e.Digital Corporation (fka EDIG)

[Cassandra]

I don't see any of those as reasons why e.Digital can not clarify the statements they have already made to shareholders about who pays whom on this agreement.

It's really very simple. It appears that there are 2 scenarios:

1. APS pays DW directly for manafacturing and EDIG only for NRE and per-unit royalties of "up to several hundred dollars per unit."

2. APS pays EDIG for the whole project and EDIG pays DW out of the up-front "royalties" when the devices are delivered.

One might wonder why I think that e.Digital would chose #2 but imply #1.

Under scenario 1, the gross revenue to e.Digital would likely be rather small and disappointing to EDIG shareholders. All e.Digital would get is its share of NRE fees and small per-unit royalties for licensing MOS.

Under scenario 2, the gross revenue to EDIG is much higher and includes what will be paid to DW for manufacturing. If shareholders can be led to conclude that the projected $1 million in revenue management states it expects from APS does not include manufacturing costs, this project would seem much more signicant than it is.

Do the math. There are 1,000 units ordered and Boyer says they cost about $1,000 each. That's a total of about $1 million. Therefore, how could e.Digital expect to take in the entire cost of the 1,000 units unless they are going to pay DW?

Also, the wording in the 10Q seems to indicate that e.Digital is responsible for manufacturing these devices, but will be paid "royalties" which can simply mean being paid on a per-unit basis.

I believe this APS agreement is similar in money flow to the Softeq agreement wherein the manufacturing revenue flowed through EDIG to Maycom (or whoever made the headsets)

What I believe e.Digital shareholders will discover when the 10Q is released in mid Nov. is that there is a very substantial cost of sales. It won't be possible to know the breakout of the COS between the remainder of the Softeq revenue and APS (or even Eclipse if there is any such revenue this Q).

I am convinced that the actual margin on the APS agreement is VERY small. Management has stated that DW did the industrial design. If so, even some of the NRE fees paid to e.Digital may end up being paid to DW in addition to manufacturing costs.