IF EDIG gets through the reexam process favorably, these margins are impressive. And, if a postiive reexam means higher settlement values, all the better.

Gross Profit

Gross profit for the third quarter of fiscal 2012 was $1,140,046 or 89% of revenues. The gross profit on product and service revenues was 37% of related revenues and the gross profit on patent licensing fees was 95% of license revenues. The gross profit on licensing was higher than prior periods as we incurred no contingency legal fees on one license during the quarter. The gross profit for the prior year's third quarter was $45,308 or 32% of product and service revenues. There were no license revenues in the prior year's third quarter. Gross profit margins are highly dependent on revenue mix, prices charged, volume of orders, and for periods with patent licensing revenues the amounts of contingency legal fees and costs.

Operating Expenses

Selling and administrative costs for the three months ended December 31, 2011 declined by $61,491 compared to the same period in the year prior. The reduced current period selling and administrative expenses is due primarily to $74,000 of reduced staffing costs offset by increased professional fees.