It's amazing that you and others still don't understand what the scheduled S-3 share registration is all about. It is not to register more shelf shares for the company to sell as you and many others seem to believe. The upcoming S-3 is to register "Conversion Shares" to be available for the holders of Series D Convertible Preferred shares (CP shares).
The company will not get any money whatsoever for these shares. It is the way it repays the loans that were converted into Series D shares. The CP noteholders are able to convert their non-liquid CP shares into common stock. Each CP share can be converted into $10 in common stock at whatever the conversion price is at the time of conversion. Currently the conversion price is $0.19, but can go lower if EDIG sells any shelf shares for less than that.
The CP noteholders are able to short sell the stock before converting, which is why it is referred to as "toxic" financing. However, the covenants provide that e.Digital may ask the noteholders to refrain from short selling for 180 days after the registration is effective.
Unlike the last S-3, which was to register 20 million shelf shares, this dilution will not bring any money into the company. It is purely for the benefit of the Series D CP holders.
From the 8-K:
6. REGISTRATION RIGHTS On or before June 30, 2003, the Company shall undertake to file a registration statement for the resale of the Conversion Shares with the Securities and Exchange Commission ("SEC") on Form S-3 or other appropriate form, and will utilize commercially reasonable efforts to make such registration statement effective as soon as possible thereafter.
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