Why are none of the Eclipse NRE fees recognized as revenue as of 9/30/03? If the work is complete, they should be recognized.
In March 2002, we announced that we had entered into a Development and
Manufacturing Agreement with Eclipse by Fujitsu Ten ("Eclipse"), a car stereo
company. Under the agreement, e.Digital receives non-recurring engineering
("NRE") fees for design and development services, as well as revenues for the
manufacture and delivery of Eclipse-branded audio products. Specifically, the
agreement states that e.Digital will provide Eclipse with engineering services
to integrate file management and compressed audio management technology designed
by e.Digital into an advanced automotive audio system. Prior to entering into
the Development and Manufacturing Agreement, we had collaborated with Eclipse
for several months to develop and deliver state-of-the-art automotive OEM and
aftermarket infotainment systems integrating the latest digital audio, voice
recognition, data storage, video, and wireless Internet technologies for sale
under the Eclipse brand name. Eclipse refers to their automotive audio system as
an "infotainment" platform because it includes not only a radio and CD Player,
but also may (i) connect wirelessly to the Internet to download music or other
data, (ii) store, organize, retrieve, and play back data, including digital
audio files, from a hard disk drive, (iii) connect wirelessly to a user's home
personal computer while parked in the driveway for purposes of downloading
and/or uploading music or other information, (iv) record radio signals to a
built-in hard disk drive as they are received and (v) recognize the driver's
voice commands to perform a variety of operations. The first system was unveiled
at the 2002 International Consumer Electronics Show in Las Vegas. To date, we
have received $45,000 under this agreement with respect to NRE fees only, of
which $45,000 has been deferred as of September 30, 2003.
