or financial position.

2019

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 2010-069 will not have a material impact on the Company’s results of operations or financial position.

In March 2010, FASB issued ASU 2010-11 “Derivatives and Hedging (Topic 815) Scope Exception Related to Embedded Credit Derivatives”. ASU 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Only one form of embedded credit derivative qualifies for the exemption—one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The ~~Company expects the~~ adoption of ASU 2010-11 will not have a material impact on the Company’s results of operations or financial position.

2120

Overview

Headquartered in Shandong Province, PRC, we 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 market our products with our brand name called “LONG FENG” through a countrywide network of distributors. 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.

Operations

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

We produce two types of soybean products - soybean protein powder and soybean powder. They are principally supplied to food and beverage producers.

We believe that we have a reputation in China for producing some of the highest quality food products. We believe our production plants operate at a high level of hygiene and efficiency and all of our plants are certified under the ISO9002 standards. We also use strict quality control systems, resulting in what we believe to be a favorable customer perception of the “Long Feng” brand.

Our products are marketed and distributed throughout China by our distributors. Our sales and marketing strategy focuses on maintaining strong distribution relationships by holding annual sales order meetings, regular distributor conferences and an excellent quality/price dynamic.

We believe our distribution system is the key to our continued success in developing the “Long Feng” brand as one of the famous domestic brands in China. Most of our distributors have long-term relationships with us.

Our primary domestic customer base for both our flour products and instant noodles consists of small retail stores in the rural areas throughout China where we believe that 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 by our customers is very strong in this sector. In addition to the small retail sector, we sell to larger supermarkets located 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 ~~export~~begin exports of instant noodles and soybean powder to Europe. In early 2008, we began exporting noodles to Nigeria, Africa.

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 ~~facilities~~locations to increase our production capacity - Build strategic alliances with multinational food groups to enhance product range and capitalize on our China distribution network

- 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.

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.

2221

Employees

We employ approximately 1,500 employees. All of them are located in the eight plants. We have maintained good relationships with our employees and no major disputes have occurred since our inception.

Currency Conversion and Exchange

Although the Chinese government regulations now allow convertibility of Renminbi (“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 expenditures. 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. To date, we have not engaged in any currency hedging transactions in connection with our operations.

Results of Operations

The following table sets forth, for the periods indicated, certain operating information expressed in U.S. dollars (in thousands, unaudited):

	Three months ended September 25,						Nine months ended September 25,
	Three months ended March 25,
	2010			2009			2010			2009
	2011			2010
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net revenue	$	6,883		$	6,046
Net revenue	$	5,450		$	6,290		$	18,043		$	15,883
Cost of goods sold		(6,388	)		(6,023	)
Cost of goods sold		(5,373	)		(6,560	)		(18,006	)		(18,591	)
Gross profit		495			23
Gross profit (loss)		77			(270	)		37			(2,708	)
Selling and distribution expenses		(247	)		(177	)
Selling and distribution expenses		(164	)		(230	)		(588	)		(597	)
General and administrative expenses		(836	)		(2,092	)
General and administrative expenses		(2,569	)		(413	)		(7,872	)		(2,021	)
Gain on fair value adjustments to embedded derivatives		81			10
Gain (loss) on fair value adjustments to embedded derivatives		(102	)		(11	)		(51	)		162
Loss before income taxes		(523	)		(2,570	)
Loss before income taxes		(2,689	)		(1,432	)		(8,853	)		(5,747	)
Income taxes expense		(1	)		(1	)
Income taxes benefit (expense)		—			(1	)		(1	)		348
Net loss attributable to controlling interest		(523	)		(2,571	)
Net loss attributable to controlling interest		(2,689	)		(1,433	)		(8,854	)		(5,397	)

~~Nine~~Three Months Ended ~~September~~March 25, ~~2010~~2011 Compared to ~~Nine~~Three Months Ended ~~September~~March 25, ~~2009~~2010

Net Revenue

Net revenue for the ~~nine~~quarter ~~months~~ ended ~~September~~March 25, ~~2010~~2011 was $186,~~043~~883,000, representing an increase of $2837,~~160,~~000, or 14%, from $156,~~883~~046,000 for the ~~nine months~~quarter ended ~~September~~March 25, ~~2009~~2010. Revenues increased in the instant noodle segment by over 217% as the global economy began to recover and the demand for our products gradually strengthened, leading to increases in both selling prices and volumes.

Revenues increased in instant noodle and flour segments by 19% and 28% as the global economy began to recover and the demand for our products gradually strengthened. However, revenue decreased in soybean segment by 19%, as the Company is gradually ceasing producing low-margin products and planning to concentrate on the high-margin products, like soybean-protein powder in the future. At such transition period, the revenue of soybean segment should be temporarily affected.

Cost of goods sold

For the ~~nine~~ three months ended ~~September~~March 25, ~~2010~~2011, cost of goods sold was $186,~~006~~388,000, ~~a decrease~~an increase of $~~585~~365,000, or 36%, as compared to $186,~~591~~023,000 for the ~~nine~~three months ended ~~September~~March 25, ~~2009~~2010. The ~~decrease~~increase was due to the ~~fact~~increase ~~that the Company did not need to provide further provision for its inventory as~~ in ~~the~~sales ~~corresponding period in 2009 in view that the price~~ of ~~its~~our ~~product was not expected to be further declined under the current economy environment~~products.

For the ~~nine~~ three months ended ~~September~~March 25, ~~2010~~2011, as a percentage of revenue, cost of goods sold decreased to ~~100~~93% as compared to ~~117~~99% for that of the same period of prior year. For the ~~nine~~three months ended ~~September~~March 25, ~~2010~~2011, gross margin was 07% as compared to ~~a negative gross margin of 17~~1% for the same period of prior year. The improvement in gross margin was mainly attributable to the ~~increase~~ inincreased ~~sales~~demand ~~volumes~~ in ~~our~~the ~~flour~~instant noodle segment.

Selling and Distribution Expenses

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

Selling and distribution expenses were $~~588~~247,000 for the ~~nine~~quarter ~~months~~ ended ~~September~~March 25, ~~2010~~ 2011, representing aan ~~decrease~~increase of $970,000 or 240% from $~~597~~177,000 for the corresponding ~~period~~quarter inof ~~2009~~2010. The ~~decrease~~increase was ~~primarily~~ due to the ~~cost controls~~increase ~~implemented~~in bysales usof our products.

As a percentage of net revenue, selling and distribution expenses decreased to 3% for the nine months ended September 25, 2010 as compared to 4% for the corresponding period in 2009. The decrease was primarily due to the cost controls implemented by us.22

As a percentage of net revenue, selling and distribution expenses increased to 4% for the quarter ended March 25, 2011 as compared to 3% for the corresponding period in 2010. The increase was due to the increase in sales of our products.

General and Administrative Expenses

General and administrative expenses ~~increased~~decreased by $51,~~851~~256,000, or ~~290~~60%, to $7836,~~872,~~000 for the ~~nine~~quarter ~~months~~ ended ~~September~~March 25, ~~2010~~2011 as compared to $2,~~021~~092,000 for the corresponding ~~period~~quarter in ~~2009~~2010. The ~~increase~~decrease was primarily due to the ~~provision for~~large ~~doubt~~amount ~~accounts.~~of ~~This~~ provision ~~stems~~for ~~from~~bad ~~customers~~debt ~~with~~due ~~receivable~~from ~~balance over one year old. Many of our~~ customers ~~are~~made export related companies. In the first nine months of 2010, these companies were still seriously affected by the world wide economy slowdown and overseas orders for Chinese food and agriculture products did not recover as quickly as expected. As a result, the food export industry in ~~Shandong was slow to recover and its turnover rate of funds stayed at a low level. As a part of~~ the ~~industry~~quarter ~~chain and supplier to export entities, the Company had to inevitably face the lengthening of its average days outstanding regarding receivables from its customers. During the nine months~~ ended ~~September~~March 25, 2010, ~~the~~which ~~Company~~were ~~believes~~lower itin ~~has recorded~~ the ~~appropriate provision~~quarter ~~for~~ended ~~bad~~March ~~debts and it has the appropriate allowance at September~~ 25, ~~2010.~~ ~~The Company will gradually tighten its credit policy and intends to strengthen collection effort regarding outstanding receivables, including legal remedies when necessary~~2011. ~~The Company believes this will prevent significant bad debts in the future.~~

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 ~~nine~~quarter ~~months~~ ended ~~September~~March 25, ~~2010~~ 2011, the ~~loss~~gain in this regard was $5181,000. For the corresponding period of ~~2009~~2010, the gain in this regard was $~~162~~10,000. 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. AnIncrease ~~increase~~ in our stock’s market value increases the value of the derivative creating losses in our income statements and a decrease in the stock’s market value reduces the value of the derivatives creating gains in our income statements.

Net Loss Attributable to Controlling Interests

Net loss attributable to controlling interest was $8523,~~854,~~000 for the ~~nine~~quarter ~~months~~ ended ~~September~~ March 25, ~~2010~~2011 as compared to net loss attributable to controlling interest of $52,~~397~~571,000 for the ~~nine~~quarter ~~months~~ ended ~~September~~March 25, ~~2009~~2010. Such ~~increase~~improvement was primarily due to ~~(i)~~improvement ~~the~~in ~~provision~~revenue ~~for~~and ~~doubtful debts due from customers, (ii)~~ the ~~write-off~~absence of ~~some~~significant ~~unserviceable~~provisions ~~equipment~~ for ~~the~~doubtful ~~nine months ended September 25~~accounts, ~~2010~~which ~~compared~~happened ~~with~~in ~~an income tax benefit for the corresponding period of 2009, and (iii) the fluctuation of gain/(loss) on fair value adjustments to embedded derivatives~~2010.

Three Months Ended September 25, 2010 Compared to Three Months Ended September 25, 2009

Net Revenue

Net revenue for the quarter ended September 25, 2010 was $5,450,000, representing a decrease of $840,000, or 13%, from $6,290,000 for the quarter ended September 25, 2009.

Revenues increased in noodle and flour segments by 61% and 1% as the global economy began to recover and the demand for our products gradually strengthened. However, revenue decreased in soybean segment by 70%, as the Company is gradually ceasing producing low-margin products and planning to concentrate on the high-margin products, like soybean-protein powder in the future. At such transition period, the revenue of soybean segment should be temporarily affected.

Cost of goods sold

For the three months ended September 25, 2010, cost of goods sold was $5,373,000, a decrease of $1,187,000, or 18%, as compared to $6,560,000 for the three months ended September 25, 2009. The decrease was due to the decrease in sales of our products.

For the three months ended September 25, 2010, as a percentage of revenue, cost of goods sold decreased to 99% as compared to 104% for that of the same period of prior year. For the three months ended September 25, 2010, gross margin was 1% as compared to a negative gross margin of 4% for the same period of prior year. The improvement in gross margin was mainly attributable to the fact that the Company did not need to provide further provision for its inventory as in the corresponding period in 2009 in view that the price of its product was not expected to be further declined under the current economy environment.

Selling and Distribution Expenses

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

Selling and distribution expenses were $164,000 for the quarter ended September 25, 2010, representing a decrease of $66,000 or 29% from $230,000 for the corresponding quarter of 2009. The decrease was due to the cost controls implemented by us.

As a percentage of net revenue, selling and distribution expenses decreased to 3% for the quarter ended September 25, 2010 as compared to 4% for the corresponding period in 2009. The decrease was due to the cost controls implemented by us.

General and Administrative Expenses

General and administrative expenses increased by $2,156,000, or 522%, to $2,569,000 for the quarter ended September 25, 2010 as compared to $413,000 for the corresponding quarter in 2009. The increase was primarily due to the provision for double accounts. This provision stems from customers with receivable balance over one year old. Many of our customers are export related companies. In the first nine months of 2010, these companies were still seriously affected by the world wide economy slowdown and overseas orders for Chinese food and agriculture products did not recover as quickly as expected. As a result, the food export industry in Shandong was slow to recover and its turnover rate of funds stayed at a low level. As a part of the industry chain and supplier to export entities, the Company had to inevitably face the lengthening of its average days outstanding regarding receivables from its customers. During the quarter ended September 25, 2010, the Company believes it has recorded the appropriate provision for bad debts and it has the appropriate allowance at September 25, 2010. The Company will gradually tighten its credit policy and intends to strengthen collection effort regarding outstanding receivables, including legal remedies when necessary. The Company believes this will prevent significant bad debts in the future.

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 quarter ended September 25, 2010, the loss in this regard was $102,000. For the corresponding period of 2009, the loss in this regard was $11,000. 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.

Net Loss Attributable to Controlling Interests

Net loss attributable to controlling interest was $2,689,000 for the quarter ended September 25, 2010 as compared to net loss attributable to controlling interest of $1,433,000 for the corresponding period of 25, 2009. Such increase was primarily due to (i) the provision for doubtful debts due from customers and (ii) the fluctuation of loss on fair value adjustments to embedded derivatives.

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~~increased by $4556,~~809,~~000 to $2530,~~034~~108,000 at ~~September~~March 25, ~~2010~~2011 as compared to $29,~~843~~552,000 at December 25, ~~2009~~2010, which was primarily due to ~~decrease~~ increase of ~~inventory~~cash and cash equivalent which was contributed by ~~consumption~~the ofincreased ~~raw~~sales ~~materials~~of ~~in production~~products.

Cash and cash equivalents were $35,~~185~~575,000 as of ~~September~~March 25, ~~2010~~2011, aan ~~decrease~~increase of $~~255~~2,819,000 from December 25, ~~2009~~2010. 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.

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. ~~The Series A Preferred Stock has been fully converted as of September 25, 2010.~~

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:

	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.
	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.	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 ~~September~~March 25, ~~2010~~2011, the Company had long-term debt obligations that resulted from the ~~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
	2011	2012	2013	2014	2015	Thereafter	Total
	(In thousands)
Pre-determined annual fee charged by joint venture partners	97	129	129	129	129	4,270	4,883

	Payment Obligations By Period
	2010		2011		2012		2013		2014		Thereafter		Total
	(In thousands)
Redeemable convertible preferred stock	$	1,238	$	—	$	—	$	—	$	—	$	—	$	1,238
Pre-determined annual fee charged by joint venture partners		33		129		129		129		129		4,399		4,948
Total	$	1,271	$	129	$	129	$	129	$	129	$	4,399	$	6,186

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	)
Partial redemption of Series A and B Preferred Stock in 2010		(1,752	)
	$	1,742

Void Share Issuances in 2010

During ~~the~~ ~~first nine months of~~ 2010, 819,~~142~~509,~~409~~894 shares of the Company’s Class A common stock were issued in excess of the Company's Articles of ~~Incorporation. Subsequent~~ ~~September 25, 2010, a further 11,367,485 were issued in excess of the Company’s Articles of~~ Incorporation. Such shares are void under Florida law and are not entitled to vote at meetings of our stockholders or to any other rights of a stockholder of the Company. In addition, any shareholder holding such void shares is entitled to recover their value from the Company unless the Company is able to replace the void share with a valid share. As of ~~November~~March 1525, ~~2010~~2011, this obligation results in a potential commitment to buy back shares amounting to approximately $800,000, plus the expenses associated with administering such claims. The Company has recorded the liability in the Redeemable Convertible Preferred Stock account where the shares were converted from and that contractual obligation could not be satisfied except with redemption or conversion to valid shares,

27Accordingly, the Company has proposed in the shareholders’ meeting scheduled to be held on May 13, 2011 to increase the authorized shares to 119,509,894 in order to cover the excess shares issued. Should the shareholders’ resolution be not approved, the Company might need to buy from the market 19,509,894 shares amounting to approximately $800,000 using the latest market price of $0.04 per share.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

Item 4T4. Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and the chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of ~~September~~March 25, ~~2010~~2011, the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that, ~~except for the void share issuance as described in Note 21,~~ our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to us and our consolidated subsidiaries, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

To enhance the control over share issuance, the Company had designed and implemented a new control point by assigning an accounting officer to check against the ledger of the authorized share capital upon issuance of new shares in the future to ensure that any new issuance will be properly arranged within the limit of the authorized share capital.

Changes in internal controls over financial reporting

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the ~~nine~~three months ended ~~September~~March 25, ~~2010~~2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

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

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

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

Item 6. Exhibits.

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).

2926

3027

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).
10.7	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).
10.9		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).
10.8	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).
10.10		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).
10.9	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).
10.11		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).
10.10	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).
10.12		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).
10.11	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).
10.13		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).
10.12	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).
10.14		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).
10.13	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).
10.15		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).
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).
21.1		Subsidiaries of New Dragon Asia Corp., (incorporated by reference to Exhibit 21.1 to our Form 10-K filed on April 6, 2010).
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).
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.
21.1	Subsidiaries of New Dragon Asia Corp., (incorporated by reference to Exhibit 21.1 to our Form 10-K filed on April 6, 2010).
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.
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.
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.
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 and Chief Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.

3128

SIGNATURES

Pursuant to the requirements 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.

	NEW DRAGON ASIA CORP.
Dated: November 15, 2010	By:	/s/ Li Xia Wang
Dated: May 5, 2011	By:	/s/ Li Xia Wang
		Name: Li Xia Wang (Principal Executive Officer)
		Title: Chief Executive Officer

Dated: November 15, 2010	By:	/s/ Ling Wang
Dated: May 5, 2011	By:	/s/ Qi Xue
		Name: Ling Wang
		Name: Qi Xue
		Title: Chief Financial Officer (Principal Financial and Accounting Officer)
		Title: Chief Financial Officer

3229

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