SOURCE: e.Digital Corporation

August 12, 2011 09:15 ET

e.Digital Announces First Quarter Results

Company Reports Profitable Results for Q1 of FY 2012

SAN DIEGO, CA--(Marketwire - Aug 12, 2011) - e.Digital Corporation (OTCBB: EDIG), a leading innovator of dedicated portable entertainment systems and patented flash memory-related technology, today reported financial results for its first quarter of fiscal 2012 ended June 30, 2011.

The Company reported net income attributable to common stockholders of $731,000, or $0.00 per share, for the first quarter of fiscal 2012 compared to a net loss of $382,000 or $(0.00) per share for the prior year's first quarter. For the first quarter of fiscal 2012 revenues totaled $2.2 million compared to $512,000 for the first quarter of the prior year. The most recent quarter included $2 million of patent license revenues compared to $25,000 for the first quarter of the prior year. Gross profit for the first quarter, including the positive contribution of licensing margins, was $1,169,000, 54% of revenues, compared to $174,000, 34% of revenues, for the prior year's first quarter. Operating expenses declined to $438,000 from $524,000 for the prior year's comparable quarter primarily due to reduced staffing costs including reduced non-cash stock compensation expense.

"Our results continue to be dependent on the timing and amount of patent license revenues and related margins," said Fred Falk, president and CEO of e.Digital Corporation. During the first fiscal quarter of 2012 the Company recognized two new license arrangements covering three defendants. As there is a reluctance of patent infringers to negotiate and license without legal action, the Company is now in its second round of legal action and through the quarter ended June 30, 2011 had licensed fourteen defendants. The Company has an outstanding complaint against eleven remaining electronics manufacturers.

As previously reported, the June 2011 Markman opinion construed claim terms in one of the Company's Flash-R patents more narrowly than proposed by the Company. The parties to the litigation subsequently proposed a future discovery plan and requested the court to construe a claim term from a second patent in the litigation. The Company believes these recent developments could affect future licensing of the '774 patent. However, a successful determination from the United States Patent and Trademark Office ("USPTO") patent reexamination could resolve ambiguities and assist the Company in future enforcement of its '774 patent. As a consequence of these and other factors, the timing and amount of licenses, if any, by existing defendants is uncertain. Future events including court rulings, patent reexamination results and other factors could have a significant positive or negative impact on future patent enforcement and licensing activity.

Falk concluded, "While the IFE business remains slow and sporadic, we continue to aggressively pursue technology licensing activities. In fiscal 2011 we filed seven patent applications related to communication networks and digital data distribution. We continue to add what we believe to be important IP to our portfolio and seek to license applications of this IP this fiscal year."

About e.Digital Corporation: For more than 20 years, e.Digital's ideas and inventions have impacted the evolution of consumer products. Today, e.Digital innovations, including its Flash-R™ portfolio of flash memory-related patents, are essential to many portable consumer electronic products. The Company pioneered dedicated portable in-flight entertainment systems and more than 30 airlines have made e.Digital powered products their in-flight entertainment choice. For more information about e.Digital, please visit: www.edigital.com.

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)
(unaudited)
June 30, March 31,
2011 2011
$ $
ASSETS
Current
Cash 2,429 1,806
Accounts receivable 1,163 98
Inventory 220 256
Deposits and prepaid expenses 34 30
Total current assets 3,846 2,190
Property and equipment, net 5 7
Total assets 3,851 2,197
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable 572 24
Accrued and other 524 153
Total current liabilities 1,096 177
Stockholders' equity 2,755 2,020
Total liabilities and stockholders' equity 3,851 2,197
e.Digital Corporation and subsidiary
Condensed Consolidated Statement of Operations
(000's omitted except per share amount)
(unaudited)
For the three months
ended June 30,
2011 2010
$ $
Revenues 2,182 512
Cost of revenues 1,013 338
Gross profit 1,169 174
Operating expenses:
Selling and administrative 249 366
Research and related expenditures 189 158
Total operating expenses 438 524
Operating income (loss) before income taxes 731 (350 )
Provision for income taxes - -
Income (loss) 731 (350 )
Dividends on preferred stock - (31 )
Income (loss) attributed to common stockholders 731 (381 )
Income (loss) per common share - basic and diluted 0.00 (0.00 )
Weighted average common shares outstanding
Basic and diluted 293,003 287,017