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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant þ
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Preliminary Proxy Statement
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Confidential, for Use of the Commission only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-11(c) or § 240.14a-12
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E.DIGITAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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e.Digital Corporation
16770 West Bernardo Drive, San Diego, California 92127
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held September 1, 2011
TO THE STOCKHOLDERS OF E.DIGITAL CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders (the “Annual Meeting”) of e.Digital Corporation, a Delaware corporation (the “Company”), will be held at the Radisson Suites Hotel Rancho Bernardo, located at 11520 West Bernardo Court, San Diego, California 92127, on September 1, 2011, beginning at 10:00 a.m. local time. The Annual Meeting will be held for the following purposes:
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To elect directors of the Company to serve as directors for the ensuing year and until such directors’ successor has been duly elected and qualified or until such directors have otherwise ceased to serve as directors.
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To ratify the appointment of SingerLewak LLP as independent accountants for the Company for the fiscal year ending March 31, 2012.
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To transact such other business as may properly come before the meeting or any postponements or adjournments thereof.
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The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.
I strongly encourage you to sign up for electronic delivery of our future annual reports and proxy materials in order to conserve natural resources and help us save costs in producing and distributing these materials. For more information, please see “Electronic Delivery of Proxy Materials and Annual Reports” on page 2 of the Proxy Statement.
The Board of Directors has fixed the close of business on July 8, 2011 as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting and at any adjournment or postponement thereof.
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By Order of the Board of Directors,
/s/ Allen Cocumelli
Allen Cocumelli
Chairman of the Board
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San Diego, California
July 20, 2011
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE 2011 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 1, 2011.
THE PROXY STATEMENT, FORM OF PROXY AND THE ANNUAL REPORT FOR THE FISCAL
YEAR ENDED MARCH 31, 2011 ARE AVAILABLE AT www.proxyvote.com
e.Digital Corporation
16770 West Bernardo Drive
San Diego, California 92127
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 1, 2011
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of e.Digital Corporation, a Delaware corporation (the “Company”), for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held beginning at 10:00 a.m. local time on September 1, 2011 at the Radisson Suites Hotel Rancho Bernardo, 11520 West Bernardo Court, San Diego, California 92127 and for use at any postponements or adjournments thereof for the purposes set forth in the accompanying Notice of Annual Meeting. Our telephone number is (858) 304-3016 and our facsimile number is (858) 304-3023. We intend to mail or electronically deliver this proxy statement, the accompanying proxy card and Notice of Annual Meeting on or about July 20, 2011 to all stockholders entitled to vote at the Annual Meeting.
Solicitation
We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this proxy statement, the proxy and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by directors, officers or other regular employees of our Company. No additional compensation will be paid to directors, officers or other regular employees for such services.
Voting Rights and Outstanding Shares
We have designated a record date of July 8, 2011 for the Annual Meeting. Only stockholders of record at the close of business on the record date will be entitled to notice of and to vote at the Annual Meeting. At the close of business on July 8, 2011, we had outstanding and entitled to vote 293,003,158 shares of common stock.
On all matters to be voted upon at the Annual Meeting, each holder of record of common stock on the record date will be entitled to one vote for each share held. All votes will be tabulated by the inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Abstentions will be counted towards the tabulation of votes cast on proposals presented to the stockholders for the purposes of determining the presence of a quorum and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether a matter has been approved. If your broker holds your shares in its name and you do not instruct your broker how to vote, your broker will nevertheless have discretion to vote your shares on our sole “routine” matter – the ratification of the appointment of our independent registered public accounting firm. Your broker will not have discretion to vote on our sole “non-routine” matter absent direction from you – the election of directors recommended by the Board of Directors. Directors will be elected by a plurality of the votes cast. As a result, the four nominees receiving the greatest number of affirmative votes will be elected. Abstentions and broker non-votes will not affect the election of a nominee who receives a plurality of votes.
The Board of Directors recommends that stockholders vote FOR election of the four directors named in this Proxy Statement to serve until the next Annual Meeting of Stockholders and until their successors are elected and have qualified (see page 2) and FOR ratification of the appointment of SingerLewak LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2012 (see page 6).
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Chairman of the Board at our principal offices, 16770 West Bernardo Drive, San Diego, California 92127, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy. If you hold shares through a bank or broker, you must contact that firm to revoke any prior proxy.
Stockholder Proposals
Any proposal relating to a proper subject which an eligible stockholder may intend to present for action at the Company’s 2012 Annual Meeting of Stockholders and which such stockholder may wish to have included in the proxy material for such meeting in accordance with the provisions of Rule 14a-8 promulgated under the Exchange Act must be received as far in advance of the meeting as possible in proper form by the Secretary of the Company at 16770 West Bernardo Drive, San Diego, California 92127 and in any event not later than March 23, 2012. It is suggested that any such proposal be submitted by certified mail, return receipt requested.
A stockholder’s notice to the Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on our books, of the stockholder proposing such business; (iii) the class and number of shares which are beneficially owned by the stockholder; (iv) any material interest of the stockholder in such business; and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Exchange Act, in his or her capacity as a proponent to a stockholder proposal.
Annual Report to Stockholders
The Company’s Annual Report to Stockholders for the year ended March 31, 2011, containing financial and other information pertaining to the Company, is being furnished to stockholders simultaneously with this Proxy Statement. Printed copies will be made available upon request.
Electronic Delivery of Proxy Materials and Annual Reports
If you are a stockholder of record, you may request and consent to electronic delivery of our future proxy materials and annual reports by following the instructions on your proxy card. If your shares are held in street name, please contact your broker, bank or other nominee and ask about the availability of electronic delivery. If you select electronic delivery, we will discontinue mailing the proxy materials and annual reports to you beginning next year and you will be sent an e-mail message notifying you of the Internet address or addresses where you may access the proxy materials and annual report. Your consent to electronic delivery will remain in effect until you revoke it. If you selected electronic delivery in a previous year, we will not mail the materials to you this year and you will receive an e-mail message with the Internet address where you may access the proxy materials and annual report for the current year.
ELECTION OF DIRECTORS
(Proposal One)
General
The Company’s bylaws state that the Board of Directors shall consist of not less than four nor more than seven members. The specific number of Board members within this range is established by the Board of Directors and is set at four for this election. A Board of four directors will be elected at the Annual Meeting. Unless otherwise instructed, proxy holders will vote the proxies received by them for the Company’s four nominees named below. In the event that any nominee of the Company is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as will assure the election of as many of the nominees listed below as possible, and, in such event, the specific nominees to be voted for will be determined by the proxy holders. It is not expected that any nominee will be unable or will decline to serve as a director. There are no arrangements or understandings between us and any other person pursuant to which he or she was or is to be selected as a director or nominee. There are no other persons whose activities are material or are expected to be material to the Company’s affairs.
The term of office of each person elected as a director will continue until the next annual meeting of stockholders and such time as his or her successor is fully elected and qualified or until his or her earlier resignation, removal or death.
The four candidates receiving the highest number of affirmative votes cast at the meeting will be elected directors.
The Board of Directors recommends that stockholders vote “FOR” each of the Director nominees listed below.
Nominees
The names of the nominees and certain information about them, as of the date of this proxy statement, are set forth below. Such information includes their present positions, principal occupations and public company directorships held in the past five years as well as the specific experience, qualifications, attributes or skills of each nominee that led the independent members of the Board to believe that, as of the date of this proxy statement, that nominee should continue to serve on the Board. However, each independent director may have a variety of reasons for believing a particular person would be an appropriate board member, and these views may differ from the views of other independent directors.
| Name |
Age |
Position and Offices |
Director Since |
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Alfred H. Falk
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56
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President, Chief Executive Officer and Director
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2009
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Allen Cocumelli (1)(2)
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60
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Chairman of the Board and Director
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1999
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Renee Warden (1)
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47
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Secretary and Director
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2005
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Eric M. Polis (2)
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41
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Director
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2008
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(1)
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Member of Audit Committee.
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(2)
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Member of Compensation Committee.
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Alfred H. Falk – was promoted and appointed as President and Chief Executive Officer of the Company by the Board of Directors on January 20, 2009 when he was also appointed as a Director. Mr. Falk had been the Company’s Vice President of Corporate Development since July 2004. He formerly served as President and a member of the Board of the Company from January 1997 (and from July 1998 as Chief Executive Officer) until July 2004. From March 1995 to January 1997, he served as Vice President of Corporate Development and Vice President of OEM and International Sales. Prior to joining the Company, Falk worked for Resources Internationale as director of U.S. sales from 1993 to 1995. From 1988 to 1993, he was the manager of OEM sales and technology licensing for Personal Computer Products, Inc. From 1978 to 1988, he held several management positions at DH Technology. Mr. Falk’s extensive business experience and background, prior sales experience, and his long service with the Company including as Chief Executive Officer since 2009, qualifies him to serve on our Board.
Allen Cocumelli – was appointed Chairman of the Board in October 2008. He also previously served as Chairman of the Board from April 2000 to November 2002. Mr. Cocumelli has been Secretary and General Counsel of SimpleNet, Inc. since 2004. Prior thereto, he was a Director of Website Services at Yahoo! Inc. from 2000 to 2004. Prior to joining Yahoo! Inc., Mr. Cocumelli was General Counsel of Simplenet Network Communications Inc. from 1996 and Chief Operating Officer of Simplenet Network Communications Inc. from November 1997 until 1999. Prior to joining Simplenet Network Communications Inc., Mr. Cocumelli was in the private practice of law. From 1978 to 1986 he served as a manager in the Components Manufacturing Group and as Director of Corporate Training and Development at Intel. Mr. Cocumelli obtained a B.S. degree in Industrial Psychology from the University of California, Los Angeles in 1972 and a J.D. from the Thomas Jefferson School of Law in 1991. Mr. Cocumelli is a member of the California Bar Association. The Board believes that Mr. Cocumelli’s technology experience and legal background will continue to be valuable as the Company pursues its patent enforcement and licensing strategy.
Renee Warden – Ms. Warden served as a Financial Manager for Verifone from July 2009 to June 2011. Previously, Ms. Warden was Director of Accounting for Revolution Money, Inc. from April 2007 to July 2009. Prior to its acquisition by Crown Castles in April 2007, Ms. Warden was Manager Special Projects/SOX for Global Signal, Inc. Prior to joining Global Signal, Inc. Ms. Warden was Vice President and Controller for Kintera, Inc. from May 2005 to May 2006. Prior to joining Kintera, Inc., Ms. Warden was an executive officer of e.Digital Corporation. Ms. Warden joined e.Digital Corporation in 1991 as Accounting Manager. In 1997 Ms. Warden was appointed Controller and Corporate Secretary for e.Digital Corporation and in 2003 was promoted to Chief Accounting Officer and Secretary until May 2005. From 1993 to 2003 Ms. Warden also held the positions of Chief Accounting Officer, Secretary and Director of Human Resources for American Technology Corporation. Ms. Warden obtained a B.S. degree in Business Accounting from the University of Phoenix in 1999. Ms. Warden’s broad financial and accounting experience positions her well to serve as a director and to fill the critical role of Audit Committee “financial expert.”
Eric M. Polis - was appointed a Director in October 2008 and Secretary in December 2010. He has been employed as an asset manager for privately-held Davric Corporation since 1997. He was Secretary, Treasurer and a Director of ASI Technology Corporation, a publicly traded specialty finance company, from July 2000 to May 2010. Mr. Polis is also a private investor and serves on the board of several Las Vegas non-profit organizations. He obtained a B.S. in Business Administration from the University of Arizona in 1993. Mr. Polis’ prior public company executive experience and broad general investment and business experience qualify him to serve on our Board.
The terms of all directors will expire at the next annual meeting of the Company’s stockholders, or when their successors are elected and qualified. Directors are elected each year, and all directors serve one-year terms. Officers serve at the pleasure of the Board of Directors. There are no arrangements or understandings between the Company and any other person pursuant to which he was or is to be selected as a director, executive officer or nominee. For information concerning beneficial ownership of Common Stock by directors, nominees and executive officers, see “Security Ownership of Certain Beneficial Owners and Management” below.
CORPORATE GOVERNANCE
General
Pursuant to Delaware law and our bylaws, our business and affairs are managed by or under the direction of our Board of Directors. Members of the Board are kept informed of our business through discussions with our President and other officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees. Our Board has two standing committees:
• The Audit Committee
• The Compensation Committee
A copy of our Audit Committee Charter is posted on the Company’s website and is available for review at www.edigital.com. Copies also are available in print, free of charge, by writing to Investor Relations, e.Digital Corporation, 16770 West Bernardo Drive, San Diego, California 92127. The Compensation Committee does not have a charter.
Director Independence
Our Board of Directors is comprised of four individuals. The Board of Directors has adopted the independence standards applicable to NASDAQ Stock Market listed issuers and after review of all relevant transactions or relationships between each director, or any of his or her family members, and us, our senior management and our independent registered public accounting firm the Board has determined that two members (Messrs. Cocumelli and Warden) are independent under such standards. While Mr. Cocumelli, as Chairman of our Board of Directors, is technically considered as an executive officer under our bylaws, we do not believe that he meets the definition of an “executive officer” under Rule 16a-1(f) of the Exchange Act in that he does not perform any policy-making functions for our Company, nor is he compensated for this position. Consequently, we consider Mr. Cocumelli as independent.
Board Committees and Meetings
The Board of Directors met five times during fiscal 2011 and acted by unanimous written consent one time. During such fiscal year, each Board member attended 100% of the meetings of the Board held during the period for which he was a director.
The Company has an Audit Committee and a Compensation Committee. The Company does not have a Nominating Committee or a Corporate Governance Committee.
Audit Committee -The Audit Committee, currently consisting of Ms. Warden and Mr. Cocumelli, assists our Board of Directors in discharging its responsibilities to oversee the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent auditor’s qualifications and independence. It reviews the audit and control functions of the Company, the Company’s accounting principles, policies and practices and financial reporting, the scope of the audit conducted by our Company’s auditors, the fees and all non-audit services of the independent auditors and the independent auditors’ opinion and letter of comment to management and management’s response thereto. The Audit Committee is governed by a written charter adopted in 2000. The Audit Committee held four meetings during the fiscal year ended March 31, 2011.
Our Board of Directors has determined that each member of the Audit Committee is able to read and understand fundamental financial statements, including our Company’s balance sheet, income statement and cash flow statement. Our Board of Directors has also determined that Ms. Warden qualifies as an “audit committee financial expert,” as defined in applicable Securities Exchange Commission rules. Since December 20, 2010, when the current Audit Committee was designated, the Board has determined that the members have met the independence and other requirements of applicable Securities Exchange Commission rules.
Compensation Committee -The Compensation Committee, currently comprised of two non-employee Board members, Allen Cocumelli and Eric M. Polis (appointed as Secretary on December 20, 2010 an uncompensated non-employee officer position), assists our Board of Directors in discharging its responsibilities in respect of compensation of our executive officers and directors. It reviews and recommends to the Board the salaries, bonuses and perquisites of our Company’s executive officers. The Compensation Committee also reviews and recommends to the Board any new compensation or retirement plans and administers such plans. No executive officer of our Company serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Company’s Board of Directors or Compensation Committee. The Compensation Committee held one meeting during the fiscal year ended March 31, 2011.
Our Compensation Committee has not adopted a formal charter. The Compensation Committee performs the following functions regarding compensation for the named executive officers (“ NEOs”):
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Review and approve our Company’s goals relating to Principal Executive Officer (“PEO”) compensation.
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Evaluate the PEO’s performance in light of the goals.
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Make recommendations to the board regarding compensation to be paid to any other NEOs.
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Annually review, for all NEOs, annual base salary, bonus, long-term incentives, employment-related agreements and special benefits.
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The Committee’s compensation policies are particularly designed to align executive officer and senior management salaries and bonus compensation to the individual’s performance in the short-term and to emphasize compensation from equity, primarily employee stock options, for long-term incentives.
Upon his appointment on or about January 16, 2009, the Committee, without a formal meeting, approved for Mr. Falk a continuation of his then annual base salary of $155,000, a level the Committee felt based on the increased responsibilities was at the lower range of base salaries for Principal Executive Officers at similarly situated companies. Although the Committee attempts to align the Principal Executive Officer’s salary with performance, as part of a general company-wide effort to contain costs, it chose to provide no salary increases until July 2010 when the annual base salary for Mr. Falk was increased to $185,000. The Committee believes Mr. Falk has significant long-term stock incentives. Mr. Falk is currently an employee at will.
Role of Board of Directors in Risk Oversight
Our management is primarily responsible to manage risk and inform the Board regarding our most material risks. The
Board has oversight responsibility of the processes established to monitor and manage such risks. The Board believes that such oversight function is the responsibility of the entire Board through frequent reports and discussions at scheduled Board meetings. In addition, the Board has delegated specific risk management oversight responsibility to the Audit Committee. In particular, the Audit Committee oversees management of risks related to accounting, auditing and financial reporting and maintaining effective internal controls for financial reporting. The Compensation Committee oversees risk management related to our executive compensation plans and arrangements. The Board believes this structure facilitates the Board’s oversight of risk management because it allows the Board, working through its committees, including the independent Audit Committee and the Compensation Committee, to participate actively in the oversight of management’s actions. These specific risk categories and our risk management practices are regularly reviewed by the entire Board in the ordinary course of regular Board meetings.
Communication with Directors
Stockholders and other interested parties who want to communicate with our Board of Directors, the non-employee Board members as a group or any other individual director should write to us at:
e.Digital Corporation
c/o Secretary
16770 West Bernardo Drive
San Diego, California 92127
Pursuant to procedures established by our non-employee Board members, we review each communication sent in accordance with the above instructions and forward such communication to the specified person or persons for response. We will not forward any incoherent, obscene or similarly inappropriate communication, or any communication that involves an ordinary business matter (such as a job inquiry, a business account or transaction, a request for information about us, form letters, spam, invitations and other forms of mass mailings), unless requested by a director or at Management’s discretion.
Code of Business Conduct and Ethics
The Company has adopted a Code of Conduct that includes a code of ethics that applies to all of the Company’s employees and directors (including its principal executive officer and its principal finance and accounting officer). This Code of Conduct is posted on the Company’s website and is available for review at www.edigital.com. Copies are also available in print, free of charge, by writing to Investor Relations, e.Digital Corporation, 16770 West Bernardo Drive, San Diego, California 92127. We intend to disclose any amendments to, or waivers from, our code of business conduct and ethics on our website.
Director Compensation
Stock Options -Directors have received in the past and may receive in the future stock options pursuant to the Company’s stock option plans.
Standard Compensation -The Company has no other arrangements to pay any direct or indirect remuneration to any directors of the Company in their capacity as directors other than in the form of reimbursement of expenses for attending directors’ or committee meetings.
RATIFICATION OF INDEPENDENT AUDITOR
(Proposal Two)
The Audit Committee has recommended, and the Board has approved, the selection of SingerLewak LLP to provide audit services to the Company for the fiscal year ending March 31, 2012. Representatives of SingerLewak LLP, are not expected to be present at the Annual Meeting.
Although this appointment of SingerLewak LLP as independent accountants is not required to be submitted to a vote by stockholders, the Board believes it appropriate, as a matter of policy, to request that the stockholders ratify the appointment. If stockholder ratification (by the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the Meeting) is not received, the Audit Committee of the Board will reconsider the appointment. Even if the selection of SingerLewak LLP is ratified, the Audit Committee of the Board may, in its discretion, appoint a different firm at any time during the year if the Audit Committee feels that such a change would be in the best interests of the Company and its stockholders. Unless otherwise directed, the proxy will be voted in favor of the ratification of such appointment.
Fees Paid to Independent Auditors
The following table describes fees for professional audit services rendered by SingerLewak LLP, our principal accountant, for the audit of our annual financial statements for the years ended March 31, 2011 and March 31, 2010 and fees billed for other services rendered by SingerLewak LLP during those periods. These amounts include fees paid to SingerLewak LLP.
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Type of Fee
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Fiscal 2011
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Fiscal 2010
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Audit Fees (1)
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$ |
93,780 |
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$ |
102,330 |
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Audit Related Fees (2)
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- |
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- |
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Tax Fees (3)
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- |
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- |
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All Other Fees (4)
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- |
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- |
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Total
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$ |
93,780 |
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$ |
102,330 |
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1.
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Audit Fees include the aggregate fees paid by us during the fiscal year indicated for professional services rendered by SingerLewak LLP for the audit of our annual financial statements and review of financial statements included in our Forms 10-Q.
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2.
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Audit Related Fees include the aggregate fees paid by us during the fiscal year indicated for assurance and related services by SingerLewak LLP that are reasonably related to the performance of the audit or review of our financial statements and not included in Audit Fees.
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3.
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Tax Fees include the aggregate fees paid by us during the fiscal year for professional services for tax compliance, tax advice and tax planning. No such fees were billed by SingerLewak LLP for the respective periods.
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4.
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All Other Fees include the aggregate fees paid by us during the fiscal year indicated for products and services other than the services reported above. No such fees were billed by SingerLewak LLP for the respective periods.
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Audit Committee Pre-Approval Policies and Procedures
The Audit Committee on an annual basis reviews audit and non-audit services performed by the independent auditor. All audit and non-audit services are pre-approved by the Audit Committee, which considers, among other things, the possible effect of the performance of such services on the auditors’ independence. The Audit Committee has considered the role of SingerLewak LLP in providing services to us for the fiscal year ended March 31, 2011 and has concluded that such services are compatible with their independence as our Company’s auditors. The Audit Committee has established its pre-approval policies and procedures, pursuant to which the Audit Committee approved the foregoing audit services provided by SingerLewak LLP in fiscal year 2011.
Proposal
At the Annual Meeting, stockholders will be asked to ratify the appointment of SingerLewak LLP, as the independent auditors of the Company for the fiscal year ending March 31, 2012.
The Board of Directors recommends a vote “FOR” the Proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock
The following security ownership information is set forth, as of July 1, 2011, with respect to (i) each stockholder known by us to be beneficial owners of more than 5% of our outstanding Common Stock, (ii) each of the current directors and nominees for election as directors, (iii) each of the named executive officers reflected in the Summary Compensation Table below and (iv) all current directors, nominees and executive officers as a group (five persons).
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Name and Address
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Amount and Nature of
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Percent
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Title
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of Beneficial Owner
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Beneficial Ownership(1)
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of Class
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of Class
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Alfred H. Falk
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1,993,850 (1)
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*
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Common
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16770 West Bernardo Drive
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San Diego, CA 92127
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Allen Cocumelli
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651,000 (2)
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*
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Common
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16770 West Bernardo Drive
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San Diego, CA 92127
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Renee Warden
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550,000 (3)
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*
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Common
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16770 West Bernardo Drive
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San Diego, CA 92127
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Eric M. Polis
|
|
4,148,117 (4)
|
1.4%
|
Common
|
|
980 American Pacific Drive, #111
|
|
|
|
|
|
Henderson, NV 89014
|
|
|
|
|
| |
|
|
|
|
|
MarDee Haring-Layton
|
|
10,000 (5)
|
*
|
Common
|
|
16770 West Bernardo Drive
|
|
|
|
|
|
San Diego, CA 92127
|
|
|
|
|
| |
|
|
|
|
|
Robert Putnam
|
|
3,838,911 (6)
|
1.3%
|
Common
|
|
16770 West Bernardo Drive
|
|
|
|
|
|
San Diego, CA 92127
|
|
|
|
|
| |
|
|
|
|
|
All officers, directors and nominees
as a group (5 persons)
|
|
7,352,967 (7)
|
2.5%
|
Common
|
|
|
(1)
|
Includes 550 shares held by son to which Mr. Falk disclaims beneficial ownership. Includes options exercisable within 60 days to purchase 1,000,000 shares.
|
|
|
(2)
|
Includes options exercisable within 60 days to purchase 650,000 shares.
|
|
|
(3)
|
Consists of options exercisable within 60 days.
|
|
|
(4)
|
Includes options exercisable within 60 days to purchase 600,000 shares. Also includes (i) 2,307,421 shares of common stock held a Family Trust of which Mr. Polis is Trustee, (ii) 1,042,696 shares of common stock held by the Polis Family LLC of which Mr. Polis is a managing member, (iii) 133,000 shares of common stock held by The Polis Charitable Foundation of which Mr. Polis is an officer, (iv) 25,000 shares of common stock held in a personal IRA, and (v) 40,000 shares of common stock held as custodian for a minor child. Mr. Polis disclaims beneficial ownership of the shares held by the Polis Charitable Foundation and as custodian for the minor child except to the extent of his respective pecuniary interest.
|
|
|
(5)
|
Includes options exercisable within 60 days to purchase 10,000 shares.
|
|
|
(6)
|
Based on information available to the Company as of the date of resignation on December 15, 2010.
|
|
|
(7)
|
Includes options exercisable within 60 days to purchase 3,310,000 shares.
|
____________________________
* Less than 1%
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of March 31, 2011, with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance, aggregated as follows:
|
Plan Category
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
|
|
|
Weighted-average exercise
price of outstanding
options, warrants and
rights
(b)
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
6,022,500 |
|
|
$ |
0.12 |
|
|
|
3,603,000 |
|
|
Equity compensation plans not approved by security holders
|
|
|
-0- |
|
|
|
- |
|
|
|
-0- |
|
|
Total
|
|
|
6,022,500 |
|
|
$ |
0.12 |
|
|
|
3,603,000 |
|
EXECUTIVE COMPENSATION
Executive Officers
Our current executive officers* are as follows:
|
Name
|
Age
|
Position
|
| |
|
|
|
Alfred H. Falk**
|
56
|
President, Chief Executive Officer and Director
|
|
Eric M. Polis**
|
41
|
Secretary*** and Director
|
_____________________
* Allen Cocumelli, as Chairman of our Board of Directors, is technically considered as an executive officer under our bylaws. However, we do not believe that he meets the definition of an “executive officer” under Rule 16a-1(f) of the Securities Exchange Act of 1934 in that he does not perform any policy-making functions for our Company, nor is he compensated for this position.
** For additional information with respect to Messrs. Falk and Polis who are also nominees as directors, see “Election of Directors.”
*** Mr. Polis serves as corporate Secretary, an executive officer position, but is not compensated for this role and is not considered an employee. He is considered a non-employee director (see “Director Compensation” below).
On January 26, 2011 MarDee Haring-Layton was appointed Principal Accounting Officer, a non-executive officer position. Since July 2010 Ms. Haring-Layton, age 35, has been a part-time consulting accountant for the Company. From January 2007 to April 2011 she was a consultant with Resources Global Professionals, a multinational professional services firm. From October 2005 to December 2006 she was Corporate Audit Manager at Royale Energy, Inc. and previously was employed by Charlotte Russe, Inc. as Systems Control and Reporting Manager and Deloitte & Touche, LLP as an audit professional. Ms. Haring-Layton obtained a B.S. in Business Administration from San Diego State University in 2003.
Pursuant to Securities Exchange Commission rules our reportable “named executive officers” for fiscal 2011 include our President and Chief Executive Officer, Alfred H. Falk, and Ms. Haring-Layton, who as our Principal Accounting Officer effectively is serving as our principal financial officer. Mr. Robert Putnam who served as Senior Vice President, Corporate Secretary and Interim Chief Accounting Officer served as our principal financial officer until his resignation in December 2010. Mr. Polis received no compensation for his role as corporate secretary which is considered an executive officer position and accordingly all his compensation is reported below under “Director Compensation.”
Summary Compensation Table
| |
|
|
|
|
|
|
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
| |
|
|
|
Salary (1)
|
|
|
Bonus
|
|
|
Awards (2)
|
|
|
Compensation
|
|
|
Total
|
|
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alfred H. Falk, President and
|
|
2011
|
|
$ |
171,129 |
|
|
|
- |
|
|
$ |
19,291 |
|
|
|
- |
|
|
$ |
190,420 |
|
|
Chief Executive Officer (PEO)
|
|
2010
|
|
$ |
155,000 |
|
|
|
- |
|
|
$ |
33,273 |
|
|
|
- |
|
|
$ |
188,273 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MarDee Haring-Layton,
|
|
2011
|
|
$ |
17,659 |
|
|
|
- |
|
|
$ |
2,044 |
|
|
|
- |
|
|
$ |
19,703 |
|
|
Principal Accounting Officer (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Putnam, Senior Vice
|
|
2011
|
|
$ |
70,374 |
|
|
|
- |
|
|
$ |
12,539 |
|
|
$ |
42,500 |
|
|
$ |
125,413 |
|
|
President, Secretary and Interim
|
|
2010
|
|
$ |
85,000 |
|
|
|
- |
|
|
$ |
16,637 |
|
|
|
- |
|
|
$ |
101,637 |
|
|
Chief Accounting Officer (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents actual cash compensation.
|
|
(2)
|
The value listed in the above table represents the fair value of the options granted during the year and valued under ASC 718. Fair value is calculated as of the grant date using a Black-Scholes option-pricing model. The determination of the fair value of share-based payment awards made on the date of grant is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. Our assumptions in determining fair value are described in our audited consolidated financial statements for the year ended March 31, 2010, included herein.
|
|
(3)
|
Ms. Haring-Layton is paid on a consulting basis with current compensation at $65 per hour with a minimum commitment of 24 hours per week.
|
|
(4)
|
Our former part-time senior vice president, secretary and interim chief financial officer, Robert Putnam, resigned effective December 15, 2010 and was paid a $42,500 separation payment as severance.
|
Outstanding Equity Awards at Fiscal Year-End
|
|
|
Number of Securities Underlying Unexercised Options Exercisable
|
|
|
Number of Securities Underlying Unexercised Options Unexercisable
|
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
|
|
|
|
|
|
|
Alfred H. Falk
|
|
|
500,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.155 |
|
12/8/13
|
| |
|
|
500,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.09 |
|
6/30/14
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MarDee Haring-Layton
|
|
|
- |
|
|
|
20,000 |
(1) |
|
|
- |
|
|
$ |
0.10 |
|
12/22/14
|
| |
|
|
- |
|
|
|
20,000 |
(1) |
|
|
- |
|
|
$ |
0.11 |
|
1/26/15
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Putnam
|
|
None
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
-
|
|
|
(1) These options vest 25% every six months after grant.
|
Option Exercises and Stock Vested Table
There were no options exercised by the Named Executive Officers during fiscal 2011. There are no pension benefits for any Named Executive Officer.
Employment Agreements, Termination of Employment and Change in Control Arrangements
No executive officer has an employment letter or agreement.
Director Compensation
Our directors are reimbursed for reasonable out-of-pocket expenses incurred in attending meetings of the board of directors and committee meetings. Employee directors do not receive any cash compensation for services as directors and have not received any equity compensation grants designated for such services. In addition, members of the board of directors who are not employees receive equity compensation grants as consideration for board and committee service from time to time. There is no established policy as to frequency or amount of equity compensation grants for non-employee directors.
The following table sets forth the compensation paid to our non-employee directors in 2011.
|
|
|
Fee Earned or Paid in Cash
|
|
|
|
|
|
|
|
|
|
|
|
Allen Cocumelli (2)
|
|
$ |
500 |
|
|
$ |
15,433 |
|
|
|
-- |
|
|
$ |
|
|
|
Renee Warden (3)
|
|
$ |
500 |
|
|
$ |
11,575 |
|
|
|
-- |
|
|
$ |
|
|
|
Eric M. Polis (4)
|
|
$ |
500 |
|
|
$ |
1,929 |
|
|
|
-- |
|
|
$ |
|
|
|
(1)
|
The value listed in the above table represents the fair value of options on shares granted to each person during the year and valued under ASC 718. Fair value is calculated as of the grant date using a Black-Scholes option-pricing model. The determination of the fair value of share-based payment awards made on the date of grant is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. Our assumptions in determining fair value are described in our audited consolidated financial statements for the year ended March 31, 2011, included in our Annual Report on Form 10-K.
|
|
(2)
|
Mr. Cocumelli was granted options on 400,000 shares during the year and at March 31, 2011 had option awards outstanding exercisable into 900,000 shares of common stock that were vested and exercisable.
|
|
(3)
|
Ms. Warden was granted options on 300,000 shares during the year and at March 31, 2011 had option awards outstanding exercisable into 800,000 shares of common stock that were vested and exercisable.
|
|
(4)
|
Mr. Polis was granted options on 50,000 shares during the year and at March 31, 2011 had option awards outstanding exercisable into 600,000 shares of common stock that were vested and exercisable.
|
During fiscal 2011 the Company paid the Law Office of Allen Cocumelli, owned by director Allen Cocumelli a total of $10,000 to provide legal and consulting advice to management primarily related to managing outside legal work including patent enforcement matters. The Company has retained the Law Office of Allen Cocumelli through January 2012 at the rate of $5,000 per month for future services but the arrangement is cancellable on 30 day notice.
AUDIT COMMITTEE REPORT
Introductory Note: The following report is not deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed soliciting material or filed under such acts.
The following is the report of the Audit Committee with respect to our audited financial statements for the fiscal year ended March 31, 2011.
The Audit Committee has reviewed and discussed the audited financial statements of e.Digital Corporation with management. The Audit Committee has discussed with SingerLewak LLP, our independent registered public accounting firm, the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Interim Auditing Standard AU Section 380, Communication with Audit Committees, which includes, among other items, matters related to the conduct of the audit of our financial statements. The Audit Committee has also received written disclosures and the letter from SingerLewak LLP required by applicable requirements of the PCAOB regarding the independent accounting firm’s communications with the audit committee concerning independence, and has discussed with SingerLewak LLP its independence from our Company.
The Audit Committee acts pursuant to the Audit Committee Charter adopted by the Board of Directors. The Board of Directors has determined that each of the members of the Audit Committee qualifies as an independent director (as defined in the Marketplace Rules of The NASDAQ Stock Market).
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that audited financial statements be included in our Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011.
| |
By: The Audit Committee of the Board of Directors
Renee Warden
Allen Cocumelli
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Persons
On occasion we engage in certain related party transactions. Related parties include directors and executive officers and their immediate family members and certain security holders and their immediate family members. For purposes of this disclosure related party security holders include any beneficial owner of more than five percent of either our common or preferred shares. The following are related party transactions with respect to the two fiscal years ended March 31, 2011.
Mr. James A. Barnes, became a related party in June 2008 when affiliated entities acquired greater than 5% of our Series AA preferred stock and ceased being a related party in June 2010 when such stock was converted to common stock. We incurred accounting, regulatory consulting services and cost reimbursements of $38,137 to Sunrise Capital, Inc., a company controlled by Mr. Barnes during fiscal 2011 ($44,254 in fiscal 2010).
Jerry E. Polis and affiliated entities were considered as related parties through ownership of greater than 5% of our outstanding common stock. At April 1, 2009 we owed Davric Corporation (“Davric”) $387,234 on a 7.5% Convertible Term Note (“Term Note”). Stated monthly principal and interest payments were $50,000 and we could elect to make monthly installment payments either in cash or in shares of common stock. Subject to certain notice periods and other limitations, the balance of the Term Note was convertible by Davric at $0.30 per common share and we could call the Term Note for mandatory conversion if the closing sale price of our common stock was at least $0.40 per share for ten consecutive trading days. During fiscal 2010 we made $350,000 of principal and interest payments through the issuance of 2,705,515 restricted shares of common stock and made the final payment of $47,865 in cash in November 2009. At March 31, 2010 there was no debt balance outstanding. Total interest expense for the fiscal year ended March 31, 2010 was $10,631. No reportable transactions were incurred during the fiscal year ended March 31, 2011.
On December 8, 2009, directors Allen Cocumelli, Renee Warden and Eric M. Polis were each granted options to acquire 250,000 shares of common stock exercisable at $0.155 per share until December 8, 2013, vesting at grant but subject other standard option plan conditions.
On June 30, 2010, directors Allen Cocumelli (as to 400,000), Renee Warden (as to 300,000) and Eric M. Polis (as to 50,000) were each granted options to acquire shares of common stock exercisable at $0.09 per share until June 30, 2014, vesting at grant but subject other standard option plan conditions.
During the fiscal year ended March 31, 2011 there were no other (and there are no currently proposed) transactions in which the amount involved exceeded the lesser of $120,000 or 1% of the average of total assets at year end for the last two completed fiscal years to which we were (or are to be) a participant and in which any executive officer, director, nominee for director, 5% beneficial owner of our common stock or other series of voting stock or member of the immediate family of any of the foregoing persons had (or will have) a direct or indirect material interest.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires the Company’s directors, executive officers and persons who own more than 10% of the Common Stock to file initial reports of ownership (Forms 3) and reports of changes in ownership of Common Stock (Forms 4 and Forms 5) with the Securities and Exchange Commission.
Based solely on a review of copies of such reports furnished to our Company and representation that no other reports were required during the fiscal year ended March 31, 2011, except as set forth below, we believe that all persons subject to the reporting requirements pursuant to Section 16(a) filed the required reports on a timely basis with the Securities and Exchange Commission. A Form 4 filed on July 1, 2010 failed to report the automatic conversion of 10,000 shares of Series AA convertible preferred stock into 1,100,441 shares of our common stock to Robert Putnam on June 30, 2010. An amended Form 4 was filed on July 6, 2011. The transaction should have been filed within two (2) business days of the conversion.
OTHER BUSINESS OF THE ANNUAL MEETING
Management is not aware of any matters to come before the Annual Meeting or any postponement or adjournment thereof other than the election of directors and the ratification of accountants. However, inasmuch as matters of which Management is not now aware may come before the meeting or any postponement or adjournment thereof, the proxies confer discretionary authority with respect to acting thereon, and the persons named in such proxies intend to vote, act and consent in accordance with their best judgment with respect thereto, provided that, to the extent the Company becomes aware a reasonable time before the Annual Meeting of any matter to come before such meeting, the Company will provide an opportunity to vote by proxy directly on such matter. Upon receipt of such proxies in time for voting, the shares represented thereby will be voted as indicated thereon and as described in this Proxy Statement.
|
San Diego, California
|
By Order of the Board of Directors
/s/ Allen Cocumelli
Allen Cocumelli
|
July 20, 2011
|
E.DIGITAL CORPORATION
Annual Meeting of Shareholders
September 1, 2011 10:00 AM
This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) ALFRED H. FALK and ERIC M. POLIS as proxies, or either of them, with the power to appoint his substitute, and hereby authorizes them to vote, as designated on the reverse of this ballot, all of the shares of Common Stock of E.DIGITAL CORPORATION that the shareholder(s) is/are entitled to vote at the Annual Meeting of shareholder(s) to be held at 10:00 AM, PST on September 1, 2011, at the Radisson Suite Hotel Rancho Bernardo, 11520 West Bernardo Court, San Diego, California 92127, and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO SUCH DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS.
(Continued and to be signed on the other side)
|
| |
|
E.DIGITAL CORPORATION
16770 WEST BERNARD DRIVE
SAN DIEGO, CA 92127
|
|
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by e.Digital Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
|
KEEP THIS PORTION FOR YOUR RECORDS
|
| |
|
DETACH AND RETURN THIS PORTION ONLY
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
EDIGITAL CORPORATION
|
| |
|
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE
FOR ITEMS 1 AND 2.
|
| |
|
For
All
|
Withhold
All
|
For All
Except
|
To Withhold authority to vote for any
Individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below
|
| |
|
|
|
|
|
|
1.
|
ELECTION OF DIRECTORS:
Nominees
|
¨
|
¨
|
¨
|
|
| 01 Alfred H. Falk 02 Allen Cocumelli 03 Renee Warden 04 Eric M. Polis |
|
|
|
|
|
2.
|
To ratify the selection of SingerLewak LLP as independent registered public accounting
firm of the Company for the fiscal year ending March 31, 2012.
NOTE: Such other business as may properly come before the meeting or any adjournment thereof.
|
For
o
|
Against
¨
|
Abstain
¨
|
(Please date and sign exactly as name or names appear(s) on your stock certificate(s). When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in the full corporate name by President or other authorized officer. If a partnership, please sign in the partnership name by authorized person. IF THE STOCK IS HELD JOINTLY, BOTH OWNERS MUST SIGN.)
| |
|
|
|
|
| |
YES
|
NO
|
|
|
|
Please indicate if you plan to attend this meeting.
|
¨
|
¨
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX]
|
Date
|
|
|
Signature (Joint Owners)
|
Date
|
