gernb1...from the Q:
In May 2002, we signed a strategic development agreement with Digitalway Co., Ltd., ("Digitalway") of Korea. Under the agreement, we co-develop and market advanced digital audio players for the consumer market. The products are branded by e.Digital and marketed in the United States and Canada. The products can also be branded by Digitalway and marketed in Asia and Europe. In January 2003, we launched the e.Digital Odyssey(TM) 1000, a portable hard disk drive-based digital audio player jointly designed by e.Digital and Digitalway, and manufactured by Digitalway. The Odyssey(TM) 1000 is based on our MicroOS(TM) technology, and has an embedded 2.5 inch, 20 GB capacity hard drive capable of storing and playing back up to 5,000 tracks. It has a USB (Universal Serial Bus)
2.0 connection capable of downloading and writing up to 8 MegaBytes (MB) per second. The Odyssey(TM) 1000 incorporates an FM radio and digital voice recorder and a large, backlit display. It also acts as a portable hard drive and can store and transport any type of data file including images, spreadsheets, or other electronic documents. VoiceNav(TM) is included to make it easier to navigate through a large music collection and play a selected track. In September, 2003, the Company introduced two new models of the Odyssey 1000 to supplement our product offerings in the areas of price and capacity. The new models, 15 GB with a 3,750 track capacity and 40 GB with a capacity to store over 10,000 tracks, both offer all of the above mentioned functionality of the 20 GB Odyssey 1000(TM).
I see no mention of any royalties paid or payable by Digitalway to EDIG. The Q states that EDIG products CAN BE branded by Digitalway and sold in Europe & Asia but there is no mention that this has actually taken place ie sales took place & royalties were generated. Furthermore, there does not appear to be any royalty income received by EDIG in the 2nd Q just filed for the period ended 09.30.03 unless it is buried in product sales. Re your comment re barter, IMHO, proper accounting would record any royalty revenue as income with a corresponding receivable for that amount. If those royalties were going to be used to pay for manufacturing costs, then the manufacturing costs would appear and the set off would be against the accounts receivable. In other words the royalty revenue would appear as income & the manufacturing cost would appear as a cost. What WOULD disappear would be the accounts receivable & the accounts payable but the INCOME & EXPENSE items would appear.
In September 2003, the Company entered into a royalty bearing licensing agreement with a multi-billion dollar Asian OEM for the manufacture of the Company's Odyssey 1000(TM) platform for OEM branding. The Asian OEM will manufacture a 1.8" version of the Odyssey 1000(TM) for specific OEM branding and e.Digital is supporting the technology, software, firmware and upgrades to the Odyssey 1000(TM) platform. Products manufactured under this agreement are scheduled for consumer release in our third fiscal quarter
It appears that EDIG has a March 31st fiscal year end. The Q just filed is for the six months ended 09.30.03. EDIG's third Q commences October 1,2003. So if EDIG signed a royalty agreement in September 2003 and products manufactured pursuant to this royalty agreement will be released to the consumer in EDIG's third fiscal Q, then one can assume that royalty income would commence in EDIG's third fiscal Q and that the next Q should contain some royalty income provided the products manufactured under the royalty agreement are released for sale to the consumer in that same Q.
All in all, IMHO, this Q was better than recent ones in that sales have commenced & agreements have been signed to get their product out there.
Hope this helps
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