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Technology Stocks : e.Digital Corporation(EDIG) - Embedded Digital Technology -- Ignore unavailable to you. Want to Upgrade?

To: bob who wrote (8451)	11/13/1999 12:40:00 PM
From: JimC1997	Read Replies (1) \| Respond to of 18366

Highlights from the 10-Q for 9/30/99: I read through the e.Digital 10-Q released on 9/12 for the quarter ended 9/30/99 and, as I expected (see Raging Bull message #97511), it indicates that shipments to Lanier were relatively small in that quarter. Consequently the company reported a loss of $0.02/share. Revenues from Lanier were $125,215 with a very good gross margin of 33%. The company also received about $25,000 in engineering service fees in the quarter. The balance sheet looks good, with $2,881,071 in cash on hand. Fixed operating expenses are running about $200,000 per month, so even with no additional revenues the company would need no additional capital for more than 14 months. The low number reported for the key working capital components of inventory ($125,884), receivables ($146,195), and payables ($584,654) indicates to me that no music player production is likely to have begun as of 9/30/99. These working capital levels are consistent with the Lanier business alone. Bashers will be quick to point out the "going concern" comment in the financials. Do not be alarmed! This has been present in every financial report for EDIG/NCII and will continue to be included until the company reaches profitability (probably in the quarter we are now in.) Another item that critics like to wave around to scare investors is the accumulated deficit. Because e.Digital is still in the red, the accumulated losses offset the net assets of the company and the book value is negative. Again, this is nothing to be concerned about. The key to a company in the early development stage is the cash position, and, as I noted above, it is very solid. The net operating loss carryforward was $29,945,000 at March 31 and has increased since. Despite the ominous sound of this item, it is actually a very good thing. It is essentially a "get out of taxes" card on future earnings and will help the cash flow as the company reached profitability. One interesting comment was contained in the footnotes: "During the quarter ended September 30, 1999 we were in production startup with our contract manufacturer. We anticipate a significant increase in production in the third fiscal quarter (ending December 31, 1999) for Lanier. We are scheduled to ship in excess of $1 million worth of product to Lanier during the fiscal third quarter. At September 30, 1999 our backlog of orders was $3.25 million from Lanier." What this says is that the entire initial $3 million Lanier order is still in backlog and that an additional $0.25 million was added to it. Lanier probably took the initial shipment of $125,000 and used those for samples and field testing, then added to the original order. All in all, I found no negative surprises and a few tidbits to make me happy. If shipments to Lanier approach $2 million in the quarter ended December 31, 1999 then the 33% gross profit on that product will be sufficient to produce a net profit for the company, prior to any earnings from the music business. Everything is moving in the right direction! JimC