09/15/09 - Pacer filing shows that e.Digital and Samsung have executed a Settlement Agreement... that is, the agreement had to have been SIGNED IN SEPTEMBER which means the numbers WILL be reported by Nov. 15th. Thanks to trillium for bringing this to our attention a couple days ago. I know that I had not been thinking that the agreement would be final until the obligations were met this month and the case was dismissed. However for financial reporting purposes, the previous explanation makes more sense and it’s good to know that we will have the Samsung settlement numbers included in the upcoming 10Q as opposed to another 3 month wait until February. This one fact is very good news for shareholders.

Now just about 3 weeks later, e.Digital was ready to declare the date for its annual shareholder’s meeting:

10/05/09 - e.Digital files proxy statement for the annual shareholder’s meeting to be held 11/19/09... exactly 45 days later which is as early as they could possibly hold it given the filing date. If I recall correctly, I think that in years past we’ve gotten a little more notice than the required 45 days. It almost seems like they were in a hurry for some reason. Hmmm.

I’ve been thinking a lot over the weekend about what’s been going on with the company and what’s been said here during the past few weeks since we won against digEcor. One recent concern that I recall is that DM might be leaving us. I can’t see any way for this to happen since with 170 or so infringers left to go:

1. If they’re making big money on settlements (i.e. the Samsung settlement was large), they’re going to want to complete more filings against other large infringers.

2. If they’re only making small money (1-2 million/settlement) with minimal effort, they’re going to want to stick around for that too. There’s nothing wrong with a nice little bread & butter account like e.Digital to help pay the bills over the next few years. I’m sure that DM’s profit margin thus far has been more than acceptable to them.

3. If there’s some conflict of interest requiring that e.Digital engage another firm, I’d doubt that the conflict would be so complete as to cut DM out altogether. Even if it were, I’d bet that e.Digital could now hire a firm as good as or even better than DM - possibly without a contingency fee arrangement.

In short, I’m not at all worried about e.Digital’s future legal representation.

Next I would like to offer my opinions regarding the Samsung settlement. At first, I was quite disappointed that they settled rather than go to Markman - and in some ways, still am. I had some renewed hope with the obligations aspect and had thought this could signal something bigger (although I never believed there was much chance of a buyout). In any case, we don’t have any more information as to what has transpired or why but I will say that my feelings about the amount have changed somewhat. I had said before that the settlement would likely be less than $5M. I now think it will most likely be in the range of $5-10M and I feel that such an amount would be acceptable assuming many more filings and settlements to come during the next year. If the amount is anything in the double-digit (over $10M) range, I will be thrilled... and if over $20M, absolutely ecstatic.

Regarding the share price, I can see us probably drifting lower... but not by much and not for long. We can already see signs that we’re on other people’s radar and I think that as the shareholder’s meeting nears along with the anticipation of the 10Q and additional filings (which could happen at any time), we’ll see the share price rise again to new highs... quite likely BEFORE news is released. If I had any available funds, I would be buying today. I imagine that a decent Samsung settlement coupled with new filings should make for quite a one-two punch... and such is quite likely to happen very, very soon in my opinion.

Finally, I’ve begun to consider the possibility of settlements without filings. I know we always assumed that this could not happen due to the potential advantage it might give to an infringer. But if DM has found a way to approach companies and secure a reasonable settlement without any filings, wouldn’t THAT be a kick in the head? Such a settlement announcement would come out of the blue without warning and imply a new source of unexpected future revenue. This is something that I can’t help but wonder if they might discuss at the SHM. It might be a good question for someone to ask anyway.

- Sinkman