``The company also reported $0.967 million in advance payments (customer deposits) at December 31, 2004.`` Curious that they reported this as of Dec. 31. They could have just as easily provided current guidance instead of 6 week old information. Impossible to tell if Midwest and North American`s orders were what the 967K in deposits were for. Keep in mind that the deposit represents 50% of the total deal. I believe Midwest announced that the Digeplayers would be available in early April so there`s an excellent chance the entire amount would be booked this Q.

The F10 settlement will likely be a split decision if it goes thru the arbitration process. If there is no announcement by the end of the week then it means no agreement outside of arbitration was reached and the outcome will have to be decided by an arbitration panel. I know management feels they have a strong case but the also know California arbitration almost always yeilds some sort of % split. If F10 offers anything less than a 50 / 50 split then I doubt EDIG will take it.

From the Oct 28th PR

Commenting on the Eclipse by Fujitsu Ten (EF10) arbitration process, Anandpura said, “The arbitration panel is scheduled to hear our case on March 7, 2005. We remain confident in the facts of our case and believe they will lead to a favorable outcome.”

From the April 20th PR.

“In light of the time and resources we have committed to this project, the inadequate and conflicting positions taken by Eclipse by Fujitsu Ten, and their refusal to provide us with their official written position on this product and our contract with them, we have no choice but to file for arbitration as called for under the Supply Agreement,” said Fred Falk, president and CEO of e.Digital Corporation. “Within the arbitration demand, we are seeking compensatory and punitive damages of up to $2.5 million plus attorneys fees for numerous breaches of the contract signed by Eclipse by Fujitsu Ten including cancellation of the initial non-cancelable order, breach of the implied covenant of good faith and fair dealing, and misappropriation of our intellectual property, confidential, proprietary and trade secret information.

The amount they are negotiating is 2.5M + attorneys fees.

I`d be very surprised if the settlement is anything less than 1.5M and it could be over 2M considering the agreedousness of F10.

It may not be included in this Quarters income if it goes to arbitration as the outcome may take a couple of weeks but the settlement will all go directly to the bottom line.

I Think that the present quarter has an excellent chance of being a record one if everything comes together.

Larry