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 November 30, 2008





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
              oNon-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
January 20, 2009.







ASIAN
DRAGON GROUP INC. AND SUBSIDIARY


(an
Exploration Stage Company)







Table of Contents




PagePART I. Financial InformationItem 1. Financial Statements.Consolidated Balance Sheets at November 30, 2008 (unaudited)
      and August 31, 2008 (audited)
                    1Unaudited Consolidated Statements of Operations for the three
      month periods ended November 30, 2008 and November 30, 2007 and the
      Exploration Stage Period of August 15, 2006 to November 30,
      2008
                    2Unaudited Consolidated Statements of Cash Flows for the three
      month periods ended November 30, 2008 and November 30, 2007 and the
      Exploration Stage Period of August 15, 2006 to November 30,
      2008
                    3Unaudited Consolidated Supplemental Disclosure of Non-cash
      Investing and Financing Activities for the three month periods ended
      November 30, 2008 and November 30, 2007 and the Exploration Stage Period
      of August 15, 2006 to November 30, 2008
                    4Notes to Consolidated Unaudited Financial
      Statements
                    5Item 2. Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                    7Item 3. Quantitative and Qualitative Disclosures about Market
      Risk
                    10Item 4. Controls and Procedures
                    10PART II. Other Information
                    12Item 1. Legal Proceedings
                    12Item 1A. Risk Factors
                    12Item 2. Unregistered Sales of Equity Securities and Use of
      Proceeds
                    16Item 3. Defaults Upon Senior Securities
                    16Item 4. Submission of Matters to a Vote of Security
      Holders
                    16Item 5. Other Information
                    16Item 6. Exhibits
                    16Signatures
                    17




Table of Contents


PART I – FINANCIAL INFORMATION




ITEM 1.  FINANCIAL STATEMENTS (unaudited)







ASIAN
DRAGON GROUP INC. AND SUBSIDIARY


(An
Exploration Stage Company)





Consolidated Balance Sheets





November
      30,
                                  2008
                                  (Unaudited)
                                
                                
                                August
      31,
                                  2008
                                  (Note
      1)ASSETSCURRENT
      ASSETSCash
                                
                                $
                                21
                                
                                
                                $
                                4,423Prepaid
      expenses
                                
                                
                                3,856
                                
                                
                                
                                4,322Total current
    assets
                                
                                
                                3,877
                                
                                
                                
                                8,745Total assets
                                
                                $
                                3,877
                                
                                
                                $
                                8,745LIABILITIES
      AND STOCKHOLDERS’ (DEFICIT)CURRENT
      LIABILITIESAccounts payable
                                
                                
                                41,768
                                
                                
                                
                                3,675Accrued
      liabilities
                                
                                
                                -
                                
                                
                                
                                10,750Note
      payable (Note 3)
                                
                                
                                24,226
                                
                                
                                
                                23,925Shareholder
      loans (Note 3 and 4)
                                
                                
                                200,712
                                
                                
                                
                                194,243Total current
      liabilities
                                
                                $
                                266,706
                                
                                
                                $
                                232,593Total liabilities
                                
                                $
                                266,706
                                
                                
                                $
                                232,593COMMITMENTS
      AND CONTINGENCIES
                                
                                
                                -
                                
                                
                                
                                -STOCKHOLDERS’
      EQUITY (DEFICIT)Common
      shares, 100,000,000 shares par value $0.001authorized,
      38,775,000outstanding
                                
                                
                                38,775
                                
                                
                                
                                38,775Paid-in
      Capital
                                
                                
                                22,984,342
                                
                                
                                
                                22,984,342Accumulated
      deficit in the exploration stage
                                
                                
                                (23,058,284
                                )
                                
                                
                                (23,032,337
                                )Accumulated
      deficit
                                
                                
                                (215,105
                                )
                                
                                
                                (215,105
                                )Accumulated
      other comprehensive income (loss)
                                
                                
                                (12,557
                                )
                                
                                
                                477Total stockholders’
      (deficit)
                                
                                
                                (262,829
                                )
                                
                                
                                (223,848
                                )Total liabilities and
      stockholders’ equity
                                
                                $
                                3,877
                                
                                
                                $
                                8,745





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






1
 Table of Contents




ASIAN
DRAGON GROUP INC. AND SUBSIDIARY


(An
Exploration Stage Company)





Consolidated Statements of Operations





Three
      Months
                    ended
                    November
      30, 2008
                  
                  
                  Three
      Months
                    ended
                    November
      30, 2007
                  
                  
                  Exploration
      Stage August 15, 2006 through
                    November
      30, 2008EXPENSES:Exploration
      licenses
                  
                  $
                  -
                  
                  
                  $
                  8,001
                  
                  
                  $
                  23,052,000Exploration
      expenses
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,215Agent
      fees
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,852,500Professional
      and consultant fees
                  
                  
                  29,002
                  
                  
                  
                  61,305
                  
                  
                  
                  481,457Stock-based
      compensation – officers and directors
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,975,491Investor  relations
                  
                  
                  -
                  
                  
                  
                  57,708
                  
                  
                  
                  134,939Administrative
      expenses
                  
                  
                  7,189
                  
                  
                  
                  16,494
                  
                  
                  
                  181,224Total expenses
                  
                  $
                  36,191
                  
                  
                  $
                  143,508
                  
                  
                  $
                  32,727,826Net
      loss from operations
                  
                  $
                  (36,191
                  )
                  
                  $
                  (143,508
                  )
                  
                  $
                  (32,727,826
                  )OTHER
      INCOME (EXPENSE):Cancelation
      of debt relating to commitments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,679,407Interest
      expense
                  
                  
                  (2,731
                  )
                  
                  
                  (2,399
                  )
                  
                  
                  (22,840
                  )Net
      Income (Loss) from continuing operations:
                  
                  
                  (38,922
                  )
                  
                  
                  (145,907
                  )
                  
                  
                  (23,071,259
                  )Net
      loss from discontinued operations :– terminated
      subsidiary
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (68,995
                  )–
      change from Development to Exploration Stage
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (146,110
                  )Net
      loss from discontinued operations
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (215,105
                  )Net
      Income (Loss)
                  
                  $
                  (38,922
                  )
                  
                  $
                  (145,907
                  )
                  
                  $
                  (23,286,364
                  )Loss
      per common share, basic and diluted from discontinued
      operations:
                  
                  $
                  n/a
                  
                  
                  $
                  n/aEarnings
      (Loss) per common share, basic and diluted from continuing
      operations:
                  
                  $
                  Nil
                  
                  
                  $
                  NilWeighted
      average shares outstanding , basicand
      diluted
                  
                  
                  38,775,000
                  
                  
                  
                  38,275,000OTHER
      COMPREHENSIVE INCOME (LOSS):Net
      Income (Loss)
                  
                  $
                  (38,922
                  )
                  
                  $
                  (145,907
                  )
                  
                  $
                  (23,286,364
                  )Foreign
      currency translation adjustment
                  
                  
                  (60
                  )
                  
                  
                  13,030
                  
                  
                  
                  417Total
      other comprehensive income (loss)
                  
                  $
                  (38,982
                  )
                  
                  $
                  (132,877
                  )
                  
                  $
                  (23,285,947
                  )








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


2
 Table of Contents


ASIAN
DRAGON GROUP INC. AND SUBSIDIARY


(An
Exploration Stage Company)





Consolidated Statements of Cash Flows





Three
      Months
                  ended
                  November
      30,
                  2008
                
                
                Three
      Months
                  ended
                  November
      30,
                  2007
                
                
                Exploration
      Stage
                  August
      15,
                  2006
      through
                  November
      30,
                  2008Cash
      flows from operating activities:Net
      Income (Loss) for period
                
                $
                (38,922
                )
                
                $
                (145,907
                )
                
                $
                (23,286,364
                )Reconciling
      adjustments:Adjustments
      to reconcile net loss to net cashused
      in operating activities:Accrued
      interest on shareholder loans
                
                
                2,429
                
                
                
                2,399
                
                
                
                22,210Accrued
      interest on Note payable
                
                
                302
                
                
                
                -
                
                
                
                630Common
      stock issued for compensation
                
                
                -
                
                
                
                -
                
                
                
                1,150,000Additional
      Paid-In Capital relating to Options –compensation
      expense
                
                
                -
                
                
                
                -
                
                
                
                5,825,491Common
      stock issued for license fee payments
                
                
                -
                
                
                
                -
                
                
                
                7,050,000Common
      stock issued for agent fee payments
                
                
                -
                
                
                
                -
                
                
                
                1,762,500Net
      change in operating assets and liabilities:Subscription
      receivable
                
                
                -
                
                
                
                1,000,000
                
                
                
                -Prepaid
      expenses
                
                
                466
                
                
                
                (17,305
                )
                
                
                (3,599
                )Commitments
      payable
                
                
                -
                
                
                
                (791,999
                )
                
                
                -Accounts
      payable and accrued  liabilities
                
                
                27,343
                
                
                
                (171,940
                )
                
                
                41,768Net
      cash provided (used) by operating activities
                
                
                (8,382
                )
                
                
                (124,752
                )
                
                
                (7,437,364
                )Cash
      flows from discontinued operations:
                
                
                -
                
                
                
                -Net
      cash provided (used) by discontinuedoperating
      activities:-
      Net loss from terminated subsidiary
                
                
                -
                
                
                
                -
                
                
                
                (68,995
                )-
      Net loss from Development Stage period
                
                
                -
                
                
                
                -
                
                
                
                (146,110
                )-
      Accrued interest on shareholder loans
                
                
                -
                
                
                
                -
                
                
                
                8,761-
      Depreciation
                
                
                -
                
                
                
                -
                
                
                
                318-
      Prepaid expenses
                
                
                -
                
                
                
                -
                
                
                
                9,500-
      Accounts payable and accrued  liabilities
                
                
                -
                
                
                
                -
                
                
                
                (9,220
                )-
      Stock issued shareholder debt conversion
                
                
                -
                
                
                
                -
                
                
                
                10,000Sub-total
                
                
                -
                
                
                
                -
                
                
                
                (195,746
                )Net
      cash provided by discontinued operationsinvesting
      activities:-
      Purchase (sale) of property and equipment
                
                
                -
                
                
                
                -
                
                
                
                (318
                )Sub-total
                
                
                -
                
                
                
                -
                
                
                
                (318
                )Net
      cash provided by discontinued operationsfinancing
      activities:-
      Common stock issued for cash
                
                
                
                
                
                
                
                
                
                
                31,266-
      Loans by stockholders
                
                
                
                
                
                
                
                
                
                
                152,689Sub-total
                
                
                -
                
                
                
                -
                
                
                
                183,955Net
      cash provided (used) by discontinuedoperations:
                
                
                -
                
                
                
                -
                
                
                
                (12,109
                )


(continued)







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


3
 Table of Contents


ASIAN
DRAGON GROUP INC. AND SUBSIDIARY


(An
Exploration Stage Company)





Consolidated
Statements of Cash Flows





(continued)


Three
      Months
                  ended
                  November
      30,
                  2008
                
                
                Three
      Months
                  ended
                  November
      30,
                  2007
                
                
                Exploration
      Stage
                  August
      15,
                  2006
      through
                  November
      30,
                  2008Adjustment
      for Net loss from terminated subsidiary
                
                
                -
                
                
                
                -
                
                
                
                68,995Adjustment
      for Net loss from Development Stage period
                
                
                -
                
                
                
                -
                
                
                
                146,110Net
      adjustments
                
                
                -
                
                
                
                -
                
                
                
                215,105Cash
      flows from financing activities:Common
      stock issued for cash
                
                
                -
                
                
                
                -
                
                
                
                7,193,860Loans
      by stockholders
                
                
                4,040
                
                
                
                (52,937
                )
                
                
                16,700Note
      payable
                
                
                -
                
                
                
                -
                
                
                
                23,597Net
      cash provided by financing activities
                
                
                4,040
                
                
                
                (52,937
                )
                
                
                7,234,157Effect
      of foreign currency translation
                
                
                (60
                )
                
                
                13,030
                
                
                
                160Net
      increase (decrease) in cash
                
                
                (4,402
                )
                
                
                (164,659
                )
                
                
                (51
                )Cash,
      beginning of period
                
                
                4,423
                
                
                
                326,381
                
                
                
                72Cash,
      end of period
                
                $
                21
                
                
                $
                161,722
                
                
                $
                21








Consolidated Supplemental Disclosure of Non-cash Investing and
Financing Activities





Three
      Months
                  ended
                  November
      30,
                  2008
                
                
                Three
      Months
                  ended
                  November
      30,
                  2007
                
                
                Exploration
      Stage
                  August
      15,
                  2006
      through
                  August
      31,
                  2008Common
      stock issued for compensation
                
                
                -
                
                
                
                -
                
                
                
                1,150,000Additional
      Paid-In Capital relating to Options
                
                
                -
                
                
                
                -
                
                
                
                5,825,491Common
      stock issued for license fee payments
                
                
                -
                
                
                
                -
                
                
                
                7,050,000Common
      stock issued for agent fee payments
                
                
                -
                
                
                
                -
                
                
                
                1,762,500TOTAL
                
                
                -
                
                
                
                -
                
                
                
                15,787,991











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


4
 Table of Contents


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 November 30, 2008 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.





Reclassifications





Certain
account balances have been reclassified to conform to current period
presentation.





NOTE
2 – 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 an
operating loss from continuing operations for the three month period ending
November, 2008 of $(38,922) and has accumulated net losses since its inception
in the amount of $(23,286,364). Additionally the Company has a deficit in
working capital and stockholders equity and has had 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 on many factors,
many of which have a high degree of uncertainty.





The
Company’s ability to continue as a going concern is contingent upon the
successful completion of additional financing arrangements and its ability to
successfully fulfill its business plan. Management is attempting to raise
additional funds to finance the operating and capital requirements of the
Company through a combination of equity and debt financings. While the Company
is making its best efforts to achieve the above plans, there is no assurance
that any such activity will generate funds that will be available for
operations. The accompanying financial statements do not include any adjustments
that might result from the resolution of these matters.










5
 Table of Contents




ASIAN
DRAGON GROUP INC. AND SUBSIDIARY


(An
Exploration Stage Company)





Notes
to Consolidated Financial Statements








NOTE
3 – Shareholder Loan and Note Payable





At
November 30, 2008, the Company had a shareholder loan outstanding from a related
party totaling $200,712 which included $30,971 of accrued interest. This loan is
uncollateralized and has no fixed repayment dates.





At
November 30, 2008, the Company had one Note Payable outstanding of $24,226,
which included $630 of accrued interest. This loan is uncollateralized, has no
fixed repayment date and is callable at any time.





NOTE
4 – Related Party Transactions





During
the three months ending November 30, 2008 related party transactions included
the shareholder loan activity recorded in Note 3.





NOTE
5 – Subsequent Event





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.











































6
 Table of Contents





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”.





RESULTS
OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED NOVEMBER 30, 2008 AND NOVEMBER
30, 2007 AND THE EXPLORATION STAGE PERIOD FROM AUGUST 16, 2006 TO NOVEMBER 30,
2008





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




7
 Table of Contents


-
Professional and Consultant Fees


- Stock
Based Compensation – officers and directors


-
Investor Relations


-
Administrative Expenses





Exploration
Licenses





Expenditures
for Exploration Licenses were $nil and $8,001 respectively for the three month
periods ended November 30, 2008 versus November 30, 2007. For the period of
August 15, 2006 (inception) to November 30, 2008 (the “Exploration Stage”) costs
for Exploration Licenses totaled $23,052,000. We anticipate these expenses will
increase over the next twelve months as we implement our business
plans.





Exploration
Expenses





Exploration
Expenses were $nil and $nil respectively for the three month periods ended
November 30, 2008 versus November 30, 2007. Expenses for the Exploration Stage
totaled $50,215. We anticipate these expenses will increase during the next
twelve months.





Agent
Fees





Agent
Fees were $nil and $nil for the three month periods ended November 30, 2008
versus November 30, 2007. Agent Fees for the Exploration Stage totaled
$1,852,500. We do not anticipate we will incur further expenses in this area
over the next twelve months.





Professional and Consultant
Fees





Professional
& Consultant Fees are comprised of fees audit, accounting, legal and other
professionals. During the three month periods ended November 30, 2008 versus
November 30, 2007, these fees were $29,002 versus $61,305 respectively. For the
Exploration Stage, these costs totaled $481,457. We anticipate Professional
& Consultant Fees will remain at current levels in the upcoming twelve
months.





Stock Based Compensation –
officers and directors





Stock
Based Compensation expenses totaled $nil and $nil for the three month periods
ended November 30, 2008 versus November 30, 2007. During the Exploration Stage
these costs totaled $6,975,491. Past expenses have related to stock and option
issuances to our officers and directors. We do not anticipate incurring stock
based compensation expenses during fiscal 2009.





Investor
Relations





Investor
Relations expenses comprise costs for press releases, maintenance of the
Company’s website and other investor information initiatives. During the three
month periods ended November 30, 2008 versus November 30, 2007, these expenses
totaled $nil and $57,708 respectively. For the Exploration Stage, Investor
Relations expenses totaled $134,939. We anticipate Investor Relations expenses
will increase substantially during the next twelve months as we continue our
efforts to raise further capital and keep current investors informed of Company
developments.





Administrative
Expenses





Administrative
Expenses were $7,189 versus $16,494 for the three month periods ended November
30, 2008 versus November 30, 2007. For the Exploration Stage, Administrative
Expenses totaled $181,224. These expenses are composed of travel, Edgar agent
filing fees, stock transfer agent fees and general office expenses. We
anticipate Administrative Expenses will increase moderately in the upcoming year
as we implement our business plans.







8
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Net
Income (Loss)





We
incurred net losses for the three month periods ended November 30, 2008 and
November 30, 2007of $(38,922) versus $(145,907) respectively. The Net Loss for
the Exploration Stage was $(23,286,364).





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
November 30, 2008, consisted of cash resources of $21, prepaid expenses of
$3,856 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 $200,712 including accrued interest as of
November 30, 2008.  Since Exploration Stage inception through to and
including May 31, 2008, 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.





Employees





As of
November 30, 2008, 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.










9
 Table of Contents


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 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.





As of 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








10
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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
November 30, 2008, 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 November 30, 2008, 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 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 first 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.






11
 Table of Contents




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.






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
three months ended November 30, 2008, the Company had a Net Loss of $(38,922).
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.







12
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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.





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.










13
 Table of Contents


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 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.







14
 Table of Contents


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.





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.







15
 Table of Contents


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 November 30, 2008.





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 November, 2008, 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.





ITEM
6.  EXHIBITS




Number
                    Exhibit Description31.1
                    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
      200231.2
                    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 200232.1
                    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











16
 Table of Contents




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:
January 20, 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 KarlssonJohn
      Karlsson
                  
                  President
      & CEO, CFO, Principal Accounting Officer, Secretary, Treasurer,
      Director and Board Chair
                  January
      20, 2009/s/ Jacques TrottierJacques
      Trottier
                  
                  Director
                  January
      20, 2009








































17