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EX-31.1 - ASIAN DRAGON GROUP 10K/A #3, CERTIFICATION 302, CEO - ASIAN DRAGON GROUP INC.asianexh31_1.htm
EX-31.2 - ASIAN DRAGON GROUP 10K/A #3, CERTIFICATION 302, CFO - ASIAN DRAGON GROUP INC.asianexh31_2.htm
EX-32.1 - ASIAN DRAGON GROUP 10K/A #3, CERTIFICATION 906, CEO/CFO - ASIAN DRAGON GROUP INC.asianexh32_1.htm


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________

FORM 10-K/A-3
 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For Fiscal Year Ended August 31, 2007

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)
 
1312 North Monroe Street, Suite 108, Spokane, Washington 99201
(Address of principal executive offices)                       (Zip Code)
 
(509) 252-8428
(Registrant’s telephone no., including area code)

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

Securities registered pursuant to Section 12(g) of the Act: 
Common Stock, $0.001 par value
(Title of class)
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 406 of the Securities Act:  Yes o  No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act:   Yes x  No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes x  No o
 
 


 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:   Yes o  No x
 
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 Act):   Yes o  No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:

Based on the closing price on December 13, 2007 of $1.11, the aggregate market value of the 32,325,000 common shares held by non-affiliates was $35,880,750.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 38,275,000 Common shares were outstanding as of December 14, 2007.
 
Documents incorporated by reference: As noted in Item 15.
 
 
NOTE:
The Company has determined that an amount of $9,679,407 recorded as Exploration License payments in the original financial statements for fiscal 2007 should not have been expensed for the year ended August 31, 2007. These financial statements reflect a removal of these expenses for fiscal 2007 and this re-filed Annual Report on Form 10-K/A-3 is based on a re-audit of the Company's financial statements for the year ended August 31, 2007 and includes a new 'Report of Independent Registered Public Accounting Firm' for the year ended August 31, 2007.









 



 
 
 
ASIAN DRAGON GROUP INC.
(an Exploration Stage Company)

Table of Contents

     
   
   
   
   
   
   
   
     
     
     


 

 

 
PART I
 
ITEM 1.   DESCRIPTION OF BUSINESS
 
General

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

Investors should be aware there is no assurance that a commercially viable mineral deposit exists on any of the properties for which we are purchasing exploration licenses, and that further exploration will be required before a final evaluation as to the economic and legal feasibility is determined.

Background

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.

On August 15, 2003, ADG acquired 100% of the issued and outstanding shares of Galaxy Telnet S.R.L. (“Galaxy Telnet”) a company incorporated under the laws of Romania under a stock exchange agreement between ADG and Galaxy Telnet dated as of October 31, 2003. Before this transaction, a former director was the sole shareholder of Galaxy Telnet. Before the acquisition of Galaxy Telnet, we did not conduct business.

We had anticipated Galaxy Telnet would be able to exploit the introduction of Voice Over Internet telecommunications services in Romania. Unfortunately this initiative was unsuccessful. As a consequence, on June 8, 2006 the Board authorized the wind-up of Galaxy Telnet. During the balance of the fiscal 2006 all affairs of the Galaxy Telnet were finalized and on August 23, 2006 it was de-registered as a corporate entity in Romania. As required by United States generally accepted accounting principles (“GAAP”), all financial information regarding Galaxy Telnet has been recorded in the financial statements as a discontinued operation.  Additionally, when ADG closed Galaxy Telnet it became required under GAAP to reset the development stage period as an exploration period with a start date of August 15, 2006, the date of the dissolution of the subsidiary. The following discussion and analysis covers material changes in the financial condition of Asian Dragon from August 15, 2006 without the inclusion of its terminated 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”.

Our fiscal year end is August 31st.

Business Development

Asian Dragon has developed it business by using World Fortune Enterprise Inc. (“WFEI”) as its Agent. The nature of the business arrangement between Asian Dragon and WFEI is based upon: (i) WFEI acting as Asian Dragon’s Agent in China to source exploration opportunities; (ii) WFEI executing contracts with partners in China which provide access to certain exploration opportunities based upon certain payment schedules; and (iii) WFEI entering agreements with Asian Dragon to sell to Asian Dragon, based on certain

 


 
payment schedules, the exploration licenses which WFEI has contracted to acquire. Under its current Exploration Agreements (attached herein as Exhibits 10.1, 10.2 and 10.3), Asian Dragon has no recourse on WFEI in the event that WFEI were to fail to meet its contractual obligations to flow funds WFEI receives from Asian Dragon through to WFEI’s Chinese Partners, or if WFEI were to fail to meet any other non-monetary obligations.

At present Asian Dragon has not acquired any of the Exploration Licenses which are referenced in its Agreements. Such acquisitions will occur upon Asian Dragon completing all payments under its Exploration Agreements with WFEI; and WFEI fulfilling all requirements under WFEI’s agreements with it Chinese Partners.

Exploration Licenses

Exploration/Concession rights are administered by the Ministry of Land and Resources in the Henan Province of the People’s Republic of China (PRC). There are Provincial and Federal bodies, with each Provincial body overseeing its own jurisdiction. The Company plans to follow and adheres to “The Mineral of Resources Law of PRC” and “China’s Policy on Mineral Resources (2003)” to administer exploration concession/mineral rights in PRC.

These can be found at:

China's Policy on Mineral Resources (2003):

http://english.gov.cn/official/2005-07/28/content_17963.htm

Mineral of Resources Law of PRC:

http://english1.mofcom.gov.cn/aarticle/lawsdata/chineselaw/200211/20021100053807.html

The Company has entered agreements to purchase 70% interests in each of six different mineral exploration licenses in China. The sites relating to these licenses are as follows: Jinjishan, Loning, Luanchuan Mozigou, Lushi Jiashapa, Xiayu Fanggelewan, and the Xiaowagou.

Jinjishan Site and Concentration Plant

The Jinjishan License consists of an Exploration License on a contiguous 28.3 sq km property located in the Northwest part of the Luoning County, Henan Province, PRC in the Changshui community. The Jinjishan Plant is located in the same area and we note that the formerly operating Jinjishan Plant, and other infrastructure and buildings acquired in each of our Exploration License purchases to date entirely, and without exception, have no value from an accounting or operational perspective due to age and state of repair. 

The Company entered into an agreement with World Fortune Enterprise Inc. to acquire a 70% interest in the Jinjishan License and a 100% interest in the Jinjishan Concentration Plant. Under the agreement the Company assumed the payment responsibilities of World Fortune for the Jinjishan Interests.

The terms of the Jinjishan Agreement require payments of $2,500,000 for the Jinjishan License and $800,000 for the Jinjishan Concentration Plant, for total consideration of $3,300,000. The Jinjishan Agreement acknowledged the Company provided payments totaling US$1,792,593 to August 29, 2007 (inclusive of a payment of US$600,000 toward the Jinjishan Plant) and required further investment by the Company as follows: (i) US$500,000 by October 1, 2007; (ii) US$500,000 by March 1, 2008; and (iii) US$500,000 by October 1, 2008.

 

 
 
World Fortune does not own the interests referenced in its agreement with Asian Dragon. World Fortune has an agreement with Luoyang Canadian United Mining Ltd. (“LCUML”) for those interests. LCUML owns the rights for the interests in the Xiaoquinling region of China, which were purchased from the Luoyang Jinjishan Gold Mine Company (“Luoyang Jinjishan”). World Fortune has represented that when they eventually assign the rights to Asian Dragon, those rights will be free and clear of all transfer, assignment, liens, charges, or encumbrances of any kind. World Fortune has also represented that when the option is exercised, it will have the right and authority to transfer the rights to Asian Dragon.
 
It is also anticipated WFEI, in its role as Asian Dragon’s China Agent, will aid the Company in establishing a Chinese Registered Subsidiary which will be wholly owned by Asian Dragon. The mineral rights under this agreement will ultimately be transferred into this subsidiary.

Asian Dragon, WFEI, LCUML, and Luoyang Jinjishan are all independent parties and are dealing at arm’s length in these arrangements.

Asian Dragon is not a party to the agreement between World Fortune and LCUML, nor a party to the agreement between LCUML and Luoyang Jinjishan which previously owned the rights and may have little or no recourse on LCUML or Luoyang Jinjishan, in the event that the purchase agreement does not comply with their agreements with each other or World Fortune. However, Asian Dragon has received an attorney’s letter from Mr. Tian Huiquing, Kunda Law Office, Hunan, China stating that the agreements are valid. Transfer of any rights in any of the above agreements will not be complete until all payments are completed.

Asian Dragon issued 250,000 shares of its common stock to World Fortune on August 29, 2007 and an additional one million shares to World Fortune nominees in regards to this agreement.

Subsequent to year-end on December 12, 2007, with the mutual consent of WFEI, the agreement was replaced with the “Jinjishan Agreement” which clarified certain terminology in the predecessor agreements. This agreement is attached herein as Exhibits 10.1. WFEI has provided Asian Dragon with an undertaking that it has extinguished all rights to any payments under the predecessor agreements and has acknowledged that it has recorded all cash and share payments made under the predecessor agreements as payments respectively under the Jinjishan Agreement, the Loning Agreement, and the Fuding Agreement.

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.


 


 
Loning Site

The Loning License consists of an Exploration License on a 9.1 sq km property located in the Xiaoqinling Region, PRC, and three km southwest of the Jinjishan License.

The Company entered into an agreement with World Fortune effective August 29, 2007, to acquire a 70% interest in the Loning License. Under the Loning Agreement, The Company assumed the payment responsibilities of World Fortune for the Loning License.

The Loning Agreement requires total payments by the Company of $1,510,000, of which $1,000,000 is to be expended by the Company for exploration purposes. The Loning Agreement acknowledged The Company has provided payments totaling US$400,000 to August 29, 2007 and required further investment by the Company as follows: (i) US$110,000 by March 1, 2008; (ii) US$500,000 by September 30, 2008; and (iii) US$500,000 by September 30, 2009.

World Fortune does not own the interests referenced in its agreement with Asian Dragon. World Fortune has an agreement with Henan Yunfeng Resource of Mining Development Co. (“Yunfeng”) for those interests. However, Yunfeng does not own the rights, but has entered into a purchase agreement with the Luoyang Longyu Jinmen Mines Limited Company (“Jinmen”) for the interests in the Xiaoquinling region of China. World Fortune has represented that when they eventually assign the rights to Asian Dragon, those rights will be free and clear of all transfer, assignment, liens, charges, or encumbrances of any kind. World Fortune has also represented that when the option is exercised, it will have the right and authority to transfer the rights to Asian Dragon.

It is also anticipated WFEI, in its role as Asian Dragon’s China Agent, will aid the Company in establishing a Chinese Registered Subsidiary which will be wholly owned by Asian Dragon. The mineral rights under this agreement will ultimately be transferred into this subsidiary.

Asian Dragon, WFEI, Yunfeng, and Jinmen are all independent parties and are dealing at arm’s length in these arrangements.

Asian Dragon is not a party to the agreement between World Fortune and Yunfeng nor a party to the agreement between Yunfeng and Jinmen which owns the rights to the interests in the Xiaoquinling region of China and may have little or no recourse on Yunfeng or Jinmen, in the event that the purchase agreement does not comply with their agreements with each other or World Fortune. However, Asian Dragon has received an attorney’s letter from Mr. Tian Huiquing, Kunda Law Office, Hunan, China stating that the agreements are valid. Transfer of any rights in any of the above agreements will not be complete until all payments are completed.

Asian Dragon issued 250,000 shares of its common stock to World Fortune on August 29, 2007 and an additional one million shares to World Fortune nominees in regards to this agreement.

Subsequent to year-end on December 12, 2007, with the mutual consent of WFEI, the agreement was replaced with the “Loning Agreement” which clarified certain terminology in the predecessor agreements. This agreement is attached herein as Exhibits 10.2. WFEI has provided Asian Dragon with an undertaking that it has extinguished all rights to any payments under the predecessor agreements and has acknowledged that it has recorded all cash and share payments made under the predecessor agreements as payments respectively under the Jinjishan Agreement, the Loning Agreement, and the Fuding Agreement.


 



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.

Luanchuan Mozigou Molybdenum Site
Lushi Jiashapa Vanadium Site
Luoning Xiayu Fanggelewan Silver-Lead Site
XWG Silver-Lead Site

The MZG License consists of an Exploration License on a 14.09 sq km property located in the Jiaohe Village of Luanchuan County, Henan Province, PRC. The JSP License consists of an Exploration License on an 8.3 sq km property located in the area of Wenguxiang to Dashihe in Lushi County, Henan Province, PRC. The FGLW License consists of a 1.75 sq km exploration license located approximately 240 km west of Zhengzhou and 80 km west of Luoyang. The XWG License consists of a 2.13 sq km exploration license located in the area of Xiayu, Henan Province, PRC. 

The Company entered into an agreement with World Fortune effective August 29, 2007, to acquire a 51% interest in the Fuding exploration licenses. Under the Fuding Agreement, the Company will assume the payment responsibilities of World Fortune for the various rights and interests.

The Fuding Agreement requires total consideration of $10,000,000. The Fuding Agreement acknowledged the Company provided an initial payment of $2,730,000 and required further payments as follows: $1,270,000 on October 1, 2007; $2,000,000 before March 1, 2008; $2,000,000 on June 1, 2008; and $2,000,000 on October 1, 2008.

A secondary component of the Fuding Agreement are two options whereby World Fortune can, at its sole discretion, increase its ownership purchase of the Fuding Rights by 19% to a total of 70% (this being 100% of Fuding’s 70% August 8, 2007 interest in the Fuding Licenses) in return for additional payments of US$10,000,000 each for two 9.5% ownership increases. The payment schedule for this secondary component includes payment by World Fortune to Fuding of:

(i)     US$10,000,000 – by June 1, 2008 for an additional 9.5% interest;
 and/or
(ii)    US$10,000,000 – by June 1, 2009 for an additional 9.5% interest

 

 


 
World Fortune does not own the interests referenced in its agreement with Asian Dragon. World Fortune has an agreement with Luoning Fuding Mining Development, Ltd. (“Fuding”) for those interests. However, Fuding does not own the rights, but has entered into purchase agreements for those rights with the following four companies (collectively referenced herein as “the Fuding Rights Holders”): (i) in respect of the Luanchuan Mozigou Molybdenum Site: the Henan Geological Investigating Bureau of General Bureau Sino-Petrochemical Geological Mine; (ii) in respect of the Lushi Jiashapa Vanadium Site: the Lushi Geological Investigating Research Office; (iii) in respect of the Luoning Xiayu Fanggelewan Silver-Lead Site: the Luoning Xiayu Fanggelewan Mining Limited Company; and (v) in respect of the XWG Silver-Lead Site: the Lingbao Yida Mining Company. World Fortune has represented that when they eventually assign the rights to Asian Dragon, those rights will be free and clear of all transfer, assignment, liens, charges, or encumbrances of any kind. World Fortune has also represented that when the option is exercised, it will have the right and authority to transfer the rights to Asian Dragon.

It is also anticipated WFEI, in its role as Asian Dragon’s China Agent, will aid the Company in establishing a Chinese Registered Subsidiary which will be wholly owned by Asian Dragon. The mineral rights under this agreement will ultimately be transferred into this subsidiary.

Asian Dragon, WFEI, Fuding, and the Fuding Rights Holders are all independent parties and are dealing at arm’s length in these arrangements.

Asian Dragon is not a party to the agreement between World Fortune and Fuding, nor a party to the agreement between Fuding and the Fuding Rights Holders and may have little or no recourse should Fuding or the Fuding Rights Holders not comply with their agreements with each other or World Fortune. However, Asian Dragon has received an attorney’s letter from Mr. Tian Huiquing, Kunda Law Office, Hunan, China stating that the agreements are valid. Transfer of any rights in any of the above agreements will not be complete until all payments are completed.

Asian Dragon issued 250,000 shares of its common stock to World Fortune on August 29, 2007 and an additional one million shares to World Fortune nominees in regards to this agreement.

Subsequent to year-end on December 12, 2007, with the mutual consent of WFEI, the agreement was replaced with the “Fuding Agreement” which clarified certain terminology in the predecessor agreements. This agreement is attached herein as Exhibits 10.3. WFEI has provided Asian Dragon with an undertaking that it has extinguished all rights to any payments under the predecessor agreements and has acknowledged that it has recorded all cash and share payments made under the predecessor agreements as payments respectively under the Jinjishan Agreement, the Loning Agreement, and the Fuding Agreement.

Subsequent to year end, the Company made a payment of $800,000 to WFEI of which $499,407 was applied as full payment of the October 1, 2007 Jinjishan commitment and $300,593 was applied to the October 1, 2007 Fuding commitment. The Company did not fulfill its entire payment for the Fuding installment and as of October 1, 2007 the Company was in default as to $802,585 toward the Fuding Agreement. A discussion was held with Fuding regarding this matter and Fuding agreed to extend the payment schedule to accommodate this default. No damages were claimed by Fuding.

Subsequent to year end on December 12, 2007, WFEI provided Asian Dragon with an undertaking that it has extinguished all rights to any payments under the Jinjishan Rights Agreement, the Loning Rights Agreement, and the Fuding Rights Agreement (collectively the “Predecessor Agreements”), in favor of revised agreements signed that day, and acknowledged that it has recorded all cash and share payments made under the Predecessor Agreements as payments respectively under the Jinjishan Agreement, the Loning Agreement, and the Fuding Agreement.
 
 



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.

During the fourth quarter of fiscal 2007, the Company also determined it would not proceed with its plans for the Tiepuling 819# and 846# Mining Center Sections project.

General

We note the Company has acquired along with certain licenses infrastructure including buildings and a formerly operating concentration mill. This entire infrastructure, without exception, has no value from an accounting or operational perspective due to its age and state of repair. 

At present the Licenses described below have no carrying value for accounting purposes because Asian Dragon does not yet have full title to each. The information which follows is meant to provide the reader of this Report with full information regarding the Company’s initiatives.

The basis and duration of our mineral rights, surface rights, claims or concessions is as follows:

The Company is acquiring the subsurface rights for various different minerals. Chinese Mineral Laws limit the Exploration License for 3 years prior to being converted to a Prospect License for another 3 years. After this time period has expired the mineral property must apply for a Mining License for production.  The terms for the duration of the Mining License is subject to the proven reserves and the annual production rate. The mineral property is eventually returned to the government if the Exploration License or the Prospect License expires without renewal. The Mining License also expires at the end of the term unless more reserves are proven to apply for an extension.

All six sites have exploration licenses that have been obtained from a Provincial body, The Ministry of Land and Resources.




 


 
Identifying information pertaining to the Exploration Licenses is as follows:
 
Site Name
 
Claim Number
 
Date of Recording
 
Expiration Date
             
Jinjishan
 
4100000720228
 
6/23/2007
 
6/22/2008
Loning
 
4100000610057
 
1/24/2006
 
1/23/2008
Mozigou
 
4100000630173
 
4/11/2006
 
3/1/2008
Jiashapa
 
4100000630457
 
8/26/2006
 
8/22/2008
Fangglewan
 
4100000640631
 
12/24/2006
 
12/5/2007
Xiaowagou
 
4100000620556
 
11/7/2006
 
12/30/2007
 
In order to retain the claims or leases, the following payments must be made per the noted schedules:.

As outlined above, the Company must complete full payment as per the payment schedules outlined in the agreements to retain the claims and/or leases, These are as follows:

Jinjishan

The terms of the Jinjishan Agreement require payments of $2,500,000 for the Jinjishan License and $800,000 for the Jinjishan Plant, for total consideration of $3,300,000. The Jinjishan Agreement acknowledged The Company provided payments totaling US$1,792,593 to August 29, 2007 (inclusive of a payment of US$600,000 toward the Jinjishan Plant) and required further investment by The Company as follows: (i) US$500,000 by October 1, 2007; (ii) US$500,000 by March 1, 2008; and (iii) US$500,000 by October 1, 2008.

Loning

The Loning Agreement requires total payments by the Company of $1,510,000, of which $1,000,000 is to be expended by the Company for exploration purposes. The Loning Agreement acknowledged the Company has provided payments totaling US$400,000 to August 29, 2007 and required further investment by the Company as follows: (i) US$110,000 by March 1, 2008; (ii) US$500,000 by September 30, 2008; and (iii) US$500,000 by September 30, 2009.

Fuding

The Fuding Agreement requires total consideration of $10,000,000. The Fuding Agreement acknowledged the Company provided an initial payment of $2,730,000 and required further payments as follows: $1,270,000 on October 1, 2007; $2,000,000 before March 1, 2008; $2,000,000 on June 1, 2008; and $2,000,000 on October 1, 2008.

A secondary component of the Fuding Agreement are two options whereby World Fortune can, at its sole discretion, increase its ownership purchase of the Fuding Rights by 19% to a total of 70% (this being 100% of Fuding’s 70% August 8, 2007 interest in the Fuding Licenses) in return for additional payments of US$10,000,000 each for two 9.5% ownership increases. The payment schedule for this secondary component includes payment by World Fortune to Fuding of:

(i)      US$10,000,000 – by June 1, 2008 for an additional 9.5% interest;
  and/or
(ii)     US$10,000,000 – by June 1, 2009 for an additional 9.5% interest

 


In summary, the areas covered by the Exploration Licenses are as follows:
 
Property Name
 
Claim Area
     
Jinjishan
 
28.29 km2
Loning
 
9.40 km2
Mozigou
 
14.09 km2
Jiashapa
 
 8.30 km2
Fangglewan
 
 1.75 km2
Xiaowagou
 
 2.13 km2
 
All the exploration license sites have been visited and examined by a Canadian independent  professional geologist with international experience, Mr. Christian Derosier, M.Sc., D.Sc., P. Geo. a member of The Canadian Institute of Mines and Metallurgy since 1976 and the Ordre des Géologues du Québec (No 129).

Jinjishan Site

The Jinjishan Site is an exploration property located in the Luoning County, Henan Province, People’s Republic of China. The exploration site consists of contiguous 28.3 sq km Exploration License located in the northwest part of Luoning County. More precisely it is located in the west part of the Henan Province and in the northwest part of the Luoning County and in the Changshui community. The closest important city is Luoning. Luoning is situated at about 1300 km WNW of Shanghai, 1300 km SSW of Beijing, 270 km west of Zhengzhou the provincial capital and 130 km west of Luoyang, the Prefecture of the Luoning County. Access to the Jinjishan Property is provided on a 120 km large paved road which runs southwesterly to the city of Luoning. From Luoning, a paved road leads southwesterly to the town of Changshui and from that locality a recently paved road leads northwesterly to the Jinjishan village and then to the Jinjishan site. The distance from Changshui to the property is approximately 10 km. This road also links Luoning to Lushi, another important city to the southwest. In Chinese, Jinjishan means the Golden Pheasant Mountain.

Loning Site

The Loning Site consists of a 9.1 sq km Exploration License and is located 2 km Southwest of Asian Dragon's Jinjishan Site with easy access via the paved highway that runs East/West of the North side of Luoning County.

Fuding Sites:

Luanchuan Mozigou (MZG) Molybdenum Site

The Luanchuan Mozigou Molybdenum Site (“MZG”) is located in Jiaohe Village of Luanchuan County, Henan Province, China. MZG contains an Exploration License comprised of 14.09 sq km with a 4 sq km aspect of the site running the same northwest-southeast trend as China Molybdenum, all aspects of this mineralized zone trend which extend over a 60 km “saddle” bordering Luanchuan and Lushi County.

Lushi Jiashapa (JSP) Vanadium Site

The Lushi Jiashapa Vanadium Site (“JSP”) is located in the area of Wenguxiang to Dashihe of Lushi County, Henan Province, China. JSP contains an Exploration License comprised of 8.3 sq km with an approximate 1 km wide by 8 km long covered east-west trend mineralized zone which extends over a 42 km area that sometimes widens up to 3 km.
 
 


 
Luoning Xiayu Fanggelewan (FGLW) Silver-Lead Site

The Luoning Xiayu Fanggelewan Site (“FGLW”) is located in the area of Xiayu, Henan Province, China. FGLW holds an Exploration License on an area of 1.75 sq km covering a series of long veins in a northeast-southwest trend. The site is located approximately 240 km west of Zhengzhou, the provincial capital, and 80 km west of Luoyang, the Prefecture of Luoning County.

Xiaowagou (XWG) Silver-Lead Site

The Xiaowagou Silver Lead Site ("XWG") is located in the area of Xiayu, Henan Province, China. XWG holds a 2.13 sq km Exploration License. The site is located approximately 240 km west of Zhengzhou, the provincial capital, and 80 km west of Luoyang, the prefecture of Luoning County.

Information about Henan Province

Topography

Henan Province is in the transitional area between the second and third steps of China’s fourstep terrain rising from east to west, with rolling mountains over 1000 metres above sea level in its western and plain areas and 100 metres or lower in its eastern region. Mountainous regions comprise 44.3 percent of its total area, and the plains, 55.7 percent.  The highest summit of the Henan Province is the Laoyacha mountain (2413.8m) in Lingbao City. The province’s lowest point is 23.2m and is found at the point where the Huaihe River leaves the province. Henan Province is surrounded by four mountain ranges: the Taihang, Funiu, Tongbai and Dabie, which stand in its north, west and south areas, leaving subsidence basins in the intermittent area. In its middle and eastern parts there is a vast fluvial plain created by the Yellow, Huaihe and Huo He rivers.

Four rivers run across Henan, the Yellow River, Huo He River, Weihe River and Hanshui River, with the Huo He River valley covering up to 53 percent of the province. The southwestern portion is part of the Yangtze River Basin that flows to the west to the Yellow Sea. There are no significant lakes. In the project area, the relief north of the Luo He (Blue river) basin is hilly and shows relatively deep valleys running northwest with an elevation gradient reaching 200m. The highest summit of the region is the Quanbao Shan culminating at 2080 metres.

Infrastructure

Because the population of Henan exceeds 92.5 million (2000 census), the province requires good infrastructure and has strict laws concerning soil occupation (agriculture) and urbanization extensions. Road, railway and telecommunication networks are well developed in this area.

Major road ways in Henan include the Kaifeng-Luoyang Expressway, the Zhengzhou-Luoyang Expressway, the Anyang-Xinxiang Expressway, the Xuchang-Luohe Expressway, the Luoyang-Sanmenxia Expressway and the Sanmenxia-Lingbao Expressway. This last section is part of China’s longest expressway linking Lianyungang (Jiangsu Province) in the east, with Horgos (Xinjiang Region) to the northwest. This provides a connection to neighboring Shaanxi. Most of these expressways have toll gates but the cost for traveling is reasonable. Zhengzhou is a major rail transport centre in China, as well as the location of the main railway manufacturers. The Beijing-Guangzhou line, the Jiaozuo-Zhicheng line and the Beijing-Kowloon railways cross the province from north to south.

Other railways include the Lanzhou-Lianyungang, the Jiaozuo-Xinxiang-Heze and the Mengmiao-Baofeng/Luohe-Fuyang lines run through Henan from west to east. The Euro-Asia Land Bridge (Lianyungang to Rotterdam) also passes through the city. Traffic is heavy on these railways with the circulation of numerous
 
 


 
passenger trains but also with considerable number of trains transporting coal between the Henan collieries and the numerous thermal power plants. With rich coal resources, Henan acts as a centre for thermal power generation in China. In 1999, the installed generating capacity in Henan reached 14.8MWh, ranking the ninth in the country. Power stations have been constructed at major cities in Zhengzhou, Kaifeng, Luoyang, Pingdingshan, Anyang, Hebi, Xinxiang, Jiaozuo and Sanmenxia. Major river transport is also easily accessible. Henan has airports in Zhengzhou, Luoyang and Nanyang and international flight services are available at Zhengzhou. Chartered flights to Hong Kong and Macau are also available.

Three of the nation’s first-class optical cables and three microwave trunk lines run through the province, making it possible for Henan to have automatic long-distance transmission, digital long-distance routes and program-controlled telephone switchboards throughout the province. Its telephone exchange capacity has reached 11.2 million circuits, with 9.38 million telephone users, 3.11 million mobile phone users and 1.1 million Internet users. Telecommunications services are growing rapidly. In the first quarter of 2001, there were 1.7 million subscribers for mobile phone services, ranked ninth in the country. Recently, Henan has opened a new broadband IP network that is among the largest in China. Cellular phone communications are available in the most remote areas of the Province. The Jinjishan mining property is covered by the cellular phone network.

Henan has water reserves of 4.84 Mkw, of which 3.23 Mkw can be exploited. By the end of 2000, there were 2394 reservoirs in the province and 4.6 Mha of land were irrigated. In the Jinjishan area, water supply and sewage system, electric service for residential and industrial use supply are presently available on site. Manpower can easily be found in the area. Luoning, only 40 km from the property, is large enough and with sufficient industry to have machine and repair shops capable of major repairs.

Climate

Located between the northern sub-tropical zone and warm temperate zone, Henan Province has four distinctive seasons with complicated weather conditions. Luoning is situated in the middle of a WSW trending valley in north-central China which has an elevation of 300-1000 metres. Because it is surrounded by loess plains, and upland areas and mountains exceeding 4000 metres to the south, the climate is dominated by long intervals of light winds which tend to result in hazy and rather dry atmospheric conditions. The climate is, on average, about 5°C warmer than Beijing and slightly drier. January is the coldest time of year with temperatures in the city dropping to - 5°C at night and rising only + 5°C during the day. July is the hottest month with average temperatures of 27°C and a range of 22° -33°C during the day. Luoning receives approximately 58 cm of precipitation per year, with July through September being the wettest period receiving nearly 30 cm of rain during this period. The period December through January is quite dry receiving a total of 2.3 cm of precipitation during this period. As a result of its climate, travelers to Luoning have a reduced risk of contracting malaria, cholera, Japanese encephalitis or other diseases which may be common in coastal regions.

Population and Services

Henan Province covers an area of 16,700 sq km and during the last census (2000), the population was estimated to be 92.5 million. It has a large population with only a moderate land area. As a consequence, the population density is relatively high, with 554 people per sq km. The provincial capital is Zhengzhou (pop. 6.3 million). Major centres are Nanyang (pop. 10.5 million), Luoyang (pop. 6.1 million), Xinxiang (pop. 5.3 million), Jiaozuo (pop. 3.2 million) and Keifeng (pop. 4.6 million). The region is rich in land resources, in mineral resources, in plant and animal resources, but much of the resources per capita are lower than China’s average. The eastern part of the province is a major grain and cotton producer. Other agricultural products include corn, soya bean, beans, canola, potatoes and peanuts. Specialties include Lingbao dates, Huiyang day lilies and common carp.

 


 
Major industries include food processing, coal, metallurgy, machinery, chemicals, petroleum refining, building materials, textiles and electronics. Zhengzhou is a major distribution centre in central China. It is known for its array of wholesale markets, including agricultural and a building materials wholesale markets. There are many places of interest and historic sites in Henan so tourism resources are also abundant. Well known tourist sites include a number of Shang ruins in or near Zhengzhou, Yin Dynasty ruins (latter part of the Shang era) in Anyang in the northeastern part of the province, the Shaolin Temple in Dengfeng and the White Horse Temple in Luoyang.

Vegetation

Henan is an important producer of the country’s wheat, corn, cotton, tobacco leaves and oil plants. In the project region, the south of the Luohe basin, the forest is clear and mostly composed of pine and deciduous trees.

Regional geology

China is subdivided into a number of geological domains which reflects current modeling of China’s evolution over time. The model is largely based on continental accretion with attendant tectonism and subduction. Movement by the Siberian Plate to the North and the Pacific-Philippines plates to the Southeast were major factors in China’s geological evolution. Henan is located on and near the southern boundary of the North China Domain and the Kunlun-Qinling Domain which represents an easterly trending structural corridor to the south of which lies the South China Domain. The early development of the Kunlun-Qinling Domain was as a shallow elongated basin separating the stable platforms to the North and South. The Variscan tectonic phase saw the final closure of the Qinling-Kunlun basin and was marked by weakening and southwards migrating volcanism, but also witnessed the most active phase of acid (granitic) intrusive activity. During the early to middle Mesozoic, volcanism was weak and intrusive activity was generally restricted to the structural breaks and shear zones which defined the margins of basins lying between mountain belts. This magmatism was predominately reflected in the emplacement of associations composed of quartz monzonite, monzogranite, syenite, granodiorite and syenogranite. During the late Mesozoic, volcanism increased and was intense locally as the circum-west Pacific magmatic belt developed. Most of this is represented by a rhyolite-dacite-andesite association together with trachyandesite-trachyte associations and alkali basalt-basaltic andesite associations. A few alkaline basic to ultrabasic rocks are present locally. Syenogranite, monzogranite, quartz monzonite, tonalite and granodiorite was emplaced at this time together locally with high level (hypabyssal) porphyries. Volcanism continued during the Cenozoic, and a few volcanoes have been active. The Axkol volcano in southern Yutian was active in 1951. These volcanic rocks generally comprise olivine basalt, alkali basalt, pyroxene andesite, picritediabase, quartz monzonite, aegirine-augite-quartz syenite and aegirine-albite granite. Gold mineralization in the Luoning area is hosted within the Kunlun-Qinling Domain or mobile belt.

The Kunlun-Qinling Domain

The parent rocks with Proterozoic sequences in the Qinling-Kunlun mobile belt were largely calc-alkaline volcano-sedimentary rocks. Having commonly undergone moderate to high grade metamorphism, these sequences are now represented by 2-mica amphibole gneisses, amphibolite, granulite, migmatite, marble, and phyllite. Some of these rocks have been dated at 2,820-2,160 Ma (zircon age). Most generally however, metamorphic grade ranges from lower greenschist to upper amphibolite facies and lower greenschist grade metamorphism prevails in some areas, notably in the North Qin Ling Mountains where mica schists were derived from a thick volcano-flysch carbonate formation. The belt is therefore a highly complex melange of juxtaposed stratigraphic units.

The magmatic geology of the mobile belt is also complex with nine magmatic stages and five magmatic belts. Most of the magmas generated were anatectic melts.  The earliest sets of rocks included basalt-dacite-rhyolite
 


 
bimodal associations, basalt-andesite calc-alkaline associations, basalt-rhyolite associations and spilite-quartz keratophyre associations. The middle Proterozoic saw a Sibaoan magmatism culminating in widespread tholeiitic series (basalt-andesite-dacite) volcanism and spilite rhyolite rift volcanism accompanied by calc-alkaline granitic plutonism. Magmatism waned during the late Proterozoic.

The most active period of intrusive and volcanic activity was during the middle to late Paleozoic, when the Qinling-Kunlun Ocean was closing, and thus Caledonian rocks are well developed in the mobile belt. Basalt-andesite-rhyolite, basalt-rhyolite, alkali basalt-trachyte-pseudoleucite phonolite and spilitic volcanic activity characterized most of the belt. Four granitic intrusive belts were active at this time within which the intrusive associations included granodiorite-monzogranite, tonaliteplagiogranite, diorite-tonalite-granodiorite, monzogranite-syenogranite, diorite-tonalite and alkali granite-diabase and syenite, as well as two-feldspar alaskite and Kfeldspar alaskite found locally in the southern part of the belt.

The tectonic history of the Qinling-Kunlun mobile belt is complex and a large part of the reason why magmatism was so widespread and so protracted. The belt is subdivided into four major units which developed at three different periods of times. In addition to this, there are 20 second-order tectonic units. The complexity of this mobile belt is partially attributable to the existence of an earlier fracture zone, the Jinningian Juncture Zone, which formed during the late Proterozoic and along which the Qinling-Kunlun mobile belt largely propagated during the late Paleozoic and the north and south China blocks collided.  The four major units of the Qinling-Kunlun mobile belt which were active during the Proterozoic are:

1)  the southern margin of the North China Plate;
2)  the Qinling-Qilian mobile belt;
3)  the Paleo-Tethys mobile belt; and,
4)  the northern margin of the South China plate.

During the medial Proterozoic, the southern sub-domain of the North China Plate was the northern sub-belt of the Jinningian Juncture. At this time, the northern subdomain of the South China plate bordered the paleo Qinling- Kunlun ocean. The subdomains on the north and south margins were complex structural zones undergoing protracted deformation and containing the remnants of pre-existing paleoblocks. The sub-domains are now divided into three second-order units on the north margin and eight second-order units on the south which encompass areas of localized uplift as well as localized sedimentary basins.

The Qinling-Qilian mobile belt (subdomain) is traceable for 3,000 km along a northwest trend, and is located in the east-central section of the Qinling-Kunlun structural belt (Figure No 7). To the west it abuts the Altun fracture zone and to the east it merges with the NE-trending Tancheng-Lujiang Fracture Zone. From the late Proterozoic through the Silurian, this belt underwent recurring extension and collision leading to rifting and closure. The Paleo-Tethys Mobile Belt to the south of the Qinling-Qilian mobile belt is a continental margin fold belt which contains a sea trough system of graben and horst structures similar to the Qinling-Qilian mobile belt.

The area is underlain by a series of rocks that are of upper greenschist to amphibolite metamorphic grade. Based on the aforementioned structural hierarchy, it is believed that the Jinjishan area falls into the Qilian-North Qinling Fold System.  The fold system is superimposed on the area north of the Qinling-Kunlun Juncture Zone. It is composed of a layered metamorphic basement sequence of mobile-type sediments which, from base to top, is composed of early Proterozoic upper greenschist to upper amphibolite grade geosynclinal metasediments, medial to late Proterozoic arc-basin formations and late Proterozoic to early Cambrian post-orogenic epicontinental formations composed of tillite and carbonate rocks, with localized volcanic strata as well as phosphatic and Mn-bearing rocks. These rocks were deposited in an expanding trough which reached culminated during the medial Ordovician.

 

 
 
The Silurian-Devonian was the main period of closing as NE-directed movement of the South China Block resulted in subduction of the trough area during the Carboniferous. Final closure of the Tethys basin occurred as a west to east scissoring at the end of the Carboniferous.

Gold mineralization

Gold has been mined in China for more than 4,000 years. In the area, mining probably began during the Tang Dynasty (618-907 AD). Local miners exploited visible gold which was present on the weathering surface of veins exposed on the mountain sides. This area was the marketing centre to which the Emperor’s men would be sent to purchase gold from the local miners. Historical artifacts suggest that the largest nuggets were 200-300 grams.

In western Henan Province, Team One of the provincial Ministry of Land and Resources (“MOLAR”) discovered gold mineralization during the 1960’s through general geological mapping and regional geochemical sampling. This revelation directly influenced mineral exploration policy and activities in Henan and Shaanxi Provinces. Although, long recognized as a source for gold, the depletion of easily non visible gold in the Luoning area tended to discourage further activity until the 1960’s when modern exploration commenced with regional scale geological mapping and geochemical sampling programs.

The Xiao Qinling gold province, located between Tongguan in Shaanxi and Lingbao in Henan province is currently the second largest gold producing area in China. Annual production is about 15 – 23 tonnes Au. The Xiao Qinling area is underlain by gneiss, marble, quartzite, migmatite, and amphibolite of the Late Archean Taihua Group. Indosinian alkalic porphyries and dykes (213 –202 My) and Yanshanian granites are widespread. The Wenyu granite intruded the central part of the gold- rich area, and is exposed over an area of about 20 sq km.

Regional structures are dominated by the E –W-trending, north-dipping, >60-km-long Maxundao deep fault zone (from Tongguan to Lingbao). It was originally a compressional feature, but shows evidence for late extension. A series of large gold deposits, with total resources of 300 – 450 t Au, occur at intersections of second-order WNW – EW striking faults with NE and NW striking faults to the north of the first-order Maxundao fault zone.

From west to east in the Xiao Qinling gold province, gold deposits hosted in rocks of the Taihua Group are concentrated in three goldfields within a 60 x15 km corridor, 2 – 15 km north of the Maxundao fault (the Tongyu and Yanzhihe deposits), Wenyu (the Wenyu, Dongchuang, Sifangou and Yangzhaiyu deposits and Dahu (Dahu and Linghu deposits ) goldfields.

A series of 4 to 20 m wide and >4 km long quartz veins lie within second-order faults.  Lesser amounts of gold occur in altered rocks along ductile – brittle shear zones and in breccia bodies. More than 1,200 gold bearing quartz veins have been discovered in this part of the Qinling gold province. Ores are noted to contain pyrite, galena, sphalerite and minor magnetite, scheelite, wolframite, molybdenite, stibnite, pyrrhotite and gold. The gangue minerals comprise quartz, calcite, ankerite, minor rutile, barite, siderite and fluorite. The alteration halos around quartz veins or shear zones comprise mainly quartz, sulphide minerals, white mica and carbonate minerals, with lesser chlorite, epidote and biotite.
 
A few large gold deposits in areas of Proterozoic basement in the Xiao Qinling area, such as Kangshan, Shanggong and Qiyugou, are controlled by a group of NE striking faults and shear zones, which are the second-order structures to another major E –W striking fault zone. The Shanggong(>30 t Au) and Kangshan (>20 t Au) deposits are located in the 33km-long, NE trending Kangshan – Qiliping ductile – brittle shear, south and parallel to the Huo He valley.

 


 
Mineralization is hosted in Mesoproterozoic felsic to intermediate volcanic rocks. The steeply dipping mineralized zones are 250 to 750 m long and 1 to 2.8 m wide veins filling brittle structures, lenses in tension gashes, alteration bands along shear zones and brecciated country rock. The ores commonly contain anomalous Ag, Te, and Pb concentrations. Alteration halos around the mineralized zones are characterized by a 1 to 3 m wide proximal sulphide –ankerite –muscovite zone, a 1 to 20 m wide pyrite – ankerite – muscovite – chlorite transitional zone and a 50 m wide distal chlorite-calcite zone.

Map of Locations
 
 
 


 
Based upon the reports of our geologist, a brief geological justification for each of the exploration projects is as follows:

Jinjishan

It is concluded that the property has merit in two ways. At first, taking into consideration that the F-2 to F15 veins, as well as the adjacent F-1 Mine, have been artisanally mined for over seven and a half years, Vein Mining and Milling Operation have given a reasonable profit. Secondary, taking into account the potential of the rest of the veins found to date on the property. Economical gold values obtained from within the F-3 through F-10 veins, greatly increase the potential of the property.

The economic potential of the Jinjishan property is considered very good as the currently known mineralized veins have attractive grades and mineralized veins are being located on an ongoing basis without the use of modern exploration techniques. In 2004 there were 10 known veins and today there are 16 veins located on the property.

Fanggelewan

There are more than eleven identified mineralized veins located on the Fanggelewan Property area.  Lengths of the known veins vary from 200 to 2 000 m. with widths varying from 1.0 to 5.0 metres. They are generally oriented at 030˚ and have a dip of 60-80˚ to the NW.

The mineralized veins P1 and P2 are strictly confined within alteration zones along the faults. They undulate and possess pinch and swell characteristics to the extent that they often pinch-out and re-appear in both strike and dip directions.

The other nine veins which are temporarily excluded of the resource calculation because limited work had been executed on them, present length, width and thickness similar mineralization and grade than the others.

Xiaowagou

There are more than seven identified mineralized veins located on the Xiaowagou Property area. Lengths of the known veins vary from 270 to 1 080 m. with widths varying from 1.0 to 5.0 metres. They are generally oriented at 030˚ and have a dip of 60-76˚ to the NW. The S-12, S-16 and S-17 veins have been well-explored by using trenching and tunneling and have had estimates of resources and reserves prepared for them by the No 6 Team.

The vein system strike sub parallel to the Tieluping system. The mineralized veins are strictly confined within alteration zones along the faults. They undulate and possess pinch and swell characteristics to the extent that they often pinch-out and re-appear in both strike and dip directions.

The other four veins which are temporarily excluded of the resource calculation because limited work had been executed on them, present length, width and thickness similar mineralization and grade than the others.

Of particular interest for the Xiaowagou Project, the Tieluping (TLP) property, which is immediately adjacent to the East, shows vein systems that are much wider than any of the other deposits found to date in the area. Some veins attain widths of up to 19.12 m with grades up to 1 102 g/T Ag and 19.4 % Pb, as reported by the Sixth Team of Henan Nonferrous Geological Bureau in their detailed 1995 exploration report.

 


 
To date we have not had reports prepared for the Loning, Mozigou or Jiashapa sites and as such there are no professionally prepared recommendations or budgets for these properties.

Breakdowns of the exploration timetable and budget, including estimated amounts that will be required for each exploration activity, such as geophysics, geochemistry, surface sampling, drilling, and other expenses for each prospect are as follows:

Jinjishan

Phase I
 
US$
 
Line cutting (GPS surveyed stations): 400km@$ 100/km
  $ 40,000  
Magnetometer survey: 400 km @ $ 100.00/km
    40,000  
I.P.Survey: n=1 to 6, a= 50 m; 60 km @ $ 1 000 /km
    60,000  
Prospecting:
    20,000  
Geology: 30 days @ $ 850.00 /d
    25,000  
Sampling and Assaying: 400 samples $ 100 / sample
    40,000  
Supervision and Report:
    20,000  
Travelling and accommodation:
    15,000  
Administration and financing:
    25,000  
Contingencies:
    15,000  
Total Phase I
  $ 300,000  
         
Phase II Mining evaluation and Infrastructures improvement
       
Adit and drift evaluation: 60 days @2 000.00 /day
  $ 120,000  
Mill improvement, repairs and maintenance:
    100,000  
Buildings:
    50,000  
Laboratory:
    200,000  
Scale:
    50,000  
Computer and softwares: data treatment:
    50,000  
Bulk sampling and processing: 20 000 tonnes
    200,000  
Mine geology: 30 days @ $ 850.00/day
    25,500  
Sampling and Assaying: 400 samples @ $ 100.00/sample
    40,000  
Supervision and Report:
    60,000  
Administration and financing
    60,000  
Contingencies:
    44,500  
Total Phase II
  $ 1,000,000  
         
Phase III Diamond drilling campaign
       
Access infrastructure:
  $ 40,000  
Drilling: NQ core size: 5500 m @ $ 145.45 /m
    800,000  
Assaying 700 samples @ $ 100/s
    70,000  
Geology logging: 71 days@ $ 850.00 /d
    60,000  
Supervision and resource estimate:
    100, 000  
Administration and financing:
    70,000  
Contingencies:
    60, 000  
Total of Phase III
  $ 1,200,000  
GRAND TOTAL
  $ 2,500,000  

The Company’s geologist Mr. Christian Derosier is of the opinion that the property has sufficient merit to justify this program and the budget as proposed. Another financial effort will be necessary for the execution of a feasibility study.

 


Fanggelewan
 
Phase I Surface Exploration
 
US$
 
Line cutting (GPS surveyed stations): 30 km@$ 200/km
  $ 6,000  
Access, infrastructure: 15 days @ $ 3000.00 /d
    45,000  
Magnetometer Survey: 30 km @ $ 180.00/km
    5,400  
Infinitem Survey: 20 km @ $ 2 080 /km
    41,600  
Gravity Survey: 30 km @ $ 700/ km
    21,000  
Prospecting, trenching and Underground sampling
    25,000  
Sampling and Assaying: 350 samples $ 200 / sample
    70,000  
Geology: 30 days @ $ 950.00 /d
    28,500  
Supervision and Report:
    32,000  
Travelling and accommodation:
    18,000  
Administration and financing:
    29,000  
Contingencies:
    28,500  
Total Phase I
  $ 350,000  
         
Phase II
       
Diamond drilling
       
Access infrastructure:
  $ 40,000  
Drilling: NQ core size: 6 000 m @ $ 180.00 /metre
    1,080,000  
Assaying 550 samples @ $ 100 /sample
    55,000  
Geology logging: 80 days@ $ 950.00 /day
    76,000  
         
Underground evaluation
       
Tunneling, drifting and raise boring on four Veins:
    400,000  
Tunneling on C29 and C30 Veins:
    150,000  
Supervision and resource estimate:
    125,000  
Travelling and accommodation:
    42,000  
Administration and financing:
    99,000  
Contingencies:
    83,000  
Total of Phase II
  $ 2,150,000  
GRAND TOTAL
  $ 2,500,000  
 
The character of the Xiayu Fanggelewan property is of sufficient merit to justify the recommended two-phase, success contingent, work program. Any potential successive work will require a thorough compilation and evaluation of results obtained following the completion of Phases I and II.

Xiaowagou
 
Phase I Surface Exploration
     
Line cutting (GPS surveyed stations): 28 km@$ 200/km
  $ 5,600  
Access, infrastructure: 18 days @ $ 3000.00 /d
    54,000  
Magnetometer Survey: 28 km @ $ 160.00/km
    4,500  
Infinitem Survey: 20 km @ $ 2 080 /km
    41,600  
Gravity Survey: 20 km @ $ 680/ km
    13,600  
Prospecting, trenching and Underground sampling
    20,000  
Sampling and Assaying:250 samples $ 200 / sample
    50,000  
Geology: 30 days @ $ 900.00 /d
    27,000  
Supervision and Report:
    30,000  
Travelling and accommodation:
    15,000  
Administration and financing:
    26,100  
Contingencies:
    26,600  
Total Phase I
  $ 314,000  
 
 
 
 
Phase II
       
Diamond drilling
       
Access infrastructure:
  $ 40,000  
Drilling: NQ core size: 5500 m @ $ 160.00 /metre
  $ 880,000  
Assaying 550 samples @ $ 100 /sample
  $ 55,000  
Geology logging: 70 days@ $ 900.00 /day
  $ 63,000  
         
Underground evaluation
       
Tunnelling, drifting and raise boring on S-12, S-16
       
and S-17 Veins:
  $ 250,000  
Tunnelling on S-11, S13, S-14 and S15 Veins:
  $ 150,000  
Supervision and resource estimate:
  $ 100,000  
Travelling and accommodation:
  $ 39,000  
Administration and financing:
  $ 52,000  
Contingencies:
  $ 57,000  
Total of Phase II
  $ 1,686,000  
GRAND TOTAL
  $ 2,000,000  
 
The character of the Xiao Wa Gou property is of sufficient merit to justify the recommended two-phase, success contingent, work program. Any potential successive work will require a thorough compilation and evaluation of results obtained following the completion of Phases I and II.

The plans for our program phases are briefly as follows:

Jinjishan

First Phase
The first phase will comprise, in addition to a grid line, a magnetometer survey over the entire Exploration License, an I.P. survey on the prime geological, structural and metallogenic targets, followed by a trenching and pitting program. Pits and trenches will be sampled and samples will be assayed. A QC/QA control program will be applied. A budget of US$300,000 is projected for this task.

Second phase
The second phase which can be carried out at the same time than the First Phase will cover the mine evaluation. It will comprise an evaluation of the adits and drifts, mill improvement, laboratory and scale construction, building repairs and improvements, bulk sampling of the different veins with underground workings. Bulk samples will be treated at the mill but several tonnes will be used to conduct several metallurgic testings in order to improve the recovery and separation of metals. A budget of US$700, 000 is projected for the second phase.

Third Phase
The third phase will consist in an exploration and definition drilling campaign from surface and underground. Access for the drilling equipment to the different parts of the permit will be improved. Diamond drill holes will test all the selected geological and geophysical anomalies. Since the targets are not already defined, we can only attribute an allowance. Testing the deep extension of known veins will require longer holes. It is recommended to bore NQ core size holes. Positive results obtained from the three phases will necessitate more definition drilling and geostatistical studies.  A budget of US$ 1, 200,000 has been estimated for the third phase.

 


 
Fanggelewan

Phase I Surface surveys
1. Assess known mineral occurrences (Au, Cu, Ag, etc.) for economic potential with detailed mapping, rock geochemistry and some trenching; 2. Carry out ground-based magnetometric, gravimetric and I.P. surveys on the property along lines oriented NW-SE and at 100 m apart. Readings for the magnetometer survey will be taken at a 12.5 m interval while for the I.P. survey, they will be taken at a 25 m spacing, reduced to 12.5 m spacing when an anomaly is picked-up.

Phase II Exploration at depth

1. Diamond Drilling
Continue exploration with diamond drilling. This work must be supported by geological and geochemical studies, and possibly geophysics, to define controls on potential mineralization and guide further exploration. Since the targets are not already totally defined, we can only attribute an allowance. It is recommended to bore NQ core size holes.

2. Underground exploration
On C29, C30, C3 C32 and C6 Veins, limited drifting and raise boring can be made in order to better delineate the known investigated veins. This will also permit an access to the underground drilling equipment for the drilling of some development drill holes. This work can be executed in parallel with the drilling from surface.

Xiaowagou

Phase I Surface surveys
1. Assess known mineral occurrences (Au, Cu, Ag, etc.) for economic potential with detailed mapping, rock geochemistry and some trenching; 2. Carry out ground-based magnetometric and I.P. surveys on the property along lines oriented NW-SE and at 100 m apart. Readings for the magnetometer survey will be taken at a 12.5 m interval while for the I.P. survey, they will be taken at a 25 m spacing, reduced when an anomaly is picked-up to 12.5 m spacing.

Phase II Exploration at depth

1. Diamond Drilling Continue exploration with diamond drilling. This work must be supported by geological and geochemical studies, and possibly geophysics, to define controls on potential mineralization and guide further exploration. Since the targets are not already totally defined, we can only attribute an allowance. It is recommended to bore NQ core size holes.

2. Underground exploration

On S-12, S16 and S-17 Veins, limited drifting and raise boring can be made in order to better delineate the known investigated veins. This will also permit an access to the underground drilling equipment for the drilling of some development drill holes. This work can be executed parallely to the drilling from surface. Underground reconnaissance on S-11, S13, S-14 and S15.

There are no current detailed plans to conduct exploration on the Loning, Mozigou, and Jiashapa properties.  Mr. Christian Derosier, the Company's independent qualified person has visited and evaluated these properties, but has not yet completed a technical report for them.

The Company is exploring and evaluating all avenues through which to provide funding including private investment and debt financing.

 

 
 
Mr. Christian Derosier, M.Sc., D.Sc., P. Geo. will be conducting any proposed exploration work.  He has been a member of The Canadian Institute of Mines and Metallurgy since 1976 and the Ordre des Géologues du Québec (No 129).
 
Detailed sampling provides a basis for the quality estimate or grade of a mineral discovery. A brief description of the sample collection, sample preparation, and the analytical procedures used to develop our analytical results is as follows. Addition the following discloses the Quality Assurance/Quality Control (QA/QC) protocols developed for the exploration program:

Jinjishan
No aspect of the sample preparation or analyses was conducted by an employee, officer, director or associate of the Company.

All samples collected by mine personnel are bagged in canvas bags without security enclosures. The samples are retained in the mine office until such time as sufficient numbers are present to warrant a trip to the local laboratory. No preparation is carried out on site. It is Mr. Christian Derosier’s belief that the mine staff are conscientious individuals and the site does not require elaborate security procedures. The mine is an integral industrial unit having no real concern for sample loss as samples can be easily replaced. Security will be an issue for the Company to handle if and when an exploration or confirmation drilling program begins as the Company will be forced to employ Western-style best practices standards. The Company will probably also wish to increase the overall quality of the sample database through maintaining a computerized sample record. Depending on the laboratory used by the Company, some level of sample preparation may be justified on site to reduce shipping costs.

In 2006, Mr. Derosier visited the Chinese Laboratory which is used by several of the Luoning County mines for the analysis of run of mine samples. The mine submits a relatively low number of samples per year to the lab and the analyses are used only as a general guide to mine development. As it is usual for China, gold assays are by aqua regia digestion on a finely pulverized charge which is not fired before digestion. As a result, the instrumental AA gold determination which follows is potentially reflective of a partial digestion of the gold contained in the sample. Mr. Derosier has not investigated lab performance further as he believed at the time of the short visit that a sample population collected for characterization studies would be too small to yield meaningful results. However, if the lab is to be used in the future, comparative analyses should be made using an accredited facility.

As a footnote, however, it is noted that the comments given by Mr. Derosier’s laboratory (IPLChimitec, Val d’Or, Quebec) about the quality of results obtained from the Chinese laboratories is considered fair and determined if inaccuracies exist from the Chinese assaying procedures, the introduced errors are relatively small.

Where the major laboratories are concerned, analytical procedures in China generally meet North American standards, and the results of Mr. Derosier’s comparisons of data derived from Chinese labs and Canadian labs in the past have shown good agreement. However, we do recognize that local practices for gold assaying can result in compromised data due to the use of an aqua regia digestion on charges which have not been fired. In such cases, aqua regia is potentially a partial digestion, thus introducing the possibility of gold contents being underreported.

Encapsulated gold in resistive base metal sulphide minerals, in secondary (oxide and silicate) base metal minerals and in silicates require s a more robust digestion involving the use of hydrofluoric acid (a 4-acid digestion), or alternatively, sample roasting.

 


 
Mr. Derosier learned that some of the companies are relying on their own labs for grade control analyses. We learned that the gold determinations, after an aqua regia digestion, were made colourimetrically. This is clearly not to western standards. Mr. Derosier does not know the extent to which the mines rely on these data to guide modifications of milling techniques to ensure optimum recovery of gold, however, it does open the potential opportunity for the Company to have a significant impact on modifying procedures and improving recoveries.

Before using a local laboratory, the Company plans to check all aspects of laboratory practice including sample log-in procedures, sample preparation, procedures, general cleanliness, the use of wash rock in crushers and pulverizers, the use of lab standards, duplicates and blanks for quality control and quality assurance purposes, the laboratory information management system, security measures and sample storage facilities.

Considering the early level of exploration on the Jinjishan property, the limitations of the geological materials sampled, and the limitations of the geochemical and geophysical methods employed, the reliability and density of the current exploration data are considered sufficient to support the interpretations made

Fanggelewan

The Company has not conducted any geochemical or drill hole sampling on the Xiayu Fanggelewan Project.

During the two visits of the property by Mr. Derosier, channel samples were taken in the adits and drifts and representative grab samples were picked-up on the stockpiles and waste piles. These samples were put in plastic bags with proper identification and sealed. Samples were delivered to the C.M.I. laboratory in Luoyang City by the Mr. Derosier.

Mr. Derosier visited the Chinese Laboratory located in Luoyang City which is used by several of the Luoning County mines for the analysis of run of mine samples. There are assay laboratories in Chengde and Beijing. The mine submits a relatively low number of samples per year to the lab and the analyses are used only as a general guide to mine development. As it is usual for China, gold assays are by aqua regia digestion on a finely pulverized charge which is not fired before digestion. As a result, the instrumental AA gold determination which follows is potentially reflective of a partial digestion of the gold contained in the sample.

Mr. Derosier has investigated lab performance with a sample population collected from different gold and base metal mines, for characterization studies. Duplicate samples were sent to the ALS-Chemex laboratory in Vancouver, B.C., Canada. Results obtained in Canada were similar to 10% higher than the Chinese labs.

Comments given by Mr. Derosier’s laboratory (ALS-Chemex, Val d’Or, Quebec) about the quality of results obtained from the Chinese laboratories is considered fair and has determined if inaccuracies exist from the Chinese assaying procedures, the introduced errors are relatively small.

Where the major laboratories are concerned, analytical procedures in China generally meet North American standards, and the results of comparisons of data derived from Chinese labs and Canadian labs in the past have shown good agreement. However, we do recognize that local practices for gold assaying can result in compromised data due to the use of an aqua regia digestion on charges which have not been fired. In such cases, aqua regia is potentially a partial digestion, thus introducing the possibility of gold contents being under-reported. Encapsulated gold in resistive base metal sulphide minerals, in secondary (oxide and silicate) base metal minerals and in silicates requires a more robust digestion involving the use of hydrofluoric acid (a 4-acid digestion), or alternatively, sample roasting.

 

 
 
Mr. Derosier has learned that some of the companies are relying on their own labs for grade control analyses. We learned that the gold determinations, after an aqua regia digestion, were made colourimetrically. This is clearly not to western standards. Mr. Derosier does not know the extent to which the mines rely on these data to guide modifications of milling techniques to ensure optimum recovery, however, it does open the potential opportunity for the Company to have a significant impact on modifying procedures and improving recoveries. Before using a local laboratory, the Company plans to check all aspects of laboratory practice including sample log-in procedures, sample preparation procedures, general cleanliness, the use of wash rock in crushers and pulverizers, the use of lab standards, duplicates and blanks for quality control and quality assurance purposes, the laboratory information management system, security measures and sample storage facilities.

At this time, the Company has not implemented any Quality Assurance/ Quality Control (QA/QC) procedure.

During the Mr. Derosier’s sampling, a great care was applied in order to eliminate contamination. Bags were identified and immediately sealed. Mr. Derosier transported the samples to the Chinese lab in Luoyang and participated in the recording and storage of samples before the analysis.

Xiaowagou

The Company has not conducted any geochemical or drill hole sampling on the Xiao Wa Gou Project.

During the two visits of the property by Mr. Derosier, channel samples were taken in the adits and drifts and representative grab samples were picked-up on the stockpiles and waste piles. These samples were put in plastic bags with proper identification and sealed. Samples were delivered to the C.M.I. laboratory in Luoyang City by Mr. Derosier.

Mr. Derosier visited the Chinese Laboratory located in Luoyang City which is used by several of the Luoning County mines for the analysis of run of mine samples. There are assay laboratories in Chengde and Beijing. The mine submits a relatively low number of samples per year to the lab and the analyses are used only as a general guide to mine development. As it is usual for China, gold assays are by aqua regia digestion on a finely pulverized charge which is not fired before digestion. As a result, the instrumental AA gold determination which follows is potentially reflective of a partial digestion of the gold contained in the sample. Mr. Derosier has investigated lab performance with a sample population collected from different gold and base metal mines, for characterization studies. Duplicate samples were sent to the ALS-Chemex laboratory in Vancouver, B.C., Canada. Results obtained in Canada were similar to 10% higher than the Chinese labs.

Comments given by Mr. Derosier’s laboratory (ALS-Chemex, Val d’Or, Quebec) about the quality of results obtained from the Chinese laboratories is pretty good and that if inaccuracies exist from the Chinese assaying procedures, the introduced errors are relatively small.

Where the major laboratories are concerned, analytical procedures in China generally meet North American standards, and the results of comparisons of data derived from Chinese labs and Canadian labs in the past have shown good agreement. However, we do recognize that local practices for gold assaying can result in compromised data due to the use of an aqua regia digestion on charges which have not been fired. In such cases, aqua regia is potentially a partial digestion, thus introducing the possibility of gold contents being under-reported. Encapsulated gold in resistive base metal sulphide minerals, in secondary (oxide and silicate) base metal minerals and in silicates requires a more robust digestion involving the use of hydrofluoric acid (a 4-acid digestion), or alternatively, sample roasting.


 

 
 
Mr. Derosier has learned that some of the companies are relying on their own labs for grade control analyses. We learned that the gold determinations, after an aqua regia digestion, were made colourimetrically. This is clearly not to western standards. Mr. Derosier does not know the extent to which the mines rely on these data to guide modifications of milling techniques to ensure optimum recovery of gold, however, it does open the potential opportunity for the Company significant impact on modifying procedures and improving recoveries. Before using a local laboratory, the Company plans to check all aspects of laboratory practice including sample log-in procedures, sample preparation procedures, general cleanliness, the use of wash rock in crushers and pulverizers, the use of lab standards, duplicates and blanks for quality control and quality assurance purposes, the laboratory information management system, security measures and sample storage facilities.

At this time, the Company has not implemented any Quality Assurance/ Quality Control (QA/QC) procedure.

Mr. Derosier’s first visit to the Xiao Wa Gou (“XWG”) Project was conducted on June 26, 2007. During the visit, some access roads were travelled and some ditches checked for rock exposures. No casing marking a drill hole emplacement has been observed.

Considering the early level of exploration on the Xiao Wa Gou Property, the limitations of the geological materials sampled, and the limitations of the geochemical methods employed, the reliability and density of the current exploration data are considered sufficient to support the interpretations made in this report.

Results of sampling made in the adits have been verified. Several new channel samples were taken under the author’s supervision and the sample bags were sealed by the author before to return to surface. This sampling and the assaying were made in accordance with NI 43-101.

ITEM 1A.   RISK FACTORS

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

THE COMPANY CANNOT GIVE ASSURANCE THAT TRANSFER OF TITLE TO EXPLORATION LICENSES DOES NOT CONTAIN UNDETECTED MATERIAL DEFECTS

The Company has investigated title to all of the Exploration Licenses of which it is in the process of acquiring, and to the best of its knowledge, title to all of these Exploration Licenses are in good standing. However, the Exploration Licenses may be subject to prior unregistered agreements or transfers and title may be affected by undetected defects. There may be valid challenges to the title of the Company’s Exploration Licenses, once acquired, which, if successful, could impair development and/or operations. The Company cannot give any assurance that title to its Exploration Licenses will not be challenged.

In addition the Company is relying on a series of agreements between Chinese companies and entities to ultimately transfer title of the Exploration Licenses to the Company. While the Company has relied on opinions provided by Chinese counsel and to the best of its knowledge these agreements will effectively transfer title, the agreements and the transfer may be affected by undetected defects and the Company cannot give any assurance that the transfer of title to the Company will not be challenged.

 

 
 
If a material defect in the transfer of any Exploration Licenses for which the Company is currently in the process of acquiring were to occur, the Company may in the future be required to record an impairment to any future capitalized amounts it had recorded relating to its Exploration Licenses or exploration activities. Such would not be the case at present however, because the Company has not yet capitalized any amounts with respect to its exploration activities.

THE COMPANY DOES NOT HAVE RECOURSE CLAUSES IN ITS EXPLORATION AGREEMENTS WITH WORLD FORTUNE ENTERPRISE INC.

In the event that WFEI were to fail to meet its payment obligations under its  Agreements with various Chinese Partners, the benefits of which flow through to Asian Dragon through the Jinjishan Agreement, the Loning Agreement, and the Fuding Agreement, , Asian Dragon would have no way to reclaim funds already transferred to WFEI.

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 year ended August 31, 2007, the Company had an operating loss of $(21,487,020). 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.

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 mineralized zones 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 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.

THE COMPANY IS SUBJECT TO A VARIETY OF APPROVAL REQUIREMENTS AT THE CHINESE CENTRAL, PROVINCIAL AND LOCAL GOVERNMENT LEVELS AND, IN PRACTICE, THERE IS SOME UNCERTAINTY SURROUNDING WHICH APPROVALS ARE ACTUALLY REQUIRED TO CONDUCT CERTAIN MINING AND EXPLORATION ACTIVITIES IN VARIOUS PARTS OF CHINA

In China, two levels of government primarily deal with the approval of the establishment of a foreign-invested joint venture in mineral exploration and mining (“Mining JV”): the central and the local (e.g., provincial or municipal). China’s Ministry of Commerce (“MOFCOM”) is the central-government-level ministry in charge of reviewing and approving the establishment of Mining JVs. Applications must be submitted to MOFCOM’s local-level counterparts for upward submission to MOFCOM. However, in practice, many provincial bureaus of commerce, such as those in Henan Province, claim final approval authority and do not forward applications to MOFCOM. To our knowledge, MOFCOM is aware of this practice but has not taken any steps to intervene or take action against Mining JVs which have been approved only at the provincial level.

Once MOFCOM, or its authorized local counterpart has issued its approval documents, the Chinese partners to the joint venture would then apply to China’s State Administration of Industry and Commerce or its authorized local counterpart for a business license. The issuance of the business license marks the legal establishment of a Mining JV and confirms the permitted scope of the Mining JV’s activities. The business license is subject to annual review and renewal.
 



The Ministry of Land and Resources (“MOLAR”) is the central-government-level ministry in charge of exploration and mining licenses. Generally speaking, MOLAR holds the final authority to issue exploration and mining licenses to Mining JVs; however, for projects in Henan province, it has delegated this authority to the respective provincial-level bureaus of land and resources in those provinces, for the Company’s current purposes, the Gold Bureau in particular.
 
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. 

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 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   DESCRIPTION OF PROPERTY

The Company has not yet acquired full title to any of the exploration licenses referenced in this Report. As such, none of the Jinjishan, Loning, Luanchuan Mozigou Molybdenum, Lushi Jiashapa Vanadium, Luoning Xiayu Fanggelewan Silver-Lead, or XWG Silver-Lead exploration license purchase installments are classified herein as material property as defined by SEC Industry Guide 7. When the Company completes its acquisitions of each respective property, each will be reclassified as material properties and additional disclosures will be included in future Reports regarding details of each.

Office Premises
Asian Dragon’s office is provided free of charge by the Company’s CEO at 1100 – 475 Howe Street, Vancouver, British Columbia, Canada.

The Company does not presently have any other material property investments.

 

 
 
ITEM 3.   LEGAL PROCEEDINGS
 
There is no litigation pending or threatened by or against us.
 
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.

 

 
PART II
 

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is currently quoted on the NASD OTC Bulletin Board (“OTCBB”). The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current "bids" and "asks", as well as volume information. Our shares are quoted on the OTCBB under the symbol “AADG”. Our shares are also listed on the Frankfurt Stock Exchange under the trading symbol “P2J1”.

The following table sets forth the range of high and low bid quotations for our common stock as reported by the OTCBB for each of the periods indicated. The market for our shares is limited, volatile and sporadic. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
 
 
Quarter Ended:
 
High Trade
   
Low Trade
   
Closing Trade
 
                   
May 31, 2006
  $ 0.40     $ 0.00     $ 0.40  
August 31, 2006
    1.55     $ 1.01     $ 1.01  
                         
November 30, 2006
  $ 4.75     $ 0.51     $ 4.24  
February 28, 2007
    7.00       3.00       4.95  
May 31, 2007
    6.25       2.50       3.40  
August 31, 2007
    4.95       1.70       2.13  

Shareholders

On August 25, 2008, there were 35 shareholders of record of our common stock.

Dividends
 
We intend to retain future earnings to support our growth. Any payment of cash dividends in the future will be dependent upon: the amount of funds legally available therefore; our earnings; financial condition; capital requirements; and other factors which our Board of Directors deems relevant.

 


 
Section 15(g) of the Securities Exchange Act of 1934

The Company’s shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, which imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by this Section 15(g), the broker/dealer must make a special suitability determination for the purchase and must have received the purchaser's written agreement to the transaction prior to the sale. Consequently, Section 15(g) may affect the ability of broker/dealers to sell the Company’s securities and also may affect your ability to sell your shares in the secondary market.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and the secondary market; terms important to an understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customer’s rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

Recent Sales of Unregistered Securities

On August 31, 2007 the Company issued 600,000 shares of its common stock in a private offering to a corporation at USD $2.1581 for aggregate proceeds of $1,294,860. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”). The Company did not engage in any general solicitation or advertising regarding these shares.

ITEM 6.   SELECTED FINANCIAL DATA

   
Fiscal
2007
   
Fiscal
2006
   
Fiscal
2005
   
Fiscal
2004
   
Fiscal
2003
 
    $     $     $     $     $  
Operating Revenue:
                                       
Quarter I - Three Months to November 30
    -       n/a       n/a       n/a       n/a  
Quarter II - Three Months to  February 28
    -       n/a       n/a       n/a       n/a  
Quarter III- Three Months to May 31
            n/a       n/a       n/a       n/a  
Full Year – Twelve Months to August 31
    -       -       n/a       n/a       n/a  
                                         
Income/(Loss) from continuing operations:
                                       
Quarter I - Three Months to November 30
    (1,063,943 )     n/a       n/a       n/a       n/a  
Quarter II - Three Months to  February 28
    (2,127,363 )     n/a       n/a       n/a       n/a  
Quarter III- Three Months to May 31
    (1,536,105 )     n/a       n/a       n/a       n/a  
Restated Full Year – Twelve Months to August 31
    (21,487,020 )     (1,424 )     n/a       n/a       n/a  




 


 
ITEM 6.   SELECTED FINANCIAL DATA (continued)

   
Fiscal
2007
   
Fiscal
2006
   
Fiscal
2005
   
Fiscal
2004
   
Fiscal
2003
 
    $     $     $     $     $  
Earnings/(Loss) per share continuing operations:
                                       
Quarter I - Three Months to November 30
    (0.03 )     n/a       n/a       n/a       n/a  
Quarter II - Three Months to  February 28
    (0.07 )     n/a       n/a       n/a       n/a  
Quarter III- Three Months to May 31
    (0.05 )     n/a       n/a       n/a       n/a  
Restated Full Year – Twelve Months to August 31
    (0.65 )     0.00       n/a       n/a       n/a  
                                         
(Loss) from discontinued operations:
                                       
Quarter I - Three Months to November 30
    n/a       (27,091 )     (15,943 )     (243 )     n/a  
Quarter II - Three Months to  February 28
    n/a       (16,449 )     (23,197 )     (4,131 )     n/a  
Quarter III- Three Months to May 31
    n/a       (16,050 )     (21,150 )     (15,971 )     n/a  
Full Year – Twelve Months to August 31
    n/a       (91,735 )     (83,651 )     (39,413 )     (467 )
                                         
(Loss) per share – discontinued operations:
                                       
Quarter I - Three Months to November 30
    n/a       0.00       0.00       0.00       n/a  
Quarter II - Three Months to  February 28
    n/a       0.00       0.00       0.00       n/a  
Quarter III- Three Months to May 31
    n/a       0.00       0.00       0.00       n/a  
Full Year – Twelve Months to August 31
    n/a       0.00       0.00       0.00       0.00  
                                         
Cash:
                                       
Quarter I - Three Months to November 30
    -       2,318       7,316       15,656       n/a  
Quarter II - Three Months to  February 28
    -       1,139       6,226       30,510       n/a  
Quarter III- Three Months to May 31
    12,971       418       6,233       35,141       n/a  
Full Year – Twelve Months to August 31
    326,381       72       1,205       13,351       7,499  
                                         
Total assets:
                                       
Quarter I - Three Months to November 30
    2,003       4,231       13,485       16,013       n/a  
Quarter II - Three Months to  February 28
    9,003       2,678       8,813       32,531       n/a  
Quarter III- Three Months to May 31
    24,067       1,418       8,315       37,235       n/a  
Full Year – Twelve Months to August 31
    326,381       2,075       4,012       15,582       7,945  


ITEM 7.   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-K 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.

When ADG closed its Romanian operating subsidiary in 2006 it became required under generally accepted accounting principles (“GAAP”) to set the exploration period of the Company to a start date of August 15, 2006, the date of the dissolution of the subsidiary. The following discussion and analysis covers material changes in the financial condition of Asian Dragon from August 15, 2006 to August 31, 2007 (“Exploration Stage Period”) and the years ended August 31, 2007 and August 31, 2006 without the inclusion of it terminated subsidiary Galaxy Telnet SRL.

Investors should be aware there is no assurance that a commercially viable mineral deposit exists on any of the properties for which we are purchasing exploration licenses, and that further exploration will be required before a final evaluation as to the economic and legal feasibility is determined.
 
Restatement of Previously Filed Financial Statements
 
The Company has determined that accrued Exploration License expenses of $9,679,407 in the original August 31, 2007 financial statements should not have been recorded. These financial statements reflect a removal of the liability and related expense for fiscal 2007 and this re-filed Annual Report on Form 10-K/A-3 is based on a re-audit of the Company's financial statements for the year ended August 31, 2007 and includes a new 'Report of Independent Registered Public Accounting Firm' for the year ended August 31, 2007.
 
RESULTS OF OPERATIONS
 
The following discussion and analysis covers material changes in the financial condition of ADG during the years ended August 31, 2007and August 31, 2006  and the Exploration Stage Period of August 15, 2006 to August 31, 2007 (the “Exploration Stage”).
 
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 – officers and directors
-  Investor Relations
-  Administrative Expenses

 


 
Exploration Licenses
As detailed in NOTES 4 and 5 in the financial statements included herein, costs for Exploration Licenses for the year ended August 31, 2007 totaled $21,852,000 compared with $Nil  respectively for  the year ended August 31, 2006 . For the Exploration Stage, costs for Exploration Licenses totaled $21,852,000. These costs included cash and share based payments made to World Fortune Enterprises Inc. (“WFEI”), and WFEI or its nominees in the case of share based payments, toward the purchase of exploration licenses for certain properties in China described in ITEM 2 in this Report. We anticipate these expenses will increase substantially in fiscal 2008 as we implement our business plans.

We also note that within the area of expected exploration there is infrastructure including buildings and a formerly operating concentration mill. This entire infrastructure, without exception, has no value from an accounting or operational perspective due to its age and state of repair. 

Exploration Expenses
Exploration Expenses for the year ended August 31, 2007 totaled $50,215 versus $Nil  respectively for the year ended August 31, 2006 . Expenses for the Exploration Stage totaled $50,215. These expenses were comprised of costs for geological services. We anticipate these expenses will increase substantially in fiscal 2008.

Agent Fees
Agent Fees for the year ended August 31, 2007 totaled $1,822,500 which was composed of cash payments of $60,000 and stock issuances expensed as $1,762,500. Agent Fees for the year ended August 31, 2006 were respectively $Nil. Agent Fees totaled $1,822,500 for the Exploration Stage. These payments were made to WFEI for the sourcing of exploration property opportunities in China. We anticipate these expenses will increase substantially in fiscal 2008 as we implement our plans to acquire further exploration properties.
 
Professional and Consultant Fees
Professional & Consultant Fees are comprised of consulting fees charged by our CEO of $100,000 and fees for work performed by accounting, audit and legal professionals. During the year ended August 31, 2007 these fees totaled $271,414 versus $1,001 related to continuing operations for the year ended August 31, 2006.  For the Exploration Stage, these costs totaled $272,414. We anticipate Professional & Consultant Fees will increase moderately in the upcoming year as we implement our business plans.

Stock Based Compensation – officers and directors
As detailed in NOTES 8 and 9 of the financial statements contained herein, Stock Based Compensation expense totaled $6,975,491 for the year ended August 31, 2007 versus $Nil  for the year ended August 31, 2006. For the Exploration Stage, Stock Based Compensation totaled $6,975,491. For the year ended August 31, 2007 these expenses were composed of the issuance of 3,000,000 options to Officers and Directors of the Company, expensed at a total cost of $5,825,491, and the issuance of 250,000 shares to each of its independent directors (total 500,000 shares), which were expensed at $1,150,000. Accounting principles require that such transactions be valued at the fair value of the consideration received or the fair value of the equity issued, whichever is more reliably measurable. The Company considers the fair value of the equity issued to be more reliably measurable than the value of the services received as consideration. Management considered alternative valuations for the equity issued in this transaction. These alternatives included consideration of using the cash consideration of $2.22 per share paid on June 18, 2007 for a similar number of shares with similar restriction issued in a private placement transaction.  Consideration was also given to discounting the public trading price per share for sale restrictions since the shares are subject to Rule 144 of the Securities and Exchange Commission and for the thinly traded market which


 


 
potentially may not support a block sale of this magnitude. After review of the various alternative approaches to valuation the stock based compensation per share was determined based upon the public trading price of $2.30 per share on that day. We do not anticipate significant stock based compensation expenses in the coming year.

Investor Relations
Investor Relations expenses comprise costs for press releases, maintenance of the Company’s website and other investor information initiatives. During the year ended August 31, 2007 these expenses totaled $73,403 versus $Nil for the year ended August 31, 2006. For the Exploration Stage, Investor Relations expenses totaled $73,403. We anticipate Investor Relations expenses will increase substantially in the coming year as we continue our efforts to raise further capital and keep current investors informed of Company developments.

Administrative Expenses
Administrative Expenses related to continuing operations were $111,314 during the year ended August 31, 2007 compared with $71 for the year ended August 31, 2006. For the Exploration Stage, Administrative Expenses totaled $111,386. These expenses are composed of travel, Edgar agent filing fees, stock transfer agent fees and general office expenses. We anticipate Administrative Expenses will increase substantially in the upcoming year as we implement our business plans.

Net Loss

We incurred net operating losses from continuing operations of $(21,487,020), or $(0.65) per share (basic and fully diluted), for the year ended August 31, 2007 versus $(1,424), or $Nil per share for the year ended August 31, 2006.  The Net Loss from continuing operations for the Exploration Stage was $(21,488,444).

We incurred net losses of $(21,487,020), or $(0.65) per share (basic and fully diluted), for the year ended August 31, 2007 versus $(93,159), or $Nil per share for the year ended August 31, 2006.  The Net Loss for the Exploration Stage was $(21,703,549).

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 August 31, 2007, consisted of cash resources of $326,381, a share sale subscription receivable of $1,000,000 and a shareholder loan from our President. Under the shareholder loan, loan advances to or on behalf of ADG, bear interest at 5% per annum, calculated and compounded annually, not in advance. ADG is 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 at any time without notice, bonus or penalty. The amount outstanding under the shareholder loan was $237,840 including accrued interest as of August 31, 2007.

Since Exploration Stage inception through to and including August 31, 2007, we have executed cash sales of our common shares totaling $6,793,860 through private placements.

 
 


 
Contractual Obligations

The Company’s remaining commitments under its Exploration License Agreements, as referenced in NOTE 4 of our financial statements, are as follows:

PART ONE – Monetary Commitments:

Project Item
 
Installment
   
Balance Due
 
Deadline
               
Jinjishan Agreement commitment to WFEI:
             
- installment one
  $ 500,000     $ 499,407  
October 1, 2007**
- installment two
  $ 500,000     $ 500,000  
March 1, 2008
- installment three
  $ 500,000     $ 500,000  
October 1, 2008
                   
Loning Agreement commitment to WFEI:
                 
- installment one
  $ 110,000     $ 76,822  
March 1, 2008
- installment two*
  $ 500,000     $ 500,000  
September 30, 2008
- installment three*
  $ 500,000     $ 500,000  
September 30, 2009
                   
Fuding Agreement commitment to WFEI:
                 
- installment one
  $ 1,270,000     $ 1,103,178  
October 1, 2007**
- installment two
  $ 2,000,000     $ 2,000,000  
March 1, 2008
- installment three
  $ 2,000,000     $ 2,000,000  
June 1, 2008
- installment four
  $ 2,000,000     $ 2,000,000  
October 1, 2008
                   
Total Balance Due
          $ 9,679,407    
                   
*(Contractually agreed to be spent by ADG for exploration expenses to develop the Loning Property)
**(On September 14, 2007, the Company made a payment of $800,000 to WFEI of which $499,407 was applied as full payment of the October 1, 2007 Jinjishan commitment and $300,593 was applied to the October 1, 2007 Fuding commitment. The Company did not fulfill its entire payment for the Fuding installment and as of October 1, 2007 the Company was in default as to $802,585 toward the Fuding Agreement)

PART TWO – Share Payment Commitments:

Project Item
 
Installment
   
Balance Due
 
Deadline
               
Jinjishan Agreement commitment to WFEI
    250,000    
Nil
 
August 29, 2007
Jinjishan Agreement commitment
to WFEI or its nominees
    1,000,000    
 
Nil
 
 
August 29, 2007
                 
Loning Agreement commitment to WFEI
    250,000    
Nil
 
August 29, 2007
Loning Agreement commitment
to WFEI or its nominees
    1,000,000    
 
Nil
 
 
August 29, 2007
                 
Fuding Agreement commitment to WFEI
    250,000    
Nil
 
August 29, 2007
Fuding Agreement commitment
to WFEI or its nominees
    1,000,000    
 
Nil
 
 
August 29, 2007
                 
Total Balance Due
         
Nil shares
   
                 
NOTE: All shares referenced are Asian Dragon Group Inc. restricted common shares
 
 

 
 
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.

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles. We have expensed all development costs related to our establishment.

Employees
 
As of August 31, 2007, 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 and related public financial information are 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 our financial statements. 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.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

EXCHANGE RATE FLUCTUATION RISK

Our reporting currency is United States Dollars (“USD”). Operations in China use the Chinese Renminbi Yuan (“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. In July 2005 the Renminbi was allowed to rise 2%. As Renminbi is used for expenditures by the Company and its agent in conducting their operations in China, the fluctuation of exchange rates of the RMB 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 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Our financial statements, together with the report of auditors, are as follows:


INDEX TO
FINANCIAL STATEMENTS

 
Page
   
   
Financial Statements for the years ended August 31, 2007and August 31, 2006  and for the Exploration Stage of August 15, 2006 to August 31, 2007:
 
   
   
   
   
   
   






 




 


 
ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)
 
 
Restated Report of Independent Registered Public Accounting Firm


Report of Independent Registered Public Accounting Firm

To Board of Directors and
Stockholders of Asian Dragon Group, Inc.

We have audited the accompanying balance sheet of Asian Dragon Group Inc. (the Company) (an Exploration Stage Company) as of August 31, 2007 and the statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year then ended. We did not audit the balance sheet, statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended August 31, 2006 or for the period from August 15, 2006 through August 31, 2006. Those financial statements were audited by other auditors whose report has been furnished to us. Our opinion on the balance sheet, statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended August 31, 2006 and for the period from August 15, 2006 through August 31, 2006 is based solely upon the report of other auditors. These financial statements are the responsibility of the Company’s managements. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Asian Dragon Group Inc. (an Exploration Stage Company) as of August 31, 2007 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have the necessary working capital for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 3 to the financial statements. These financial statements do not include any adjustments that might result for the outcome of this uncertainty.

/s/ Madsen & Associates CPAs, Inc.
Madsen & Associates CPAs, Inc.
Salt Lake City, Utah
June 17, 2010




 


 
ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)
 
 
Report of Independent Registered Public Accounting Firm


Board of Directors
Asian Dragon Group Inc.

We have audited the accompanying balance sheet of Asian Dragon Group Inc. (An Exploration Stage Company) as of August 31, 2006 and the related statements of operations, stockholders’ equity, and cash flows for the year ended August 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Asian Dragon Group Inc. (An Exploration Stage Company) as of  August 31, 2006 and the results of its operations, stockholders’ equity, and its cash flows for  the year ended August 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3, 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. Management's plan in regard to this matter is also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

/s/ Schumacher & Associates, Inc.

Schumacher & Associates, Inc.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, Colorado 80211

December 14, 2006


 
 

 
 
ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)

Balance Sheets

 
 
 
 
Restated
Year ended
August 31,
2007
   
Year ended
August 31,
2006
 
ASSETS
           
             
CURRENT ASSETS
           
Cash (Note 2)
  $ 326,381     $ 72  
Prepaid expenses
    -       -  
Accounts receivable
    -       2,003  
Total current assets
    326,381       2,075  
Total assets
  $ 326,381     $ 2,075  
                 
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
               
                 
CURRENT LIABILITIES
               
Accounts payable
  $ 66,470     $ 15,536  
Account payable - related party ( Note 7)
    75,000       -  
Accrued expenses
    40,000       -  
Shareholder loans (Notes 6 and 7)
    237,840       161,802  
Total current liabilities
  $ 419,310     $ 177,338  
                 
Total liabilities
  $ 419,310     $ 177,338  
                 
COMMITMENTS AND CONTINGENCIES
(Notes 2 to 13)
    -       -  
                 
STOCKHOLDERS’ EQUITY (DEFICIT)
               
Common shares, 100,000,000 shares par value $0.001 authorized, 38,275,000 and 32,025,000 issued and outstanding at August 31, 2007 and  August 31, 2006 respectively (Notes 2 and 8).
    38,275       32,025  
Paid-in Capital (Notes 8 and 9)
    22,584,842       9,241  
Subscription receivable (Note 8)
    (1,000,000 )     -  
Accumulated deficit in the exploration stage (Note 2)
    (21,488,444 )     (1,424 )
Accumulated deficit
    (215,105 )     (215,105 )
Accumulated other comprehensive (loss)  (Note 2)
    (12,497 )     -  
Total stockholders’ (deficit)
    (92,929 )     (175,263 )
Total liabilities and stockholders’ equity
  $ 326,381     $ 2,075  



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



ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)

Statements of Operations and Comprehensive Loss

   
Restated
Year ended
August 31, 2007
   
Year ended
August 31,
2006
   
Exploration Stage 
August 15, 2006
through August 31,
2007
 
EXPENSES:
                 
Exploration licenses (including $7,050,000 in stock-based payments)
  $ 12,172,593     $ -     $ 12,172,593  
Exploration expenses
    50,215       -       50,215  
Agent fees (including $1,762,500 in stock-based payments)
    1,822,500       -       1,822,500  
Professional and consultant fees
    271,414       1,001       272,414  
Stock-based compensation – officers and directors
    6,975,491       -       6,975,491  
Investor  relations
    73,403       -       73,403  
Administrative expenses
    111,314       71       111,386  
Total expenses
  $ 21,476,930     $ 1,072     $ 21,478,002  
                         
Net loss from operations
  $ (21,476,930 )   $ (1,072 )   $ (21,478,002 )
Interest expense
    (10,090 )     (352 )     (10,442 )
Net loss from continuing operations
  $ (21,487,020 )   $ (1,424 )   $ (21,488,444 )
Net loss from discontinued operations (Note 12) :                        
– terminated subsidiary
    -       (24,720 )     (68,995 )
– change from Development to Exploration Stage
    -       (67,015 )     (146,110 )
Net Loss
  $ (21,487,020 )   $ (93,159 )   $ (21,703,549 )
Loss per common share (Note 2), basic and diluted from discontinued operations:
  $ n/a     $ Nil     $ -  
Loss per common share (Note 2), basic and diluted from continuing operations:
  $ (0.65 )   $ Nil     $ -  
Weighted average shares outstanding , basic and diluted (Notes 2 and 8)
    32,867,467       79,066,918       -  
OTHER COMPREHENSIVE LOSS:
                       
Net loss
  $ (21,487,020 )   $ (93,159 )   $ (21,703,549 )
Foreign currency translation adjustment
    (12,497 )     -       (12,497 ))
Total other comprehensive (loss)
  $ (21,499,517 )   $ (93,159 )   $ (21,716,046 )




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


 
ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)

 Restated Statement of Stockholders’ Equity (Deficit)

   
Common Shares
   
Common Stock
   
Discount on Common Stock
   
Paid-in Capital
   
Subscriptions Receivable
   
Accumulated Other Comprehensive (Loss)
   
Accumulated Deficit
   
Deficit Accumulated during
Exploration Stage
   
Total Stockholders’ Equity (Deficit)
 
                                                       
Opening Stock balance
    19,315,000     $ 19,315     $ (7,309 )   $ 29,260     $     $     $     $     $  
To give effect to 4 for 1 stock dividend May 25, 2006
    77,260,000     $     $     $     $     $     $     $     $  
Balance, August 31, 2004
    96,575,000     $ 19,315     $ (7,309 )   $ 29,260     $     $     $ (39,719 )   $       $ 1,547  
Net loss in 2005 from discontinued operations:                                                                        
- terminated subsidiary
        $     $     $     $     $     $ (26,583 )   $     $ (26,583 )
- change from Development Stage to Exploration Stage
        $     $     $     $     $     $ (57,068 )   $     $ (57,068 )
Balance, August 31, 2005
    96,575,000     $ 19,315     $ (7,309 )   $ 29,260     $     $     $ (123,370 )   $     $ (82,104 )
Cancellation of common shares
August 8, 2006
    (64,550,000 )   $ 12,710     $ 7,309     $ (20,019 )   $     $     $     $     $  
Net loss in 2006 from  discontinued operations:                                                                        
- terminated subsidiary
        $     $     $     $     $     $ (24,720 )   $     $ (24,720 )
- change from Development Stage to Exploration Stage
        $     $     $     $     $     $ (67,015 )   $     $ (67,015 )
Net loss Exploration Stage
        $     $     $     $               $     $ (1,424 )   $ (1,424 )
Balance, August 31, 2006
    32,025,000     $ 32,025     $     $ 9,241     $     $     $ (215,105 )   $ (1,424 )   $ (175,263 )
Common shares issued for cash at $4.00 per share November 6, 2006
    250,000     $ 250     $     $ 999,750     $     $     $     $     $ 1,000,000  
Common shares issued for cash at $5.00 per share December 18, 2006
    400,000     $ 400     $     $ 1,999,600     $     $     $     $     $ 2,000,000  
Common shares issued for cash at $5.00 per share April 2, 2007
    300,000     $ 300     $     $ 1,499,700     $     $     $     $     $ 1,500,000  
Common shares issued as compensation and expensed at $2.30 per share June 15, 2007
    500,000     $ 500     $     $ 1,149,500     $     $     $     $     $ 1,150,000  
          (continued)                                                                        
 
 
The accompanying notes to financial statements are an integral part of these financial statements

 
 
ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)

 Restated Statement of Stockholders’ Equity (Deficit) (continued)

   
Common Shares
   
Common Stock
   
Discount on Common Stock
   
Paid-in Capital
   
Subscriptions Receivable
   
Accumulated Other Comprehensive (Loss)
   
Accumulated Deficit
   
Deficit Accumulated during
Exploration Stage
   
Total Stockholders’ Equity (Deficit)
 
                                                       
Common shares issued for cash at $2.22 per share June 18, 2007
    450,000     $ 450     $     $ 998,550     $     $     $     $     $ 999,000  
Common shares issued as Agent fees and expensed at $2.35 per share August 29, 2007
    750,000     $ 750     $     $ 1,761,750     $     $     $     $     $ 1,762,500  
Common shares issued for license fees and expensed at $2.35 per share August 29, 2007
    3,000,000     $ 3,000     $     $ 7,047,000     $     $     $     $     $ 7,050,000  
Additional Paid-In Capital relating to options expensed at $2.13 per share August 31, 2007
        $     $     $ 5,825,491     $     $     $     $     $ 5,825,491  
Common shares issued for cash at $2.1581 per share August 31, 2007
    600,000     $ 600     $     $ 1,294,260     $ (1,000,000 )   $     $     $     $ 294,860  
Foreign currency translation adjustment
                          $     $ (12,497 )                 (12,497 )
Net loss for year ended August 31, 2007
        $     $     $                 $     $ (21,487,020 )   $ (21,487,020 )
Balance, August 31, 2007
    38,275,000     $ 38,275     $     $ 21,584,842     $ (1,000,000 )   $ (12,497 )   $ (215,105 )   $ (21,488,444 )   $ (92,929 )

 
 
 
 
 
 
 

 






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

 
 
ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)

Statements of Cash Flows

   
Restated
Year ended
August 31,
2007
   
 
Year ended
August 31,
2006
   
Exploration Stage
August 15,
2006 through
August 31,
2007
 
Cash flows from operating activities:
                 
Net Loss for the period
  $ (21,487,020 )   $ (93,159 )   $ (21,703,549 )
                         
  Adjustments to reconcile net loss to net cash used in operating activities:
                       
Accrued interest on shareholder loans
    10,090       352       10,442  
Common stock issued for compensation
    1,150,000       -       1,150,000  
Additional Paid-In Capital relating to Options – compensation expense
    5,825,491       -       5,825,491  
Common stock issued for license payments
    7,050,000       -       7,050,000  
Common stock issued for agent payments
    1,762,500       -       1,762,500  
Accrued interest on shareholder loans related to discontinued operations
    -       5,712       8,761  
Depreciation related to discontinued operations
    -       -       318  
Common stock issued shareholder debt conversion related to discontinued operations
    -       -       10,000  
Net change in operating assets and liabilities:
                       
Accounts receivable
    2,003       (2,003 )        
Prepaid expenses
    -       -          
Commitments payable
    9,679,407       -       9,679,407  
Accounts payable and accrued  liabilities
    165,934       5,215       181,470  
Prepaid expenses related to discontinued operations
    -       2,200       9,500  
Accounts payable and accrued liabilities related to discontinued operations
    -       (177 )     (9,220 )
Net cash provided (used) by operating activities
    (5,521,002 )     (81,860 )     (5,704,287 )
                         
          (continued)                        
 






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


 
ASIAN DRAGON GROUP INC.
(An Exploration Stage Company)

Statements of Cash Flows

   
Restated
Year ended
August 31,
2007
   
Year ended
August 31,
2006
   
Exploration Stage
August 15,
2006 through
August 31,
2007
 
Cash flows from investing activities: