Yep, they're free shares. e.Digital is issuing 7.87 million shares for $500,000. If Fusion doesn't want to play anymore, all they need to do is dump shares to lower the price to 8 cents and keep it there.
IMO, it's very misleading to leave out the "commitment shares" in the PR. The price paid for the shares they received was 6.4 cents, not 12 cents.
On January 2, 2007, we entered into a common stock purchase agreement (the
"Purchase Agreement") with Fusion Capital Fund II, LLC, an Illinois limited
liability company ("Fusion Capital"). Pursuant to the Purchase Agreement, we
have sold to Fusion Capital $250,000 of our common stock at a purchase price of
$0.12 per share and we have agreed to sell to Fusion Capital $250,000 of our
common stock at a purchase price of $0.12 per share on the date that a
registration statement related to the transaction is filed with the SEC. Subject
to earlier termination at our discretion, we may sell an additional $8.0 million
of our common stock to Fusion Capital from time to time over a 25-month period
after the SEC has declared effective the registration statement related to the
transaction. We agreed to issue to Fusion Capital 200,000 shares of our common
stock as an expense reimbursement and 3,500,000 shares of our common stock as a
commitment fee for entering into the Purchase Agreement.
