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Monday, 08/14/2006 5:17:19 PM

Monday, August 14, 2006 5:17:19 PM

Post# of 93827
FOR IMMEDIATE RELEASE

e.DIGITAL CORPORATION REPORTS Q1 FISCAL 2007 RESULTS

Provides Update on eVU™ Business and

Flash Memory-based IP Monetization Efforts



(SAN DIEGO, CA, – August 14, 2006) – e.Digital Corporation (OTC: EDIG), a leading innovator of proprietary secure digital video technology and products, and patented technology in the utilization of flash memory in portable devices, today reported revenues for the first quarter of its fiscal year 2007 ended June 30, 2006 totaled $21,000 compared to revenues of $998,000 for the first quarter of fiscal 2006. The decrease resulted from the inability or unwillingness of contract manufacturer, Maycom, to timely deliver a 1250 unit digEplayer™ order as previously reported and the resulting digEcor litigation which has hindered volume eVU™ orders. At June 30, 2006 the prepaid order was still behind schedule. While waiting several weeks for digEcor’s definitive instructions regarding the 1250 unit order, Maycom has recently advised the Company that it is going ahead with its preparations to begin manufacturing the delayed order. Maycom has consented to onsite inspections by employees of e.Digital during the manufacturing process and has agreed to daily penalties for any further late delivery beyond their promised mid-October delivery date. However, delivery of this order is not assured nor can there be assurance that digEcor will accept delivery pursuant to the terms of the order.

The company reported an operating loss of $684,000 for its first fiscal quarter 2007, compared to an operating loss of $530,000 for the same period last year. Net loss available to common stockholders for the first fiscal quarter of 2007 was $(0.01) per basic diluted share, compared to $(0.00) per basic diluted share for the same period last year.

“While the digEcor complaint has hindered volume eVU mobile entertainment system orders to date, our turnkey entertainment services business continues to be well-received by companies offering, and expected to offer, eVUs to their customers/passengers/patients,” said Will Blakeley, e.Digital’s president and chief technical officer. “With Maycom’s scheduled delivery of the delayed 1250 units in mid-October and volume eVU production beginning this quarter with our U.S. manufacturer, we are focused on closing volume eVU orders and aggressively pursuing the monetization of our flash memory patent portfolio.”

In addition to direct eVU product sales, e.Digital believes that as its turnkey entertainment services solution is adopted, the Company will capture more margin on each unit sale and collect monthly revenues from content and other services, and could become profitable with annual deliveries totaling approximately 4,000 eVU units.

Blakeley concluded by providing an update on the company’s efforts to monetize its flash memory-based patent portfolio. “Over the last month, we have had productive IP consultations with several well-respected intellectual property law firms. We believe there is significant interest in prosecuting our patent portfolio on a contingency basis. With the assistance of IP veteran, Pat Nunally, management and outside law firms have been conducting patent due diligence while evaluating the licensing potential to companies in the cell phone, PDA/Pocket PC, portable A/V recorder, digital camera, camcorder, and other portable device industries. Based on results to date, we are encouraged about the prospects of beginning the licensing process to monetize our important patent portfolio this calendar year.”

About e.Digital Corporation:. e.Digital is a provider of secure portable Video on Demand products including its eVU™ mobile entertainment system. e.Digital also licenses its MicroOS™, Content Mark-Up Language (CML) application, LDP software, patent-pending Hardware Security technologies, Digital Rights Management (DRM) solutions, Content Download applications, Encryption and Content Protection solutions, and Video Display software applications. Additionally, e.Digital partners with leading, innovative companies, designing and providing manufacturing services for products employing the Company’s proprietary digital technology platforms. e.Digital is also pursuing the monetization of its flash memory-related patent portfolio. For more information about e.Digital and its technology platforms, please visit the company website at 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. These statements are not guarantees of future performance and involve risks, uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to the Company’s ability to finance its operations, favorably resolve the complaint filed by digEcor, Inc. against the Company and certain of its officers and employees, sell its products, implement a turnkey financial, product, and maintenance solution, manufacture and ship orders in a timely manner, secure additional business, monetize its patent portfolio and other risks identified and discussed in our filings with the Securities and Exchange Commission (“SEC”). 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.

Note: eVU and MicroOS are trademarks of e.Digital Corporation. All other company, product, and service names are the property of their respective owners.

CONTACT:
e.Digital Corporation: Robert Putnam, (858) 304-3016 ext. 205, rputnam@edigital.com





e.Digital Corporation and subsidiary

Condensed Balance Sheet

(000's omitted except per share amounts)







March 31, 2006

March 31, 2005



$

$

ASSETS





Current





Cash and cash equivalents

1,059

1,290

Accounts receivable

2

52

Deposits and prepaid expenses

32

505

Total current assets

1,093

1,847

Property and equipment, net

63

126

Total assets

1,156

1,973

LIABILITIES AND STOCKHOLDERS' DEFICIT





Current





Accounts payable

261

522

Accrued liabilities and other

627

616

Customer deposits

794

707

Lease liability

515

515

Unsecured notes, short-term

1,016

35

Convertible subordinated notes

397

942

Total current liabilities

3,610

3,337

Long-term liabilities

-

897

Stockholders' deficit

(2,454)

(2,261)

Total liabilities and stockholders' deficit

1,156

1,973









































e.Digital Corporation and subsidiary



Condensed Statements of Operations



(000's omitted except per share amounts)











For the year ended March 31,





2006

2005





$

$



Total revenue

3,250

4,252



Cost of revenue

3,136

3,255



Gross profit

114

997



Operating expenses:







Selling and administrative

1,318

1,518



Research and related expenditures

1,338

1,515



Total operating expenses

2,656

3,033



Operating loss

(2,542)

(2,036)



Other expense

565

381



Loss and comprehensive loss

(3,107)

(2,417)



Imputed and accrued dividends on preferred stock

2,161

1,326



Loss attributable to common stockholders

(5,268)

(3,743)



Loss per common share - basic and diluted

$ (0.03)

$ (0.02)



Weighted average common shares outstanding

177,472,037

165,525,386




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