e.DIGITAL CORPORATION REPORTS

FIRST QUARTER FISCAL 2006 REVENUES

(SAN DIEGO, CA, – August 15, 2005) – e.Digital Corporation (OTC: EDIG), a leading innovator of proprietary digital technology platforms, today reported revenues for its first fiscal quarter of 2006 ended June 30, 2005 totaled $998,000 compared to $93,000 for first quarter of fiscal 2005 revenues, an increase of 971 percent.

Gross profit for the first three months of fiscal 2006 was $171,000 compared to $69,000 for the first three months of fiscal 2005. While gross margins for the company’s products have averaged approximately 20%, the decrease in gross margin in the first fiscal quarter occurred due to additional costs incurred for the development of platform and product enhancements. The company reported an operating loss of $530,000 for its first fiscal quarter 2006, compared to an operating loss of $705,000 for the same period last year.

Net loss available to common stockholders for the first fiscal quarter of 2006 was $(0.00) per basic diluted share, compared to $(0.00) per basic diluted share for the same period last year.

Also, the company reported it has received purchase orders for approximately $1.6 million, which it expects to ship in the second quarter of fiscal 2006.

“As we outlined in our presentation following our recent annual meeting of shareholders, we are making progress growing revenues and reducing losses,” said Atul Anandpura, president and chief executive officer of e.Digital Corporation. “We see a growing market for versions of secure, closed system video products which we are moving to exploit by developing a new digital video/audio technology platform (DVAP) based on further augmentation of our MicroOS™ and a powerful new processor.”

The new DVAP will come in the form of a finished product with the following planned features:

• High resolution digital LCD

• Embedded magnetic card reader

• Touch screen capabilities

• Internet access

• Voice over IP (VOIP)

• Full featured graphical user interface

• Content security

• RFID for tracking and theft control

• Access to e.Digital-supplied content

Concluded Anandpura, “Based on current and emerging DVAP business from the in-flight entertainment, healthcare, cruise line, and car rental markets as well as from kiosk-based businesses desiring to utilize our smaller screen Kino™, in fiscal 2006, we expect increased annual revenues and business over fiscal 2005. Most of the anticipated increase in revenues is expected through sales of secure closed system video products based on both new and current versions of our proprietary DVAP to branding customers.”

About e.Digital Corporation: e.Digital Corporation partners with leading, innovative companies, designing and providing manufacturing services for their branded digital video/audio and wireless products based on the Company’s proprietary MicroOS™-enabled technology platforms. e.Digital specializes in the delivery, management, and protection of secure digital content through it’s technology platforms. e.Digital’s services include the licensing of the Company’s MicroOS, custom software and hardware development, industrial design, and manufacturing services through the Company’s manufacturing partners. 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, acceptance of customer-branded products, securing additional business, 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 by e.Digital Corporation 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: MicroOS and Kino 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) 679-1504, rputnam@edigital.com

e.Digital Corporation and subsidiary

Condensed Balance Sheet

(000`s omitted except per share amounts)

(audited)

June 30, 2005

March 31, 2005

$

$

ASSETS

Current

Cash

542

1,290

Accounts receivable

24

52

Inventory

-

-

Prepaid expense and other

949

505

Total current assets

1,515

1,847

PP&E and other assets

110

126

Total assets

1,625

1,973

LIABILITIES AND STOCKHOLDERS` DEFICIT

Current

Accounts payable

497

522

Accrued liabilities

623

616

Customer deposits

954

707

Leased liabilities

515

515

Promissory notes short-term

1,828

977

Total current liabilities

4,417

3,337

Long-term liabilities

-

897

Stockholders` deficit

(2,792)

(2,261)

Total liabilities and stockholders` deficit

1,625

1,973

e.Digital Corporation and subsidiary

Condensed Statement of Operations

(000`s omitted except per share amounts)

(audited)

as of June 30,

2005

2004

$

$

Total revenue

998

93

Cost of revenue

827

24

Gross profit

171

69

Operating expenses:

Selling, general and administrative

339

346

Research and development

362

427

Total operating expenses

701

773

Loss from operations

(530)

(705)

Other income (expense):

Interest expense

(121)

(30)

Other

4

-

Total other income (expense)

(117)

(30)

Net loss

(647)

(735)

Dividends on convertible preferred stock

(43)

(47)

Net loss available to common stockholders

(690)

(782)

Net loss per share of common stock

- basis and diluted

(0.00)

(0.00)

Average weighted number of common

stock outstanding.

175,209

162,439