SAN DIEGO (BUSINESS WIRE) - Today we filed our Form 10-KSB with the Securities and Exchange Commission,
summarizing our 2001 fiscal year ended March 31, 2001.
Per our Shareholder Communications policy, I would like to provide you with a summary and an update of our recent
business.
Financial Results
Revenues for products and services for the fiscal year ended March 31, 2001, totaled $1.83 million, versus a total of
$490,000 for the previous completed fiscal year (FY). This reflects more than a 370% increase in revenues and the total for
FY 2001 is close to the combined revenues from the last three fiscal years. We have created conservative internal forecasts
based on existing agreements and additional projects in development, and we believe that the increasing revenue we have
experienced over the last year is only the beginning of a sustainable trend.
Losses for the 2001 fiscal year totaled $3.65 million, or $0.07 per share, compared with $2.61 million or $0.05 per share for
the same period the year before. This loss reflects costs associated with the development of new technology platforms and
product designs marketed to OEM customers and licensees, expansion of our existing facility and additional staffing. During
the year we also dedicated significant resources to research and development efforts, and to the specific development
needs of certain OEM customers for their soon-to-be-released, "Powered by e.Digital" consumer electronics products. We
believe that as more products reach completion and are taken to market, the royalties generated, in addition to continuing
service fees for new engineering and design projects, will shrink the gap between expenses and revenues. We have also
taken steps internally to expand our service menu and significantly increase potential profit centers in our dealings with OEM
customers and licensees.
The current quarter, ending June 30, will reflect revenue primarily from products manufactured and delivered to Lanier
Healthcare as well as non-recurring engineering (NRE) fees from several OEM customers. Revenues for our first fiscal
quarter 2002 have exceeded those for the fourth fiscal quarter of 2001. The quarterly report Form 10-QSB for the quarter
ending June 30 is due to be filed no later than August 15.
Our financial results for the remainder of this year are expected to reflect the results of product development and product
deliveries and the resulting increase in NRE fees and royalties paid to us by our customers. Per accounting pronouncement
SAB101, titled "Revenue Recognition," public companies are required to spread recognition of NRE fees over several
quarters when billed in lump sums or prepaid. Due to this revenue recognition policy, fees received during a given quarter
may need to be recognized over several quarters. We expect this to result in a steady and more uniform revenue stream.
Recent Business
We continue to experience increasing demand for our MicroOS(TM)-based technology integration and product development
services. Our OEM customer list continues to grow and includes some of the best-known companies in the world. We are
working closely with them in the development and delivery of their e.Digital-powered products. These activities have
produced and are expected to produce increasing revenues for engineering services, manufacturing management services,
technology integration, product development, and design services performed on our customers' behalf as well as significant
royalties as these products are brought to market.
Notwithstanding delays, progress has been made with our OEMs and manufacturing partners on our hard-disk-drive based
jukebox designs and other product platforms. Based on current information from our customers we expect to see products
using our designs to be launched by OEMs to consumers this summer. We are also increasing our involvement with the
development and launch of some of our OEM customers' products. This is expected to allow us to maximize our opportunities
and revenue in each customer relationship, while gaining more control of various processes that affect the time frames of
consumer product launches.
DataPlay recently announced the completion of a $55 million round of funding from global companies in the music, computer,
and consumer electronics industries to support the manufacturing and consumer launch of DataPlay's digital media. We are
optimistic about the demand for DataPlay and look forward to their launch announcements as well as product announcements
from our OEMs. We are working with OEM customers and with DataPlay to integrate their digital media into a variety of
consumer electronics and computer-related products. Development work based on this technology integration has added to
our NRE revenues. These products are expected to produce substantial royalties and licensing fees for our company when
they are scheduled to reach the market, later this year.
Under Chief Operating Officer Jim Collier, our service offerings are expanding significantly. Each addition to our service
menu is a potential profit center for us, and increases our value to our customers. We are experiencing demand for additional
services, and -- based on Jim's extensive experience in all phases of operations management -- we are augmenting our
resources to support our customers' needs, and in turn, create more opportunities for revenue generation, beyond NREs and
royalties, and higher profitability potential per product.
We are leveraging strategic partnerships to perform total product life cycle management for some of our OEM customers and
licensees. We are becoming closely involved in the end-to-end supply chain of logistics, manufacturing, product management
and back-end support for many customers. We are becoming more proactive in the areas of pre-production planning, testing,
quality assurance, and industry compliance/certification testing. We will be announcing a strategic partner to assist in
managing services to support our customers' marketing, customer service, order fulfillment, technical support, and warranty
service needs. All of these efforts and partnerships are expected to result in further licensing fees, additional service fees,
and significantly higher revenues to e.Digital per unit shipped.
At the request of our OEM customers, we are developing multiple end-user products based on common platforms. With our
unique position as a technology integrator and applications innovator, we have created opportunities for products with higher
potential profit margins. With the backing of our OEM customers and partners, we are specifically targeting devices that can
be successful in the consumer market, including digital music and voice recorder/players, digital video for portable devices,
automotive and home stereo products, set top boxes, wireless communications integration, and voice navigation integration.
We expect these products to drive an increase in our revenue and move our designs and technology into a variety of new
consumer electronics products throughout the world.
Summary
There is a great deal of activity and hard work being done inside your company to capitalize on several business
opportunities that have developed since January. Our 30% increase in personnel since the beginning of the year is the direct
result of our increasing OEM business. With the addition of Jim Collier as COO, we have entered a new level of service
integration that is proving to be of great benefit to our OEM customers.
We appreciate your desire for more news and details on our products, projects, agreements, and relationships. We also
share your frustration that expected announcements have been delayed. We have achieved several milestones this year that
will be revealed according to the timelines of our OEM customers. Tempering our frustration with the pace of news is the
knowledge and expectation of major OEM announcements and launch plans for new consumer products based on our
technology.
With several OEM-branded products based on our platforms scheduled to be released this year, along with other substantial
business developments, we remain confident about our corporate and financial future. While the exact time frames remain up
to our OEM customers and partners, with their support and the assistance of Fleishman-Hillard, we do expect multiple
developments and announcements this summer, particularly from major OEMs, timed around trade shows, scheduled product
launches and other industry events.
Sincerely yours,
Alfred H. Falk
President and CEO
About e.Digital
e.Digital Corp. offers an engineering partnership for the world's leading electronics companies to link portable digital devices
to PCs and the Internet. e.Digital develops and markets to consumer electronics manufacturers complete end-to-end
solutions for delivery and management of open and secure digital media with a focus on music players/recorders and
portable digital voice recorders. Engineering services range from the licensing of e.Digital's patented MicroOS(TM) and
MicroCAM(TM) technologies to custom software and hardware development, industrial design and manufacturing services.
For more information on the company, please visit www.edig.com.
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