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EXCEL - IDEA: XBRL DOCUMENT - EARTH DRAGON RESOURCES INC.Financial_Report.xls
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EX-31.1 - CERTIFICATION - EARTH DRAGON RESOURCES INC.ex311.htm
EX-32.1 - CERTIFICATION - EARTH DRAGON RESOURCES INC.ex321.htm
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v2.4.0.6
Notes Payable
3 Months Ended
Aug. 31, 2011
Debt Disclosure [Abstract]  
Notes Payable

 

6. Notes Payable

Notes payable consist of:
   
August 31, 2011
   
May 31, 2011
 
             
Promissory note dated February 28, 2011(replaced June 1, 2011 with a Convertible Promissory Note) issued to MED Ventures Ltd. for cash advances on January 24, 2011 and February 22, 2011, interest at 12%, originally due February 27, 2012 (amended June 1, 2011 to extend maturity date to December 31, 2013), unsecured (commencing June 1, 2011, convertible into shares of common stock at a pre-split and post-split price of $0.001 per share), less unaccreted debt discount of $256,519 and $0 respectively.
 
$
23,481
   
$
280,000
 
                 
Promissory note dated November 30, 2010 issued to Irish Son Limited (“ISL”) in exchange for ISL’s payments of certain Company liabilities (see Note 5), interest at 6%, due on demand, unsecured.
   
26,980
     
26,980
 
Totals
   
50,461
     
306,980
 
Current portion
   
(26,980)
     
(306,980)
 
Notes payable – non-current
 
$
23,481
   
$
-
 

On March 8, 2011, we repaid $35,000 of the $315,000 promissory note payable to MED Ventures Ltd. through a $35,000 payment to Hansen Drilling Ltd. at the instruction of MED Ventures Ltd.

On June 1, 2011, the Company executed a new Convertible Promissory Note to Med Ventures Ltd. which replaced the original Promissory Note dated February 28, 2011.   The new Convertible Promissory Note provides the holder the right at any time to convert any part of the Note into shares of the Company’s common stock at a pre-split and post-split conversion rate of $0.001 per share (provided that such holder’s conversion does not result in the holder’s percentage ownership to exceed 4.9% of the total number of common shares outstanding).  The new Convertible Promissory Note also provides that no re-capitalization, forward split or reverse split of the Company’s common stock to take effect after June 1, 2011 shall have a dilutive effect on the number of shares that are to be issued as a result of such conversion.  Accordingly, the $0.001 per share conversion rate was not adjusted as a result of the December 12, 2011 1 for 500 reverse stock split.  At the $0.001 conversion price, the $280,000 note balance is convertible into 280,000,000 shares of our common stock.  Using the $0.041 pre-split June 1, 2011 closing trading price of our common stock, the $280,000 note balance would have been convertible into 6,829,268 shares of our common stock.  Accordingly, the intrinsic value of the beneficial conversion feature is $11,200,000 (273,170,732 incremental shares multiplied by the $0.041 pre-split June 1, 2011 closing trading price), To account for this, the Company recognized a $280,000 debt discount on June 1, 2011 (the discount is limited to the amount of the proceeds allocated to the convertible instrument) and is accreting the discount as interest expense over the 31 month term of the Convertible Promissory Note.

At August 31, 2011 and May 31, 2011, accrued interest payable on the notes payable was $18,155 and $9,278, respectively.