e.Digital Corporation (fka EDIG)

[JBocca9801]

Cassandra--

For the last time, the 1994 stock option plan provides that options may qualify for treatment as either ISO's or NQSO's. From the Proxy statement of 09/2000:

General Description of the 1994 Plan

The 1994 Plan is designed to promote the interest of the Company and its stockholders by providing an incentive to certain key employees, directors and consultants of the Company and its affiliates to continue their employment and
to afford such employees, directors and consultants the opportunity to acquire and enlarge their stock ownership in the Company in order that they may have a direct interest in the Company's success. The 1994 Plan provides for the
granting of options which either qualify for treatment as incentive stock options under Section 422A of the Internal Revenue Code of 1986, as amended (the "Code") and are designated "incentive stock options" or which do not qualify for such treatment and are designated "nonstatutory stock options." Unless the context clearly indicates to the contrary, the term "option" used herein shall mean either an incentive stock option or a non-statutory stock option and the
term "optionee" shall mean any person holding an option granted under the 1994 Plan.

http://www.sec.gov/Archives/edgar/data/886328/000089843000002750/0000898430-00-002750.txt

Additionally, from the same proxy statement:

Nonstatutory Options. Other than incentive stock options granted under the 1994 Plan, all options granted under the 1994 Plan will be taxed as nonstatutory options. Upon the grant of a nonstatutory option, no income will be recognized
by the optionee and the Company will not be entitled to a deduction. This is because such options are not actively traded on an established market and the fair market value of the option privilege is not easily ascertainable. Upon the
exercise of nonstatutory options, the optionee will recognize taxable income in the amount by which the then fair market value of the shares of Common Stock acquired exceeds the option exercise price, with the Company being entitled to a
deduction in an equal amount. The amount of such taxable income will be characterized as compensation income to the optionee. Persons that may be subject to the application of the provisions of Section 16(b) of the Securities Exchange Act of 1934 are subject to certain additional rules.

Upon the subsequent disposition of the Common Stock, the optionee will recognize gain or loss, which will be characterized as capital gain or loss in an amount equal to the difference between the proceeds received upon disposition
and his or her basis for the shares (the basis being equal to the sum of the price paid for the stock and the amount of income realized upon exercise of the option) provided the shares are held as a capital asset. Any capital gain or
loss to the optionee will be characterized as long-term or short-term, depending upon whether his or her holding period for tax purposes exceeds one year.

The taxable income recognized upon the exercise of nonstatutory options is subject to withholding for federal income tax purposes. Accordingly, the Company generally must, as a condition to the exercise of a nonstatutory option, deduct from payments otherwise due to the optionee the amount of taxes required to be withheld by virtue of such exercise or require that the optionee pay such withholding to the Company or make other arrangements satisfactory to the Company regarding the payment of such taxes.

Cassandra, please post your proof which supports this statement which you made:

"However, since these execs exercised ISOs (incentive stock options), they had no withholding tax due whatsoever and no need to sell them immediately."

Please support your statements that the options exercised were treated for tax purposes as ISO's.

"J"