If you underline the "in certain instances", which preceds what you have underlined in your post, the picture gets clearer...

The pragraph that you have cited is an attempt by the company to say, (in plain English), the following:...

At June 30, 2007 we "had outstanding unfilled purchase orders" for eVu from various "customers", and had placed orders with component suppliers and manufacturers in the amount of $1.9 million dollars...

"Purchase commitments for product and components are generally subject to modifications as to timing, quantities and scheduling and in certain instances may be cancelable without penalty."

"Purchase Orders", must be a larger number than $1.9 million which EDIG has committed to pay its manufactures and component suppliers, (EDIG has to make some money too)...

So, in the underlined sentence EDIG is telling us that in some instances  orders may be cancelabe without any penalty...

When you juxtapose this with the paragrph that states EDIG gets "deposits" for orders received, the only logical conclusion is that, "and in certain instances may be cancelable without penalty.", is meant to cover situations when a party orders some eVUs for a "TEST RUN" and decides not to use the eVU a la RYAN AIR, and EDIG is left "taking it on the chin" as you put it by having to take back the products and do some other thing with them...

Does that make sense?...Lol...

GLTA...

Gil...