10. Subsequent Events
Reverse Stock Split
Effective December 12, 2011, the Company effected a 1 for 500 reverse stock split, decreasing the issued and outstanding shares of common stock from 254,480,000 shares to approximately 508,960 shares. The accompanying financial statements have been adjusted to retroactively reflect this stock split.
Acquisition of Project X , Inc.
On February 10, 2012, the Company completed its acquisition of Project X, Inc. (“Project X”) in exchange for 8,570,000 shares of Company common stock (representing approximately 94% of the approximately 9,078,960 issued and outstanding shares of Company common stock after the exchange) pursuant to a Share Exchange Agreement dated January 18, 2012.
Project X, Inc., a wholly-owned subsidiary of Earth Dragon Resources, Inc. (the "Company"), was formed on June 1, 2011, for the purpose of entering into a Joint Venture with Deep Marine Salvage Inc., a Nevis corporation ("DMS"). The purpose of the Joint Venture is to engage in the business of locating and recovering valuable cargo from ships lost throughout the world's oceans. On September 6, 2012, Project X and DMS entered into a Joint Venture Agreement (the "JV Agreement") to set forth the terms of the parties' agreement to create and operate such Joint Venture (the "JV"). This JV supersedes the original Joint Venture dated July 20, 2011, and the Amendment to that Joint Venture dated January 13, 2012. The JV's business strategy is to locate and obtain cargo from identified shipwrecks located globally.
The JV Agreement with Deep Marine Salvage, Inc. ("DMS") calls for the prompt and complete performance of JV funding obligations. On April 27, 2012, the parties entered into a Pledge Agreement whereby 10 million shares of the Company's common stock was issued to DMS to secure the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) by Project X of the JV funding obligations, which for purposes hereof is deemed satisfied upon completion of either:
(a) Project X raising $10 million for the operations of the JV; or
(b) Project X raising such lesser amount for the operations of the JV, which the parties to the JV agree is sufficient for the JV's operations.
Any funds raised via "in-kind" financing shall be counted towards the amounts described above. The shares will bear a restrictive transfer legend due to the fact that the shares will not be registered with the Securities and Exchange Commission and can only be resold pursuant to a registration statement or pursuant to an exemption from the registration requirements set forth in the securities laws and regulations.
Conversions of Notes Payable into Common Stock
From March 27, 2012 to August 7, 2012, the Company issued a total of 3,520,000 shares of its common stock to 9 assignees of portions of the Convertible Promissory Note due to MED Ventures Ltd (see Note 6) in satisfaction of a total of $3,520 of such Note.