Letter From the President; This letter is a direct Communication From
the President and CEO of e.Digital Corp. -- OTC:EDIG --
SAN DIEGO, Jun 28, 2001 (BUSINESS WIRE) --
Dear Shareholder:
Today we filed our Form 10-KSB with the Securities and Exchange Commission,
summarizing our 2001 fiscal year ended March 31, 2001.
Per our Shareholder Communications policy, I would like to provide you with a
summary and an update of our recent business.
Financial Results
Revenues for products and services for the fiscal year ended March 31, 2001,
totaled $1.83 million, versus a total of $490,000 for the previous completed
fiscal year (FY). This reflects more than a 370% increase in revenues and the
total for FY 2001 is close to the combined revenues from the last three fiscal
years. We have created conservative internal forecasts based on existing
agreements and additional projects in development, and we believe that the
increasing revenue we have experienced over the last year is only the beginning
of a sustainable trend.
Losses for the 2001 fiscal year totaled $3.65 million, or $0.07 per share,
compared with $2.61 million or $0.05 per share for the same period the year
before. This loss reflects costs associated with the development of new
technology platforms and product designs marketed to OEM customers and
licensees, expansion of our existing facility and additional staffing. During
the year we also dedicated significant resources to research and development
efforts, and to the specific development needs of certain OEM customers for
their soon-to-be-released, "Powered by e.Digital" consumer electronics products.
We believe that as more products reach completion and are taken to market, the
royalties generated, in addition to continuing service fees for new engineering
and design projects, will shrink the gap between expenses and revenues. We have
also taken steps internally to expand our service menu and significantly
increase potential profit centers in our dealings with OEM customers and
licensees.
The current quarter, ending June 30, will reflect revenue primarily from
products manufactured and delivered to Lanier Healthcare as well as
non-recurring engineering (NRE) fees from several OEM customers. Revenues for
our first fiscal quarter 2002 have exceeded those for the fourth fiscal quarter
of 2001. The quarterly report Form 10-QSB for the quarter ending June 30 is due
to be filed no later than August 15.
Our financial results for the remainder of this year are expected to reflect the
results of product development and product deliveries and the resulting increase
in NRE fees and royalties paid to us by our customers. Per accounting
pronouncement SAB101, titled "Revenue Recognition," public companies are
required to spread recognition of NRE fees over several quarters when billed in
lump sums or prepaid. Due to this revenue recognition policy, fees received
during a given quarter may need to be recognized over several quarters. We
expect this to result in a steady and more uniform revenue stream.
Recent Business
We continue to experience increasing demand for our MicroOS(TM)-based technology
integration and product development services. Our OEM customer list continues to
grow and includes some of the best-known companies in the world. We are working
closely with them in the development and delivery of their e.Digital-powered
products. These activities have produced and are expected to produce increasing
revenues for engineering services, manufacturing management services, technology
integration, product development, and design services performed on our
customers' behalf as well as significant royalties as these products are brought
to market.
Notwithstanding delays, progress has been made with our OEMs and manufacturing
partners on our hard-disk-drive based jukebox designs and other product
platforms. Based on current information from our customers we expect to see
products using our designs to be launched by OEMs to consumers this summer. We
are also increasing our involvement with the development and launch of some of
our OEM customers' products. This is expected to allow us to maximize our
opportunities and revenue in each customer relationship, while gaining more
control of various processes that affect the time frames of consumer product
launches.
DataPlay recently announced the completion of a $55 million round of funding
from global companies in the music, computer, and consumer electronics
industries to support the manufacturing and consumer launch of DataPlay's
digital media. We are optimistic about the demand for DataPlay and look forward
to their launch announcements as well as product announcements from our OEMs. We
are working with OEM customers and with DataPlay to integrate their digital
media into a variety of consumer electronics and computer-related products.
Development work based on this technology integration has added to our NRE
revenues. These products are expected to produce substantial royalties and
licensing fees for our company when they are scheduled to reach the market,
later this year.
Under Chief Operating Officer Jim Collier, our service offerings are expanding
significantly. Each addition to our service menu is a potential profit center
for us, and increases our value to our customers. We are experiencing demand for
additional services, and -- based on Jim's extensive experience in all phases of
operations management -- we are augmenting our resources to support our
customers' needs, and in turn, create more opportunities for revenue generation,
beyond NREs and royalties, and higher profitability potential per product.
We are leveraging strategic partnerships to perform total product life cycle
management for some of our OEM customers and licensees. We are becoming closely
involved in the end-to-end supply chain of logistics, manufacturing, product
management and back-end support for many customers. We are becoming more
proactive in the areas of pre-production planning, testing, quality assurance,
and industry compliance/certification testing. We will be announcing a strategic
partner to assist in managing services to support our customers' marketing,
customer service, order fulfillment, technical support, and warranty service
needs. All of these efforts and partnerships are expected to result in further
licensing fees, additional service fees, and significantly higher revenues to
e.Digital per unit shipped.
At the request of our OEM customers, we are developing multiple end-user
products based on common platforms. With our unique position as a technology
integrator and applications innovator, we have created opportunities for
products with higher potential profit margins. With the backing of our OEM
customers and partners, we are specifically targeting devices that can be
successful in the consumer market, including digital music and voice
recorder/players, digital video for portable devices, automotive and home stereo
products, set top boxes, wireless communications integration, and voice
navigation integration. We expect these products to drive an increase in our
revenue and move our designs and technology into a variety of new consumer
electronics products throughout the world.
Summary
There is a great deal of activity and hard work being done inside your company
to capitalize on several business opportunities that have developed since
January. Our 30% increase in personnel since the beginning of the year is the
direct result of our increasing OEM business. With the addition of Jim Collier
as COO, we have entered a new level of service integration that is proving to be
of great benefit to our OEM customers.
We appreciate your desire for more news and details on our products, projects,
agreements, and relationships. We also share your frustration that expected
announcements have been delayed. We have achieved several milestones this year
that will be revealed according to the timelines of our OEM customers. Tempering
our frustration with the pace of news is the knowledge and expectation of major
OEM announcements and launch plans for new consumer products based on our
technology.
With several OEM-branded products based on our platforms scheduled to be
released this year, along with other substantial business developments, we
remain confident about our corporate and financial future. While the exact time
frames remain up to our OEM customers and partners, with their support and the
assistance of Fleishman-Hillard, we do expect multiple developments and
announcements this summer, particularly from major OEMs, timed around trade
shows, scheduled product launches and other industry events.
Sincerely yours,
Alfred H. Falk
President and CEO
About e.Digital
e.Digital Corp. 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 players/recorders and portable digital voice
recorders. Engineering services range from the licensing of e.Digital's patented
MicroOS(TM) and MicroCAM(TM) technologies to custom software and hardware
development, industrial design and manufacturing services. For more information
on the company, please visit www.edig.com.
Safe Harbor statement under the Private Securities Litigation Reform of 1995:
This document contains forward-looking statements relating to future
performance, technology and product development that may affect future results
and the future viability of the company. Actual results could be affected or
differ materially from those projected in the forward-looking statements as a
result of risks and uncertainties, including future products and results,
technological shifts, potential technical difficulties that could delay new
products, competition, general economic factors, pricing pressures, the
uncertainty of market acceptance of new products and services by OEMs and
end-user customers, and other factors identified and discussed in the Company's
most recent filings with the Securities and Exchange Commission. These
forward-looking statements are based on information and management's
expectations as of the date hereof. Future results may differ materially from
the Company's current expectations.
Note: e.Digital, MicroOS, and MicroCAM are trademarks of e.Digital Corp. All
other company, product, and service names are the property of their respective
owners.
CONTACT: e.Digital Corp.
Robert Putnam, 858/679-1504
robert@edig.com |
