Jabber, I agree.

Everybody needs to read the whole document...IMO.

On January 2, 2007, we entered into a common stock purchase agreement (the
"Purchase Agreement") with Fusion Capital Fund II, LLC, an Illinois limited
liability company ("Fusion Capital"). Pursuant to the Purchase Agreement, we
have sold to Fusion Capital $250,000 of our common stock at a purchase price of
$0.12 per share and we have agreed to sell to Fusion Capital $250,000 of our
common stock at a purchase price of $0.12 per share on the date that a
registration statement related to the transaction is filed with the SEC. Subject
to earlier termination at our discretion, we may sell an additional $8.0 million
of our common stock to Fusion Capital from time to time over a 25-month period
after the SEC has declared effective the registration statement related to the
transaction. We agreed to issue to Fusion Capital 200,000 shares of our common
stock as an expense reimbursement and 3,500,000 shares of our common stock as a
commitment fee for entering into the Purchase Agreement.

      Concurrently with entering into the Purchase Agreement, we entered into a
registration rights agreement with Fusion Capital (the "Registration Rights
Agreement"). Under the Registration Rights Agreement, we agreed to file a
registration statement with the SEC covering the shares that have been issued or
may be issued to Fusion Capital under the Purchase Agreement. After the SEC has
declared effective the registration statement, generally we have the right but
not the obligation from time to time to sell our shares to Fusion Capital in
amounts between $80,000 and $1 million depending on certain conditions. We have
the right to control the timing and amount of any sales of our shares to Fusion
Capital. The purchase price of the shares will be determined based upon the
market price, as defined in the Purchase Agreement, of our shares without any
fixed discount. Fusion Capital shall not have the right or the obligation to
purchase any shares of our common stock on any business day that the price of
our common stock is below $0.08. The agreement may be terminated by us at any
time at our discretion without any additional cost to us.

      The issuance of the 2,083,333 shares of common stock for the cash of
$250,000, the issuance of the 200,000 expense reimbursment shares and the
3,500,000 commitment shares and the additional 2,083,333 shares issuable for
cash of $250,000 at the registration statement date are issued or issuable as
exempt under section 4(2) of the Securities Act of 1933, as amended.

      The foregoing description of the Purchase Agreement and the Registration
Rights Agreement are qualified in their entirety by reference to the full text
of the Purchase Agreement and Registration Rights Agreement, a copy of each of
which is attached hereto as Exhibit 10.1 and 10.2, respectively, and each of
which is incorporated herein in its entirety by reference.

Item 3.02. Unregistered Sales of Equity Securities.

      The information contained above in Item 1.01 is hereby incorporated by
reference into this Item 3.02.

      At September 30, 2006 the Company had $1,300,000 of convertible 12%
Subordinated Promissory Notes due December 31, 2006, as amended ("Subordinated
Notes") outstanding. As reported on Form 8-K filed December 12, 2006, $600,000
was converted into 7,500,000 shares of common stock. On or before December 29,
2006, the balance of $700,000 was converted by three holders and the Company has
issued 8,750,000 shares of common stock. At December 29, 2006 all convertible
12% Subordinated Promissory Notes due December 31, 2006 had been converted and
are no longer an obligation of the Company. A legend was placed on each of the
stock certificates that were issued except for shares meeting the requirements
of SEC Rule 144(k).

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

10.1  Common Stock Purchase Agreement, dated as of January 2, 2007, by and
      between e.Digital Corporation and Fusion Capital Fund II, LLC.

10.2  Registration Rights Agreement, dated as of January 2, 2007, by and between
      e.Digital corporation and Fusion Capital Fund II, LLC.