I am pretty sure WENCOR has to accept the settlement route.

1.It will be extremely hardship for the company in this economic situation to face extra ordinary expenses in legal fees in further appeal process.



2.The chance of winning in the CALIFORNIA for the non compete provision is zero to none.As court defined " The non compete provision is UNFORCIABLE UNDER CALIFORNIA LAW.Every contract by which anyone is restrained from engaging in a lawful profession , trade or business of any kind is to that extent is VOID. The court found emphatically THE

UNCERTAINTY , INCONSISTENCY and EXPANSIVE SCOPE , WOULD SURVIVE A REASONABLENESS INQUIRY.,






.Even if appeal , moved to WASHINGTON , there is going to be a big and tremendous ambiguity in interpretation of non disclosure agreement in that state

.All in all is going to be a big win for EDIG.

4. In regard to IFE business it is my understanding if WENCOR wants to be top contender and competetive in non IFE business like health care industry it needs to have a very fast DRM capability ( I strongly believe the new eVU 2 version has been updated with one of



the fastest DRM in the market ). If WENCOR fail in this regard , the chance to enter in non IFE market will be very slim. Who knows they may get out of IFE business once for all.



5.In view of total expenses for 1250 battery replacement i believe it will be somewhere between 80 - 95 thousand dollars that we

may owe to WENCOR. Please look at following 10-k from june 2008 quarterly report.

We have answered the complaint and are pursuing certain counterclaims. The case is currently in the discovery phase. In January 2007, the Court ruled on certain motions of the parties. In its ruling, the Court dismissed digEcor’s unjust enrichment, fraud, negligent misrepresentation, tortious interference and punitive damage claims. The Court further acknowledged the delivery of the 1,250-unit order and a partial settlement between the parties reducing digEcor’s claim for purchase-price or actual damages from $793,750 to $94,846 with such amount still being disputed by e.Digital. digEcor’s contract and damages claims remain in dispute, and the Court provided some interpretation of the contracts at issue in its ruling. digEcor subsequently amended its Complaint to assert an alternative breach of contract claim, and claims for federal, state and common law unfair competition, and sought an injunction prohibiting us “from engaging in any competition with digEcor until after 2013.” In April 2007 digEcor filed a motion for summary judgment seeking enforcement of an alleged noncompete provision and an injunction prohibiting us from competing with digEcor. In October 2007 the Court denied, without prejudice, digEcor’s motion for partial summary judgment and a request for injunction. The foregoing and other findings of the Court may be subject to appeal by either party. We believe we have substantive and multiple defenses and intend to vigorously challenge the remaining matters and pursue existing and possible additional counterclaims. Due to the uncertainties inherent in any litigation, however, there can be no assurance whether we will or will not prevail in our defense against digEcor’s remaining claims. We are also unable to determine at this time the impact this complaint and matter may have on our financial position or results of operations. We have an accrual of $80,000 as an estimate of our obligation related to the remaining general damage claim and we intend to seek restitution from Maycom for any damages we may incur but recovery from Maycom is not assured. Maycom is not involved in the design, tooling or production of our proprietary eVU mobile product. Moreover, we do not presently plan or expect to produce or sell digEplayer models to digEcor or other customers in the future.