e.DIGITAL AND MUSICAL SHOWCASE ULTRA-COMPACT, HIGH CAPACITY PORTABLE MUSIC PLAYER AT CES

Musical and e.Digital Expand Licensing Agreement to Incorporate Cornice Storage Element

(CES - Las Vegas, NV – January 8, 2004) – e.Digital Corporation (OTC: EDIG) today announced an expanded licensing agreement with Musical Electronics Limited. The expanded licensing agreement incorporates Cornice Storage Elements with e.Digital’s digital audio platform for original equipment manufacturing and marketing through Musical. First-generation players are scheduled to be shown during this week’s Consumer Electronics Show.

e.Digital has designed the hardware and firmware for the new devices which are based on the Company’s proprietary MicroOS™ technology. The new, highly compact units will utilize the 1.5 gigabyte Cornice Storage Element (SE) and will be manufactured and marketed for branded distribution by Musical and their customers.

The two companies have previously worked together to develop and distribute a 10-gigabyte hard disk drive based MP3 player/recorder with direct encoding into MP3 format for Circuit City.

“Musical is a widely respected original equipment manufacturer of consumer electronics,” noted Fred Falk, e.Digital’s president and chief executive officer. “We believe the significantly smaller form factor, increased capability, desirable feature set and outstanding quality will make this product successful for Musical and their branding customers.”

“e.Digital’s compact and dynamic MicroOS core is a unique benefit when addressing the demands of our client base,” commented Christopher Tse, managing director, Musical. “We are excited to offer leading edge products with e.Digital technology that incorporate Cornice Storage Elements.”

About Musical Electronics Limited: Musical Electronics is a Hong Kong based ISO2000 certified company principally engaged in the design, manufacture and marketing of consumer electronics products. As an organization, Musical is committed to the highest standards of customer service and through effective planning, implementation and control, anticipates the present and future needs of its customers. The Company’s major OEM and ODM customers have included –Alba, Alfa, Audio Vox, Best Buy, Bush, Carrefour, Circuit City, Classic, Curtis Mathes, e.Digital, Elta, ESC, Goodmans, GPX, Innovation, Jensen, Jwin, K-mart, Koss, Memorex, Roadstar, Sanyo, Sonigem and others.