SAN DIEGO--(BUSINESS WIRE)----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(TM) 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."