SOURCE: e.Digital Corporation

November 12, 2010 08:30 ET

e.Digital Reports Fiscal Q2 2011 Financial Results

Company to Announce New IP & Business Developments This Quarter

SAN DIEGO, CA--(Marketwire - November 12, 2010) - e.Digital Corporation (OTCBB: EDIG), a leading innovator of dedicated portable entertainment systems and patented flash memory-related technology, today reported revenues for fiscal Q2 2011 ended September 30, 2010 totaled $238,000, compared to revenues of $1.5 million for the same period a year ago. Fiscal Q2 2010 revenues included $1.25 million in licensing fees from the Company's Flash-R™ patent portfolio.

e.Digital's Flash-R patent portfolio is comprised of fundamental technology related to the use of flash memory in the large and growing portable electronic products market. The Company introduced the first portable recorder with removable flash memory in 1993 and believes its patent portfolio to be essential to many consumer electronics products that utilize flash memory including cell phones, digital cameras, camcorders, PDAs and other popular devices.

e.Digital filed enforcement actions against 19 companies in November 2009 after settling with and licensing seven companies in its first round of cases. To date, three of the 19 companies in the second round have settled and entered into licensing agreements. A Markman hearing has been scheduled for January 28, 2011 in connection with the second round of Flash-R intellectual property (IP) cases.

Gross profit for fiscal Q2 2011 was $89,000 or 37% of revenues, compared to $937,000 or 62% of revenues for the same period a year ago that included $807,000 of margin from patent licensing.

Operating expenses for fiscal Q2 2011 were $361,000, compared to $377,000 in fiscal Q2 2010.

Loss attributable to common stockholders for fiscal Q2 2011 was $272,000 or $(0.00) per share, compared to income attributable to common stockholders of $292,000 or $0.00 per share for the same period last year.

Revenues for the first six months of fiscal 2011 were $750,000, compared to $1.7 million for the same six months in fiscal 2010. The 57% reduction in revenues was due primarily to the decrease in patent license revenue.

Gross profit for the first six months of fiscal 2011 was $264,000 or 35% of revenues, compared to $1.0 million or 69% of revenues for the same period a year ago that included $807,000 of margin from patent licensing.

Operating expenses for the first six months of fiscal 2011 were $886,000, compared to $1.0 million for the first six months of fiscal 2010. The decrease was derived primarily from reduced professional fees associated with the favorable digEcor litigation outcome reported last year.

Loss attributable to common stockholders for the first six months of fiscal 2011 was $653,000 or $(0.00) per share, compared to $320,000 or $(0.00) per share for the same period last year.

"We are in the process of filing new patents to expand our IP portfolio and look forward to announcing these new technology and business developments this quarter," said Fred Falk, president and CEO of e.Digital Corporation. "We anticipate additional IP licensing and eVU systems and services revenues this fiscal year."

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: 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)

                                    September 30,     March 31,
                                         2010            2010
                                          $               $
ASSETS
 Current
   Cash                                       2,145           2,819
   Accounts receivable                          169             109
   Inventory                                    298             347
   Deposits and prepaid expenses                 46              59
                                    --------------- ---------------
 Total current assets                         2,658           3,334
   Property and equipment, net                    7              11
                                    --------------- ---------------
 Total assets                                 2,665           3,345
                                    =============== ===============

LIABILITIES AND STOCKHOLDERS'
 EQUITY
 Current
   Accounts payable                             107              52
   Accrued and other                            103             316
                                    --------------- ---------------
 Total current liabilities                      210             368
 Stockholders' equity                         2,455           2,977
                                    --------------- ---------------
 Total liabilities and
  stockholders' equity                        2,665           3,345
                                    =============== ===============




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

                                          For the three     For the six
                                          months ended      months ended
                                          September 30,     September 30,
                                          2010     2009     2010     2009
                                           $        $        $        $
Revenues                                    238    1,512      750    1,735
Cost of revenues                            149      576      486      697
                                        -------  -------  -------  -------
 Gross profit                                89      936      264    1,038
Operating expenses:
 Selling and administrative                 274      251      640      827
 Research and development                    87      126      246      206
                                        -------  -------  -------  -------
Total operating expenses                    361      377      886    1,033
                                        -------  -------  -------  -------
Operating income (loss)                    (272)     559     (622)       5
Other income (expenses)                       -       (5)       -      (19)
                                        -------  -------  -------  -------
Income (loss) before income taxes          (272)     554     (622)     (14)
Provision for income taxes                    -     (206)       -     (206)
                                        -------  -------  -------  -------
Income (loss)                              (272)     348     (622)    (220)
Dividends on convertible preferred
 stock                                        -      (56)     (31)     (99)
                                        -------  -------  -------  -------
Income (loss) attributed to common
 stockholders                              (272)     292     (653)    (319)
                                        =======  =======  =======  =======
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  284,408  289,994  283,463
                                        =======  =======  =======  =======