02/13/2007
FOR IMMEDIATE RELEASE                                                                                                                                                                  

(SAN DIEGO, CA, – February 13, 2007) – e.Digital Corporation (OTC: EDIG), a leading producer of proprietary secure digital video technology and products, and owner of a portfolio of  important flash memory patents, today reported improved results for the third fiscal 2007 quarter ended December 31, 2006. For the third quarter, e.Digital reported total revenues of $1.30 million a 1,035% increase from total revenues of $115,000 for the third quarter of fiscal 2006. Revenue for the third quarter included the first commercial quantity shipments of the Company’s new eVU mobile entertainment system to in-flight entertainment (IFE) customers and the delayed shipment of a digEplayer™ order. 

e.Digital reported an operating profit of $226,000 for the three months ended December 31, 2006, as compared to an operating loss of $515,000 for the three months ended December 31, 2005. Contributing to the operating profit was $713,000 of revenue from the digEplayer order, the costs of which were recorded as an impairment in the prior year due to uncertainty of delivery from a contract supplier. Operating costs increased from $524,000 to $714,000 primarily due to non-cash stock-based compensation costs, increased professional fees and increased sales and marketing costs associated with the commercial launch of eVU.  Net loss available to common stockholders for the third fiscal quarter of 2007 was $(0.00) per basic diluted share as compared to $(0.00) per basic diluted share for the same period last year.  

For the nine months ended December 31, 2006, the Company reported total revenues of $1.34 million, a 57% decrease from total revenues of $3.10 million for the nine months of fiscal 2006.  Revenues for the fiscal 2006 period included three quarters of product sales while the latest nine-month period included only one quarter of product sales as the Company was transitioning from the old digEplayer model to the new eVU system. e.Digital reported an operating loss of $1.34 million for the nine months ended December 31, 2006 as compared to an operating loss of $1.32 million for the nine months ended December 31, 2005. For the nine months ended December 31, 2006, net loss available to common stockholders was $(0.01) per basic diluted share as compared to $(0.01) per basic diluted share for the same period last year. 

e.Digital also reported that it has backlog and shipments this quarter to date of approximately $900,000 with further orders and shipments expected this quarter. The Company is generating new business through direct sales efforts and through distributors such as U.K.-based Mezzo Movies. e.Digital also participates in pilot and trial programs and responds to formal requests for proposal from companies in the healthcare and travel and leisure industries. e.Digital is currently participating in two eVU trials with major airlines. One of the trial partners is among the world’s largest airlines.  

The Company reported it improved its financial position during the quarter ended December 31, 2006 through: 

·         The conversion of the $1.30 million balance of 12% Subordinated Convertible Promissory Notes previously due December 31, 2006 into equity. At December 31, 2006 no such notes remained outstanding.

·         The exchange of two 15% Unsecured Promissory Notes previously due December 31, 2006 for $970,752 in a 7.5% Convertible Subordinated Three Year Term Note, payable monthly, due November 30, 2009.  The Company issued 500,000 shares of restricted common stock to extend the term and reduce the interest rate on the debt. 

·         The conversion of a customer deposit obligation of $713,000 into revenue upon delivery of related digEplayer products. 

“We are pleased and encouraged by the growing acceptance of our new eVU mobile entertainment system by regional and international airlines and by the in flight entertainment industry (IFE),” said Will Blakeley, e.Digital’s president and chief technical officer.  “We are building on the progress made last quarter by growing our eVU business, diversifying our customer base, and pursuing the monetization of our patent portfolio.”

“While the last twelve months have been challenging, we are pleased to be in full production and shipping what we believe to be the best in class portable IFE product,” continued Blakeley. “We have worked diligently on product design and with our suppliers to improve margins while providing value and utility to our customers.” 

Blakeley concluded, “Our strategy is to rapidly grow our eVU revenues through increased marketing efforts and to exploit through licensing our important portfolio of patents related to the use of flash memory in portable devices. We look forward to announcing new eVU business and portfolio-related IP developments this quarter and throughout the year.” 

About e.Digital Corporation:. e.Digital is a provider of secure portable Video on Demand products including its eVU™ mobile entertainment system. e.Digital also owns and is pursuing the monetization of its portfolio of flash memory-related patents. e.Digital’s proprietary digital technology platform employs its MicroOS™ operating system, Content Mark-Up Language (CML) application, LDP software, patent-pending Hardware Security technologies, Digital Rights Management (DRM) solutions, Content Download applications, Encryption and Content Protection solutions, and Video Display software applications. For more information about e.Digital and its technology platforms, please visit the company website at www.edigital.com. 

Safe Harbor statement under the Private Securities Litigation Reform of 1995: All statements made in this document, other than statements of historical fact, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. You should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, the stage of product and market development, expected future developments and other factors that we believe are appropriate under the circumstances. These forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the businesses of the Company and the industries and markets in which the Company operates. These statements are not guarantees of future performance and involve risks, uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to the Company’s ability to finance its operations, favorably resolve the complaint filed by digEcor, Inc. against the Company, sell its products, manufacture and ship orders in a timely manner, secure additional business, monetize its patent portfolio and other risks identified and discussed in our filings with the Securities and Exchange Commission (“SEC”). Actual outcomes and results may differ materially from what is expressed or implied by the forward-looking statements. More information about potential factors that could affect the Company can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed with the Securities and Exchange Commission (“SEC”). e.Digital Corporation disclaims any intent or obligation to update these or any forward-looking statements, except as otherwise specifically stated by it. 

Note: eVU and MicroOS are trademarks of e.Digital Corporation. All other company, product, and service names are the property of their respective owners.

CONTACT:

e.Digital Corporation: Robert Putnam, (858) 304-3016 ext. 205,  rputnam@edigital.com

  e.Digital
  16770 West Bernardo Drive
  San Diego, CA 92127
  Phone: (866) 502-8234
  Fax: (858) 304-3023
  Stock Symbol: EDIG.OB

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