LETTER FROM THE PRESIDENT
This letter is a direct communication from the President and CEO
of e.Digital Corporation (OTC:EDIG).
October 21, 2003
Dear Shareholder:
As our Annual General Meeting approaches we would like to take
this opportunity to provide a summary and an update on our
business, products and strategies.
Shareholder Meeting and Voting
We have set Thursday, December 4, 2003, as the date for our
Annual General Meeting of Shareholders, which will be held at
e.Digital’s Corporate Offices in San Diego, California. We will
provide a live audio webcast of the meeting at 2:00 p.m. Pacific
Standard Time. Details of the broadcast will be announced
before the meeting.
Proxy materials are being prepared and will be mailed to
Shareholders of Record as of the Record Date (October 21,
2003). We encourage you to read your Proxy materials and return
your ballot quickly. We also encourage you to take advantage of
your broker’s telephone and Internet-based voting systems. All
ballots must be received no later than noon Pacific Time on
December 4, 2003 to be counted at the Annual Meeting.
Summary of Business Developments
Over the past ten months, we have executed our business plan of
maximizing our technology and securing new Original Equipment
Manufacturer (OEM) business. We have cut costs, consolidated
operations, solidified recurring revenue and landed new OEM
business and opportunities. As a result, we have realized our
strongest three consecutive quarters in the Company’s history.
Based on current business and expected OEM product deliveries,
we anticipate that the quarter ending December 31, 2003 will
continue this trend.
During the past year, we have announced new business
developments that demonstrate we are building our business to
maximize returns from our technology, services and products.
Let me detail our progress in our announced areas of business:
Wireless Headset
This summer, we delivered Ears to the World, a wireless,
MP3-based headset (personal translation device) for use within
Walt Disney World Resort. The Show Translators supply
real-time, location-based narrative providing a more satisfying
personal experience for guests with limited English fluency.
French, German, Japanese, Portuguese and Spanish translations
are currently available.
The translators utilize our patented MicroOS™ as well as our
hardware and firmware. The Ears to the World project was
developed as a result of the partnership announced in February
between Hewlett-Packard, Softeq Development, and e.Digital. The
translators interact with many key attractions in all four theme
parks in Orlando, Florida (Magic Kingdom, Epcot, Disney-MGM
Studios and Disney’s Animal Kingdom). We expect further business
and future opportunities for this product and from these OEM
relationships.
Automotive Infotainment System
When we announced our relationship with Eclipse by Fujitsu Ten
in 2002, the project consisted of developing an automotive
infotainment system based on MicroOS that would be integrated
with one of their popular in-car CD/Stereo models. As the
project progressed, Eclipse by Fujitsu Ten requested additional
functionality to accommodate a greatly expanded range of product
models. After several modifications to the original
specifications at their request, and based on their updated
schedule, we expect to deliver the automotive infotainment
systems to Eclipse by Fujitsu Ten this quarter. Because Eclipse
by Fujitsu Ten is a tier one supplier to major OEMs such as
Toyota, if this product proves successful in the automotive
aftermarket, we expect further business for this system and
subsequent generations.
Odyssey 1000™ Digital Jukebox Platform
In January 2003, we launched our Odyssey 1000. The original 20
gigabyte model was supplemented with 15 and 40 gigabyte models
in September. This present combination of offerings addresses
the needs of a variety of consumers, from those who find cost to
be the most important factor to others desiring larger capacity.
As current demand for digital jukebox products is focused on
smaller form factors with increasing functionality, we reported
in September that we licensed the Odyssey 1000 platform for a
1.8” hard disc drive-based form factor to a major Asian OEM for
third party branding and distribution. We are pleased to report
that the Asian OEM is in production and we expect the first
branded units to be released to consumers in early November. We
expect this new 1.8” HDD version of our Odyssey 1000 platform
will be the basis for future Odyssey models.
To augment the new smaller 1.8” HDD configuration, we have
enabled digital rights management (DRM) support, full ID3 tag
support and Windows Media Player compatibility in order to
interface with many of the new content sites that have recently
come on line. A firmware upgrade with these enhancements will
be released for Odyssey 1000s sold to date.
Because of the flexibility of our MicroOS we have developed a
wide range of feature sets for the Odyssey 1000 platform,
providing many choices for OEM customers. This a-la-carte model
allows OEM clients to customize the Odyssey 1000 platform for
their individual specifications and product needs.
Personal Video Platform
We are pleased to report that the first version of our
MicroOS-enabled personal video platform launched this month as
APS’ digEplayer™ in-flight entertainment system. The digEplayer
was officially unveiled by APS and e.Digital at this year’s
World Airline Entertainment Association (WAEA) Conference and
Exhibition in Seattle in early September. Meetings held at the
conference have yielded new opportunities and potential business
from major airlines beyond the initial order placed for Alaska
Airlines.
Video quality, ease-of-use and content security are the primary
components of our personal video platform. We have partnered
with DivXNetworks to create robust content protection utilizing
their patent pending video encryption technology and our
proprietary firmware and hardware encryption.
While APS’ digEplayer provides an excellent example of one of
the many uses for our proprietary video platform, the business
opportunities extend beyond airlines and represent potentially
millions of dollars in revenue to e.Digital through expected
royalties, new orders, refurbishment and upgrades.
We are currently pursuing licensing opportunities with OEMs
interested in customizing our personal video system for a
variety of specifications and products including in-home and
automotive applications.
Other Business
We continue to work on new business opportunities for our
technologies and product platforms with announced and
unannounced OEM partners. Among the opportunities we are working
on is the licensing of our MicroOS core. We look forward to
detailing this and other new opportunities at December’s Annual
General Meeting.
Summary
The past year has been one of significant growth for e.Digital
as we overcame many challenges and worked to position your
company for success.
Atul Anandpura and our team of engineers have worked diligently
with our OEM customers and partners to customize and enhance our
technology platforms for new products targeted at emerging
markets. Our ability to integrate new technologies and support
the security concerns of content providers combined with the
proliferation of secure content availability is creating greater
demand for our MicroOS technology, engineering services and
product platforms. We are well positioned to capitalize on
current and future opportunities in the audio, video and
wireless products industries.
We thank you, our shareholders, customers, board of directors,
employees and partners for your continued support and look
forward to meeting with many of you at the Annual Meeting.
Sincerely,
Alfred H. Falk
President and Chief Executive Officer
Safe Harbor statement under the Private Securities Litigation
Reform of 1995: All statements made in this document, other than
statements of historical fact, are forward-looking statements.
Forward-looking statements are based on the then-current
expectations, beliefs, assumptions, estimates and forecasts
about the businesses of the Company and the industries and
markets in which the company operates. Those statements are not
guarantees of future performance and involve risks,
uncertainties and assumptions that will be difficult to predict.
Therefore, actual outcomes and results may differ materially
from what is expressed or implied by those forward-looking
statements. More information about potential factors that could
affect the Company can be found in its most recent Form 10-K,
Form 10-Q and other reports and statements filed by e.Digital
with the Securities and Exchange Commission (“SEC”). e.Digital
disclaims any intent or obligation to update those
forward-looking statements, except as otherwise specifically
stated by it.
Editors Note: digEplayer is the trademark of APS, Inc. MicroOS
is the registered trademark of e.Digital. All other company,
product, and service names are the property of their respective
owners.
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