e.Digital Corporation (fka EDIG)

[newelong]

MaryinRed ...

"WHO is making what...off IFE? That is my question of the day. One can make "guesstimates" based on the announced players and their roles."

I`ll give it a try ...

I think the Company has made it quite clear that its primary focus is on IFE, and I think management has been pretty consistent in what`s been told to shareholders over the past six months ...

Q: With regard to IFE, how many airlines is e.Digital currently working with?

A: Our relationship is with APS, who is our customer. They are working directly with airlines, and there is a contract in place with one major airline. However, we have been contacted by other airlines and travel-industry customers interested in our IFE system and we are pursuing these new opportunities with APS. [3-24-03 FAQ]

"Thank you for your e-mail, Phil. The manufacturing costs including parts and labor are being paid for by APS." [RP 6-11-03 e-mail]

"Thank you for your e-mail, . In place of small rental payments, we negotiated substantial up-front per-unit royalties for our IFE devices. We also expect to generate significant on-going recurring revenue for IFE product repairs, replacements and refurbishments. Please call me at your convenience if you would like to discuss this further." [RP recent e-mail to Redwing999]

The following are statements from the 8-14-03 webcast ...

"The royalties range from several dollars on the flash-based designs up to several hundred dollars on the audio-video platform." [Fred]

"And with the airlines alone you ... you look at orders in the thousands of pieces, and times that by royalties in the hundreds of dollars you can see how, just in that industry alone, that revenue can quickly add up for the Company, as well as all the other markets that we`re pursuing with APS" [Robert]

Granted we don`t know the specifics about the contract, but just for arguments sake, let`s say that APS sells these devices to the airline for $1,000 apiece, pays Digitalway $400 for the manufacturing costs and their profit, pays e.Digital a $400 royalty for engineering and design fees, our IP and our profit, and pockets the remaining $200. I would think that NRE and design fees could be as much, or perhaps even more than, our royalty on this initial order; however, on subsequent orders the only cost I can see would be for that of our chip with the patented and proprietary MicroOS embedded. Consequently, the Company`s gross margin here could be somewhere in excess of $350 per unit, IMO. Now, ASSUMING that after the testing phase, the airline orders 9,000 more of these devices, then I would think our gross margin could perhaps be in the neighborhood of $3,150,000 ... and tack onto that, say $50/unit [under a 3-year $150 warranty contract], and we can add another $500,000 to annual revenues, less of course, all related charges for "repairs, replacements and refurbishments" ... and this all pertains to just one airline contract. Furthermore, if we can interest a major avionics company into licensing our IFE device platform for a $300-$350 royalty per unit, including our chip and consultations ... well, isn`t this what the Company has always wanted to do ?? Perhaps, just perhaps, it`s time has come !?!

So, is this "royalty" issue all that difficult to understand, or am I way off base here ?? It does seem like e.Ditital could be re-defining the meaning of "royalty", at least as we may have come to know and love it in the past, anyway !?! Would appreciate your input as always, but keep in mind that the IFE business is all about the present and the future, so I`m really hoping to hear no more about the Company`s past, which IMO, wouldn`t be relevant here.

TIA

NEWe.LONG

P.S. I think Cassandra is a bit confused about this term "royalty", too ...

"Does e.Digital have to pay DW for manufacturing out of this so-called royalty payment? If so, then it is not a true "royalty."[/i}

http://www.investorshub.com/boards/read_msg.asp?message_id=1392032

... but she did post this nice picture ...

http://www.investorshub.com/boards/read_msg.asp?message_id=1392702