e.Digital Corporation (fka EDIG)

[Cassandra]

HH: chipperica is correct. The financiers do not cover their short position by buying shares on the open market. Their short position is already considered covered by an "underlying long position" which are the common shares to which they have either conversion rights or warrants (an additional 3 million shortable shares in this case).

The way it works is that they sell common shares on the open market and then convert their preferred shares or warrants at prices below what they sold them for. The shares they sell are all new shares being dumped into the float. That's why these kind of financing vehicles are so dilutive.