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 29, 2004

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 29, 2004 – 15,040,169 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 29, 2004
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

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 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 EPS 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 20 of the annual financial statements. The selected financial data should be read in conjunction with the Company's financial statements.

The primary difference between the loss of ($1,847,490) under Canadian GAAP versus the loss of ($238,539) under US GAAP for the year ended February 29, 2004 is the recovery of stock option compensation costs calculated in accordance with FIN 44 and the expensing of the deferred product launch costs and certain deferred costs based on SOP 98-5(i) of US GAAP.

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

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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 year end (1.3357), while revenues and expenses have been translated at the average rate for the year (1.3657) .

Exchange rates for the previous six months: 

Exchange rates for the five most recent financial years:

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 17% of revenue and the ten largest comprising 65% 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

A. History and development of the Company.

Suite 1800 – 1500 West Georgia Street
Vancouver BC
Canada V6G 2Z6
Tel: 604-685-5200

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Following is a list of the Company's main subsidiaries as at February 29, 2004:

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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 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. The premises, including adjacent office space, are under a lease for approximately $31,845 per month that expires June 2006.

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.

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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 $1,164 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 $13,214 per month until August 31, 2004.

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 $6,261 to $7,734 per month until January 2008.

Sales
Sales for the year ended February 29, 2004 were $41,502,604, compared to $47,361,598 for the previous year, representing a decrease of 12.4 % or $5.86 million. The decrease is attributed to the following:

Cost of Sales and Margin
Cost of sales decreased from $38,009,995 to $31,584,076 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 the change in billing method for a large co-pack customer. Gross margin was $9,918,528 in the current year compared to $9,351,603 in the prior year. The margin percentage of 23.9% is higher

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than the previous year of 19.7% due to the change in billing method for a large co-pack customer, and improved margins in branded products.

Selling, General and Administration Expenses
These expenses increased $1,415,083 from $8,977,802 to $10,392,885, or 15.8% . 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 20 of the financial statements.

Cost of Sales and Margin
Cost of sales increased from $32,073,301 to $38,009,995 as a result of the sales increase. Gross margin was $9,351,603 in the current year compared to $9,108,248 in the prior year. The margin percentage of 19.7 % is lower than the previous year of 22% due to the increase of co-pack volume of products in which the Company supplies the raw materials and the production issues related to the start up of the two new brands TREK ®, and Pez® 100% Juice ™.

Selling, General and Administration Expenses
These expenses increased from $6,075,710 to $8,977,802, or 48%, compared to the sales increase of 15%. These additional costs are the result of expanding the market for certain proprietary products into the US. The Leading Brands of America office opened in February 2002, and the company has since established a sales presence across the US.

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Other Expenses
Depreciation decreased by $66,034 from $821,503 in the prior year to $755,469. This was due to the closure of the Alamo Snack Facility, the sale of the bar truck business, and the sale of the distribution building in Edmonton during 2002. Amortization of goodwill, deferred costs and trademarks and rights decreased by $173,071 from $444,894 to $271,823 mostly due to the change in accounting policy relating to goodwill as noted in the summary of significant accounting policies in the financial statements, stating that goodwill is no longer amortized. Interest decreased by $212,190 from $626,186 to $413,996 due to lower average borrowing and interest rates during the year, and the retirement of a long term debt relating to a production line in the Richmond plant. For US GAAP, interest accretion of $147,615 on convertible preferred shares would not be recorded as explained in note 20 of the financial statements.

Extraordinary Loss on Investment
At the end of the fiscal year 2003, the Company decided to discontinue support of the Quick Home Operations delivery service and, accordingly, recorded a $6,523,880 write down on its investment, as stated in Note 7 of the financial statements.

Financial Year Ended February 28, 2002

Cost of Sales and Margin
Cost of sales decreased from $40,048,600 to $32,073,301 as a result of the sales decrease. The margin percentage of 22% is consistent with the prior year.

Selling, General and Administration Expenses
These expenses decreased from $10,436,743 to $6,075,710, or 42% compared to the sales decrease of 19%. Upon termination of the SoBe license agreement the Company significantly reduced marketing, sales, distribution and administration personnel and expenditures. In the prior year, the Company had invested in these areas to build this brand in Canada.

Other Expenses
Depreciation decreased by $524,920 from $1,346,423 in the prior year to $821,503 due to the sale of capital assets related to the SoBe termination and the change in amortization rates for certain production equipment as explained in the summary of significant accounting policies in the financial statements. Amortization of goodwill, deferred costs and trademarks and rights aggregating $444,894 was consistent with the prior year amounts of $436,863. Interest decreased by $179,743 from $805,929 to $626,186 due to lower average borrowings and interest

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rates during the year. For US GAAP, interest accretion of $112,484 on convertible preferred shares would not be recorded as explained in note 20 of the financial statements.

Other Income
For Canadian GAAP purposes, a gain on termination of $199,033 relating to a termination of license was recorded in 2002, with an additional $3,734,002 being recognized in 2001. For US GAAP purposes these gains have been recorded in 2002. For US GAAP, additional expenses relating to deferred costs, website development and stock based compensation costs would be recorded. These differences are explained in note 20 of the financial statements.

Financial Year Ended February 29, 2004
As at February 29, 2004 the company had negative working capital of $1,673,014 compared to negative working capital of $1,444,111 at the prior year end. Bank indebtedness was $3,179,800 compared to $2,914,542 for the prior year. There were no cash or cash equivalents as at February 29, 2004 or the previous year.

The company believes it will have sufficient working capital for the next 12 months, resulting from operating profits estimated for the 2005 fiscal year.

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 ™ and start up costs in the US.

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

The company has a demand revolving operating bank loan with a credit limit of $3,369,020 with an interest rate of the Canadian prime rate of its lender plus 0.75 – 1.25% per annum. The Company also has a term loan in the amount of $3,483,759 with an interest rate of the Canadian prime rate of its lender plus 1.0% per annum.

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Other sources of financing include a mortgage, a 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 28, 2003
As at February 28, 2003 the company had negative working capital of $1,444,111 compared to negative working capital of $208,400 at the prior year end. Bank indebtedness was $2,914,542 compared to $1,276,193 for the prior year. There were no cash or cash equivalents as at February 28, 2003 or the previous year.

In the opinion of the Company, the current level of working capital is sufficient for present and future requirements as the company has unused borrowing capacity on its revolving demand loan of approximately $1.46 million as at February 28, 2003.

Net cash generated from operating activities for the 12 months ended February 28, 2003 was $596,970. Operating activities generated $196,774 of cash compared to $2,518,836 in the prior year. Working capital changes generated $400,196 due to a reduction in average days outstanding in trade accounts receivable, which was partially offset by an increase in prepaid expenses relating to deposits on production line equipment.

Net cash utilized in investing activities was $2,394,301 compared to $4,160,337 generated in the prior year. In the prior year, $4,493,211 was received as a result of the termination of the SoBe agreement, and $1,595,891 from the sale of capital assets. During 2003, $693,953 was advanced to Quick Home Delivery operations compared to $1,158,609 in the prior year. During 2003, $781,094 was expended on deferred costs compared to $108,817 in the prior year. $944,931 was expended on the purchase of capital assets compared to $693,327 in the prior year. In the prior year, $95,963 was received from the sale of a bar truck business and $63,975 was advanced to the purchaser under a long term promissory note.

Financing activities generated $2,034,891 from an increase in bank indebtedness of $1,638,349, issue of common shares relating to the exercising of options for $406,884 and the net reduction of long term indebtedness of $10,342.

The company has a demand revolving operating bank loan with a credit limit of $4,380,054 with an interest rate of Canadian prime plus 0.75% . The Company also has a term loan in the amount of $2,401,269 with an interest rate of Canadian prime plus 1.0% .

Other sources of financing include a mortgage, a note payable and capital 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.

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Financial Year Ended February 28, 2002
As at February 28, 2002, the Company had negative working capital of $208,400 compared to negative working capital of $481,132 at the prior year end. Bank indebtedness was $1,276,193 compared to $4,227,391 for the prior year. There were no cash or cash equivalents as at February 28, 2002 or the previous year.

Net cash generated from operating activities for the 12 months ended February 28, 2002 was $1,169,878 compared to $1,288,347 in the previous year. Operating activities generated $2,518,836 of cash compared to $204,193 that was utilized in the prior year. Working capital changes utilized $1,348,958 as decreases of accounts payable of $2,984,995 were not fully offset by decreases in inventory and accounts receivable. In the prior year, working capital changes generated $1,492,540 due to a large increase in accounts payable, only partially offset by increases in accounts receivable and inventory.

The primary reason for the changes within working is the change in relationship with SoBe. Accounts receivable decreased with sales, maintaining the normal number of days sales outstanding. Inventory decreased significantly as the Company was no longer purchasing the raw materials for the SoBe product, but was still earning co-pack revenue. As a result inventory turns increased. A portion of the funds received from the SoBe termination was used to decrease accounts payable as the Company began taking advantage of supplier discounts.

Net cash generated from investing activities was $4,160,337 compared to $5,356,312 utilized in the prior year. $4,493,211 was received as a result of the termination of the SoBe agreement. $1,595,891 was received from the sale of capital assets, primarily coolers and the Edmonton distribution warehouse. $693,327 was invested in capital assets, primarily coolers, distribution vehicles and production equipment. $1,158,609 was advanced to Quick Home Delivery Operations primarily for marketing costs and the purchase of capital assets related to the Quick assets and business as explained in notes 1 and 7 of the financial statements. $95,963 was received on the sale of the Company's bar truck business and $63,975 was advanced to the purchaser under a long term promissory note. $108,817 was expended on deferred costs.

Financing activities utilized $5,436,577 as $2,371,785 of long term debt was repaid, bank indebtedness reduced by $2,951,198 and treasury stock of $113,594 was purchased.

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, Reporting on the Costs of Start-Up Activities, costs are expensed as incurred as explained in note 20 (a) to the financial statements.

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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.

Sales for the first quarter ended May 31, 2004 are about 24% lower than the comparable period in the prior year. Concurrently, cost of sales reduced a similar amount causing gross margin to remain consistent with the same period in the prior year. This is primarily due to the decrease in sales of branded products in the United States, and 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.

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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 20 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 and long-term investments advances.

Goodwill is recorded at cost and, effective January 1, 2002, it is no longer amortized. Management tests goodwill for impairment on an annual basis or earlier when circumstances indicating that its carrying value may not be recoverable, by comparing the book value of each reporting unit on each balance sheet date to its fair value.

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Long-term investments are recorded at cost less amounts written off to reflect a permanent impairment in value.

At the end of the fiscal year 2003, the Company decided to discontinue support of its investment related to the Quick Home Operations delivery service and, accordingly, recorded a $6,523,880 write-down on investment.

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.

The Company has adopted the recommendations regarding stock-based compensation under the CICA Handbook Section 3870 "Stock-Based Compensation and Other Stock-Based Payment". The standard requires that all stock-based awards made to consultants be measured and recognized using a fair value based method such as the Black Scholes option pricing model. The standard encourages the use of a fair value based method for all awards granted to employees, but only requires the fair value based method for direct awards of stock, stock appreciation rights and awards that call for settlement in cash or assets. Awards that a company has the ability to settle in stock are recorded as equity, whereas awards that the entity is required to or has a practice of settling in cash are recorded as liabilities. The Company uses the intrinsic value method of accounting for stock options granted to employees and directors (for services rendered as a director) as allowed under the section. Under this method, compensation costs are generally recorded when the exercise price of the options is less than the market value of the underlying common stock. The proceeds received on the exercise of stock options are credited to share capital. The section does, however, require the disclosure on a pro-forma basis of the impact on operations of using the fair value based method for stock options granted to directors and employees on or after January 1, 2002.

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

At this time, the Company does not anticipate the implementation of any new accounting standards for Canadian GAAP purposes to have a material effect on the financial statements.

The Company relies upon the Safe Harbor Laws of 1933, 1934, and 1995 for all public 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. 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.

Item 6. – Directors, Senior Management and Employees

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.

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.

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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 173,192 replacement stock options granted to Directors.

BBI Holdings Inc. ("BBI"), which is controlled by Ralph McRae, receives $5,126 per month for consulting services provided by Mr. McRae and another director of BBI.

The following table is a summary of compensation paid to the CEO, the CFO, and the 3 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.

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The function of the compensation committee is to review the compensation of the President and guidelines for the compensation policies of the Company. The Committee reports its recommendations to the Board. Compensation matters may also be reviewed and approved by the entire board of directors.

As of June 1, 2004 the executive officers of Leading Brands, Inc. are:

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

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Item 7. – Major Shareholders and Related Party Transactions

As at June 1, 2004, the Company had 15,040,169 common shares without par value issued and outstanding.

B. Related party transactions.

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A-7.

Legal Proceedings

A supplier to the Company commenced an action against the Company claiming a debt in the amount of $279,535. The Company denied this claim and counter sued for breach of contract and negligence. In June 2004, this matter was settled at no cost to the Company.

A former supplier of the Company commenced a lawsuit against the Company for unpaid amounts totaling approximately $686,615 in respect of beverage product allegedly purchased by the Company. The Company commenced a counter claim against the former supplier totaling approximately $5,201,833 for losses incurred as a result of the former supplier's alleged breach of contract. The legal proceedings between the two parties are at an early stage, discoveries have not yet been held and the amounts and merits of the supplier's claim and the Company's counter claim are not presently determinable. The amount of the ultimate loss, if any, will be recorded in the period it becomes determinable.

In October 2003, the Company commenced an action in Connecticut against the former President of LBAI, the Company's US subsidiary, a supplier, three of its licensors and their principal, seeking damages for improper and fraudulent conduct by those persons and their associates and to prevent the improper termination of three license agreements. Issues surrounding the three license agreements then became the subject of a lawsuit and arbitration proceeding pending in Massachusetts against the Company initiated by certain of the licensors. The Company continues to pursue the Connecticut lawsuit against the former President of LBAI. A related action was then commenced by the supplier against the Company in Virginia and yet another action was commenced by one of the licensors against the Company and its Chairman and CEO in Massachusetts. Although the lawsuit and arbitration demand issued in Massachusetts seek several million dollars in damages against the Company, management is of the opinion that the claims commenced against it by these parties are frivolous. While the outcome of these claims is not presently determinable, at this time, the Company does not expect them to have a material adverse effect on the financial position or results of operations of the Company.

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.

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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

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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.

The fair value of this debt decreases as market interest rates increase. The fair value of this debt is estimated at $821,414 as at February 29, 2004 as disclosed in note 18 (a) of the financial statements.

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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.

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.

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Item 15. - Controls and Procedures.

Based on their evaluation as of February 29,2004, 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-14(c) and 15-d14(c) 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.

The Company is in the process of considering and finalizing its code of ethics.

Item 16C. – Principal Accountant Fees and Services.

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

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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.

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.

The Consolidated Financial Statements of Leading Brands, Inc. for the year ended February 29, 2004, February 28, 2003 and February 28, 2002 are attached to this report as Exhibit 19.1.

Item 18. – Not applicable.

Item 19. – Exhibits.

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The following documents have been previously filed and are incorporated by reference:

Certificate of Incorporation and Articles and amendments to the Articles and Memorandum of the Company, amended on June 29, 1998 and April 13, 1999 Memorandum and Part 27 of the Articles of Leading Brands, Inc. as amended February 27, 2001.

Contracts for Sale of Goods, Lease and related documents between Leading Brands of Canada, Inc., Northland Technologies, Inc., and Quick Home Delivery (Canada), Inc. dated November 30, 2000.

Licence Agreement between Quick, Inc. and Northland Technologies, Inc. dated January 1, 2001.

Agreement of Purchase and Sale, and related documents between Leading Brands of Canada, Inc. and Northland Technologies, Inc. dated January 1, 2001. Management Agreement and related documents between Leading Brands of Canada, Inc. and Quick Home Delivery (Canada), Inc. dated January 1, 2001.

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: June 23, 2004

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