e.Digital Corporation (fka EDIG)

[toms]

05/30/06
SHAREHOLDER ALERT

e.digital CORPORATION releases BUSINESS UPDATE

Company Provides Update on Complaint, eVU™ Business Developments,

and Efforts to Monetize Flash Memory-Related Patent Portfolio



(SAN DIEGO, CA, May 30, 2006) – e.Digital Corporation (OTC: EDIG), a leading innovator of proprietary, secure digital video technology and products, and patented technology in the utilization of flash memory in portable devices, released an update today on the recently filed digEcor complaint, eVU™ business developments, on-going efforts to monetize e.Digital’s flash memory-related patent portfolio, and other company developments.



digEcor Complaint

We have engaged Utah counsel to answer digEcor’s complaint filed May 4, 2006. Our answer is expected to include, but may not be limited to:

• Notice of removal to move the complaint from state court to federal court where we believe this matter belongs and where we can argue against the complaint more expediently, and pursue contemplated counter claims

• Motion to dismiss the unwarranted injunctive relief claim. Among other defenses, we believe the April 2002 non-disclosure agreement was superseded by a subsequent October 2002 agreement that has since expired and therefore there is no basis for injunctive relief.

• Motion to seek a declaratory judgment on the injunctive relief claim.

Other legal action is also being contemplated. Our counsel is scheduled to file a response to digEcor’s complaint during the week of June 5th. We are also contemplating revoking all our software licenses that digEcor utilizes to operate the digEplayers™ they have purchased. (For more information about the digEcor complaint, please view the following link: http://www.edigital.com/shal051706.htm )



1250 Unit digEplayer™ Order

While we have received recent verbal and e-mail assurances from Maycom that they intend to perform under the November 2005 digEcor purchase order, we are waiting for a definitive manufacturing schedule from them. With the assistance of a law firm in Korea, we are pursuing legal remedies against Maycom and its principal to compel their performance. (For more information regarding this order, please view the following link: http://www.edigital.com/shal033106.htm ).



eVU™ Business Developments

In spite of the digEcor complaint, we are experiencing growing interest from prospective eVU customers in the healthcare and travel and leisure industries, particularly from the

in flight entertainment (IFE) industry. We are pleased to announce that we have signed our first IFE eVU agreement and received our first IFE eVU order, details of which we expect to announce next month along with other eVU business.

We have put in to place the key elements of a turnkey entertainment services business including financial services partners for qualifying customers to lease eVU units as well as provide warranty and insurance coverage in case of failure, damage, or normal wear and tear. Our turnkey service enables qualifying eVU customers to get eVU units into the hands of their customers/passengers/patients and quickly begin generating revenue without significant initial costs. Not only are our eVU costs and product margin covered up front by a financial services company on qualifying orders, in many cases we also expect to receive monthly content, logistic services, and warranty fees over the lifetimes of the contracts. Based on our expected product and leasing margins and our turnkey entertainment services being fully implemented, we believe we can become profitable with annual eVU sales of approximately 4,000 units.



Flash Memory Patent Portfolio

The preliminary independent evaluations we have received to date on our flash memory-related patents and claims are encouraging, particularly on our #5,491,774 patent. Based on this progress, and with the assistance of outside parties, we are beginning an intensive three-month process to identify the products and companies that may be utilizing our intellectual property and attempt to determine a monetary value on our claims and patents as they relate to the revenues being generated by these products. This effort will also include preparing the agreements and materials necessary to begin approaching potential licensees of our patent portfolio. We expect to provide more details about this in June.



New Address

Last year, the building where we have been headquartered in approximately 7,500 sq. ft. for almost nine years was sold to a new owner. The new owner’s preference was to lease the entire 108,000 sq. ft. facility at Evening Creek Drive South to one tenant. However, the new owner informed us of other facilities under their ownership that could serve as our new offices. Earlier this year, we came to terms on a 4,800+ sq. ft. facility located at 16770 West Bernardo Drive, San Diego (92127). Please be advised that, this week, we are vacating the old facility and moving into the new offices so our phone and e-mail service may not be fully operational until Monday, June 5th.



About e.Digital Corporation:. Through customer and partnering relationships, e.Digital is a provider of secure portable Video on Demand products. e.Digital’s services include the licensing of the Company’s MicroOS™, Content Mark-Up Language (CML) application, patent-pending Hardware Security technology, Digital Rights Management (DRM) solutions, Content Download software, and Video Display software applications. In addition, e.Digital partners with leading, innovative companies, designing and providing manufacturing services for products employing the Company’s proprietary digital technology platforms. 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, favorably resolve the complaint filed by digEcor, Inc. against the Company and certain of its officers and employees, sell its products, implement a turnkey financial, product, and maintenance solution, manufacture and ship orders in a timely manner, secure 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 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: eVU and MicroOS are trademarks of e.Digital Corporation. All other company, product, and service names are the property of their respective owners.

Press Contact:
Robert Putnam
[phone] ext.205
[e-mail]