##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
.
 Commission file number: 0-17972
 DIGI INTERNATIONAL INC.
  Delaware
    
    41-1532464(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 11001 Bren Road East
Minnetonka, Minnesota 55343  (Address of principal executive offices) (Zip Code)
 (952) 912-3444  (Registrants telephone number, including area code)
 þ o
  o þ o o
  o þ




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##### 



PagePART I. FINANCIAL INFORMATIONITEM 1. Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Statements of Operations for the three
months ended December 31, 2007 and 2006
    
    
    3Condensed Consolidated Balance Sheets as of
December 31, 2007 and September 30, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for
the three months ended December 31, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial
Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    13Forward-looking Statements
    
    
    13ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20ITEM 4. Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    22ITEM 1A. Risk Factors
    
    
    22ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22ITEM 3. Defaults Upon Senior Securities
    
    
    22ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    22ITEM 5. Other Information
    
    
    22ITEM
6. Exhibits
    
    
    22Exhibit 31(a)Exhibit 31(b)Exhibit 32
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DIGI INTERNATIONAL INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three months ended December 31,2007
    
    
    2006(in thousands, except per common share data)Net sales
    
    $
    44,574
    
    
    $
    41,811Cost of sales (exclusive of amortization of purchased and core
technology shown separately below)
    
    
    19,543
    
    
    
    18,650Amortization of purchased and core technology
    
    
    1,136
    
    
    
    1,148Gross profit
    
    
    23,895
    
    
    
    22,013Operating expenses:Sales and marketing
    
    
    8,686
    
    
    
    8,158Research and development
    
    
    6,589
    
    
    
    5,972General and administrative
    
    
    4,022
    
    
    
    3,578Total operating expenses
    
    
    19,297
    
    
    
    17,708Operating income
    
    
    4,598
    
    
    
    4,305Interest income, net:Interest income
    
    
    1,054
    
    
    
    796Interest expense
    
    
    (14
    )
    
    
    (25
    )Total interest income, net
    
    
    1,040
    
    
    
    771Income before income taxes
    
    
    5,638
    
    
    
    5,076Income tax provision
    
    
    1,968
    
    
    
    1,274Net income
    
    $
    3,670
    
    
    $
    3,802Net income per common share:Basic
    
    $
    0.14
    
    
    $
    0.15Diluted
    
    $
    0.14
    
    
    $
    0.15Weighted average common shares, basic
    
    
    25,619
    
    
    
    25,078Weighted average common shares, diluted
    
    
    26,593
    
    
    
    25,983
   3




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DIGI INTERNATIONAL INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 December 31,
    
    
    September 30,2007
    
    
    2007(in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,778
    
    
    $
    18,375Marketable securities
    
    
    68,863
    
    
    
    67,111Accounts receivable, net
    
    
    20,525
    
    
    
    21,022Inventories
    
    
    26,647
    
    
    
    26,130Other
    
    
    4,732
    
    
    
    4,961Total current assets
    
    
    138,545
    
    
    
    137,599Marketable securities, long-term
    
    
    4,246
    
    
    
    2,081Property, equipment and improvements, net
    
    
    20,727
    
    
    
    19,987Identifiable intangible assets, net
    
    
    22,416
    
    
    
    24,214Goodwill
    
    
    66,995
    
    
    
    66,817Other
    
    
    920
    
    
    
    1,128Total assets
    
    $
    253,849
    
    
    $
    251,826LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Capital lease obligations, current portion
    
    $
    381
    
    
    $
    379Accounts payable
    
    
    5,299
    
    
    
    6,554Income taxes payable
    
    
    1,623
    
    
    
    3,156Accrued expenses:Compensation
    
    
    4,133
    
    
    
    7,080Other
    
    
    3,610
    
    
    
    4,727Total current liabilities
    
    
    15,046
    
    
    
    21,896Capital lease obligations, net of current portion
    
    
    263
    
    
    
    358Income taxes payable  long-term
    
    
    3,990
    
    
    
    Net deferred tax liabilities
    
    
    5,280
    
    
    
    6,667Total liabilities
    
    
    24,579
    
    
    
    28,921Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value; 2,000,000 shares authorized;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 60,000,000 shares authorized;
28,267,761 and 28,153,763 shares issued
    
    
    283
    
    
    
    281Additional paid-in capital
    
    
    174,463
    
    
    
    172,156Retained earnings
    
    
    69,944
    
    
    
    66,782Accumulated other comprehensive income
    
    
    2,816
    
    
    
    2,121Treasury stock, at cost, 2,578,237 and 2,606,419 shares
    
    
    (18,236
    )
    
    
    (18,435
    )Total stockholders equity
    
    
    229,270
    
    
    
    222,905Total liabilities and stockholders equity
    
    $
    253,849
    
    
    $
    251,826
   4




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DIGI INTERNATIONAL INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three months ended December 31,2007
    
    
    2006(in thousands)Operating activities:Net income
    
    $
    3,670
    
    
    $
    3,802Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation of property, equipment and improvements
    
    
    601
    
    
    
    645Amortization of identifiable intangible assets and other assets
    
    
    1,896
    
    
    
    1,947Excess tax benefits from stock-based compensation
    
    
    (129
    )
    
    
    (60
    )Stock-based compensation
    
    
    872
    
    
    
    765Deferred income taxes (benefit) provision
    
    
    (1,235
    )
    
    
    78Other
    
    
    162
    
    
    
    289Changes in operating assets and liabilities:Accounts receivable
    
    
    667
    
    
    
    657Inventories
    
    
    (620
    )
    
    
    (2,930
    )Other assets
    
    
    304
    
    
    
    (776
    )Accounts payable and accrued expenses
    
    
    (4,149
    )
    
    
    (2,444
    )Income taxes payable
    
    
    1,978
    
    
    
    1,179Net cash provided by operating activities
    
    
    4,017
    
    
    
    3,152Investing activities:Purchase of held-to-maturity marketable securities
    
    
    (23,836
    )
    
    
    (16,941
    )Proceeds from maturities of held-to-maturity marketable securities
    
    
    19,919
    
    
    
    20,143Contingent purchase price payments related to business acquisitions
    
    
    (1,315
    )
    
    
    (781
    )Purchase of property, equipment, improvements and certain
other intangible assets
    
    
    (1,177
    )
    
    
    (688
    )Net cash (used in) provided by investing activities
    
    
    (6,409
    )
    
    
    1,733Financing activities:Payments on capital lease obligations
    
    
    (102
    )
    
    
    (103
    )Excess tax benefits from stock-based compensation
    
    
    129
    
    
    
    60Proceeds from stock option plan transactions
    
    
    1,224
    
    
    
    515Proceeds from employee stock purchase plan transactions
    
    
    348
    
    
    
    191Net cash provided by financing activities
    
    
    1,599
    
    
    
    663Effect of exchange rate changes on cash and cash equivalents
    
    
    196
    
    
    
    246Net (decrease) increase in cash and cash equivalents
    
    
    (597
    )
    
    
    5,794Cash and cash equivalents, beginning of period
    
    
    18,375
    
    
    
    15,674Cash and cash equivalents, end of period
    
    $
    17,778
    
    
    $
    21,468
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DIGI INTERNATIONAL INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 1.
    
    BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Recently Issued Accounting Pronouncements
    6




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 1.
    
    BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
   2.
    
    COMPREHENSIVE INCOME
  Three months endedDecember 31,2007
    
    
    2006Net income
    
    $
    3,670
    
    
    $
    3,802Foreign currency translation gain
    
    
    695
    
    
    
    379Comprehensive income
    
    $
    4,365
    
    
    $
    4,181
 3.
    
    NET INCOME PER COMMON SHARE
   7




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 3.
    
    NET INCOME PER COMMON SHARE (CONTINUED)
  Three months ended December 31,2007
    
    
    2006Numerator:Net income
    
    $
    3,670
    
    
    $
    3,802Denominator:Denominator for basic net income per common
share  weighted average shares outstanding
    
    
    25,619
    
    
    
    25,078Effect of dilutive securities:Employee stock options and employee
stock purchase plan
    
    
    974
    
    
    
    905Denominator for diluted net income per common
share  adjusted weighted average shares outstanding
    
    
    26,593
    
    
    
    25,983Net income per common share, basic
    
    $
    0.14
    
    
    $
    0.15Net income per common share, diluted
    
    $
    0.14
    
    
    $
    0.15
  4.
    
    SELECTED BALANCE SHEET DATA
 December 31,
    
    
    September 30,(in thousands)
    
    2007
    
    
    2007Accounts receivable, net:Accounts receivable
    
    $
    21,017
    
    
    $
    21,501Less allowance for doubtful accounts
    
    
    492
    
    
    
    479$
    20,525
    
    
    $
    21,022Inventories:Raw materials
    
    $
    23,511
    
    
    $
    20,097Work in process
    
    
    112
    
    
    
    816Finished goods
    
    
    3,024
    
    
    
    5,217$
    26,647
    
    
    $
    26,130Other accrued expenses:Product warranty accrual
    
    $
    1,134
    
    
    $
    1,155Accrued professional fees
    
    
    639
    
    
    
    522Unearned revenue
    
    
    323
    
    
    
    190Other accrued expenses
    
    
    1,514
    
    
    
    1,910Contingent purchase price accrual
    
    
    
    
    
    
    950$
    3,610
    
    
    $
    4,727
   8




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 5.
    
    GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS
  December 31, 2007
    
    
    September 30, 2007Gross
    
    
    
    
    
    
    
    
    
    
    Grosscarrying
    
    
    Accum.
    
    
    
    
    
    
    carrying
    
    
    Accum.amount
    
    
    amort.
    
    
    Net
    
    
    amount
    
    
    amort.
    
    
    NetPurchased and core technology
    
    $
    38,735
    
    
    $
    (27,853
    )
    
    $
    10,882
    
    
    $
    38,702
    
    
    $
    (26,689
    )
    
    $
    12,013License agreements
    
    
    2,440
    
    
    
    (2,390
    )
    
    
    50
    
    
    
    2,440
    
    
    
    (2,290
    )
    
    
    150Patents and trademarks
    
    
    8,011
    
    
    
    (4,073
    )
    
    
    3,938
    
    
    
    7,925
    
    
    
    (3,818
    )
    
    
    4,107Customer maintenance contracts
    
    
    700
    
    
    
    (411
    )
    
    
    289
    
    
    
    700
    
    
    
    (394
    )
    
    
    306Customer relationships
    
    
    11,671
    
    
    
    (4,414
    )
    
    
    7,257
    
    
    
    11,613
    
    
    
    (3,975
    )
    
    
    7,638Total
    
    $
    61,557
    
    
    $
    (39,141
    )
    
    $
    22,416
    
    
    $
    61,380
    
    
    $
    (37,166
    )
    
    $
    24,214
   2008 (nine months)
    
    $
    3,7782009
    
    
    4,2022010
    
    
    3,6372011
    
    
    3,0762012
    
    
    2,5122013
    
    
    1,765
  Three months ended December 31,2007
    
    
    2006Beginning balance, October 1
    
    $
    66,817
    
    
    $
    65,841Foreign currency translation adjustment
    
    
    178
    
    
    
    100Ending balance, December 31
    
    $
    66,995
    
    
    $
    65,941
 6.
    
    INCOME TAXES
   9




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 6.
    
    INCOME TAXES (CONTINUED)
   7.
    
    FINANCIAL GUARANTEES
  Balance at
    
    
    Warranties
    
    
    Settlements
    
    
    Balance atOctober 1
    
    
    issued
    
    
    made
    
    
    December 312007
    
    
    
    
    
    $
    1,155
    
    
    $
    165
    
    
    $
    (186
    )
    
    $
    1,1342006 (1)
    
    
    
    
    
    $
    1,104
    
    
    $
    85
    
    
    $
    (225
    )
    
    $
    964
 (1)
    
    Warranties issued includes a decrease in estimate adjustment of $132,000 for the three
months ended December 31, 2006.
   10




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 8.
    
    CONTINGENCIES
 Contingent obligations
  Legal Proceedings
   In re Initial Public Offering Securities Litigation en banc
   11




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 8.
    
    CONTINGENCIES (CONTINUED)
     12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
       OVERVIEW
    13




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
  
 
 
 
 
  14




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 CONSOLIDATED RESULTS OF OPERATIONS
  Three months ended December 31,
    
    
    % increase2007
    
    
    2006
    
    
    (decrease)Net sales
    
    $
    44,574
    
    
    
    100.0
    %
    
    $
    41,811
    
    
    
    100.0
    %
    
    
    6.6
    %Cost of sales (exclusive of amortization of purchased
and core technology shown separately below)
    
    
    19,543
    
    
    
    43.8
    
    
    
    18,650
    
    
    
    44.6
    
    
    
    4.8Amortization of purchased and core technology
    
    
    1,136
    
    
    
    2.6
    
    
    
    1,148
    
    
    
    2.8
    
    
    
    (1.0
    )Gross profit
    
    
    23,895
    
    
    
    53.6
    
    
    
    22,013
    
    
    
    52.6
    
    
    
    8.5Operating expenses:Sales and marketing
    
    
    8,686
    
    
    
    19.5
    
    
    
    8,158
    
    
    
    19.5
    
    
    
    6.5Research and development
    
    
    6,589
    
    
    
    14.8
    
    
    
    5,972
    
    
    
    14.3
    
    
    
    10.3General and administrative
    
    
    4,022
    
    
    
    9.0
    
    
    
    3,578
    
    
    
    8.5
    
    
    
    12.4Total operating expenses
    
    
    19,297
    
    
    
    43.3
    
    
    
    17,708
    
    
    
    42.3
    
    
    
    9.0Operating income
    
    
    4,598
    
    
    
    10.3
    
    
    
    4,305
    
    
    
    10.3
    
    
    
    6.8Interest income, net
    
    
    1,040
    
    
    
    2.3
    
    
    
    771
    
    
    
    1.8
    
    
    
    34.9Income before income taxes
    
    
    5,638
    
    
    
    12.6
    
    
    
    5,076
    
    
    
    12.1
    
    
    
    11.1Income tax provision
    
    
    1,968
    
    
    
    4.4
    
    
    
    1,274
    
    
    
    3.0
    
    
    
    54.5Net income
    
    $
    3,670
    
    
    
    8.2
    %
    
    $
    3,802
    
    
    
    9.1
    %
    
    
    (3.5
    )%
   Three months ended December 31,
    
    
    % increase($ in thousands)
    
    2007
    
    
    2006
    
    
    (decrease)Non-embedded
    
    $
    23,857
    
    
    
    53.5
    %
    
    $
    25,166
    
    
    
    60.2
    %
    
    
    (5.2
    )%Embedded
    
    
    20,717
    
    
    
    46.5
    
    
    
    16,645
    
    
    
    39.8
    
    
    
    24.5Total net sales
    
    $
    44,574
    
    
    
    100.0
    %
    
    $
    41,811
    
    
    
    100.0
    %
    
    
    6.6
    %
 Non-embedded
  Embedded
    15




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
    Three months ended December 31,
    
    
    $ increase($ in thousands)
    
    2007
    
    
    2006
    
    
    (decrease)Operating expenses:Sales and marketing
    
    $
    8,686
    
    
    
    19.5
    %
    
    $
    8,158
    
    
    
    19.5
    %
    
    $
    528Research and development
    
    
    6,589
    
    
    
    14.8
    
    
    
    5,972
    
    
    
    14.3
    
    
    
    617General and administrative
    
    
    4,022
    
    
    
    9.0
    
    
    
    3,578
    
    
    
    8.5
    
    
    
    444Total operating expenses
    
    $
    19,297
    
    
    
    43.3
    %
    
    $
    17,708
    
    
    
    42.3
    %
    
    $
    1,589
       16




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
      Consolidated Statement of Cash Flow Highlights (in thousands)
 Three months ended December 31,2007
    
    
    2006
    
    
    ChangeOperating activities
    
    $
    4,017
    
    
    $
    3,152
    
    
    $
    865Investing activities
    
    
    (6,409
    )
    
    
    1,733
    
    
    
    (8,142
    )Financing activities
    
    
    1,599
    
    
    
    663
    
    
    
    936Effect of exchange rate changes on cash
and cash equivalents
    
    
    196
    
    
    
    246
    
    
    
    (50
    )Net (decrease) increase in cash and
cash equivalents
    
    $
    (597
    )
    
    $
    5,794
    
    
    $
    (6,391
    )
 Reconciliation of Net Income to Cash Inflows (Outflows) from Operating Activities (in thousands)
 Three months ended December 31,2007
    
    
    2006
    
    
    ChangeNet income
    
    $
    3,670
    
    
    $
    3,802
    
    
    $
    (132
    )Deferred income taxes (benefit) provision
    
    
    (1,235
    )
    
    
    78
    
    
    
    (1,313
    )Depreciation and amortization
    
    
    2,497
    
    
    
    2,592
    
    
    
    (95
    )Stock-based compensation
    
    
    872
    
    
    
    765
    
    
    
    107Excess tax benefits from stock-based compensation
    
    
    (129
    )
    
    
    (60
    )
    
    
    (69
    )Other reconciling items
    
    
    162
    
    
    
    289
    
    
    
    (127
    )Net income adjusted for non-cash expenses
    
    
    5,837
    
    
    
    7,466
    
    
    
    (1,629
    )Changes in working capital
    
    
    (1,820
    )
    
    
    (4,314
    )
    
    
    2,494Cash flows provided by operating activities
    
    $
    4,017
    
    
    $
    3,152
    
    
    $
    865
  17




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
           18




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
        19




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         
 ITEM 4. CONTROLS AND PROCEDURES
    20




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ITEM 4. CONTROLS AND PROCEDURES (CONTINUED)
    21




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 Exhibit No.
    
    Description3(a)
    
    Restated Certificate of Incorporation of the Company, as amended (1)3(b)
    
    Amended and Restated By-Laws of the Company (2)4(a)
    
    Form of Rights Agreement, dated as of June 10, 1998 between Digi International
Inc. and Wells Fargo Bank Minnesota, National Association (formerly known as Norwest
Bank Minnesota, National Association), as Rights Agent (3)4(b)
    
    Amendment dated January 26, 1999, to Share Rights Agreement, dated as of
June 10, 1998 between Digi International Inc. and Wells Fargo Bank Minnesota,
National Association (formerly known as Norwest Bank Minnesota, National
Association), as Rights Agent (4)31(a)
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31(b)
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32
    
    Section 1350 Certification
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ITEM 6. EXHIBITS (CONTINUED)
 (1)
    
    Incorporated by reference to Exhibit 3(a) to the Companys Form 10-K for the year ended
September 30, 1993 (File No. 0-17972)(2)
    
    Incorporated by reference to Exhibit 3(b) to the Companys Form 10-Q for the quarter ended
March 31, 2007 (File No. 0-17972)(3)
    
    Incorporated by reference to Exhibit 1 to the Companys Registration Statement on Form 8-A
dated June 24, 1998 (File No. 0-17972)(4)
    
    Incorporated by reference to Exhibit 1 to Amendment 1 to the Companys Registration Statement
on Form 8-A dated February 5, 1999 (File No. 0-17972)
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##### Table of Contents



DIGI INTERNATIONAL INC.Date: February 7, 2008
    
    By:
    
    /s/ Subramanian Krishnan

Subramanian KrishnanSenior Vice President, Chief Financial Officerand Treasurer (Principal Financial andAccounting Officer)
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Exhibit Number
    
    Document Description
    
    Form of Filing3(a)
    
    Restated Certificate of Incorporation
of the Company, as Amended (incorporated
by reference to the corresponding exhibit
number to the Companys Form 10-K for
the year ended September 30, 1993
(File No. 
0-17972))
    
    Incorporated by Reference3(b)
    
    Amended and Restated By-Laws of the
Company (incorporated by reference to
the corresponding exhibit number to the
Companys Form 10-Q for the quarter ended
March 31, 2007
(File No. 
0-17972))
    
    Incorporated by Reference4(a)
    
    Form of Rights Agreement, dated as of
June 10, 1998 between Digi International Inc.
and Wells Fargo Bank Minnesota, National
Association (formerly known as Norwest Bank
Minnesota, National Association), as Rights
Agent (incorporated by reference to Exhibit 1
to the Companys Registration Statement on
Form 8-A dated June 24, 1998
(File No. 
0-17972))
    
    Incorporated by Reference4(b)
    
    Amendment dated January 26, 1999, to Share
Rights Agreement, dated June 10, 1998
between Digi International Inc. and Wells Fargo
Bank Minnesota, National Association (formerly
known as Norwest Bank Minnesota, National
Association), as Rights Agent (incorporated
by reference to Exhibit 1 to Amendment No. 1
to the Companys Registration Statement on
Form 8-A dated February 5, 1999
(File No. 0-17972))
    
    Incorporated by Reference31(a)
    
    Rule 13a-14(a)/15d-14(a) 
Certification of Chief Executive Officer
    
    Filed Electronically31(b)
    
    Rule 13a-14(a)/15d-14(a) 

Certification of Chief Financial Officer
    
    Filed Electronically32
    
    Section 1350 Certification
    
    Filed Electronically
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