e.Digital Corporation (fka EDIG)

[Cassandra]

HrH/Ory: Setting the record straight regarding the Basso Entities and e.Digital.

Contrary to LL's contention on agora, Basso did not "accumulate" shares. They bought the lion's share of the Series EE convertible preferred shares in Novemember. The Series EE CP shares are the worst kind of PIPEs wherein the dollar amount per CP share is fixed and the number of common shares into which they are converted is dependent upon the share price in the preceeding 20 trading days (85% of the VWAP).

This is the format used in toxic or death spiral convertibles. The only thing that prevents this from being a classic death-spiral (such as the horrific Series C in 2000) is that the covenants state that conversion price shall not be lower that $0.19 unless the company offers any common shares or common share equivalents (debt, etc.) to any party below that price. If that happens they could become the worst of the worst.

The covenants also state that no party may convert shares that give them ownership of more than 4.99% of common shares outstanding (as that is reportable to the SEC). However, it appears that the SEC has taken the position that just having beneficial ownership of (i.e. the right to own) more than 4.99% requires reporting. Therefore, e.Digital belatedly filed Sch 13G to report the beneficial ownership of the Basso Entities, which are controlled by the same individuals.

Contrary to what LL says, Basso does not "own" any common shares, they have only "beneficial ownership."

I explained the difference in beneficial ownership of unregistered derivative securities and ownership of common shares in this post: http://www.ragingbull.lycos.com/mboard/boards.cgi?board=EDIG&read=1219808

The covenants of the Series EE CP shares required e.Digital to file a registration statement (S-3) within 30 days or face liquidated damages. Furthermore, the company also faces liquidated damages if the registration statement was not declared effective within 90 days. Those 90 days were up on March 2, so they are now 44 days into liquidated damages.

e.Digital has ammended and resubmitted the S-3 multiple times (on forms S-2A and 424B3), most likely in an attempt to satisfy the SEC that it has all of the information required. The company has also filed ammendments to the last 10K and 10Q (just a statement about accounting controls) as well as the Schedule 13G declaring the over 4.99% beneficial ownership of the Basso entities.

This delay is reminisent of the delay in the S-3 a couple of years ago which allowed I Kant to profit.

Sorry that this is so long, but I'd really like to help shareholders understand the repeated financings e.Digital uses.

When one invests in underfunded OTC stocks, it's critical to understand the implications of toxic PIPEs and loans structured such as was the I Kant loan (which was as bad or worse than a toxic PIPE).

Those who want to pump the stock always downplay how damaging these finanicings are to the share price and call those who shine the light on the details "bashers" who should be ignored. If I were a basher in cahoots with the financiers, would I let people know how these work (legal and illegal shorting), the dilution they cause and the effect on the share price? The financiers need pumpers more than so-called "bashers" as they can tank the stock on their own with short sales.

If you really want to know what's going on, NEVER trust those who assure you that these financings are good or even just that they aren't bad. They all involve more shares that the financiers need to sell with someone else buying the newly minted shares.

Financiers pay promoters to push the stock, often posting on message boards and sounding like longs. It helps the financiers to profit if the shareholders feel okay witht he financing and continue to add shares. That's why relying on boards like agoracom is very hazzardous. FL Barrister is probably on the right track and I think LL is the #1 suspect.

All OTC investors should pay attention to the SEC filings and learn to read them without relying on the interpretations of others.

http://www.pinksheets.com/quote/filings.jsp?symbol=EDIG

Again, sorry for the length. Please feel free to ask questions for clarification or if you want to see excerpts from the filings that back-up what I say. I'm always happy to provide the sources to as back-up.