SOURCE: e.Digital Corporation

February 11, 2010 16:25 ET

e.Digital Reports Fiscal 2010 Q3 Financial Results

Licensing Revenues and Additional Flash-R™ Patent Portfolio Business Developments Anticipated in Fiscal 2010 Q4

SAN DIEGO, CA--(Marketwire - February 11, 2010) - e.Digital Corporation (OTCBB: EDIG), a leading technology innovator of dedicated portable entertainment systems and patented flash memory-related technology, today reported revenues for its fiscal 2010 third quarter ended December 31, 2009 totaled $284,000, compared to revenues of $3.9 million for fiscal 2009 Q3, which included $3.65 million in licensing fees from the Company's Flash-R™ patent portfolio.

"Our revenues vary significantly quarter to quarter due primarily to the timing of licensing revenues," remarked Fred Falk, e.Digital's president and CEO. "Revenues in fiscal 2010 Q3 were lower as we previously completed licensing seven companies in the first round of filings and our legal representatives recently filed against 19 more companies in the second round of Flash-R related patent infringement cases."

"As we announced in December, we are pleased to have entered into our first royalty-bearing license and settlement agreement with one of the companies in the second round of filings," continued Falk. "We will receive our first royalty payment from the licensee later this year."

Commenting on the Company's eVU™ business, Falk said, "Our eVU portable IFE systems and services business added three new airline customers last quarter and we expect additional eVU business this quarter."

Gross profit for fiscal 2010 Q3 was $104,000 or 37% of revenues, compared to $2.3 million or 59% of revenues for the same period a year ago, which included $2.2 million of patent licensing margin. Gross profit margins are highly dependent on revenue mix, prices charged, volume of orders, and for patent licensing the amounts of contingency legal fees and costs.

While operating expenses for fiscal 2010 Q3 were comparable to fiscal 2009 Q3 as both totaled $689,000, there were changes in the expenditure mix. Fiscal 2010 Q3 included $58,000 in shareholder related costs due to the annual meeting being held in the fiscal third quarter and $110,000 of non-cash stock-based compensation expense. Reduced current period expenses included $28,000 of reduced staffing costs due to fewer personnel and $163,000 of reduced professional fees primarily due to reduced business litigation costs as a result of the favorable outcome of the digEcor litigation. The Company expects professional fees in fiscal 2010 Q4 to be less than the prior year due to the conclusion of the digEcor business litigation.

Loss attributable to common stockholders for fiscal 2010 Q3 included the net loss after taxes of $315,000 reduced by accrued and deemed dividends on the Series AA Stock of $45,000 for a net loss attributable to common stockholders of $361,000, or (0.00) per share. The net income after tax for fiscal 2009 Q3 was decreased by accrued and deemed dividends of $43,000 for net income attributable to common stockholders of $1.5 million, or 0.01 per share.

Revenues for the first nine months of fiscal 2010 were $2.0 million, compared to $6.1 million for the same nine months in fiscal 2009. The reduction in revenues reflected reduced patent license revenues. Fiscal 2010 nine-month revenues included eVU products and service revenue of $769,000 and patent license revenue of $1.25 million.

Gross profit for the first nine months of fiscal 2010 was $1.1 million or 57% of revenues, compared to $3.6 million or 59% of revenues for the same period a year ago.

Operating expenses for the first nine months of fiscal 2010 were $1.7 million, compared to $2.1 million for the first nine months of fiscal 2009. The $400,000 decrease included reduced staffing costs of $147,000 due to fewer personnel, an $18,000 reduction in shareholder related costs due to reduced annual meeting mailing costs, and $373,000 of reduced business litigation and legal accrual costs as a result of the favorable outcome of the digEcor litigation, offset by a $95,000 increase in non-cash stock-based compensation expense.

Loss attributable to common stockholders for the first nine months of fiscal 2010 was $681,000 or $(0.00) per share, compared to income attributable to common stockholders of $762,000 or $0.00 per share for the same nine-month period last year.

"To date, we have made good progress on the next generation of our proprietary eVU platform as we remain committed to introducing new eVU systems later this year directly and through partnering efforts," Falk added. "We also anticipate licensing revenues and additional Flash-R patent portfolio business developments this quarter and throughout this calendar year."

Commenting on the Company's plans to attract additional investment interest in e.Digital, Robert Putnam, e.Digital's senior vice president, stated, "As we continue to build upon last fiscal year's progress through landing and announcing anticipated Flash-R licensing agreements, new eVU orders and partnerships, and improving the Company's financials, we expect to draw the attention of micro cap funds and retail investors with an interest in intellectual property related equities. We believe we have some of the fundamentals in place to make e.Digital appealing to funds and new investors and, this year, we expect to add other elements necessary to attract significant new investment interest."

About e.Digital Corporation: e.Digital is a leading innovator of dedicated portable in flight entertainment systems. More than 30 airlines have made dedicated portable systems powered by e.Digital technology their in flight entertainment choice. e.Digital also owns and is monetizing its Flash-R™ portfolio of flash memory-related patents. e.Digital was the first company to develop, patent, and productize fundamental techniques that opened the door to the widespread use of flash memory in many of today's popular electronic products. For more information about e.Digital, please visit:

Safe Harbor statement under the Private Securities Litigation Reform of 1995: All statements made in this document, other than statements of historical fact, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. You should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, the stage of product and market development, expected future developments and other factors that we believe are appropriate under the circumstances. These forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the businesses of the Company and the industries and markets in which the Company operates. Actual outcomes and results may differ materially from what is expressed or implied by the forward-looking statements. More information about potential factors that could affect the Company can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed with the Securities and Exchange Commission ("SEC"). e.Digital Corporation disclaims any intent or obligation to update these or any forward-looking statements, except as otherwise specifically stated by it.

                   e.Digital Corporation and subsidiary
                   Condensed Consolidated Balance Sheet
                  (000's omitted except per share amount)

                                                  December 31,   March 31,
                                                      2009         2009
                                                       $            $
    Cash                                                 2,839        3,814
    Accounts receivable                                    213           94
    Inventory                                              427          517
    Deposits and prepaid expenses                           19           26
                                                  ------------ ------------
  Total current assets                                   3,498        4,451
    Property and equipment, net                             14           27
                                                  ------------ ------------
  Total assets                                           3,512        4,478
                                                  ============ ============

    Accounts payable                                       101          203
    Accrued and other                                      170          590
    Convertible term debt                                    -          381
                                                  ------------ ------------
  Total current liabilities                                271        1,174
  Long term liabilities                                      -           24
  Stockholders' equity                                   3,241        3,280
                                                  ------------ ------------
  Total liabilities and stockholders' equity             3,512        4,478
                                                  ============ ============

                      e.Digital Corporation and subsidiary
                 Condensed Consolidated Statement of Operations
                     (000's omitted except per share amount)

                                  For the three months  For the nine months
                                   ended December 31,    ended December 31,
                                    2009       2008       2009       2008
                                     $          $          $          $
Revenues                              284      3,906      2,019      6,058
Cost of revenues                      180      1,619        876      2,500
                                  -------    -------     -------   -------

  Gross profit                        104      2,287      1,143      3,558
Operating expenses:
  Selling and administrative          559        577      1,387      1,743
  Research and development            130        112        336        388
                                  -------    -------     -------   -------
Total operating expenses              689        689       1,723     2,131
                                  -------    -------     -------   -------
Operating income (loss)              (585)     1,598        (580)    1,427
Other income (expenses)                32        (50)         12      (313)
                                  -------    -------     -------   -------
Income (loss) before income taxes    (553)     1,548        (568)    1,114
Provision for income taxes            238          -          31      (264)
                                  -------    -------     -------   -------
Income (loss)                        (315)     1,548        (537)      850
Dividends on convertible preferred
 stock                                (45)       (43)       (144)      (88)
                                  -------    -------     -------   -------
Income (loss) attributed to common
 stockholders                        (360)     1,505        (681)      762
                                  =======    =======     =======   =======
Income (loss) per common share -
 basic and diluted                  (0.00)      0.01       (0.00)     0.00
                                  =======    =======     =======   =======

Weighted average common shares
  Basic                           286,626    279,144     284,521   276,917
                                  =======    =======     =======   =======
  Diluted                         286,626    281,455     284,521   277,912
                                  =======    =======     =======   =======

Contact Information

    e.Digital Corporation:
    Robert Putnam
    (858) 304-3016 ext. 205
    Email Contact