Asian Dragon 10-Q 2009 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarter Ended February 28, 2009

OR

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

FOR THE TRANSITION PERIOD FROM _______________________ TO _______________________

Commission File # 000-52268

ASIAN DRAGON GROUP INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

98-0418754

(IRS Employer Identification Number)

#108 - - 1312 North Monroe Street

Spokane, Washington 99201

(Address of principal executive offices) (Zip Code)

(509) 252-8428

(Registrant’s telephone no., including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 is a large accelerated filer, an accelerated filer, or a non-accelerated file.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	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 issuer had 38,775,000 shares of common stock issued and outstanding as of April 13, 2009.

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

 (an Exploration Stage Company)

Table of Contents

			Page
PART I. Financial Information			1
	Item 1. Financial Statements.		1
		Consolidated Balance Sheets at February 28, 2009 (unaudited) and August 31, 2008 (audited)	1
		Unaudited Consolidated Statements of Operations for the three and six month periods ended February 28, 2009 and February 29, 2008 and the Exploration Stage Period of August 15, 2006 to February 28, 2009	2
		Unaudited Consolidated Statements of Cash Flows for the six month periods ended February 28, 2009 and February 29, 2008 and the Exploration Stage Period of August 15, 2006 to February 28, 2009	3
		Unaudited Consolidated Supplemental Disclosure of Non-cash Investing and Financing Activities for the six month periods ended February 28, 2009 and February 29, 2008 and the Exploration Stage Period of August 15, 2006 to February 28, 2009	4
		Notes to Consolidated Unaudited Financial Statements	5
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
	Item 3. Quantitative and Qualitative Disclosures about Market Risk		12
	Item 4. Controls and Procedures		12
PART II. Other Information			15
	Item 1. Legal Proceedings		15
	Item 1A. Risk Factors		15
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		18
	Item 3. Defaults Upon Senior Securities		19
	Item 4. Submission of Matters to a Vote of Security Holders		19
	Item 5. Other Information		19
	Item 6. Exhibits		19
Signatures			20

PART I – FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS (unaudited)

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Consolidated Balance Sheets

	February 28, 2009 (Unaudited)			August 31, 2008 (Note 1)
ASSETS
CURRENT ASSETS
Cash	$	251		$	4,423
Prepaid expenses		3,616			4,322
Total current assets		3,867			8,745
Total assets	$	3,867		$	8,745
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
CURRENT LIABILITIES
Accounts payable		18,609			3,675
Accrued liabilities		1,500			10,750
Note payable (Note 3)		24,521			23,925
Shareholder loans (Note 3 and 4)		238,000			194,243
Total current liabilities	$	282,630		$	232,593
Total liabilities	$	282,630		$	232,593
COMMITMENTS AND CONTINGENCIES		-			-
STOCKHOLDERS’ EQUITY (DEFICIT)
Common shares, 100,000,000 shares par value $0.001 authorized, 38,775,000 issued and outstanding		38,775			38,775
Paid-in Capital		22,984,342			22,984,342
Accumulated deficit in the exploration stage		(23,087,185	)		(23,032,337	)
Accumulated deficit		(215,105	)		(215,105	)
Accumulated other comprehensive income (loss)		410			477
Total stockholders’ (deficit)		(278,763	)		(223,848	)
Total liabilities and stockholders’ equity	$	3,867		$	8,745

The accompanying notes to financial statements are an integral part of these financial statements

1

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Consolidated Statements of Operations

	Three months ended February 28, 2009			Three months ended February 29, 2008			Six months ended February 28, 2009			Six months ended February 29, 2008			Exploration Stage August 15, 2006 through  February 28, 2009
EXPENSES:
Exploration licenses	$	-			1,191,999		$	-			1,200,000		$	23,052,000
Exploration expenses		-			-			-			-			50,215
Agent fees		-			30,000			-			30,000			1,852,500
Professional and consultant fees		12,058			77,319			41,060			138,624			493,515
Stock-based compensation		-			-			-			-			6,975,491
Investor  relations		-			-			-			57,708			134,939
Administrative expenses		897			16,909			8,087			33,403			182,121
Total expenses	$	12,955			1,316,227		$	49,147			1,459,735		$	32,740,781
Net (Loss) from operations	$	(12,955	)		(1,316,227	)	$	(49,147	)		(1,459,735	)	$	(32,740,781	)
OTHER INCOME (EXPENSE):
Cancelation of debt relating to commitments		-			9,679,407			-			9,679,407			9,679,407
Interest expense		(2,971	)		(2,280	)		(5,702	)		(4,679	)		(25,811	)
Net Income (Loss) from continuing operations:		(15,926	)		8,360,900			(54,849	)		8,214,993			(23,087,185	)
Discontinued operations :
– Net (Loss) from terminated subsidiary		-			-			-			-			(68,995	)
– Net (Loss) from Development Stage		-			-			-			-			(146,110	)
Net Income (Loss)	$	(15,926	)		8,360,900		$	(54,849	)		8,214,993		$	(23,302,290	)
Earnings (Loss) per common share, basic and diluted:	$	Nil		$	0.22		$	Nil		$	0.21
Weighted average shares outstanding , basic and diluted		38,775,000			38,404,834			38,775,000			38,404,834
OTHER COMPREHENSIVE INCOME (LOSS):
Net Income (Loss)	$	(15,926	)		8,360,900		$	(54,849	)		8,214,993		$	(23,302,290	)
Foreign currency translation adjustment		(7	)		395			(67	)		13,425			410
Total other comprehensive income (loss)	$	(15,933	)		8,361,295		$	(54,916	)		8,228,418		$	(23,301,880	)

The accompanying notes to financial statements are an integral part of these financial statements

2

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

	Six months ended February 28, 2009			Six months ended February 29, 2008			Exploration Stage August 15, 2006 through February 28, 2009
Cash flows from operating activities:
Net Income (Loss) for period	$	(54,849	)	$	8,214,993		$	(23,302,290	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accrued interest on shareholder loans		5,106			4,679			24,887
Accrued interest on Note payable		596			-			924
Cancelation of debt relating to commitments		-			(9,679,407	)		(9,679,407	)
Common stock issued for compensation		-			-			1,150,000
Additional Paid-In Capital relating to Options		-			-			5,825,491
Common stock issued for license payments		-			-			7,050,000
Common stock issued for agent payments		-			-			1,762,500
Sub-total continuing operations		5,702			(9,674,728	)		6,134,395
Accrued interest on shareholder loans related to discontinued operations		-			-			8,761
Depreciation related to discontinued operations		-			-			318
Common stock issued for debt conversion related to discontinued operations		-			-			10,000
Sub-total discontinued operations		-			-			19,079
Net change in operating assets and liabilities:
Subscription receivable		-			1,000,000			-
Prepaid expenses		706			(6,416	)		(3,359	)
Commitments payable		-			-			9,679,407
Accounts payable and accrued  liabilities		5,685			(148,194	)		20,109
Sub-total continuing operations		6,391			845,390			9,696,157
Prepaid expenses related to discontinued operations		-			-			9,500
Accounts payable and accrued liabilities related to discontinued operations		-			-			(9,220	)
Sub-total discontinued operations		-			-			280
Net cash provided (used) by operating activities		(42,756	)		(614,345	)		(7,452,379	)
Cash flows from investing activities:
Purchase (sale) of property and equipment     related to discontinued operations		-			-			(318	)
Sub-total discontinued operations		-			-			(318	)
Net cash provided (used) by investing activities		-			-			(318	)
(continued)

The accompanying notes to financial statements are an integral part of these financial statements

3

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

	Six months ended February 28, 2009			Six months ended February 29, 2008			Exploration Stage August 15, 2006 through February 28, 2009
(continued)
Cash flows from financing activities:
Common stock issued for cash		-			400,000			7,193,860
Shareholder loans		38,651			(57,616	)		51,311
Note payable		-			-			23,597
Sub-total continuing operations		38,651			342,384			7,268,768
Common stock issued for cash related to discontinued operations								31,266
Shareholder loans related to discontinued operations								152,689
Sub-total discontinued operations		-			-			183,955
Net cash provided by financing activities		38,651			342,384			7,452,723
Effect of foreign currency translation		(67	)		13,425			153
Net increase (decrease) in cash		(4,172	)		(258,536	)		179
Cash, beginning of period		4,423			326,381			72
Cash, end of period	$	251		$	67,845		$	251

Consolidated Supplemental Disclosure of Non-cash Investing and Financing Activities

	Three Months ended February 28, 2009		Three Months ended February 29, 2008		Exploration Stage August 15, 2006 through February 28, 2009
Common stock issued for compensation		-		-		1,150,000
Additional Paid-In Capital relating to Options		-		-		5,825,491
Common stock issued for license payments		-		-		7,050,000
Common stock issued for agent payments		-		-		1,762,500
Common stock issued for debt conversion related to discontinued operations		-		-		10,000

The accompanying notes to financial statements are an integral part of these financial statements

4

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

NOTE 1 – Nature of Business and Basis of Presentation

Asian Dragon Group Inc. (“Asian Dragon”, “ADG”, “We”, the “Registrant”, or the “Company”) was incorporated as a Nevada corporation on June 11, 2003. Asian Dragon was established to develop projects which focus on China’s growing precious and base metals reserves and markets. Effective August 15, 2006, the business of its operating subsidiary Galaxy Telnet SRL was wound-up and the subsidiary was de-registered as a corporate entity. Asian Dragon’s August 31, 2006 audited financial statements were presented to reflect the discontinuation of operation of Galaxy Telnet SRL and concurrently the date at which Asian Dragon became an Exploration Stage Company was set as August 15, 2006. On April 10, 2008 the Company incorporated a British Columbia company named Asian Dragon Silver Inc. (“ADSI”) as a wholly owned subsidiary. The financial statements of the Company are presented on a consolidated basis and include all accounts of both the Company and its subsidiary. The consolidated unaudited financial statements as of February 28, 2009 included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  It is suggested that these financial statements be read in conjunction with the August 31, 2008 audited financial statements and notes thereto.

Exploration Stage Activities

The Company has been in the exploration stage since August 15, 2006 and has not yet realized any revenues from its operations.

NOTE 2 – Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist in understanding Asian Dragon’s financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.

The financial statements reflect the following significant accounting policies:

Exploration Stage Company

The Company is an exploration stage company as defined by SEC Industry Guide 7, and follows the Financial Accounting Standards Board (“FASB”) Statements of Financial Accounting Standards (“SFAS”) No. 7, where applicable. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced.  As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.

5

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Mineral Property and Exploration Costs

Mineral property exploration costs are expensed as incurred.  Mineral property acquisition costs are initially capitalized when incurred using the guidance in the Emerging Issues Task Force (EITF) 04-02, Whether Mineral Rights are Tangible or Intangible Assets.  The Company assesses the carrying costs for impairment under Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for Impairment or Disposal of Long Lived Assets at each fiscal quarter end.  An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property.  Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value.

When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized.  Such costs will be amortized using the units-of-production method over the estimated life of the proven and probable reserves.  If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

Basic and Diluted Net Loss per Share

Basic net loss per share is computed in accordance with SFAS No. 128, “Earnings per Share”. Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss available to common stockholders by common stock equivalents. At February 28, 2009, the Company did not have any common stock equivalents outstanding.

Fair Value of Financial Instruments

The  carrying  value  of  accounts  payable,  and  other  financial  instruments reflected  in  the  financial  statements  approximates  fair  value  due  to the short-term maturity of the instruments. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Income Taxes

The Company has adopted SFAS No. 109, “Accounting for Income Taxes”, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years during which the differences are expected to reverse and upon the possible realization of net operating loss carry-forwards.

6

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Valuation of Long-Lived Assets

The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of un-depreciated balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.

Start-up Costs

The Company has adopted FASB Statement of Position No. 98-5 ("SOP 98-5"), "Reporting the Costs of Start-Up Activities." SOP 98-5 requires that all non-governmental entities expense the cost of start-up activities, including organizational costs as those costs are incurred.

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 Foreign Currency Translation, using the exchange rate prevailing at the balance sheet date. Historical cost balances are re-measured using historical exchange rates. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income.  Foreign currency transactions are primarily undertaken in Canadian dollars.  The Company has not to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Cash and Cash Equivalents

The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 160 “Noncontrolling Interests in Consolidated Financial Statements”. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. A non-controlling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards by requiring, among other things, that: (i) The ownership interests in subsidiaries held by parties other than the parent be clearly identified, labelled, and presented in the consolidated statement of

7

ASIAN DRAGON GROUP INC. AND SUBSIDIARY

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

financial position within equity, but separate from the parent’s equity; and (ii) the amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated statement of income. The Company has adopted this Statement and this adoption did not result any changes to the presentation of its balance sheet and statement of operations.

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on these financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to current year presentation.

NOTE 3 – Going Concern

Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company has accumulated operating losses since its inception and has limited business operations, which raises substantial doubt about the Company’s ability to continue as a going concern. The continuation of the Company is dependent upon the continuing financial support of investors and stockholders of the Company. As of February 28, 2009 we projected the Company would need additional cash resources to operate during the upcoming 12 months and would raise this capital through shareholder loans from our President. The Company intends to attempt to acquire additional operating capital through private equity offerings to the public and existing investors to fund its business plan. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

NOTE 4 – Shareholder Loan and Note Payable

At February 28, 2009, the Company had a shareholder loan outstanding from a related party totaling $238,000 which included $33,648 of accrued interest. This loan is uncollateralized and has no fixed repayment dates.

At February 28, 2009, the Company had one Note Payable outstanding of $24,521, which included $924 of accrued interest. This loan is uncollateralized, has no fixed repayment date and is callable at any time.

8

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Certain information included herein contains forward-looking statements that involve risks and uncertainties within the meaning of Sections 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934. These sections provide that the safe harbor for forward looking statements does not apply to statements made in initial public offerings. The words, such as "may," "would," "could," "anticipate," "estimate," "plans," "potential," "projects," "continuing," "ongoing," "expects," "believe," "intend" and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this Form 10-Q and include all statements that are not statements of historical fact regarding intent, belief or current expectations of the Company, our directors or our officers, with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans; (iii) continued development of business opportunities; (iv) market and other trends affecting our future financial condition; (v) our growth and operating strategy. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) we have incurred significant losses since our inception; (ii) any material inability to successfully develop our business plans; (iii) any adverse effect or limitations caused by government regulations; (iv) any adverse effect on our ability to obtain acceptable financing; (v) competitive factors; and (vi) other risks including those identified in our other filings with the Securities and Exchange Commission.

General

Asian Dragon was established to develop projects which focus on China’s growing precious and base metals reserves and markets.

Asian Dragon Group Inc. (“Asian Dragon”, “ADG”, “we”, the “Registrant”, or the “Company”) was incorporated in Nevada on June 11, 2003 and on August 10, 2006 filed Articles of Amendment with the Nevada Secretary of State to change its name to Asian Dragon Group Inc. Our fiscal year end is August 31st. On April 10, 2008 the Company incorporated a British Columbia company named Asian Dragon Silver Inc. (“ADSI”) as a wholly owned subsidiary. The financial statements of the Company are presented on a consolidated basis and include all accounts of both the Company and its subsidiary.

The Company’s common stock is traded in the NASD Over-The-Counter market under the symbol “AADG” and the Company is also listed on the Frankfurt Stock Exchange under the trading symbol “P2J1”.

Agreement Cancelations

Effective December 2, 2008, the Company determined it would be unable to raise sufficient capital to meet contractual payment obligations under three exploration property purchase agreements it had entered. As such, the Board approved a resolution which authorized the Company to abandon its exploration initiatives in China and cancel the Agreements it had signed with World Fortune Enterprise Inc., such cancellations to be effective December 2, 2008. Additionally, the Company cancelled the FGLW-XWG Transfer Agreement (dated April 30, 2008) which had assigned some of the Company’s rights under the Fuding (Revised) Agreement to its subsidiary Asian Dragon Silver Inc., such cancellation was also effective December 2, 2008.

9

Premature News Release

In March 2009 the Company began negotiations with Ophir Exploration Inc. regarding acquisition of that company. On March 13, 2009 the Company issued a press release regarding these negotiations titled: “Asian Dragon Group Inc., Finalizes Acquisition of Ophir Exploration Inc., in Mineral Rich Suriname and Appoints of New Lead Director” (attached  to this Report on Form 10-Q as Exhibit 99.1). This news release was prematurely issued and detailed events which have not yet been finalized. The Company regrets any confusion this may have caused and formally records here that negotiations are still underway and news regarding these will be released in the near future.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED FEBRUARY 28, 2009 AND FEBRUARY 29, 2008 AND THE EXPLORATION STAGE PERIOD FROM AUGUST 16, 2006 TO FEBRUARY 28, 2009

Revenues

ADG did not earn revenues during the periods included in the financial statements in this report.

Expenses

Our operating expenses are classified into seven categories:

- Exploration Licenses

- Exploration Expenses

- Agent Fees

- Professional and Consultant Fees

- Stock Based Compensation

- Investor Relations

- Administrative Expenses

Exploration Licenses

Expenditures for Exploration Licenses were $nil and $nil versus $1,191,999 and $1,200,000 respectively for the three and six month periods ended February 28, 2009 versus February 29, 2008. For the period of August 15, 2006 (inception) to February 28, 2009 (the “Exploration Stage”) costs for Exploration Licenses totaled $23,052,000.

Exploration Expenses

Exploration Expenses were $nil and $nil versus $nil and $nil respectively for the three and six month periods ended February 28, 2009 versus February 29, 2008. Exploration expenses for the Exploration Stage totaled $50,215.

Agent Fees

Agent Fees were $nil and $nil versus $30,000 and $30,000 respectively for the three and six month periods ended February 28, 2009 versus February 29, 2008. Agent Fees for the Exploration Stage totaled $1,852,500.

10

Professional and Consultant Fees

Professional and Consultant Fees were $12,058 and $41,060 versus $77,319 and $138,624 respectively for the three and six month periods ended February 28, 2009 versus February 29, 2008. Professional and Consultant Fees for the Exploration Stage totaled $493,515.

Stock Based Compensation

Stock Based Compensation expenses totaled $nil and $nil versus $nil and $nil respectively for the three and six month periods ended February 28, 2009 versus February 29, 2008. During the Exploration Stage these costs totaled $6,975,491.

Investor Relations

Investor Relations expenses totaled $nil and $nil versus $nil and $57,708 respectively for the three month and six periods ended February 28, 2009 versus February 29, 2008. For the Exploration Stage, Investor Relations expenses totaled $134,939.

Administrative Expenses

Administrative Expenses totaled $897 and $8,087 versus $16,909 and $33,403 respectively for the three and six month periods ended February 28, 2009 versus February 29, 2008. For the Exploration Stage, Administrative Expenses totaled $182,121.

Net Income (Loss)

We experienced net income and net (losses) for the three and six month periods ended February 28, 2009 and February 29, 2008 of $(15,926) and $(54,849) versus $8,360,900 and $8,214,993 respectively. The Net Loss for the Exploration Stage was $(23,302,290).

Liquidity and Capital Resources

Since its inception, the Company has financed its cash requirements from sale of common stock and shareholder loans. Uses of funds have included activities to establish and develop our business. The Company’s principal sources of liquidity as of February 28, 2009, consisted of cash resources of $251, prepaid expenses of $3,616 and shareholder loans from a related party. Under the shareholder loans, loan advances to or on behalf of ADG or ADSI, bear interest at 5% per annum, calculated and compounded annually, not in advance. ADG or ADSI are required to repay the outstanding principal and interest at any time on demand. Prepayment of all or a portion of the outstanding principal and interest may be made by ADG or ADSI at any time without notice, bonus or penalty. The amount outstanding under the shareholder loan was $238,000 including accrued interest as of February 28, 2009.  Since Exploration Stage inception through to and including February 282009, we have executed cash sales of our common shares totaling $7,193,860 through private placements.

Material Events and Uncertainties

Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in rapidly evolving markets. There can be no assurance that we will successfully address such risks, expenses and difficulties.

11

Employees

As of February 28, 2009, we had no employees and used contracted services to perform geological work, legal services and our bookkeeping. Additionally our CEO was engaged on a consulting basis. Going forward, the Company will use consultants with specific skills to assist with various aspects of its project evaluation, due diligence, acquisition initiatives, corporate governance and property management.

Critical Accounting Policies

Asian Dragon’s financial statements are prepared on a consolidated basis which includes the accounts of both the Company and its subsidiary and include related public financial information based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in NOTE 2 of the financial statements included with our Report on Form 10-K for fiscal 2008. While all these significant accounting policies impact its financial condition and results of operations, Asian Dragon views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on Asian Dragon’s financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. We have expensed all development costs related to our establishment.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

EXCHANGE RATE FLUCTUATION RISK

Our reporting currency is United States Dollars (“USD”). Our transactions in China use the Chinese Renminbi (“RMB”) which has been informally pegged to the USD. However, China is under international pressure to adopt a more flexible exchange rate system. If the RMB were no longer pegged to the USD, rate fluctuations may have a material impact on the Company’s financial reporting. The fluctuation of exchange rates of Renminbi may have positive or negative impacts on the results of operations of the Company.

We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.

ITEM 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time

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periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's certifying officer has concluded that the Company's disclosure controls and procedures are not effective in reaching that level of assurance.

At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Management's Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company's CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in conformity with U.S. generally accepted accounting principles and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

As of February 28, 2009, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the criteria established by COSO management concluded that the Company's internal control over financial reporting was not effective as of February 28, 2009, as a result of the identification of the material weaknesses described below.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Specifically, management identified the following control deficiencies. (1) The Company has not properly segregated duties as one or two individuals initiate, authorize, and complete all transactions. The Company has not implemented measures that would prevent the individuals from overriding the internal control system. The Company does not believe that this control deficiency has resulted in deficient financial reporting because the Chief Financial Officer is aware of his responsibilities under the SEC's reporting requirements and

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personally certifies the financial reports. (2) The Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software.

Accordingly, while the Company has identified certain material weaknesses in its system of internal control over financial reporting, it believes that it has taken reasonable steps to ascertain that the financial information contained in this report is in accordance with generally accepted accounting principles. Management has determined that current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.

Changes in Internal Control over Financial Reporting

During the second quarter of the Company’s fiscal year ended August 31, 2009, no material changes were made to the Company’s internal control over financial reporting

Remediation Plan

Addition of staff

We have identified that additional staff will be required to properly segment the accounting duties of the Company. However, we do not currently have resources to fulfill this part of our plan and will be addressing this matter once sufficient resources are available.

Limitations on the Effectiveness of Controls

The Company has confidence in its revised regime of internal controls and procedures. Nevertheless, the Company’s management (including the Chief Executive Officer and Chief Financial Officer) believes that a control system, no matter how well designed and operated can provide only reasonable assurance and cannot provide absolute assurance that the objectives of the internal control system are met, and no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitation in all internal control systems, no evaluation of controls can provide absolute assurance that all control issuers and instances of fraud, if any, within the Company have been detected.

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PART II – OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

There is no litigation pending or threatened by or against us.

ITEM 1A.   RISK FACTORS

The following risk factors should be considered in connection with an evaluation of our business:

THE COMPANY'S LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO JUDGE ITS PROSPECTS.

The Company has a limited operating history upon which an evaluation of the Company, its current business and its prospects can be based. You should consider any purchase of the Company's shares in light of the risks, expenses and problems frequently encountered by all companies in the early stages of its corporate development.

LIQUIDITY AND CAPITAL RESOURCES ARE UNCERTAIN.

For the six months ended February 28, 2009, the Company had a Net Loss of $(54,849). The Company may need to raise additional capital by way of an offering of equity securities, an offering of debt securities, or by obtaining financing through a bank or other entity. The Company has not established a limit as to the amount of debt it may incur nor has it adopted a ratio of its equity to debt allowance. If the Company needs to obtain additional financing, there is no assurance that financing will be available from any source, that it will be available on terms acceptable to us, or that any future offering of securities will be successful. If additional funds are raised through the issuance of equity securities, there may be a significant dilution in the value of the Company’s outstanding common stock. The Company could suffer adverse consequences if it is unable to obtain additional capital which would cast substantial doubt on its ability to continue its operations and growth.

THE VALUE AND TRANSFERABILITY OF THE COMPANY'S SHARES MAY BE ADVERSELY IMPACTED BY THE LIMITED TRADING MARKET FOR ITS SHARES AND THE PENNY STOCK RULES.

There is only a limited trading market for the Company's shares. The Company's common stock is traded in the over-the-counter market and "bid" and "asked" quotations regularly appear on the OTC Bulletin Board under the symbol "AADG" and the Company is also listed on the Frankfurt Stock Exchange under the trading symbol “P2J1”. There can be no assurance that the Company's common stock will trade at prices at or above its present level and an inactive or illiquid trading market may have an adverse impact on the market price. In addition, holders of the Company's common stock may experience substantial difficulty in selling their securities as a result of the "penny stock rules" which restrict the ability of brokers to sell certain securities of companies whose assets or revenues fall below the thresholds established by those rules.

FUTURE SALES OF SHARES MAY ADVERSELY IMPACT THE VALUE OF THE COMPANY'S STOCK.

If required, the Company may seek to raise additional capital through the sale of common stock. Future sales of shares by the Company or its stockholders could cause the market price of its common stock to decline.

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MINERAL EXPLORATION AND DEVELOPMENT ACTIVITIES ARE SPECULATIVE IN NATURE.

Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in the Company not receiving an adequate return of investment capital.

Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis. Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results. Short term factors relating to reserves, such as the need for orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.

THE COMPANY WILL BE SUBJECT TO OPERATING HAZARDS AND RISKS WHICH MAY ADVERSELY AFFECT THE COMPANY'S FINANCIAL CONDITION.

Mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. The Company's operations will be subject to all the hazards and risks normally incidental to exploration, development and production of metals, such as unusual or unexpected formations, cave-ins or pollution, all of which could result in work stoppages, damage to property and possible environmental damage. The Company does not have general liability insurance covering its operations and does not presently intend to obtain liability insurance as to such hazards and liabilities. Payment of any liabilities as a result could have a materially adverse effect upon the Company's financial condition

THE COMPANY'S ACTIVITIES WILL BE SUBJECT TO ENVIRONMENTAL AND OTHER INDUSTRY REGULATIONS WHICH COULD HAVE AN ADVERSE EFFECT ON THE FINANCIAL CONDITION OF THE COMPANY.

The Company's activities are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailing disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards and enforcement, fines and penalties for

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non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations could have an adverse effect on the financial condition of the Company.

The operations of the Company include exploration and development activities and commencement of production on its properties, require permits from various federal, state, provincial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.

Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.

COMPETITION MAY HAVE AN IMPACT ON THE COMPANY'S ABILITY TO ACQUIRE ATTRACTIVE PRECIOUS METALS PROPERTIES, WHICH MAY HAVE AN ADVERSE IMPACT ON THE COMPANY'S OPERATIONS.

Significant and increasing competition exists for the limited number of precious metals acquisition opportunities available. As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than the Company, the Company may be unable to acquire attractive precious metals properties on terms it considers acceptable. Accordingly, there can be no assurance that any exploration program intended by the Company on properties it intends to acquire will yield any reserves or result in any commercial mining operation.

DOWNWARD FLUCTUATIONS IN METAL PRICES MAY SEVERELY REDUCE THE VALUE OF THE COMPANY.

The Company has no control over the fluctuations in the prices of the metals for which it is exploring.  A significant decline in such prices would severely reduce the value of the Company.

THE COMPANY CURRENTLY RELIES ON CERTAIN KEY INDIVIDUALS AND THE LOSS OF ONE OF THESE CERTAIN KEY INDIVIDUALS COULD HAVE AN ADVERSE EFFECT ON THE COMPANY.

The Company's success depends to a certain degree upon certain key members of the management. These individuals are a significant factor in the Company's growth and success. The loss of the service of members of the management and advisory board could have a material adverse effect on the Company. In particular, the success of the Company is highly dependent upon the efforts of the President & CEO, CFO, PAO, Treasurer & Secretary, Chair & Director of the Company, John Karlsson, the loss of whose services would have a material adverse effect on the success and development of the Company. 

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THE COMPANY DOES NOT MAINTAIN KEY MAN INSURANCE TO COMPENSATE THE COMPANY FOR THE LOSS OF CERTAIN KEY INDIVIDUALS.

The Company does not anticipate having key man insurance in place in respect of its senior officers or personnel, although the Board has discussed and investigated the prospect of obtaining key man insurance for John Karlsson.

WE ARE AN EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A COMMERCIALLY VIABLE DEPOSIT OR "RESERVE" EXISTS ON ANY PROPERTIES FOR WHICH THE COMPANY HAS, OR MIGHT OBTAIN, AN INTEREST.

The Company is an exploration stage company and cannot give assurance that a commercially viable deposit, or “reserve,” exists on any properties for which the Company currently has (through an option) or may have (through potential future joint venture agreements or acquisitions) an interest. Therefore, determination of the existence of a reserve depends on appropriate and sufficient exploration work and the evaluation of legal, economic, and environmental factors. If the Company fails to find a commercially viable deposit on any of its properties, its financial condition and results of operations will be materially adversely affected.

WE REQUIRE SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL PRECIOUS METAL DEPOSITS EXIST ON OUR PROPERTIES.

Any potential development and production of the Company’s exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand the Company’s operations on these exploration properties is anticipated to involve consideration and evaluation of several significant factors including, but not limited to:

§ Costs of bringing each property into production, including exploration work, preparation of production feasibility studies, and construction of production facilities;

§ Availability and costs of financing;

§ Ongoing costs of production;

§ Market prices for the precious metals to be produced;

§ Environmental compliance regulations and restraints; and

§ Political climate and/or governmental regulation and control.

GENERAL MINING RISKS

Factors beyond our control may affect the marketability of any substances discovered from any resource properties the Company may acquire. Metal prices, in particular gold and silver prices, have fluctuated widely in recent years. Government regulations relating to price, royalties, and allowable production and importing and exporting of precious metals can adversely affect the Company. There can be no certainty that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and operations on any projects it may acquire and environmental concerns about mining in general continue to be a significant challenge for all mining companies.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There have been no unregistered sales of equity securities during the three months ended February 28, 2009.

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ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

The Company has no senior securities outstanding.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarter ended February 28, 2009, no matters were submitted to a vote of the Company's security holders, through the solicitation of proxies or otherwise.

ITEM 5.   OTHER INFORMATION

As reported on a Form 8-K filed December 3, 2008, effective December 2, 2008 the Company determined it would be unable to raise sufficient capital to meet contractual payment obligations under three exploration property purchase agreements it had entered. As such, the Board approved a resolution which authorized the Company to abandon its current exploration initiatives in China and cancel the Agreements it had signed with World Fortune Enterprise Inc., such cancellations to be effective December 2, 2008. Additionally, the Company cancelled the FGLW-XWG Transfer Agreement (dated April 30, 2008) which had assigned some of the Company’s rights under the Fuding (Revised) Agreement to its subsidiary Asian Dragon Silver Inc., such cancellation was also effective December 2, 2008.

In March 2009 the Company began negotiations with Ophir Exploration Inc. regarding acquisition of that company. On March 13, 2009 the Company issued a press release regarding these negotiations titled: “Asian Dragon Group Inc., Finalizes Acquisition of Ophir Exploration Inc., in Mineral Rich Suriname and Appoints of New Lead Director” (attached  to this Report on Form 10-Q as Exhibit 99.1). This news release was prematurely issued and detailed events which have not yet been finalized. The Company regrets any confusion this may have caused and formally records here that negotiations are still underway and news regarding these will be released in the near future.

ITEM 6.   EXHIBITS

Number	Exhibit Description
31.1	Certificate of President (chief executive officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certificate of Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certificate of President (chief executive officer) and Treasurer (principal financial officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	March 13, 2009 News Release

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SIGNATURES

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

ASIAN DRAGON GROUP INC.

/s/ John Karlsson

John Karlsson

President and CEO, CFO, Principal Accounting Officer, Secretary and Treasurer, Director

and Board Chair

Dated: April 13, 2009

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

NAME	TITLE	DATE
/s/ John Karlsson
John Karlsson	President & CEO, CFO, Principal Accounting Officer, Secretary, Treasurer, Director and Board Chair	April 13, 2009
/s/ Jacques Trottier
Jacques Trottier	Director	April 13, 2009

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