SOURCE: e.Digital Corporation

February 03, 2011 16:30 ET

e.Digital Reports Fiscal Third Quarter Results

SAN DIEGO, CA--(Marketwire - February 3, 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 third quarter of fiscal 2011 ended December 31, 2010.

The net loss attributable to common stockholders of $314,000, or $(0.00) per share, for the third quarter of fiscal 2011 was less than the prior year's third quarter loss of $360,000, also $(0.00) per share. For the third quarter of fiscal 2011 revenues totaled $141,000 compared to $284,000 for the third quarter of the prior year. Gross profit was $46,000, 32% of revenues, compared to $104,000, 37% of revenues, for the prior year. Operating expenses declined to $363,000 for the most recent third quarter compared to $688,000 for the prior year's third quarter.

Loss attributable to common stockholders for the first nine months of fiscal 2011 was $967,000 or $(0.00) per share, compared to $680,000 or $(0.00) per share for the same nine month period last fiscal year. For the first nine months of 2011 revenues totaled $891,000 a decrease from $2.0 million for the comparable prior year period. The prior year included $1.25 million in licensing fees from the Company's Flash-R™ patent portfolio compared to $31,000 for the most recent nine month period. Gross profit was $309,000, 35% of revenues, compared to $1.1 million, 57% of revenues, for the prior year. Operating expenses declined to $1.2 million for the most recent nine months compared to $1.7 million for the prior year period.

"Our results are highly dependent on the timing and amount of patent license revenues and related margins," said Fred Falk, president and CEO of e.Digital Corporation. "We have an outstanding complaint against sixteen electronics manufacturers, and the timing and amount of any future patent licenses is uncertain. Current year reductions in operating expenses reflect management cost controls, reductions of certain professional and public company costs and reduced non-cash compensation costs."

The Company continues to pursue patent enforcement activities. A Markman hearing (patent claims construction hearing) for the Company's second round enforcement action was held on January 28, 2011. A successful outcome could assist patent licensing efforts. Likewise a successful determination from the United States Patent and Trademark Office ("USPTO") patent reexamination would assist the Company in defending challenges to the validity of the Company's flash memory related patents.

With a goal of reducing costs and aligning to a traditional schedule the Company is now planning an annual meeting in the Summer following the release of its 2011 annual report for the fiscal year ending March 31, 2011. To bridge to the new meeting schedule the Company will hold a shareholder conference call for early March to update on fiscal 2011 activity and plans for fiscal 2012.

Falk concluded, "We recently reorganized research and development personnel to develop new technologies in the areas of communication networks and digital data distribution. Our goal is to expand our portfolio of intellectual property and continue to exploit our long record of technology innovation. We will provide more details on our new IP during the March conference."

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,
                                                        2010        2010
                                                         $           $
    Cash                                                  1,932       2,819
    Accounts receivable                                      93         109
    Inventory                                               290         347
    Deposits and prepaid expenses                            48          59
                                                    ----------- -----------
  Total current assets                                    2,363       3,334
    Property and equipment, net                               6          11
                                                    ----------- -----------
  Total assets                                            2,369       3,345
                                                    =========== ===========

    Accounts payable                                         99          52
    Accrued and other                                       124         316
                                                    ----------- -----------
  Total current liabilities                                 223         368
  Stockholders' equity                                    2,146       2,977
                                                    ----------- -----------
  Total liabilities and stockholders' equity              2,369       3,345
                                                    =========== ===========

                   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,
                                  2010       2009       2010       2009
                                   $          $          $          $
Revenues                              141        284        891      2,019
Cost of revenues                       95        180        582        876
                                ---------  ---------  ---------  ---------
  Gross profit                         46        104        309      1,143
Operating expenses:
  Selling and administrative          281        559        920      1,386
  Research and development             82        129        328        336
                                ---------  ---------  ---------  ---------
Total operating expenses              363        688      1,248      1,722
                                ---------  ---------  ---------  ---------
Operating loss                       (317)      (584)      (939)      (579)
Other income (expenses)                 -         32          -         12
                                ---------  ---------  ---------  ---------
Loss before income taxes             (317)      (552)      (939)      (567)
Provision for income taxes              3        237          3         31
                                ---------  ---------  ---------  ---------
Loss for the period                  (314)      (315)      (936)      (536)
Dividends on convertible
 preferred stock                        -        (45)       (31)      (144)
                                ---------  ---------  ---------  ---------
Loss attributed to common
 stockholders                        (314)      (360)      (967)      (680)
                                =========  =========  =========  =========
Loss per common share - basic
 and diluted                        (0.00)     (0.00)     (0.00)     (0.00)
                                =========  =========  =========  =========
Weighted average common shares
  Basic and diluted               293,003    286,626    291,000    284,521
                                =========  =========  =========  =========