e.Digital Corporation (fka EDIG)

[Cassandra]

Blackdog: He was pointing out that the company has the option of requiring conversion of the Series D convertible preferred shares if the share price is at $0.60 or better for 10 consecutive trading days. This would eliminate the dividends that e.Digital is paying the holders of these shares, which would save significant money to the company.

The part that JimC2003 (already booted BTW) emphasized in bold is that this can only occur if the Registration Statement (S-3) has been declared effective by the SEC. Since EDIG has not yet filed the S-3 for the 11 million plus conversion shares, they can't exercise this provision and can't discontinue the dividends.

If they had gotten the S-3 out of the way on or before June 30, 2003 as they promised in the covenants, they would have this option available to them, which would be a very good thing for the company and a bad thing for the financiers.

The worst part of the situation IMO is that this S-3 is still looming out there and e.Digital has not given a revised date for it to be filed. Since dilution like this usually causes a decrease in the PPS, it could catch investors and traders by surprise.