SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest reported) December 10, 2012
Commission File Number 000-53774
EARTH DRAGON RESOURCES, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
402 W. Broadway, Suite 400
San Diego, California 92101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 321-6882
ITEM 8.01 - OTHER EVENTS
As previously announced, Earth Dragon Resources, Inc. and its wholly-owned
subsidiary, Project X, Inc., have entered into a New Joint Venture Agreement
with Deep Marine Salvage ("DMS") to create a joint venture to salvage cargo from
certain identified shipwrecks (the "Joint Venture"). A copy of the new Joint
Venture Agreement was filed as an Exhibit to Earth Dragon's Current Report on
Form 8-K filed with the dated September 11, 2012.
The Joint Venture was formed for the financing and salvage of three (3) World
War I shipwrecks, which the Company's management believes contains cargo
consisting of precious metals. The UK government issued three (3) licenses for
these wrecks to our Joint Venture partner in December 2011.
Research obtained by the Company indicates a large amount of gold cargo on two
(2) wrecks and silver cargo on the third. All three (3) wrecks lie in less than
250 meters of water. As a result of such research, the Joint Venture conducted a
final survey of all three (3) wrecks in preparation for recovery operations,
which are scheduled to begin May 2013. We expect to release results of the
survey in the next few weeks.
EARH could receive up to approximately $650 million from the recovery assuming
100% of the cargo on all three (3) wrecks is salvaged and gold and silver prices
remain at today's levels.
Marine salvage comes with many risks factors including accuracy of research,
raising the necessary capital, the ability to complete the salvage and
fluctuating expenses of marine operations. Operational risk factors can affect
the amount of cargo that is actually recovered.
Statements about our future expectations are "forward-looking statements", which
are not guarantees of future performance. When used herein, the words "may,"
"will," "should," "anticipate," "believe," "appear," "intend," "plan," "expect,"
"estimate," "approximate," "potential" and similar expressions are intended to
identify such forward-looking statements. These statements involve risks and
uncertainties inherent in our business, including those set forth below and also
set forth in our other filings with the Securities and Exchange Commission, and
are subject to change at any time. Our actual results could differ materially
from these forward-looking statements. We undertake no obligation to update
publicly any forward-looking statement.
Set forth below are cautionary statements identifying important factors that
could cause actual events or results to differ materially from any
forward-looking statements made by or on behalf of us, whether oral or written.
We wish to ensure that any forward-looking statements are accompanied by
meaningful cautionary statements. Accordingly, any such statements are qualified
in their entirety by reference to, and are accompanied by, the following
important factors that could cause actual events or results to differ materially
from our forward-looking statements.
The company's revenues could be impacted if they elect to sell part of their
Joint Venture to obtain capital. This would result in a decrease in revenue for
the company assuming cargo is recovered.
ACTS OF PIRACY
Firstly the Wrecks are located in British waters approximately within 50
nautical miles off the coast of Ireland. These are sovereign waters with
oversight by the British Government. Piracy is not an issue generally within
these protected waters. Despite these facts there is no assurance that our
salvage operations would not be subject to an act of piracy.
Management and our Joint Venture partner adequate time contingencies have been
allocated into the salvage operations time lines - taking into consideration
potential weather delays. The optimal seasonal time has been chosen to undertake
the operation. However, weather is by its very nature unpredictable, and though
great care is taken to plan operations for the best months of the year in any
given area may force a temporary shutdown of salvage operations.
There are no guarantees offered that the Cargo as envisioned actually exists on
the wrecks or that it can be recovered. Recovery of entire budgets or
expenditures may not be fully assured. Marine salvage is a high risk operation
We believe that the Joint Venture owns all legal claims to the cargo on the
identified wreck, subject to the contractual claims of the UK government to any
cargo recovered. However, this may not preclude other parties from attempting to
make a legal challenge against our claims. We presently are not aware of any
General risk applies to any and all business ventures and all commercial
business risks are inherent herein. This is not an extensive list of all
potential risk factors.
There are no guarantees offered herein or represented by management. Any
business venture of this kind must be considered to be a high risk business
venture and high risk investment and Offering.
There are several business risks associated with any commercial venture and
there is no different consideration to be given to this Company or it's
operations. General risks can include but not limited to: having sufficient
funds necessary to meet our operating budget and all contingent expenses,
management failures and bad decision making, stock market fluctuations, economic
risks, there are no ultimate assurances that Cargos can be recovered nor
monetized successfully, salvage operations and techniques can fail, there are
significant regulatory compliance issues, regulators can impose cease trading
restrictions or other restrictions on junior public companies of this kind. All
normal business and commercial risks can and will apply to this venture.
Refer to the disclaimers and forward looking statements posted on these
presentations that are meant to cover all items prepared or presented with
respect to this Offering and all related material. Refer also to the disclaimer
posted on the Project Budget. Professional advisors should be consulted to
properly understand these and all disclaimers associated with this Offering and
related materials and information.
This is a high risk business venture . Any Investment Returns are estimates and
projections only and are not guaranteed. Investing in junior public stocks is
considered to be high risk in nature. There are no guarantees offered herein.
LEGAL AND SECURITIES RISKS
IF ANY OF THE FOLLOWING RISKS OCCUR, OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION COULD BE SERIOUSLY HARMED. THE RISKS AND UNCERTAINTIES
DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS AND
UNCERTAINTIES, INCLUDING THOSE THAT WE DO NOT KNOW ABOUT OR THAT WE CURRENTLY
DEEM IMMATERIAL, ALSO MAY ADVERSELY AFFECT OUR BUSINESS.
RISKS RELATED TO US AND OUR INDUSTRY
WE HAVE NEVER EARNED A PROFIT AND THERE IS NO GUARANTEE THAT WE WILL EVER EARN A
From our inception to the period ended on August 31, 2012 and to date, we have
not generated any revenue. We do not currently have any revenue producing
operations. We are not currently operating profitably, and it should be
anticipated that we will operate at a loss at least until such time when the
production stage is achieved, if production is, in fact, ever achieved.
WE ARE SENSITIVE TO FLUCTUATIONS IN THE PRICE OF GOLD AND OTHER MINERALS, WHICH
IS BEYOND OUR CONTROL. THE PRICE OF GOLD AND OTHER MINERALS IS VOLATILE AND
PRICE CHANGES ARE BEYOND OUR CONTROL.
The price of gold and other precious metals can fluctuate. The prices of gold
and other precious metals have been and will continue to be affected by numerous
factors beyond our control. Factors that affect the price of gold and other
precious metals include the demand from consumers for products that use gold and
other precious metals, economic conditions, over supply from secondary sources
and costs of production. Price volatility and downward price pressure, which can
lead to lower prices, could have a material adverse effect on the costs or the
viability of our projects.
MARINE SALVATION IS A HIGHLY SPECULATIVE BUSINESS AND WE MAY NOT BE SUCCESSFUL
IN RECOVERING CARGO.
The process of marine salvation is a highly speculative business. In seeking
available opportunities, we will compete with a number of other companies,
including established, multi-national companies that have more experience and
resources than us.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
WE HAVE NOT PAID ANY CASH DIVIDENDS ON OUR SHARES OF COMMON STOCK AND DO NOT
ANTICIPATE PAYING ANY SUCH DIVIDENDS IN THE IMMEDIATE FUTURE.
Payment of future dividends, if any, will depend on our earnings and capital
requirements, our debt facilities and other factors considered appropriate by
our Board of Directors. To date, we have not paid any cash dividends on our
Common Stock and do not anticipate paying any such dividends in the immediate
future. Management does make forward looking statements in this regard - should
its venture succeed then management does intend to pay dividends subject to
several risk factors which could however be out of management's control.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL.
We will need to obtain additional financing in order to complete our business
plan. We may not be able to find such financing if required. Obtaining
additional financing would be subject to a number of factors, including investor
acceptance of Cargo and investor sentiment. These factors may adversely affect
the timing, amount, terms, or conditions of any financing that we may obtain or
make any additional financing unavailable to us.
BECAUSE OF OUR LIMITED RESOURCES AND THE SPECULATIVE NATURE OF OUR BUSINESS,
THERE IS A SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The report of our independent auditors, on our most recent audited financial
statements indicates that there are a number of factors that raise substantial
doubt about our ability to continue as a going concern. Our continued operations
are dependent on our ability to obtain financing and upon our ability to achieve
future profitable operations. If we are not able to continue as a going concern,
it is likely investors will lose their investment.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND THE NASDAQ'S SALES PRACTICE REQUIREMENTS, WHICH MAY
LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our common shares may be deemed to be "penny stock" as that term is defined in
Regulation Section "240.3a51 -1" of the Securities and Exchange Commission (the
"SEC"). Penny stocks are stocks: (a) with a price of less than U.S. $5.00 per
share; (b) that are not traded on a "recognized" national exchange; (c) whose
prices are not quoted on the NASDAQ automated quotation system (NASDAQ - where
listed stocks must still meet requirement (a) above); or (d) in issuers with net
tangible assets of less than U.S. $2,000,000 (if the issuer has been in
continuous operation for at least three (3) years) or U.S. $5,000,000 (if in
continuous operation for less than three (3) years), or with average revenues of
less than U.S. $6,000,000 for the last three (3) years.
Section "15(g)" of the United States Securities Exchange Act of 1934, as
amended, and Regulation Section "240.15g(c)2" of the SEC require broker dealers
dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in our common shares are
urged to obtain and read such disclosure carefully before purchasing any common
shares that are deemed to be "penny stock".
Moreover, Regulation Section "240.15g -9" of the SEC requires broker dealers in
penny stocks to approve the account of any investor for transactions in such
stocks before selling any penny stock to that investor. This procedure requires
the broker-dealer to: (a) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (b)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (c) provide the investor with a written statement
setting forth the basis on which the broker dealer made the determination in
(ii) above; and (d) receive a signed and dated copy of such statement from the
investor confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives. Compliance with
these requirements may make it more difficult for investors in our common shares
to resell their common shares to third parties or to otherwise dispose of them.
Stockholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, dated April 17, 1991, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse. Such
(i) control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer;
(ii) manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases;
(iii)boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
(iv) excessive and undisclosed bid-ask differential and markups by selling
(v) the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level,
along with the resulting inevitable collapse of those prices and with
consequent investor losses.
Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
Pursuant to the requirements of the Securities Exchange of 1934, the registrant
has caused this report to be signed on its behalf by the undersigned hereunto
DATE: December 13, 2012
EARTH DRAGON RESOURCES, INC.
By: /s/ J. Michael Johnson
Name: J. Michael Johnson
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