SOURCE: e.Digital Corporation

November 10, 2011 10:00 ET

e.Digital Announces Second Quarter Results

SAN DIEGO, CA--(Marketwire - Nov 10, 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 second quarter of fiscal 2012 ended September 30, 2011.

The Company reported net income of $163,000, or $0.00 per share, for the second quarter of fiscal 2012 compared to a net loss of $272,000 or $(0.00) per share for the prior year's second quarter. For the second quarter of fiscal 2012 revenues totaled $1.0 million compared to $238,000 for the second quarter of the prior year. The most recent quarter included $0.9 million of patent license revenues compared to none for the second quarter of the prior year. Gross profit for the second quarter, including the positive contribution of licensing margins, was $599,000, 57% of revenues, compared to $89,000, 37% of revenues, for the prior year's second quarter. Operating expenses declined to $334,500 from $361,000 for the prior year's comparable quarter primarily due to reduced staffing costs including reduced non-cash stock compensation expense. Quarter-end cash increased to $3,032,000 from $1,806,000 at March 31, 2011.

For the six months ended September 30, 2011 the Company reported net income of $894,000, or $0.00 per share, on revenues of $3.2 million. This is an improvement over the comparable six months of the prior year that had a net loss of $654,000 on revenues of $750,000.

"Higher margin revenue from Flash-R™ licensing allowed us to post a profitable quarter and profitable six months," said Fred Falk, president and CEO of e.Digital Corporation. Even though the Colorado litigation is now concluded, Flash-R licensing activities continue while our '774 and '737 patents are in reexamination. We recently signed a licensing agreement without litigation that we believe will contribute to a profitable third fiscal quarter. While the timing and amount of any future licenses may be impacted positively or negatively by the patent reexamination and other factors, we remain optimistic about the revenue potential of our Flash-R portfolio."

"With regard to the reexamination process, we received and are responding to an office action from the United States Patent and Trademark Office ("USPTO") on the '774 patent. We will likewise respond to the '737 office action when received. We are encouraged that one of the outcomes of the reexamination process is that we will have clarity on the language and applications of the patents for future licensing and litigation. We expect the reexamination process to conclude within approximately six months."

The Company continues to advance the development of its Nunchi™ technology. The Nunchi platform consists of an infrastructure for mobile devices and host servers. Since the Nunchi Server hosts third-party application specific signal processing algorithms, the infrastructure must be thoroughly defined and rigorously tested. In the current quarter, the Nunchi team will gather data to test larger sample groups, focusing on scalability and adaptability to multiple wireless operator networks. In fiscal 2011 the Company filed seven patent applications related to communication networks and digital data distribution and continues to add to its IP portfolio.

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:

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)
September 30, March 31,
2011 2011
$ $
Cash 3,032 1,806
Accounts receivable 101 98
Inventory 217 256
Deposits and prepaid expenses 36 30
Total current assets 3,386 2,190
Property and equipment, net 4 7
Total assets 3,390 2,197
Accounts payable 230 24
Accrued and other 239 153
Total current liabilities 469 177
Stockholders' equity 2,921 2,020
Total liabilities and stockholders' equity 3,390 2,197
e.Digital Corporation and subsidiary
Condensed Consolidated Statement of Operations
(000's omitted except per share amount)
For the three months For the six months
ended September 30, ended September 30,
2011 2010 2011 2010
$ $ $ $
Revenues 1,042 238 3,224 750
Cost of revenues 443 149 1,456 487
Gross profit 599 89 1,768 263
Operating expenses:
Selling and administrative 231 274 480 640
Research and related expenditures 104 87 293 246
Total operating expenses 335 361 773 886
Operating income (loss) before income taxes 264 (272 ) 995 (623 )
Provision for income taxes (101 ) - (101 ) -
Income (loss) 163 (272 ) 894 (623 )
Dividends on preferred stock - - - (31 )
Income (loss) attributed to common stockholders 163 (272 ) 894 (654 )
Income (loss) per common share - basic and diluted 0.00 (0.00 ) (0.00 ) 0.00
Weighted average common shares outstanding
Basic and diluted 293,003 293,003 293,003 289,994