Please see the following language from Section 4 of the Common Stock Purchase Agreement filed as an exhibit to the Form 8-K filed with the Securities and Exchange Commission on January 8, 2007:

(e) Issuance of Commitment Shares; Limitation on Sales of Commitment Shares. Immediately upon the execution of this Agreement, the Company shall issue to the Buyer as consideration for the Buyer entering into this Agreement 3,500,000 shares of Common Stock (the “ Commitment Shares”).  The Commitment Shares and the Initial Purchase Shares shall be issued in certificated form and (subject to Section 5 hereof) shall bear the following restrictive legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

The Buyer agrees that the Buyer shall not transfer or sell the Commitment Shares until the earlier of (a) 500 Business Days (25 Monthly Periods) from the date hereof or (b) the date on which this Agreement has been terminated...”

The Purchase shares were issued at $0.12. Possible future purchase share sales will be based on the market prices of e.Digital’s shares at the time of sales without any fixed discount. The Commitment shares were issued to facilitate this transaction in lieu of warrants and/or cash and share price discounts.

Sometimes the 8-Ks are difficult to understand completely, they need to be digested more than once. I hope the above helps to clarify the 3.5 mil shares and the registration aspect.