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

FORM 20-F

¨  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 2005

OR

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

Commission File No. 0-19884

LEADING BRANDS, INC.
[Exact name of Registrant as specified in its charter]

Not Applicable
[Translation of Registrant's name into English]

British Columbia, Canada
[Jurisdiction of incorporation or organization]

Suite 1800 – 1500 West Georgia Street, Vancouver, BC Canada V6G 2Z6
[Address of principal executive offices]

Securities registered or to be registered pursuant to Section 12(b) of the Act:
None

Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares Without Par Value

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
[Title of Class]

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period
covered by the annual report:

February 28, 2005 – 15,045,069 Common Shares without par value

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 twelve 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 ¨  

Indicate by check mark which financial statement item the Registrant has elected to follow:
Item 17 x      Item 18 ¨  

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Securities and Exchange Commission
Washington, D.C. 20549 U.S.A.

Form 20-F
For the fiscal year ended February 28, 2005
Commission File No. 0-19884
Leading Brands, Inc.

Index

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P A R T   I

Item 1. – Identity of Directors, Senior Management and Advisers

This item is not applicable for an Annual Report.

Item 2. – Offer Statistics and Expected Timetable

This item is not applicable for an Annual Report.

Item 3. – Key Information A. Selected Financial data.

1. and 2.

The following table sets forth certain selected consolidated financial information with respect to the Company for the periods indicated. It should be read in conjunction with this Annual Report and the Company's consolidated financial statements listed in Item 17 of this Annual Report. The following table is derived from, and is qualified by, the Company's financial statements and the notes thereto which have been prepared in accordance with generally accepted accounting principles in Canada.

Unless otherwise specified, all amounts set out in this Annual Report are expressed in United States dollars.

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For all years presented, diluted earnings per share was the same as basic except for 2001 where diluted EPS was $0.08.

The following table sets forth the above financial information prepared in accordance with generally accepted United States accounting principles as disclosed in note 21 of the annual financial statements. The selected financial data should be read in conjunction with the Company’s financial statements and the notes thereto, included elsewhere in this Annual Report.

The primary difference between the income of $625,643 under Canadian GAAP versus the income of $782,784 under US GAAP for the year ended February 28, 2005 is the fair value based method to account for employee based options under Canadian GAAP not required under US GAAP.

For all years presented, the diluted earnings (loss) per share was the same as basic earnings per share.

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3.               Exchange Rates

The Company maintains its financial records in Canadian dollars and translates them into United States dollars for reporting purposes. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in United States dollars. Assets and liabilities have been translated using the rate in effect at the fiscal year end (1.2335), while revenues and expenses have been translated at the average rate for the fiscal year (1.2888) .

B.               Capitalization and indebtedness.

This item is not applicable for an Annual Report.

C.               Reasons for the offer and use of proceeds.

This item is not applicable for an Annual Report.

D.               Risk factors.

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Historically, the Company has had periods of unprofitable operations. The Company is engaged in a relatively capital intensive industry (bottling operations) that is subject to some seasonal fluctuations. In periods of low volumes, fixed costs can result in operating losses.

The Company derives a substantial portion of its revenue from several major customers with the largest customer contributing 18% of revenue and the ten largest comprising 75% of revenue. The loss of several major customers would have a negative impact on earnings.

The Company purchases from the United States certain raw materials and goods for resale in Canada and thus is vulnerable to exchange rate fluctuations. The Company sells certain products manufactured in Canada into the US. The Company does not presently use any financial instruments to hedge foreign currency fluctuations. The sale of Canadian-produced products into the US acts as a natural hedge against foreign currency fluctuations. A significant increase in the value of the US dollar in relation to the Canadian dollar would increase the Company’s cost of product and revenues from export sales. The amount of export revenue does not offset the amount of raw materials and goods for resale purchased in US dollars. Therefore, some vulnerability to exchange rate fluctuations exists.

The Company relies on a limited number of suppliers for certain raw materials. While other sources of supply do exist, an unexpected disruption in supply could create operational problems and increased costs in the short term.

The following are some of the other factors that could affect the Company’s financial performance:

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Item 4. – Information on the Company

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C.               Organizational structure.

Following is a list of the Company’s main subsidiaries as at February 28, 2005:

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D.               Property, plants and equipment.

Beverage Operations

Leading Brands operates two beverage plants: one in Edmonton, Alberta and one in Richmond, British Columbia. The two plants have a total 144 oz. equivalent case capacity of approximately 25,000,000 cases per annum.

Leading Brands owns a 50,000 square foot plant in Edmonton, Alberta, located at 4104 -99 Street. The plant contains three lines: glass, P.E.T. and pouch line for a combined 144 oz. equivalent case capacity of 10,000,000 cases per annum.

The Richmond, B.C. plant, is a 100,000 square foot leased facility, with a high speed combination hot fill glass and PET plastic line, and a carbonated line. This plant has an annual case volume capacity of approximately 15,000,000 144 oz. equivalent cases.

Leading Brands also owns and operates a spring site at Mt. Woodside, Agassiz, British Columbia, approximately 50 miles east of Vancouver. The Company sells bulk tankered water to bottlers in the greater Vancouver area.

Sales and Distribution

The Company has a sales office in the following location:

#250 – 1050 Seminaire nord, Saint-Jean-sur-Richelieu, Quebec. The space occupies 1,469 square feet and is leased month-to-month for $1,289 US per month.

The following location serves the role of regional warehouse or distribution centre.

3870 – 98 Street, Edmonton, Alberta. The space occupies 61,872 square feet and is leased for $16,720 US per month until August 31, 2007.

The Company also utilizes the following third party distribution centres:

The Company’s head office is located at Suite 1800 – 1500 West Georgia Street, Vancouver BC. The space occupies 6,036 square feet and is being leased for $7,748 to $8,563 US per month until January 2008.

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Item 5. – Operating and Financial Review

A.               Operating results

Introduction

The Company is involved in two main business functions, the operation of two bottling plants and the distribution of the Company’s brands and other licensed brands. The plants provide bottling services to large co-pack customers and national grocery chains for their products and also produce the Company’s branded products. The Company’s distribution division markets and sells the Company’s branded beverage products and other food and beverage products licensed to the Company, through the Integrated Distribution System (IDS) of distributors, wholesalers, grocery chains and direct delivery to retail stores.

The Company’s goal is to increase production volume and sales by securing additional volume from its existing co-pack customers, securing new production contracts from customers requiring bottling services, and increasing distribution of the Company’s branded beverage products and other food and beverage products licensed to the Company through distribution contracts. The Company’s major focus is to accomplish this while incurring minimal increases in selling, general and administrative costs to create increased profit for the Company.

Financial Year Ended February 28, 2005

Sales

Gross sales for the year ended February 28, 2005 were $34,415,849 compared to $41,773,575 for the previous year, representing a decrease of 17.6 %. The decrease in plant revenue is a result of a decrease in revenue from sales to customers where the Company supplies the raw materials of $4,442,360 offset by an increase in revenue from sales to customers where the customer supplies the raw materials of $3,515,197, which includes a reduction in Ocean Spray production. The decrease in distribution and other revenue consists of a decrease in revenue from food products of $1,677,750, mainly due to the discontinuation of the Little Debbie’s snack food line, a decrease in revenue of the Company’s own brands of $3,017,051 mainly due to the refocus of the sales force in the US, and a net decrease in sales of licensed brands and other revenue of $1,735,762, representing a decrease in revenue from the loss of the Mad Croc distribution

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contract in the amount of $3,147,008 offset by an increase in sales of other licensed brands and other revenue of $1,411,246. Sales discounts, allowances and rebates for the year ended February 28, 2005 were $849,645 compared to $976,649 for the previous year, representing a decrease of 13%. The decrease of $127,004 represents a decrease in sales discounts, allowances and rebates related to the sales of branded products in the amount of $300,856 offset by an increase in volume rebates related to the bottling plant in the amount of $173,852.

Cost of Sales and Margin

Cost of sales for the year ended February 28, 2005 were $23,543,348 compared to $31,403,389 for the previous year, representing a decrease of 25%. The decrease in plant cost of sales of $3,121,045 is a result of a decrease in cost of sales for customers where the Company supplies the raw materials of $4,321,060 offset by an increase in cost of sales for customers where the customer supplies the raw materials of $1,200,015. The decrease in distribution and other cost of sales of $4,738,996 consists of a decrease from foods products of $1,731,211, mainly due to the discontinuation of the Little Debbie’s snack food line, a decrease from the Company’s own brands of $1,736,227 mainly due to the refocus of the sales force in the US, and a net decrease in licensed brands and other products of $1,271,558, representing a decrease in Mad Croc distribution in the amount of $1,816,692 offset by an increase from other licensed brands and other products of $545,134.

Margin for the year ended February 28, 2005 was $10,022,856 compared to $9,393,537 for the previous year, representing a increase of 6.7% . The increase in plant margin of $2,020,030 is a result of a decrease in margin from customers where the Company supplies the raw materials of $121,300 offset by an increase in margin from customers where the customer supplies the raw materials of $2,141,330. The decrease in distribution and other margin of $1,390,711 consists of an increase from foods products of $137,035 mainly due to increased profitability from remaining food products, a decrease from the Company’s own brands of $1,154,083 mainly due to the refocus of the sales force in the US, and a net decrease in licensed brands and other products of $373,663, representing a decrease in Mad Croc distribution in the amount of $1,204,470 offset by an increase from other licensed brands and other products of $830,807.

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Selling, General and Administration Expenses

These expenses decreased $1,291,653 from $9,867,894 to $8,576,241, or 13.1% . Selling, general and administrative expenses related to the US decreased $1,583,453 due to the refocus of the US sales division, marketing expenses decreased $409,418 due to lower sales of the Company’s own brands, offset by an increase in general and administrative expenses of $701,218 due to increased bottling plant volume.

Other Expenses and Recovery

Depreciation remained consistent with the prior year at $878,770 compared to $896,406 in the 2004 fiscal year. Amortization of deferred costs decreased by $216,107 from $296,875 to $80,768. Amortization decreased by $258,573 relating to the impairment write down at the end of the 2004 fiscal year of certain deferred costs for start up and product development in the US market that was partially offset by an increase in amortization of $42,466 for product development costs related to the Company’s new brands. Interest decreased by $24,460 from $339,630 to $315,170 due lower average borrowing levels. In the current year, the Company recorded income from the cancellation of certain distribution and bottling contracts in the amount of $695,585. In the current fiscal year, the Company recorded a loss on sale of assets in the amount of $43,590 due to the sale of retired production equipment, compared to a $9,083 loss on sale of assets in the prior year. In the year ended February 28, 2005, the Company reduced the valuation allowance against future income tax assets in the amount of $543,141 due to an increased certainty that the Company would be able to realize on the asset compared with $805,383 in the prior year. In the fiscal year ended February 28, 2005, the Company recorded a reduction in the future income tax asset in the amount of $745,090 corresponding to the operating profits in the Canadian operating entity. The Company paid cash income taxes in the fiscal year ended February 29, 2004 in the amount of $3,943 and recovered income tax of $3,690 in the year ended February 28, 2005.

Financial Year Ended February 29, 2004

Sales

Net sales for the year ended February 29, 2004 were $40,796,926, compared to $47,276,240 for the previous year, representing a decrease of 13.7 % or $6.48 million. The decrease is attributed to the following:

Cost of Sales and Margin

Cost of sales decreased from $37,924,637 to $31,403,389 as a result of the net difference between the increase in cost of sales for branded products and the decrease in cost of sales due to

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the change in billing method for a large co-pack customer. Gross margin was $9,393,537 in the current year compared to $9,351,603 in the prior year.

Selling, General and Administration Expenses

These expenses increased $890,092 from $8,977,802 to $9,867,894, or 9.9% . The additional costs are for wage and benefit costs, marketing expenses and other administrative costs incurred as a result of expanding the market for certain proprietary products into the US.

Other Expenses

Depreciation increased by $140,937 from $755,469 in the prior year to $896,406. The increase was due to the effect of foreign currency translations of $106,597 and increased depreciation due to the addition of capital assets in the production facilities of $34,340. Amortization of deferred costs increased by $25,052 from $271,823 to $296,875. The increase was due to the effect of foreign currency translation of $38,354 net of a decrease in amortization of $13,302 due to trademarks and other deferred costs reaching the end of their amortization periods in the fiscal year ended February 29, 2004. Interest decreased by $74,366 from $413,996 to $339,630 due the reduction of interest accretion on convertible preferred shares in the amount of $147,615, converted in the December 2002, net of the increase in interest due to the effect of foreign currency translation in the amount of $37,586 and interest on higher average borrowing levels in the amount of $35,663. For US GAAP, interest accretion of $147,615 on convertible preferred shares in 2003 would not be recorded as explained in note 21 of the financial statements. In the year ended February 28, 2003, the Company decided to discontinue support of the Quick Home Operations delivery service and, accordingly, recorded a $6,523,880 impairment write down on its investment.

B.               Liquidity and Capital Resources

Financial Year Ended February 28, 2005

As at February 28, 2005 the company had negative working capital of $899,375 compared to negative working capital of $1,673,014 at the prior year end. This improvement in working capital resulted from cash generated through operating income. Bank indebtedness was $2,512,897 compared to $3,179,800 for the prior year which was reduced for the reasons mentioned above. There were no cash or cash equivalents as at February 28, 2005 or the previous year.

The agreement with respect to the bank indebtedness contains three restrictive covenants. They are a tangible net worth covenant, a current ratio covenant and a capital acquisition covenant. The Company was in compliance with all but the current ratio covenant at February 28, 2005. Subsequent to the year end, the lender renewed the Company’s loans. The Company does not expect any additional covenant violations in the foreseeable future.

Notwithstanding the negative working capital as at February 28, 2005, the Company believes it will have sufficient working capital for the next 12 months since the Company has generated cash flow from operations at the beginning of the fiscal year ending February 28, 2006, significantly reducing the working capital deficit. The Company has no significant planned capital projects and believes that it currently has sufficient working capital to continue

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operations for the next twelve months and thereafter. Should any significant capital projects be planned, they will likely require further financing.

Net cash generated in operating activities for the 12 months ended February 28, 2005 was $1,770,156 compared to $853,640 utilized in the prior fiscal year. Cash in-flow from operations generated $2,137,132 of cash compared to $712,314 utilized in the prior year. In fiscal 2005 normal operating activities in the Canadian operations generated $2,140,790, settlement from cancellation of distribution and bottling contracts generated $695,585, normal operating activities in the US operations utilized $639,482 and other marketing and holding entities utilized $59,761. Working capital changes utilized $366,976 due mainly to a decrease in trade accounts payable of $2,857,118, mostly due to a $2,370,237 decrease in Canadian operations due to cash generated from operations, the change in product mix in the co-pack products mentioned in the sales section, discontinuation of the Little Debbie’s snack food line and reduced sales in the Company’s own brands and a $484,068 decrease in US operations due to the discontinuation of the Mad Croc product line and payment of legal fees relating to the contract settlement. The utilization from the reduction of accounts payable was offset by working capital generated by a decrease in prepaid expenses of $9,773, a decrease in inventory of $920,364; a $914,222 decrease in the Canadian operating entities due to the same reasons mentioned above for the reduction of accounts payable and a $6,142 decrease in the US operating entities and a decrease in accounts receivable of $1,560,005; a $1,527,480 decrease in the Canadian operating entity for the reasons mentioned above for accounts payable and inventory, a $33,881 decrease in the US operating entities and a $1,356 increase in the marketing and holding entities.

Net cash utilized in investing activities was $290,679 compared to $687,916 in the prior year. $256,329 was expended on the purchase of capital assets compared to $541,776 in the prior year. During fiscal year 2005, $178,690 was expended on equipment for the bottling operations, $29,908 was expended on vehicles and $47,731 was expended on office equipment, software, and leasehold improvements. The sale of assets generated $40,715 compared to $63,730 in the prior year. Cash was utilized for expenditures on deferred costs in the amount of $75,065 for new product development costs compared to $209,870 in the prior year, of which $77,699 for new product development costs and $132,171 for start up costs related to the alcohol bottling contract.

Financing activities utilized $1,650,381 compared to $1,257,966 generated in the prior year. In the current year, the Company repaid long-term debt of $1,128,209 compared to $724,006 in the prior year, decreased bank indebtedness in the amount of $890,440 compared to $57,057 in the prior year as a result of increased cash flow from operations in the fiscal year ended February 28, 2005. This was offset by proceeds from additional long term debt of $363,829 in the current year, which is consisted of a $232,775 increase in the Company’s term loan to fund capital equipment purchases and a $131,054 increase in the mortgage on the Edmonton bottling facility. In the prior year, long term debt increased $1,728,180 mostly due to an increase in the Company’s term loan. In the current year, the issuance of common shares relating to the exercising of options and warrants generated $4,439 compared to $310,849 in the prior year.

The company has a demand revolving operating bank loan with a credit limit of $3,648,156 with an interest rate of the Canadian prime rate of its lender plus 0.75 – 1.25% per annum. The

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Company also has a term loan from the bank in the amount of $3,186,508 with an interest rate of the Canadian prime rate of its lender plus 1.0% per annum.

Other sources of financing include a mortgage, a promissory note payable and leases more fully described in note 9 of the financial statements.

The Company generally maintains bank indebtedness in Canadian funds and does not use financial instruments for hedging purposes. The Company does not have any material capital expenditure commitments.

Financial Year Ended February 29, 2004

As at February 29, 2004 the company had negative working capital of $1,673,014. Bank indebtedness was $3,179,800. There were no cash or cash equivalents as at February 29, 2004..

Net cash utilized in operating activities for the 12 months ended February 29, 2004 was $853,640. Operating activities utilized $712,314 of cash compared to $196,774 generated in the prior year. Working capital changes utilized $141,326 due to an increase in trade accounts receivable of $1,063,691, which was partially offset by a decrease in prepaid expenses relating to the refund of deposits on production line equipment of $547,131, a decrease in inventory of $293,777 and an increase in accounts payable of $81,457.

Net cash utilized in investing activities was $687,916 compared to $2,394,301 in the prior year. $541,776 was expended on the purchase of capital assets for production line modification and expansion compared to $944,931 in the prior year. During the fiscal year ended February 28, 2003, $693,953 was advanced to support Quick Home Delivery operations that were discontinued at the end of that fiscal year. $209,870 was expended on deferred costs compared to $781,094 in the prior year. Expenditures were higher in 2003 due to new product development costs for TREK ®, and Pez® 100% Juice ^TM and start up costs in the US.

Financing activities generated $1,257,966 from an increase term loan of $1,497,342, other long term debt of $230,838 net of repayment of long term debt in the amount of $724,006, proceeds from the issuance of common shares relating to the exercising of options and warrants for $310,849 and a decrease in bank indebtedness of $57,057.

Other sources of financing include a mortgage, a note payable and leases more fully described in note 9 of the financial statements.

C.               Research and development, patents and licenses, etc.

The Company defers certain new product promotion, launch and development costs and amortizes them over 36 months commencing with the date of the launch of the related product. See note 6 of the financial statements. In the fiscal year ended February 29, 2004, the Company has taken a non-cash write down in the amount of $632,579 due to impairment of deferred costs from previous periods, related to the refocus of the US market. Under US GAAP, SOP 98-5,

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Reporting on the Costs of Start-Up Activities, costs are expensed as incurred as explained in note 21 to the financial statements.

The Company does not have a formal research and development program. It develops products as and when it sees fit by working with existing staff and outside consultants, where appropriate.

Following are current and pending patents and intellectual property owned by the Company:

D.               Trend Information.

Sales to date for the first quarter of fiscal 2006 are trending about 13% lower than the comparable period in the prior year. Concurrently, cost of sales are trending lower causing gross margin to remain consistent with the same period in the prior year. This is primarily due to the reduced sales in co-pack products due to a reduction in sales of co-pack products in which the Company supplies the raw materials and an increase in sales of co-pack products in which the customer supplies the raw materials. The strength of the Canadian dollar compared to the US dollar over the prior year, has a positive effect on the Company’s cost of goods sold in the Canadian market. This is partially offset by the increased costs of goods sold into the US market.

E.               Off-balance sheet arrangements.

F.               Tabular disclosure of contractual obligations.

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1) Since the interest rates on the majority of the Company’s debt is at floating interest rates based on prime, the interest amount above is estimated.

Critical Accounting Policies

The Company’s annual financial statements have been prepared in accordance with accounting principles generally accepted in Canada. Differences from United States accounting principles are disclosed in note 21 in the notes to the annual financial statements in Item 17 of this Annual Report on Form 20-F. Some accounting policies have a significant impact on the amount reported in these financial statements. A summary of those significant accounting policies can be found in the Summary of Significant Accounting Policies in the annual financial statements. Note that the preparation of this Annual Report on Form 20-F requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The Company believes, as explained below, that the most critical accounting policies cover the following areas: goodwill, revenue recognition and stock based compensation.

Goodwill

Goodwill is recorded at cost and, effective January 1, 2002, it is no longer amortized. Goodwill is tested for impairment annually or if an event occurs that will more likely than not reduce the fair value of the reporting unit below its carrying value. An impairment loss will only be recognized if the carrying amount is not recoverable when compared to the undiscounted future cash flow. As the Company has reported net income for fiscal 2005 and expects its operations to continue to be profitable in the future, no impairment loss has been recognized. The significant assumptions are as follows:

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Revenue Recognition

Revenue on sales of products is recognized when the products are delivered and title transfers to customers. Revenues from the provision of manufacturing, bottling or other services are recognized when the services are performed and collection of related receivables is reasonably assured. Certain figures are reclassified in prior periods relating to sales discounts, allowances and rebates to conform with Canadian GAAP changes on revenue recognition.

Stock-based Compensation

Effective January 1, 2004, the Company has retroactively adopted, without restatement, the new recommendations of CICA Handbook Section 3870, “Stock-based compensation and other stock-based payments”, which now requires companies to adopt the fair value based method for all stock-based awards granted on or after March 1, 2002. Previously the Company was only required to disclose the pro forma effect of stock options issued to employees and directors in the notes to the financial statements. The effect of this change in accounting policy was to increase the accumulated deficit and contributed surplus as of March 1, 2004 by $836,350.

Under US GAAP, the Company continues to apply Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees”, and related FASB Interpretation No. 44 (“FIN 44”) in accounting for all stock options granted to employees and directors. Under APB 25, compensation expense is generally recognized for stock options granted with exercise prices below the market price of the underlying common shares on the date of grant. Stock options that have been modified to reduce the exercise price are accounted for as variable. Stock options that have been modified to increase life are remeasured as if the awards were newly granted.

Compensation costs are charged to the Consolidated Statements of Income and Deficit or capitalized to deferred costs, depending on the nature of the award.

As a result of the change in accounting policy under Canadian GAAP, there is a Canadian – US GAAP difference as described in more detail in Note 21 of the consolidated financial statements.

New Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-Based Payment.” SFAS No. 123(R) would require the Company to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial statements. In addition, SFAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. For public entities that file as a foreign private issuer, SFAS No. 123(R) is effective for the first fiscal year beginning after June 15, 2005.

In December 2004, FASB issued SFAS No. 153 to amend Opinion 29 by eliminating the exception for non-monetary exchanges of similar productive assets and replaces it with general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange is defined to have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.

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The Company is assessing the effect on the consolidated financial statements as a result of the implementation of these new standards.

G.               Forward Looking Statements.

This report includes “forward-looking information” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements which are not historical facts, are forward-looking statements. The Company, through its management, makes forward-looking public statements concerning its expected future operations, performance and other developments. The words “believe”, “intend”, “expect”, “anticipate”, “project”, “estimate”, “predict” and similar expressions are also intended to identify forward-looking statements.

Such forward-looking statements are necessarily estimates reflecting the Company's best judgment based upon current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. It is impossible to identify all such factors. Factors which could cause actual results to differ materially from those estimated by the Company include, but are not limited to, general economic conditions, weather conditions, changing beverage consumption trends, pricing, availability of raw materials, economic uncertainties (including currency exchange rates), government regulation, managing and maintaining growth, the effect of adverse publicity, litigation, competition and other factors which may be identified from time to time in the Company's public announcements.

Reliance should not be placed on these forward-looking statements, which reflect the views of our directors and management as at the date of this Annual Report only. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after publication.

Item 6. – Directors, Senior Management and Employees

A.               Directors and senior management.

The following is a list of the current directors and senior officers of the Company, their municipalities of residence, their current positions with the Company, areas of experience, and principal business activities performed outside the Company:

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There are no arrangements or understandings pursuant to which any of the above was selected as a director or executive officer. There are no family relationships between any of the persons named above.

B.               Compensation.

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In fiscal 1996, the Company implemented a management incentive compensation system. Under that system, the executive and divisional management of the Company exchanged part of their salary for stock options and a bonus program, payable in a combination of cash and the Company shares. Entitlement to the bonus is tied directly to the Company’s profitability in relation to budget. The Company’s sales and delivery personnel are paid in part by commission. The Company’s plant workers are also paid in part by an incentive tied to their productivity. The Company has no other bonus or profit sharing plans.

Compensation of Directors

Directors receive $1,500 CDN per quarter (pro rated for those serving less than a full quarter) and $500 CDN for each directors’ meeting and committee meeting attended.

Directors are also compensated for their services in their capacity as directors by the granting from time to time of incentive stock options. During the most recently completed financial year, there were 225,000 stock options expired and new options were granted to these Directors.

BBI Holdings Inc. (“BBI”), which is controlled by Ralph McRae, receives $5,431 USD per month for consulting services provided by Mr. McRae and another director of BBI.

Compensation of Executive Officers

The following table is a summary of compensation paid to the CEO, the CFO, and the 2 most highly compensated Executive Officers of the Company and its subsidiaries.

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No amounts have been set aside or accrued by the Company during its last fiscal year to provide pension, retirement or similar benefits for directors or officers of the Company.

C.               Board practices.

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D.              Employees.

Following are the number of employees of the Company for the past 3 financial years:

E.               Share ownership.

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Item 7. – Major Shareholders and Related Party Transactions

A.               Major shareholders.

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As at May 2, 2005, the Company had 15,045,069 common shares without par value issued and outstanding.

B.               Related party transactions.

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Item 8. – Financial Information

A-7.

Legal Proceedings

In January 2000, a former supplier of the Company commenced a lawsuit against the Company for unpaid amounts totaling approximately Cdn$991,000 in respect of beverage product allegedly purchased by the Company. The Company commenced a counter claim against the former supplier totaling approximately Cdn$7,478,000 for losses incurred as a result of the former supplier’s alleged breach of contract. This matter has been settled at no cost to the Company, pending final exchange of settlement documents.

An action from 2003 involving the former President of LBAI, a supplier, 3 licensors and their principal was settled in July 2004. A payment was made to the Company by the former President of LBAI, and no payment was made by the Company. The 3 license agreements were terminated, and certain suppliers of those products forgave substantial amounts.

The Company is subject to other legal proceedings and claims that arise in the ordinary course of its business, none of which are expected to have significant effects on the Company’s financial position or profitability.

A-8.

Dividend Distributions

The Company will consider dividend distributions when it determines that it cannot realize better returns to investors by investing internally.

B.               Significant Changes since the date of the annual financial statements.

None

Item 9. – The Offer and Listing.

Note: For an Annual Report, only the information called for by Items 9.A.4 and 9.C is required

A.               Offer and listing details.

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Item 10. – Additional Information.

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Item 11. – Quantitative and Qualitative Disclosures About Market Risk.

The table below shows the long term debt whose fair value is subject to market risk as interest rates change.

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The fair value of this debt decreases as market interest rates increase. The fair value of this debt is estimated at $679,000 as at February 28, 2005 as disclosed in note 19 (a) of the financial statements.

The fair value of this debt is equal to the book amount. Future cash flows will be adversely impacted by interest rate increases.

Item 12. – Description of Securities Other than Equity Securities.

This item is not applicable.

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P A R T   II

Item 13. – Defaults, Dividend Arrearages and Delinquencies.

This item is not applicable.

Item 14. – Material Modifications to the Rights of Security Holders and Use of Proceeds.

Item 15. - Controls and Procedures.

Based on their evaluation as of February 28, 2005, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Act”) are effective to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Act is recorded, processed, summarized and communicated to them as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Company’s internal controls during the period covered by this annual report that could significantly affect the Company’s internal controls over financial reporting.

Item 16A. – Audit Committee Financial Expert.

The Company’s Board of Directors has determined that the Company has at least one audit committee financial expert, Mr. Douglas Carlson, serving on its audit committee. For details on his professional career, see “Item 6. Directors, Senior Management and Employees”.

Item 16B. – Code of Ethics.

The Company has adopted a code of business conduct and ethics, which is attached as an exhibit to this report.

Item 16C. – Principal Accountant Fees and Services.

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The audit committee approves all audit, audit-related services, tax services and other services provided by BDO Dunwoody LLP. Any services provided by BDO Dunwoody LLP that are not specifically included within the scope of the audit must be pre-approved by the audit committee in advance of any engagement. Under the Sarbanes-Oxley Act of 2002, audit committees are permitted to approve certain fees for audit-related services, tax services and other services pursuant to a de minimus exception prior to the completion of an audit engagement. In 2004, none of the fees paid to BDO Dunwoody LLP were approved pursuant to the de minimus.

Item 16D. – Exemptions from the Listing Standards for Audit Committees.

None

Item 16E. – Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

During 2002, the Company repurchased 108,400 of its issued and outstanding shares. These shares were cancelled during 2003, and no further shares have been repurchased.

P A R T   III

Item 17. – Financial Statements.

The Consolidated Financial Statements of Leading Brands, Inc. for the year ended February 28, 2005, February 29, 2004 and February 28, 2003 are attached to this report.

Item 18. – Not applicable.

Item 19. – Exhibits.

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SIGNATURES

               The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

LEADING BRANDS, INC.

/s/ Ralph McRae

Ralph D. McRae
Chairman and Chief Executive Officer

Dated:         May 25, 2005

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