e.Digital Corporation (fka EDIG)

[murgirl]

Reflecting on the past ..From the 6/28/99 Shareholders letter:
Accomplishments During the Last Year

For e.Digital, fiscal 1999 was an extraordinary year. Our early entry into the digital world and our record of accomplishments positions us as an industry leader in providing portable digital recording solutions. Our selection by Lanier, Intel and Lucent for state-of-the-art projects is evidence of the strength of our core technology and our experience in implementing hardware and software solutions. We are now aggressively exploiting our industry position. Major events in the past year have aided in furthering our industry leadership:

We recently began shipping Lanier product against $3 million of initial production orders.
We are designing and developing an advanced digital voice recorder under contract to Intel.
We have completed a second-generation digital music player in cooperation with Lucent and we are marketing the technology to the industry.
We have worked to establish strategic and industry relationships with major companies in the digital music and portable device markets.
We were recently selected by IBM to be an inaugural member of the VoiceTIMES alliance to develop standards for voice technologies in handheld mobile devices.
Our engineering team is serving as a technical advisor to Lucent at meetings of the SDMI (Secure Digital Music Initiative), a group--founded by the five major music recording labels--which is establishing standards for secure delivery of digital music over the Internet.
We have been granted four U.S. patents on our core technology, our MicroOS™ file management system.
We are especially proud of the Lanier product. (Go to http://www.lanier.com/healthcare/ docutivity/voicewrite-mobile.html/ to see a photo and description of the product.) This full-featured handheld digital voice recorder with PC docking station began shipping in mid June, and is being sold exclusively by Lanier under the brand name Cquence Mobile. This remarkable product is being installed in Lanier's medical and legal customer base, fulfilling the needs of high-volume dictation users with hand-held convenience and quick connection to a facility file management and transcription package through the PC docking station.

While we are dependent on Lanier to market this product, we are confident in their ability to do so. Lanier is a premier worldwide marketing company with $1.6 billion in annual revenue.

Our Intel product design will also be an important technical achievement for our team. A number of prototypes are being developed to Intel's specifications; they include PC downloading capabilities and can interact with third-party software that performs voice-to-text functions and text-to-voice functions. The integration of these functions with convenient hand-held devices is proving to be a rapid growth area for both business and personal use. We are positioned to take advantage of these growth areas with a highly advanced, full-featured product.

Our accomplishments, experience and technological advances gained during research and development over the last 2½ years are very valuable assets, and will be applied to many future products and technologies.



Strategic and Industry Relationships

During the last year we have developed and nurtured a growing base of strategic and industry relationships in the digital music and mobile enterprise markets. These relationships enhance our ability to participate in explosive new fields of business. While we are often precluded from discussing certain negotiations and relationships due to limitations set by our customers, the following achievements highlight relationships developed in the last year:

We are collaborating with Lucent to jointly offer OEMs a reference design incorporated in a new handheld solid-state Internet music player. The new SDMI-compliant music player features the MicroOS file management system and plays music stored in Lucent's EPAC audio compression format that offers high security and CD-transparent sound quality. Initia0l designs incorporate a 32 Megabyte CompactFlash card produced by SanDisk. We are collaborating on the marketing of this product design to a wide range of participants in the digital music industry.
Our EPAC music player uses a new generation of Digital Signal Processor manufactured by Texas Instruments. We are serving as the DSP engineering specialist to port EPAC software to this new generation of Texas Instrument DSPs.
We are working with Cognicity and Lucent to use Cognicity's AudioKey as a security feature to watermark digital music content providing a means for copyright protection. A watermark is an embedded digital tag on a CD or digital music file providing a means of tracking its source and use.
The current demonstrations of the EPAC player use Celestial's Audio Library software to manage digital music on the PC, function as a personal music server (jukebox) and manage the transfer of digital music to the portable EPAC player.
We are working with Intel on an advanced voice recorder design. Intel is also an inaugural member of the VoiceTIMES alliance.
IBM is leading the VoiceTIMES alliance and we are working to expand our relationship with IBM through this and other activities.
Through SDMI members and others, we are actively pursuing relationships with additional digital music industry participants including other compression and protection technology providers. The worldwide electronics industry is quickly evolving to provide more content in a variety of formats for portable consumer devices.

The VoiceTIMES alliance is focused on research studies to identify enterprise solutions where voice technology can change the way companies do business by providing plug and play compatible mobile devices. Initial focus is on the medical, law enforcement, insurance, service, field sales and ERP (Enterprise Resource Planning) markets.

We want to maintain flexibility to adapt to rapidly changing industry trends and to focus on our strength - meeting the needs for more complex memory management in mobile devices.