FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to __________

Commission File Number 0-29657

1121 Steeles Avenue West, Suite 803
Toronto, Ontario, Canada M2R 3W7
(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (416) 661-4989

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock $0.0001 par value
(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X           No

State the issuer's revenues for its most recent fiscal year: $0.

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 sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days: The aggregate market value of the shares of Common Stock held by non-affiliates of the Registrant, as of March 30, 2006 was $34,270,550.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: As of March 30, 2006, the Registrant had 46,020,533 common shares outstanding.

Transitional Small Business Disclosure Format (check one): Yes [   ]     No [X]

ITEM 1. DESCRIPTION OF BUSINESS

Silver Dragon Resources Inc., f/k/a American Entertainment and Animation Corporation, and American Electric Automobile Company, Inc. (the "Company") was formed in the State of Delaware on May 9, 1996.

The Company was originally formed to go into the business of developing and marketing electric automobiles. On June 15, 1996 the Company acquired all of the outstanding stock of California Electric Automobile Co., Inc. ("CEAC"), a California corporation formed on November 14, 1995, in consideration for 1,050,000 shares of the Company's common stock. Of the 1,050,000 shares, 900,000 were held in escrow pending the exercise of CEAC's option to purchase the assets and business of San Diego Electric Automobile Company ("SDEAC"). On October 17, 1996 the Company exercised its option to purchase the assets and business of SDEAC. The purchase price was the 900,000 shares of AEAC's common stock held in escrow from the previous acquisition of CEAC.

On May 18, 1996, the Company entered into an agreement with China Electric Automobile Company of Hong Kong, Ltd. ("CEHK") in which each exchanged approximately 5% of their outstanding common stock for the other company's stock. The object of the relationship was the pursuit of business opportunities and product development using the company's combined resources. On February 12, 1997, the Company entered into an agreement with CEHK to form a joint venture named American Electric Automobile Company (Asia), Inc. ("AEAA"), a California corporation, to engage in various electric vehicle related businesses, including design, production and trading in electric vehicles and related parts. The Company received forty-five percent of the ownership of AEAA and CEHK received the remaining fifty-five percent ownership.

On January 31, 2001, the Company sold its interest in AEAA to Edward F. Myers for $100. Mr. Myers was the former Chairman of the Company. After careful consideration, the Board of Directors of the Company decided that it would be in the Company's best interest to discontinue its investment into Asia. The inherent risks involved in doing business in China, the difficulty in monitoring the situation, as well as the continued monetary investment into Asia that would have been required led the Board to the decision to discontinue its investment in Asia.

Originally, the Company was unsuccessful in its electric automobile business. As a result, on August 23, 2000, the Company entered into a Letter Agreement under which it agreed to issue 3,250,000 shares of restricted common shares to Bisell Investments Inc. ("Bisell") for a total investment of $275,000. On September 13, 2000 pursuant to the August 23, 2000 Letter of Agreement, the Company accepted the resignations of Edward F. Myers, Betty N. Myers and Gary Degano as directors and officers. The Company then appointed Pierre Quilliam as a director, President and CEO; Stephen M. Cohen as director, Secretary and Treasurer; and Denise Quilliam as a director. Edward F. Myers, Betty N. Myers and Gary Degano remained as officers and directors of CEAC until they resigned on February 16, 2001. On that date Pierre Quilliam was appointed Chairman of CEAC, Stephen M. Cohen was appointed Secretary and Treasurer and Glenn Roach was appointed President and elected to the Board of Directors of CEAC.

On February 23, 2001, the Company moved from its facility in San Diego to a new facility in Temecula, California, which was managed by Glenn Roach. The facility was being used for conversion of Electric Vehicles and for prototype development of the Electric Boats. In late 2001, the Company ran out of funds to develop and operate its business, and efforts to raise capital to continue business were not successful. As a result, the Company terminated operations in January 2002.

On February 28, 2002, the Company entered into an agreement to purchase 100% of the shares of Cyper Entertainment Inc. ("Cyper"), a Korean corporation (the "Acquisition Agreement") in consideration for 20,000,000 shares of restricted common stock of the Company. Cyper was in the business of manufacturing and distributing 3D digital animation, multi-media and entertainment related products. On April 17, 2002, the Company completed the acquisition of Cyper.

On May 31, 2002, the Company accepted the resignations of Pierre Quilliam, Stephen Cohen and Denise Quilliam as Directors and Officers of the Company. Simultaneously, the Company appointed Duk Jin Jang, Marc Hazout, Jason Chung and John Chung to the Board of Directors. Mr. Jang was named Chairman, Mr. Hazout was named President and CEO, and Jason Chung was named Chief Financial Officer and Treasurer. Messrs. Jang, Chung and Chung were appointed by the shareholders of Cyper. Mr. Hazout was appointed by the former controlling shareholders of the Company.

On December 3, 2002, the Company purchased from Tempest Artwork Ltd. the exclusive option to acquire the rights to produce a feature film or television production based on the original portrait of William Shakespeare by John Sanders. The purchase price of the option was $30,000, and was for a period of one year. The option price was $30,000 plus royalties on various revenue streams that would be derived from the final production. The Company did not have funding to produce the final production, and accordingly did not exercise the option.

On May 28, 2003, the Company signed a letter of intent with Words and Pictures Productions, Inc. to co-produce a full-length 3D animated feature film based on the Uncle Mugsy animated character. The Company has not signed a formal contract relating to the subject matter of the letter of intent, and has no intention of doing so.

On February 25, 2005, the Company amended its Certificate of Incorporation to change its name to "Silver Dragon Resources Inc." in order to better reflect its current business strategy focusing on global silver exploration and development.

Overview. The Company's primary objective is to explore for gold, silver, base metals and industrial minerals and, if warranted, to develop those existing mineral properties. Its secondary objective is to locate, evaluate, and acquire other mineral properties, and to finance their exploration and development through equity financing, by way of joint venture or option agreements or through a combination of both. See "Item 2. Description of Property."

On April 24, 2005, the Company signed a Venture Agreement with Sino Silver Corp. whereby the Company acquired 50% of Sino Silver's interest in the net proceeds from the sale of minerals or the sale of mining rights as a result of the exploration, evaluation and development of a property located in the Erbaohuo Silver District in Northern China. Sino Silver owns 60% of the equity in a Chinese company, Sanhe Sino-Top Resources & Technology, Ltd., which holds the exploration and mining rights to several properties, including the one that is the subject of the Letter of Intent. In consideration for this interest, the Company paid Sino Silver $150,000 on the closing date along with 250,000 restricted common shares of the Company. Pursuant to the Agreement, an additional $200,000 is payable to Sino Silver within 2 years of the closing date, along with the delivery of an additional 250,000 restricted common shares of the Company.

Agreement with Linear Gold Corp.

On September 7, 2005, the Company entered into a Joint Venture Agreement with Linear Gold Corp., Linear Gold Caribe, S.A. (Linear Gold Corp. and Linear Gold Caribe, S.A. are collectively referred to as "Linear Gold"), and Linear Gold Mexico, S.A. de C.V. ("Linear Mexico").

Linear Mexico, which is wholly-owned by Linear Gold, owns an option ("Linear Mexico's Option") to acquire the exploration and exploitation rights to the property known as the Tierra Blanca Property in Durango, Mexico (the "Property"). Under Linear Mexico's Option, Linear Mexico is entitled to acquire the exploration and exploitation rights to the Property by payment of $2,000,000. Prior to exercising Linear Mexico's Option, and to keep Linear Mexico's Option in force, Linear Mexico is required to pay the property owners $20,000 in year one, $35,000 by April 6, 2006, and $70,000 by April 6, 2007.

Under the Agreement, the Company has the option to acquire a 55% interest in the Property. If the option is exercised, the property would be conveyed to a newly formed corporation, which the Company would own 55% of, with Linear Gold owning the remaining 45%. Upon execution of the Agreement, the Company paid Linear Gold $45,000 and issued Linear Gold 100,000 shares of common stock.

In order to exercise the option to acquire a 55% interest in the Property, the Company must:

• pay Linear Gold an additional $75,000 on March 31, 2006;

• issue Linear Gold an additional 200,000 shares of common stock on September 7, 2006;

• pay Linear Gold an additional $110,000 on March 31, 2007; and

• issue Linear Gold an additional 300,000 shares of common stock on September 7, 2007.

In addition, the Company is required to make expenditures for work on the Property in the following amounts: $150,000 in Year 1, $200,000 in Year 2, and $500,000 in Year 3.

In the event the Company exercises the option to acquire an interest in the Property, it would be responsible for paying 55% of the option price (or $1,100,000) and 55% of any funds necessary to mine the Property.

The Company can terminate its obligation to pay funds and issue shares under the Agreement at any time that it does not wish to continue exploration of the Property on thirty days notice to Linear Gold. In the event the Company makes all payments and issues all shares under the Agreement, but Linear Gold elects not to exercise Linear Mexico's Option, then Linear Gold will assign Linear Mexico's Option to a Mexican subsidiary of the Company in consideration for $2.00.

In the event Linear Mexico's Option is exercised, and the Company exercises its option under the Agreement, then Linear Gold and the Company have agreed to work on good faith to develop a budget for mining the Property, in which event both Linear Gold and the Company will have thirty days to contribute their respective shares of the budget. In the event one party does not contribute its share of the budget, the defaulting party's share of ownership of the corporation established to own the mining rights will be reduced to reflect its pro rata share of total capital contributed, based upon an initial valuation of the Property of $3,545,454.50.

The company formed to own the mining rights will be governed by a management committee composed of one member selected by each of the Company and Linear Gold. Among the decisions the company cannot make without the unanimous consent of both the Company and Linear Gold are: a decision to bring the mine into production; the incurrence of any indebtedness other than normal accounts payable; pledging, assigning or encumbering the company's assets; any capital commitment in excess of $100,000; hiring any employees with an annual salary in excess of $100,000; the creation of new classes of capital stock or the issuance of any new shares of capital stock; or any disposition of the assets of the company. Day to day management of the company will be handled by an operator, which will be the entity that holds the greatest share of ownership of the company.

1.     On March 2, 2006, the Company's wholly-owned subsidiary, Silver Dragon Mining De Mexico, S.A. De C.V. ("Silver Dragon Mexico") entered into an agreement with Jaime Muguiro Pena (the "Assignment Agreement") wherein Mr. Pena assigned to Silver Dragon Mexico the mining and exploitation rights to 10 mining concessions, which include an operating mine, totaling approximately 1354 hectares in Guadalupe, Durango, Mexico in consideration for the payment to Mr. Pena of US$799,000 plus applicable V.A.T. The Agreement requires Mr. Pena to carry out all necessary actions to obtain registration in his favour of 3 of the 10 concessions, which are in the process of being registered in the name of Mr. Pena. The purchase price is payable as follows:

i)     US$100,000 was paid on the closing;

ii)    US$100,000 payable six months from the closing date;

iii)   US$100,000 payable twelve months from the closing date;

iv)   US$200,000 payable twenty-four months from the closing date;

v)    US$299,000 payable thirty-six months from the closing date.

All payments are subject to V.A.T.

Until such time as the purchase price is paid in full, Mr. Pena retains a reservation of the concession domains and may continue to dispose of up to 30 tons of ore per day from the mine. Silver Dragon Mexico is entitled to all amounts mined over and above the 30 tons per day.

Silver Dragon Mexico has also entered into an Assets Bailment Agreement with Mr. Pena which allows Silver Dragon Mexico the use of certain mining equipment (the "Equipment") which, subject to the terms of the Assets Bailment Agreement, is included in the purchase price for the mining concessions referred to in the Assignment Agreement. Upon payment in full of the purchase price pursuant to the Assignment Agreement, Silver Dragon Mexico can purchase the Equipment for the sum of US$1,000 plus V.A.T.

2.     On March 2, 2006, Silver Dragon Mexico entered into an agreement with Ramon Tomas Davila Flores (the "Assignment Agreement") wherein Mr. Flores assigned to Silver Dragon Mexico the mining and exploitation rights to 5 mining concessions, which include an operating mine, totaling approximately 31 hectares in Guadalupe, Durango, Mexico in consideration for the payment to Mr. Flores of US$245,000 plus applicable V.A.T. which was paid on closing, along with 110,000 restricted common shares of the Company

Silver Dragon Mexico has also entered into an Assets Purchase Agreement with Mr. Flores for the purchase of certain mining equipment for the sum of US$5,000 plus V.A.T.

All payments are subject to V.A.T.

4.     On March 9, 2006, Silver Dragon Mexico entered into an agreement with Silvia Villasenor Haro, the owner of Puro Corazon, wherein, in consideration for the sum of US$50,000 plus V.A.T., she has consented to the assignment of the mining and exploitation rights of Puro Corazon to Silver Dragon Mexico. In addition, she has agreed to modify the exploitation agreement of Minera which was assigned to Silver Dragon Mexico as follows:

i)   The consideration to be paid to Ms. Haro due to the exploitation of the mining concession will be in the amount of USD$1.50 per ton of economic ore that is extracted from the mine, to be paid monthly, within the following 30 days as of the date in which the Silver Dragon Mexico receives the corresponding invoices.

Regardless of the above, in the event that Silver Dragon Mexico does not initiate production over the lot regarding the Concession Title within a 6 months period of the date of execution of the Agreement, Silver Dragon Mexico must pay to Ms. Haro the monthly amount of $3,500.00 dollars plus VAT. Such payment will be made for the period or periods of time during which no ore is extracted, and paid within the first eight days of the corresponding month.

In the event that Silver Dragon Mexico pays Ms. Haro the above mentioned monthly consideration, such must be discounted from any future payment made by Silver Dragon Mexico to Ms. Haro as a result of the production and extraction of ore, subject to the condition that the payments due to Ms. Haro by the production and extraction of ore are maintained at least in the minimum monthly amount of US$3,500.00. If Silver Dragon Mexico decides not to produce nor extract ore, any monthly payments that are made to Ms. Haro will remain to her benefit.

ii)   Option to Purchase. Silver Dragon Mexico has been granted the option to purchase the Concession, which can be exercised by Silver Dragon Mexico by providing written notice to Ms. Haro within a 30 days period in advance to the following events:

a)  The Option to Purchase the Concession can be exercised by Silver Dragon Mexico within 3 years of the date of execution of the Agreement upon payment of the amount of USD$2,000,000 plus the applicable Value Added Tax ; or alternatively,

On March 21, 2006, the Company entered into an Asset Purchase Agreement with Sino Silver Corp. ("Sino Silver") and Sanhe Sino-Top Resources and Technologies, Ltd. ("Sino-Top") wherein Sino Silver agreed to sell its 60% interest in Sino-Top to the Company. Sino-Top holds the exploration and mining rights to 9 properties in the Erbaohuo Silver District in Inner Mongolia, China. The total purchase price is US$650,000 plus 4,000,000 restricted common shares of the Company payable as follows:

x) US$150,000 was paid on the closing;

xi) US$100,000 payable on May 20, 2006;

xii) US$400,000 payable and the 4,000,000 restricted common shares of the Company deliverable upon receipt of the requisite approvals to the transfer by the local Provincial Department of Commerce in China;

The Company has also committed to invest approximately US$1,300,000 into Sino-Top in 2006 towards exploration and property maintenance on the nine properties in the portfolio, with emphasis on bringing the Erbahuo mine into production in 2007 and advanced stage exploration on two properties (Zuanxinhu and Saihanaobao). This agreement supersedes the Venture Agreement dated April 24, 2005 between the Company and Sino Silver.

Competition. Many companies are engaged in the exploration of mineral properties. The Company encounters strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing gold, silver, base metals and industrial metals. Many of these companies have substantially greater technical and financial resources than the company and thus the Company may be at a disadvantage with respect to some of its competitors.

Regulation. The Company's interests in its properties will be subject to various laws and regulations concerning exploration, allowable production, taxes, labor standards, environmental protection, mine safety, regulations relating to royalties, importing and exporting of minerals and other matters. In addition, new laws or regulations governing operations and activities could have a material adverse impact on the Company.

On January 31, 2005 the Company sold 1,500,000 shares of common stock to accredited investors for a total of $30,000.

Between January 31, 2005 and April 5, 2005, the Company sold 180,000 shares of common stock in a private placement offering pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act") and/or Section 4(2) of the Securities Act, and/or Regulation D promulgated thereunder. Each share was sold for a price of $0.10 and the Company has received $18,000 in proceeds for the sale of the shares as of April 5, 2005.

In January 2006, the Company sold 2,500,000 shares of common stock to accredited investors for a total of $250,000.

In March 2006, the Company sold 1,000,000 shares of common stock to accredited investors for a total of $100,000.

In February and March 2006, the Company sold 1,000,000 Units to accredited investors for a total of $1,000,000. Each Unit consists of one share of the Company's common stock and 2 one-half of one (1/2) common stock purchase warrants ("Warrant"). Each whole Warrant is exercisable at $2.00 per common share and $5.00 per common share.

The Company has no patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts that management believes have any value.

The Company has no full or part-time employees, other than Marc Hazout, the Company's President, CEO. Mr. Hazout is employed pursuant to an Employment Agreement.

You should consider each of the following risk factors and any other information set forth in this Form 10-KSB and the other Company's reports filed with the Securities and Exchange Commission ("SEC"), including the Company's financial statements and related notes, in evaluating the Company's business and prospects. The risks and uncertainties described below are not the only ones that impact on the Company's operations and business. Additional risks and uncertainties not presently known to the Company, or that the Company currently considers immaterial, may also impair its business or operations. If any of the following risks actually occur, the Company's business and financial condition, results or prospects could be harmed.

NO REVENUE AND MINIMAL ASSETS.

The Company presently does not have any revenues, nor does it anticipate operating income in the near future. Ultimately, the Company hopes to derive revenues from the producing silver mines in Guadalupe, Durango, Mexico. In addition, the Company may obtain interests in mining properties that can be sold or licensed to strategic partners or third parties and/or develop producing mines on its own in order to generate revenues. These activities will be undertaken over a number of years. No assurances can be given that the Company will be able to obtain the necessary funding during this time to remain in operation. The inability to raise additional funds will have a material adverse affect on the Company's business, plan of operation and prospects.

COMPETITION IN THE SILVER EXPLORATION BUSINESS. The Company competes with other silver mining and exploration companies possessing far greater financial resources, technical facilities, personnel and experience in connection with the acquisition of silver exploration and mining properties, and is currently an insignificant participant in the business of silver exploration and development.

CONFLICTS OF INTEREST - GENERAL. The officers and directors are associated with other firms and are involved in a range of business activities that may have business dealings with the Company at some point in time. Due to these affiliations and the fact that some officers are expected to devote only a portion of their time to the business of the Company, there are potential inherent conflicts of interest in their acting as directors and as officers. Each of the officers and directors is or may become an officer, director, controlling shareholder, partner or participant in other entities engaged in a variety of businesses. These existing and potential conflicts of interest are irreconcilable and could involve the participating officers and directors in litigation brought by the Company's shareholders or by the shareholders of other entities with which the officers and directors are currently, or may become, affiliated. To help alleviate this position somewhat, management has adopted a policy of full disclosure with respect to business transactions with any entity in which any or all of the officers or directors are affiliated, either directly or indirectly. An officer or director may continue any business activity in which such officer or director engaged prior to joining the Company.

LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has neither conducted, nor have others made available to it, results of market research indicating that market demand exists for the transactions contemplated by the Company. Moreover, the Company does not have, and does not plan to establish, a marketing organization. Even in the event demand is identified for a merger or acquisition contemplated by the Company, there is no assurance the Company will be successful in completing any such business combination.

REGULATION. Now that the Company has acquired silver mining interests outside Canada and the United States, such as the ones in Mexico, it will have to deal with foreign regulatory and governmental agencies, and the rules and regulations of such agencies. No assurances can be given that it will be successful in its efforts. Furthermore, it is possible that the legal and regulatory environment pertaining to the exploration and development of silver mining properties in such jurisdictions will change. Uncertainty and new regulations and rules could increase the Company's cost of doing business or prevent it from conducting its business.

PENNY STOCK RULES LIMIT MARKET AND LIQUIDITY. Trading in the Company's common stock is subject to certain regulations adopted by the SEC commonly known as the "Penny Stock Rules". The Company's common stock qualifies as penny stock and is covered by Section 15(g) of the Securities and Exchange Act of 1934, as amended (the "1934 Act"), which imposes additional sales practice requirements on broker/dealers who sell the Company's common stock in the market. The "Penny Stock" rules govern how broker/dealers can deal with their clients and "penny stock". For sales of the Company's common stock, the broker/dealer must make a special suitability determination and receive from clients a written agreement prior to making a sale. The additional burdens imposed upon broker/dealers by the "penny stock" rules may discourage broker/dealers from effecting transactions in the Company's common stock, which could severely limit its market price and liquidity. This could prevent investors from reselling the Company's common stock and may cause the price of the common stock to decline.

ITEM 2. DESCRIPTION OF PROPERTY

Since March 1, 2004, the Company has been maintaining its offices at 1121 Steeles Avenue West, Suite 803, Toronto, Ontario, Canada

ITEM 3. LEGAL PROCEEDINGS

The Company was not the subject of any pending or threatened legal proceedings as of March 30, 2006.

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

No matters were voted upon by the stockholders during the fourth quarter of the fiscal year, as required to be reported upon by the Company in response to this Item 4.

ITEM 5. MARKET FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS

The Company's common stock is registered with the United States Securities and Exchange Commission under section 12(g) of the Securities Exchange Act of 1934. The Company's stock is traded on the Over the Counter Bulletin Board under the symbol "SDRG." From January 1, 2001 to July 16, 2002, the Company's common stock traded under the symbol "AEAC." On or about July 16, 2002, the Company's trading symbol changed to "AEAN" as a result of the change in the Company's name its previous name. On March 9, 2005, following the change of the Company's name, the Company's trading symbol changed to "SDRG".

The following table summarizes the low and high prices for the company's common stock for each of the calendar quarters for the fiscal years ended December 31, 2004 and 2005.

ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This Form 10KSB contains certain "forward-looking statements" as such term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. Without limiting the generality of the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "intend", "could", "estimate" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements.

Results of Operation

During the years ended December 31, 2005 and 2004, the Company did not have any revenues.

During the years ended December 31, 2005 and 2004, the Company incurred operating expenses of $543,688 and $387,921 respectively. The increase is mainly a result increased, advertising and promotion expenses which totaled $152,373 in 2005 and overall expenses increased as a result of the Company's increased activities in 2005.

During the years ended December 31, 2005 and 2004, the Company incurred net other income (expense) of $779 and ($11,106), respectively which relates to interest income in 2005.

During the years ended December 31, 2005 and 2004, the Company reported a net loss of ($542,909) and ($399,028), respectively. The reason for the increase in 2005 is due to factors discussed above.

Liquidity and Capital Resources

As of December 31, 2005 the Company had $303 in cash, $9,500 in subscriptions receivable, which funds were subsequently received. In addition, the Company had $56,521 in related party advances, and accounts payable and accrued liabilities totaling of $139,437, for a working capital deficit of ($195,655) compare to a working capital deficit of ($890,155) in 2004. During 2005, the Company has been dependent on loans from its sole director and officer to pay routine expenses, and the issuance of its common stock to satisfy expenses.

The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Off Balance Sheet Arrangements. The Company does not have any off-balance sheet arrangements or contractual obligations that have had or are reasonably likely to have a material current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that have not been disclosed in the Company's financial statements.

ITEM 7. FINANCIAL STATEMENTS

The financial statements are attached hereto as Exhibit A.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

By resolution adopted on January 24, 2006, the board of directors of Silver Dragon Resources Inc. elected to change independent Accountants. The independent accounting firm of Moore Stephens Cooper Molyneux LLP notified the Registrant on January 24, 2006 that they were terminating their registration with the Public Company Accounting Oversight Board and therefore, were resigning as the Registrant's accountants. The independent auditors report on the consolidated financial statements for the two years ended December 31, 2003 and December 31, 2004, and the subsequent periods preceding December 31, 2005 contained no adverse opinion, no disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles, except that each report issued by Moore Stephens Cooper Molyneux LLP for the years ended December 31, 2004 and 2003, and the interim periods ended March 31, 2005, June 30, 2005 and September 30, 2005 respectively raised substantial doubt about the Company's ability to continue as a going concern. The decision to change accountants was approved by the Registrants board of directors. In connection with the audits of the Company's consolidated financial statements for each of the two years ended December 31 2003 and December 31, 2004, and during any subsequent interim periods preceding December 31, 2005, as well as the period up to and including January 24, 2006, there have been no disagreements with Moore Stephens Cooper Molyneux LLP on any matters of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which if not resolved to the satisfaction of Moore Stephens Cooper Molyneux LLP would have caused Moore Stephens Cooper Molyneux LLP to make reference to the subject matter of the disagreements in connection with their reports.

Engagement of new independent accountants.

On January 24, 2006, the Registrant's board of directors engaged SF Partnership LLP, 4950 Yonge Street, Suite 400 Toronto, Ontario, M2N 6K1 as its new independent auditors (the "new" accounting firm) to audit the Registrant's financial statements. The Registrant, during the two most recent fiscal years and the subsequent interim periods prior to the engagement of the new accounting firm, did not consult with the new accounting firm with regard to any of the matters listed in Regulation S-B items 304 (a) (2) (i) or (ii).

ITEM 8A. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and timely alerting them to material information relating to the Company required to be filed in its periodic SEC filings. There has been no change in the Company's internal control over financial reporting during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Audit Committee and Audit Committee Financial Expert

The Company has only one director and therefore does not have an audit committee.

Code of Ethics

Currently, we have only limited business operations and only one director and one officer and, therefore, we believe a code of ethics would have limited utility. We intend to adopt a code of ethics as our business operations expand and we have more directors, officers and employees.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following table sets forth certain information concerning directors, executive officers and key employees of the Company:

The term of office of each director of the Company ends at the next annual meeting of the Company's stockholders or when such director's successor is elected and qualifies. No date for the annual meeting of stockholders is specified in the Company's bylaws or has been fixed by the Board of Directors. Pursuant to the Company's bylaws, the date of the annual meeting is to be determined by the current Board of Directors. Except as otherwise indicated below, no organization by which any officer or director previously has been employed is an affiliate, parent, or subsidiary of the Company.

During 2005, the Board of Directors held 2 meetings.

The following information sets forth the backgrounds and business experience of the directors and executive officers:

Marc M. Hazout has been President, Chief Executive Officer and a director of the Company since June 1, 2002. From 1985 to 1987, Mr. Hazout was the Canadian licensee and franchisee for a multinational clothing manufacturer and retailer. From 1987 to 1991, Mr. Hazout established a private label apparel manufacturing and retailing company. From 1991 to 1998, Mr. Hazout developed, owned and operated entertainment complexes in Toronto. Mr. Hazout attended The Canadian Securities Institute from 1998-2000 and in 1999 worked as an equity trader for Swift Trade Securities Inc. in Toronto. Since 1998, Mr. Hazout has been President and C.E.O. of Travellers International Inc., an investment and merchant banking firm headquartered in Toronto. Mr. Hazout studied International Relations and Economics at York University in Toronto from 1983 to 1985. Mr. Hazout completed the Real Estate Licensing Course at Humber College in Toronto in 1984.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the compensation earned by the Company's Chief Executive Officers during the last three fiscal years and other officers who received compensation in excess of $100,000 during any of the last three fiscal years. In accordance with Item 402(a)(5), the Company has omitted certain columns from the table required by Item 402(b).

(a) The securities underlying these options are the shares of the Company's Common Stock, $0.0001 par value.

On March 31, 2005, the Company issued 3,254,018 restricted shares to Mr. Hazout in consideration for accrued salary and expenses owing to Mr. Hazout pursuant to his previous Employment Agreement which expired in July 2005.

On November 15, 2005, the Company entered into an Employment Agreement with Marc Hazout. The Employment Agreement provides that Mr. Hazout shall be employed by the Company for a term of five years, and is entitled to a base salary of $288,000 per year. Mr. Hazout is also entitled to a commission on sales generated by him consistent with the Company's commission policy for all sales personnel. Further, he is entitled to 8 weeks paid holiday and 14 personal days, sick leave, medical and group insurance, participation in pension or profit sharing plans of the Company, and a car allowance of up to $3,000 per month. In the event of a termination of the Employment Agreement without cause by the Company, he will be entitled to severance equal to 100% of his remaining base salary under the Employment Agreement, plus an amount equal to 75% of the base salary plus full medical coverage for 12 months following the termination date. The Employment Agreement contains provisions prohibiting him from competing with the Company or soliciting customers or employees from the Company for a period of one year following the termination of his employment.

The Company's past policy has been to pay its non-management directors $500 in restricted common stock for each board meeting attended. In addition, directors are reimbursed for any reasonable expenses incurred in the connection with attendance at board or committee meetings or any expenses generated in connection with the performance of services on the behalf of the Company. The Company currently has two directors, one of whom is also the chief executive officer of the Company. The Company is currently exploring acquisition possibilities. The Company anticipates that its policy on director compensation will change when and if it makes a material acquisition.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of March 30, 2006, with respect to the beneficial ownership of the Company's Common Stock by (i) each executive officer and director of the Company, (ii) all directors and executive officers of the Company as a group, and (iii) any person who is known by the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company's common stock.

(1) Based on 46,020,533 shares issued and outstanding as of March 17, 2006

(2) Based on 17,221,751 shares owned by Travellers International, Inc., a company owned by Mr. Hazout.

The following table provides information as of December 31, 2005 about our compensation plans under which shares of stock have been authorized:

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On April 8, 2004, the Company issued Travellers International, Inc. 375,000 shares of the common stock in settlement of payables of $15,000 due to Mr. Hazout.

On November 5, 2004, the Company issued Travellers International, Inc. 200,000 shares of the common stock in settlement of payables of $10,000 due to Mr. Hazout.

On March 31, 2005, the Company issued Travellers International Inc. 3,254,018 shares of the common stock in settlement of accrued and outstanding salary and expenses of $813,504.54 due to Mr. Hazout pursuant to his Employment Agreement dated July 10, 2002.

On January 10, 2006 the Company issued Travellers International Inc. 1,000,000 shares of the common stock pursuant to the terms of the Employment Agreement dated November 15, 2005 with Marc Hazout.

On March 1, 2006 the Company issued Travellers International Inc. 1,000,000 shares of the common stock in consideration for its assistance to the Company in the acquisition of the mining rights in Cerro Las Minitas, Mexico.

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(b) The financial statements filed as part of this report are listed separately in the Index to Financial Statements.

(1) Incorporated by reference from the Form 10-SB filed on February 23, 2000.

(2) Incorporated by reference from the Form 10-SB/A filed on July 17, 2003. Most recent amendment attached.

(3) Included within financial statements attached hereto as Exhibit A.

(4) Incorporated by reference from the Form 8-K filed on January 27, 2006.

(5) Incorporated by reference from the Form 8-K filed on November 7, 2001.

(b) Reports on Form 8-K: None

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for professional services rendered by the principal accountant was $9,989 for 2004 and $23,000 for 2005.

Audit-Related Fees were nil for 2004 and 2005. Tax Fees were nil for 2004 and 2005 All Other Fees were nil for 2004 and 2005.

In accordance with Section 13 of 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2005 and 2004

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To the Board of Directors and Stockholders of
Silver Dragon Resources, Inc.
(formerly American Entertainment and Animation Corporation)

We have audited the accompanying consolidated balance sheet Silver Dragon Resources, Inc. and subsidiary (a development stage company) as at December 31, 2004, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year ended December 31, 2004 and for the period from June 15, 1996 [inception] to December 31, 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the cumulative data from June 15, 1996 to December 31, 2001. The cumulative data was audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts in the cumulative data through December 31, 2001, is based solely on the report of other auditors.

We conducted our audits 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 whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Silver Dragon Resources, Inc. (formerly American Entertainment and Animation Corporation) and subsidiary [a development stage company] as of December 31, 2004 and the results of their operations and their cash flows for the years then ended and for the period from June 15, 1996 (inception) to December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has recurring losses from operations and has a net capital deficiency. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Managements' plans are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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Silver Dragon Resources, Inc. (formerly American Entertainment and Animation Corporation) ("SDR" or the "The Company") a Delaware corporation, was incorporated on May 9, 1996. The Company is headquartered in Ontario, Canada and operates primarily in the United States and Canada. On June 15, 1996, SDR acquired all of the outstanding stock of California Electric Automobile Co., Inc. ("CEAC"), a California corporation incorporated on November 14, 1995.

The Company is in the development stage as defined in Financial Accounting Standards Board Statement No.7. "Accounting and Reporting For Development Stage Companies." To date, the Company has generated minimal sales and has devoted its efforts primarily to developing its products, implementing its business strategy and raising working capital through equity financing or short-term borrowings.

The Company's mission is to acquire and develop a portfolio of silver properties in proven silver districts globally.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company incurred a net loss of approximately $1,052,035 (2004 - $399,027) for the year and has accumulated losses since inception of approximately $3,589,561 (2004 - $2,537,526). In addition, the Company has a working capital deficiency of approximately $195,655 (2004 - $890,155) at December 31, 2005. The Company's continuation as a going concern is uncertain and dependant on successfully bringing its services to market, achieving future profitable operations and obtaining additional sources of financing to sustain its operations. In the event the Company cannot obtain the necessary funds, it will be necessary to delay, curtail or cancel the further development of its products and services. Though the business plan indicates profitable operation in the coming year, these profits are contingent on completing and fulfilling contracts with various providers of goods and services throughout the world to provide the Company with a cashflow to sustain operations.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

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Sino Silver

On April 24, 2005, the Company entered into a venture agreement with Sino Silver Corp. ("Sino Silver") whereby the Company acquired 50% of Sino Silver's interest in the net proceeds from the sale of minerals or the sale of mining rights as a result of the exploration, evaluation and development of a property located in the Erbaohuo Silver District in Northern China. In consideration for this interest, the Company paid Sino Silver $150,000 on the closing date along with 250,000 restricted common stock of the Company. Pursuant to the Agreement, an additional $200,000 is payable to Sino Silver within 2 years of the closing date, along with the delivery of an additional 250,000 restricted common stock of the Company. Included in these costs are financing fees incurred through the issuance of 500,000 restricted common stock.

Linear Gold

On September 7, 2005, the Company entered into a joint venture agreement with Linear Gold Corp., Linear Gold Caribe, S.A. (Linear Gold Corp. and Linear Gold Caribe, S.A. are collectively referred to as "Linear Gold"), and Linear Gold Mexico, S.A. de C.V. ("Linear Mexico").

Linear Mexico, which is wholly-owned by Linear Gold, owns an option to acquire the exploration and exploitation rights to the property known as the Tierra Blanca Property in Durango, Mexico (the "Mexico Property"). Under Linear Mexico's Option, Linear Mexico is entitled to acquire the exploration and exploitation rights to the Property by payment of $2,000,000. Prior to exercising Linear Mexico's Option, and to keep Linear Mexico's Option in force, Linear Mexico is required to pay the property owners $20,000 in year one, $35,000 by April 6, 2006, and $70,000 by April 6, 2007.

Under the agreement, the Company has the option to acquire a 55% interest in the Mexico Property. If the option is exercised, the property would be conveyed to a newly formed corporation, which the Company would own 55% of, with Linear Gold owning the remaining 45%. Upon execution of the agreement, the Company paid Linear Gold $45,000 and issued Linear Gold 100,000 shares of common stock.

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The Company's income tax provision (recovery) has been calculated as follows:

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The Company has accumulated approximately $3,327,035 of taxable losses, which can be used to offset future federal taxable income. The utilization of the losses expires in years 2015 to 2025.

The Tax Reform Act of 1986 imposed substantial restrictions on the utilization of net operating losses and tax credits in the event of an "ownership change", as defined by the Internal Revenue Code. Federal and State net operating losses are subject to limitations as a result of these restrictions. Under such circumstances, the Company's ability to utilize its net operating losses against future income may be reduced.

During the year ended December 31, 2005, the Company issued 3,254,018 shares of its common stock in lieu of $813,505 cash in settlement of amounts owing to an officer of the Company in accordance with the terms of his employment agreement.

During the year ended December 31, 2005, the Company issued 7,295,000 shares of its common stock in settlement of $1,150,000 in payables due for services performed.

During the year ended December 31, 2004, the Company issued 575,000 shares of its common stock in lieu of $25,000 cash in settlement of related party advances.

During the year ended December 31, 2003, the Company issued 4,861,111 shares of its common stock in lieu of approximately $150,000 cash in settlement of related party advances.

During the year ended December 31, 2003, the Company issued 66,300 shares of its common stock for the settlement of approximately $1,326 of payables due to a former director and current shareholder for services performed.

For the year ended December 31, 2005 and 2004, there were no cash payments for income taxes and no cash was paid for accrued interest.

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In the normal course of its operations, the Company has been or, from time to time, may be named in legal actions seeking monetary damages. While the outcome of these matters cannot be estimated with certainty, management does not expect, based upon consultation with legal counsel, that they will have a material effect on the Company's business or financial condition or results of operations.

In July 2002, the Company entered into an employment agreement with an officer of the Company. During the years ended December 31, 2005 and 2004, $154,500 and $342,000 respectively is included in the statement of operations in management and director fees. The term of the employment agreement is for three years and carries an option for renewal upon mutual agreement between the officer and the Company. On March 31, 2005, the Company issued 3,254,018 restricted common shares, valued to $813,505 in settlement of all amounts owing to the officer of the Company in accordance with the terms of his employment agreement..

On November 15, 2005, the Company entered into an employment agreement with an officer of the Company. The term of the agreement is five years and carries an option for renewal upon mutual agreement between the officer and the Company. The agreement includes a base salary of $288,000 per year, a signing bonus of 1,000,000 shares of common stock of the company and a benefits package.

On December 8, 2005 the Company entered into a twelve month agreement Uptick Capital for financing and strategic advice for fees totaling $27,000 and 1.5 million restricted common shares.

On January 10, 2006 the Company entered into a three month contract with Small Cap Voice.Com Inc. for investor relations services for fees totaling $15,000 and 100,000 restricted common shares.

On January 10, 2006 the Company entered into a three month contract with Torrey Hills Capital for strategic planning services for fees of $32,500 and 300,000 restricted common shares.

On March 1, 2006 the Company entered into a twenty-four month contract with an individual for administrative services for $4,000 per month and 1,000,000 restricted common shares.

On March 21, 2006, the Company entered into an Asset Purchase Agreement with Sino Silver and Sanhe Sino-Top Resources and Technologies Ltd. to purchase the assets of Sino Silver. The total purchase price is US$650,000 plus 4,000,000 restricted common shares of the Company payable as follows: US$150,000 was paid on the closing;US$100,000 payable on May 20, 2006; US$400,000 payable and the 4,000,000 restricted common shares of the Company deliverable upon receipt of the requested government approvals in China. The Company has also committed to invest approximately US$1,300,000 into Sino-Top in 2006 .

On March 15, 2006 the Company entered into a three month contract with Empire Relations Group for investor relations services for fees of $15,000 and 40,000 restricted common shares.

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On January 10, 2006 the Company entered into a two month contract with Small Cap Voice.Com, Inc., who will provide the Company with investor relations services in return for cash fees and 100,000 restricted shares.

On January 10, 2006 the Company entered into a three month consulting contract with Torrey Hills Capital, who will provide the Company with strategic planning services in return for cash fees and 300,000 shares of its restricted common stock. On January 10, 2006 the Company issued Travellers International Inc. 1,000,000 shares of common stock pursuant to the terms of the Employment Agreement dated November 15, 2005 with Marc Hazout.

On January 19, 2006 the Company entered into a contract with an individual who will provide strategic planning services in return for 300,000 restricted shares.

On January 25, 2006 the Company issued 2,500,000 restricted common shares valued at $250,000 under a private placement.

On February 17, 2006, the Company completed the sale of 1,000,000 Units, at a price of $1.00 per Unit, for total gross proceeds of $1,000,000. Each Unit consists of one share of the Company's common stock and 2 one-half of one (1/2) common stock purchase warrants ("Warrant"). The first half warrant is exercisable in whole warrants at $2.00 per common share and the second half warrant in whole warrants at $5.00 per common share.

On March 1, 2006 the Company entered into a twenty-four month contract with an individual for administrative services for fees and 1,000,000 restricted common shares.

On March 1, 2006 the Company entered into a contract with an individual for investor relations services in The Peoples Republic of China for 1,000,000 restricted common shares.

On March 1, 2006 the Company issued Travellers International Inc. 1,000,000 shares of the common stock in consideration for its assistance to the Company in the acquisition of the mining rights in Cerro Las Minitas, Mexico.

On March 2, 2006, the Company's wholly-owned subsidiary, Silver Dragon Mining De Mexico entered into an agreement for the mining and exploitation rights to 10 mining concessions, which include an operating mine, totaling approximately 1354 hectares in Guadalupe, Durango, Mexico in consideration for the payment of US$799,000.

On March 2, 2006, Silver Dragon Mexico entered into an agreement for the assignment of the mining and exploitation rights to 5 mining concessions, which include an operating mine, totaling approximately 31 hectares in Guadalupe, Durango, Mexico in consideration for the payment of US$245,000 plus applicable V.A.T. which was paid on closing, along with 110,000 restricted common shares of the Company. Silver Dragon Mexico has also entered into an Asset Purchase Agreement with the same party for the purchase of certain mining equipment for the sum of US$5,000 plus V.A.T.

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On March 8, 2006, Silver Dragon Mexico entered into an agreement for the assignment of the mining and exploitation rights to 1 mining concession known as "Puro Corazon" which includes an operating mine, totaling approximately 9 hectares, in Guadalupe, Durango, Mexico in consideration for the payment of US$400,000 and 2 Million restricted common shares of the Company.

On March 9, 2006, Silver Dragon Mexico entered into an agreement for the assignment of the mining and exploitation rights of Puro Corazon in consideration for the sum of US$50,000. In addition, the exploitation agreement of Puro Corazon which was assigned to Silver Dragon Mexico was modified to include minimum monthly fees of $3,500 based on production and extraction. Silver Dragon Mexico has also been granted the option to purchase the Concession.

On March 15, 2006 the Company entered into a four month contract with Empire Relations Group who will provide investor relations services in return for cash fees and 40,000 restricted shares.

On March 21, 2006, the Company entered into an Asset Purchase Agreement with Sino Silver and Sanhe Sino-Top Resources and Technologies, Ltd. ("Sino-Top") wherein Sino Silver agreed to sell its 60% interest in Sino-Top to the Company. Sino-Top holds the exploration and mining rights to 9 properties in the Erbaohuo Silver District in Inner Mongolia, China. The total purchase price is US$650,000 plus 4,000,000 restricted common shares of the Company. The Company has also committed to invest approximately US$1,300,000 into Sino-Top in 2006 towards exploration and property maintenance on the nine properties in the portfolio. This agreement supersedes the Venture Agreement dated April 24, 2005 between the Company and Sino Silver, and is subject to receipt of the requested government approvals in China.

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