e.Digital CORPORATION RECEIVES

$1.5 Million IN RESTRICTED STOCK Financing

(SAN DIEGO, CA, February 27, 2006) – e.Digital Corporation (OTC: EDIG), a leading innovator of proprietary flash memory management and secure digital video technology, today announced it received $1.5 million through the sale of restricted common shares and warrants to 27 accredited investors; two of the accredited investors are officers of the company.

The company expects to use the proceeds from this financing to speed the roll-out of its new, proprietary eVU™ mobile entertainment product and turnkey entertainment services business to U.S. and international companies in the healthcare and travel and leisure industries, and to military organizations, as well as fund its efforts to partner with an intellectual property management company to jointly pursue monetizing the company’s flash memory management-based patent portfolio, and for general working capital.

Under the terms of a Restricted Common Stock Purchase Agreement, the company issued and sold 18,750,000 shares of restricted common stock at a cash purchase price of $0.08 per share. The company also issued “A” Warrants to purchase 4,687,500 shares of common stock with an exercise price of $0.10 per share, exercisable until February 28, 2009, and “B” Warrants to purchase 4,687,500 shares of common stock with an exercise price of $0.09 per share, exercisable until six months after the effective date of a “best efforts” registration statement. Pricing of the financing was set at 85% of the average closing common stock bid price for the ten days prior to the commitment and pricing date of February 22, 2006 with the “A” Warrant set at 120% of such price and the “B” Warrant set at 110% of such price, all prices rounded to the nearest whole cent. No broker fees or warrants were paid in connection with the financing.

The common stock and warrants to purchase common stock have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States without a registration statement or exemption from registration. The company has agreed to file a registration statement on the securities. The company`s Form 8-K, filed today with the SEC, provides a description of this transaction and information on anti-dilution adjustments to existing securities.