e.Digital Corporation (fka EDIG)

[Cassandra]

The 15% Unsecured Notes are in default again.

The company can not even make the $7,500 monthly interest payments on the loan so has again entered into a forbearance agreement with the lender.

3. UNSECURED PROMISSORY NOTES
15% Unsecured Notes
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On December 11, 2002, the Company issued a 15% Unsecured Promissory Note ("15%
Unsecured Note") for gross cash proceeds of $750,000. The 15% Unsecured Note,
under the original term, was scheduled to mature on February 11, 2004 and
payable $50,000 each month, with a final payment of $35,801 on February 11,
2004. The Company entered into a forbearance agreement with the lender through
and including December 31, 2002. On December 30, 2002, the Company issued
133,223 shares of Common Stock in consideration for all unpaid interest. On
December 23, 2002, the holder of the 15% Unsecured Note agreed to (i) extend the
maturity date of the 15% Unsecured Note from February 11, 2004 to May 31, 2005;
(ii) reduce the monthly payments from $50,000 to $7,500 through December 31,
2003, representing the monthly interest on the 15% Unsecured Note and (iii)
$50,000 payments each month, beginning January 31, 2004. As at June 30, 2003,
accrued interest totaled $56,250 {March 31, 2003 - $28,125}. The Company has
entered into an additional forbearance agreement with the lender deferring any
payments through and including December 31, 2003.