Russell Packer

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Carlsbad, CA #####

Re:       Grant of Stock Option

Dear Russell:

In consideration of your agreement to serve on the board of directors (the “Board”) of e.Digital Corporation (the “Company”) and for other good and valuable consideration, the parties hereto, intending to be legally bound, agree as follows:

1.       Grant of Option. Subject to the conditions set forth below, the Company hereby grants to you, effective as of September 15, 2016 (“Grant Date”), as a matter of separate inducement and not in lieu of any salary or other compensation for your services, the right and option to purchase (the “Option”), in accordance with the terms and conditions set forth herein, an aggregate of 250,000 shares of Stock of the Company (the “Option Shares”), at the Exercise Price (as hereinafter defined). As used herein, the term “Exercise Price” shall mean a price equal to $0.075 per share, subject to the adjustments and limitations set forth herein. In no event shall the exercise price be less than the greater of (a) the par value per share of a Share of Stock or (b) the Fair Market Value of a share of Stock as of the Grant Date. The Option granted hereunder is intended to constitute an Option which is not designed pursuant to section 422 of the Internal Revenue Code of 1986, as amended; however, you should consult with your tax advisor concerning the proper reporting of any federal or state tax liability that may arise as a result of the grant or exercise of the Option.

2.       Exercise.

(a)       For purposes of this Option Agreement, the Option Shares shall be deemed “Nonvested Shares” unless and until they have become “Vested Shares.” The Option shall in all events terminate at the close of business on the fourth (4th) anniversary of the date of this Option Agreement. Subject to other terms and conditions set forth herein, the Option may be exercised in cumulative installments as follows:

    Adjustments. The terms of an Option shall be subject to adjustment from time to time, in accordance with the following provisions:

(a)       If at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock or otherwise) the number of shares of Stock then outstanding into a greater number of shares of Stock, then (i) the number of shares of Stock (or other kind of securities) that may be acquired under the Option shall be increased proportionately and (ii) the price (including Exercise Price) for each share of Stock (or other kind of shares or securities) subject to the then outstanding Option shall be reduced proportionately, without changing the aggregate purchase price or value of the outstanding Option