e.Digital Corporation (fka EDIG)

[philozarton]

Press Release Source: e.Digital Corp.


e.Digital Corp. Releases Summary of Annual Shareholders Meeting
Wednesday November 6, 8:04 am ET


SAN DIEGO--(BUSINESS WIRE)--Nov. 6, 2002--e.Digital Corp. (OTC:EDIG - News) held its Annual General Meeting of Shareholders yesterday in Escondido, Calif. This release summarizes the company's presentation to shareholders.
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The Company's formal business consisted of two proposals. Proposal #1 to elect Alex Diaz and re-elect Alfred H. Falk, Robert Putnam, Jim Collier, Allen Cocumelli and Victor Ramsauer to the Board of Directors; and Proposal #2 to ratify the appointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ended March 31, 2003, were approved by shareholders.

As part of his informal presentation, Fred Falk, president & CEO of e.Digital, introduced Bryan Jones, who joined the Company in June as e.Digital's Vice President of Broadband Entertainment. Falk also introduced Alex Diaz, who joined the Board of Directors in July. Mr. Diaz is Executive Vice President of Califormula Radio Group, the largest group of San Diego owned and operated radio stations.

Falk's presentation included a summary of the company's "firsts" including the conversion of audio from analog to digital, the linkage of handheld audio recorders to the PC and the Internet, the use of removable Flash memory for digital voice recording, storage, PC interface, and playback; the development of VoiceNav technology, which enables users to select and play music tracks by simply speaking the titles; and the first reference design for multi-codec support and the first multi-codec digital audio player.

A new agreement with PortalPlayer also was announced. PortalPlayer supplies consumer electronics manufacturers with complete chip solutions for open and secure delivery and management of digital media. PortalPlayer develops and markets advanced system on chip solutions for digital audio recording and playback using MP3 and other popular digital compression technologies tightly integrated with electronic commerce and digital rights management technologies.

Falk said, "As part of the agreement, PortalPlayer will refer pre-qualified customers to us for engineering services and product development using the PortalPlayer IP. This partnership opens the door for revenue producing opportunities, both from non-recurring engineering (NRE) fees and royalties as well as revenue sharing from PortalPlayer. It also provides us with another opportunity to incorporate new technologies into useful applications and attractive products for OEM customers, which in turn should generate additional OEM interest."

Falk also discussed e.Digital's partnership with Aircraft Protective Systems, Inc. (APS) to develop and market a portable, hard disk drive-based In-Flight Entertainment, or IFE, system under contract for a leading U.S. airline. The agreement calls for e.Digital to manufacture the units and sell them to the airlines through APS, which is a certified airline service and equipment provider. Discussions are underway with major motion picture studios to provide content for this device, making it the first portable IFE unit of its kind to be introduced to the airline and travel industry.

According to Falk, "This customizable product is intended to play music and movies and provides airlines with an alternative to retrofitting their planes with embedded and costly In-Flight Entertainment systems. We believe this is a viable solution for airlines to offer passengers personalized, portable in-flight entertainment with no aircraft downtime and relatively minimal costs. We believe, as do several motion picture executives, that it will significantly upgrade the standard in In-Flight Entertainment."

Falk added that, "We expect significant ongoing revenue associated with this project, including revenue from non-recurring and recurring service fees plus licensing fees and royalties on each unit. This contract represents e.Digital's first venture into the In-Flight Entertainment industry; with APS we are in discussions with several other airlines to adopt the portable IFE model and implement this service and value-added content for their passengers. There is tremendous growth potential for this system, as it can be applied to the entire travel and leisure industry."

Falk also recounted the poor performance of retail consumer electronics products due to pricing pressures and major retailers' restrictive and unfavorable policies. Falk said that, "The Company will continue to maintain a limited, focused, mostly regional retail presence, but we believe better profit margins can be realized through our OEM relationships and by selling our products on our Web site, overseas, and through select regional retailers in North America."

Falk added, "Reflecting a recent change to the Company's internal procedures, for accounting purposes, we now treat sales to major retailers strictly as consignment sales. Because of this, and because our consumer electronics sales over the summer were extremely weak, we expect revenues for the quarter ended September 30, 2002, to be substantially less than the projected $2.6 million. This is due to a number of factors, including the larger retailer's rigid sell-through policies and overall price reductions in the industry.

"We are seeing a marked improvement in retail sales and OEM business for the current quarter and we look forward to providing further revenue and business updates this month and in December," said Falk.

The 10-Q for the quarter ended September 30, 2002, is due to be filed with the Securities and Exchange Commission no later than November 14, 2002.

Falk added that, "We are focusing our development, sales, marketing, and support efforts mainly on digital products for the general consumer audience. Our objective is to have our MicroOS(TM) and application designs play major roles in the growing market for portable digital devices.

"There are four ways e.Digital is building its revenue base: First, selling e.Digital branded products through European, Asian, and U.S. regional retailers. Second, through OEM development projects. Third, through licensing and royalties from OEM-branded e.Digital-powered products. Fourth, through e-tail and our own web presence," Falk said.

Bryan Jones, Vice President of Broadband Entertainment, talked about e.Digital's new broadband entertainment Web site, WeDigMusic.com, which was launched in September. The site has already had a million hits and traffic to the site is expected to multiply as more features are added. He also discussed revenue opportunities through advertisements and record label promotions, as well as through strategic content partnerships with companies such as MP3.com. In the future, the site plans to feature downloadable e-books, movies, videos and more.

Highlights from the informal business presentation included the following:

A summary of e.Digital-branded consumer products introduced to market in the past year, which included the Odyssey 100, 200, and 300 digital audio players; the Treo 10 and 15 digital jukeboxes; the MXP 100 digital audio player and voice recorder; and the Silhouette MP3-CD player. The Silhouette MP3-CD product has been pulled from e.Digital's product line due to battery-related issues. e.Digital is working with the manufacturer to find a solution and hopes to re-offer the product in the near future.
OEM products introduced to the market in the past year from Asian and European OEM customers included the BeoSound 2 by Bang & Olufsen, sold in their specialty electronics stores worldwide; and the Classic XP3 and DP2000 by Musical, sold through Circuit City in the United States.
In order to reduce costs, the Company has consolidated responsibilities and is no longer using APL Direct Logistics' distribution center. Distribution is now handled internally, where costs can be more closely controlled and overhead is more reasonable. These combined measures have reduced monthly operating expenses by 30%.
The Company is working with an ASIC manufacturer to provide a DivX-certified multi-codec solution for video. Several Asian companies interested in developing products using this technology are in negotiations with e.Digital.
The Company announced that it will showcase several of its products at the International Consumer Electronics Show (CES) 2003 in Las Vegas, the biggest consumer electronics trade show in the world.
The Company is working with APS, Eclipse by Fujitsu Ten, Bang & Olufsen, Samsung, Digitalway, and others on projects based on its cutting-edge technology, employing research and development that in many cases it has already completed.
The meeting closed with a live demo of e.Digital's much-anticipated new consumer product, the Odyssey 1000 20G hard disk drive-based digital audio player and voice recorder. The player features e.Digital's VoiceNav technology for voice navigation, an FM tuner, a scroll wheel for easy manual navigation, animated LCD, pre-loaded content, and much more.
Falk concluded, "Our passion for e.Digital and our technologies remains strong. I am convinced that there will be a steady increase in products that will utilize our technologies and engineering services. We've had many technological firsts; we will continue to focus on turning those firsts into financial rewards for e.Digital and for our shareholders."

A replay of the meeting is available through webcast at http://www.edig.com/news/events.html for the next 45 days.

About e.Digital

e.Digital Corp. designs, licenses, brands, manufactures, and sells digital audio products and technologies. The company's trademarked digital audio players include the MXP(TM) 100, Treo(TM) portable digital jukebox line, Silhouette(TM) ultra-slim MP3-CD player, and Odyssey(TM) line of flash- and hard disk drive-based players. e.Digital launched WeDigMusic.com to complement its digital audio players by providing consumers with a one-stop-shop for streaming and downloading music from thousands of artists on the Web. The company also 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, voice and video players/recorders, and automotive infotainment and telematics systems. Other applications for e.Digital's technology include portable digital music players and voice recorders; desktop, laptop, and handheld computers; PC peripherals; cellular phone peripherals; e-books; video games; digital cameras; and digital video recorders. Engineering services range from the licensing of e.Digital's patented MicroOS(TM) file management system to custom software and hardware development, industrial design, and manufacturing services. For more information on the company, please visit www.edig.com. To shop at the e.Digital online store, please visit www.edigital-store.com.

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. Factors that may affect the Company's businesses, financial condition and operating results include future products and results, technological shifts, potential technical difficulties that could delay new products and services, competition, pricing pressures, the uncertainty of market acceptance of new products and services by OEM's and end-user customers, effects of changes in the economy, consumer spending, the ability of the Company to maintain relationships with strategic partners and suppliers, the ability of the Company to timely and successfully develop, maintain and protect its technology and product and service offerings and execute operationally, the ability of the company to attract corporate financing and the ability of the Company to attract and retain qualified personnel. 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: e.Digital, Odyssey, Treo, Silhouette, MXP 100, WeDigMusic, and VoiceNav are trademarks of e.Digital Corporation. All other company, product, and service names are the property of their respective owners.



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e.Digital Corp., San Diego
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