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<SEC-DOCUMENT>0001019687-08-000517.txt : 20080211
<SEC-HEADER>0001019687-08-000517.hdr.sgml : 20080211
<ACCEPTANCE-DATETIME>20080211165739
ACCESSION NUMBER:		0001019687-08-000517
CONFORMED SUBMISSION TYPE:	S-1
PUBLIC DOCUMENT COUNT:		23
FILED AS OF DATE:		20080211
DATE AS OF CHANGE:		20080211

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AETHLON MEDICAL INC
		CENTRAL INDEX KEY:			0000882291
		STANDARD INDUSTRIAL CLASSIFICATION:	LABORATORY ANALYTICAL INSTRUMENTS [3826]
		IRS NUMBER:				133632859
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		S-1
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-149164
		FILM NUMBER:		08594284

	BUSINESS ADDRESS:	
		STREET 1:		3030 BUNKER HILL STREET, #4000
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92109
		BUSINESS PHONE:		858-459-7800

	MAIL ADDRESS:	
		STREET 1:		3030 BUNKER HILL STREET, #4000
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92109

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BISHOP EQUITIES INC
		DATE OF NAME CHANGE:	19930602
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-1
<SEQUENCE>1
<FILENAME>aethlon_s1.txt
<TEXT>
<PAGE>

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 2008
                                                   REGISTRATION NO. 333-________
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ______________________

                                    FORM S-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                             ______________________
                              AETHLON MEDICAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         NEVADA                                                   13-3632859
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

                                      3826
                          (Primary Standard Industrial
                             Classification Number)
                             ______________________

                       3030 BUNKER HILL STREET, SUITE 4000
                           SAN DIEGO, CALIFORNIA 92109
                                 (858) 459-7800
               (Address, Including Zip Code and Telephone Number,
        Including Area Code, of Registrant's Principal Executive Offices)


                                 JAMES A. JOYCE
                       3030 BUNKER HILL STREET, SUITE 4000
                           SAN DIEGO, CALIFORNIA 92109
                                 (858) 459-7800
            (Name, Address, Including Zip Code and Telephone Number,
                   Including Area Code, of Agent for Service)

                      WITH COPIES OF ALL CORRESPONDENCE TO:
                               JENNIFER A. POST, ESQ.
                             RICHARDSON & PATEL LLP
                         10900 WILSHIRE BLVD. SUITE 500
                          LOS ANGELES, CALIFORNIA 90024
                                 (310) 208-1182
                             ______________________



<PAGE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this registration statement.

     If any of the securities being registered on this form are to be offered on
     a delayed or continuous basis pursuant to Rule 415 under the Securities Act
     of 1933, check the following box. |X|

     If this Form is filed to register additional securities for an offering
     pursuant to Rule 462(b) under the Securities Act, please check the
     following box and list the Securities Act registration statement number of
     the earlier effective registration statement for the same offering. |_|

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
     under the Securities Act, check the following box and list the Securities
     Act registration statement number of the earlier effective registration
     statement for the same offering. |_|

     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
     under the Securities Act, check the following box and list the Securities
     Act registration statement number of the earlier effective registration
     statement for the same offering. |_|

<TABLE>
<S>                     <C>
                                            CALCULATION OF REGISTRATION FEE
=================================================================================================================
  Title of Each Class of         Amount to be      Proposed Maximum     Proposed Maximum        Amount of
Securities to be Registered       Registered      Per Share Offering   Aggregate Offering    Registration Fee
                                                        Price               Price (1)
- -----------------------------------------------------------------------------------------------------------------

     Common Stock                8,000,000(2)          $0.57 (1)            $4,560,000           $179.21
- -----------------------------------------------------------------------------------------------------------------

     Total                       8,000,000             $0.57                $4,560,000           $179.21
=================================================================================================================
</TABLE>

(1)    Estimated solely for the purpose of computing the amount of the
       registration fee pursuant to Rule 457(c) of Regulation C as of the close
       of the market on February 7, 2008, based on the average of the high and
       low prices for that date.

(2)    8,000,000 common shares issued or issuable to Fusion Capital Fund II, LLC
       under a common stock purchase agreement.

     The Registrant hereby amends this Registration Statement on such date or
     dates as may be necessary to delay its effective date until the Registrant
     shall file a further amendment which specifically states that this
     Registration Statement shall thereafter become effective in accordance with
     Section 8(a) of the Securities Act of 1933 or until the Registration
     Statement shall become effective on such date as the Commission, acting
     pursuant to said Section 8(a), may determine.

         EXPLANATORY NOTE: IN COMPLIANCE WITH THE RECENTLY PUBLISHED CHANGES TO
THE SECURITIES AND EXCHANGE COMMISSION'S RULES AND REGULATIONS CONCERNING
"SMALLER REPORTING COMPANIES" AND THE USE OF FORM S-1 FOR REGISTRATIONS UNDER
THE SECURITIES ACT OF 1933, THE REGISTRANT HAS PREPARED THIS FORM S-1 UTILIZING
THE SUBSTANTIVE DISCLOSURE REQUIREMENTS OF REGULATION SB AS NOW INCORPORATED
UNDER REGULATION SK. THE REGISTRANT IS ALSO UTILIZING THE CURRENT FORM S-1 COVER
PAGE FOR THIS FILING PENDING RELEASE OF FINAL UPDATES TO THE FORM.





<PAGE>

        PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2008


THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.


                                   PROSPECTUS

                              AETHLON MEDICAL, INC.


                        8,000,000 Shares of Common Stock


         This prospectus relates to the sale of up to 8,000,000 shares of our
common stock by Fusion Capital Fund II, LLC. Fusion Capital is sometimes
referred to in this prospectus as the selling shareholder. The prices at which
Fusion Capital may sell the shares will be determined by the prevailing market
price for the shares or in negotiated transactions. We will not receive proceeds
from the sale of our shares by Fusion Capital.

         Our common stock is registered under Section 12(g) of the Securities
Exchange Act of 1934 and quoted on the Over-The-Counter Bulletin Board under the
symbol "AEMD.OB" On February 7, 2008, the last reported sale price for our
common stock as reported on the Over-The-Counter Bulletin Board was $0.57 per
share.

                               -------------------

         Investing in our common stock involves certain risks. See "Risk
Factors" beginning on page 2 for a discussion of these risks.
                               -------------------

         The selling shareholder is an "underwriter" within the meaning of the
Securities Act of 1933, as amended.
                               -------------------


         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

                               -------------------





                The date of this Prospectus is February 11, 2008.





<PAGE>



                                TABLE OF CONTENTS
                                                                          PAGE
                                                                          ----

PROSPECTUS SUMMARY                                                          1
RISK FACTORS                                                                2
FORWARD LOOKING STATEMENTS                                                 15
USE OF PROCEEDS                                                            15
THE FUSION TRANSACTION                                                     16
DESCRIPTION OF BUSINESS                                                    18
DESCRIPTION OF PROPERTIES                                                  26
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS               27
EXECUTIVE COMPENSATION                                                     29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT             32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                             34
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                  35
LEGAL PROCEEDINGS                                                          39
DESCRIPTION OF SECURITIES                                                  39
EQUITY COMPENSATION PLANS                                                  39
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS                   41
THE SELLING SHAREHOLDER                                                    42
PLAN OF DISTRIBUTION                                                       42
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
    AND FINANCIAL DISCLOSURE                                               43
TRANSFER AGENT                                                             43
LEGAL MATTERS                                                              43
EXPERTS                                                                    43
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
    FOR SECURITIES ACT LIABILITIES                                         44
REPORTS TO SECURITY HOLDERS                                                44
WHERE YOU CAN FIND MORE INFORMATION                                        44


                                        i




<PAGE>

                               PROSPECTUS SUMMARY

         This summary highlights important information about our company and
business. Because it is a summary, it may not contain all of the information
that is important to you. To understand this offering fully, you should read
this entire prospectus and the financial statements and related notes included
in this prospectus carefully, including the "Risk Factors" section. Unless the
context requires otherwise, "WE," "US," "OUR", " and the "COMPANY" and similar
terms collectively refer to Aethlon Medical, Inc.

THE COMPANY

         We are a development stage medical device company focused on expanding
the applications of our Hemopurifier (R) platform technology, which is designed
to rapidly reduce the presence of infectious viruses and other toxins from human
blood. In this regard, our core focus is the development of therapeutic devices
that treat acute viral conditions, chronic viral diseases and pathogens targeted
as potential biological warfare agents. The Hemopurifier(R) combines the
established scientific principles of affinity chromatography and hemodialysis as
a means to mimic the immune system's response of clearing viruses and toxins
from the blood before cell and organ infection can occur. The Hemopurifier(R)
cannot cure viral conditions but can prevent virus and toxins from infecting
unaffected tissues and cells. We have completed pre-clinical blood testing of
the Hemopurifier(R) to treat HIV and Hepatitis-C, and have completed human
safety trials on Hepatitis-C infected patients in India and are in the process
of obtaining regulatory approval from the U.S. Food and Drug Administration
("FDA")to initiate clinical trials in the United States.

         The commercialization of the Hemopurifier(R) will likely require the
completion of human efficacy clinical trials. The approval of any application of
the Hemopurifier(R) in the United States will necessitate the approval of the
FDA to initiate human studies. Such studies could take years to demonstrate
safety and effectiveness in humans and there is no assurance that the
Hemopurifier(R) will be cleared by the FDA as a device we can market to the
medical community. We also expect to face similar regulatory challenges from
foreign regulatory agencies, should we attempt to commercialize and market the
Hemopurifier(R) outside of the United States. As a result, we have not generated
revenues from the sale of any Hemopurifier(R) application. Additionally, there
have been no independent validation studies of our Hemopurifiers(R) to treat
infectious disease. We manufacture our products on a small scale for testing
purposes but have yet to manufacture our products on a large scale for
commercial purposes. All of our pre-clinical human blood studies have been
conducted in our laboratories under the direction of Dr. Richard Tullis, our
Chief Science Officer.

         As of January 22, 2008, we had issued and outstanding 37,169,188 common
shares, and common share purchase options and warrants entitling the holders to
purchase up to 26,246,781 common shares. We are a Nevada corporation. Our
principal executive offices are located at 3030 Bunker Hill Street, Suite 4000,
San Diego, California 92109. Our telephone number is (858) 459-7800. The address
of our website is www.aethlonmedical.com. Information on our website is not a
part of this prospectus.

THE OFFERING

         Fusion Capital, the selling shareholder under this prospectus, is
offering for sale up to 8,000,000 shares of our common stock hereto. On March
21, 2007, we entered into a common stock purchase agreement with Fusion Capital
Fund II, LLC, an Illinois limited liability company. On August 10, 2007, we
entered into the first amendment to the common stock purchase agreement. Under
the agreement as amended, Fusion Capital is obligated, under certain conditions,
to purchase shares from us in an aggregate amount of $8.4 million from time to
time over a 25 month period. On March 27, 2007, we sold 1,333,333 shares of
common stock to Fusion Capital under the agreement for total proceeds of
$400,000. Under the terms of the common stock purchase agreement, Fusion Capital
has received a commitment fee consisting of 1,050,000 shares of our common
stock. We have reserved up to an additional 8,000,000 shares of our common stock
for sale to Fusion Capital under the agreement. As of January 22, 2008, there
were 37,169,188 shares outstanding (36,356,244 shares held by non-affiliates)
excluding the 8,000,000 shares offered by Fusion Capital pursuant to this
prospectus which it has not yet purchased from us. If all of such 8,000,000
shares offered hereby were issued and outstanding as of the date hereof, the
8,000,000 shares would represent approximately 17.71% of the total common stock
outstanding or approximately 18.03% of the non-affiliate shares outstanding as
of January 22, 2008. The number of shares ultimately offered for sale by Fusion
Capital is dependent upon the number of shares purchased by Fusion Capital under
the agreement.

                                        1


<PAGE>

         We do not have the right to make any additional sales of our shares to
Fusion Capital unless and until the US Securities & Exchange Commission has
declared effective the registration statement of which this prospectus is a
part. After the Securities & Exchange Commission has declared effective such
registration statement, generally we will have the right, but not the
obligation, from time to time to sell our shares to Fusion Capital in amounts
between $32,000 and $1.0 million depending on certain conditions. We have the
right to control the timing and amount of any sales of our shares to Fusion
Capital. The purchase price of the shares will be determined based upon the
market price of our shares without any fixed discount at the time of each sale.
Fusion Capital shall not have the right nor the obligation to purchase any
shares of our common stock on any business day that the price of our common
stock is below $0.25. The agreement may be terminated by us at any time at our
discretion without any cost to us.

SUMMARY FINANCIAL DATA

         The following tables summarize the consolidated statements of
operations and balance sheet data for our company.


<TABLE>
<S>                     <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:                       SIX MONTHS ENDED                   YEARS ENDED
                                                               SEPTEMBER 30, (UNAUDITED)               MARCH 31,
                                                          -----------------------------------------------------------------
                                                               2007             2006             2007             2006
- ---------------------------------------------------------------------------------------------------------------------------
      Revenue                                              $          0     $          0     $          0     $          0
      Gross profit                                         $          0     $          0     $          0     $          0
      Operating loss                                       $ (1,561,301)    $ (1,039,433)    $ (2,084,254)    $ (2,094,939)
      Net loss                                             $   (791,251)    $ (1,246,810)    $ (6,024,545)    $ (2,920,183)
      Net loss attributed to common shareholders           $   (791,251)    $ (1,246,810)    $ (6,024,545)    $ (2,920,183)
      Loss per common share, basic and diluted             $      (0.02)    $      (0.05)    $      (0.22)    $      (0.15)
      Weighted average common shares outstanding,
        basic and diluted                                    32,489,949       25,779,241       26,937,727       19,551,501


CONSOLIDATED BALANCE SHEET DATA:                            September 30,                     MARCH 31,
                                                                2007                             2007
                                                            (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
      Current assets                                       $    188,425                      $    444,676
      Total assets                                         $    353,328                      $    613,358
      Total current liabilities                            $  6,893,034                      $  7,705,028
      Accumulated deficit                                  $(28,878,243)                     $(28,086,992)
      Total stockholders' deficit                          $ (6,539,706)                     $ (7,091,670)
      Total liabilities and stockholders' deficit          $    353,328                      $    613,358
</TABLE>


                                  RISK FACTORS

         An investment in our common shares involves a high degree of risk and
is subject to many uncertainties. These risks and uncertainties may adversely
affect our business, operating results and financial condition. In such an
event, the trading price for our common shares could decline substantially, and
you could lose all or part of your investment. In order to attain an
appreciation for these risks and uncertainties, you should read this prospectus
in its entirety and consider all of the information and advisements contained in
this prospectus, including the following risk factors and uncertainties.

RISKS RELATING TO OUR BUSINESS

         WE HAVE INCURRED SIGNIFICANT LOSSES AND EXPECT LOSSES TO CONTINUE FOR
THE FORESEEABLE FUTURE.

         We have yet to establish any history of profitable operations. We have
not had any significant revenues from our principal operations. We have incurred
annual operating losses of $2,084,254, $2,094,939 and $2,183,377, for the fiscal
years ended March 31, 2007, 2006, and 2005, respectively, and an operating loss
of $1,561,301 in the six months ended September 30, 2007. At March 31, 2007, we
had an accumulated deficit of $28,086,992. We have incurred net losses of
$6,024,545 and $2,920,183 for the fiscal years ended March 31, 2007 and 2006 and
$791,251 for the six months ended September 30, 2007. We have not had revenues
to date. We expect that our revenues, if any, will not be sufficient to sustain
our operations for the foreseeable future. Our profitability will require the
successful commercialization of our Hemopurifier(R) technology. No assurances
can be given when or if this will occur or that we will ever generate revenues
or be profitable.




                                        2


<PAGE>

         WE HAVE RECEIVED AN EXPLANATORY PARAGRAPH FROM OUR AUDITORS REGARDING
OUR ABILITY TO CONTINUE AS A GOING CONCERN

         Our independent registered public accounting firm noted in their report
accompanying our financial statements for our fiscal year ended March 31, 2007
that we had a significant deficit accumulated during the development stage, had
a working capital deficit and that a significant amount of additional capital
will be necessary to advance the development of our products to the point at
which we may become commercially viable and stated that those conditions raised
substantial doubt about our ability to continue as a going concern. Note 1 to
our financial statements for the year ended March 31, 2007 addressed
management's plans to address these matters. We cannot assure you that our
business plans will be successful in addressing these issues. This explanatory
paragraph about our ability to continue as a going concern could affect our
ability to obtain additional financing at favorable terms, if at all, as it may
cause investors to lose faith in our long term prospects. If we cannot
successfully continue as a going concern, our shareholders may lose their entire
investment in our common shares.

         WE WILL REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND
WITHOUT IT WE WILL NOT BE ABLE TO CONTINUE OPERATIONS; OUR AGREEMENT WITH FUSION
CAPITAL MAY NOT PROVIDE SUFFICIENT OPERATING CAPITAL FOR US.

         We only have the right to receive $32,000 every two business days under
the agreement with Fusion Capital unless our stock price equals or exceeds
$0.30, in which case we can sell greater amounts to Fusion Capital as the price
of our common stock increases. Fusion Capital shall not have the right nor the
obligation to purchase any shares of our common stock on any business day that
the market price of our common stock is less than $0.25. Since we are
registering 8,000,000 shares that we may sell to Fusion Capital pursuant to this
prospectus not including the commitment shares or the 1,333,333 shares already
purchased by Fusion Capital, the selling price of our common stock to Fusion
Capital will have to average approximately $1.00 per share for us to receive the
remaining proceeds of $8,000,000. Assuming a purchase price of $0.61 per share
(the closing sale price of the common stock on January 25, 2008) and the
purchase by Fusion Capital of the full 8,000,000 shares under the common stock
purchase agreement, proceeds to us would be $5,280,000 which includes the
initial purchase of 1,333,333 shares for $400,000.

         The extent to which we rely on Fusion Capital as a source of funding
will depend on a number of factors including, the prevailing market price of our
common stock and the extent to which we are able to secure working capital from
other sources, such as through the sale of our products. Specifically, Fusion
Capital shall not have the right nor the obligation to purchase any shares of
our common stock on any business days that the market price of our common stock
is less than $0.25. If obtaining sufficient financing from Fusion Capital were
to prove unavailable or prohibitively dilutive and if we are unable to generate
cash from the sale of enough of our products, we will need to secure another
source of funding in order to satisfy our working capital needs. Even if we are
able to access the maximum of $8,400,000 under the common stock purchase
agreement with Fusion Capital, we may still need additional capital to fully
implement our business, operating and development plans. Should the financing we
require to sustain our working capital needs be unavailable to us on reasonable
terms when we require it, the consequences could be a material adverse effect on
our business, operating results, financial condition and prospects.

         WE MAY FAIL TO OBTAIN GOVERNMENT CONTRACTS TO DEVELOP OUR
HEMOPURIFIER(R) TECHNOLOGY FOR BIODEFENSE APPLICATIONS.

         The U.S. Government has undertaken commitments to help secure improved
countermeasures against bioterrorism. To date, we have been unsuccessful in
obtaining grant income. As a result, future attempts to obtain grant income from
the Federal Government will be sought through direct communication to government
health and military agencies, and may include unsolicited proposals to provide
the Hemopurifier(R) as a treatment countermeasure.

                                        3


<PAGE>

        At present, the Hemopurifier(R) has not been approved for use by any
U.S. Government agency, nor have we received any contracts to purchase the
Hemopurifier(R). Since inception, we have not generated revenues from the sale
of any product based on our Hemopurifier(R) technology platform. The process of
obtaining government contracts is lengthy with the uncertainty that we will be
successful in obtaining announced grants or contracts for therapeutics as a
medical device technology. Accordingly, we cannot be certain that we will be
awarded any U.S. Government grants or contracts utilizing our Hemopurifier(R)
platform technology.

         IF THE U.S. GOVERNMENT FAILS TO PURCHASE SUFFICIENT QUANTITIES OF ANY
FUTURE BIODEFENSE CANDIDATE UTILIZING OUR HEMOPURIFIER(R) PLATFORM TECHNOLOGY,
WE MAY BE UNABLE TO GENERATE SUFFICIENT REVENUES TO CONTINUE OPERATIONS.

         We cannot be certain of the timing or availability of any future
funding from the U.S. Government, and substantial delays or cancellations of
funding could result from protests or challenges from third parties once such
funding is obtained. If we develop products utilizing our Hemopurifier(R)
platform technology that are approved by the U.S. Food and Drug Administration
(the "FDA"), but the U.S. Government does not place sufficient orders for these
products, our future business will be harmed.

         U.S. GOVERNMENT AGENCIES HAVE SPECIAL CONTRACTING REQUIREMENTS, WHICH
CREATE ADDITIONAL RISKS.

         Our business plan to provide biodefense product candidates may involve
contracts with the U.S. Government. U.S. Government contracts typically contain
unfavorable termination provisions and are subject to audit and modification by
the government at its sole discretion, which subjects us to additional risks.
These risks include the ability of the U.S. Government to unilaterally:

         o        suspend or prevent us for a period of time from receiving new
                  contracts or extending existing contracts based on violations
                  or suspected violations of laws or regulations;

         o        audit and object to our contract-related costs and fees,
                  including allocated indirect costs;

         o        control and potentially prohibit the export of our products;
                  and

         o        change certain terms and conditions in our contracts.


         If we were to become a U.S. Government contractor, we would be required
to comply with applicable laws, regulations and standards relating to our
accounting practices and would be subject to periodic audits and reviews. As
part of any such audit or review, the U.S. Government may review the adequacy
of, and our compliance with, our internal control systems and policies,
including those relating to our purchasing, property, estimating, compensation
and management information systems. Based on the results of its audits, the U.S.
Government may adjust our contract-related costs and fees, including allocated
indirect costs. In addition, if an audit or review uncovers any improper or
illegal activity, we would possibly be subject to civil and criminal penalties
and administrative sanctions, including termination of our contracts, forfeiture
of profits, suspension of payments, fines and suspension or prohibition from
doing business with the U.S. Government. We could also suffer serious harm to
our reputation if allegations of impropriety were made against us. Although
adjustments arising from government audits and reviews have not seriously harmed
our business in the past, future audits and reviews could cause adverse effects.
In addition, under U.S. Government purchasing regulations, some of our costs,
including most financing costs, amortization of intangible assets, portions of
our research and development costs, and some marketing expenses, would possibly
not be reimbursable or allowed under such contracts. Further, as a U.S.
Government contractor, we would be subject to an increased risk of
investigations, criminal prosecution, civil fraud, whistleblower lawsuits and
other legal actions and liabilities to which purely private sector companies are
not.

         WE WILL FACE INTENSE COMPETITION FROM COMPANIES THAT HAVE GREATER
FINANCIAL, PERSONNEL AND RESEARCH AND DEVELOPMENT RESOURCES THAN OURS. THESE
COMPETITIVE FORCES MAY IMPACT OUR PROJECTED GROWTH AND ABILITY TO GENERATE
REVENUES AND PROFITS, WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS AND THE
VALUE OF YOUR INVESTMENT.

         Our competitors are developing vaccine candidates, which could compete
with the Hemopurifier(R) medical device candidates we are developing. Our
commercial opportunities will be reduced or eliminated if our competitors
develop and market products for any of the diseases we target that:

                                        4


<PAGE>

         o        are more effective;

         o        have fewer or less severe adverse side effects;

         o        are better tolerated;

         o        are more adaptable to various modes of dosing;

         o        are easier to administer; or

         o        are less expensive than the products or product candidates we
                  are developing.

         Even if we are successful in developing effective Hemopurifier(R)
products, and obtain FDA and other regulatory approvals necessary for
commercializing them, our products may not compete effectively with other
successful products. Researchers are continually learning more about diseases,
which may lead to new technologies for treatment. Our competitors may succeed in
developing and marketing products that are either more effective than those that
we may develop, alone or with our collaborators, or that are marketed before any
products we develop are marketed.

         The Congress' passage of the Project BioShield Bill, a comprehensive
effort to develop and make available modern, effective drugs and vaccines to
protect against attack by biological and chemical weapons or other dangerous
pathogens, may encourage competitors to develop their own product candidates. We
cannot predict the decisions that will be made in the future by the various
government agencies as a result of such legislation.

         Our competitors include fully integrated pharmaceutical companies and
biotechnology companies as well as universities and public and private research
institutions. Many of the organizations competing with us, have substantially
greater capital resources, larger research and development staffs and
facilities, greater experience in product development and in obtaining
regulatory approvals, and greater marketing capabilities than we do.

         The market for medical devices is intensely competitive. Many of our
potential competitors have longer operating histories, greater name recognition,
more employees, and significantly greater financial, technical, marketing,
public relations, and distribution resources than we have. This intense
competitive environment may require us to make changes in our products, pricing,
licensing, services or marketing to develop, maintain and extend our current
technology. Price concessions or the emergence of other pricing or distribution
strategies of competitors may diminish our revenues (if any), adversely impact
our margins or lead to a reduction in our market share (if any), any of which
may harm our business.

         WE HAVE LIMITED MANUFACTURING EXPERIENCE.

         To achieve the levels of production necessary to commercialize our
Hemopurifier(R) products, we will need to secure manufacturing agreements with
contract manufacturers which comply with good manufacturing practice standards
and other standards prescribed by various federal, state and local regulatory
agencies in the U.S. and any other country of use.

         We have limited experience manufacturing products for testing purposes
and no experience manufacturing products for large scale commercial purposes. We
will likely outsource the manufacture of our Hemopurifier(R) products to third
parties operating FDA-certified facilities. To date, we have manufactured
devices on a small scale for testing purposes. There can be no assurance that
manufacturing and control problems will not arise as we attempt to commercialize
our products or that such manufacturing can be completed in a timely manner or
at a commercially reasonable cost. Any failure to address such problems could
delay or prevent commercialization of our products and would have a material
adverse effect on us.

         OUR HEMOPURIFIER(R) TECHNOLOGY MAY BECOME OBSOLETE.

         Our Hemopurifier(R) products may be made unmarketable by new scientific
or technological developments where new treatment modalities are introduced that
are more efficacious and/or more economical than our Hemopurifier(R) products.
The Homeland Security industry is growing rapidly with many competitors trying
to develop products or vaccines to protect against infectious disease. Any one
of our competitors could develop a more effective product which would render our
technology obsolete.

         OUR USE OF HAZARDOUS MATERIALS, CHEMICALS AND VIRUSES REQUIRE US TO
COMPLY WITH REGULATORY REQUIREMENTS AND EXPOSES US TO POTENTIAL LIABILITIES.

                                        5


<PAGE>

         Our research and development involves the controlled use of hazardous
materials, chemicals and viruses. The primary hazardous materials include
chemicals needed to construct the Hemopurifier(R) cartridges and the infected
plasma samples used in preclinical testing of the Hemopurifier(R). All other
chemicals are fully inventoried and reported to the appropriate authorities,
such as the fire department, who inspect the facility on a regular basis. We are
subject to federal, state, local and foreign laws governing the use,
manufacture, storage, handling and disposal of such materials. Although we
believe that our safety procedures for the use, manufacture, storage, handling
and disposal of such materials comply with the standards prescribed by federal,
state, local and foreign regulations, we cannot completely eliminate the risk of
accidental contamination or injury from these materials. We have had no
incidents or problems involving hazardous chemicals or biological samples. In
the event of such an accident, we could be held liable for significant damages
or fines. We currently carry a limited amount of insurance to protect us from
these damages. In addition, we may be required to incur significant costs to
comply with regulatory requirements in the future.

         WE ARE DEPENDENT FOR OUR SUCCESS ON A FEW KEY EXECUTIVE OFFICERS. OUR
INABILITY TO RETAIN THOSE OFFICERS WOULD IMPEDE OUR BUSINESS PLAN AND GROWTH
STRATEGIES, WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS AND THE VALUE OF
YOUR INVESTMENT.

         Our success depends to a critical extent on the continued services of
our Chief Executive Officer, James A. Joyce and our Chief Science Officer,
Richard H. Tullis. Were we to lose one or more of these key executive officers,
we would be forced to expend significant time and money in the pursuit of a
replacement, which would result in both a delay in the implementation of our
business plan and the diversion of limited working capital. The loss of Dr.
Tullis would harm the clinical development of our products due to his unique
experience with the Hemopurifier(R) technology. The loss of Dr. Tullis and/or
Mr. Joyce would be detrimental to our growth as they possess unique knowledge of
our business model and infectious disease which would be difficult to replace
within the biotechnology field. We can give you no assurance that we can find
satisfactory replacements for these key executive officers at all, or on terms
that are not unduly expensive or burdensome to our company. Although Mr. Joyce
and Mr. Tullis have signed employment agreements providing for their continued
service to our company, these agreements will not preclude them from leaving our
company. We do not currently carry key man life insurance policies on any of our
key executive officers which would assist us in recouping our costs in the event
of the loss of those officers.

         OUR INABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL COULD IMPEDE
OUR ABILITY TO GENERATE REVENUES AND PROFITS AND TO OTHERWISE IMPLEMENT OUR
BUSINESS PLAN AND GROWTH STRATEGIES, WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR
BUSINESS AND COULD ADVERSELY AFFECT THE VALUE OF YOUR INVESTMENT.

         We currently have an extremely small staff comprised of five full time
employees consisting of our Chief Executive Officer, our President, our Chief
Science Officer, a research scientist, a research associate and other personnel
employed on a contract basis. We also employ a Senior Vice President - Finance
on a part time, contract basis. Although we believe that these employees and
consultants, will be able to handle most of our additional administrative,
research and development and business development in the near term, we will
nevertheless be required over the longer-term to hire highly skilled managerial,
scientific and administrative personnel to fully implement our business plan and
growth strategies. Due to the specialized scientific nature of our business, we
are highly dependent upon our ability to attract and retain qualified
scientific, technical and managerial personal. Competition for these
individuals, especially in San Diego where many biotechnology companies are
located, is intense and we may not be able to attract, assimilate or retain
additional highly qualified personnel in the future. We cannot assure you that
we will be able to engage the services of such qualified personnel at
competitive prices or at all, particularly given the risks of employment
attributable to our limited financial resources and lack of an established track
record.

         WE PLAN TO GROW RAPIDLY, WHICH WILL PLACE STRAINS ON OUR MANAGEMENT
TEAM AND OTHER COMPANY RESOURCES TO BOTH IMPLEMENT MORE SOPHISTICATED
MANAGERIAL, OPERATIONAL AND FINANCIAL SYSTEMS, PROCEDURES AND CONTROLS AND TO
TRAIN AND MANAGE THE PERSONNEL NECESSARY TO IMPLEMENT THOSE FUNCTIONS. OUR
INABILITY TO MANAGE OUR GROWTH COULD IMPEDE OUR ABILITY TO GENERATE REVENUES AND
PROFITS AND TO OTHERWISE IMPLEMENT OUR BUSINESS PLAN AND GROWTH STRATEGIES,
WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS AND THE VALUE OF YOUR
INVESTMENT.

                                        6


<PAGE>

         We will need to significantly expand our operations to implement our
longer-term business plan and growth strategies. We will also be required to
manage multiple relationships with various strategic partners, technology
licensors, customers, manufacturers and suppliers, consultants and other third
parties. This expansion and these expanded relationships will require us to
significantly improve or replace our existing managerial, operational and
financial systems, procedures and controls; to improve the coordination between
our various corporate functions; and to manage, train, motivate and maintain a
growing employee base. The time and costs to effectuate these steps may place a
significant strain on our management personnel, systems and resources,
particularly given the limited amount of financial resources and skilled
employees that may be available at the time. We cannot assure you that we will
institute, in a timely manner or at all, the improvements to our managerial,
operational and financial systems, procedures and controls necessary to support
our anticipated increased levels of operations and to coordinate our various
corporate functions, or that we will be able to properly manage, train, motivate
and retain our anticipated increased employee base.

         WE MAY HAVE DIFFICULTY IN ATTRACTING AND RETAINING MANAGEMENT AND
OUTSIDE INDEPENDENT MEMBERS TO OUR BOARD OF DIRECTORS AS A RESULT OF THEIR
CONCERNS RELATING TO THEIR INCREASED PERSONAL EXPOSURE TO LAWSUITS AND
SHAREHOLDER CLAIMS BY VIRTUE OF HOLDING THESE POSITIONS IN A PUBLICLY-HELD
COMPANY.

         The directors and management of publicly traded corporations are
increasingly concerned with the extent of their personal exposure to lawsuits
and shareholder claims, as well as governmental and creditor claims which may be
made against them, particularly in view of recent changes in securities laws
imposing additional duties, obligations and liabilities on management and
directors. Due to these perceived risks, directors and management are also
becoming increasingly concerned with the availability of directors and officers
liability insurance to pay on a timely basis the costs incurred in defending
such claims. We currently do carry limited directors and officers liability
insurance. Directors and officers liability insurance is expensive and difficult
to obtain. If we are unable to continue or provide directors and officers
liability insurance at affordable rates or at all, it may become increasingly
more difficult to attract and retain qualified outside directors to serve on our
board of directors. We may lose potential independent board members and
management candidates to other companies in the biotechnology field that have
greater directors and officers liability insurance to insure them from liability
or to biotechnology companies that have revenues or have received greater
funding to date which can offer greater compensation packages. The fees of
directors are also rising in response to their increased duties, obligations and
liabilities as well as increased exposure to such risks. As a company with a
limited operating history and limited resources, we will have a more difficult
time attracting and retaining management and outside independent directors than
a more established company due to these enhanced duties, obligations and
liabilities.

         OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, INCLUDING
OUR U.S. AND INTERNATIONAL PATENTS COULD NEGATIVELY IMPACT OUR PROJECTED GROWTH
AND ABILITY TO GENERATE REVENUES AND PROFITS, WHICH WOULD HAVE A NEGATIVE IMPACT
ON OUR BUSINESS AND THE VALUE OF YOUR INVESTMENT.

         We rely on a combination of patents, patents pending, copyrights,
trademark and trade secret laws, proprietary rights agreements and
non-disclosure agreements to protect our intellectual properties. We cannot give
you any assurance that these measures will prove to be effective in protecting
our intellectual properties.

         In the case of patents, we cannot give you any assurance that our
existing patents will not be invalidated, that any patents that we currently or
prospectively apply for will be granted, or that any of these patents will
ultimately provide significant commercial benefits. Further, competing companies
may circumvent any patents that we may hold by developing products which closely
emulate but do not infringe our patents. While we intend to seek patent
protection for our products in selected foreign countries, those patents may not
receive the same degree of protection as they would in the United States. We can
give you no assurance that we will be able to successfully defend our patents
and proprietary rights in any action we may file for patent infringement.
Similarly, we cannot give you any assurance that we will not be required to
defend against litigation involving the patents or proprietary rights of others,
or that we will be able to obtain licenses for these rights. Legal and
accounting costs relating to prosecuting or defending patent infringement
litigation may be substantial. We believe that certain patent applications filed
and/or other patents issued more recently will help to protect the proprietary
nature of the Hemopurifier(R) treatment technology.

                                        7


<PAGE>

         The Hemopurifier(R) and related treatment approaches are protected by
three issued U.S. patents and four issued international patents. We have also
applied for three additional U.S. patents and eight additional international
patents.

         We also rely on proprietary designs, technologies, processes and
know-how not eligible for patent protection. We cannot give you any assurance
that our competitors will not independently develop the same or superior
designs, technologies, processes and know-how.

         While we have and will continue to enter into proprietary rights
agreements with our employees and third parties giving us proprietary rights to
certain technology developed by those employees or parties while engaged by our
company, we can give you no assurance that courts of competent jurisdiction will
enforce those agreements.

         IF WE FAIL TO COMPLY WITH EXTENSIVE REGULATIONS OF DOMESTIC AND FOREIGN
REGULATORY AUTHORITIES, THE COMMERCIALIZATION OF OUR PRODUCT CANDIDATES COULD BE
PREVENTED OR DELAYED.

         Our pathogen filtration devices, or Hemopurifier(R) products, are
subject to extensive government regulations related to development, testing,
manufacturing and commercialization in the U.S. and other countries. The
determination of when and whether a product is ready for large scale purchase
and potential use will be made by the U.S. government through consultation with
a number of governmental agencies, including the FDA, the National Institutes of
Health, the Centers for Disease Control and Prevention and the Department of
Homeland Security. Our product candidates are in the pre-clinical and clinical
stages of development and have not received required regulatory approval from
the FDA to be commercially marketed and sold. The process of obtaining and
complying with FDA and other governmental regulatory approvals and regulations
is costly, time consuming, uncertain and subject to unanticipated delays. Such
regulatory approval (if any) and product development requires several years.
Despite the time and expense exerted, regulatory approval is never guaranteed.
We also are subject to the following risks and obligations, among others.

         o        The FDA may refuse to approve an application if they believe
                  that applicable regulatory criteria are not satisfied.

         o        The FDA may require additional testing for safety and
                  effectiveness.

         o        The FDA may interpret data from pre-clinical testing and
                  clinical trials in different ways than we interpret them.

         o        If regulatory approval of a product is granted, the approval
                  may be limited to specific indications or limited with respect
                  to its distribution.

         o        The FDA may change their approval policies and/or adopt new
                  regulations.

         Failure to comply with these or other regulatory requirements of the
FDA may subject us to administrative or judicially imposed sanctions, including:

         o        warning letters;

         o        civil penalties;

         o        criminal penalties;

         o        injunctions;

         o        product seizure or detention;

         o        product recalls; and

         o        total or partial suspension of productions.


         DELAYS IN SUCCESSFULLY COMPLETING OUR CLINICAL TRIALS COULD JEOPARDIZE
OUR ABILITY TO OBTAIN REGULATORY APPROVAL OR MARKET OUR HEMOPURIFIER(R) PRODUCT
CANDIDATES ON A TIMELY BASIS.

                                        8


<PAGE>

         Our business prospects will depend on our ability to complete clinical
trials, obtain satisfactory results, obtain required regulatory approvals and
successfully commercialize our Hemopurifier(R) product candidates. Completion of
our clinical trials, announcement of results of the trials and our ability to
obtain regulatory approvals could be delayed for a variety of reasons,
including:

         o        serious adverse events related to our medical device
                  candidates;

         o        unsatisfactory results of any clinical trial;

         o        the failure of our principal third-party investigators to
                  perform our clinical trials on our anticipated schedules;
                  and/or

         o        different interpretations of our pre-clinical and clinical
                  data, which could initially lead to inconclusive results.

         Our development costs will increase if we have material delays in any
clinical trial or if we need to perform more or larger clinical trials than
planned. If the delays are significant, or if any of our Hemopurifier(R) product
candidates do not prove to be safe or effective or do not receive required
regulatory approvals, our financial results and the commercial prospects for our
product candidates will be harmed. Furthermore, our inability to complete our
clinical trials in a timely manner could jeopardize our ability to obtain
regulatory approval.

         THE INDEPENDENT CLINICAL INVESTIGATORS THAT WE RELY UPON TO CONDUCT OUR
CLINICAL TRIALS MAY NOT BE DILIGENT, CAREFUL OR TIMELY, AND MAY MAKE MISTAKES,
IN THE CONDUCT OF OUR CLINICAL TRIALS.

         We depend on independent clinical investigators to conduct our clinical
trials. The investigators are not our employees, and we cannot control the
amount or timing of resources that they devote to our product development
programs. If independent investigators fail to devote sufficient time and
resources to our product development programs, or if their performance is
substandard, it may delay FDA approval of our medical device candidates. These
independent investigators may also have relationships with other commercial
entities, some of which may compete with us. If these independent investigators
assist our competitors at our expense, it could harm our competitive position.

         THE APPROVAL REQUIREMENTS FOR MEDICAL PRODUCTS USED TO FIGHT
BIOTERRORISM ARE STILL EVOLVING, AND WE CANNOT BE CERTAIN THAT ANY PRODUCTS WE
DEVELOP, IF EFFECTIVE, WOULD MEET THESE REQUIREMENTS.

         We are developing product candidates based upon current governmental
policies regulating these medical countermeasure treatments. For instance, we
intend to pursue FDA approval of our proprietary pathogen filtration devices to
treat infectious agents under requirements published by the FDA that allow the
FDA to approve certain medical devices used to reduce or prevent the toxicity of
chemical, biological, radiological or nuclear substances based on human clinical
data to demonstrate safety and immune response, and evidence of effectiveness
derived from appropriate animal studies and any additional supporting data. Our
business is subject to substantial risk because these policies may change
suddenly and unpredictably and in ways that could impair our ability to obtain
regulatory approval of these products, and we cannot guarantee that the FDA will
approve our proprietary pathogen filtration devices.

         OUR PRODUCT DEVELOPMENT EFFORTS MAY NOT YIELD MARKETABLE PRODUCTS DUE
TO RESULTS OF STUDIES OR TRIALS, FAILURE TO ACHIEVE REGULATORY APPROVALS OR
MARKET ACCEPTANCE, PROPRIETARY RIGHTS OF OTHERS OR MANUFACTURING ISSUES.

         Our success depends on our ability to successfully develop and obtain
regulatory approval to market new filtration devices. We expect that a
significant portion of the research that we will conduct will involve new and
unproven technologies. Development of a product requires substantial technical,
financial and human resources even if the product is not successfully completed.

                                        9


<PAGE>

         Our previously planned products have not become marketable products due
in part to our transition in 2001 from a focus on utilizing our Hemopurifier(R)
technology on treating harmful metals to treating infectious diseases prior to
our having completed the FDA approval process. Our transition was made in order
to focus on larger markets with an urgent need for new treatment and to take
advantage of the greater sense of urgency surrounding acute and chronic
infectious diseases. Prior to initiating the development of infectious disease
Hemopurifiers(R), we successfully completed an FDA approved Phase I human safety
trial of a Hemopurifier(R) to treat aluminum and iron intoxication. Since
changing the focus to infectious disease research, we have not initiated an FDA
approved human clinical trial as the development of the technology is still
continuing and will require both significant capital and scientific resources.
Our pending products face similar challenges of obtaining successful clinical
trials in route to gaining FDA approval prior to commercialization.
Additionally, our limited financial resources hinder the speed of our product
development due to personnel constraints.

         Our potential products may appear to be promising at various stages of
development yet fail to reach the market for a number of reasons, including the:

         o        lack of adequate quality or sufficient prevention benefit, or
                  unacceptable safety during pre-clinical studies or clinical
                  trials;

         o        failure to receive necessary regulatory approvals;

         o        existence of proprietary rights of third parties; and/or

         o        inability to develop manufacturing methods that are efficient,
                  cost-effective and capable of meeting stringent regulatory
                  standards.

         THE PATENTS WE OWN COMPRISE A MAJORITY OF OUR ASSETS WHICH COULD LIMIT
OUR FINANCIAL VIABILITY.

         The Hemopurifier(R) is protected by five issued patents, four of which
we own and one which we have an exclusive license. Our exclusive license expires
March 2020 and is subject to termination if the inventors have not received a
minimum of $15,000 in any year during the term beginning in the second year
after the Food & Drug Administration approves the Hemopurifier(R). These patents
comprise a majority of our assets. At September 30, 2007, our intellectual
property assets comprise 85.9% of our non-current assets, and 40.1% of total
assets. If our existing patents are invalidated or if they fail to provide
significant commercial benefits, it will severely hurt our financial condition
as a majority of our assets would lose their value. Further, since the financial
value of our patents is written down for accounting purposes over the course of
their term until they expire, our assets comprised of patents will continually
be written down until they lose value altogether.

         LEGISLATIVE ACTIONS AND POTENTIAL NEW ACCOUNTING PRONOUNCEMENTS ARE
LIKELY TO IMPACT OUR FUTURE FINANCIAL POSITION AND RESULTS OF OPERATIONS.

         There have been regulatory changes, including the Sarbanes-Oxley Act of
2002, and there may potentially be new accounting pronouncements or additional
regulatory rulings which will have an impact on our future financial position
and results of operations. The Sarbanes-Oxley Act of 2002 and other rule changes
as well as proposed legislative initiatives following the Enron bankruptcy have
increased our general and administrative costs as we have incurred increased
legal and accounting fees to comply with such rule changes. Further, proposed
initiatives are expected to result in changes in certain accounting rules,
including legislative and other proposals to account for financial instruments
at fair value. These and other potential changes could materially increase the
expenses we report under accounting principles generally accepted in the United
States of America, and adversely affect our operating results.

         OUR PRODUCTS MAY BE SUBJECT TO RECALL OR PRODUCT LIABILITY CLAIMS.

         Our Hemopurifier(R) products may be used in connection with medical
procedures in which it is important that those products function with precision
and accuracy. If our products do not function as designed, or are designed
improperly, we may be forced by regulatory agencies to withdraw such products
from the market. In addition, if medical personnel or their patients suffer
injury as a result of any failure of our products to function as designed, or
our products are designed inappropriately, we may be subject to lawsuits seeking
significant compensatory and punitive damages. The risk of product liability
claims, product recalls and associated adverse publicity is inherent in the


                                       10


<PAGE>

testing, manufacturing, marketing and sale of medical products. We do not have
general clinical trial liability insurance coverage. There can be no assurance
that future insurance coverage will to be adequate or available. We may not be
able to secure product liability insurance coverage on acceptable terms or at
reasonable costs when needed. Any product recall or lawsuit seeking significant
monetary damages may have a material affect on our business and financial
condition. Any liability for mandatory damages could exceed the amount of our
coverage. Moreover, a product recall could generate substantial negative
publicity about our products and business and inhibit or prevent
commercialization of other future product candidates.


         POLITICAL OR SOCIAL FACTORS MAY DELAY OR IMPAIR OUR ABILITY TO MARKET
OUR PRODUCTS.

         Products developed to treat diseases caused by or to combat the threat
of bioterrorism will be subject to changing political and social environments.
The political and social responses to bioterrorism have been highly charged and
unpredictable. Political or social pressures may delay or cause resistance to
bringing our products to market or limit pricing of our products, which would
harm our business. Bioterrorism has become the focus of political debates both
in terms of how to approach bioterrorism and the amount of funding the
government should provide for any programs involving homeland protection.
Government funding for products on bioterrorism could be reduced which would
hinder our ability to obtain governmental grants.


RISKS RELATING TO AN INVESTMENT IN OUR SECURITIES

         TO DATE, WE HAVE NOT PAID ANY CASH DIVIDENDS AND NO CASH DIVIDENDS WILL
BE PAID IN THE FORESEEABLE FUTURE.

         We do not anticipate paying cash dividends on our common shares in the
foreseeable future, and we cannot assure an investor that funds will be legally
available to pay dividends, or that even if the funds are legally available,
that the dividends will be paid.

         THE APPLICATION OF THE "PENNY STOCK" RULES COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL
THOSE SHARES.

         As long as the trading price of our common shares is below $5 per
share, the open-market trading of our common shares will be subject to the
"penny stock" rules. The "penny stock" rules impose additional sales practice
requirements on broker-dealers who sell securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of securities and
have received the purchaser's written consent to the transaction before the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the broker-dealer must deliver, before the transaction, a disclosure
schedule prescribed by the SEC relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common shares, and may result in decreased
liquidity for our common shares and increased transaction costs for sales and
purchases of our common shares as compared to other securities.

         THE SALE OF OUR COMMON STOCK TO FUSION CAPITAL MAY CAUSE DILUTION AND
THE SALE OF THE SHARES OF COMMON STOCK ACQUIRED BY FUSION CAPITAL COULD CAUSE
THE PRICE OF OUR COMMON STOCK TO DECLINE.

         In connection with entering into the common stock purchase agreement
with Fusion Capital, we authorized the issuance of up to 10,383,333 shares of
our common stock, including 2,383,333 shares which have already been issued, of
which 8,000,000 shares are being registered pursuant to this prospectus. The
number of shares ultimately offered for sale by Fusion Capital under this
prospectus is dependent upon the number of shares purchased by Fusion Capital
under the agreement. The purchase price for the common stock to be sold to
Fusion Capital pursuant to the common stock purchase agreement will fluctuate



                                       11
<PAGE>

based on the price of our common stock. All 8,000,000 shares registered in this
offering are expected to be freely tradable. It is anticipated that shares
registered in this offering will be sold over a period of up to 25 months from
the date of this prospectus. Depending upon market liquidity at the time, a sale
of shares under this offering at any given time could cause the trading price of
our common stock to decline. Fusion Capital may ultimately purchase all, some or
none of the 8,000,000 shares of common stock not yet issued but registered in
this offering. After it has acquired such shares, it may sell all, some or none
of such shares. Therefore, sales to Fusion Capital by us under the agreement may
result in substantial dilution to the interests of other holders of our common
stock. The sale of a substantial number of shares of our common stock under this
offering, or anticipation of such sales, could make it more difficult for us to
sell equity or equity-related securities in the future at a time and at a price
that we might otherwise wish to effect sales. However, we have the right to
control the timing and amount of any sales of our shares to Fusion Capital and
the agreement may be terminated by us at any time at our discretion without any
cost to us.

         OUR COMMON SHARES ARE THINLY TRADED, SO YOU MAY BE UNABLE TO SELL AT OR
NEAR ASK PRICES OR AT ALL IF YOU NEED TO SELL YOUR SHARES TO RAISE MONEY OR
OTHERWISE DESIRE TO LIQUIDATE YOUR SHARES.

         Our common shares have historically been sporadically or
"thinly-traded" on the OTCBB, meaning that the number of persons interested in
purchasing our common shares at or near ask prices at any given time may be
relatively small or non-existent. This situation is attributable to a number of
factors, including the fact that we are a small company which is relatively
unknown to stock analysts, stock brokers, institutional investors and others in
the investment community that generate or influence sales volume, and that even
if we came to the attention of such persons, they tend to be risk-averse and
would be reluctant to follow an unproven company such as ours or purchase or
recommend the purchase of our shares until such time as we became more seasoned
and viable. As a consequence, there may be periods of several days or more when
trading activity in our shares is minimal or non-existent, as compared to a
seasoned issuer which has a large and steady volume of trading activity that
will generally support continuous sales without an adverse effect on share
price. We cannot give you any assurance that a broader or more active public
trading market for our common shares will develop or be sustained, or that
current trading levels will be sustained.

         THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN
OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY-TRADED PUBLIC
FLOAT, LIMITED OPERATING HISTORY AND LACK OF REVENUE WHICH COULD LEAD TO WIDE
FLUCTUATIONS IN OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON
SHARES MAY NOT BE INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING
MARKET. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE
PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.

         The market for our common shares is characterized by significant price
volatility when compared to seasoned issuers, and we expect that our share price
will continue to be more volatile than a seasoned issuer for the indefinite
future. In fact, during the 52-week period ended December 31, 2007, the high and
low sale prices of a share of our common stock were $0.88 and $0.25,
respectively. The volatility in our share price is attributable to a number of
factors. First, as noted above, our common shares are sporadically and/or thinly
traded. As a consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our shareholders may disproportionately influence
the price of those shares in either direction. The price for our shares could,
for example, decline precipitously in the event that a large number of our
common shares are sold on the market without commensurate demand, as compared to
a seasoned issuer which could better absorb those sales without adverse impact
on its share price. Secondly, we are a speculative or "risky" investment due to
our limited operating history and lack of revenue or profit to date, and the
uncertainty of future market acceptance for our potential products. As a
consequence of this enhanced risk, more risk-adverse investors may, under the
fear of losing all or most of their investment in the event of negative news or
lack of progress, be more inclined to sell their shares on the market more
quickly and at greater discounts than would be the case with the stock of a
seasoned issuer. The following factors may add to the volatility in the price of
our common shares: actual or anticipated variations in our quarterly or annual
operating results; acceptance of our proprietary technology as a viable method
of augmenting the immune response of clearing viruses and toxins from human
blood; government regulations, announcements of significant acquisitions,


                                       12


<PAGE>

strategic partnerships or joint ventures; our capital commitments and additions
or departures of our key personnel. Many of these factors are beyond our control
and may decrease the market price of our common shares regardless of our
operating performance. We cannot make any predictions or projections as to what
the prevailing market price for our common shares will be at any time, including
as to whether our common shares will sustain their current market prices, or as
to what effect that the sale of shares or the availability of common shares for
sale at any time will have on the prevailing market price.

         Shareholders should be aware that, according to SEC Release No.
34-29093, the market for penny stocks has suffered in recent years from patterns
of fraud and abuse. Such patterns include (1) control of the market for the
security by one or a few broker-dealers that are often related to the promoter
or issuer; (2) manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask differential
and markups by selling broker-dealers; and (5) the wholesale dumping of the same
securities by promoters and broker-dealers after prices have been manipulated to
a desired level, along with the resulting inevitable collapse of those prices
and with consequent investor losses. Our management is aware of the abuses that
have occurred historically in the penny stock market. Although we do not expect
to be in a position to dictate the behavior of the market or of broker-dealers
who participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.

         VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES
LITIGATION.

         The market for our common shares is characterized by significant price
volatility when compared to seasoned issuers, and we expect that our share price
will continue to be more volatile than a seasoned issuer for the indefinite
future. In the past, plaintiffs have often initiated securities class action
litigation against a company following periods of volatility in the market price
of its securities. We may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and liabilities and
could divert management's attention and resources.

         OUR OFFICERS AND DIRECTORS BENEFICIALLY OWN OR CONTROL APPROXIMATELY
22.31% OF OUR OUTSTANDING COMMON SHARES AS OF JANUARY 22, 2008, WHICH MAY LIMIT
THE ABILITY OF YOURSELF OR OTHER SHAREHOLDERS, WHETHER ACTING INDIVIDUALLY OR
TOGETHER, TO PROPOSE OR DIRECT THE MANAGEMENT OR OVERALL DIRECTION OF OUR
COMPANY. ADDITIONALLY, THIS CONCENTRATION OF OWNERSHIP COULD DISCOURAGE OR
PREVENT A POTENTIAL TAKEOVER OF OUR COMPANY THAT MIGHT OTHERWISE RESULT IN YOU
RECEIVING A PREMIUM OVER THE MARKET PRICE FOR YOUR COMMON SHARES.

         As of January 22, 2008, our officers and directors beneficially own or
control approximately 22.31% of our outstanding common shares (assuming the
exercise of all outstanding options and warrants held by our officers and
directors). These persons will have the ability to substantially influence all
matters submitted to our shareholders for approval and to control our management
and affairs, including extraordinary transactions such as mergers and other
changes of corporate control, and going private transactions.

         A LARGE NUMBER OF COMMON SHARES ARE ISSUABLE UPON EXERCISE OF
OUTSTANDING COMMON SHARE PURCHASE OPTIONS, WARRANTS AND CONVERTIBLE PROMISSORY
NOTES. THE EXERCISE OR CONVERSION OF THESE SECURITIES COULD RESULT IN THE
SUBSTANTIAL DILUTION OF YOUR INVESTMENT IN TERMS OF YOUR PERCENTAGE OWNERSHIP IN
THE COMPANY AS WELL AS THE BOOK VALUE OF YOUR COMMON SHARES. THE SALE OF A LARGE
AMOUNT OF COMMON SHARES RECEIVED UPON EXERCISE OF THESE OPTIONS OR WARRANTS ON
THE PUBLIC MARKET TO FINANCE THE EXERCISE PRICE OR TO PAY ASSOCIATED INCOME
TAXES, OR THE PERCEPTION THAT SUCH SALES COULD OCCUR, COULD SUBSTANTIALLY
DEPRESS THE PREVAILING MARKET PRICES FOR OUR SHARES.

         As of January 22, 2008, there are outstanding purchase options and
warrants entitling the holders to purchase 26,246,781 common shares at a
weighted average exercise price of $0.36 per share. There are 4,914,118 shares
underlying promissory notes convertible into common stock at a weighted average
exercise price of $0.21. The exercise price for all of the aforesaid warrants,
may be less than your cost to acquire our common shares. In the event of the
exercise of these securities, you could suffer substantial dilution of your
investment in terms of your percentage ownership in the company as well as the
book value of your common shares. In addition, the holders of the common share
purchase options or warrants may sell common shares in tandem with their
exercise of those options or warrants to finance that exercise, or may resell
the shares purchased in order to cover any income tax liabilities that may arise
from their exercise of the options or warrants.

                                       13


<PAGE>

         OUR ISSUANCE OF ADDITIONAL COMMON SHARES, OR OPTIONS OR WARRANTS TO
PURCHASE THOSE SHARES, WOULD DILUTE YOUR PROPORTIONATE OWNERSHIP AND VOTING
RIGHTS.

         We are entitled under our certificate of incorporation to issue up to
100,000,000 shares of common stock. After taking into consideration our
outstanding common stock at January 22, 2008, our convertible notes, outstanding
options and outstanding warrants we will be entitled to issue up to 31,669,913
additional common shares. Our board may generally issue shares of common stock,
or options or warrants to purchase those shares, without further approval by our
shareholders based upon such factors as our board of directors may deem relevant
at that time. It is likely that we will be required to issue a large amount of
additional securities to raise capital to further our development. It is also
likely that we will be required to issue a large amount of additional securities
to directors, officers, employees and consultants as compensatory grants in
connection with their services, both in the form of stand-alone grants or under
our stock plans. We cannot give you any assurance that we will not issue
additional shares of common stock, or options or warrants to purchase those
shares, under circumstances we may deem appropriate at the time.

         OUR ISSUANCE OF ADDITIONAL COMMON SHARES IN EXCHANGE FOR SERVICES OR TO
REPAY DEBT, WOULD DILUTE YOUR PROPORTIONATE OWNERSHIP AND VOTING RIGHTS AND
COULD HAVE A NEGATIVE IMPACT ON THE MARKET PRICE OF OUR COMMON STOCK.

         Our board may generally issue shares of common stock to pay for debt or
services, without further approval by our shareholders based upon such factors
as our board of directors may deem relevant at that time. For the past three
years and for the six months ended September 30, 2007, we issued a total of
2,728,578 shares for debt to reduce our obligations. The average price discount
of common stock issued for debt in this period, weighted by the number of shares
issued for debt in such period was 69.41% and 31.67% for the years ended March
31, 2006 and 2007. We issued no shares for debt in the six months ended
September 30, 2007.

         For the past three fiscal years and the six month period ended
September 30, 2007 we issued a total of 6,165,233 shares in payment for
services. The average price discount of common stock issued for services during
this period, weighted by the number of shares issued was 36.0%, 14.86% and 4.54%
for the years ended March 31, 2005, 2006 and 2007, respectively. For the six
months ended September 30, 2007, we issued 356,294 shares for services. It is
likely that we will issue additional securities to pay for services and reduce
debt in the future. We cannot give you any assurance that we will not issue
additional shares of common stock under circumstances we may deem appropriate at
the time.

         THE ELIMINATION OF MONETARY LIABILITY AGAINST OUR DIRECTORS, OFFICERS
AND EMPLOYEES UNDER OUR CERTIFICATE OF INCORPORATION AND THE EXISTENCE OF
INDEMNIFICATION RIGHTS TO OUR DIRECTORS, OFFICERS AND EMPLOYEES MAY RESULT IN
SUBSTANTIAL EXPENDITURES BY OUR COMPANY AND MAY DISCOURAGE LAWSUITS AGAINST OUR
DIRECTORS, OFFICERS AND EMPLOYEES.

         Our certificate of incorporation contains provisions which eliminate
the liability of our directors for monetary damages to our company and
shareholders. Our bylaws also require us to indemnify our officers and
directors. We may also have contractual indemnification obligations under our
agreements with our directors, officers and employees. The foregoing
indemnification obligations could result in our company incurring substantial
expenditures to cover the cost of settlement or damage awards against directors,
officers and employees, which we may be unable to recoup. These provisions and
resultant costs may also discourage our company from bringing a lawsuit against
directors, officers and employees for breaches of their fiduciary duties, and
may similarly discourage the filing of derivative litigation by our shareholders
against our directors, officers and employees even though such actions, if
successful, might otherwise benefit our company and shareholders.

         ANTI-TAKEOVER PROVISIONS MAY IMPEDE THE ACQUISITION OF OUR COMPANY.

         Certain provisions of the Nevada General Corporation Law have
anti-takeover effects and may inhibit a non-negotiated merger or other business
combination. These provisions are intended to encourage any person interested in
acquiring us to negotiate with, and to obtain the approval of, our Board of
Directors in connection with such a transaction. However, certain of these
provisions may discourage a future acquisition of us, including an acquisition
in which the shareholders might otherwise receive a premium for their shares. As
a result, shareholders who might desire to participate in such a transaction may
not have the opportunity to do so.

                                       14


<PAGE>

                           FORWARD-LOOKING STATEMENTS

         This prospectus, including the sections titled "Prospectus Summary" and
"Risk Factors" and other sections, contains certain statements that constitute
"forward-looking statements". These forward-looking statements are derived, in
part, from various assumptions and analyses we have made in the context of our
current business plan and information currently available to us and in light of
our experience and perceptions of historical trends, current conditions and
expected future developments and other factors we believe to be appropriate in
the circumstances. You can generally identify forward-looking statements through
words and phrases such as "SEEK", "ANTICIPATE", "BELIEVE", "ESTIMATE", "EXPECT",
"INTEND", "PLAN", "BUDGET", "PROJECT", "MAY BE", "MAY CONTINUE", "MAY LIKELY
RESULT", and similar expressions. When reading any forward looking statement you
should remain mindful that all forward-looking statements are inherently
uncertain as they are based on current expectations and assumptions concerning
future events or future performance of our company, and that actual results or
developments may vary substantially from those expected as expressed in or
implied by that statement for a number of reasons or factors, including those
relating to:

         o        whether or not markets for our products develop and, if they
                  do develop, the pace at which they develop;

         o        our ability to attract and retain the qualified personnel to
                  implement our growth strategies,

         o        our ability to obtain approval from the Food and Drug
                  Administration for our products;

         o        our ability to protect the patents on our proprietary
                  technology;

         o        our ability to fund our short-term and long-term financing
                  needs;

         o        changes in our business plan and corporate strategies; and

         o        other risks and uncertainties discussed in greater detail in
                  the sections of this prospectus, including those captioned
                  "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS".

         Each forward-looking statement should be read in context with, and with
an understanding of, the various other disclosures concerning our company and
our business made elsewhere in this prospectus as well as other pubic reports
filed with the United States Securities and Exchange Commission (the "SEC"). You
should not place undue reliance on any forward-looking statement as a prediction
of actual results or developments. We are not obligated to update or revise any
forward-looking statement contained in this prospectus to reflect new events or
circumstances unless and to the extent required by applicable law.


                                 USE OF PROCEEDS

         This prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling shareholder. We will receive
no proceeds from the sale of shares of common stock in this offering. However,
we may receive up to $8.4 Million in proceeds from the sale of our common stock
to Fusion Capital under the common stock purchase agreement. Any proceeds from
Fusion Capital we receive under the common stock purchase agreement will be used
for working capital and general corporate purposes.


                                       15


<PAGE>

                             THE FUSION TRANSACTION

General

         On March 21, 2007, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC, an Illinois limited liability company. On
August 10, 2007, we entered into the first amendment to the common stock
purchase agreement. Under the amended agreement, Fusion Capital is obligated,
under certain conditions, to purchase shares from us in an aggregate amount of
$8.4 million from time to time over a 25 month period. Under the agreement, we
have sold to Fusion Capital 1,333,333 shares of our common stock for total
proceeds to us of $400,000. On the date we sold those shares to Fusion Capital,
the market price of our common stock was $0.75. Fusion Capital has received a
commitment fee consisting of 1,050,000 shares of our common stock. As of January
22, 2008, there were 37,169,188 shares outstanding (36,368,271 shares held by
non-affiliates) excluding the 8,000,000 shares offered by Fusion Capital
pursuant to this prospectus which it has not yet purchased from us. If all of
such 8,000,000 shares offered hereby were issued and outstanding as of the date
hereof, the 8,000,000 shares would represent approximately 17.71% of the total
common stock outstanding or approximately 18.03% of the non-affiliate shares
outstanding as of January 22, 2008. The number of shares ultimately offered for
sale by Fusion Capital is dependent upon the number of shares purchased by
Fusion Capital under the agreement.

         We do not have the right to commence any additional sales of our shares
to Fusion Capital under the agreement until the Securities & Exchange Commission
has declared effective the registration statement of which this prospectus is a
part of. After the Securities & Exchange Commission has declared effective such
registration statement, generally we have the right but not the obligation from
time to time to sell our shares to Fusion Capital in amounts between $32,000 and
$1.0 million depending on certain conditions. We have the right to control the
timing and amount of any sales of our shares to Fusion Capital. The purchase
price of the shares will be determined based upon the market price of our shares
without any fixed discount at the time of each sale. Fusion Capital shall not
have the right or the obligation to purchase any shares of our common stock on
any business day that the price of our common stock is below $0.25. The
agreement may be terminated by us at any time at our discretion without any cost
to us.

Purchase Of Shares Under The Common Stock Purchase Agreement

         Under the common stock purchase agreement, on any business day selected
by us, we may direct Fusion Capital to purchase up to $32,000 of our common
stock. The purchase price per share is equal to the lesser of:

         o        the lowest sale price of our common stock on the purchase
                  date; or

         o        the average of the three (3) lowest closing sale prices of our
                  common stock during the twelve (12) consecutive business days
                  prior to the date of a purchase by Fusion Capital.

         The purchase price will be equitably adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction
occurring during the business days used to compute the purchase price. We may
direct Fusion Capital to make multiple purchases from time to time in our sole
discretion; no sooner then every two (2) business days.

Our Right To Increase the Amount to be Purchased

         In addition to purchases of up to $32,000 from time to time, we may
also from time to time elect on any single business day selected by us to
require Fusion Capital to purchase our shares in an amount up to $50,000
provided that our share price is not below $0.30 during the three (3) business
days prior to and on the purchase date. We may increase this amount to up to
$100,000 if our share price is not below $0.40 during the three (3) business
days prior to and on the purchase date. This amount may also be increased to up
to $200,000 if our share price is not below $0.55 during the three (3) business
days prior to and on the purchase date. This amount may also be increased to up


                                       16


<PAGE>

to $400,000 if our share price is not below $0.70 during the three (3) business
days prior to and on the purchase date. This amount may also be increased to up
to $1.0 million if our share price is not below $1.50 during the three (3)
business days prior to and on the purchase date. We may direct Fusion Capital to
make multiple large purchases from time to time in our sole discretion; however,
at least two (2) business days must have passed since the most recent large
purchase was completed. The price at which our common stock would be purchased
in this type of larger purchase will be the lesser of (i) the lowest sale price
of our common stock on the purchase date and (ii) the lowest purchase price (as
described above) during the previous seven (7) business days prior to the
purchase date.

Minimum Purchase Price

         Under the common stock purchase agreement, we have set a minimum
purchase price ("floor price") of $0.25. However, Fusion Capital shall not have
the right or the obligation to purchase any shares of our common stock in the
event that the purchase price would be less than the floor price. Specifically,
Fusion Capital shall not have the right or the obligation to purchase shares of
our common stock on any business day that the market price of our common stock
is below $0.25.

Events of Default

         Generally, Fusion Capital may terminate the common stock purchase
agreement without any liability or payment to the Company upon the occurrence of
any of the following events of default:

         o        the effectiveness of the registration statement of which this
                  prospectus is a part lapses for any reason (including, without
                  limitation, the issuance of a stop order) or is unavailable to
                  Fusion Capital for sale of our common stock offered hereby and
                  such lapse or unavailability continues for a period of ten
                  (10) consecutive business days or for more than an aggregate
                  of thirty (30) business days in any 365-day period;

         o        suspension by our principal market of our common stock from
                  trading for a period of three (3) consecutive business days;

         o        the de-listing of our common stock from our principal market
                  provided our common stock is not immediately thereafter
                  trading on the Nasdaq Global Market, the Nasdaq Capital
                  Market, the New York Stock Exchange or the American Stock
                  Exchange;

         o        the transfer agent`s failure for five (5) business days to
                  issue to Fusion Capital shares of our common stock which
                  Fusion Capital has purchased under the common stock purchase
                  agreement;

         o        any material breach of the representations or warranties or
                  covenants contained in the common stock purchase agreement or
                  any related agreements which has or which could have a
                  material adverse effect on us subject to a cure period of five
                  (5) business days; or

         o        any participation or threatened participation in insolvency or
                  bankruptcy proceedings by or against us.

Our Termination Rights

         We have the unconditional right at any time for any reason to give
notice to Fusion Capital terminating the common stock purchase agreement without
any cost to us.

No Short-Selling or Hedging by Fusion Capital

         Fusion Capital has agreed that neither it nor any of its affiliates
shall engage in any direct or indirect short-selling or hedging of our common
stock during any time prior to the termination of the common stock purchase
agreement.

                                       17


<PAGE>

Commitment Shares Issued to Fusion Capital

         Under the terms of the common stock purchase agreement, Fusion Capital
has received a commitment fee consisting of 1,050,000 shares of our common
stock.

Effect of Performance of the Common Stock Purchase Agreement on Our Stockholders

         All 8,000,000 shares registered in this offering are expected to be
freely tradable. It is anticipated that shares registered in this offering will
be sold over a period of up to 25 months from the date of this prospectus. The
sale by Fusion Capital of a significant amount of shares registered in this
offering at any given time could cause the market price of our common stock to
decline and to be highly volatile. Fusion Capital may ultimately purchase all,
some or none of the 8,000,000 shares of common stock not yet issued but
registered in this offering. After it has acquired such shares, it may sell all,
some or none of such shares. Therefore, sales to Fusion Capital by us under the
agreement may result in substantial dilution to the interests of other holders
of our common stock. However, we have the right to control the timing and amount
of any sales of our shares to Fusion Capital and the agreement may be terminated
by us at any time at our discretion without any cost to us.

         We have authorized the sale to Fusion Capital of up to 8,000,000 shares
of our common stock. The number of shares ultimately offered for sale by Fusion
Capital under this prospectus is dependent upon the number of shares purchased
by Fusion Capital under the agreement. The following table sets forth the amount
of proceeds we would receive from Fusion Capital from the sale of shares at
varying purchase prices including the $400,000 we have already received:

<TABLE>
<S>             <C>
                                              Percentage of Outstanding    Proceeds from the Sale of
                                              Shares After Giving Effect   Shares to Fusion Capital
Assumed Average      Number of Shares to be   to the Issuance to Fusion    Under the Common Stock
Purchase Price       Issued if Full Purchase  Capital(1)                   Purchase Agreement
- -----------------------------------------------------------------------------------------------------
       $0.25                8,000,000                    17.71%                  $ 2,000,000
       $0.35                8,000,000                    17.71%                  $ 2,800,000
       $0.50                8,000,000                    17.71%                  $ 4,000,000
       $0.61(2)             8,000,000                    17.71%                  $ 4,880,000
       $1.00                8,000,000                    17.71%                  $ 8,000,000
       $1.33                6,015,038                    13.93%                  $ 8,000,000
</TABLE>

         (1)      Based on 37,169,188 shares outstanding as of January 22, 2008.
                  Includes the 2,383,333 shares already acquired by Fusion
                  Capital under the agreement and the number of shares issuable
                  under the agreement at the corresponding assumed purchase
                  price set forth in the adjacent column.

         (2)      Closing sale price of our shares on January 25, 2008.

Background of Relationship Between Fusion and the Company

         On May 20, 2004, we entered into a common stock purchase agreement with
Fusion Capital for the purchase of up to $6,250,000 of our common stock over a
30 month period. Under the agreement we sold 8,000,000 of our common shares to
Fusion Capital over an approximately 30 month period for proceeds of $2,591,745.
That agreement is concluded pursuant to its terms and we cannot sell any
additional shares to Fusion Capital under that agreement.

                             DESCRIPTION OF BUSINESS

         GENERAL

         Aethlon Medical, Inc. ("Aethlon Medical", "We" or the "Company"),
formerly Bishop Equities, Inc. ("Bishop"), was incorporated in Nevada in April
1991 to provide a public vehicle for participation in a business transaction
through a merger with or acquisition of a private company. In March 1993, we
successfully offered our common stock at $6.00 per share through an initial
public offering. In March 1999, Bishop began doing business as "Aethlon Medical,
Inc." In March 2000, the Company's Articles of Incorporation were amended to
formally change the name of the Company from "Bishop Equities, Inc." to "Aethlon
Medical, Inc."

                                       18


<PAGE>

         BUSINESS DEVELOPMENT/ACQUISITIONS

         On March 10, 1999, (1) Aethlon, Inc., a California corporation
("Aethlon"), (2) Hemex, Inc., a Delaware corporation ("Hemex"), the accounting
predecessor to the Company, and (3) Bishop, a publicly traded "shell" company,
completed an Agreement and Plan of Reorganization (the "Plan") structured to
result in Bishop's acquisition of all of the outstanding common shares of
Aethlon and Hemex (the "Reorganization"). The Reorganization was intended to
qualify as a tax-free transaction under Section 368 (a)(1)(B) of the 1986
Internal Revenue Code, as amended. Under the Plan's terms, Bishop issued 733,500
and 1,350,000 shares of its common stock to the common stock shareholders of
Aethlon and Hemex, respectively, such that Bishop then owned 100% of each
company.

         On January 10, 2000, we acquired all the outstanding common stock of
Syngen Research, Inc. ("Syngen") in exchange for 65,000 shares of our restricted
common stock in order to establish research facilities in San Diego, California,
as well as employ Dr. Richard Tullis, the founder of Syngen. Dr. Tullis is a
recognized research scientist in the area of DNA synthesis and antisense. Syngen
had no significant assets, liabilities, or operations, and primarily served as
the entity through which Dr. Tullis performed research consulting services. As
such, the acquisition has been accounted for as an acquisition of assets in the
form of an employment contract with Dr. Tullis and not as a business
combination. Dr. Tullis was appointed to the Board of Directors of Aethlon
Medical and was elected its Vice President for Business Development. Effective
June 1, 2001, Dr. Tullis was appointed Chief Science Officer of Aethlon Medical,
replacing Dr. Clara Ambrus, who retired from the Company.

         On April 6, 2000, we completed the acquisition of Cell Activation, Inc.
("Cell"). In accordance with the purchase agreement, we issued 99,152 shares of
restricted common stock and issued 50,148 options to purchase common stock in
exchange for all of the outstanding common shares and options to purchase common
stock of Cell. After the transaction, Cell became our wholly-owned subsidiary.
The acquisition was accounted for as a purchase. At March 31, 2001, management
determined that goodwill recognized in the purchase of Cell was impaired due to
the permanent suspension of operations by Cell, and, accordingly, treated the
related goodwill as fully impaired.


         BUSINESS OF ISSUER

         We are a developmental stage medical device company focused on
expanding the applications of our Hemopurifier (R) platform technology which is
designed to rapidly reduce the presence of infectious viruses and other toxins
from human blood. As such, we focus on developing therapeutic devices to treat
acute viral conditions brought on by pathogens targeted as potential biological
warfare agents and chronic viral conditions including HIV/AIDS and Hepatitis-C.
The Hemopurifier (R) combines the established scientific technologies of
hemodialysis and affinity chromatography as a means to mimic the immune system's
response of clearing viruses and toxins from the blood before cell and organ
infection can occur. The Hemopurifier (R) cannot cure these afflictions but can
lower viral loads and allow compromised immune systems to overcome otherwise
serious or fatal medical conditions.

         The Hemopurifier(R)

         The Hemopurifier(R) is an broad spectrum platform technology that
combines the established scientific methods of hemodialysis (artificial kidneys)
and affinity chromatography (a method that allows the selective capture of
viruses and related toxins) as a means to augment the natural immune response of
clearing infectious virus and toxins from the blood. The therapeutic goal of
each Hemopurifier (R) application is to improve patient survival rates by
reducing viral load and preserving the immune function. We believe that the
Hemopurifier (R) will enhance and prolong the benefit of current infectious
disease drug therapies and fill the void for patients who inevitably become
resistant to such therapies. The Hemopurifier (R) is also positioned to treat
those infected by biological agents for which there are no effective drug or
vaccine treatments. The Hemopurifier (R) is not a substitute for antiviral drug
or vaccine therapies, as it is solely positioned to treat drug and vaccine
resistant pathogens.

                                       19


<PAGE>

         Traditionally, hemodialysis (kidney dialysis) has been used to remove
urea and other small metabolic toxins that accumulate in the blood of people
with acute or chronic kidney failure (also called renal failure). Acute renal
failure is generally treated in hospital intensive care units using a continuous
filtration therapy. Chronic renal failure is treated through intermittent,
thrice-weekly kidney dialysis in a specialized clinic setting. A catheter is
most often the method used to gain access to the blood which is then pumped
through thousands of hollow micro-fibers running the length of the kidney
dialysis cartridge. Within the cartridge, toxins, urea and excess water pass
through small pores in the walls of the micro-fibers and are removed by a
separately circulating dialysis fluid outside of the fibers. Blood cells and
molecules that are too large to pass through the pores are retained and the
cleansed blood is returned back to circulation.

         The Hemopurifier (R) modifies this process in several ways to provide
an efficient method to selectively remove targeted viruses and toxins. First,
the pores of the micro-fibers within the Hemopurifier (R) are large enough to
allow circulating infectious viruses and toxins to separate from the blood and
diffuse through the walls of the fibers. Second, within the cartridge but
outside of the fibers the Hemopurifier (R) contains a unique material (the
"affinity agent") which selectively binds to the viruses or toxins. Because of
the affinity agent's ability to bind to viruses and toxins, there is no need for
a separate circulation of a dialysis solution within the Hemopurifier (R). This
provides the flexibility to use the Hemopurifier (R) either on kidney dialysis
machines (global infrastructure), by employing a simple pump mechanism or by
using a patient's own blood pressure (in field or military applications)to drive
circulation.

         Infectious Disease

         The current treatment for viral illnesses include vaccines and
antiviral drugs. Vaccines have been the most successful in curing viral diseases
(e.g. polio and smallpox). Unfortunately, newly emerging pathogens (e.g. SARS),
highly mutable RNA viruses (e.g., HIV and Hepatitis C) and exotic viruses that
might be used in terrorist attacks often do not have vaccine treatments.
Similarly, antiviral drugs are often useful in controlling viral infections.
However, there do not seem to be any general, broad-spectrum antiviral agents
similar to penicillin for bacteria and viruses capable of rapidly developing
drug resistant mutations. In addition, it generally takes years and millions of
dollars to develop vaccine and drug candidates that may or may not be approved
by the FDA.

         Our Hemopurifier(R) technology represents a new approach to treating
viral diseases. The application is designed to work with current treatments to
remove infectious virus, toxic viral proteins and injurious immunological
mediators directly from the blood of the patient. By removing circulating virus
and toxins the Hemopurifier(R) cartridge prevents virus and toxins from
infecting tissues and cells. The device cannot cure HIV and Hepatitis-C but
appears to augment the immune response of clearing viruses and toxins from the
blood before infection can occur. Scientifically, this action is known as
"Fusion Inhibition" since the ability of the virus to enter or fuse with host
cells or organs is inhibited.

         The Hemopurifier(R) is positioned as a therapeutic medical device that
can be quickly deployed to treat genetically engineered and drug and vaccine
resistant biowarfare agents. For example, we demonstrated the ability to rapidly
build and test new antibody cartridges upon receipt of an antibody against HIV
which was previously untested for its utility as an agent to be immobilized
within the Hemopurifier(R) treatment cartridge. The process included the
attachment of the antibody to agarose beads to create an affinity or binding
solution that was immobilized within the hollow-fiber treatment cartridge as
means to capture HIV as it diffused through the fibers. Human blood infected
with HIV was then circulated through the cartridge to measure the ability of the
Hemopurifier(R) to capture HIV over a range of time periods. Human blood
infected with HIV was also circulated through a control cartridge without
immobilized antibodies as a means to document an improved ability to capture
infectious virus when the immobilized antibody was utilized in the treatment
cartridge. Upon completion of the circulation of infected blood, diagnostic
studies were conducted to verify the viral capture rate of the Hemopurifier(R)
with and without the immobilized antibody. The data was then provided in a
confidential report to the antibody manufacturer within ten days of the original
receipt of the antibody in our labs.

                                       20


<PAGE>

         Biological Weapons

         We are developing treatments to combat infectious agents that may be
used in biological warfare and terrorism. We are working to design
Hemopurifiers(R) that can be rapidly deployed by armed forces as wearable
post-exposure treatments on the battlefield, as well as dialysis-based
treatments for civilian populations. We are focusing our bio-defense strategy on
treating "Category A" agents, which are considered by the Centers for Disease
Control ("CDC") to be the worst bioterrorism threats. These agents include the
viruses that cause Smallpox, hemorrhagic fevers such as Ebola and Marburg, the
Anthrax toxin, and Botulinum toxin. We have not yet published any data related
to the treatment of any "Category A" agent. In March 2007, we submitted an
Investigational Device Exemption ("IDE") with the FDA the goal of which is to
obtain approval to conduct human safety and, if applicable, animal efficacy
trials targeted to a specific bioterror viral agent. We are presently in the
process of conducting in-vitro trials to determine the most appropriate
"Category A" application.

         Manufacturing

         We plan to manufacture a small number of cartridges sufficient to
complete clinical trials in our current facilities. Ultimately, we will
outsource cartridge manufacturing to a GMP/ISO9001 compliant contract
manufacturer. Hemopurifiers(R) to treat pathogens that are bioweapons candidates
will be sold directly to the U.S. military and the federal government. Sale of
Hemopurifiers(R) to treat chronic viral conditions will be directed through
organizations with established distribution channels.

         Research and Development

         In fiscal year 2001, we realigned our research and development
activities from developing Hemopurifiers(R) to treat harmful metals to
developing Hemopurifiers(R) for the treatment of chronic viral conditions. As a
result of this strategic realignment, we initiated the consolidation of all
scientific and administrative functions into our San Diego facilities during the
fourth quarter of fiscal year 2001. This consolidation was completed during the
first quarter of fiscal year 2002 and our facilities in Buffalo, N.Y. were
closed. In 2004, we expanded our research effort to include the development of
Hemopurifiers(R) to treat acute viral diseases as well as countermeasures
against biological weapons. The cost of research and development, all of which
has been charged to operations, amounted to approximately 1,429,059 over the
last two fiscal years.

         Patents

         We currently own or have license rights to a number of U.S. and foreign
patents and patent applications and endeavor to continually improve our
intellectual property position. We consider the protection of our technology,
whether owned or licensed, to the exclusion of use by others, to be vital to our
business. While we intend to focus primarily on patented or patentable
technology, we may also rely on trade secrets, unpatented property, know-how,
regulatory exclusivity, patent extensions and continuing technological
innovation to develop our competitive position.

         In certain countries, medical devices are not patentable or only
recently have become patentable, and enforcement of intellectual property rights
in some countries has been limited or non-existent. Future enforcement of
patents and proprietary rights in many countries can be expected to be
problematic or unpredictable. We cannot guarantee that any patents issued or
licensed to us will provide us with competitive advantages or will not be
challenged by others. Furthermore, we cannot be certain that others will not
independently develop similar products or will not design around patents issued
or licensed to us. We cannot guarantee that patents that are issued will not be
challenged, invalidated or infringed upon or designed around by others, or that
the claims contained in such patents will not infringe the patent claims of
others, or provide us with significant protection against competitive products,
or otherwise be commercially valuable. We may need to acquire licenses under
patents belonging to others for technology potentially useful or necessary to
us. If any such licenses are required, we cannot be certain that they will be
available on terms acceptable to us, if at all. To the extent that we are unable
to obtain patent protection for our products or technology, our business may be
materially adversely affected by competitors who develop substantially
equivalent technology.

                                       21


<PAGE>

         INDUSTRY

         The industry for treating infectious disease is extremely competitive,
and companies developing new treatment procedures are faced with severe
regulatory challenges. In this regard, only a very small percentage of companies
that are developing new treatments will actually obtain approval from the FDA to
market their treatments in the United States. Currently, the market for treating
chronic and acute viral diseases is comprised of drugs designed to reduce viral
load by inhibiting viral replication or by inhibiting viruses from infecting
healthy cells. Unfortunately, these drugs are generally toxic, are expensive to
develop, and inevitably infected patients will develop viral strains that become
resistant to drug treatment. As a result, patients are ultimately left without
treatment options.

         COMPETITION

         We are advancing our Hemopurifier(R) technology as a treatment to
enhance and prolong current drug therapies by removing the viral strains that
cause drug resistance. The Hemopurifier(R) is also designed to prolong life for
infected patients who have become drug resistant and have no other treatment
options. Therefore, we do not believe that the Hemopurifier(R) competes with the
current drug therapy treatment standard. However, if the industry considered the
Hemopurifier(R) to be a potential replacement for drug therapy, then the
marketplace for the Hemopurifier(R) would be extremely competitive. We are also
pursuing the development of Hemopurifiers(R) to be utilized as treatment
countermeasures against biological weapons. In this regard, we are targeting the
treatment of pathogens, which are microbial organisms that cause disease, in
which current treatments are either limited or do not exist. We believe that we
are the sole developer of viral filtration systems (Hemopurifiers(R)) to treat
chronic viral conditions, acute viral conditions and biological weapons.
However, we face competition from the producers of the following alternative
treatment options for all market applications.

         Antiviral Drugs

         For viral infections, specific antiviral drugs can be effective, but
there are none that are effective against a broad-spectrum of infectious virus.
At present, only a few antiviral drugs are available to treat the multitude of
viruses that could be used as biological weapons. For example, Ribavirin is the
treatment of choice for certain viral hemorrhagic fever infections, but has no
current application to Ebola and Marburg infections. Newer antiviral drugs have
shown some promise in animal models, and limited case reports in humans are
encouraging. The lack of broad-spectrum antivirals takes on added significance
in light of the ability of many viruses to rapidly develop resistance.

         Current efforts to define the genetic details of normal and pathogenic
agents on a molecular level promise the hope of new points of attack. Genomic
analysis of viral pathogens and animal models of responses to infection provide
valuable information enabling the potential development of novel treatment and
prevention strategies. However, even the rapid elucidation of the genetic
structure of a specific pathogen does not provide sufficient information to
quickly design an effective cure.

         Another approach in drug development is combinatorial chemistry, which
provides the ability to rapidly synthesize large libraries of related compounds,
many of which are completely new. However, there is still a need to laboriously
screen each new compound for efficacy in fighting a particular disease. In that
sense, combinatorial drugs confront the same problem as the traditional method
of screening of plant and animal extracts for active compounds that block viral
or bacterial replication.

         Vaccines

         Historically, the most effective tools in controlling infections have
been vaccines. Polio, measles, mumps and many other viral illnesses are now
controllable and smallpox has been eradicated from nature. Licensed vaccines for
hemorrhagic fever viruses are limited to yellow fever (though others are in the
trial phase of approval). Promising vaccines are being tested for some of the
other diseases, but research is hampered by the need to conduct the studies in
secure laboratories.

         There are other problems with relying on vaccines as our primary
protection against a biological weapons attack. While vaccination may be an
effective treatment in a military setting, it would be problematic for civilian
populations for several reasons:


                                       22


<PAGE>

         o        The infectious virus would have to be known prior to vaccine
                  deployment. With the exception of smallpox, post-exposure
                  vaccination is ineffective.

         o        If everyone in the United States could be vaccinated, it would
                  be impossible to vaccinate people against every viral threat.

         o        Vaccines are only useful if the viral target has not mutated o
                  or been genetically altered.

         Vaccines that are effective and safe are difficult to develop. History
has shown that such development can be a slow process and may not even be
possible for highly mutable pathogens like HIV and Hepatitis C. Moreover,
current vaccine strategies often carry significant risk for complications. For
example, the smallpox vaccine, which uses attenuated strains of a live virus,
can occasionally cause illness or death by infection from the very organism that
usually provides protection.

         GOVERNMENT REGULATION

         The Hemopurifier(R) is a medical device subject to extensive and
rigorous regulation by FDA, as well as other federal and state regulatory bodies
in the United States and comparable authorities in other countries. Therefore,
we cannot assure that our technology will successfully complete any regulatory
clinical trial for any of our proposed applications.

         One of the problems facing the FDA is the need to ensure public safety
while at the same time preventing unsafe treatments from reaching the public.
The balance between these competing pressures has resulted in a long and
deliberate process for approving new treatments, which is not responsive to the
urgent need for new treatments presented in the era of bioterrorism. For most
drugs, the principal research and development phases take several years prior to
a drug being submitted to the FDA for testing. A clinical research program takes
two to ten years, depending on the agent and clinical indication, after which
the marketing application review period requires an average of one year. Once a
product is approved for market, long-term post-marketing surveillance,
inspections, and product testing must be performed to ensure the quality,
safety, and efficacy of the product, as well as appropriate product labeling.

         FDA'S PREMARKET CLEARANCE AND APPROVAL REQUIREMENTS. Each medical
device we wish to commercialize in the United States will require the filing of
a Premarket Approval ("PMA") from FDA. Medical devices are classified into one
of three classes--Class I, Class II, or Class III--depending on the degree or
risk associated with each medical device and the extent of control needed to
ensure safety and effectiveness. Devices deemed to pose lower risks are placed
in either Class I or II, which requires the manufacturer to submit to FDA a
premarket notification requesting permission to commercially distribute the
device. Our Hemopurifier(R) has been categorized as a Class III device,
requiring premarket approval.

         CLINICAL TRIALS. Clinical trials are almost always required to support
an FDA premarket application. In the United States, these trials generally
require submission of an application for an Investigational Device Exemption, or
IDE, to FDA. The IDE application must be supported by appropriate data, such as
animal and laboratory testing results, showing that it is safe to test the
device in humans and that the testing protocol is scientifically sound. The IDE
must be approved in advance by FDA for a specific number of patients unless the
product is deemed a non-significant risk device eligible for more abbreviated
IDE requirements. Clinical trials for significant risk devices may not begin
until the IDE application is approved by FDA and the appropriate institutional
review boards, or IRBs, at the clinical trial sites. Our clinical trials must be
conducted under the oversight of an IRB at the relevant clinical trial sites and
in accordance with FDA regulations, including but not limited to those relating
to good clinical practices. We are also required to obtain patients' informed
consent that complies with both FDA requirements and state and federal privacy
regulations. We, FDA or the IRB at each site at which a clinical trial is being
performed may suspend a clinical trial at any time for various reasons,
including a belief that the risks to study subjects outweigh the benefits. Even
if a trial is completed, the results of clinical testing may not demonstrate the
safety and efficacy of the device, may not be equivocal or may otherwise not be
sufficient to obtain approval of the product. Similarly, in Europe the clinical
study must be approved by the local ethics committee and in some cases,
including studies with high-risk devices, by the Ministry of Health in the
applicable country.

                                       23


<PAGE>

         In March 2007 we submitted an Investigational Device Exemption ("IDE")
with the FDA the goal of which is to obtain approval to conduct human safety
and, if applicable, animal efficacy trials targeted to a specific bioterror
viral agent. We are presently in the process of conducting in-vitro trials to
determine the most appropriate "Category A" bioterror application. Upon
successful completion of the IDE clinical trials, we would anticipate submitting
a PMA (see below).

         PREMARKET APPROVAL PATHWAY. A PMA application must be supported by
extensive data, including but not limited to technical, preclinical, clinical
trials, manufacturing and labeling to demonstrate to FDA's satisfaction the
safety and effectiveness of the device.

         After a PMA application is submitted and FDA determines that the
application is sufficiently complete to permit a substantive review, FDA will
accept the application for review. FDA has 180 days to review an "accepted" PMA
application, although the review of an application generally occurs over a
significantly longer period of time and can take up to several years. During
this review period, FDA may request additional information or clarification of
the information already provided. Also, an advisory panel of experts from
outside FDA may be convened to review and evaluate the application and provide
recommendations to FDA as to the approvability of the device. In addition, FDA
will conduct a pre-approval inspection of the manufacturing facility to ensure
compliance with quality system regulations. New PMA applications or PMA
application supplements are required for significant modification to the
manufacturing process, labeling and design of a device that is approved through
the premarket approval process. Premarket approval supplements often require
submission of the same type of information as a premarket approval application,
except that the supplement is limited to information needed to support any
changes from the device covered by the original premarket approval application
and may not require as extensive clinical data or the convening of an advisory
panel.

         PERVASIVE AND CONTINUING REGULATION. After a device is placed on the
market, numerous regulatory requirements continue to apply. These include:

         o        FDA's Quality System Regulation, or QSR, which requires
                  manufacturers, including third-party manufacturers, to follow
                  stringent design, testing, control, documentation and other
                  quality assurance procedures during all aspects of the
                  manufacturing process;

         o        labeling regulations and FDA prohibitions against the
                  promotion of products for uncleared, unapproved or off-label
                  uses;

         o        clearance or approval of product modifications that could
                  significantly affect safety or efficacy or that would
                  constitute a major change in intended use;

         o        medical device reporting, or MDR, regulations, which require
                  that manufacturers report to FDA if their device may have
                  caused or contributed to a death or serious injury or
                  malfunctioned in a way that would likely cause or contribute
                  to a death or serious injury if the malfunction were to recur;
                  and

         o        post-market surveillance regulations, which apply when
                  necessary to protect the public health or to provide
                  additional safety and effectiveness data for the device.

         After a device receives a PMA, any modification that could
significantly affect its safety or effectiveness, or that would constitute a
major change in its intended use, will require a new clearance or approval. FDA
requires each manufacturer to make this determination initially, but FDA can
review any such decision and can disagree with a manufacturer's determination.

         The regulations also require that we report to FDA any incident in
which our product may have caused or contributed to a death or serious injury or
in which our product malfunctioned and, if the malfunction were to recur, would
likely cause or contribute to death or serious injury.


                                       24


<PAGE>

         FRAUD AND ABUSE. We may also directly or indirectly be subject to
various federal and state laws pertaining to healthcare fraud and abuse,
including anti-kickback laws. In particular, the federal healthcare program
Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting,
offering, receiving or providing remuneration, directly or indirectly, in
exchange for or to induce either the referral of an individual, or the
furnishing, arranging for or recommending a good or service, for which payment
may be made in whole or part under federal healthcare programs, such as the
Medicare and Medicaid programs. Penalties for violations include criminal
penalties and civil sanctions such as fines, imprisonment and possible exclusion
from Medicare, Medicaid and other federal healthcare programs. The Anti-Kickback
Statute is broad and prohibits many arrangements and practices that are lawful
in businesses outside of the healthcare industry. In implementing the statute,
the Office of Inspector General, or OIG, has issued a series of regulations,
known as the "safe harbors." These safe harbors set forth provisions that, if
all their applicable requirements are met, will assure healthcare providers and
other parties that they will not be prosecuted under the Anti-Kickback Statute.
The failure of a transaction or arrangement to fit precisely within one or more
safe harbors does not necessarily mean that it is illegal or that prosecution
will be pursued. However, conduct and business arrangements that do not fully
satisfy each applicable element of a safe harbor may result in increased
scrutiny by government enforcement authorities, such as the OIG.

        INTERNATIONAL. International sales of medical devices are subject to
foreign governmental regulations, which vary substantially from country to
country. The time required to obtain clearance or approval by a foreign country
may be longer or shorter than that required for FDA clearance or approval, and
the requirements may be different.

         The primary regulatory environment in Europe is that of the European
Union, which has adopted numerous directives and has promulgated voluntary
standards regulating the design, manufacture, clinical trials, labeling and
adverse event reporting for medical devices. Devices that comply with the
requirements of a relevant directive will be entitled to bear CE conformity
marking, indicating that the device conforms with the essential requirements of
the applicable directives and, accordingly, can be commercially distributed
throughout the member states of the European Union, and other countries that
comply with or mirror these directives. The method of assessing conformity
varies depending on the type and class of the product, but normally involves a
combination of self-assessment by the manufacturer and a third-party assessment
by a notified body, an independent and neutral institution appointed by a
country to conduct the conformity assessment. This third-party assessment may
consist of an audit of the manufacturer's quality system and specific testing of
the manufacturer's device. Such an assessment is required in order for a
manufacturer to commercially distribute the product throughout these countries.
ISO 9001 and ISO 13845 certifications are voluntary harmonized standards.
Compliance establishes the presumption of conformity with the essential
requirements for a CE Marking.

         We have completed preclinical studies that demonstrate the removal of
HIV and Hepatitis C virus from infected human blood. We have also completed
initial animal safety studies, limited human safety studies and are presently
engaged in the in-vitro testing and clinical planning required to support our
IDE submission as outlined in the "Timelines" table below.

         The outline and table below describe suggested timelines for the
generation and testing of our current targets. The timelines presuppose the
development of a working relationship with government or private agencies
capable of handling biowarfare agents and refer to calendar year dates.


         US Clinical Trials - IDE:

      o     Human safety study site selection - Q2 2007

      o     IDE filing and FDA review: Q1 - Q3 2007

      o     In-vitro studies at BSL4 Facility to determine appropriate bioweapon
            agent target (i.e. Ebola, Marburg, Lassa): Q2 - Q3 2007

      o     FDA approval of human safety study/protocol - Q3 2008

      o     Human Safety Study: Q3 2008 through Q4 2008

      o     PMA - Q3 2008

         Note that the Hemopurifier(R) technology is applicable to a range of
"Class A" Bio-weapons candidates and that the safety studies noted above begin
the process of determining those which have the largest market potential or
strategic importance. We have estimated the direct costs for performing the
proposed submissions and clinical tests on the above timetable will require at
least $4.1 million through the end of calendar 2008.

                                       25

<PAGE>

<TABLE>
<S>             <C>

                             ----------------------------------------------------------------------------------
                                              2007                            2008
- ---------------------------------------------------------------------------------------------------------------
                                               Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4
- ---------------------------------------------------------------------------------------------------------------

US CLINICAL TRIALS - CHRONIC DISEASES

Pre-IDE Planning                                     Site Selection
IDE Submission                                IDE
FDA IDE Review                                          Review -------
In-Vitro Studies~Bioterror Target
Ebola~Marburg~Lassa                                     Studies ------
US Human Safety Study                                                                      Safety Study -----------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

      Because we may market our products abroad we will be subject to varying
foreign regulatory requirements. Although international efforts are being made
to harmonize these requirements, applications must currently be made in each
individual country. The data necessary and the review time varies significantly
from one country to another. Approval by the FDA does not ensure approval by the
regulatory bodies of other countries. Any future collaborators will also be
subject to all of the above-described regulations in connection with the
commercialization of products utilizing our technology.

         PRODUCT LIABILITY

         The risk of product liability claims, product recalls and associated
adverse publicity is inherent in the testing, manufacturing, marketing and sale
of medical products. We have limited clinical trial liability insurance
coverage. There can be no assurance that future insurance coverage will be
adequate or available. We may not be able to secure product liability insurance
coverage on acceptable terms or at reasonable costs when needed. Any liability
for mandatory damages could exceed the amount of our coverage. A successful
product liability claim against us could require us to pay a substantial
monetary award. Moreover, a product recall could generate substantial negative
publicity about our products and business and inhibit or prevent
commercialization of other future product candidates.

         SUBSIDIARIES

         We have four dormant wholly-owned subsidiaries, Aethlon, Inc., Cell
Activation, Inc., Syngen Research, Inc., and Hemex, Inc.

         EMPLOYEES

         At January 22, 2008, we had five full-time employees, comprised of our
Chief Executive Officer, our President, our Chief Science Officer, and two
research scientists. We also employ a Senior Vice President - Finance on a part
time basis. We utilize, whenever appropriate, contract and part time
professionals in order to conserve cash and resources. We believe our employee
relations are good. None of our employees is represented by a collective
bargaining unit.


                            DESCRIPTION OF PROPERTIES

         We currently rent approximately 3,200 square feet of executive office
space and laboratory space at 3030 Bunker Hill Street, Suite 4000, San Diego,
California 92109 at the rate of $7,744 per month rent, plus approximately $5,000
per month in maintenance and other fees on a lease that expired on July 12,
2007. We are presently operating on a month to month lease arrangement.


                                       26


<PAGE>


          DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

         The names, ages and positions of our directors and executive officers
as of January 22, 2008 are listed below:

         NAMES                        TITLE OR POSITION                      AGE
         -----------------------------------------------------------------------
         James A. Joyce (1)           Chairman, President, Chief Executive   45
            Officer and Secretary

         Harold H. Handley, PhD (2)   President                              55

         Richard H. Tullis, PhD (3)   Vice President, Chief Science Officer  62
            and Director

         Franklyn S. Barry, Jr.       Director                               67

         Edward G. Broenniman         Director                               71


         (1) Effective June 1, 2001, Mr. Joyce was appointed our President and
Chief Executive Officer, replacing Mr. Barry, who continues as a member of the
board of directors.

         (2) Effective July 18, 2006, Dr. Handley was appointed President.

         (3) Effective June 1, 2001, Dr. Tullis was appointed as our Chief
Science Officer.

         Certain additional information concerning the individuals named above
is set forth below. This information is based on information furnished us by
each individual noted.

         EXECUTIVE OFFICERS

         James A. Joyce, Chairman and CEO

         Mr. Joyce is the founder of Aethlon Medical, and has been the Chairman
of the Board and Secretary since March 1999. On June 1, 2001, our Board of
Directors appointed Mr. Joyce with the additional role of CEO. In 1992, Mr.
Joyce founded and was the sole shareholder of James Joyce & Associates, an
organization that provided management consulting and corporate finance advisory
services to CEOs and CFOs of publicly traded companies. Previously, from 1989 to
1991, Mr. Joyce was Chairman and Chief Executive Officer of Mission Labs, Inc.
Prior to that Mr. Joyce was a principal in charge of U.S. operations for London
Zurich Securities, Inc. Mr. Joyce is a graduate of the University of Maryland.

         Harold H. Handley, Ph.D., President

         Mr. Harold H. Handley has been President of the Company since July
2006. Mr. Handley brings over 20 years experience in management and research in
immunology, biotechnology and medical devices. Mr. Handley has authored or
co-authored over 20 publications and helped developed 15 patents. Prior to
joining Aethlon, Mr. Handley was Executive Vice President and Chief Scientific
Officer for Transvivo, Inc., a privately-held company, from 2000 to 2006. From
1996 to 2000, Mr. Handley was Vaccine Program Director for Maxim
Pharmaceuticals, Inc. Mr. Handley was a co-founder of Idec Limited Partners,
Inc., today known as Biogen Idec, Inc., operating with a market value exceeding
$14 billion. (NasdaqGS:BIIB). Mr. Handley holds a Ph.D in Anatomy and Cell
Biology from University of Virginia and a B.A. in Zoology from the University of
California, Los Angeles.


                                       27

<PAGE>

         Richard H. Tullis, Ph.D., Vice President, Chief Science Officer

         Dr. Tullis has been Vice President and a director of the Company since
January 2000 and Chief Science Officer since June 2001. Dr. Tullis has extensive
biotechnology management and research experience, and is the founder of Syngen
Research, a wholly-owned subsidiary of Aethlon Medical, Inc. Previously, Dr.
Tullis co-founded Molecular Biosystems, Inc., a former NYSE company. At
Molecular Biosystems, Dr. Tullis was Director of Oligonucleotide Hybridization,
Senior Research Scientist and Member of the Board of Directors. In research, Dr.
Tullis developed and patented the first application of oligonucleotides to
antisense antibiotics and developed new methods for the chemical synthesis of
DNA via methoxy-hosphorochloridites. Dr. Tullis also co-developed the first
applications of covalently coupled DNA-enzyme conjugates using synthetic
oligonucleotides during his tenure at Molecular Biosystems. In 1985, Dr. Tullis
founded, and served as President and CEO of Synthetic Genetics, Inc., a pioneer
in custom DNA synthesis, which was sold to Molecular Biology Resources in 1991.
Dr. Tullis also served as interim-CEO of Genetic Vectors, Inc., which completed
its IPO under his management, and was co-founder of DNA Sciences, Inc., a
company that was eventually acquired by Genetic Vectors. Dr. Tullis received his
Ph.D. in Biochemistry and Cell Biology from the University of California at San
Diego, and has done extensive post-doctoral work at UCSD, USC, and the
University of Hawaii.

         Franklyn S. Barry, Jr.

         Mr. Barry has over 30 years of experience in managing and building
companies. He was President and Chief Executive Officer of Hemex from April 1997
through May 31, 2001 and our President and CEO from March 10, 1999 to May 31,
2001. He became a director of Aethlon Medical on March 10, 1999. From 1994 to
April 1997, Mr. Barry was a private consultant. Included among his prior
experiences are tenures as President of Fisher-Price and as co-founder and CEO
of Software Distribution Services, which today operates as Ingram Micro, an
international distributor of personal computer products. Mr. Barry serves on the
Board of Directors of Merchants Mutual Insurance Company.

         Edward G. Broenniman

         Mr. Broenniman became a director of Aethlon Medical on March 10, 1999.
Mr. Broenniman has 35 years of management and executive experience with
high-tech, privately-held growth firms where he has served as a CEO, COO, or
corporate advisor, using his expertise to focus management on increasing
profitability and stockholder value. He is the Managing Director of The Piedmont
Group, LLC, a venture advisory firm. Mr. Broenniman served on the Board of
Directors of publicly-traded QuesTech (acquired by CACI International), and
currently serves on the Boards of four privately-held firms. His nonprofit
Boards are the Dingman Center for Entrepreneurship's Board of Advisors at the
University of Maryland, the National Association of Corporate Directors,
National Capital Chapter and the Board of the Association for Corporate Growth,
National Capital Chapter.

         Our Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing our overall performance. Members of the
Board are kept informed of our business activities through discussions with the
CEO and other officers, by reviewing analyses and reports sent to them, and by
participating in Board and committee meetings. Our bylaws provide that each of
the directors serves for a term that extends to the next Annual Meeting of
Shareholders of the Company.

         AUDIT COMMITTEE

         The Audit Committee is responsible for recommending to the Board of
Directors the selection of independent public accountants to audit the Company's
books and records annually, to discuss with the independent auditors and
internal auditors the scope and results of any audit, to review and approve any
nonaudit services performed by the Company's independent auditing firm, and to
review certain related party transactions. The members of the Audit Committee
are Franklyn Barry and Edward Broenniman who are independent directors as
defined under Nasdaq Rule 4200(a)(14). Mr. Barry is the Chairman of the Audit
Committee. The Audit Committee met four times in the 2007 fiscal year. The Audit
Committee oversees our financial reporting process on behalf of the Board of
Directors. The Board has determined that the Audit Committee does not have a
designated financial expert serving on the Committee but the Board believes that
its current members have the sufficient knowledge and experience necessary to
fulfill the duties and obligations.

         FAMILY RELATIONSHIPS

         There are no family relationships between or among the directors,
executive officers or persons nominated or charged by us to become directors or
executive officers.


                                       28

<PAGE>

         There are no arrangements or understandings between any two or more of
our directors or executive officers. There is no arrangement or understanding
between any of our directors or executive officers and any other person pursuant
to which any director or officer was or is to be selected as a director or
officer, and there is no arrangement, plan or understanding as to whether
non-management shareholders will exercise their voting rights to continue to
elect the current board of directors. There are also no arrangements, agreements
or understanding between non-management shareholders that may directly or
indirectly participate in or influence the management of our affairs.

         INVOLVEMENT IN LEGAL PROCEEDINGS

         To the best of our knowledge, during the past five years, none of the
following occurred with respect to a present or former director or executive
officer of the Company: (1) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; (2) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (3) being
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of any competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; and (4) being found
by a court of competent jurisdiction (in a civil action), the SEC or the
Commodities Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed, suspended
or vacated.

         CODE OF ETHICS

         On February 23, 2005, the Board of Directors approved a "Code of
Business Conduct and Ethics."


         EXECUTIVE COMPENSATION

      The following table sets forth compensation information for services
rendered to us by our executive officers (collectively, the Company's "Named
Executive Officers") in all capacities, other than as directors, during each of
the prior two fiscal years. The following table summarizes all compensation for
the two fiscal years ending March 31, 2006 and 2007, received by our Chief
Executive Officer, Chief Science Officer, Chief Financial Officer and President.
The following information includes the dollar value of base salaries, bonus
awards, stock awards granted and certain other compensation, if any, whether
paid or deferred.

<TABLE>
<S>                     <C>

                                                     SUMMARY COMPENSATION TABLE


                                                                                NON-EQUITY   NONQUALIFIED
                                                                                INCENTIVE    DEFERRED ALL
                                                           STOCK     OPTION       PLAN       COMPENSATION     OTHER
NAMED EXECUTIVE OFFICER                                    AWARDS    AWARDS    COMPENSATION     EARNINGS       COMP.
TOTAL
AND PRINCIPAL POSITION        YEAR  SALARY ($)  BONUS ($)   ($)       ($)          ($)            ($)          ($)           ($)
- ---------------------------   ----  ----------  ---------  ------  ---------   ------------  --------------  ----------  -----------
James A. Joyce          (1)   2007  $ 240,000    $   --    $   --  $      --   $         --  $           --  $       --  $  240,000
CHIEF EXECUTIVE OFFICER       2006  $ 224,712    $   --    $   --  $300,000(4) $         --  $           --  $       --  $  524,712

Richard H. Tullis, Ph.D (2)   2007  $ 180,000    $   --    $   --  $      --   $         --  $           --  $       --  $  180,000
VICE PRESIDENT AND CHIEF      2006  $ 165,000    $   --    $   --  $      --   $         --  $           --  $       --  $  165,000
SCIENCE OFFICER

James W. Dorst          (3)   2007  $ 150,000    $   --    $   --  $      --   $         --  $           --  $       --  $  150,000
CHIEF FINANCIAL OFFICER       2006  $  93,750    $   --    $   --  $ 57,000(5) $         --  $           --  $       --  $  150,750
</TABLE>



                                       29

<PAGE>

(1) The aggregate number of stock awards and stock option awards issued to Mr.
Joyce and outstanding as of March 31, 2007 is 0 and 5,088,243. On June 13, 2007,
Mr. Joyce was granted a stock option award to purchase 2,500,000 shares of
Common stock at an exercise price of $0.36 per share.

(2) The aggregate number of stock awards and stock option awards issued to Dr.
Tullis and outstanding as of March 31, 2007 is 0 and 2,014,350.

(3) The aggregate number of stock awards and stock option awards issued to Mr.
Dorst and outstanding as of March 31, 2006 is 0 and 500,000.

(4) The value of the option award was calculated using the binomial lattice
option pricing model based on the following assumptions: weighted average life
of five years; risk-free interest rate of 4%; volatility rate of 72%; and fair
market value of $0.122 per share at the date of grant.

(5) The value of the option award was calculated using the binomial lattice
option pricing model based on the following assumptions: weighted average life
of three years; risk-free interest rate of 3.96%; volatility rate of 88%; and
fair market value of $0.114 per share at the date of grant.


The following table sets forth certain information concerning unexercised
options, stock that has not vested, and equity incentive plan awards for each of
our named executive officers outstanding as of March 31, 2007.

<TABLE>
<S>                     <C>

                                     OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

- ------------------------------------------------------------------------------------------------------------------------
                                OPTION AWARDS                                                STOCK AWARDS
- ------------------------------------------------------------------------------- ----------------------------------------
                                                                                                             Equity
                                                                                                             incentive
                                                                                                             plan
                                                                                                             awards:
                                                                                                             Market
                                                                                                  Equity     or
                                                                                                  incentive  payout
                                                                                          Market  plan       value
                                                                                 Number   value   awards:    of
                                                                                 of       of      number     unearned
                                              Equity                             shares   shares  of         shares,
                                              Incentive                          or       or      unearned   units
                                              Plan                               units    units   shares,    or
                   Number of     Number of    Awards:                            of       of      units or   other
                   securities    securities   Number of                          stock    stock   other      rights
                   underlying    underlying   Securities                         that     that    rights     that
                   unexercised   unexercised  underlying    Option               have     have    that       have
                   options       options (#)  unexercised   exercise  Option     not      not     have not   not
                   (#)           Unexercis-   unearned      price     expiration vested   vested  vested     vested
Name               Exercisable   able         options (#)   ($)       date       (#)      ($)     (#)        ($)
- ------------------------------------------------------------------------------------------------------------------------

James A. Joyce       1,115,550           --                  $0.38      2/23/10
                       557,775           --                  $0.38     12/31/10
                       557,775           --                  $0.38     12/31/11
                     2,857,143           --                  $0.21     09/09/15

Richard H. Tullis      867,175           --                  $0.38     2/23/10
                       433,588           --                  $0.38    12/31/10
                       433,587           --                  $0.38    12/31/11
                        30,000           --                  $2.56    12/31/10
                       250,000           --                  $1.90     3/12/12

James Dorst            165,000      335,000(1)               $0.23    08/01/08

Harold Handley              --      500,000                  $0.27    10/02/16
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  166,667 options vest each year on August 1 starting August 1, 2006. Mr.
     Dorst resigned from the Company on December 10, 2007. At that time, he had
     333,333 options vested, which will expire on March 10, 2008.

Option Grants to Executive Officers in 2007

There were 500,000 stock options granted to our President, Harold H. Handley. No
options were granted to our Chief Executive Officer, Chief Scientific Officer or
Chief Financial Officer in fiscal year 2007.


                                       30

<PAGE>

Director Compensation

The following director compensation disclosure reflects all compensation awarded
to, earned by or paid to the directors below for the fiscal year ended March 31,
2007.

<TABLE>
<S>                                                                           <C>
                                                                  Change in
                                                                   Pension
                         Fees                                       Value
                         Earned                                      and
                          or                        Non-Equity   Nonqualified
                         Paid                       Incentive      Deferred        All
                          in      Stock   Option      Plan       Compensation     Other
                         Cash    Awards   Awards   Compensation    Earnings    Compensation    Total
Name                      ($)      ($)      ($)         ($)           ($)           ($)         ($)
- -----------------------  ------  -------  -------  ------------  ------------  ------------  --------
James A. Joyce (1)         --      --        --         --            --            --          --
- -----------------------  ------  -------  -------  ------------  ------------  ------------  --------
Richard Tullis (2)         --      --        --         --            --            --          --
- -----------------------  ------  -------  -------  ------------  ------------  ------------  --------
Franklyn Barry (3)         --      --        --         --            --            --          --
- -----------------------  ------  -------  -------  ------------  ------------  ------------  --------
Edward Broenniman (4)      --      --        --         --            --            --          --
- -----------------------  ------  -------  -------  ------------  ------------  ------------  --------
</TABLE>

(1) The aggregate number of stock awards and options awards issued and
outstanding as of March 31, 2007 are 0 and 5,088,243.

(2) The aggregate number of stock awards and options awards issued and
outstanding as of March 31, 2007 are 0 and 2,014,350.

(3) The aggregate number of stock awards and options awards issued and
outstanding as of March 31, 2007 are 0 and 516,417.

(4) The aggregate number of stock awards and options awards issued and
outstanding as of March 31, 2007 are 0 and 520,050.

         EMPLOYMENT AGREEMENTS

         We entered into an employment agreement with Mr. Joyce effective April
1, 1999. Effective June 1, 2001, Mr. Joyce was appointed President and Chief
Executive Officer and his base annual salary was increased from $120,000 to
$180,000. Effective January 1, 2005, Mr. Joyce's salary was increased from
$180,000 to $205,000 per year. Effective April 1, 2006, Mr. Joyce's salary was
increased from $205,000 to $240,000 per year. Under the terms of the agreement,
his employment continues at a salary of $240,000 per year for successive one
year periods, unless given notice of termination 60 days prior to the
anniversary of his employment agreement.

         We entered into an employment agreement with Dr. Tullis effective
January 10, 2000. Effective June 1, 2001, Dr. Tullis was appointed our Chief
Science Officer of the Company. His compensation under the agreement was
modified in June 2001 from $80,000 to $150,000 per year. Effective January 1,
2005, Dr. Tullis' salary was increased from $150,000 to $165,000 per year.
Effective April 1, 2006, Dr. Tullis' salary was increased from $165,000 to
$180,000 per year. Under the terms of the agreement, his employment continues at
a salary of $180,000 per year for successive one-year periods, unless given
notice of termination 60 days prior to the anniversary of his employment
agreement

         Both Mr. Joyce's and Dr. Tullis' agreements provide for health
insurance and disability benefits, one year of severance pay if their employment
is terminated by us without cause or due to change in our control before the
expiration of their agreements, and allow for bonus compensation and stock
option grants as determined by our Board of Directors. Both agreements also
contain restrictive covenants preventing competition with us and the use of
confidential business information, except in connection with the performance of
their duties for the Company, for a period of two years following the
termination of their employment with us.

         Effective August 1, 2005, Mr. Dorst was appointed our Chief Financial
Officer. Mr. Dorst was paid an annual salary of $150,000. He was also granted
five-year options to purchase 500,000 shares of common stock at $0.23 per share,
vesting over three years. Mr. Dorst resigned his employment with us on December
10, 2007. At the time of his resignation 331,667 options were vested and must be
exercised on or prior to March 10, 2008 of they will terminate.

         Effective July 18, 2006, Dr. Handley was appointed our President. Dr.
Handley is paid an annual salary of $180,000. He was also granted ten-year
options to purchase 500,000 shares of common stock at $0.27 per share, vesting
over three years.


                                       31

<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth selected information, computed as of
January 22, 2008, about the amount of shares of common stock beneficially owned
by: each of our "EXECUTIVE OFFICERS" (defined as our President, Secretary, Chief
Financial Officer or Treasurer, any vice-president in charge of a principal
business function, such as sales, administration or finance, or any other person
who performs similar policy making functions for our company); each of our
directors; each person known to us to own beneficially more than 5% of any class
of our securities; and the group comprised of our current directors and
executive officers.

         Except as otherwise noted in the footnotes below, the entity,
individual Director or Executive Officer has sole voting and investment power
over such securities.

                                                                        COMMON
                                                                       (VOTING)
NAME AND ADDRESS OF BENEFICIAL OWNERS (1) (2)            AMOUNT         %(3)

Ellen R. Weiner Family Revocable Trust (4)(7)         10,880,818        9.9%
10645 N. Tatum Blvd. Suite 200-166
Phoenix, Arizona  85028

James A. Joyce (5)(6)(7)(8)                           6,688,243       15.46%

Estate of Allan S. Bird (4)(7)                        3,206,840        8.03%
PO Box 371179
Las Vegas, Nevada 89137

Richard H. Tullis (5)(6)(7)(9)                        2,072,350        5.29%

Phillip A. Ward (15)                                  3,292,077        8.71%
P.O. Box 3322
Rancho Santa Fe, CA 92067 (7)

Calvin M. Leung (10)(7)                               1,985,859        5.34%
P.O. Box 2366
Costa Mesa, CA 92628

Fusion Capital Fund II, LLC (11)                      2,258,333        6.08%
222 Merchandise Mart Plaza, Suite 9-112
Chicago, IL 60654

Edward G. Broenniman (6)(12)                            655,924        1.73%

Franklyn S. Barry, Jr. (6)(13)                          523,010        1.38%


Harold H. Handley (5)(14)                               500,000        0.13%


Directors and executive officers, as a group         10,439,527       22.31%
  (5 members)


(1)      Beneficial ownership is determined in accordance with Rule 13d-3 under
         the Securities Exchange Act and is generally determined by voting power
         and/or investment power with respect to securities. Except as indicated
         by footnote and subject to community property laws where applicable,
         the Company believes the persons named in the table above have sole
         voting and investment power with respect to all shares of Common Stock
         shown as beneficially owned by them. Unless otherwise indicated, the
         address of each shareholder is 3030 Bunker Hill Street, Suite 4000, San
         Diego, CA 92109.

(2)      A person is deemed to be the beneficial owners of securities that can
         be acquired by such person within 60 days from January 22, 2008 upon
         the exercise of warrants or options. Each beneficial owner's percentage
         ownership is determined by assuming that options and warrants that are
         held by such person (but not those held by any other person) and that
         are exercisable within 60 days from January 22, 2008 have been
         exercised.

(3)      Assumes 37,169,188 shares of Common Stock outstanding at January 22,
         2008.

                                       32

<PAGE>

(4)      Includes shares issuable upon conversion of convertible notes and
         associated warrants which would be issued in the event and at such time
         as such notes are converted into restricted shares of common stock.
         Includes convertible notes held by both the Ellen R. Weiner
         Family Revocable Trust and the Estate of Allan S. Bird as follows: (i)
         Ellen R. Weiner Family Revocable Trust owns a convertible promissory
         note in the principal amount of $660,000 convertible at $0.20 per
         share, a Class A Interest Warrant for 1,128,188 shares exercisable at
         $0.20 per share, a Class A-1 Damages Warrant for 511,621 shares
         exercisable at $0.40 per share, a Class A Principal Warrant for
         3,800,000 shares exercisable at $0.20 per share; and (ii) Estate of
         Allan S. Bird owns a convertible promissory note in the principal
         amount of $225,000 convertible at $0.20 per share, a Class A Interest
         Warrant for 326,799 shares exercisable at $0.20 per share, a Class A-1
         Damages Warrant for 151,621 shares exercisable at $0.40 per share, a
         Class A Principal Warrant for 1,125,000 shares exercisable at $0.20 per
         share. Mr. Bird was Ms. Weiner's father-in-law. Neither the Trust nor
         the Estate is entitled to convert Convertible Promissory Notes or
         associated Warrants to the extent that such conversion or exercise
         would cause the aggregate number of shares of common stock beneficially
         owned by either of them to exceed 9.9% of the outstanding shares of the
         common stock following such exercise. The Ellen R. Weiner Family Trust
         disclaims any beneficial ownership of Mr. Bird's notes, associated
         warrants and underlying common stock. The Estate of Mr. Bird disclaims
         any beneficial ownership of such Trust's notes and associated warrants.

(5)      Executive officer.

(6)      Director.

(7)      More-than-5% shareholder.

(8)      Includes options to purchase 2,231,100 restricted common shares at
         $0.38 and options to purchase 2,857,143 restricted common shares at
         $0.21. Also includes 1,000,000 options to purchase restricted common
         shares at $0.36. Mr. Joyce also owns options to purchase 1,500,000
         restricted common shares at $0.36 which are not yet vested.

(9)      Includes 250,000 stock options exercisable at $1.90 per share, 30,000
         stock options exercisable at $2.56 per share and 1,734,350 stock
         options with an exercise price of $0.38 per share.

(10)     Includes all shares owned by members of Mr. Leung's family and related
         entities.

(11)     Steven G. Martin and Joshua B. Scheinfeld, the principals of Fusion
         Capital, are deemed to be beneficial owners of all of the shares of
         common stock owned by Fusion Capital. Messrs. Martin and Scheinfeld
         have shared voting and disposition power over the shares being offered
         under this prospectus.

(12)     Includes 53,885 common shares owned by Mr. Broenniman's wife and
         options to purchase 2,500 shares at an exercise price of $3.00, 3,000
         shares at an exercise price of $1.78 and 514,550 shares at an exercise
         price of $0.38.

(13)     Includes 1,867 stock options with an exercise price of $1.84 and
         514,550 stock options with an exercise price of $0.38.

(14)     Includes 500,000 stock options with an exercise price of $0.27.

(15)     Includes warrants to purchase 100,000 shares of common stock at an
         exercise price of $0.50; warrants to purchase 55,555 shares of common
         stock at an exercise price of $0.90; warrants to purchase 90,000 shares
         of common stock at an exercise price of $0.34; warrants to purchase
         100,000 shares of common stock at an exercise price of $0.17; warrants
         to purchase 55,555 shares of common stock at an exercise price of
         $0.18; warrants to purchase 55,555 shares of common stock at an
         exercise price of $0.18; and 130,000 shares of common stock underlying
         a convertible promissory note in the principal amount of $65,000 and
         convertible at $0.50 per share.


                                       33

<PAGE>

                            CERTAIN RELATIONSHIPS AND
                              RELATED TRANSACTIONS

         Described below are certain transactions or series of transactions
between us and our executive officers, directors and the beneficial owners of 5%
or more of our common stock, on an as converted basis, and certain persons
affiliated with or related to these persons, including family members, in which
they had or will have a direct or indirect material interest in amounts that
exceed $60,000 for the last two completed fiscal years, other than compensation
arrangements that are otherwise required to be described under "Executive
Compensation."

         On September 9, 2005, as previously disclosed on Form 8-K, we issued a
stock option to acquire 2,857,143 common shares to our CEO and Chairman, James
A. Joyce, in satisfaction of $300,000 in previously accrued payroll expense.

         On November 14, 2006, in exchange for $100,000, the Company issued to
the Phillip A Ward Trust 555,556 restricted shares of common stock. In addition,
the Company issued an initial five-year non-cashless warrant to purchase 555,556
restricted shares of common stock at an exercise price of $0.18. In the event
that the initial warrant is exercised, the holder will receive an additional
five-year non-cashless warrant to purchase 555,556 restricted shares of common
stock at an exercise price of $0.18.

         On December 15, 2006, the Company issued a $33,000 10% Convertible
Note, due March 15, 2007 to the Phillip A Ward Trust. The note is presently in
default and since March 15, 2007 has accrued interest at 15%. The face value of
the note is convertible into 194,118 restricted shares of common stock. In
addition, the Company issued an initial five-year non-cashless warrant to
purchase 194,118 restricted shares of common stock at an exercise price of
$0.17. In the event that the initial warrant is exercised, the holder will
receive an additional five-year non-cashless warrant to purchase 194,118
restricted shares of common stock at an exercise price of $0.17.

         On July 13, 2007, in exchange for $60,000, the Company issued the
Phillip A Ward Trust a 12% Convertible Note, with accrued interest due at
Maturity on July 13, 2008. The face value of the note is convertible at a $0.50
conversion price into 120,000 restricted shares of common stock.

         From July 11, 2005 through December 15, 2005, the Company received
$760,000 From the Ellen R. Weiner Family Revocable Trust and $225,000 from Allan
S. Bird (the "Noteholders") as a portion of a $1.0 Promissory Note (the
"Notes")funding. The Promissory Notes accrued interest at the rate of 10% per
annum and originally matured on January 2, 2007. Effective March 22, 2007, the
Company entered into Allonges with the Noteholders and amended and restated the
Notes to extend the maturity date until January 2, 2008. The Notes were
convertible into Units at any time prior to the maturity date at the conversion
price of $0.20 per Unit. Each Unit was comprised of one share of the Company's
common stock and one Class A Common Stock Purchase Warrant (the "Class A
Warrant"). Each Class A Warrant expired on January 2, 2011 and was exercisable
to purchase one share of Common Stock at a price of $0.20 per share (the
"Exercise Price"). If the Holder exercised Class A Warrants on or before July 3,
2008, the Company will issue the Holder one Class B Common Stock Purchase
Warrant (the "Class B Warrant" and with the Class A Warrant, collectively, the
"Warrants") for every two Class A Warrants exercised. Each Class B Warrant had a
three-year term and was exercisable to purchase one share of Common Stock at a
price equal to the greater of $0.20 per share or 75% of the average of the
closing bid prices of the Common Stock for the five trading days immediately
preceding the date of the notice of conversion.

         On November 29, 2007, the Company entered into Amended and Restated 10%
Series A Convertible Promissory Notes (the "Notes") with the Estate of Allan S.
Bird, the Ellen R. Weiner Family Revocable Trust, Claypoole Capital, LLC and
Christian J. Hoffman III (the "Holders"). The Notes were issued in exchange for
the promissory notes previously issued by the Company (described above) to the
Holders (the "Prior Notes"), and all amendments to the Prior Notes, including
certain allonges entered into between the Company and the Holders on March 5,
2007 (the "Allonges").

         The Notes bear an aggregate principal amount of $1,000,000 and are
convertible into an aggregate of 5,000,000 shares of the Company's Common Stock
and mature on February 15, 2009. The Notes provide for the payment of accrued
and default interest through December 31, 2007 in the aggregate amount of
$295,248 to be paid in units ("Units") at the rate of $0.20 per Unit, each Unit
consisting of one share of the Company's Common Stock and one Class A Common
Stock Purchase Warrant (the "Class A Warrant") to purchase one share of the
Company's Common Stock at an exercise price of $0.20 per share. If the Holders
exercise the Class A Warrants on or before February 15, 2010, the Company will
issue them one Class B Common Stock Purchase Warrant (the "Class B Warrant") for
every two Class A Warrants exercised. The Class B Warrants will have an exercise
price of $0.60 per share.

                                       34

<PAGE>

         The Notes also provide for the payment of liquidated damages through
November 29, 2007 in the aggregate amount $269,336 to be paid in units ("Damages
Units") at the rate of $0.40 per Damages Unit, each Damages Unit consisting of
one share of the Company's Common Stock and one Class A-1 Common Stock Purchase
Warrant (the "Class A-1 Warrant") to purchase on share of the Company's Common
Stock at an exercise price of $0.40 per share. If the Holders exercise the Class
A-1 Warrants on or before February 15, 2010, the Company will issue them one
Class B-1 Common Stock Purchase Warrant (the "Class B-1 Warrant") for every two
Class A-1 Warrants exercised. The Class B-1 Warrants will have an exercise price
of $0.40 per share.

         In addition, the Notes provide for the issuance of Class A Principal
Common Stock Purchase Warrants (the "Class A Principal Warrant") to purchase an
aggregate of 5,000,000 shares of the Company's Common Stock on the same terms as
the Class A Warrants.

         The following table summarizes the number of shares of the Company's
Common Stock issued and issuable upon the conversion of the Notes or the
exercise of the various warrants issued or issuable pursuant to the Notes.

                  Note Conversion                    5,000,000
                  Accrued Interest                   1,476,242
                  Liquidated Damages                   673,340
                  Class A Warrants                   1,476,242
                  Class A-1 Warrants                   673,340
                  Class A Principal Warrants         5,000,000
                  Class B Warrants                     738,121
                  Class B-1 Warrants                   336,670
                                                  ------------
                  Total                             15,373,955
                                                  ============

         The shares underlying the Class A Warrants, the Class A-1 Warrants and
the Class A Principal Warrants shall be registered with the SEC by March 31,
2008, and the shares underlying the Class B Warrants and the Class B-1 Warrants
shall be registered with the SEC by the 30th day following the issuance date of
such warrants.


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                              OR PLAN OF OPERATION

         The following discussion of our consolidated financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and their explanatory notes appearing elsewhere in this
prospectus.

         Certain statements contained herein that are not related to historical
results, including, without limitation, statements regarding the Company's
business strategy and objectives, future financial position, expectations about
pending litigation and estimated cost savings, are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act") and
involve risks and uncertainties. Although we believe that the assumptions on
which these forward-looking statements are based are reasonable, there can be no
assurance that such assumptions will prove to be accurate and actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, regulatory policies, competition from other similar businesses, and
market and general economic factors. All forward-looking statements contained in
this prospectus are qualified in their entirety by this statement.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2006

Operating Expenses

         Consolidated operating expenses for the three months ended September
30, 2007 were approximately $690,000 in comparison with approximately $535,000
for the comparable quarter a year ago. The increase of approximately $155,000,
or 29% was comprised of increases in Payroll & Related and Professional expenses
of approximately $94,000 and $87,000, respectively, offset by a decrease in
overall General and Administrative expense of approximately $26,000.



                                       35

<PAGE>

         Payroll & Related expenses increased by approximately $94,000 or 45%
from the prior period one year ago. The primary reason for this was the
recognition of increased stock option related expense. Professional expenses
increased approximately $88,000 or 53% due to increases in legal expense of
approximately $79,000, increases in patent related legal expense of
approximately $7,000 and net increases in other administrative expenses of
approximately $2,000. General and administrative expenses decreased
approximately $26,000 or 29% as compared to the prior quarter one year ago. This
decrease was comprised of approximate decreases in financial conference expense
of $19,000, travel expense of $13,000 and all other administrative expense of
$8,000, offset by an increase in lab supplies of approximately $14,000.

Other Expense

         Other expenses decreased by approximately $527,000 or 569% as compared
to the prior quarter one year ago. This decrease was comprised of a non-cash
reduction in the fair value of warrant liability of approximately $492,000, an
approximate $17,000 reduction in interest expense and a decrease of
approximately $18,000 in other expenses. Interest expense was reduced because
the BCF associated with the Company's 10% Series A Convertible Promissory Notes
("Notes") was fully amortized to interest expense prior to the current fiscal
quarter. The warrant liability is also related to the Notes and it is required
to be revalued at the end of each reporting period until effective registration
of the shares underlying the Notes and related Warrants becomes effective (See
Note 3 to the condensed consolidated financial statements).

Net Loss

         The Company recorded a consolidated net loss of approximately $255,000
and $628,000 for the quarters ended September 30, 2007 and 2006, respectively.
The decreased net loss of approximately 59% was primarily attributable to the
change in the fair value of the warrant liability offset by increased operating
expenses.

         Basic and diluted loss per common share were ($0.01) for the three
month period ended September 30, 2007 compared to ($0.02) for the same period
ended September 30, 2006. This reduction in loss per share was primarily a
result of the greater number of common shares outstanding during the three month
period ended September 30, 2007, as compared to the three month period ended
September 30, 2006 and the significant benefit recognized attributable to the
change in fair value of the warrant liability.

SIX MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE SIX MONTHS ENDED
SEPTEMBER 30, 2006

Operating Expenses

         Consolidated operating expenses were approximately $1,561,000 for the
six months ended September 30, 2007, versus approximately $1,039,000 for the
comparable period ended September 30, 2006. The increase of approximately
$522,000, or 50%, is a result of approximate increases in Professional expenses
of $74,000, Payroll expenses of $431,000 and General and Administrative expenses
$17,000.

         For the comparable six-month periods, Professional Fees increased
approximately $74,000 or 20%, Payroll expenses increased approximately $431,000
or 110% and General and Administrative expenses increase approximately $17,000
or 6%.

         The Professional expense increase is comprised of an increase in legal
fees of approximately $137,000, offset by approximate decreases of $29,000 in
scientific consulting fees, $26,000 in investor relations expenses, $6,000 in
directors' fees and $2,000 in accounting services as compared to the prior
period.

         The General and Administrative expense increase is comprised of
approximate increases in lab supplies of $53,000, insurance expense of $14,000
and utilities expense of $12,000 offset by decreases in financial conference
expense of approximately $38,000, travel expense of $18,000 and a reduction in
all other general expenses of approximately $6,000.

         The Payroll and related expense increase is comprised of approximately
$77,000 of increases in payroll expense primarily a result of our having a
full-time President hired in the middle of the previous period and an
approximate increase in stock option compensation expense of $354,000.


                                       36

<PAGE>

Other Expense

         Other expenses decreased by approximately $977,000 or 471% as compared
to the prior period one year ago. This decrease was comprised of a non-cash
reduction in the fair value of warrant liability of $914,000, an approximate
$81,000 reduction in interest expense and an increase of approximately $18,000
in other expenses. Interest expense was reduced because the BCF associated with
the Company's 10% Series A Convertible Promissory Notes ("Notes") was fully
amortized to interest expense prior to the current fiscal period. The warrant
liability is also related to the Notes and it is required to be revalued at the
end of each reporting period until effective registration of the shares
underlying the Notes and related Warrants becomes effective (See Note 3 to the
condensed consolidated financial statements).

Net Loss

         We recorded a consolidated net loss of $791,568 and $1,246,810 for the
six-month periods ended September 30, 2007 and 2006, respectively. The decrease
in net loss was primarily attributable to a net decrease the change in valuation
of the warrant liability.

         Basic and diluted loss per common share were ($0.02) for the six month
period ended September 30, 2007 compared to ($0.05) for the same period ended
September 30, 2006. This reduction in loss per share was attributable to both
the greater number of common shares outstanding during the six month period
ended September 30, 2007, as compared to the six-month period ended September
30, 2006, and by the decreased net loss for the six-month period ended September
30, 2007, as compared to the equivalent period one year ago.

LIQUIDITY AND CAPITAL RESOURCES

         To date, the Company has funded its capital requirements for the
current operations from net funds received from the public and private sale of
debt and equity securities, as well as from the issuance of common stock in
exchange for services. The Company's cash position at September 30, 2007 was
approximately $180,000 compared to approximately $440,000, at March 31, 2006,
representing a decrease of approximately $260,000.

         The Company's cash position at December 31, 2007 was approximately
$333,000. During the three month period ended December 31, 2007, the Company
raised approximately $450,000 through the issuance of notes and $165,000 through
the issuance of common stock units. Additionally, through January 22, 2008, the
Company raised $100,000 through the issuance of common stock units and
approximately $200,000 through the issuance of notes.

         During the six months ended September 30, 2007, operating activities
used net cash of approximately $1,067,000 while the Company received
approximately $818,000 from the issuance of common stock and convertible notes
and purchased approximately $4,000 of new equipment.

         During the six month period ended September 30, 2007, net cash used in
operating activities primarily consisted of a change in the estimated fair value
of warrant liability of approximately $914,000 and approximate net loss of
$792,000. These were offset principally by the fair market value of common stock
of approximately $194,000 issued in payment for services and approximately
$353,000 in stock-based compensation and changes in other current balance sheet
accounts of approximately $85,000.

         An increase in working capital during the six months ended September
30, 2007 in the amount of approximately $555,000 increased the Company's
negative working capital position to approximately ($6,705,000) at September 30,
2007 as compared to a negative working capital of approximately ($7,260,000) at
March 31, 2007.

         The Company's current deficit in working capital requires us to obtain
funds in the short-term to be able to continue in business, and in the longer
term to fund research and development on products not yet ready for market.

         The Company's operations to date have consumed substantial capital
without generating revenues, and will continue to require substantial capital
funds to conduct necessary research and development and pre-clinical and
clinical testing of Hemopurifier(R) products, and to market any of those
products that receive regulatory approval. The Company does not expect to
generate revenue from operations for the foreseeable future, and its ability to
meet its cash obligations as they become due and payable is expected to depend
for at least the next several years on its ability to sell securities, borrow
funds or a combination thereof. The Company's future capital requirements will
depend upon many factors, including progress with pre-clinical testing and
clinical trials, the number and breadth of our programs, the time and costs
involved in preparing, filing, prosecuting, maintaining and enforcing patent
claims and other proprietary rights, the time and costs involved in obtaining
regulatory approvals, competing technological and market developments, and
management's ability to establish collaborative arrangements, effect successful
commercialization strategies, marketing activities and other arrangements. The
Company expects to continue to incur increasing negative cash flows and net
losses for the foreseeable future, and presently requires a minimum of $125,000
per month to sustain operations.


                                       37

<PAGE>

         Management does not believe that inflation has had or is likely to have
any material impact on the Company's limited operations.

         At the date of this filing, we do not have plans to purchase
significant amounts of equipment or hire significant numbers of employees prior
to successfully raising additional capital.

         PLAN OF OPERATION

         The Company's current plan of operation is to fund our anticipated
increased research and development activities and operations for the near future
through the common stock purchase agreement in place with Fusion Capital,
whereby Fusion Capital has committed to buy up to an additional $8,400,000 of
our common stock over a 25-month period that will commence initially upon the
filing of and, in the future, upon the declared effectiveness of this
registration statement. No assurance can be given that we will receive funds
under our agreement with Fusion Capital. Based on our projections of additional
resources required for operations and to complete research, development and
testing associated with our Hemopurifier(R) products, we anticipate that these
funds will satisfy our cash requirements, including this anticipated increase in
operations, in excess of the next twelve months. However, due to market
conditions and to assure availability of funding for operations in the long
term, we plan to arrange for additional funding, subject to acceptable terms,
during the next twelve months.

         The Company is a development stage medical device company that has not
yet engaged in significant commercial activities. The primary focus of our
resources is the advancement of our proprietary Hemopurifier(R) platform
treatment technology, which is designed to rapidly reduce the presence of
infectious viruses and toxins in human blood. Our focus is to prepare our
Hemopurifier(R) to treat chronic viral conditions, acute viral conditions and
viral-based bioterror threats in human clinical trials.

         The Company plans to continue research and development activities
related to our Hemopurifier(R) platform technology, with particular emphasis on
the advancement of our treatment for "Category A" pathogens as defined by the
Federal Government under Project Bioshield and the All Hazards Preparedness Act
of 2006. The Company has filed an Investigational Device Exemption ("IDE") with
the FDA in order to proceed with Human safety studies of the Hemopurifier(R).
Such studies, complemented by planned in-vivo and appropriate animal in-vitro
studies should allow the Company to proceed to Premarket Approval ("PMA")
process. The PMA process is the last major FDA hurdle in determining the safety
and effectiveness of Class III medical Devices (of which the Hemopurifier(R) is
one).

         Management anticipates continuing to increase spending on research and
development over the next 12 months. Additionally, associated with the Company's
anticipated increase in research and development expenditures, we anticipate
purchasing additional amounts of equipment during this period to support our
laboratory and testing operations. Operations to date have consumed substantial
capital without generating revenues, and will continue to require substantial
and increasing capital funds to conduct necessary research and development and
pre-clinical and clinical testing of our Hemopurifier(R) products, as well as
market any of those products that receive regulatory approval. The Company does
not expect to generate revenue from operations for the foreseeable future, and
our ability to meet our cash obligations as they become due and payable is
expected to depend for at least the next several years on our ability to sell
securities, borrow funds or a combination thereof. Based on our projections of
additional resources required for operations and to complete research,
development and testing associated with our Hemopurifier(R) products, we
anticipate that these funds will satisfy our cash requirements, including this
anticipated increase in operations, in excess of the next twelve months.
However, due to market conditions and to assure availability of funding for
operations in the long term, we plan to arrange for additional funding, subject
to acceptable terms, during the next twelve months. Future capital requirements
will depend upon many factors, including progress with pre-clinical testing and
clinical trials, the number and breadth of our clinical programs, the time and
costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims and other proprietary rights, the time and costs involved in
obtaining regulatory approvals, competing technological and market developments,
as well as management's ability to establish collaborative arrangements,
effective commercialization, marketing activities and other arrangements. The
Company expects to continue to incur increasing negative cash flows and net
losses for the foreseeable future.

         OFF BALANCE SHEET ARRANGEMENTS

         We have not entered into any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources and would be
considered material to investors.



                                       38

<PAGE>

                                LEGAL PROCEEDINGS

         We may be involved from time to time in various claims, lawsuits,
disputes with third parties or breach of contract actions incidental to the
normal course of business operations. We are not aware of any material pending
legal proceedings involving our Company.

                            DESCRIPTION OF SECURITIES

GENERAL

         Our authorized capital consists of 100,000,000 shares of common stock,
par value $.001 per share (these shares are referred to in this prospectus as
"Common Shares"). As of January 22, 2008, there were issued and outstanding
37,169,188 common shares.

COMMON SHARES

         Our common shareholders are entitled to one vote per share on all
matters to be voted upon by those shareholders. Upon the liquidation,
dissolution, or winding up of our Company, our common shareholders will be
entitled to share ratably in all of the assets which are legally available for
distribution, after payment of all debts and other liabilities. Our common
shareholders have no preemptive, subscription, redemption or conversion rights.
All of our currently outstanding common shares are, and all of our common shares
offered for sale under this prospectus will be, validly issued, fully paid and
non-assessable.

OPTIONS AND WARRANTS CONVERTIBLE INTO COMMON SHARES

         As of January 22, 2008, there were outstanding common share purchase
options entitling the holders to purchase 14,542,721 common shares at a weighted
average exercise price of $0.38 per share and warrants entitling the holders to
purchase up to 11,704,060 common shares at a weighted average exercise price of
$0.34 per share.

DEBT CONVERTIBLE INTO COMMON SHARES

         As of January 22, 2008, there were outstanding convertible debt
instruments entitling the holders to convert their debt into 4,914,118 common
shares at a weighted conversion price of $0.21 per share.


                            EQUITY COMPENSATION PLANS

SUMMARY EQUITY COMPENSATION PLAN DATA

         The following table sets forth information compiled on an aggregate
basis as of January 22, 2008 with respect to the various equity compensation
plans, including stand-alone compensation arrangements, under which we have
granted or are authorized to issue equity securities to employees or
non-employees in exchange for consideration in the form of goods or services:


<TABLE>
<CAPTION>
                                             NUMBER OF                           NUMBER OF SECURITIES
                                            SECURITIES          WEIGHTED-       REMAINING AVAILABLE FOR
                                              TO BE              AVERAGE         FUTURE ISSUANCE UNDER
                                           ISSUED UPON       EXERCISE PRICE    EQUITY COMPENSATION PLANS
                                           EXERCISE OF       OF OUTSTANDING     EXCLUDING SECURITIES TO
                                           OUTSTANDING          OPTIONS,        BE ISSUED UPON EXERCISE
                                             OPTIONS,           WARRANTS        OF OUTSTANDING OPTIONS,
                                             WARRANTS          AND RIGHTS       WARRANTS AND RIGHTS) (3)
PLAN CATEGORY                            OR RIGHTS(1)(2)
- ---------------------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>                    <C>
Equity compensation plans approved
  by shareholders:                              32,500           $2.65                  467,500

Equity compensation plans not
  approved by shareholders(1):              11,704,060           $0.36                      N/A

                                      -------------------------------------------------------------------

        Total                               11,736,560           $0.36                  467,500
                                      -------------------------------------------------------------------
</TABLE>

(1)   The description of the material terms of non-plan issuances of equity
      instruments is discussed in Notes 4, 5 and 6 of the accompanying
      consolidated financial statements for the fiscal year ended March 31,
      2007.

(2)   Net of equity instruments forfeited, exercised or expired.

(3)   This column does not include 1,807,003 shares of common stock that remain
      to be issued under the 2003 Consultant Stock Plan.


                                       39

<PAGE>

         2000 STOCK OPTION PLAN

                           Number of
                        securities to be   Weighted average
                          issued upon       exercise price        Number of
                          exercise of       of outstanding        securities
                          outstanding          options,           remaining
                       options, warrants     warrants and       available for
   Plan Category           and rights           rights         future issuance
- --------------------- ------------------- ------------------ -------------------
                              (a)                (b)                 (c)
- --------------------- ------------------- ------------------ -------------------
Equity compensation
plans approved by
security holders            32,500             $ 2.65              467,500
- --------------------- ------------------- ------------------ -------------------
Equity compensation
plans not approved
by security holders             --                 --                   --
- --------------------- ------------------- ------------------ -------------------
Total                       32,500             $ 2.65              467,500
- --------------------- ------------------- ------------------ -------------------

         Our 2000 Stock Option Plan (the "Plan"), adopted by us in August 2000,
provides for the grant of incentive stock options (ISOs") to our full-time
employees (who may also be Directors) and nonstatutory stock options ("NSOs") to
non-employee Directors, consultants, customers, vendors or providers of
significant services. The exercise price of any ISO may not be less than the
fair market value of the Common Stock on the date of grant or, in the case of an
optionee who owns more than 10% of the total combined voting power of all
classes of our outstanding stock, not be less than 110% of the fair market value
on the date of grant. The exercise price, in the case of any NSO, must not be
less than 75% of the fair market value of the Common Stock on the date of grant.
The amount reserved under the Plan is 500,000 options. At January 22, 2008, we
had granted 32,500 options under the 2000 Stock Option Plan, with 467,500
available for future issuance.


         2003 CONSULTANT STOCK PLAN

- --------------------- ------------------- ------------------ -------------------
   Plan Category       Number of shares
                       of common stock    Weighted average    Number of common
                        available for      price of shares    shares remaining
                        issuance under    issued under the     available for
                           the plan             plan          future issuance
- --------------------- ------------------- ------------------ -------------------
                             (a)                 (b)                (c)
- --------------------- ------------------- ------------------ -------------------
Equity compensation
plans approved by
security holders                 --                --                   --
- --------------------- ------------------- ------------------ -------------------
Equity compensation
plans not approved
by security holders       5,000,000            $ 0.31            2,015,994
- --------------------- ------------------- ------------------ -------------------
Total                     5,000,000            $ 0.31            2,015,994
- --------------------- ------------------- ------------------ -------------------

         Our 2003 Consultant Stock Plan (the "Stock Plan"), adopted by us in
August 2003, advances our interests by helping us obtain and retain the services
of persons providing consulting services upon whose judgment, initiative,
efforts and/or services we are substantially dependent, by offering to or
providing those persons with incentives or inducements affording such persons an
opportunity to become owners of our capital stock. Consultants or advisors are
eligible to receive grants under the plan program only if they are natural
persons providing bona fide consulting services to us, with the exception of any
services they may render in connection with the offer and sale of our securities
in a capital-raising transaction, or which may directly or indirectly promote or
maintain a market for our securities. We initially reserved a total of 1,000,000
common shares for issuance under the Stock Plan and increased this to 3,000,000
on August 29, 2005 and 5,000,000 on August 9, 2007. The Stock Plan provides for
the grants of common stock. No awards may be issued after the ten year
anniversary of the date we adopted the Stock Plan, the termination date for the
plan.

         On March 29, 2004, we filed with the SEC a registration statement on
Form S-8 for the purpose of registering 1,000,000 common shares issuable under
the Stock Plan under the Securities Act of 1933.

         On August 29, 2005, we filed with the SEC a registration statement on
Form S-8 for the purpose of registering 2,000,000 common shares issuable under
the Stock Plan under the Securities Act of 1933.


                                       40

<PAGE>

         On August 9, 2007, we filed with the SEC a registration statement on
Form S-8 for the purpose of registering 2,000,000 common shares issuable under
the Stock Plan under the Securities Act of 1933.

         STAND-ALONE GRANTS

         From time to time our board of directors grants common share purchase
options or warrants to selected directors, officers, employees, consultants and
advisors in payment of goods or services provided by such persons on a
stand-alone basis outside of any of our formal stock plans. The terms of these
grants are individually negotiated.


            MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

DESCRIPTION OF MARKET

         Our common shares are currently quoted on the OTCBB under the symbol
"AEMD." Our Common Stock has had a limited and sporadic trading history. The
following table sets forth the quarterly high and low bid prices for our common
shares on the OTCBB for the periods indicated. The prices set forth below
represent inter-dealer quotations, without retail markup, markdown or commission
and may not be reflective of actual transactions.

                                                             BID PRICE
                                                      -----------------------
PERIOD                                                 HIGH          LOW
- -----------------------------------------------------------------------------

2007:
Fourth Quarter                                          $0.75       $0.49
Third Quarter                                            0.88        0.57
Second Quarter                                           0.76        0.55
First Quarter                                            0.84        0.25

2006:
Fourth Quarter                                           0.84        0.25
Third Quarter                                            0.34        0.19
Second Quarter                                           0.84        0.32
First Quarter                                            0.98        0.26

2005:
Fourth Quarter                                           0.77        0.21
Third Quarter                                            0.25        0.18
Second Quarter                                           0.33        0.22
First Quarter                                            0.52        0.25

         There are approximately 143 record holders of our Common Stock at
January 21, 2008. The number of registered shareholders includes an estimate of
the number of beneficial owners of common shares held in street name. The
transfer agent and registrar for our common stock is Computershare Trust
Company, located in Denver, Colorado.

DIVIDEND POLICY

         We have never paid any cash dividends on our common shares, and we do
not anticipate that we will pay any dividends with respect to those securities
in the foreseeable future. Our current business plan is to retain any future
earnings to finance the expansion and development of our business. Any future
determination to pay cash dividends will be at the discretion of our board of
directors, and will be dependent upon our financial condition, results of
operations, capital requirements and other factors as our board may deem
relevant at that time.


                                       41

<PAGE>

                             THE SELLING SHAREHOLDER

         The following table presents information regarding the selling
shareholder. Neither the selling shareholder nor any of its affiliates has held
a position or office, or had any other material relationship, with us.

         On May 20, 2004, we entered into a common stock purchase agreement with
Fusion Capital for the purchase of up to $6,250,000 of our common stock over a
30 month period. Under the agreement we sold 8,000,000 of our common shares to
Fusion Capital over an approximately 30 month period for proceeds of $2,591,745.
That agreement is concluded pursuant to its terms and we cannot sell any
additional shares to Fusion Capital under that agreement.


<TABLE>
- ------------------------- -------------------- --------------------------- --------------- ---------------------------
                          Shares               Percentage of Outstanding   Shares to be    Percentage of Outstanding
                          Beneficially Owned   Shares Beneficially Owned   Sold in the     Shares Beneficially Owned
Selling Shareholder       Before Offering      Before Offering (1)         Offering        After Offering
- ------------------------- -------------------- --------------------------- --------------- ---------------------------
<S>                       <C>                  <C>                         <C>             <C>
Fusion Capital Fund II,
LLC (1) (2)               2,258,333            6.1%                       8,000,000       *
- ------------------------- -------------------- ---------- ----------------- --------------- ---------------------------
</TABLE>

* Less than 1%.

(1)      2,258,333 shares of our common stock have been acquired by Fusion
         Capital under the common stock purchase agreement. Fusion Capital may
         acquire up to an additional 8,000,000 shares under the common stock
         purchase agreement which are being offered pursuant to this prospectus.
         Percentage of outstanding shares is based on 37,169,188 shares of
         common stock outstanding as of January 22, 2008.

(2)      Steven G. Martin and Joshua B. Scheinfeld, the principals of Fusion
         Capital, are deemed to be beneficial owners of all of the shares of
         common stock owned by Fusion Capital. Messrs. Martin and Scheinfeld
         have shared voting and disposition power over the shares being offered
         under this prospectus.


                              PLAN OF DISTRIBUTION

         The common stock offered by this prospectus is being offered by Fusion
Capital Fund II, LLC, the selling shareholder. The common stock may be sold or
distributed from time to time by the selling shareholder directly to one or more
purchasers or through brokers, dealers, or underwriters who may act solely as
agents at market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The sale of the common stock offered by this Prospectus may be effected
in one or more of the following methods:

         o    ordinary brokers' transactions;
         o    transactions involving cross or block trades;
         o    through brokers, dealers, or underwriters who may act solely as
              agents
         o    "at the market" into an existing market for the common stock;
         o    in other ways not involving market makers or established business
              markets, including direct sales to purchasers or sales effected
              through agents;
         o    in privately negotiated transactions; or
         o    any combination of the foregoing.

         In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in the state or an exemption
from the registration or qualification requirement is available and complied
with.

         Brokers, dealers, underwriters, or agents participating in the
distribution of the shares as agents may receive compensation in the form of
commissions, discounts, or concessions from the selling shareholder and/or
purchasers of the common stock for whom the broker-dealers may act as agent. The
compensation paid to a particular broker-dealer may be less than or in excess of
customary commissions.

         Fusion Capital is an "underwriter" within the meaning of the Securities
Act.

         Neither we nor Fusion Capital can presently estimate the amount of
compensation that any agent will receive. We know of no existing arrangements
between Fusion Capital, any other shareholder , broker, dealer, underwriter, or
agent relating to the sale or distribution of the shares offered by this
Prospectus. At the time a particular offer of shares is made, a prospectus
supplement, if required, will be distributed that will set forth the names of
any agents, underwriters, or dealers and any compensation from the selling
shareholder, and any other required information.


                                       42

<PAGE>

         We will pay all of the expenses incident to the registration, offering,
and sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers, or agents. We have also agreed to indemnify Fusion
Capital and related persons against specified liabilities, including liabilities
under the Securities Act.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons, we
have been advised that in the opinion of the SEC this indemnification is against
public policy as expressed in the Securities Act and is therefore,
unenforceable.

         Fusion Capital and its affiliates have agreed not to engage in any
direct or indirect short selling or hedging of our common stock during the term
of the common stock purchase agreement.

         We have advised Fusion Capital that while it is engaged in a
distribution of the shares included in this Prospectus it is required to comply
with Regulation M promulgated under the Securities Exchange Act of 1934, as
amended. With certain exceptions, Regulation M precludes the selling
shareholder, any affiliated purchasers, and any broker-dealer or other person
who participates in the distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of the shares offered hereby this
Prospectus.

         This offering will terminate on the date that all shares offered by
this Prospectus have been sold by Fusion Capital.


                  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

         The report of Squar, Milner, Peterson, Miranda & Williamson, LLP on our
financial statements as of and for the years ended March 31, 2007, 2006 and 2005
did not contain an adverse opinion, or a disclaimer of opinion.


                                 TRANSFER AGENT

         The transfer agent for our common shares is Computershare Trust
Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401. We act as
our own transfer agent with regard to our outstanding common share purchase
options and warrants.


                                  LEGAL MATTERS

         The validity of the issuance of the common shares to be sold by the
selling shareholder under this prospectus was passed upon for our company by
Richardson & Patel LLP. As of January 25, 2008, Richardson & Patel LLP owns a
warrant to purchase 225,000 shares with an exercise price of $0.76. Partner of
Richardson & Patel LLP own collectively warrants to purchase 509,275 shares of
common Stock at exercises prices of $0.25 (for 418,365 shares) and $0.76 (for
90,910 shares). The warrants were issued to Richardson & Patel LLP as payment
for services rendered in connection with the representation of the Company in
our financings and this registration statement. Additionally, Erick E.
Richardson and Nimish Patel, the principals of Richardson & Patel LLP own a
warrant to purchase 113,636 shares with an exercise price of $0.76 through RP
Capital, LLP.

                                     EXPERTS

         Squar, Milner, Peterson, Miranda & Williamson, LLP, a registered
independent public accounting firm, have audited the accompanying consolidated
balance sheet as of March 31, 2007 and the related consolidated statements of
operations, stockholders' deficit and cash flows for each of the years in the
two-year period then ended and for the period from January 31, 1984 (Inception)
to March 31, 2007 to the extent set forth in their report, and such financial
statements have been included in this prospectus in reliance upon the report of
such Firm given upon their authority as experts in auditing and accounting.



                                       43

<PAGE>

     DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
                                   LIABILITIES

         Our Articles of Incorporation permit us to limit the liability of our
directors to the fullest extent permitted under Section 78.037 of the Nevada
General Corporation Law. As permitted by Section 78.037 of the Nevada General
Corporation Law, our Bylaws and Articles of Incorporation also include
provisions that eliminate the personal liability of each of its officers and
directors for any obligations arising out of any acts or conduct of such officer
or director performed for or on behalf of the Company. To the fullest extent
allowed by Section 78.751 of the Nevada General Corporation Law, we will defend,
indemnify and hold harmless its directors or officers from and against any and
all claims, judgments and liabilities to which each director or officer becomes
subject to in connection with the performance of his or her duties and will
reimburse each such director or officer for all legal and other expenses
reasonably incurred in connection with any such claim of liability. However, we
will not indemnify any officer or director against, or reimburse for, any
expense incurred in connection with any claim or liability arising out of the
officer's or director's own negligence or misconduct in the performance of duty.

         The provisions of our Bylaws and Articles of Incorporation regarding
indemnification are not exclusive of any other right we have to indemnify or
reimburse our officers or directors in any proper case, even if not specifically
provided for in our Articles of Incorporation or Bylaws.

         We believe that the indemnity provisions contained in our bylaws and
the limitation of liability provisions contained in our certificate of
incorporation are necessary to attract and retain qualified persons for these
positions. No pending material litigation or proceeding involving our directors,
executive officers, employees or other agents as to which indemnification is
being sought exists, and we are not aware of any pending or threatened material
litigation that may result in claims for indemnification by any of our directors
or executive officers.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.

                           REPORTS TO SECURITY HOLDERS

         We file annual and quarterly reports with the SEC. In addition, we file
additional reports for matters such as material developments or changes. Our
executive officers, directors and beneficial owners of 10% or more of our common
shares also file reports relative to the acquisition or disposition of our
common shares or acquisition, disposition or exercise of our common share
purchase options or warrants. These filings are a matter of public record and
any person may read and copy any materials we file with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers, including us, that file electronically with
the SEC. We are not required to deliver an annual report with this prospectus,
nor will we do so. However, you may obtain a copy of our annual report, or any
of our other public filings, by contacting the Company or from the SEC as
mentioned above.

                       WHERE YOU CAN FIND MORE INFORMATION

         We are subject to the informational requirements of the Securities
Exchange Act and must file reports, proxy statements and other information with
the SEC. The reports, information statements and other information we file with
the Commission can be inspected and copied at the Commission Public Reference
Room, 100 F Street, N.E. Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at (800) SEC-0330.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy, and information statements and other information regarding
registrants, like us, which file electronically with the Commission. Our
headquarters are located at 3030 Bunker Hill Street, Suite 4000, San Diego, CA
92109. Our phone number at that address is (858) 459-7800. Our Web site is
maintained at http://www.aethlonmedical.com.

         This prospectus constitutes a part of a registration statement on Form
S-1 filed by us with the Commission under the Securities Act of 1933. As
permitted by the rules and regulations of the Commission, this prospectus omits
certain information that is contained in the registration statement. We refer
you to the registration statement and related exhibits for further information
with respect to us and the securities offered. Statements contained in the
prospectus concerning the content of any documents filed as an exhibit to the
registration statement (or otherwise filed with the Commission) are not
necessarily complete. In each instance you may refer to the copy of the filed
document. Each statement is qualified in its entirety by such reference.

         No person is authorized to give you any information or make any
representation other than those contained or incorporated by reference in this
prospectus. Any such information or representation must not be relied upon as
having been authorized. Neither the delivery of this prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that there
has been no change in our affairs since the date of the prospectus.

                                       44

<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          INDEX TO FINANCIAL STATEMENTS


      Year Ended March 31, 2007

Report of Independent Registered Public Accounting Firm.................... F-1

Consolidated Balance Sheet ................................................ F-2

Consolidated Statements of Operations ..................................... F-3

Consolidated Statements of Stockholders' Deficit........................... F-4

Consolidated Statements of Cash Flows ..................................... F-15

Notes to Consolidated Financial Statements................................. F-17


      Quarter Ended September 30, 2007 (UNAUDITED)

Consolidated Balance Sheet ................................................ F-46

Consolidated Statement of Operations ...................................... F-47

Consolidated Statement of Cash Flows ...................................... F-48

Notes to Consolidated Financial Statements ................................ F-49

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Aethlon Medical, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Aethlon Medical,
Inc. and Subsidiaries (the "Company"), a development stage company, as of March
31, 2007 and the related consolidated statements of operations, stockholders'
deficit and cash flows for each of the years in the two-year period then ended
and for the period from January 31, 1984 (Inception) to March 31, 2007. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aethlon Medical,
Inc. and Subsidiaries as of March 31, 2007 and the consolidated results of their
operations and their cash flows for each of the years in the two-year period
then ended and for the period from January 31, 1984 (Inception) to March 31,
2007, in conformity with accounting principles generally accepted in the United
States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has suffered
continuing losses from operations, is in default on certain debt, has negative
working capital of approximately $7,260,000 and a deficit accumulated during the
development stage of approximately $28,087,000 at March 31, 2007. As discussed
in Note 1 to the consolidated financial statements, a significant amount of
additional capital will be necessary to advance the development of the Company's
products to the point at which they may become commercially viable. These
conditions, among others, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding these matters are also
described in Note 1. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 1 to the consolidated financial statements, effective April
1, 2006, the Company changed its method of accounting for stock-based
compensation to conform to Financial Accounting Standards Board No. 123-R, Share
Based Payment.

   /S/ SQUAR, MILNER, PETERSON, MIRANDA & WILLIAMSON, LLP

   JULY 12, 2007

   NEWPORT BEACH, CALIFORNIA


                                       F-1

<PAGE>
<TABLE>
<S>               <C>

- --------------------------------------------------------------------------------------------
                                    AETHLON MEDICAL, INC.
                                (A Development Stage Company)
                                  CONSOLIDATED BALANCE SHEET
                                        MARCH 31, 2007
- --------------------------------------------------------------------------------------------

                                            ASSETS

CURRENT ASSETS
                      Cash                                                     $    440,106
                      Prepaid expenses                                                4,570
                                                                               ------------

TOTAL CURRENT ASSETS                                                                444,676

NON-CURRENT ASSETS
                      Property and equipment, net                                    13,662
                      Patents, net                                                  141,820
                      Deposits                                                       13,200
                                                                               ------------

TOTAL ASSETS                                                                   $    613,358
                                                                               ============


                            LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
                      Accounts payable and accrued liabilities                 $  1,374,079
                      Due to related parties                                      1,088,999
                      Notes payable                                                 502,500
                      Convertible notes payable, net of discounts                    50,000
                      Warrant obligation                                          4,689,450
                                                                               ------------

TOTAL CURRENT LIABILITIES                                                         7,705,028
                                                                               ------------

COMMITMENTS AND CONTINGENCIES


STOCKHOLDERS' DEFICIT
                      Common stock, par value of $0.001, 100,000,000 shares
                        authorized; 31,912,153 issued and outstanding                31,912
                      Additional paid-in capital                                 20,963,410
                      Deficit accumulated during the development stage          (28,086,992)
                                                                               ------------

TOTAL STOCKHOLDERS' DEFICIT                                                      (7,091,670)
                                                                               ------------
                      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT              $    613,358
                                                                               ============

- --------------------------------------------------------------------------------------------
               SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

                                             F-2






<PAGE>

- ----------------------------------------------------------------------------------------------------------
                                           AETHLON MEDICAL, INC.
                                       (A Development Stage Company)
                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                              FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                     FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- ----------------------------------------------------------------------------------------------------------
                                                                                         JANUARY 31, 1984
                                                                                       (INCEPTION) THROUGH
                                                       2007                2006           MARCH 31, 2007
                                                  --------------------------------------------------------

Grant income                                      $         --         $         --         $  1,424,012
Subcontract income                                          --                   --               73,746
Sale of research and development                            --                   --               35,810
                                                  --------------------------------------------------------
                                                            --                   --            1,533,568

OPERATING EXPENSES
 Professional fees                                     700,092              851,594            5,938,227
 Payroll and related                                   889,192              675,171            8,135,197
 General and administrative                            494,970              486,452            4,927,001
 Impairment                                                 --               81,722            1,313,253
                                                  --------------------------------------------------------
                                                     2,084,254            2,094,939           20,313,678
                                                  --------------------------------------------------------
OPERATING LOSS                                      (2,084,254)          (2,094,939)         (18,780,110)

OTHER (INCOME) EXPENSE
Loss on extinguishment of debt                       1,216,748                   --            1,216,748
Change in fair value of warrant liability            2,112,575              360,125            2,472,700
Interest expense                                       390,968              450,297            5,262,420
Interest income                                             --                   --              (17,415)
Other                                                  220,000               14,822              372,429
                                                  --------------------------------------------------------
                                                     3,940,291              825,244            9,306,882
                                                  --------------------------------------------------------

NET LOSS                                          $ (6,024,545)        $ (2,920,183)        $(28,086,992)
                                                  ========================================================

Basic and diluted net loss per share
  attributable to common stockholders             $      (0.22)        $      (0.15)
                                                  ==================================

Weighted average number of common
  shares outstanding                                26,937,727           19,551,501
                                                  ==================================

- ----------------------------------------------------------------------------------------------------------
                      SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

                                                    F-3






<PAGE>

- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED       TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------

Balance, January 31, 1984 (Inception)                   --  $         --  $         --   $         --   $         --   $         --

Common stock issued for cash at $1
per share                                           22,000            22        26,502             --             --         26,524

Common stock issued for cash at $23
per share                                            1,100             1        24,999             --             --         25,000

Common stock issued for cash at $86
per share                                              700             1        59,999             --             --         60,000

Common stock issued for cash at $94
per share                                              160             1        14,999             --             --         15,000

Common stock issued for cash at $74
per share                                              540             1        39,999             --             --         40,000

Common stock issued for cash at $250
per share                                            4,678             5     1,169,495             --             --      1,169,500

Capital contributions                                   --            --       521,439             --             --        521,439

Common stock issued for compensation
at $103 per share                                    2,600             3       267,403             --             --        267,406

Conversion of due to related parties
to common stock at $101 per share                    1,120             1       113,574             --             --        113,575

Conversion of due to related parties
to common stock at $250 per share                    1,741             2       435,092             --             --        435,094

Effect of reorganization                         2,560,361         2,558        (2,558)            --             --             --

Common stock issued in connection with
employment contract at $8 per share                 65,000            65       519,935             --             --        520,000

Common stock issued in connection with
the acquisition of patents at $8 per share          12,500            13        99,987             --             --        100,000

Warrants issued to note holders in
connection with notes payable                           --            --       734,826             --             --        734,826

Warrants issued for services                            --            --         5,000             --             --          5,000

Net loss                                                --            --            --             --     (4,746,416)    (4,746,416)
                                              ------------  ------------  ------------   ------------   ------------   ------------
BALANCE, MARCH 31, 2000                          2,672,500         2,673     4,030,691             --     (4,746,416)      (713,052)

Common stock and options issued in connection
with acquisition of Cell Activation, Inc.
at $7.20 per share                                  99,152            99     1,067,768             --             --      1,067,867

Warrants issued to note holders in
connection with notes payable                           --            --       218,779             --             --        218,779

Warrants issued to promoter in
connection with notes payable                           --            --       298,319             --             --        298,319

Beneficial conversion feature of
convertible notes payable                               --            --       150,000             --             --        150,000

Warrants issued to promoter in
connection with convertible notes
payable                                                 --            --       299,106             --             --        299,106

Options issued to directors for
services as board members                               --            --        14,163             --             --         14,163

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                 F-4





<PAGE>

- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL     DEFERRED         DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN      CONSULTING      DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL         FEES            STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------

Options and warrants issued for services                --            --       505,400             --             --        505,400

Common stock issued for services at
$3 per share                                         5,500             5        16,495             --             --         16,500

Common stock issued for cash at $1
per share                                          100,000           100        99,900             --             --        100,000

Net loss                                                --            --            --             --     (4,423,073)    (4,423,073)
                                              ------------  ------------  ------------   ------------   ------------   ------------

BALANCE, MARCH 31, 2001                          2,877,152  $      2,877  $  6,700,621   $         --   $ (9,169,489)  $ (2,465,991)

Common stock, warrants and options
issued for accounts payable and
accrued liabilities                                 21,750            22       243,353             --             --        243,375

Common stock issued for services at
$2.65 per share                                      6,038             6        15,994             --             --         16,000

Common stock issued for cash at $1.00
per share, net of issuance costs of
$41,540 paid to a related party                    730,804           731       688,533             --             --        689,264

Common stock issued for services at
$2.75 per share                                     10,000            10        27,490             --             --         27,500

Common stock issued in connection with
license agreement at $3.00 per share                 6,000             6        17,994             --             --         18,000

Common stock issued to holder of
convertible notes payable at $3.00
per share                                           70,586            71       211,687             --             --        211,758

Options issued to directors for
services as board members                               --            --         7,459             --             --          7,459

Common stock issued for cash at $1.50
per share, net of issuance costs
of $2,500                                           16,667            17        22,483             --             --         22,500

Beneficial conversion feature of
convertible notes payable                               --            --       185,000             --             --        185,000

Common stock issued for conversion of
convertible notes payable and accrued
interest at an average price of
$1.24 per share                                    134,165           134       166,352             --             --        166,486

Common stock issued for services at
$2.72 per share                                      9,651            10        26,240             --             --         26,250

Options issued to consultant for
services                                                --            --       562,000             --             --        562,000

Common stock and warrants for services
at $1.95 per share                                  62,327            62       161,475             --             --        161,537

Common stock issued for services at
$1.90 per share                                      9,198             9        17,491             --             --         17,500

Stock options exercised for cash                   400,000           400       199,600             --             --        200,000

Warrants issued to note holders for
90-day forebearance                                     --            --       118,000             --             --        118,000

Common stock and warrants issued to
note holders and vendors in the
debt-to-equity conversion program at
$1.25 per share                                    816,359           816     1,623,635             --             --      1,624,451

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                 F-5

<PAGE>

- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE       (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------
Other warrant transactions                              --            --       (32,715)            --             --        (32,715)

Net loss                                                --            --            --             --     (3,995,910)    (3,995,910)
                                              ------------  ------------  ------------   ------------   ------------   ------------

BALANCE - MARCH 31, 2002                         5,170,697  $      5,171  $ 10,962,692   $         --   $(13,165,399)  $ (2,197,536)


Proceeds from the issuance of common stock
at $0.50 per share in connection
with the exercise of options                       200,000           200        99,800             --             --        100,000

Interest expense related to beneficial
conversion feature                                      --            --       150,000             --             --        150,000

Pro-rata value assigned to warrants
issued in connection with conversion of
accounts payable                                        --            --        71,000             --             --         71,000

Pro-rata value assigned to warrants
issued in connection with note payable                  --            --        30,000             --             --         30,000

Issuance of common stock at $1.25 per
share in connection with the conversion
of accounts payable                                150,124           150       187,505             --             --        187,655

Issuance of common stock at $1.25 per
share in connection with the conversion
of notes payable                                   420,000           420       104,580             --             --        105,000

Estimated fair market value of options
issued for services                                     --            --       114,000             --             --        114,000

Issuance of common stock at $0.25 per
share for cash                                     461,600           462       114,938             --             --        115,400

Issuance of common stock at $0.26 per
share for cash                                      19,230            19         4,981             --             --          5,000

Issuance of common stock at $1.25 per
share for cash                                       8,000             8         9,992             --             --         10,000

Issuance of common stock at $0.65 per
share for services                                  69,231            69        44,931             --             --         45,000

Issuance of common stock at $0.51 per
share for services                                 196,078           196        99,804             --             --        100,000

Adjustment booked                                       --            --      (100,000)            --        100,000             --

Net loss                                                --            --            --             --     (2,461,116)    (2,461,116)
                                              ------------  ------------  ------------   ------------   ------------   ------------

BALANCE - MARCH 31, 2003                         6,694,960  $      6,695  $ 11,894,223   $         --   $(15,526,515)  $ (3,625,597)

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                 F-6






<PAGE>

- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED         DURING     STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------

BALANCE - MARCH 31, 2003                         6,694,960  $      6,695  $ 11,894,223   $         --   $(15,526,515)  $ (3,625,597)

Proceeds from the issuance of common stock
at $0.25 per share in connection
with the exercise of warrants                      540,000           540       134,460             --             --        135,000

Issuance of common stock at $0.25 per share
in connection with the conversion of notes
payable, including interest of $15,099             300,397           300        74,799             --             --         75,099

Issuance of common stock at $0.35 per share
in connection with the conversion of notes
payable, including interest of $59,827             813,790           814       284,013             --             --        284,827

Issuance of common stock at $0.50 per share
in connection with the conversion of notes
payable, including interest of $509                 11,017            11         5,498             --             --          5,509

Issuance of common stock at $0.42 per share
in connection with the conversion of notes
payable, including interest of $696                 13,725            14         5,682             --             --          5,696

Issuance of common stock at $0.65 per share
in connection with the conversion of notes
payable, including interest of $5,088               27,059            27        17,561             --             --         17,588

Issuance of common stock at $0.25 per share
in connection with the conversion of notes
payable, including interest of $15,416             461,667           462       114,954             --             --        115,416

Issuance of common stock at $0.25 per
share for cash                                   1,226,000         1,226       305,274             --             --        306,500

Issuance of common stock at $0.30 per
share for cash                                     180,000           180        53,820             --             --         54,000

Issuance of common stock at $0.525 per
share for cash                                      40,000            40        20,960             --             --         21,000

Issuance of common stock at $1.125 per
share for cash                                       5,000             5         5,620             --             --          5,625

Issuance of common stock at $0.25 per
share for services                                  10,000            10         2,490             --             --          2,500

Issuance of common stock at $0.34 per
share for services                                  73,529            73        24,927             --             --         25,000

Issuance of common stock at $0.40 per
share for services                                  62,000            62        24,763             --             --         24,825

Issuance of common stock at $0.45 per
share for services                                 185,185           185        83,148             --             --         83,333

Issuance of common stock at $0.50 per
share for services                                   5,000             5         2,495             --             --          2,500

Interest expense related to beneficial
conversion feature                                      --            --       324,800             --             --        324,800

Net loss                                                --            --            --             --     (1,518,798)    (1,518,798)
                                              ------------  ------------  ------------   ------------   ------------   ------------

BALANCE - MARCH 31, 2004                        10,649,329  $     10,649  $ 13,379,487   $         --   $(17,045,313)  $ (3,655,177)

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........

                                                                 F-7






<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------

BALANCE - MARCH 31, 2004                        10,649,329  $     10,649  $ 13,379,487   $         --   $(17,045,313)  $ (3,655,177)

Proceeds from the issuance of common stock
at $0.25 per share in connection
with the exercise of warrants                    1,126,564         1,127       280,515             --             --        281,642

Issuance of common stock at $0.44 per
share for cash                                   1,415,909         1,416       621,584             --             --        623,000

Issuance of common stock at $0.25 per
share for cash                                      40,233            40         9,960             --             --         10,000

Issuance of common stock at $0.28 per
share for cash                                      35,947            36         9,964             --             --         10,000

Issuance of common stock at $0.29 per
share for cash                                      69,431            69        19,931             --             --         20,000

Issuance of common stock at $0.32 per
share for cash                                      94,449            94        29,906             --             --         30,000

Issuance of common stock at $0.33 per
share for cash                                      60,620            61        19,939             --             --         20,000

Issuance of common stock at $0.35 per
share for cash                                     172,824           173        59,826             --             --         59,999

Issuance of common stock at $0.36 per
share for cash                                     223,756           224        79,776             --             --         80,000

Issuance of common stock at $0.37 per
share for cash                                     108,079           108        39,892             --             --         40,000

Issuance of common stock at $0.38 per
share for cash                                      26,549            27         9,973             --             --         10,000

Issuance of common stock at $0.39 per
share for cash                                      51,748            52        19,948             --             --         20,000

Issuance of common stock at $0.40 per
share for cash                                      25,233            25         9,975             --             --         10,000

Issuance of common stock at $0.42 per
share for cash                                     143,885           144        59,857             --             --         60,001

Issuance of common stock at $0.43 per
share for cash                                      70,467            70        29,930             --             --         30,001

Issuance of common stock at $0.45 per
share for cash                                      22,455            22         9,978             --             --         10,000

Issuance of common stock at $0.46 per
share for cash                                      43,944            44        19,956             --             --         20,000

Issuance of common stock at $0.47 per
share for cash                                     128,836           129        59,872             --             --         60,001

Issuance of common stock at $0.52 per
share for cash                                      95,502            96        49,904             --             --         49,999

Issuance of common stock with warrants
at $0.36 per unit for cash                          55,556            56        19,944             --             --         20,000

Issuance of common stock at $0.27 per
share for cash                                      90,000            90        24,210             --             --         24,300

Issuance of common stock at $0.50 per
share for cash                                       3,000             3         1,497             --             --          1,500

Issuance of common stock to Fusion
Capital for "commitment" shares                     50,000            50           (50)            --             --             --

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                 F-8

<PAGE>

- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------
Issuance of common stock to Fusion
Capital for fees                                   418,604           419          (419)            --             --             (0)

Issuance of common stock at $0.34 per share
in connection with the conversion of notes
payable, including interest of $38,371             479,513           480       162,891             --             --        163,371

Issuance of common stock at $0.44 per
share in connection with the conversion
of notes payable                                   113,636           114        49,886             --             --         50,000

Issuance of common stock at $0.25 per
share in connection with the conversion
of notes payable                                    80,000            80        19,920             --             --         20,000

Issuance of common stock at $0.49 per
share in connection with the conversion
of notes payable                                   174,606           175        85,382             --             --         85,557

Issuance of common stock at $1.75 per
share for services                                  17,143            17        29,983             --             --         30,000

Issuance of common stock at $0.44 per
share for services                                 265,273           265       116,455             --             --        116,720

Issuance of common stock at $0.70 per
share for services                                  10,715            11         7,489             --             --          7,500

Issuance of common stock at $0.73 per
share for services                                   6,850             7         4,993             --             --          5,000

Issuance of common stock at $0.55 per
share for services                                  46,364            46        25,454             --             --         25,500

Issuance of common stock at $0.25 per
share for services                                 165,492           165        41,208             --             --         41,373

Issuance of common stock at $0.45 per
share for services                                  28,377            28        12,741             --             --         12,769

Issuance of common stock at $0.50 per
share for services for deferred
consulting services                                 60,000            60        29,940        (30,000)            --             --

Issuance of common stock at $0.49 per
share for services                                  25,087            25        12,318             --             --         12,343

Issuance of common stock at $0.45 per
share for services for deferred
consulting services                                 66,666            67        29,933        (30,000)            --             --

Issuance of common stock at $0.37 per
share for services                                  13,369            13         4,987             --             --          5,000

Issuance of common stock at $0.42 per
share for services                                  19,231            19         7,981             --             --          8,000

Issuance of common stock at $0.39 per
share for services                                  18,042            18         6,982             --             --          7,000

Issuance of common stock at $0.32 per
share for services                                 162,678           163        52,382             --             --         52,545

Issuance of common stock at $0.31 per
share for services                                  16,234            16         4,984             --             --          5,000

Issuance of common stock at $0.39 per
share for employee bonus                            22,500            22         8,754             --             --          8,776

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                 F-9





<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------

Debt discount on debt issued with
detachable warrants                                     --            --        84,000             --             --         84,000

Amortization of deferred consulting fees                --            --            --         30,000             --         30,000

Intrinsic value of options issued to
directors                                               --            --       424,262             --             --        424,262

Net loss                                                --            --            --             --     (2,096,951)    (2,096,951)
                                              ------------  ------------  ------------   ------------   ------------   ------------

BALANCE - MARCH 31, 2005                        17,014,696  $     17,015  $ 16,088,278   $    (30,000)  $(19,142,264)  $ (3,066,971)

Issuance of common stock at $0.28 per
share for cash                                      35,947            36         9,964             --             --         10,000

Issuance of common stock at $0.26 per
share for cash                                      38,256            38         9,962             --             --         10,000

Issuance of common stock at $0.26 per
share for cash                                      38,401            38         9,962             --             --         10,000

Issuance of common stock at $0.25 per
share for cash                                     201,165           201        49,799             --             --         50,000

Issuance of common stock at $0.25 per
share for cash                                      80,466            80        19,920             --             --         20,000

Issuance of common stock at $0.25 per
share for cash                                      80,466            80        19,920             --             --         20,000

Issuance of common stock at $0.25 per
share for cash                                      80,466            80        19,920             --             --         20,000

Issuance of common stock at $0.25 per
share for cash                                      80,466            80        19,920             --             --         20,000

Issuance of common stock at $0.18 per
share for cash                                     100,000           100        17,500             --             --         17,600

Issuance of common stock at $0.25 per
Share for cash                                     301,744           302        74,698             --             --         75,000

Issuance of common stock at varied prices
for cash                                         2,485,249         2,485       767,512             --             --        769,997

Issuance of common stock at $0.76 per
share for cash                                     568,181           568       431,249             --             --        431,818

Issuance of common stock at $0.25 per share
in connection with the conversion of notes
payable, including interest of $4,564              140,000           140        34,860             --             --         35,000

Issuance of common stock at $0.20 per share in
connection with the conversion of
convertible notes payable, including
interest of $4,943                                 174,716           175        34,768             --             --         34,943

Issuance of common stock at $0.31 per
share for services                                   9,740            10         2,990             --             --          3,000

Issuance of common stock at $0.30 per
share for services                                  25,134            25         7,475             --             --          7,500

Issuance of common stock at $0.25 per
share for services                                  31,424            31         7,869             --             --          7,900

Issuance of common stock at $0.26 per
share for services                                  19,084            19         4,981             --             --          5,000

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                F-10




<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------
Issuance of common stock at $0.25 per
share for services                                  33,228            33         8,407             --             --          8,440

Issuance of common stock at $0.25 per
share for services                                  24,000            24         5,976             --             --          6,000

Issuance of common stock at $0.26 per
share for services                                  11,450            11         2,989             --             --          3,000

Issuance of common stock at $0.26 per
share for services                                  19,084            19         4,981             --             --          5,000

Issuance of common stock at $0.26 per
share for services                                  34,352            34         8,966             --             --          9,000

Issuance of common stock at $0.26 per
share for services                                  11,450            11         2,989             --             --          3,000

Loss on settlement of accrued legal
liabilities                                             --            --       142,245             --             --        142,245

Issuance of common stock at $0.24 per
share for services                                  12,605            13         2,987             --             --          3,000

Issuance of common stock at $0.24 per
share for services                                  21,008            21         4,979             --             --          5,000

Issuance of common stock at $0.23 per
share for services                                  21,739            22         4,978             --             --          5,000

Issuance of common stock at $0.23 per
share for services                                  21,740            22         4,978             --             --          5,000

Issuance of common stock at $0.23 per
share for services                                   2,155             2           498             --             --            500

Issuance of common stock at $0.23 per
share for services                                  91,739            92        21,008             --             --         21,100

Issuance of common stock at $0.21 per
share for services                                 175,755           176        37,084             --             --         37,260

Issuance of common stock at $0.23 per
share for services                                  37,863            38         8,519             --             --          8,557

Issuance of common stock at $0.23 per
share for services                                  21,368            21         4,979             --             --          5,000

Issuance of common stock at $0.21 per
share for services                                  27,852            28         5,710             --             --          5,738

Issuance of common stock at $0.24 per
share for services                                  21,186            21         4,979             --             --          5,000

Issuance of common stock at $0.22 per
share for services                                  35,278            35         7,585             --             --          7,620

Issuance of common stock at $0.38 per
share for services                                  13,298            13         4,987             --             --          5,000

Issuance of common stock at $0.38 per
share for services                                  19,948            20         7,640             --             --          7,660

Issuance of common stock at $0.37 per
share for services                                  97,662            98        36,037             --             --         36,135

Issuance of common stock at $0.25 per
share for services                                 371,847           372        91,137             --             --         91,509

Issuance of common stock at $0.25 per
share for services                                  73,964            74        18,128             --             --         18,202

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                F-11



<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------
Issuance of common stock at $0.29 per
share for services                                  13,333            13         3,827             --             --          3,840

Issuance of common stock at $0.33 per
share for services                                  15,060            15         4,985             --             --          5,000

Issuance of common stock at $0.24 per
share for services                                 579,813           580       138,575             --             --        139,155

Issuance of common stock at $0.28 and
$0.33 per share for services                        66,017            66        19,934             --             --         20,000

Issuance of common stock at $0.36 per
share for services                                  13,889            14         4,986             --             --          5,000

Issuance of common stock at $0.33 per
share for services                                   9,091             9         2,989             --             --          2,999

Issuance of common stock at $0.28 per
share for services                                  10,563            11         2,991             --             --          3,001

Issuance of common stock at $0.33 per
share for services                                 150,000           150        48,850        (49,000)            --             --

Issuance of common stock at $0.28 per
share for services                                  35,714            36         9,964             --             --         10,000

Issuance of common stock at $0.33 per
share for services                                  15,152            15         4,985             --             --          5,000

Issuance of common stock at $0.28 per
per share for services                              17,730            18         4,982             --             --          5,000

Issuance of common stock at $0.20 and
$0.37 per share for services                        79,255            79        19,894             --             --         19,974

Issuance of common stock at $0.33 per
share for services                                  33,333            33         9,967             --             --         10,000

Issuance of common stock at $0.39 per
share for services                                 220,080           220        85,171             --             --         85,391

Issuance of common stock at $0.49 per
share for services                                   7,275             7         3,543             --             --          3,550

Issuance of common stock at $0.34 per
share for services                                  27,284            27         9,170             --             --          9,197

Issuance of common stock at $0.33 per
share for services                                 158,046           158        51,997             --             --         52,155

Issuance of common stock at $0.20 per
share for services                                 836,730           837       166,509             --             --        167,346

Issuance of cashless warrants                      389,168           389          (389)            --             --             --

Conversion of accrued salaries to
employee stock options                                  --            --       300,000             --             --        300,000

Debt discount on debt issued with
detachable warrants                                     --            --       119,610             --             --        119,610

Interest expense related to beneficial
conversion feature                                      --            --       222,375             --             --        222,375

Professional fees related to registration
statement                                               --            --       (76,732)            --             --        (76,732)

Amortization of deferred consulting
fees                                                    --            --            --         34,083             --         34,083

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                F-12




<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------
Reclassification of derivative liabilities
upon registration of shares underlying
warrants                                                --            --     1,090,000             --             --      1,090,000

Net loss                                                --            --            --             --     (2,920,183)    (2,920,183)
                                              ------------  ------------  ------------   ------------   ------------   ------------

BALANCE - MARCH 31, 2006                        25,383,705  $     25,384  $ 20,322,494   $    (44,917)  $(22,062,447)  $ (1,759,486)
                                              ------------  ------------  ------------   ------------   ------------   ------------

Issuance of common stock at varied prices
for cash                                         2,649,773         2,650       794,097             --             --        796,747

Issuance of common stock at $0.18 per
share for cash                                     555,556           556        99,444             --             --        100,000

Issuance of common stock at $0.30 per
share for cash                                   1,333,333         1,333       398,667             --             --        400,000

Issuance of common stock at $0.24 per share
in connection with the conversion of notes
payable, including interest of $18,750             107,759           108        43,642             --             --         43,750

Issuance of common stock at $0.24 per
share for services                                  33,058            33         7,967             --             --          8,000

Issuance of common stock at $0.25 per
share for services                                 126,065           127        31,858             --             --         31,965

Issuance of common stock at $0.26 per
share for services                                 156,485           156        40,349             --             --         40,505

Issuance of common stock at $0.27 per
share for services                                  30,075            30         7,970             --             --          8,000

Issuance of common stock at $0.28 per
share for services                                  43,819            44        12,256             --             --         12,300

Issuance of common stock at $0.29 per
share for services                                  14,563            15         4,150             --             --          4,165

Issuance of common stock at $0.30 per
share for services                                  18,454            19         5,531             --             --          5,550

Issuance of common stock at $0.31 per
share for services                                  32,984            33        10,467             --             --         10,500

Issuance of common stock at $0.32 per
share for services                                  52,722            53        17,947             --             --         18,000

Issuance of common stock at $0.34 per
share for services                                  29,965            30         9,470             --             --          9,500

Issuance of common stock at $0.37 per
share for services                                 132,765           133        48,725             --             --         48,858

Issuance of common stock at $0.40 per
share for services                                   7,813             8         2,492             --             --          2,500

Issuance of common stock at $0.45 per
share for services                                   3,363             3         1,497             --             --          1,500

Issuance of common stock at $0.47 per
share for services                                  14,535            15         4,985             --             --          5,000

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                                F-13






<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
                                                        AETHLON MEDICAL, INC.
                                                    (A Development Stage Company)
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                                           FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                                 FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          DEFICIT
                                                                                                         ACCUMULATED      TOTAL
                                                     COMMON STOCK          ADDITIONAL      DEFERRED        DURING      STOCKHOLDERS'
                                              --------------------------    PAID IN       CONSULTING     DEVELOPMENT      EQUITY
                                                 SHARES        AMOUNT       CAPITAL          FEES           STAGE        (DEFICIT)
                                              ------------  ------------  ------------   ------------   ------------  -------------

Issuance of common stock at $0.50 per
share for services                                  35,601            36        17,765             --             --         17,801

Issuance of common stock at $0.51 per
share for services                                  21,078            21        10,728             --             --         10,749

Issuance of common stock at $0.53 per
share for services                                  20,127            20         8,980             --             --          9,000

Issuance of common stock at $0.55 per
share for services                                   4,545             5         2,495             --             --          2,500

Issuance of common stock at $0.58 per
share for services                                  17,332            17         9,983             --             --         10,000

Issuance of common stock at $0.59 per
share for services                                   8,532             9         4,991             --             --          5,000

Issuance of common stock at $0.61 per
share for services                                   4,934             5         2,995             --             --          3,000

Issuance of common stock at $0.79 per
share for services                                  10,095             9         7,990             --             --          8,000

Issuance of common stock at $0.81 per
share for services                                   3,086             3         2,497             --             --          2,500

Correction for issuance of cashless warrants      (174,716)         (175)          175             --             --             --

Issuance of cashless warrants                       30,617            31           (31)            --             --             --

Issuance of commitment shares                    1,050,000         1,050        (1,050)            --             --             --

Interest expense related to beneficial
conversion feature                                      --            --        50,000             --             --         50,000

Amortization of deferred consulting fees                --            --            --         44,917             --         44,917

Licensing rights to cancer patent                   40,000            40        10,760             --             --         10,800

Stock compensation expense                              --            --        38,132             --             --         38,132

Issuance of common stock at $0.20 per
Share in settlement of accrued liabilities         114,130             114        22,997           --             --         23,111

Reclassification of derivative liabilities
upon registration of shares underlying
warrants                                                --            --    (1,090,000)            --             --     (1,090,000)

Net loss                                                --            --            --             --     (6,024,545)    (6,024,545)
                                              ------------  ------------  ------------   ------------   ------------   ------------

BALANCE - MARCH 31, 2007                        31,912,153  $     31,912  $ 20,963,410  $         --    $(28,086,992)  $ (7,091,670)
                                              ============  ============  ============   ============   ============   ============

- -----------------------------------------------------------------------------------------------------------------------------------
                                  SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

                                                                F-14






<PAGE>

- ------------------------------------------------------------------------------------------------------------------------------
                                                     AETHLON MEDICAL, INC.
                                                 (A DEVELOPMENT STAGE COMPANY)
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                               FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                                            January 31, 1984
                                                                                                          (Inception) Through
                                                                             2007              2006          March 31, 2007
                                                                         -----------------------------------------------------

Cash flows from operating activities:
     Net loss                                                            $ (6,024,545)     $ (2,920,183)       $(28,086,992)
     Adjustments to reconcile net loss to net cash used in
       operating activities:
          Depreciation and amortization                                        23,400            34,241           1,007,393
          Amortization of deferred consulting fees                             44,917            34,083             109,000
          Gain on settlement of debt                                               --          (131,175)           (131,175)
          Loss on settlement of accrued legal liabilities                          --           142,245             142,245
          Gain on sale of property and equipment                                   --                --             (13,065)
          Change in estimated fair value of warrant liability               2,112,575           360,125           2,472,700
          Fair market value of warrants issued in connection
            with accounts payable and debt related costs                           --                --           2,715,736
          Fair market value of common stock, warrants and
            options issued for services and interest                          274,914           704,383           3,486,916
          Stock based compensation                                             38,132                --             462,394
          Loss on debt extinguishment                                       1,216,748                --           1,216,748
          Amortization of debt discount                                       177,762           259,416           1,285,787
          Impairment of patents and patents pending                                --            81,722             416,026
          Impairment of goodwill                                                   --                --             897,227
          Deferred compensation forgiven                                           --                --             217,223

          Changes in operating assets and liabilities:
               Prepaid expenses                                                27,652          (22,034)             156,967
               Other assets                                                     4,000           20,050              (13,200)
               Accounts payable and accrued liabilities                       535,166         (118,276)           2,049,116
               Due to related parties                                        (149,625)         (28,878)           1,322,500
                                                                         -----------------------------------------------------

     Net cash used in operating activities                                 (1,718,904)       (1,584,281)        (10,286,454)
                                                                         -----------------------------------------------------

Cash flows from investing activities:
     Purchases of property and equipment                                      (17,810)           (4,651)          (266,697)
     Patents and patents pending                                               (6,294)          (11,000)          (370,127)
     Proceeds from the sale of property and equipment                              --                --             17,065
     Cash of acquired company                                                      --                --             10,728
                                                                         -----------------------------------------------------

     Net cash used in investing activities                                    (24,104)          (15,651)          (609,031)
                                                                         -----------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------
                                SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
continued.........
                                                              F-15






<PAGE>

- ------------------------------------------------------------------------------------------------------------------------------
                                                     AETHLON MEDICAL, INC.
                                                 (A DEVELOPMENT STAGE COMPANY)
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        FOR THE YEARS ENDED MARCH 31, 2007 AND 2006 AND
                         FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH MARCH 31, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                                            January 31, 1984
                                                                                                          (Inception) Through
                                                                             2007              2006          March 31, 2007
                                                                       -------------------------------------------------------

Cash flows from financing activities:
     Net proceeds from the issuance of notes payable                               --           100,000           1,710,000
     Principal repayments of notes payable                                         --           (80,000)           (292,500)
     Proceeds from the issuance of convertible notes payable                   50,000         1,030,000           2,078,000
     Net proceeds from the issuance of common stock                         1,296,737         1,454,415           7,916,822
     Professional fees related to registration statements                          --           (76,731)            (76,731)
                                                                       -------------------------------------------------------

     Net cash provided by financing activities                              1,346,737         2,427,684          11,335,591
                                                                       -------------------------------------------------------

Net increase (decrease) in cash                                              (396,271)          827,752             440,106

Cash at beginning of period                                                   836,377             8,625                  --
                                                                       -------------------------------------------------------

Cash at end of period                                                    $    440,106      $    836,377     $       440,106
                                                                       =======================================================

Supplemental disclosure of cash flow information -
  Cash paid during the period for:
          Interest                                                       $         --      $      8,000     $       263,258
                                                                       =======================================================
          Income taxes                                                   $         --      $         --     $        13,346
                                                                       =======================================================

Supplement schedule of noncash investing and financing activities:

Debt and accrued interest converted to common stock                      $      43,750     $     69,942     $     2,480,711
                                                                       =======================================================
Debt discount on notes payable associated with
  detachable warrants                                                    $      50,000     $  1,070,860     $     1,154,860
                                                                       =======================================================
Issuance of common stock, warrants and options in
   settlement of accrued expenses and due to related parties             $      23,111     $    467,346     $     1,003,273
                                                                       =======================================================
Reclassification of derivative liability to (from)
   additional paid-in capital                                            $  (1,090,000)    $  1,090,000     $            --
                                                                       =======================================================
Issuance of common stock in connection with license
  agreements                                                             $          --     $         --     $        18,000
                                                                       =======================================================
Net assets of entities acquired in exchange for
  equity securities                                                      $          --     $         --     $     1,597,867
                                                                       =======================================================
Debt placement fees paid by issuance of warrants                         $          --     $         --     $       843,538
                                                                       =======================================================
Patent pending acquired for 12,500 shares of common stock                $          --     $         --     $       100,000
                                                                       =======================================================
Common stock issued for prepaid expenses                                 $          --     $         --     $       161,537
                                                                       =======================================================
Licensing rights acquired with common stock issuance                     $      10,800     $         --     $       10,800
                                                                       =======================================================

- ------------------------------------------------------------------------------------------------------------------------------
                                SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

                                                              F-16
</TABLE>






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Aethlon Medical, Inc. ("Aethlon" or the "Company") engages in the research and
development of a medical device known as the Hemopurifier(R) that removes
harmful substances from the blood. Aethlon is in the development stage on the
Hemopurifier(R) and significant research and testing are still needed to reach
commercial viability. Any resulting medical device or process will require
approval by the U.S. Food and Drug Administration ("FDA") or the regulatory
agency of any foreign country where it intends to sell its device. Aethlon has
submitted an Investigational Device Excemption ("IDE") to the FDA and plans to
begin FDA sanctioned clinical trials within the next twelve months. Since many
of Aethlon's patents were issued in the 1980's, some have expired and other are
scheduled to expire in the near future. Thus, some patents may expire before FDA
approval or approval in a foreign country, if any, is obtained. However, the
Company believes that certain patent applications and/or other patents issued
more recently will help protect the proprietary nature of the Hemopurifier(R)
treatment technology.

Aethlon is classified as a development stage enterprise under accounting
principles generally accepted in the United States of America ("GAAP"), and has
not generated revenues from its planned principal operations.

Aethlon's common stock is quoted on the Over-the-Counter Bulletin Board
administered by the National Association of Securities Dealers ("OTCBB") under
the symbol "AEMD.OB."

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Aethlon Medical, Inc. and its inactive wholly-owned subsidiaries Aethlon,
Inc., Hemex, Inc., Syngen Research, Inc. and Cell Activation, Inc.(hereinafter
collectively referred to as the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation.

GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the
ordinary course of business. The Company has suffered continuing losses from
operations, is in default on certain debt, has negative working capital of
approximately $7,260,000 recurring losses from operations and a deficit
accumulated during the development stage of approximately $28,087,000 at March
31, 2007, which among other matters, raises substantial doubt about its ability
to continue as a going concern. A significant amount of additional capital will
be necessary to advance the development of the Company's products to the point
at which they may become commercially viable. The Company intends to fund
operations through debt and/or equity financing arrangements, which management
believes may be insufficient to fund its capital expenditures, working capital
and other cash requirements (consisting of accounts payable, accrued
liabilities, amounts due to related parties and amounts due under various notes
payable) for the fiscal year ending March 31, 2008. Therefore, the Company will
be required to seek additional funds to finance its long-term operations.

The Company is currently addressing its liquidity issue by continually seeking
investment capital through the public markets, specifically, through private
placement of common stock and a pending common stock purchase agreement with
Fusion Capital Fund II, LLC ("Fusion"). The Company believes that its cash on
hand and funds available from Fusion and/or additional private investment will
be sufficient to meet its liquidity needs for fiscal 2008. However, no assurance
can be given that the Company will receive any funds in addition to the funds it
has received to date.

                                      F-17






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

GOING CONCERN (continued)

The successful outcome of future activities cannot be determined at this time
and there is no assurance that, if achieved, the Company will have sufficient
funds to execute its intended business plan or generate positive operating
results.

The consolidated financial statements do not include any adjustments related to
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

RISKS AND UNCERTAINTIES

The Company operates in an industry that is subject to intense competition,
government regulation and rapid technological change. The Company's operations
are subject to significant risk and uncertainties including financial,
operational, technological, regulatory and other risks associated with a
development stage company, including the potential risk of business failure.

USE OF ESTIMATES

The Company prepares its consolidated financial statements in conformity with
GAAP, which requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting periods. Significant
estimates made by management include, among others, realization of long-lived
assets, valuation of derivative liabilities, estimating fair value associated
with debt and equity transactions and valuation of deferred tax assets. Actual
results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosure About
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments when it is practicable to estimate that
value. The carrying amount of the Company's cash, accounts payable, accrued
liabilities and notes payable approximates their estimated fair values due to
the short-term maturities of those financial instruments. Management has
concluded that it is not practical to determine the estimated fair value of
amounts due to related parties. SFAS No. 107 requires that for instruments for
which it is not practicable to estimate their fair value, information pertinent
to those instruments be disclosed, such as the carrying amount, interest rate,
and maturity, as well as the reasons why it is not practicable to estimate fair
value. Information about these related party instruments is included in Note 8.
Management believes it is not practical to estimate the fair value of such
financial instruments because the transactions cannot be assumed to have been
consummated at arm's length, the terms are not deemed to be market terms, there
are no quoted values available for these instruments, and an independent
valuation would not be practicable due to the lack of data regarding similar
instruments, if any, and the associated potential costs.

CONCENTRATIONS OF CREDIT RISKS

Cash is maintained at a single financial institution. The Federal Deposit
Insurance Corporation ("FDIC") insures accounts at each institution for up to
$100,000. At times, cash may be in excess of the FDIC insurance limit. The
Company had approximately $340,000 exceeding this limit at March 31, 2007.

                                      F-18






<PAGE>
                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
which range from two to five years. Repairs and maintenance are charged to
expense as incurred while improvements are capitalized. Upon the sale or
retirement of property and equipment, the accounts are relieved of the cost and
the related accumulated depreciation with any gain or loss included in the
statements of operations.

INCOME TAXES

Under SFAS No. 109, "Accounting for Income Taxes," deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the consolidated financial statements and their respective
tax basis. Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts reported for income tax purposes, and (b) tax
credit carry-forwards. The Company records a valuation allowance for deferred
tax assets when, based on management's best estimate of taxable income in the
foreseeable future, it is more likely than not that some portion of the deferred
income tax assets may not be realized.

LONG-LIVED ASSETS

SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS No. 144
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that their carrying amounts may not be
recoverable. If the cost basis of a long-lived asset is greater than the
projected future undiscounted net cash flows from such asset, an impairment loss
is recognized.

Impairment losses are calculated as the difference between the cost basis of an
asset and its estimated fair value. SFAS No. 144 also requires companies to
separately report discontinued operations and extends that reporting requirement
to a component of an entity that either has been disposed of (by sale,
abandonment or in a distribution to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the carrying amount or the
estimated fair value less costs to sell. The provisions of this pronouncement
relating to assets held for disposal generally are required to be applied
prospectively after the adoption date to newly initiated commitments to sell or
dispose of such assets, (as defined), by management. As a result, management
cannot determine the potential effects that adoption of SFAS No. 144 will have
on the Company's financial statements with respect to future disposal decisions,
if any. Management believes no impairment charges were necessary during the
fiscal years ended March 31, 2007 and 2006.

EARNINGS PER SHARE

Under SFAS No. 128, "Earnings per Share," basic earnings per share is computed
by dividing net income available to common stockholders by the weighted average
number of common shares assumed to be outstanding during the period of
computation. Diluted earnings per share is computed similar to basic earnings
per share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive
If the Company had net income in each of the years ended March 31, 2007 and
2006, 12,885,453 and 11,086,990 shares would have been considered additional
common stock equivalents, respectively, based on the treasury stock method. As
the Company had net losses for the periods presented, basic and diluted loss per
share are the same, as any additional common stock equivalents would be
antidilutive.

                                      F-19






<PAGE>
                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

SEGMENTS

SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information," requires public companies to report selected segment information
in their quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the foreign
countries in which it holds significant assets and how the Company reports
revenues and its major customers. The Company currently operates in one segment,
as disclosed in the accompanying consolidated statements of operations.

STOCK BASED COMPENSATION

Effective April 1, 2006, the Company adopted the provisions of SFAS No. 123-R,
"Share Based Payment." SFAS No. 123-R requires employee stock options and rights
to purchase shares under stock participation plans to be accounted for under the
fair value method and requires the use of an option pricing model for estimating
fair value. Accordingly, share-based compensation is measured when all granting
activities have been completed, generally the grant date, based on the fair
value of the award. Prior to April 1, 2006, the Company accounted for awards
granted under its equity incentive plan under the intrinsic value method
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations, and provided the
required pro forma disclosures prescribed by SFAS No. 123, "Accounting for Stock
Based Compensation," as amended. The exercise price of options is generally
equal to the market price of the Company's common stock (defined as the closing
price as quoted on the Over-the-Counter Bulletin Board administered by Nasdaq)
on the date of grant. Under the modified prospective method of adoption for SFAS
No. 123-R, the compensation cost recognized by the Company beginning April 1,
2006 includes (a) compensation cost for all equity incentive awards granted
prior to, but not yet vested as of April 1, 2006, based on the grant-date fair
value estimated in accordance with the original provisions of SFAS No. 123, and
(b) compensation cost for all equity incentive awards granted subsequent to
April 1, 2006, based on the grant-date fair value estimated in accordance with
the provisions of SFAS No. 123-R.

From time to time, the Company's Board of Directors grants common share purchase
options or warrants to selected directors, officers, employees, consultants and
advisors in payment of goods or services provided by such persons on a
stand-alone basis outside of any of the Company's formal stock plans. The terms
of these grants are individually negotiated and generally expire within five
years from the grant date.

In August 2000, the Company adopted the 2000 Stock Option Plan ("Stock Option
Plan"), which was approved by its stockholders in September 2000. The Stock
Option Plan provides for the issuance of up to 500,000 options to purchase
shares of common stock. Such options can be incentive options or nonstatutory
options, and may be granted to employees, directors and consultants. The Stock
Option Plan has limits as to the eligibility of those stockholders who own more
than 10% of Company stock, as defined. The options granted pursuant to the Stock
Option Plan may have exercise prices of no less than 100% of fair market value
of the Company's common stock at the date of grant (incentive options), or no
less than 75% of fair market value of such stock at the date of grant
(nonstatutory). At March 31, 2007, the Company had granted 47,500 options under
the 2000 Stock Option Plan of which 15,000 had been forfeited, with 467,500
available for future issuance. All of these options vested prior to the adoption
of FAS 123-R.

The effects of share-based compensation resulting from the application of SFAS
No. 123-R to options granted outside of the Company's Stock Option Plan resulted
in an expense of $38,132 for the fiscal year ended March 31, 2007. This expense
was recorded as stock compensation included in payroll and related expenses in
the accompanying March 31, 2007 condensed consolidated statement of operations.
Share-based compensation recognized as a result of the adoption of SFAS No.
123-R as well as pro forma disclosures according to the original provisions of
SFAS No. 123 for periods prior to the adoption of SFAS No. 123-R use the
Binomial Lattice option pricing model for estimating fair value of options
granted.

The following table summarizes the effect of share-based compensation resulting
from the application of SFAS No. 123-R to options granted:

                                                      Fiscal Year Ended
                                                       March 31, 2007

Payroll and related                                      $   38,132
                                                         ==========
Net share-based compensation effect
   in net loss from operations                           $   38,132
                                                         ==========

Basic and diluted loss per common share                  $    (0.00)
                                                         ==========

                                      F-20






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK BASED COMPENSATION (continued)

In accordance with SFAS No. 123-R, the Company reviews share-based compensation
on a quarterly basis for changes to the estimate of expected award forfeitures
based on actual forfeiture experience. The effect of adjusting the forfeiture
rate for all expense amortization after March 31, 2006 is recognized in the
period the forfeiture estimate is changed. The effect of forfeiture adjustments
for the fiscal year ended March 31, 2007 was insignificant.

Pro forma information required under SFAS No. 123 for periods prior to April 1,
2006 as if the Company had applied the fair value recognition provisions of SFAS
No. 123 to options granted under and outside of the Company's equity incentive
plans was as follows:

                                                            YEAR ENDED MARCH 31,
                                                            -------------------
                                                                    2006
                                                                ------------

Net loss available to common stockholders, as reported          $  2,920,183
Add back: Recorded intrinsic value                                        --
Pro forma compensation expense                                       361,111
                                                                ------------
Pro forma net loss available to common stockholders             $  3,281,294
                                                                ============
Loss per common share, as reported
  Basic and diluted                                             $      (0.15)
                                                                ============
Loss per common share, pro forma
  Basic and diluted                                             $      (0.17)
                                                                ============

Pro forma compensation expense reported in the above table is generally based on
the vesting provisions in the related stock option grants.

Share compensation expense for the fiscal year ended March 31, 2007 relates to
the vesting of existing grants (issued subsequent to April 1, 2006), the date
the Company adopted SFAS No. 123-R and of grants issued during the current
fiscal year.

The following weighted average assumptions were used in the valuation of these
instruments.

                                               2007           2006
                                              ------         ------
Annual dividends                               Zero           Zero
Expected volatility                            91.9%            89%
Risk free interest rate                        4.84%          4.82%
Expected life                               10.0 years     5.0 years

The expected volatility is based on the historic volatility. The expected life
of options granted is based on the "simplified method" described in the SEC's
Staff Accounting Bulletin No. 107 due to changes in the vesting terms and
contractual life of current option grants compared to the Company's historical
grants.

Options outstanding that have vested and are expected to vest as of March 31,
2007 are as follows:

                                                      Weighted
                                        Weighted      Average
                                         Average      Remaining      Aggregate
                           Number of    Exercise     Contractual     Intrinsic
                             Shares       Price     Term in Years    Value (1)
- ------------------------  -----------  ----------  ---------------  -----------

Vested                     8,369,060   $    0.39        5.33        $ 3,396,474
Expected to vest             835,000        0.25        5.67        $   412,550
                          -----------                               -----------
     Total                 9,204,060                                $ 3,809,024
                          ===========                               ===========

(1) These amounts represent the difference between the exercise price and $0.74,
the closing market price of the Company's common stock on March 31, 2007 as
quoted on the Over-the-Counter Bulletin Board under the symbol "AEMD.OB" for all
in-the-money options outstanding.

                                      F-21




<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK BASED COMPENSATION (continued)

Options outstanding that are expected to vest are net of estimated future
forfeitures in accordance with the provisions of SFAS No. 123-R, which are
estimated when compensation costs are recognized. The Company estimates that the
fair value of unvested stock options expected to vest and be expensed in future
periods is approximately $134,000. Additional information with respect to stock
option activity is as follows:

                                                 Outstanding Options
                                         --------------------------------------
                               Shares                   Weighted     Aggregate
                              Available   Number of     Average      Intrinsic
                              for Grant     Shares   Exercise Price  Value (1)
- ---------------------------- ----------- ----------- -------------- -----------
March 31, 2006                  467,500   9,012,785       $ 0.38    $ 3,875,498
                                                                    ===========
Grants                               --     500,000       $ 0.27
Exercises                            --          --           --
Cancellations                        --    (308,725)      $ 0.38
                             ----------- -----------
March 31, 2007                  467,500   9,204,060       $ 0.38    $ 3,802,324
                             =========== ===========                ===========

Options exercisable at:
March 31, 2006                            7,135,518       $ 0.39
                                         ===========      ======
March 31, 2007                            8,369,060       $ 0.39
                                         ===========      ======

(1) Represents the difference between the exercise price and the March 31, 2006
or March 31, 2007 market price of the Company's common stock, which was $0.81
and $0.74, respectively, for "in the money" options.

The Company follows SFAS No. 123-R (as interpreted by EITF Issue No. 96-18,
"Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services") to account for
transactions involving services provided by third parties where the Company
issues equity instruments as part of the total consideration.

Pursuant to paragraph 8 of SFAS No. 123, the Company accounts for such
transactions using the fair value of the consideration received (i.e. the value
of the goods or services) or the fair value of the equity instruments issued,
whichever is more reliably measurable. The Company applies EITF Issue No. 96-18,
in transactions, when the value of the goods and/or services are not readily
determinable and (1) the fair value of the equity instruments is more reliably
measurable and (2) the counterparty receives equity instruments in full or
partial settlement of the transactions, using the following methodology:

a)    For transactions where goods have already been delivered or services
      rendered, the equity instruments are issued on or about the date the
      performance is complete (and valued on the date of issuance).

b)    For transactions where the instruments are issued on a fully vested,
      non-forfeitable basis, the equity instruments are valued on or about the
      date of the contract.

c)    For any transactions not meeting the criteria in (a) or (b) above, the
      Company re-measures the consideration at each reporting date based on its
      then current stock value.

PATENTS

The Company capitalizes the cost of patents and patents pending, some of which
were acquired, and amortizes such costs over the shorter of the remaining legal
life or their estimated economic life, upon issuance of the patent.

STOCK PURCHASE WARRANTS ISSUED WITH NOTES PAYABLE

The Company granted warrants in connection with the issuance of certain notes
payable. Under APB Opinion No. 14, "Accounting for Convertible Debt and Debt
Issued With Stock Purchase Warrants", as amended, the relative estimated fair
value of such warrants represents a discount from the face amount of the notes
payable. Accordingly, the relative estimated fair value of the warrants in those
certain transactions where the warrants qualified for equity classification has
been recorded in the consolidated financial statements as a discount from the
face amount of the notes. The discount is amortized using the effective yield
method over the respective term of the related notes payable.

                                      F-22



<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE

The convertible feature of certain notes payable (see Notes 6 and 7) provides
for a rate of conversion that is below market value. Such feature is normally
characterized as a "beneficial conversion feature" ("BCF"). Pursuant to Emerging
Issues Task Force Issue No. 98-5 ("EITF Issue No. 98-5"), "Accounting for
Convertible Securities With Beneficial Conversion Features or Contingently
Adjustable Conversion Ratio" and Emerging Issues Task Force Issue No. 00-27,
"Application of EITF Issue No. 98-5 to Certain Convertible Instruments," the
estimated fair value of the BCF is recorded in the consolidated financial
statements as a discount from the face amount of the notes. Such discounts are
accreted to interest expense over the term of the notes using the effective
yield method.

CLASSIFICATION OF WARRANT OBLIGATION

In connection with the issuance of the 10% Series A Convertible Notes (see Note
6), the Company had an obligation to file a registration statement covering the
common shares underlying the convertible notes and related warrants (the
"Registerable Securities", as defined in the Registration Rights Agreement). The
obligation to file the registration statement met the criteria of an embedded
derivative to be bifurcated pursuant to SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended. The classification of the
warrant obligation was evaluated at each reporting date. From the original
issuance date through January 20, 2006 and October 27, 2006, the Company was
required to classify the warrant obligation as a derivative liability, recorded
at its fair value, in accordance with SFAS No. 133 under EITF Issue No. 00-19,
"Accounting for Derivative Financial Instruments Indexed To, and Potentially
Settled In, a Company's Own Stock." Accordingly, the warrants were classified as
derivative liabilities with the change in fair value reported in earnings.

REGISTRATION PAYMENT ARRANGEMENTS

The Company accounts for its liquidated damages on registration rights
agreements (see Note 6) in accordance with FASB Staff Position EITF 00-19-2,
which specifies that the contingent obligation to make future payments or
otherwise transfer consideration under a registration payment arrangement should
be separately recognized and measured in accordance with SFAS No. 5, "Accounting
for Contingencies."

RESEARCH AND DEVELOPMENT EXPENSES

The Company incurred approximately $673,614 and $754,000 of research and
development expenses during the years ended March 31, 2007 and 2006,
respectively, which are included in various operating expenses in the
accompanying consolidated statements of operations.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has not entered into any off-balance sheet arrangements that have or
are reasonably likely to have a current or future material effect on the
Company's financial statements.

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the FASB issued FASB Interpretation ("FIN") No. 48, "Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109."
This interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with SFAS No.
109,"Accounting for Income Taxes." FIN No. 48 prescribes a more-likely-than-not
recognition threshold and a measurement attribute for the financial statement
recognition and measurement of tax positions taken (or expected to be taken) in
an income tax return. It also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. The requirement to assess the need for a valuation
allowance on net deferred tax assets is not affected by FIN No. 48. This
pronouncement is effective for fiscal years beginning after December 31, 2006.
Management is in the process of evaluating this guidance, and therefore has not
yet determined the impact (if any) that FIN No.48 will have on the Company's
financial position or results of operation upon adoption.

In September 2006, the FASB issued SFAS No.157, "Fair Value Measurements," which
defines fair value, establishes a framework for measuring fair value in
accordance with GAAP, and expands disclosures about fair value measurements.
SFAS No. 157 simplifies and codifies related guidance within GAAP, but does not
require any new fair value measurements. The guidance in SFAS No. 157 applies to
derivatives and other financial instruments measured at estimated fair value
under SFAS No. 133 and related pronouncements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Management does not expect the
adoption of SFAS No. 157 to have a significant effect on the Company's financial
position or results of operation.

                                    F-23

<PAGE>

                               AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS (continued)

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities." SFAS No. 159 allows entities to
choose, at specified election dates, to measure eligible financial assets and
liabilities at fair value that are not otherwise required to be measured at fair
value. If the Company elects the fair value option for an eligible item, changes
in that item's fair value in subsequent reporting periods must be recognized in
current earnings. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007. Management has not yet evaluated the effects on future
consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not
believed by management to have a material impact on the Company's present or
future consolidated financial statements.

2.    PROPERTY AND EQUIPMENT

Property and equipment consist of the following at March 31, 2007:

Furniture and office equipment                       $      261,535
Accumulated depreciation                                   (247,873)
                                                     ---------------
                                                     $       13,662
                                                     ===============

Depreciation expense for the years ended March 31, 2007 and 2006 approximated
$16,500 and $23,000, respectively.

3.    PATENTS

Patents include both foreign and domestic patents. There was one patent pending
at March 31, 2007 and 2006. The unamortized cost of patents and patents pending
is written off when management determines there is no future benefit. During the
years ended March 31, 2007 and 2006, patents with net carrying values of $0 and
$81,722, respectively, were written off as impairment expense. At March 31,
2007, the gross carrying amount of patents and patents in process totaled
approximately $175,000and the related accumulated amortization totaled
approximately 33,000. Amortization of patents approximated $7,000 and $12,000
during the years ended March 31, 2007 and 2006, respectively. Amortization
expense on patents is estimated to be approximately $7,000 per year for the next
five fiscal years. Some of the Company's patents have expired and others may
expire before FDA approval, if any, is obtained.

4.    DEBT-TO-EQUITY CONVERSION PROGRAM

In March 2002, for a limited time, the Company extended an offer to certain note
holders and vendors to convert past due amounts into restricted common stock and
warrants to purchase common stock of the Company. The offer entailed the
conversion of liabilities at a rate of one share and one-half of a warrant for
every $1.25 converted. The warrants had an exercise price of $2.00 per share and
expired three years from the date of issuance; none are outstanding at March 31,
2006 and 2005.

5.    NOTES PAYABLE

12% NOTES

From August 1999 through September 2000, the Company entered into arrangements
for the issuance of notes payable from private placement offerings (the "12%
Notes") in the original aggregate amount of $422,500. The 12% Notes bore annual
interest at 12% (15% after maturity), required interest to be paid quarterly,
matured one year from the date of issuance, and carried detachable warrants.
These notes have no acceleration provisions. In June 2004, one such note in the
principal amount of $12,500 plus accrued interest was repaid. In December 2004,
each of two such notes in the principal amount of $25,000, plus $17,778 accrued
interest, were converted to 87,303 restricted common shares at $0.49 per share.

On May 27, 2005 the Company issued a promissory note to an accredited investor
in an amount of $100,000 with 12% interest maturing on December 1, 2005. In
conjunction with the issuance of the Note, the Company also issued a 12-month
warrant to acquire 400,000 shares of Common Stock at $0.25 per share.
Accordingly, this warrant has been valued using a Black-Scholes option pricing
model and an associated discount of $41,860, was accreted to interest expense
over the term of the Note. This entire amount was included in interest expense
during the fiscal year ended March 31, 2006.

At March 31, 2007, $347,500 of principal balance of the 12% Notes were
outstanding and delinquent, in default, and bore interest at the default rate of
15%.

                                      F-24

<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

5.    NOTES PAYABLE (continued)

10% NOTES

From time to time, the Company issued convertible notes payable ("10% Note") to
various investors, bearing interest at 10% per annum, with principal and
interest due six months from the date of issuance. The 10% Notes require no
payment of principal or interest during the term and may be converted to common
stock of the Company at the conversion price of $0.50 per share at any time at
the option of the noteholder. The total amount of the original notes issued was
$275,000. There were two remaining 10% Notes outstanding at March 31, 2004. As
of such date and through March 31, 2007, these notes were classified as notes
payable since they were no longer convertible.

The remaining 10% Note in the amount of $5,000, was past due and in default at
March 31, 2007. At March 31, 2007, interest payable on this note totaled $2,875.

9% NOTE

In April 2003, the Company issued a convertible note in the amount of $150,000
("9% Note"), bearing interest at 9% per annum, with principal and interest due
in June 2003, which is in default and currently bears penalty interest at 18%
per annum. The 9% Note required no payment of principal or interest during the
term and was convertible into common stock of the Company at the conversion
price of $0.25 per share through June 2003 at the option of the noteholder. As
this note is no longer convertible, the outstanding balance totaling $150,000
has been recorded as notes payable in the accompanying consolidated balance
sheet.

Notes payable, which are all in default, consist of the following at March 31,
2006:

         12% Notes payable, all past due                     $  347,500
         10% Note payable, past due                               5,000
          9% Note payable, past due                             150,000
                                                             ----------
                                                             $  502,500
                                                             ==========

Management's plans to satisfy the remaining outstanding balance on these notes
include converting the notes to common stock at market value or repayment with
available funds.

6.    CONVERTIBLE NOTES PAYABLE

10% CONVERTIBLE NOTES

On December 15, 2006, the Company issued two 10% Convertible Notes ("December
10% Notes") totaling $50,000 to accredited investors. The December 10% Notes
accrue interest at a rate of ten percent (10%) per annum and mature on March 15,
2007. Such notes are convertible into shares of restricted common stock at any
time at the election of the holder at a fixed conversion price of $0.17 per
share for any conversion occurring on or before the maturity date. In addition,
upon issuance, the Company issued five-year Warrants ("December 10% Note
Warrants") to purchase a number of shares equal to the number of shares into
which the December 10% Notes can be converted at a fixed exercise price of
$0.17. Additionally, if the December 10% Note Warrants are exercised prior to
December 15, 2007, the holder will receive an additional warrant on the same
terms as the December 10% Note Warrants on a one to one basis. The warrants can
be settled in unregistered shares of common stock. The December 10% Note
Warrants have been valued using a Binomial Lattice option pricing model and an
associated discount of $15,627, the relative fair value measured at the
commitment date, was recorded and presented net against the face amount of the
December 10% Notes. The convertible feature of the December 10% Notes provides
for an effective conversion rate that is below market value. Pursuant to EITF
No. 98-5 and EITF No. 00-27, the Company estimated the fair value of such BCF to
be $34,373 and recorded such amount as a debt discount. The discounts associated
with the warrants and the BCF were accreted to interest expense over the term of
the December 10% Notes. Interest expense on the December 10% Notes for accretion
of such debt discounts totaled approximately $50,000 for the fiscal year ended
March 31, 2007.

15% CONVERTIBLE NOTE

On May 16, 2005 the Company issued Fusion Capital ("Fusion") a $30,000
Convertible Promissory Note (the "Convertible Note") with an interest rate of
fifteen percent (15%) per annum that matured on August 15, 2005 (the "Maturity
Date"). In addition, the Company issued Fusion a five-year warrant to purchase
300,000 shares of the Company's common stock at an exercise price of $0.25 per
share (the "Warrant"). In accordance with EITF Issue No. 98-5, EITF Issue No.
00-27 and APB No. 14, the Company recorded debt discounts associated with
conversion feature and the warrants totaling $30,000 which was entirely

                                      F-25

<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

6.    CONVERTIBLE NOTES PAYABLE (continued)

accreted to interest expense during the fiscal year ended March 31, 2006. The
Convertible Note and approximately $5,000 in associated accrued interest was
exchanged for 174,716 shares of restricted common stock on March 23, 2006.

10% SERIES A CONVERTIBLE NOTES

From July 11, 2005 through December 15, 2005 the Company received cash
investments totaling $1,000,000 from accredited investors based on agreed-upon
terms reached on the cash receipt dates. Such investments were documented in
November and December 2005 in several 10% Series A Convertible Promissory Notes.
The 10% Series A Convertible Notes accrue interest at a rate of ten percent
(10%) per annum and matured on January 2, 2007. The 10% Series A Convertible
Notes were convertible into shares of common stock at any time at the election
of the holder at a conversion price equal to $0.20 per share for any conversion
occurring on or prior to the maturity date.

Convertible Notes Payable consistes of the following at March 31, 2007:

                                                                      Net
                                      Principal       Discount       Amount
                                      ---------       --------       -------

10% Series A Convertible Notes      $   1,000,000   $ (1,000,000)  $        --
December 10% Convertible Notes             50,000             --        50,000
                                    =============   ============   ===========
                                    $   1,050,000   $ (1,000,000)  $    50,000

The Conversion Option

SFAS No. 133 states that a contract issued by an entity that is both (a) indexed
to its own stock and (b) would be classified in stockholders' equity if it were
a freestanding financial instrument is not a derivative for purposes of that
pronouncement. Management has concluded that the conversion option associated
with the 10% Series A Convertible Notes is "indexed to the Company's own stock"
as that term is defined by EITF Issue No. 01-6, "The Meaning of Indexed to
Company's Own Stock". In addition, since such notes have been determined to be
"conventional convertible debt instruments" as defined in EITF Issue No. 05-2,
"The Meaning of Conventional Convertible Debt Instrument" in Issue 00-19", the
requirements of EITF Issue No. 00-19 do not apply. Lastly, the debt host
contract is not a derivative in its entirety and (based on SFAS No. 133) the
conversion option need not be bifurcated from such contract. Therefore, the
conversion option is not a derivative instrument as contemplated by EITF Issue
No. 00-19 or SFAS No. 133. As explained below, the Company has therefore applied
intrinsic value accounting, where applicable, to the BCF embedded in the
conversion option.

Intrinsic Value Accounting for the BCF

The Company accounted for the BCF associated with the issuance of the 10% Series
A Convertible Notes in accordance EITF Issue No. 98-5, EITF Issue No. 00-27, and
APB No. 14. The convertible feature of the 10% Series A Convertible Notes
provides for a rate of conversion that is below market value. The excess of the
proceeds over the estimated fair value of the warrants (see "Accounting for the
Warrants" below) was used to calculate the effective conversion price per share.
Pursuant to EITF 98-5 and EITF 00-27, the Company has estimated the fair value
of such BCF to be $270,125 and recorded such amount as a debt discount against
the face amount of the notes. Such discount was accreted to interest expense
over the original term of the notes. Total interest expense on the 10% Series A
Convertible Notes for amortization of the above BCF debt discount totaled
$142,364 and $127,762 for the fiscal years ended March 31, 2007 and 2006.

                                      F-26

<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

10% SERIES A CONVERTIBLE NOTES (continued)

Accounting for the Warrants

Under this transaction, the Company is obligated to register for resale the
common shares underlying the warrants, and as a result, the embedded derivative
associated with this warrant obligation does not meet the scope exception of
paragraph 11(a) of SFAS No. 133. Specifically, at the commitment date, the
Company did not have any uncommitted registered shares to settle the warrant
obligation and accordingly, such obligation was required to be classified as a
liability (outside of stockholders' deficit) in accordance with EITF Issue No.
00-19. The Series A Warrants were valued at $729,875 on the commitment date
using a Binomial Lattice option pricing model. Such amount was recorded as a
derivative liability and an offsetting debt discount against the face amount of
the 10% Series A Convertible Notes. Such debt discount will begin to be expensed
as future conversions occur and the warrants are issued.

On January, 2006, the registration statement which included the shares
underlying the 10% Series A Convertible Notes ("Notes")and related warrants was
deemed effective. At such time, the Company re-evaluated the classification of
the warrant obligation and determined that the warrant obligation me the
criteria for equity classification under EITF No. 00-19. Accordingly, the
Company revalued the warrants at such date, totaling $1,090,000, with the change
in fair value of the warrant liability totaling $360,125 expensed in the
accompanying consolidated statements of operations for the year ended March 31,
2006.

The Allonge Transactions

Effective March 22, 2007, the Company entered into four Allonges (the
"Allonges") to its 10% Series A Convertible Notes entered into in December 2005
having an aggregate principal amount of $1,000,000 (the "Notes") with the Estate
of Allan S. Bird, the Ellen R. Weiner Family Revocable Trust, Claypoole Capital,
LLC and Christian J. Hoffmann III (the "Holders"). Each Holder has qualified as
an "accredited investor" as that term is defined in the

                                      F-27

<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

6.    CONVERTIBLE NOTES PAYABLE (continued)

Securities Act of 1933, as amended (the "Act"). Pursuant to the Allonges, the
Company amended and restated the Notes to extend the maturity date of the Notes
from January 2, 2007 until January 3, 2008. The Company will also pay all
accrued interest, through February 15, 2007 and each calendar quarter
thereafter, in the form of units (the "Units")at the rate of $0.20 per Unit (the
"Interest Payment Rate"). The Allonges amend the Notes so that they are now
convertible into Units at any time prior to the Maturity Date at the conversion
price of $0.20 per Unit (the "Conversion Price"). Each Unit is composed of one
share of the Company's Common Stock and one Class A Common Stock Purchase
Warrant (the "Class A Warrant"). Each Class A Warrant expires on January 2, 2011
and is exercisable to purchase one share of Common Stock at a price of $0.20 per
share (the "Exercise Price"). If the Holder exercises Class A Warrants on or
before July 3, 2008, the Company will issue the Holder one Class B Common Stock
Purchase Warrant (the "Class B Warrant" and with the Class A Warrant,
collectively, the "Warrants") for every two Class A Warrants exercised. Each
Class B Warrant has a three-year term and is exercisable to purchase one share
of Common Stock at a price equal to the greater of $0.20 per share or 75% of the
average of the closing bid prices of the Common Stock for the five trading days
immediately preceding the date of the notice of conversion. Pursuant to EITF
06-06, and because of the change in the fair value of embedded conversion
options as a result of the issuance of Units under the Allonges on March 22,
2007, such issuance was determined to be a substantial change in the 10% Series
A Notes resulting in the extinguishment of the Notes as per APB No. 26.
Therefore on March 22, 2007, the Company recorded a loss on extinguishment of
debt of $1,216,748. Between March 22, 2007 and March 31, 2007, the Company also
recorded an additional other expense of $143,125 to record the change in fair
value of the derivative liability at the end of the fiscal year. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

On or about March 13, 2007, the Company determined that the effectiveness of the
registration statement underlying the warrant shares associated with the 10%
Series A Convertible Notes had lapsed on October 27, 2006. Pursuant to EITF
Issue No. 00-19, the Company believed it could no longer control settlement in
registered shares. Accordingly, the Company reclassified the warrants as a
derivative liability. Upon extinguishment, the Company recorded a net increase
in warrant liability of $757,002. In addition, other expense of $1,212,448 was
recorded for the change in fair value through the end of the fiscal year.
Further, the Company also recorded estimated liquidated damages in an amount of
$220,000, an amount of the Company's estimate of the damages that are expected
to be paid prior to the effective registration of the shares underlying the
warrants.

7.    EQUITY TRANSACTIONS

2003 CONSULTANT STOCK PLAN

In August 2003, the Company adopted the 2003 Consultant Stock Plan (the "Stock
Plan"), which provides for grants of common stock through August 2013, to assist
the Company in obtaining and retaining the services of persons providing
consulting services for the Company. A total of 1,000,000 common shares are
reserved for issuance under the Stock Plan. On March 29, 2004, the Company filed
a registration statement on Form S-8 for the purpose of registering 1,000,000
common shares issuable under the Stock Plan under the Securities Act of 1933. On
August 29, 2005, the Company filed a Form S-8 for the purpose of registering an
additional 2,000,000 shares, for a total of 3,000,000 common shares reserved
under the Plan.

2005 DIRECTORS COMPENSATION PROGRAM

In February 2005, the Company adopted the 2005 Directors Compensation Program
(the "Directors Compensation Program") to assist in obtaining and retaining the
services of outside directors. Under the Directors Compensation Program, a newly
elected director will receive a one time grant of a non-qualified stock option
of 1.5% of the common stock outstanding at the time of election. The options
will vest one-third at the time of election to the board and the remaining
two-thirds will vest equally at year end over three years. Additionally, each
director will also receive an annual $25,000 non-qualified stock option
retainer, $15,000 of which is to be paid at the first of the year to all
directors who are on the Board prior to the first meeting of the year and a
$10,000 retainer will be paid if a director attends 75% of the meetings either
in person, via conference call or other electronic means. The exercise price for
the options under the Directors Compensation Program will equal the average
closing of the last ten (10) trading days prior to the date earned.

                                      F-28



<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK

In April 2004, the Company issued 500,000 shares of restricted common stock to
an accredited individual investor in connection with the exercise of warrants at
$0.25 per share for cash totaling $125,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

In April 2004, the Company issued 17,143 shares at $1.75 per share to an
accredited individual investor for investor relations services in the amount of
$30,000. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.

In April 2004, the Company issued 50,000 shares of restricted common stock to
Fusion Capital Fund II, LLC, an accredited institutional investor, for a
financing commitment to provide $6,000,000 under a registered private placement.
In connection with the $6,000,000 financing the Company paid a fee to Fusion
Capital in the amount of 418,604 shares of common stock. The Company recorded no
expense related to the issuance of these shares since they were related to
equity fund raising activities. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

In May 2004, the Company issued 225,000 shares of common stock at $0.44 per
share and 225,000 warrants to purchase the Company's common stock at a price of
$0.76 per share to legal counsel for legal services in the amount of $99,000,
which was recorded as expense in the accompanying consolidated financial
statements. This transaction was exempt from registration pursuant to Section
4(2)of the Securities Act of 1933.

In May 2004, a $50,000 10% convertible note was converted at $0.44 per share for
113,636 shares of common stock and 113,636 warrants to purchase the Company's
common stock at a price of $0.76 per share. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

In May 2004, the Company issued a total of 1,415,909 shares of restricted stock
at a price of $0.44 per share for cash totaling $623,000 to fourteen accredited
investors. In connection with the issuance of these shares, the Company granted
the stockholders 1,640,908 warrants to purchase the Company's common stock at a
price of $0.76 per share. The warrants vested immediately and expire on the
fifth anniversary from the date when a registration statement covering the
common stock underlying such warrants is declared effective. This transaction
was exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

In July 2004, the Company issued 10,715 shares of restricted common stock at
$0.70 per share to an accredited individual for employee placement services in
the amount of $7,500. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

In July 2004, the Company issued 6,850 shares of restricted common stock at
$0.73 per share to an accredited individual for consulting services on
opportunities for the Company's Hemopurifier(R) within the biodefense
marketplace in the amount of $5,000. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

In September 2004, the Company issued 479,513 shares of restricted common stock
to an accredited investor, in conjunction with the conversion of $125,000 in
principal amount of notes, plus accrued interest, at $0.34 per share, in
accordance with their convertible note agreement (see Note 7). This transaction
was exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

                                      F-29






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

In November and December 2004, the Company issued 80,000 shares of restricted
common stock to an accredited individual investor in connection with the
exercise of 80,000 warrants at $0.25 per share for consideration of a $20,000
reduction in the principal amount of a 10% one-year promissory note. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

In December 2004, the Company issued 461,667 shares of restricted common stock
to two accredited individual investors in connection with the exercise of
461,667 warrants at $0.25 per share for cash totaling $115,417. This transaction
was exempt from registration pursuant to Section 4(2) of the Securities Act of
1933.

In December 2004, the Company repaid two $25,000 12% promissory notes, including
accrued interest of $17,778 each, through the issuance of 87,303 restricted
common shares at $0.49 per share to each of two separate accredited individual
investors. These transactions were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.

In December 2004, the Company issued 60,000 shares of restricted common stock at
$0.50 per share under a consulting agreement with an accredited individual
investor, for investor relations consulting services to the Company. The fair
value of the transaction of $30,000 was recorded as deferred compensation and
presented as an offset to additional paid-in capital in the accompanying
consolidated financial statements. Such amount is being amortized to expense
over the six month term of the agreement. At March 31, 2005, $15,000 of such
amount remained unamortized. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933. The remaining $15,000
balance in deferred consulting fees were amortized during the fiscal year ended
March 31, 2006.

In January 2005, the Company issued 55,556 shares of restricted common stock at
$0.36 per share and a warrant to purchase 55,556 shares of common stock at $0.44
per share for cash in the amount of $20,000 to an accredited individual
investor. This transaction was exempt from registration pursuant to Section
4(2)of the Securities Act of 1933.

In January 2005, the Company issued 66,666 shares of restricted common stock at
$0.45 per share to an accredited individual investor under a consulting
agreement for investor relations services to the Company. The fair value of the
transaction of $30,000 was recorded as deferred compensation and presented as an
offset to additional paid-in capital in the accompanying consolidated financial
statements. Such amount is being amortized to expense over the six month term of
the agreement. At March 31, 2005, $15,000 of such amount remained unamortized.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933. The remaining $15,000 balance in deferred consulting
fees were amortized during the fiscal year ended March 31, 2006.

In January 2005, the Company issued 25,834 shares of restricted common stock to
an accredited individual investor in connection with the exercise of a warrant
to purchase 25,834 shares of common stock at $0.25 per share for cash totaling
$6,459. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.

In February 2005, the Company issued 139,063 shares of restricted common stock
to an accredited individual investor in connection with the exercise of a
warrant to purchase 139,063 shares of common stock at $0.25 per share for cash
totaling $34,766. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

                                      F-30






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

In February 2005, the Company issued 90,000 shares of restricted common stock at
$0.27 per share and a three-year warrant to purchase 90,000 shares of common
stock at $0.34 per share for cash in the amount of $24,300 to an accredited
individual investor. This transaction was exempt from registration pursuant to
Section 4(2)of the Securities Act of 1933.

During the year ended March 31, 2005, the Company issued an additional total of
1,416,958 shares of restricted common stock at prices ranging from $0.25 to
$0.52 for total cash proceeds of approximately $541,000.

During the year ended March 31, 2005, the Company issued an additional 557,647
shares of restricted common stock at prices ranging from $0.25 to $0.55 under
various consulting service agreements for total recorded value of approximately
$196,000. All services on these agreements were completed and expensed during
the year ended March 31, 2005.

In April 2005, the Company issued 9,740 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.31 per share in payment for scientific consulting services to
the Company valued at $3,000.

In April 2005, the Company issued 25,134 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.30 per share in payment for regulatory affairs consulting
services to the Company valued at $7,500.

In April 2005, the Company issued 31,424 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.25 per share in payment for regulatory affairs consulting
services to the Company valued at $7,900.

During the year ended March 31, 2006, the Company issued 3,990,807 shares of
common stock at prices between $0.25 to and $0.76 per share to Fusion Capital
under its $6,000,000 common stock purchase agreement for cash proceeds totaling
$1,436,815. These shares are registered pursuant to the Company's Form SB-2
registration statement effective December 7, 2004.

During the quarter ended June 30, 2005, the Company issued 95,420 shares of
common stock pursuant to the Company's S-8 registration statement covering the
Company's 2003 Consultant Stock Plan at $0.262 per share in payment for
regulatory affairs consulting services to the Company valued at $25,000.

In May 2005, the Company issued 33,228 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.25 per share in payment for regulatory affairs consulting
services to the Company valued at $8,440.

In May 2005, the Company issued 24,000 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.25 per share in payment for investor relations consulting
services to the Company valued at $6,000.

In May 2005 the Company issued 100,000 shares of common stock and a warrant to
purchase 400,000 shares of common stock at a purchase price of $0.18 per share
to an accredited investor for $17,600. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

                                      F-31






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

In May 2005, the Company issued 11,450 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.26 per share in payment for scientific consulting services to
the Company valued at $3,000.

In June 2005, the Company issued 34,352 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.26 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In June 2005, the Company issued 34,352 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.26 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In June 2005, the Company issued 11,450 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.26 per share in payment for scientific consulting services to
the Company valued at $3,000.

In June 2005, the Company issued 21,008 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.24 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In June 2005, the Company issued 836,730 shares of restricted common stock and a
three-year warrant to purchase 418,365 shares of the Company's restricted common
stock at an exercise price of $0.25 to legal counsel as an inducement to settle
accrued past due legal services payable in the amount of $167,346 which had been
expensed in the prior fiscal year. At the time of the settlement, the shares of
the Company's restricted common stock were valued at $209,183 and, using a
Black-Scholes option pricing model, the warrant was valued at $100,408. The
non-cash additional consideration of $142,245 has been recorded as professional
fees expense during the fiscal year ended March 31, 2006.

In June 2005, the Company issued 12,605 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.24 per share in payment for scientific consulting services to
the Company valued at $3,000.

During the quarter ended June 30, 2005, the Company expensed $30,000 of deferred
consulting fees, which were included in additional paid-in capital at March 31,
2005, as the related consulting services were completed.

In July 2005, the Company issued 43,479 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.23 per share in payment for regulatory affairs consulting
services to the Company valued at $10,000.

In July 2005, the Company issued 2,155 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.23 per share in payment for regulatory affairs consulting
services to the Company valued at $500.

In August 2005, the Company issued 37,863 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.23 per share in payment for regulatory affairs consulting
services to the Company valued at $8,557.

                                      F-32






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

In August 2005, the Company issued 91,739 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.23 per share in payment for regulatory affairs consulting
services to the Company valued at $21,100.

In August 2005, the Company issued 21,368 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.23 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In August 2005, the Company issued 175,755 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.21 per share in payment for regulatory affairs consulting
services to the Company valued at $37,260.

In September 2005, the Company issued 27,852 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.21 per share in payment for regulatory affairs consulting
services to the Company valued at $5,738.

In October 2005, the Company issued 21,186 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.24 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In October 2005, the Company issued 35,278 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.22 per share in payment for regulatory affairs consulting
services to the Company valued at $7,620.

In November 2005, the Company issued 19,948 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.38 per share in payment for regulatory affairs consulting
services to the Company valued at $7,660.

In November 2005, the Company issued 97,662 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.37 per share in payment for regulatory affairs consulting
services to the Company valued at $36,135.

In November 2005, the Company issued 13,298 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.38 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In December 2005, the Company issued 371,847 shares of common stock to legal
counsel pursuant to the Company's S-8 registration statement covering the
Company's 2003 Consultant Stock Plan at $0.25 per share in payment of general
legal fees valued at $91,509.

In December 2005, the Company issued 73,964 shares of restricted common stock at
$0.25 per share in payment of legal fees related to capital raising transactions
valued at $18,202.

                                      F-33






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

In December 2005, the Company issued 13,333 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.29 per share in payment for regulatory affairs consulting
services to the Company valued at $3,840.

In December 2005, the Company issued 15,060 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.33 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In January 2006, the Company issued 579,813 shares of restricted common stock at
$0.24 per share in payment for patent fees valued at $139,155.

In January 2006, the Company issued 66,017 shares of restricted common stock at
Prices ranging from $0.28 to $0.33 per share in payment for investor relations
valued at $20,000.

In January 2006, the Company issued 9,091 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.33 per share in payment for regulatory affairs consulting
services to the Company valued at $3,000.

In January 2006, the Company issued 13,889 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.36 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In February 2006, the Company issued 10,563 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.28 per share in payment for regulatory affairs consulting
services to the Company valued at $3,000.

In March 2006, the Company issued 17,730 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.28 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000.

In March 2006, the Company issued 79,255 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.28 per share in payment for Corporate communications consulting
services to the Company valued at $19,974.

In March 2006, the Company issued 110,040 shares of common stock to legal
counsel pursuant to the Company's S-8 registration statement covering the
Company's 2003 Consultant Stock Plan and 110,040 shares of restricted stock at
$0.39 per share in payment of general legal fees valued at $85,392.

In March 2006, the Company issued 7,275 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.49 per share in payment for regulatory affairs consulting
services to the Company.

In March 2006, the Company issued 27,284 shares of common stock to legal counsel
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.34 per share in payment of general legal fees valued
at $9,197.

                                      F-34






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

In March 2006, the Company issued 158,046 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.33 per share in payment for regulatory affairs consulting
services to the Company valued at $52,155.

In March 2006, the Company converted a $30,000 10% promissory notes held by an
accredited individual investor, including accrued interest of $4,564, through
the issuance of 140,000 restricted common shares at $0.25 per share.

In March 2006, a $30,000 15% convertible note, including accrued interest of
$4,943, was converted at $0.20 per share for 174,716 shares of common stock.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

In March 2006, the Company issued 150,000 shares of restricted common stock
under a one year investor relations consulting agreement which was valued at
$49,000 and being amortized over a one year period. Approximately $4,000 was
amortized during the year ended March 31, 2006. As a result, the remaining
balance of $44,917 represents that entire balance of deferred consulting fees
(contra equity) in accompanying consolidated balance sheet.

In March 2006, the Company issued 35,714 shares of restricted common stock
payment of professional services related to investor relations valued at
$10,000.

In March 2006, the Company issued 15,152 shares of restricted common stock at
$0.33 per share in payment of professional services related to investor
relations valued at $5,000.

In March 2006, the Company issued 33,333 shares of restricted common stock at
$0.30 per share in payment of an option agreement valued at $10,000.

In April 2006, the Company issued 3,782 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.79 per share in payment for regulatory affairs consulting
services to the Company valued at $3,000 based on the value of the services.

In April 2006, the Company issued 25,601 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.50 per share in payment for past due rents owed by the Company
valued at $12,801 based on the value of the services.

In April 2006, the Company issued 6,313 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.79 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000 based on the value of the services.

In April 2006, the Company issued 10,000 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.50 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000 based on the value of the services.

In April 2006, the Company issued 14,563 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.29 per share in payment for regulatory affairs consulting
services to the Company valued at $4,165 based on the value of the services.

In April 2006, the Company issued 3,086 shares of restricted common stock at
$0.81 per share in payment for investor relations valued at $2,500 based on the
value of the services.

During April 2006, the Company issued 209,679 shares of common stock at prices
between $0.57 and $0.74 per share to Fusion Capital under its $6,000,000 common
stock purchase agreement for net cash proceeds totaling $140,002. These shares
are registered pursuant to the Company's Form SB-2 registration statement
effective December 7, 2004.

In April 2006, the Company repaid a $25,000 15% promissory notes, including
accrued interest of $18,750, through the issuance of 107,759 restricted common
shares at $0.41 per share to an accredited individual investor. There was no
gain or loss on the extinguishment.

In May 2006, the Company issued 8,532 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.59 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000 based on the value of the services.

In May 2006, the Company issued 5,703 shares of common stock pursuant to the
Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.53 per share in payment for regulatory affairs consulting
services to the Company valued at $3,000 based on the value of the services.

                                       F-35

<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

      In May 2006, the Company issued 4,545 shares of restricted common stock at
$0.55 per share in payment for investor relations valued at $2,500 based on the
value of the services.

      In June 2006, the Company issued 8,681 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.58 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000 based on the value of the services.

      In June 2006, the Company issued 5,703 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.53 per share in payment for regulatory affairs consulting
services to the Company valued at $3,000 based on the value of the services.

      In June 2006, the Company issued 3,363 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.45 per share in payment for regulatory affairs consulting
services to the Company valued at $1,500 based on the value of the services.

      In July 2006, the Company issued 8,721 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.34 per share in payment for regulatory affairs consulting
services to the Company valued at $3,000 based on the value of the services.

      In July 2006, the Company issued 10,684 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.47 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000 based on the value of the services.

      In July 2006, the Company issued 6,250 shares of restricted common stock
at $0.40 per share in payment for investor relations services to the Company
valued at $2,500 based on the value of the services.

      In July 2006, the Company issued 7,813 shares of restricted common stock
at $0.32 per share in payment for investor relations services to the Company
valued at $2,500 based on the value of the services.

      In July 2006, the Company issued 8,721 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.34 per share in payment for regulatory affairs consulting
services to the Company valued at $3,000 based on the value of the services.

      In July 2006, the Company issued 132,765 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.37 per share in payment for regulatory affairs
consulting services to the Company valued at $48,858 based on the value of the
services.

      In July 2006, the Company issued 14,535 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consultant
Stock Plan at $0.34 per share in payment for regulatory affairs consulting
services to the Company valued at $5,000 based on the value of the services.

      During August 2006, the Company issued 113,235 shares of common stock at
prices between $0.26 and $0.27 per share to Fusion Capital under its $6,000,000
common stock purchase agreement for net cash proceeds totaling $30,000. These
shares are registered pursuant to the Company's Form SB-2 registration statement
effective December 7, 2004.

      In August 2006, the Company issued 9,434 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.32 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

      In August 2006, the Company issued 86,779 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.25 per share in payment for general legal expenses
to the Company valued at $22,085 based on the value of the services.

      In August 2006, the Company issued 114,132 shares of restricted common
stock at $0.20 per share in payment for accrued accounting consulting services
provided to the Company by a third party valued at $23,111 based upon the value
of the services.

      During September 2006, the Company issued 439,936 shares of common stock
at prices between $0.25 and $0.26 per share to Fusion Capital under its
$6,000,000 common stock purchase agreement for net cash proceeds totaling
$110,000. These shares are registered pursuant to the Company's Form SB-2
registration statement effective December 7, 2004.

                                       F-36


<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

      In September 2006, the Company issued 4,808 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.31 per share in payment for regulatory affairs
consulting services to the Company valued at $1,500 based on the value of the
services.

      In September 2006, the Company issued 15,723 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.32 per share in payment for regulatory affairs
consulting services to the Company valued at $5,000 based on the value of the
services.

      In September 2006, the Company issued 9,868 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.30 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

      In September 2006, the Company issued 16,447 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.32 per share in payment for regulatory affairs
consulting services to the Company valued at $5,000 based on the value of the
services.

      In September 2006, the Company issued 9,733 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.30 per share in payment for regulatory affairs
consulting services to the Company valued at $2,550 based on the value of the
services.

      During October 2006, the Company issued 201,165 shares of common stock at
$0.25 per share to Fusion Capital under its $6,000,000 common stock purchase
agreement for net cash proceeds totaling $50,000. These shares are registered
pursuant to the Company's Form SB-2 registration statement effective December 7,
2004.

      In October 2006, the Company issued 16,994 shares of restricted common
stock at $0.31 per share in payment for investor relations services to the
Company valued at $2,500 based on the value of the services.

      In October 2006, the Company issued 8,929 shares of restricted common
stock at $0.28 per share in payment for investor relations services to the
Company valued at $2,500 based on the value of the services.

      In October 2006, the Company issued 18,797 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.27 per share in payment for regulatory affairs
consulting services to the Company valued at $5,000 based on the value of the
services.

      In October 2006, the Company issued 11,278 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.27 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

      In October 2006, the Company issued 7,540 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.25 per share in payment for regulatory affairs
consulting services to the Company valued at $1,900 based on the value of the
services.

      In November 2006, the Company issued 555,556 shares of restricted common
stock at $0.18 per share in exchange for an investment of $100,000. As an
inducement the Company also issued five-year warrants to purchase a number of
shares equal to the number of restricted shares issued converted at a fixed
exercise price of $0.18. Additionally, if the warrants are exercised prior to
November 14, 2007, the holder will receive an additional warrant on the same
terms as the warrants.

      In November 2006, the Company issued 11,905 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.25 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

      In November 2006, the Company issued 19,841 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.25 per share in payment for regulatory affairs
consulting services to the Company valued at $5,000 based on the value of the
services.

      In December 2006, the Company issued 12,397 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.24 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

      In December 2006, the Company issued 20,661 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.24 per share in payment for regulatory affairs
consulting services to the Company valued at $5,000 based on the value of the
services.

                                        F-37
<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

      In December 2006, the Company issued 40,000 shares of restricted common
stock at $0.25 per share in exchange for license and development rights related
to certain intellectual property valued at $10,800 based on the fair market
value of the intellectual property license.

      During December 2006, the Company issued 118,360 shares of common stock at
prices between $0.25 and $0.26 per share to Fusion Capital under its $6,000,000
common stock purchase agreement for net cash proceeds totaling $30,000. These
shares are registered pursuant to the Company's Form SB-2 registration statement
effective December 7, 2004.

      In January 2007, the Company issued 15,248 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consulting Stock Plan at $0.28 per share in payment for regulatory affairs
consulting services to the Company valued at $4,300 based on the value of the
services.

      In January 2007, the Company issued 10,714 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consulting Stock Plan at $0.28 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

      In January 2007, the Company issued 125,091 shares of restricted common
stock at between $0.24 and $0.31 per share in payment for investor relations
services to the Company valued at $32,500 based on the value of the services.

      In January 2007, the Company issued 17,857 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consulting Stock Plan at $0.28 per share in payment for regulatory affairs
consulting services to the Company valued at $5,000 based on the value of the
services.

      During January 2007, the Company issued 782,268 shares of common stock at
prices between $0.25 and $0.273 per share to Fusion Capital under its $6,000,000
common stock purchase agreement for net cash proceeds totaling $200,001. These
shares were registered pursuant to the Company's Form SB-2 registration
statement effective December 7, 2004.

      In February 2007, the Company issued 31,394 shares of common stock
pursuant to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.255 per share in payment for general legal expenses
to the Company valued at $8,005 based on the value of the services.

      In February 2007, the Company issued 9,740 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consulting Stock Plan at $0.308 per share in payment for regulatory affairs
consultant services to the Company valued at $3,000 based on the value of the
services.

      During February 2007, the Company issued 692,751 shares of common stock at
prices between $0.28 and $0.32 per share to Fusion Capital under its $6,000,000
common stock purchase agreement for net cash proceeds totaling $199,998. These
shares were registered pursuant to the Company's Form SB-2 registration
statement effective December 7, 2004.

      In March 2007, the Company issued 15,723 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consulting Stock Plan at $0.318 per share in payment for regulatory affairs
consultant services to the Company valued at $5,000 based on the value of the
services.

      In March 2007, the Company issued 4,934 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consulting
Stock Plan at $0.608 per share in payment for regulatory affairs consultant
services to the Company valued at $3,000 based on the value of the services.

      In March 2007, the Company issued 21,078 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consulting Stock Plan at $0.51 per share in payment for regulatory affairs
consultant services to the Company valued at $10,750 based on the value of the
services.

      In March 2007, the Company issued 8,651 shares of common stock pursuant to
the Company's S-8 registration statement covering the Company's 2003 Consulting
Stock Plan at $0.578 per share in payment for regulatory affairs consultant
services to the Company valued at $5,000 based on the value of the services.

      During March 2007, the Company issued 92,379 shares of common stock at
prices between $0.36 and $0.44 per share to Fusion Capital under its $6,000,000
common stock purchase agreement for net cash proceeds totaling $36,745. These
shares were registered pursuant to the Company's Form SB-2 registration
statement effective December 7, 2004.

                                      F-38






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

COMMON STOCK (continued)

In March 2007, the Company issued 1,333,333 shares of common stock at $0.30 per
share to Fusion Capital for net cash proceeds of $400,000. In addition, the
Company issued 1,050,000 of common shares as a commitment fee under a common
stock purchase agreement.

On March 22, 2007 in effecting the Allonges (see "The Allonge Transactions"),
the Company amended its 10% Series A Convertible Notes to extend the maturity
date of the Notes from January 2, 2007 until January 3, 2008. The Company agreed
to pay all accrued interest, through February 15, 2007 in the form of units (the
"Units") at the rate of $0.20 per Unit (the "Interest Payment Rate"). The Notes
are convertible into Units at any time prior to the Maturity Date at the
conversion price of $0.20 per Unit (the "Conversion Price"). Each Unit is
composed of one share of the company's common stock and warrants. At March 31,
2007, the Company is obligated to issue, but has not yet issued, 685,328 "Unit
Shares" of common stock under the Allonges.

WARRANTS

During the year ended March 31, 2005, the Company granted 568,181 warrants to an
investor in connection with a commitment fee for the purchase of common stock.
The warrants have an exercise price of $0.76 per share, vest immediately and are
exercisable through May 2009. As the warrants were issued in connection with
equity financing, no expense has been recorded in the accompanying consolidated
financial statements.

During the year ended March 31, 2005, the Company granted 847,727 warrants to
investors in connection with the purchase of common stock. The warrants have an
exercise price of $0.76 per share, vest immediately and are exercisable through
May 2009. As the warrants were issued in connection with equity financing, no
expense has been recorded in the accompanying consolidated financial statements.

During the year ended March 31, 2005, the Company issued 113,636 warrants to
purchase common stock for $0.76 per share, which are exercisable through May
2009 and vested upon grant. The warrants were issued in connection with the
conversion of notes payable (see Notes 7 and 8). These warrants were valued
using the Black Scholes option pricing model; the relative pro-rata estimated
fair value was insignificant and was charged to interest expense upon grant.

During the year ended March 31, 2005, the Company issued 225,000 warrants to
purchase common stock for $0.76 per share, which are exercisable through May
2009 and vested upon grant. The warrants were issued in connection with common
stock issued for legal services expense totaling $99,000 (see "Common Stock"
above).

During the year ended March 31, 2005, the Company issued 260,000 warrants to
purchase common stock for $0.50 per share, which vested upon grant and expire in
October 2007. The warrants were issued in connection with the issuance of notes
payable (see Note 7). These warrants were valued using the Black Scholes option
pricing model; the relative pro-rata estimated fair value is being amortized to
interest expense over the life of the notes.

During the year ended March 31, 2005, the Company issued 144,443 warrants to
purchase common stock for $0.90 per share, which vested upon grant and expire in
October 2007. The warrants were issued in connection with the issuance of notes
payable (see Note 7). These warrants were valued using the Black Scholes option
pricing model; the relative pro-rata estimated fair value was amortized to
interest expense over the life of the notes.

During the year ended March 31, 2005, the Company granted 55,556 warrants to An
investor in connection with the purchase of common stock. The warrants have an
exercise price of $0.44 per share, vest immediately and are exercisable through
January 2008. As the warrants were issued in connection with equity financing,
no expense has been recorded in the accompanying consolidated financial
statements.

During the year ended March 31, 2005, the Company granted 90,000 warrants to
investors in connection with the purchase of common stock. The warrants have an
exercise price of $0.34 per share, vest immediately and are exercisable through
February 2008. As the warrants were issued in connection with equity financing,
no expense has been recorded in the accompanying consolidated financial
statements.

As noted under "Common Stock", 1,206,564 warrants with an exercise price of
$0.25 per share, which were granted to investors in connection with the purchase
of common stock, were exercised during the year ended March 31, 2005.

                                      F-39




<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

WARRANTS (continued)

On May 16, 2005, the Company granted 100,000 warrants to an accredited investor
in connection with the purchase of 100,000 restricted common shares for $17,600.
the warrants have an exercise price of $0.176 and are exercisable through May
2008.

On May 16, 2005, the Company granted 300,000 warrants to Fusion Capital Fund II,
LLC in connection with the issuance of a 15% Convertible Note. The warrants have
an exercise price of $0.25 per share and are exercisable through May 2010.

On May 27, 2005, the Company granted 400,000 warrants to an accredited investor
in connection with the issuance of a $100,000 12% note payable. The warrants had
an exercise price of $0.25 and expired on May 27, 2006.

On June 27, 2005, the Company granted three-year warrants to purchase 418,365
shares of the Company's restricted common stock at an exercise price of $0.25 to
legal counsel as an inducement to settle accrued past due legal services
payable.

From July 11, 2006 through December 14, 2005, the Company granted three-year
warrants to purchase 5,000,000 shares of common stock to the holders of an
aggregate of $1,000,000 in 10% Series A Convertible Notes. The warrants have an
exercise price of $0.20 and will be issued upon conversion of the underlying 10%
Series A Convertible Notes.

On March 31, 2006, as an inducement to exercise 568,181 warrants at an exercise
price of $0.76 per share, the Company issued five-year replacement warrants in
like amount to Fusion Capital Fund II, LLC. The 568,181 replacement warrants
have an exercise price of $0.76. Such warrants were valued using Binomial Option
Pricing model and such vale was insignificant.

On November 14, 2006, in conjunction with the purchase of 555,556 shares of the
Company's restricted common stock, the Company granted five-year non-cashless
warrants to purchase 555,556 shares of restricted common stock at an exercise
price of $0.18. If such warrants are exercised on or before November 14, 2007,
the warrant holder will receive five-year non-cashless warrants to purchase an
additional 555,556 shares of restricted common stock at an exercise price of
$0.18.

On December 15, 2006, as an inducement to enter into a $100,000 10% convertible
note, the Company granted noteholders five-year non-cashless warrants to
purchase 294,118 shares of restricted common stock at an exercise price of
$0.17. If such warrants are exercised on or before December 15, 2007, the
noteholders will receive five-year non-cashless warrants to purchase an
additional 294,118 shares of restricted common stock at an exercise price of
$0.17.

On March 22, 2007 in effecting the Allonges, the Company amended its 10% Series
A Convertible Notes to extend the maturity date of the Notes from January 2,
2007 until January 3, 2008. The Company will also pay all accrued interest,
through February 15, 2007 and each calendar quarter thereafter, in the form of
units (the "Units")at the rate of $0.20 per Unit (the "Interest Payment Rate").
The Notes are convertible into Units at any time prior to the Maturity Date at
the conversion price of $0.20 per Unit (the "Conversion Price"). Each Unit is
composed of one share of the Company's Common Stock and one Class A Common Stock
Purchase Warrant (the "Class A Warrant"). Each Class A Warrant expires on
January 2, 2011 and is exercisable to purchase one share of Common Stock at a
price of $0.20 per share (the "Exercise Price"). If the Holder exercises Class A
Warrants on or before July 3, 2008, the Company will issue the Holder one Class
B Common Stock Purchase Warrant (the "Class B Warrant" and with the Class A
Warrant, collectively, the "Warrants") for every two Class A Warrants exercised.
Each Class B Warrant has a three-year term and is exercisable to purchase one
share of Common Stock at a price equal to the greater of $0.20 per share or 75%
of the average of the closing bid prices of the Common Stock for the five
trading days immediately preceding the date of the notice of conversion. Class A
Warrants to purchase 685,328 shares of Common Stock and Class B Warrants to
purchase 342,665 shares of Common Stock were granted under the Allonges.

                                      F-40






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

WARRANTS (continued)

A summary of the aggregate warrant activity for the years ended March 31, 2007
and 2006 is presented below:

<TABLE>
<CAPTION>
                                                    Year Ended March 31,
                                 ----------------------------------------------------------
                                             2007                          2006
                                 ----------------------------  ----------------------------
                                                  Weighted                      Weighted
                                                   Average                       Average
                                                  Exercise                      Exercise
                                    Warrants        Price         Warrants       Price
                                 -------------  -------------  -------------  -------------
<S>                                 <C>           <C>             <C>           <C>
Outstanding, beginning of year      3,791,908     $   0.61        2,833,834     $   0.91
      Granted                       1,535,002     $   0.19        1,786,546         0.41
      Exercised                      (160,000)    $   0.50         (568,182)        0.76
Cancelled/Forfeited                  (669,000)    $   0.72         (260,290)        3.30
                                   ----------     --------       ----------     --------

Outstanding, end of year            4,479,910     $   0.46        3,791,908     $   0.61
                                   ==========     ========       ==========     ========

Exercisable, end of year            4,479,910     $   0.46        3,791,908     $   0.61
                                   ==========     ========       ==========     ========

Weighted average estimated fair
  value of warrants granted                       $   0.29                      $   0.23
                                                  ========                      ========
</TABLE>

The following outlines the significant weighted average assumptions used to
estimate the fair value information presented utilizing the Black-Scholes and
Binomial Lattice option pricing models:

                                          Years Ended March 31,
                                         2007               2006
                                      -----------       -----------
Risk free interest rate               4.47%-4.57%        4.18%-4.3%
Average expected life                  4.4 years           3 years
Expected volatility                  90.7% - 93.4%        72% - 97%
Expected dividends                                           None

The detail of the warrants outstanding and exercisable as of March 31, 2007 is
as follows:

<TABLE>
<CAPTION>
                                      Warrants Outstanding             Warrants Exercisable
                           ----------------------------------------  -------------------------
                                           Weighted      Weighted                   Weighted
                                            Average       Average                    Average
                               Number      Remaining     Exercise        Number     Exercise
Range of Exercise Prices    Outstanding   Life (Years)     Price      Outstanding     Price
- ------------------------   ------------- -------------- -----------  ------------- -----------
<S>  <C>                     <C>             <C>        <C>            <C>          <C>
     $0.17 - $0.20            1,635,002       4.07       $  0.19        1,635,002    $  0.19
     $0.25 - $0.44              863,921       1.81       $  0.27          863,921    $  0.27
     $0.50 - $0.90            1,998,987       3.00       $  0.76        1,998,987    $  0.76
                           -------------                             -------------
                              4,497,910                                 4,497,910
                           =============                             =============
</TABLE>

                                      F-41






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7.    EQUITY TRANSACTIONS (continued)

OPTIONS

At March 31, 2007 the Company had issued 1,337,825 options to outside directors
and 3,965,450 options to employee-directors under the 2005 Directors
Compensation Program.

From time to time, the Company's Board of Directors grants common share purchase
options or warrants to selected directors, officers, employees, consultants and
advisors in payment of goods or services provided by such persons on a
stand-alone basis outside of any of the Company's formal stock plans. The terms
of these grants are individually negotiated.

In August 2000, the Company adopted the 2000 Stock Option Plan ("Stock Option
Plan"), which was approved by its stockholders in September 2000. The Stock
Option Plan provides for the issuance of up to 500,000 options to purchase
shares of common stock. Such options can be incentive options or nonstatutory
options, and may be granted to employees, directors and consultants. The Stock
Option Plan has limits as to the eligibility of those stockholders who own more
than 10% of Company stock, as defined. The options granted pursuant to the Stock
Option Plan may have exercise prices of no less than 100% of fair market value
of the Company's common stock at the date of grant (incentive options), or no
less than 75% of fair market value of such stock at the date of grant
(nonstatutory). At March 31, 2007, the Company had granted 47,500 options under
the 2000 Stock Option Plan of which 15,000 had been forfeited, with 467,500
available for future issuance.

In March 2002, the Board of Directors granted the Company's Chief Executive
Officer ("CEO") and Chief Scientific Officer ("CSO") non-qualified stock options
to purchase up to 250,000 shares of common stock each, at an exercise price of
$1.90 per share (the estimated fair value of the underlying common stock at
grant date) and expire March 2012. Awards are earned upon achievement of certain
financial and/or research and development milestones. On July 1, 2005, the
Company's CEO forfeited all of his aforementioned 250,000 options.

In February 2005, the Board of Directors granted the Company's Chief Executive
Officer ("CEO")and Chief Scientific Officer ("CSO") non-qualified stock options
to purchase up to 2,231,100 and 1,734,350 shares of common stock, respectively,
at an exercise price of $0.38 per share and vest fifty percent immediately,
twenty-five percent in December 2005 and twenty-five percent in December 2006.
In addition Mr. Calvin Leung, a board member, was granted non-qualified stock
options to purchase up to 308,725 shares at $0.38 that vest fifty percent
immediately, twenty-five percent in December 2005 and twenty-five percent in
December 2006. Messrs. Franklyn S Barry and Edward G Broenniman, board members,
were each granted non-qualified stock options to purchase up to 514,550 shares
at $0.38 that vest forty percent immediately, twenty-five percent in December
2005 and twenty-five percent in December 2006. All of these options granted
expire in 2010 and 2011 and were granted at a price that was $0.08 below the
estimated fair value of the underlying common stock on the date of grant.
Accordingly, the Company recorded approximately $424,000 of compensation expense
in the accompanying consolidated statement of operations for the year ended
March 31, 2005.

On September 9, 2005, the Company granted 2,857,143 options to James A. Joyce,
its Chief Executive Officer, in exchange for $300,000 of accrued related-party
liabilities. The fair value of such options approximated the value of the
accrued related-party liability.

                                      F-42






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

7. EQUITY TRANSACTIONS (continued)

OPTIONS (continued)

The following is a summary of the stock options outstanding at March 31, 2007
and 2006 and the changes during the two years then ended:

<TABLE>
<CAPTION>

                                                      Year Ended March 31,
                                 ----------------------------------------------------------
                                             2007                          2006
                                 ----------------------------  ----------------------------
                                                  Weighted                      Weighted
                                                   Average                       Average
                                                  Exercise                      Exercise
                                    Options         Price         Options         Price
                                 -------------  -------------  -------------  -------------
<S>                                 <C>           <C>             <C>           <C>
Outstanding, beginning of year      9,012,785     $    0.38       6,679,390     $   0.80
      Granted                         500,000          0.27       3,357,143         0.21
      Exercised                            --            --              --           --
      Cancelled/Forfeited            (308,725)         2.74      (1,023,748)          --
                                  -----------     ---------     -----------     --------

Outstanding, end of year            9,204,060     $    0.38       9,012,785     $   0.38
                                  ===========     =========     ===========     ========

Exercisable, end of year            8,369,060     $    0.39       7,135,518     $   0.39
                                  ===========     =========     ===========     ========

Weighted average estimated fair
  value of options granted                        $    0.23                     $   0.12
                                                  =========                     ========
</TABLE>

The following outlines the significant weighted average assumptions used to
estimate the fair value information presented utilizing the Binomial Lattice
option pricing model for the years ended March 31, 2007 and March 31, 2006:

Years Ended March 31,
                                         2007          2006
                                      -----------   -----------
Risk free interest rate                  4.84%         4.18%
Average expected life                  10 years     4.7 years
Expected volatility                       92%           72%
Expected dividends                       None          None

The detail of the options outstanding and exercisable as of March 31, 2007 is as
follows:

<TABLE>
<CAPTION>
                                             Options Outstanding               Options Exercisable
                                ------------------------------------------ ----------------------------
                                                  Weighted      Weighted                     Weighted
                                                   Average       Average                      Average
                                     Number       Remaining     Exercise        Number       Exercise
Range of Exercise Prices          Outstanding       Life          Price      Outstanding       Price
                                --------------- ------------- ------------ --------------- ------------
<S> <C>                             <C>           <C>             <C>          <C>            <C>
    $0.21 - $0.23                   3,357,143     7.39 years      $ 0.21       3,022,143      $ 0.21
        $0.38                       5,494,550     4.15 years      $ 0.37       4,994,550      $ 0.38
    $1.78 - $3.75                     352,367     4.57 years      $ 2.02         352,367      $ 2.02
                                  -----------                                -----------
                                    9,204,060                                  8,369,060
                                  ===========                                ===========
</TABLE>

                                      F-43






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

8.    RELATED PARTY TRANSACTIONS

DUE TO RELATED PARTIES

Certain officers of the Company and other related parties have advanced the
Company funds, agreed to defer compensation and/or paid expenses on behalf of
the Company to cover working capital deficiencies. These non interest-bearing
liabilities have been included as due to related parties in the accompanying
consolidated financial statements.

Other related party transactions are disclosed elsewhere in these notes to
consolidated financial statements.

9.    INCOME TAX PROVISION

Income tax expense for the years ended March 31, 2007 and 2006 differed from the
amounts computed by applying the U.S. Federal income tax rate of 34 percent to
the loss from continuing operations before provision for income taxes as a
result of the following:

                                                        2007            2006
                                                     ------------   ------------
Computed "expected" tax benefit                      $(2,048,000)   $  (993,000)

Reduction in income taxes resulting from:
    Derivative expense                                   718,000        122,000
    Debt extinguishment                                  414,000             --
    Change in deferred tax assets valuation
      allowance                                        1,078,000      1,024,000
    State and local income taxes,
      net of federal benefit                            (162,000)      (153,000)
    Other                                                     --             --
                                                     -----------    -----------
                                                     $        --    $        --
                                                     ===========    ===========

The tax effects of temporary differences that give rise to significant portions
of deferred tax assets at March 31, 2007 are presented below:

Deferred tax assets:
    Net operating loss carryforwards                                $ 5,210,000
    Capitalized research and development                              2,670,000
    Other                                                               136,000
                                                                    -----------
        Total gross deferred tax assets                               8,016,000

        Less valuation allowance                                     (8,016,000)
                                                                    -----------
        Net deferred tax assets                                     $        --
                                                                    ===========

The valuation allowance increased by $1,078,000 and $1,024,000 during the years
ended March 31, 2007 and 2006, respectively. The current provision for income
taxes for the years ended March 31, 2007 and 2006 is not significant and due
primarily to certain state taxes. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which temporary differences become
deductible. Management considers projected future taxable income and tax
planning strategies in making this assessment. Based upon the history of
operating losses, management believes it is more likely than not the Company
will not realize the benefits of these deductible differences. A full reduction
allowance has been recorded to offset 100% of the deferred tax asset.

As of March 31, 2007, the Company had tax net operating loss carryforwards of
approximately $13,600,000 and $8,307,000 available to offset future taxable
Federal and state income, respectively. The carryforward amounts expire in
various years through 2026. In the event the Company were to experience a
greater than 50% change in ownership as defined in Section 382 of the Internal
Revenue Code, the utilization of the Company's tax net operating loss
carryforwards could be severely restricted.

                                      F-44






<PAGE>

                              AETHLON MEDICAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
- --------------------------------------------------------------------------------

10.   COMMITMENTS AND CONTINGENCIES

EMPLOYMENT CONTRACTS

The Company entered into an employment agreement with its Chairman of the Board
effective April 1, 1999. The agreement, which is cancelable by either party upon
sixty days notice, will be in effect until the employee retires or ceases to be
employed by the Company. The Chairman of the Board was appointed President and
Chief Executive Officer ("CEO") effective June 1, 2001 upon which the base
annual salary was increased from $120,000 to $180,000. Effective January 1,
2005, the CEO's salary was increased from $180,000 to $205,000 per year. The CEO
is eligible for an annual bonus at the discretion of the Board of Directors, of
which $0 and $20,000 was earned during each of the years ended March 31, 2007
and 2006, respectively. Under the terms of the agreement, if the employee is
terminated he may become eligible to receive a salary continuation payment in
the amount of at least twelve months' base salary. Effective April 1, 2006,the
CEO's salary was increased from $205,000 to $240,000 per year.

The Company entered into an employment agreement with Dr. Tullis effective
January 10, 2000. Effective June 1, 2001, Dr. Tullis was appointed the Company's
Chief Science Officer of the Company. His compensation under the agreement was
modified in June 2001 from $80,000 to $150,000 per year. Effective January 1,
2005 Dr. Tullis' salary was increased from $150,000 to $165,000 per year Under
the terms of the agreement, his employment continues at a salary of $165,000 per
year for successive one-year periods, unless given notice of termination 60 days
prior to the anniversary of his employment agreement. Dr. Tullis was granted
250,000 stock options to purchase the Company's common stock in connection the
completing certain milestones, such as the initiation and completion of certain
clinical trials, the submission of proposals to the FDA and the filing of a
patent application. Under the terms of the agreement, if the employee is
terminated he may become eligible to receive a salary continuation payment in
the amount of twelve months base salary. Effective April 1, 2006, the CSO's
salary was increased from $165,000 per year to $185,000 per year.

LEASE COMMITMENTS

The Company leases its office and research and development space under an
operating lease agreement which expires in July 2006. The Company signed an 12
month extension of its existing lease on substantially the same terms as its
present lease. Minimum monthly payments under the new extension approximate
$7,700.

Rent expense approximated $105,000 and $126,000 for the years ended March 31,
2007 and 2006, respectively.

                                      F-45





<PAGE>

PART I.
                              FINANCIAL INFORMATION


               ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                              AETHLON MEDICAL, INC.
                          (A Development Stage Company)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (Unaudited)

                                                                   September 30,
                                                                       2007
                                                                   ------------

                                     ASSETS
Current assets
     Cash                                                          $    180,146
     Prepaid expenses and other current assets                            8,279
                                                                   ------------
                                                                        188,425

Property and equipment, net                                              10,087
Patents and patents pending, net                                        141,616
Other assets                                                             13,200
                                                                   ------------

                                                                   $    353,328
                                                                   ============

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
     Accounts payable and accrued liabilities                      $  1,451,349
     Due to related parties                                           1,083,999
     Notes payable                                                      502,500
     Convertible notes payable, net of discount                          80,761
     Warrant obligation                                               3,775,425
                                                                   ------------
                                                                      6,893,034
Commitments and Contingencies

Stockholders' Deficit
     Common stock, par value $0.001 per share;
         50,000,000 shares authorized;
         33,944,216 shares issued and outstanding                        33,945
     Additional paid-in capital                                      22,304,593
     Deficit accumulated during`
         development stage                                          (28,878,243)
                                                                   ------------
                                                                     (6,539,706)
                                                                   ------------
                                                                   $    353,328
                                                                   ============

         The accompanying notes are an integral part of these unaudited
                  condensed consolidated financial statements.

                                       F-46






<PAGE>

<TABLE>
                                                      AETHLON MEDICAL, INC.
                                                  (A Development Stage Company)
                                         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              For the Three and Six Months Ended September 30, 2007 and 2006 and
                            For the Period January 31, 1984 (Inception) Through September 30, 2007
                                                           (Unaudited)


                                                                                                                  January 31, 1984
                                       Three Months       Three Months        Six Months         Six Months          (Inception)
                                           Ended              Ended             Ended               Ended              through
                                       September 30,      September 30,      September 30,      September 30,       September 30,
                                           2007               2006               2007               2006                2007
                                       -------------      -------------      -------------      -------------      --------------
<S>                                    <C>                <C>                <C>                <C>                <C>
REVENUES

  Grant income                         $          --      $          --      $          --      $          --      $    1,424,012
  Subcontract income                              --                 --                 --                 --              73,746
  Sale of research and development                --                 --                 --                 --              35,810
                                       -------------      -------------      -------------      -------------      --------------
                                                  --                 --                 --                 --           1,533,568

EXPENSES

  Professional Fees                          253,671            166,144            441,076            366,648           6,379,303
  Payroll and related                        300,590            207,020            821,776            391,277           8,956,973
  General and administrative                 135,767            161,776            298,449            281,508           5,225,450
  Impairment                                      --                 --                 --                 --           1,313,253
                                       -------------      -------------      -------------      -------------      --------------
                                             690,028            534,940          1,561,301          1,039,443          21,874,979
                                       -------------      -------------      -------------      -------------      --------------
OPERATING LOSS                              (690,028)          (534,940)        (1,561,301)        (1,039,443)        (20,341,411)
                                       -------------      -------------      -------------      -------------      --------------

OTHER EXPENSE (INCOME)
  Loss on Extinguishment of debt                                                                                       1,216,748
  Change in fair value of
      warrant liability                     (492,250)               --           (914,025)                --           1,558,675
  Interest and other debt expenses            75,107            92,714            125,726            207,377           5,388,146
  Interest income                                 --                --                 --                 --             (17,415)
  Other                                      (17,833)               --             18,249                 --             390,678
                                       -------------      -------------      -------------      -------------      --------------
                                            (434,976)           92,714           (770,050)            207,377          8,536,832
                                       -------------      -------------      -------------      -------------      --------------
NET LOSS                               $    (255,052)    $    (627,654)     $    (791,251)      $  (1,246,810)       (28,878,243)
                                       =============      =============      =============      =============      ==============

BASIC AND DILUTED LOSS PER
  COMMON SHARE                         $       (0.01)    $       (0.02)     $       (0.02)     $       (0.05)
                                       =============      =============      =============      =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                        32,997,498        25,990,706         32,489,949         25,779,241
                                       =============      =============      =============      =============

           The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

                                                                F-47






<PAGE>

                                                        AETHLON MEDICAL, INC.
                                                    (A DEVELOPMENT STAGE COMPANY)
                                              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 AND
                               FOR THE PERIOD JANUARY 31, 1984 (INCEPTION) THROUGH SEPTEMBER 30, 2007
                                                             (Unaudited)


                                                                                                                 January 31, 1984
                                                               Six Months Ended         Six Months Ended            (Inception)
                                                              September 30, 2007       September 30, 2006            Through
                                                                 (Unaudited)              (Unaudited)            September 30,2007
                                                             --------------------     --------------------     --------------------
Cash flows from operating activities:

      Net loss                                               $           (791,251)    $         (1,246,810)    $        (28,878,243)
      Adjustments to reconcile net loss to net cash
        used in operating activities:

          Depreciation and amortization                                    12,668                   14,972                1,020,061
          Amortization of deferred consulting fees                             --                   24,500                  109,000
          Gain on sale of property and equipment                            1,777                       --                  (11,288)
          Gain on settlement of debt                                           --                       --                 (131,175)
          Loss on settlement of accrued legal liabilities                      --                       --                  142,245
          Stock based compensation                                        352,951                    9,500                  815,345
          Loss on debt extinguishment                                          --                       --                1,216,748
          Fair market value of warrants issued in
            connection with accounts payable and debt                          --                       --                2,715,736
          Fair market value of common stock, warrants
          and options issued for services                                 194,119                  164,458                3,681,035
          Change in fair value of warrant liability                      (914,025)                      --                1,558,675
          Amortization of debt discount                                     7,958                  109,012                1,293,745
          Beneficial conversion feature of convertible
            notes payable                                                      --                       --                      --
          Impairment of patents and patents pending                            --                       --                  416,026
          Impairment of goodwill                                               --                       --                  897,227
          Deferred compensation forgiven                                       --                       --                  217,223
          Changes in operating assets and liabilities:
                Prepaid expenses                                           (3,709)                 (21,805)                 153,258
                Other assets                                                   --                    3,960                  (13,200)
                Accounts payable and accrued
                liabilities                                                77,270                  (19,754)               2,126,386
                Due to related parties                                     (5,000)                (103,000)               1,317,500
                                                             --------------------     --------------------     --------------------
      Net cash used in operating activities                            (1,067,242)              (1,064,967)             (11,353,696)
                                                             --------------------     --------------------     --------------------

Cash flows from investing activities:

      Purchases of property and equipment                                  (3,997)                 (14,454)                (270,694)
      Patents and patents pending                                          (6,669)                      --                 (376,796)
      Proceeds from the sale of property and equipment                         --                       --                   17,065
      Cash of acquired company                                                 --                       --                   10,728
                                                             --------------------     --------------------     --------------------


      Net cash used in investing activities                                (10,666)                (14,454)                (619,697)
                                                             --------------------     --------------------     --------------------

Cash flows from financing activities:

      Proceeds from the issuance of notes payable                              --                       --                1,710,000
      Principal repayments of notes payable                                    --                       --                 (292,500)
      Proceeds from the issuance of convertible notes
        payable                                                            60,000                       --                2,138,000
      Proceeds from the issuance of common stock                          815,000                  280,003                8,731,822
      Fees paid for equity financing                                      (57,052)                      --                  (57,052)
      Professional fees related to registration statement                      --                       --                  (76,731)
                                                             --------------------     --------------------     --------------------

      Net cash provided by financing activities                           817,948                  280,003               12,153,539
                                                             --------------------     --------------------     --------------------

Net (decrease) increase in cash                                          (259,960)                (799,418)                 180,146

Cash at beginning of period                                               440,106                  836,377                       --
                                                             --------------------     --------------------     --------------------

Cash at end of period                                        $            180,146     $             36,959     $            180,146
                                                             ====================     ====================     ====================


             The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

                                                                 F-48
</TABLE>
<PAGE>

                              AETHLON MEDICAL, INC.
                          (A Development Stage Company)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2007

NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

We are a development stage medical device company focused on expanding the
applications of our Hemopurifier (R) platform technology, which is designed to
rapidly reduce the presence of infectious viruses and other toxins from human
blood. In this regard, our core focus is the development of therapeutic devices
that treat acute viral conditions, chronic viral diseases and pathogens targeted
as potential biological warfare agents. The Hemopurifier(R) combines the
established scientific principles of affinity chromatography and hemodialysis as
a means to mimic the immune system's response of clearing viruses and toxins
from the blood before cell and organ infection can occur. The Hemopurifier(R)
cannot cure viral conditions but can prevent virus and toxins from infecting
unaffected tissues and cells. We have completed pre-clinical blood testing of
the Hemopurifier(R) to treat HIV and Hepatitis-C, and have completed human
safety trials on Hepatitis-C infected patients in India and are in the process
of obtaining regulatory approval from the U.S. Food and Drug Administration
("FDA") to initiate clinical trials in the United States.

The commercialization of the Hemopurifier(R) will likely require the
completion of human efficacy clinical trials. The approval of any application of
the Hemopurifier(R) in the United States will necessitate the approval of the
FDA to initiate human studies. Such studies could take years to demonstrate
safety and effectiveness in humans and there is no assurance that the
Hemopurifier(R) will be cleared by the FDA as a device we can market to the
medical community. We also expect to face similar regulatory challenges from
foreign regulatory agencies, should we attempt to commercialize and market the
Hemopurifier(R) outside of the United States. As a result, we have not generated
revenues from the sale of any Hemopurifier(R) application. Additionally, there
have been no independent validation studies of our Hemopurifiers(R) to treat
infectious disease. We manufacture our products on a small scale for testing
purposes but have yet to manufacture our products on a large scale for
commercial purposes. All of our pre-clinical human blood studies have been
conducted in our laboratories under the direction of Dr. Richard Tullis, our
Chief Science Officer.

The Company is classified as a development stage enterprise under accounting
principles generally accepted in the United States of America ("GAAP"), and has
not generated revenues from its principal operations.

The Company's common stock is quoted on the Over-the-Counter Bulletin Board of
the National Association of Securities Dealers under the symbol "AEMD.OB".

The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with GAAP for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended September 30, 2007 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2008. For further information, refer to the Company's Annual Report
On Form 10-KSB for the year ended March 31, 2007, which includes audited
financial statements and footnotes as of March 31, 2007 and for the years ended
March 31, 2006 and 2007.

NOTE 2. GOING CONCERN AND LIQUIDITY CONSIDERATIONS

The accompanying condensed consolidated financial statements have been prepared
on a going concern basis, which contemplates, among other things, the
realization of assets and the satisfaction of liabilities in the ordinary course
of business. The Company has experienced continuing losses from operations, is
in default on certain debt, has negative working capital of approximately
($6,705,000), recurring losses from operations and a deficit accumulated during
the development stage of approximately ($28,878,000) at September 30, 2007,
which among other matters, raises significant doubt about its ability to
continue as a going concern. The Company has not generated significant revenue
or any profit from operations since inception. A significant amount of
additional capital will be necessary to advance the development of the Company's
products to the point at which they may become commercially viable. The Company
intends to fund operations through debt and/or equity financing arrangements,
which management believes may be insufficient to fund its capital expenditures,
working capital and other cash requirements (consisting of accounts payable,
accrued liabilities, amounts due to related parties and amounts due under
various notes payable) for the fiscal year ending March 31, 2008. Therefore the
Company will be required to seek additional funds to finance its short-term
operations.

The Company is currently addressing its liquidity issue by exploring investment
capital opportunities. The Company believes that its access to capital, together
with existing cash resources, will be sufficient to meet its liquidity needs for
fiscal 2008. In August 2007, the Company raised $815,000 in a private placement
(see Note 5). The Company has in place an $8.4 million common stock purchase
agreement with Fusion Capital Fund II, LLC, which can provide working capital
pending successful registration of the shares underlying the agreement. The
Company's present working capital balance is insufficient to meet its working
capital needs for fiscal 2008. However, no assurance can be given that the
Company will receive any additional funds through its capital raising efforts.

The condensed consolidated financial statements do not include any adjustments
relating to the recoverability of assets that might be necessary should the
Company be unable to continue as a going concern.

                                      F-49
<PAGE>

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies of the Company presented below is
designed to assist the reader in understanding the Company's consolidated
financial statements. Such financial statements and related notes are the
representations of Company management, who is responsible for their integrity
and objectivity. These accounting policies conform to GAAP in all material
respects, and have been consistently applied in preparing the accompanying
condensed consolidated financial statements.

PRINCIPLES OF CONSOLIDATION

The accompanying condensed consolidated financial statements include the
accounts of Aethlon Medical, Inc. and its legal wholly-owned subsidiaries
Aethlon, Inc., Hemex, Inc. and Cell Activation, Inc.(collectively hereinafter
referred to as the "Company"). These subsidiaries are dormant and there exist no
material intercompany transactions or balances.

LOSS PER COMMON SHARE

Loss per common share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during the year in
accordance with SFAS No. 128, "EARNINGS PER SHARE."

Securities that could potentially dilute basic loss per share (prior to their
conversion, exercise or redemption) were not included in the
diluted-loss-per-share computation because their effect is anti-dilutive. There
were 18,459,500 and 17,899,812 potentially dilutive common shares outstanding
for the three and six months ended September 30, 2007, respectively.

PATENTS

The Company capitalizes the cost of patents, some of which were acquired, and
amortizes such costs over the shorter of the remaining legal life or their
estimated economic life, upon issuance of the patent.

RESEARCH AND DEVELOPMENT EXPENSES

The Company incurred approximately $331,000 and $335,000 of research and
development expenses during the six months ended September 30, 2007 and 2006,
respectively. For the fiscal quarter ended September 30, 2007 and 2006, the
Company incurred research and development expense of approximately $151,000 and
$176,931, respectively.

EQUITY INSTRUMENTS FOR SERVICES PROVIDED BY OTHER THAN EMPLOYEES

The Company follows SFAS No. 123-R (as interpreted by Emerging Issues Task Force
("EITF") Issue No. 96-18, "ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO
OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS OR
SERVICES") ("EITF No. 96-18") to account for transactions involving goods and
services provided by third parties where the Company issues equity instruments
as part of the total consideration. Pursuant to paragraph 7 of SFAS No. 123-R,
the Company accounts for such transactions using the fair value of the
consideration received (i.e. the value of the goods or services) or the fair
value of the equity instruments issued, whichever is more reliably measurable.

The Company applies EITF No. 96-18, in transactions, when the value of the goods
and/or services are not readily determinable and (1) the fair value of the
equity instruments is more reliably measurable and (2) the counterparty receives
equity instruments in full or partial settlement of the transactions, using the
following methodology:

(a)  For transactions where goods have already been delivered or services
     rendered, the equity instruments are issued on or about the date the
     performance is complete (and valued on the date of issuance).
(b)  For transactions where the instruments are issued on a fully vested,
     non-forfeitable basis, the equity instruments are valued on or about the
     date of the contract.
(c)  For any transactions not meeting the criteria in (a) or (b) above, the
     Company re-measures the consideration at each reporting date based on its
     then current stock value.

                                      F-50
<PAGE>

IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

SFAS No.144 ("SFAS 144"), "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF" addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS 144 requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. If
the cost basis of a long-lived asset is greater than the projected future
undiscounted net cash flows from such asset (excluding interest), an impairment
loss is recognized. Impairment losses are calculated as the difference between
the cost basis of an asset and its estimated fair value. SFAS 144 also requires
companies to separately report discontinued operations and extends that
reporting requirement to a component of an entity that either has been disposed
of (by sale, abandonment or in a distribution to owners) or is classified as
held for sale. Assets to be disposed of are reported at the lower of the
carrying amount or the estimated fair value less costs to sell. Management
believes that no impairment existed at or during the six months ended September
30, 2007.

BENEFICAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE

The convertible feature of certain notes payable provides for a rate of
conversion that is below market value. Such feature is normally characterized as
a "Beneficial Conversion Feature" ("BCF"). Pursuant to EITF Issue No. 98-5,
"ACCOUNTING FOR CONVERTIBLE SECURITIES WITH BENEFICIAL CONVERSION FEATURES OR
CONTINGENTLY ADJUSTABLE CONVERSION RATIO" and EITF No. 00-27, "APPLICATION OF
EITF ISSUE NO. 98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS," the estimated fair
value of the BCF is recorded in the consolidated financial statements as a
discount from the face amount of the notes. Such discounts are amortized to
interest expense over the term of the notes.

DERIVATIVE LIABILITIES AND CLASSIFICATION OF WARRANT OBLIGATION

The Company evaluates free-standing instruments (or embedded derivatives)
indexed to its common stock to properly classify such instruments within equity
or as liabilities in its financial statements, pursuant to the requirements of
the EITF Issue No. 00-19, "ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS
INDEXED TO AND POTENTIALLY SETTLED IN, A COMPANY'S OWN STOCK," EITF Issue No.
01-06, "THE MEANING OF INDEXED TO A COMPANY'S OWN STOCK," EITF Issue No. 05-04,
"THE EFFECT OF A LIQUIDATED DAMAGES CLAUSE ON A FREESTANDING FINANCIAL
INSTRUMENT SUBJECT TO EITF Issue No. 00-19," and SFAS No. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," as amended. The Company's policy
is to settle instruments indexed to its common shares on a first-in-first-out
basis.

In the fiscal year ending March 31, 2006, the Company was obligated to register
for resale the shares underlying warrants in connection with the issuance of its
10% Series A Convertible Promissory Notes. In accordance with EITF Issue No.
00-19, the value of the warrants were recorded as a liability until the
registration became effective on January 20, 2006. On or about March 13, 2007,
the Company determined that the effectiveness of the registration statement
underlying the conversion and warrant shares associated with the 10% Series A
Promissory Notes had lapsed on October 27, 2006. Upon the registration lapse, in
accordance with EITF Issue No. 00-19, the Company reversed the accounting effect
of the prior registration effectiveness and reclassified the warrants from
stockholders to a derivative liability, which is required to be revalued at the
end of each reporting period. At September 30, 2007, the fair value of the
warrant liability was determined to be $3,775,425 and for the six months ended
September 30, 2007 a gain in the amount of approximately $914,000 was recognized
as other income as a result of the change in the fair value of such liability
since March 31, 2007.

REGISTRATION PAYMENT ARRANGEMENTS

The Company accounts for its liquidated damages on registration rights
agreements in accordance with FASB Staff Position EITF Issue No. 00-19-2
"ACCOUNTING FOR REGISTRATION PAYMENT ARRANGEMENTS" which specifies that the
contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement should be separately
recognized and measured in accordance with SFAS No. 5, "Accounting for
Contingencies." On September 30, 2007, the Company had recorded $238,249 of
accrued liquidated damages in accounts payable and accrued liabilities on the
accompanying condensed consolidated balance sheet.

                                      F-51
<PAGE>

STOCK BASED COMPENSATION

Effective April 1, 2006, the Company adopted the provisions of SFAS No. 123-R,
"Share-Based Payment," ("SFAS No. 123-R"). SFAS No. 123-R requires employee
stock options and rights to purchase shares under stock participation plans to
be accounted for under the fair value method and requires the use of an option
pricing model for estimating fair value. Accordingly, share-based compensation
is measured at the grant date, based on the fair value of the award. The Company
previously accounted for awards granted under its equity incentive plan under
the intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," and related interpretations, and
provided the required pro forma disclosures prescribed by SFAS No. 123,
"ACCOUNTING FOR STOCK BASED COMPENSATION," as amended. The exercise price of
options is generally equal to the market price of the Company's common stock
(defined as the closing price as quoted on the Over-the-Counter Bulletin Board
administered by Nasdaq) on the date of grant. Accordingly, no share-based
compensation was recognized in the financial statements for the three and six
months ended June 30, 2005. Under the modified prospective method of adoption
for SFAS No. 123-R, the compensation cost recognized by the Company beginning
April 1, 2006 includes (a) compensation cost for all equity incentive awards
granted prior to, but not yet vested as of April 1, 2006, based on the
grant-date fair value estimated in accordance with the original provisions of
SFAS No. 123, and (b) compensation cost for all equity incentive awards granted
subsequent to April 1, 2006, based on the grant-date fair value estimated in
accordance with the provisions of SFAS No. 123-R.

From time to time, the Company's Board of Directors grants common share purchase
options or warrants to selected directors, officers, employees, consultants and
advisors in payment of goods or services provided by such persons on a
stand-alone basis outside of any of the Company's formal stock plans. The terms
of these grants are individually negotiated and generally expire within five
years from the grant date.

In August 2000, the Company adopted the 2000 Stock Option Plan ("Stock Option
Plan"), which was approved by its stockholders in September 2000. The Stock
Option Plan provides for the issuance of up to 500,000 options to purchase
shares of common stock. Such options can be incentive options or nonstatutory
options, and may be granted to employees, directors and consultants. The Stock
Option Plan has limits as to the eligibility of those stockholders who own more
than 10% of Company stock, as defined. The options granted pursuant to the Stock
Option Plan may have exercise prices of no less than 100% of fair market value
of the Company's common stock at the date of grant (incentive options), or no
less than 75% of fair market value of such stock at the date of grant
(nonstatutory). At September 30, 2006, the Company had granted 47,500 options
under the 2000 Stock Option Plan of which 15,000 had been forfeited, with
467,500 available for future issuance. All of these options vested prior to the
adoption of FAS 123-R.

The effects of share-based compensation resulting from the application of SFAS
No. 123-R to options granted outside of the Company's Stock Option Plan resulted
in an expense of $69,446 for the quarter ended September 30, 2007 and $352,951
for the six month period ended September 30, 2007. This expense was recorded as
stock compensation included in payroll and related expenses in the accompanying
September 30, 2007 condensed consolidated statement of operations. Share-based
compensation recognized as a result of the adoption of SFAS No. 123-R as well as
pro forma disclosures according to the original provisions of SFAS No. 123 for
periods prior to the adoption of SFAS No. 123-R use the Binomial Lattice option
pricing model for estimating fair value of options granted.

The following table summarizes the effect of share-based compensation resulting
from the application of SFAS No. 123-R to options granted:

                                          Three Months Ended   Six Months Ended
                                         September 30, 2007   September 30, 2007

Payroll and related                         $  (69,446)         $(352,951)
                                            ==========          =========
Net share-based compensation effect
   in net loss from continuing operations   $  (69,446)         $(352,951)
                                            ==========          =========

Basic and diluted loss per common share     $    (0.00)         $   (0.00)
                                            ==========          =========

                                      F-52
<PAGE>

In accordance with SFAS No. 123-R, the Company adjusts share-based compensation
on a quarterly basis for changes to the estimate of expected award forfeitures
based on actual forfeiture experience. The effect of adjusting the forfeiture
rate for all expense amortization after March 31, 2006 is recognized in the
period the forfeiture estimate is changed. The effect of forfeiture adjustments
for the six month period ended September 30, 2007 was insignificant.


The following weighted average assumptions were used in the valuation of these
instruments.

                                      Six Months Ended
                                          September 30
                              -----------------------------
                                 2007                2006
                              ----------          ----------
Annual dividends                 zero                zero
Expected volatility               92%                 72%
Risk free interest rate          4.72%               4.18%
Expected life                 2.14 years            4.7 years

The expected volatility is based on the historic volatility. The expected life
of options granted is based on the "simplified method" described in the SEC's
Staff Accounting Bulletin No. 107 due to changes in the vesting terms and
contractual life of current option grants compared to the Company's historical
grants. Options outstanding that have vested and are expected to vest as of
September 30, 2007 are as follows:

                                                      Weighted
                                         Weighted      Average
                                         Average      Remaining      Aggregate
                             Number of   Exercise    Contractual     Intrinsic
                              Shares      Price     Term in Years    Value (1)
- -------------------------  -----------   --------   -------------   ----------

Vested                       9,702,393    $  0.38        5.27       $2,817,804
Expected to vest             2,001,667       0.33        8.85       $  572,317
                           -----------                              ----------
     Total                   11,704,060                             $3,390,121
                           ===========                              ==========

(1) These amounts represent the difference between the exercise price and $0.62,
the closing market price of the Company's common stock on September 30, 2007 as
quoted on the Over-the-Counter Bulletin Board under the symbol "AEMD.OB" for all
in-the-money options outstanding.

                                      F-53
<PAGE>

Options outstanding that are expected to vest are net of estimated future
forfeitures in accordance with the provisions of SFAS No. 123-R, which are
estimated when compensation costs are recognized. Additional information with
respect to stock option activity is as follows:

                                                   Outstanding Options
                                           -------------------------------------
                               Shares                   Weighted       Aggregate
                             Available     Number of     Average       Intrinsic
                             for Grant     Shares     Exercise Price   Value (1)
- ---------------------------  ---------     ------     --------------  ----------
March 31, 2006                 467,500   9,204,060       $ 0.38       $3,802,324
                                                                      ==========
Grants                              --   2,500,000       $ 0.36
Exercises                           --          --           --
Cancellations                       --          --           --
                             ----------  ----------      ------
September 30, 2007             467,500   11,704,060      $ 0.38       $2,808,974
                             ==========  ==========      ======       ==========

Options exerciseable at:
March 31, 2007                            8,369,060      $ 0.39
                                         ==========      ======
September 30, 2007                        9,702,393      $ 0.38

(1) Represents the difference between the exercise price and the March 31, 2007
or September 30, 2007 market price of the Company's common stock, which was
$0.74 and $0.62, respectively.

At September 30, 2007, there was approximately $513,000 of unrecognized
compensation cost related to share-based payments which is expected to be
recognized over a weighted average period of 1.62 years

INCOME TAXES

Under SFAS 109, "ACCOUNTING FOR INCOME TAXES," deferred tax assets and
liabilities are recognized for the future tax consequences attributable to the
difference between the consolidated financial statements and their respective
tax basis. Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts reported for income tax purposes, and (b) tax
credit carryforwards. The Company records a valuation allowance for deferred tax
assets when, based on management's best estimate of taxable income (if any) in
the foreseeable future, it is more likely than not that some portion of the
deferred tax assets may not be realized.

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the FASB issued FASB Interpretation ("FIN") No. 48, "Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109."
FIN No. 48 establishes a single model to address accounting for certain tax
positions. FIN No. 48 clarifies the accounting for income taxes by prescribing a
minimum recognition threshold a tax position is required to meet before being
recognized in the financial statements. FIN No. 48 also provides guidance on
derecognition measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition.

The Company adopted the provisions of FIN No. 48 on April 1, 2007. Upon
adoption, the Company recognized no adjustment in the amount of unrecognized tax
benefits. As of the date of adoption the Company had no unrecognized tax
benefits. The Company's policy is to recognize interest and penalties that would
be assessed in relation to the settlement of unrecognized tax benefits as a
component of income tax expense. The Company has recognized approximately
$36,000 in penalties and interest upon the adoption of FIN No. 48.

The Company and it subsidiaries are subject to federal income tax. With few
exceptions, the Company is no longer subject to U.S. federal income tax
examination for years before 2000; state and local tax examinations before 2000.
However, to the extent allowed by law, the tax authorities may have the right to
examine prior periods where net operating losses were generated and carried
forward, and make adjustments up to the amount of the net operating loss
carryforward amount.

                                      F-54
<PAGE>

The Company is not currently under Internal Revenue Service (IRS), state, local
or foreign jurisdiction tax examinations.

For the quarter and nine-month periods ended September 30, 2007, the Company
recorded no income tax provision.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
which defines fair value, establishes a framework for measuring fair value in
accordance with GAAP, and expands disclosures about fair value measurements.
SFAS No. 157 simplifies and codifies related guidance within GAAP, but does not
require any new fair value measurements. The guidance in SFAS No. 157 applies to
derivatives and other financial instruments measured at estimated fair value
under SFAS No. 133 and related pronouncements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities." SFAS No. 159 allows entities to
choose, at specified election dates, to measure eligible financial assets and
liabilities at fair value that are not otherwise required to be measured at fair
value. If the Company elects the fair value option for an eligible item, changes
in that item's fair value in subsequent reporting periods must be recognized in
current earnings. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007. Management has not yet evaluated the effects on future
consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not
believed by management to have a material impact on the Company's present or
future consolidated financial statements.


NOTE 4. NOTES PAYABLE

At September 30, 2007, the Company had $502,500 in principal amount of notes
payable outstanding with twelve noteholders.

The Company is currently in default on $502,500 of amounts owed under various
unsecured notes payable and is currently seeking other financing arrangements to
retire all past due notes. At September 30, 2007 the Company had accrued
interest in the amount of $385,848 associated with these defaulted notes
payable.

On July 13, 2007, in exchange for $60,000, the Company issued the Phillip A.
Ward Trust a 12% Convertible Note, with accrued interest due at maturity on July
13, 2008. The face value of the note is convertible at a $0.50 conversion price
into 120,000 restricted shares of common stock.

At September 30, 2007, the Company had $1,110,000 in principal amount of
convertible notes payable outstanding, net of $1,030,239 discount, held by six
noteholders. The $1,030,000 discount is comprised of $29,921 in unamortized BCF
discount and $1,000,000 in unamortized discount attributable to the valuation of
warrant rights associated with the issuance of convertible notes. At September
30, 2007, the Company had accrued interest in the amount of $243,623 associated
with these convertible notes payable.

NOTE 5. EQUITY TRANSACTIONS

In April 2007, the Company issued 30,617 shares of restricted common
stock as the result of a cashless exercise of 80,000 warrants held by a former
noteholder.

In April 2007, the Company issued 15,152 shares of restricted common
stock at $0. 33 per share in payment of an option agreement valued at $5,000.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

In April 2007, the Company issued 8,651 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.58 per share in payment for regulatory affairs
consulting services to the Company valued at $5,000 based on the value of the
services.

In April 2007, the Company issued 3,937 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.76 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

In May 2007, the Company issued 13,124 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.76 per share in payment for regulatory affairs
consulting services to the Company valued at $10,000 based on the value of the
services.

In May 2007, the Company issued 5,155 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.58 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

In June 2007, the Company issued 41,999 shares of restricted common
stock at between $0.30 and $0.74 per share in payment for investor relations
services to the Company valued at $20,000 based on the value of the services.

In June 2007, the Company issued 17,526 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.58 per share in payment for regulatory affairs
consulting services to the Company valued at $10,200 based on the value of the
services.

In June 2007, the Company issued 5,155 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.58 per share in payment for regulatory affairs
consulting services to the Company valued at $3,000 based on the value of the
services.

                                      F-55
<PAGE>

In June 2007, the Company issued 10,174 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.63 per share in payment for regulatory affairs
consulting services to the Company valued at $6,450 based on the value of the
services.

In August 2007, the Company issued 1,630,000 shares of common stock for cash
proceeds of $815,000 ($757,950 net of commissions). The shares were issued to
accredited investors in the form of Units comprised of two shares of common
stock and one three-year warrant to acquire common stock at an exercise price of
$0.50. The offering price of each Unit was $1.00.

In August 2007, the Company issued 14,827 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.60 per share in payment of grant writing consulting
services to the Company valued at $10,500 based upon the value of the services.

In August of 2007, the Company issued 71,045 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.24 per share in payment for outstanding liabilities
related to regulatory consulting services to the Company valued at $17,051
based upon the value of the services provided.

In August of 2007, the Company issued 13,017 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.49 per share in payment for regulatory consulting
services to the Company valued at $6,413 based upon the value of the services
provided.

In August of 2007, the Company issued 103,106 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.59 per share in payment of legal fees related to
general corporate legal services to the Company valued at $62,894 based upon
the value of the services provided.

In August 2007, the Company issued 21,020 shares of restricted common stock at
prices between $0.68 and $0.78 per share in payment for investor relations
services to the Company valued at $15,000 based on the value of the services.

In August 2007, the Company issued 8,264 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at prices between $0.68 and $0.78 per share in payment
for regulatory affairs consulting services to the Company valued at $6,000
based on the value of the services.

In September 2007, the Company issued 14,000 shares of common stock to an
accredited investor at $0.50 per share in payment of commissions related to
the August Private Placement transaction valued at $7,000 based upon the value
of services provided.

In September 2007, the Company issued 5,294 shares of common stock pursuant
to the Company's S-8 registration statement covering the Company's 2003
Consultant Stock Plan at $0.68 per share in payment for regulatory affairs
consulting services to the Company valued at $3,600 based on the value of
the services provided.

                                      F-56
<PAGE>

NOTE 6. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

From time to time, claims are made against the Company in the ordinary course of
business, which could result in litigation. Claims and associated litigation are
subject to inherent uncertainties and unfavorable outcomes could occur, such as
monetary damages, fines, penalties or injunctions prohibiting the Company from
selling one or more products or engaging in other activities. The occurrence of
an unfavorable outcome in any specific period could have a material adverse
effect on the Company's results of operations for that period or future periods.
The Company is not presently a party to any pending or threatened legal
proceedings.

                                      F-57
<PAGE>

                                     PART II

Indemnification of Directors and Officers

         Our Articles of Incorporation permit us to limit the liability of our
directors to the fullest extent permitted under Section 78.037 of the Nevada
General Corporation Law. As permitted by Section 78.037 of the Nevada General
Corporation Law, our Bylaws and Articles of Incorporation also include
provisions that eliminate the personal liability of each of its officers and
directors for any obligations arising out of any acts or conduct of such officer
or director performed for or on behalf of the Company. To the fullest extent
allowed by Section 78.751 of the Nevada General Corporation Law, we will defend,
indemnify and hold harmless its directors or officers from and against any and
all claims, judgments and liabilities to which each director or officer becomes
subject to in connection with the performance of his or her duties and will
reimburse each such director or officer for all legal and other expenses
reasonably incurred in connection with any such claim of liability. However, we
will not indemnify any officer or director against, or reimburse for, any
expense incurred in connection with any claim or liability arising out of the
officer's or director's own negligence or misconduct in the performance of duty.

      The provisions of our Bylaws and Articles of Incorporation regarding
indemnification are not exclusive of any other right we have to indemnify or
reimburse our officers or directors in any proper case, even if not specifically
provided for in our Articles of Incorporation or Bylaws.

      We believe that the indemnity provisions contained in our bylaws and the
limitation of liability provisions contained in our certificate of incorporation
are necessary to attract and retain qualified persons for these positions. No
pending material litigation or proceeding involving our directors, executive
officers, employees or other agents as to which indemnification is being sought
exists, and we are not aware of any pending or threatened material litigation
that may result in claims for indemnification by any of our directors or
executive officers.

      Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
us is against public policy as expressed hereby in the Securities Act and we
will be governed by the final adjudication of such issue.

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         The following table sets forth the estimated costs and expenses which
we expect to incur with respect to the offering and sale or distribution of
common shares under this registration statement. We have agreed to pay all of
these expenses.

 SEC Filing Fee                                                     $      178
 Financial printer fees                                                  1,000*
 Legal fees and expenses                                                11,500*
 Blue Sky Fees and Expenses                                                500*
 Accounting fees and expenses                                           15,000*
 Miscellaneous                                                             500*
- -------------------------------------------------------------------------------
 Total                                                              $   28,678
- -------------------------------------------------------------------------------
* estimated


                                       45


<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

         We have sold or issued the following securities not registered under
the Securities Act in reliance upon the exemption from registration pursuant to
Section 4(2) of the Securities Act or Regulation D of the Securities Act during
the three year period ending on the date of filing of this registration
statement. Except as stated below, no underwriting discounts or commissions were
payable with respect to any of the following transactions.


MARCH 31, 2007 THROUGH JANUARY 22, 2008

CONVERTIBLE NOTE PAYABLE

      On July 13, 2007, in exchange for $60,000, the Company issued the Phillip
A Ward Trust a 12% Convertible Note, with accrued interest due at Maturity on
July 13, 2008. The face value of the note is convertible at a $0.50 conversion
price into 120,000 restricted shares of common stock. This transaction was
exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

         On January 18, 2008 the Company issued and sold promissory notes in the
principal amount of $220,000 (the "Notes") and three-year warrants to purchase
and aggregate of 660,000 shares of the Company's common stock at an exercise
price of $.50 per share (the "Warrants"). The Notes bear interest compounded
monthly at an annual rate of eight percent (8%) per annum and mature on October
18, 2008. The Company is required to file a registration statement with the SEC
covering the shares underlying the Warrants within 60 calendar days of closing.
In the event that, within 180 days of closing such registration statement is not
effective, the Company is obligated to penalties, payable in cash, of 2% per
month. This transaction was exempt from registration pursuant to Regulation D
promulgated under the Securities Act of 1933.

         On December 5, 2007 the Company issued and sold promissory notes in the
principal amount of $495,000 (the "Notes") and three-year warrants to purchase
and aggregate of 1,485,000 shares of the Company's common stock at an exercise
price of $.50 per share (the "Warrants"). The Notes bear interest compounded
monthly at an annual rate of eight percent (8%) per annum and mature on
September 5, 2008. The Company is required to file a registration statement with
the SEC covering the shares underlying the Warrants within 60 calendar days of
closing. In the event that, within 180 days of closing such registration
statement is not effective, the Company is obligated to penalties, payable in
cash, of 2% per month. This transaction was exempt from registration pursuant to
Regulation D promulgated under the Securities Act of 1933.

         Effective March 5, 2007, the Company entered into four Allonges (the
"Allonges") to its 10% Series A Convertible Promissory Notes entered into in
December 2005 having an aggregate principal amount of $1,000,000 (the "Prior
Notes") with the Estate of Allan S. Bird, the Ellen R. Weiner Family Revocable
Trust, Claypoole Capital, LLC and Christian J. Hoffmann III (the "Holders").
This transaction was exempt from registration pursuant to Regulation D
promulgated under the Securities Act of 1933.

On November 29, 2007, the Company entered into Amended and Restated 10% Series A
Convertible Promissory Notes (the "Notes") with the Holders. The Notes were
issued in exchange for the Prior Notes, and all amendments to the Prior Notes,
including the Allonges entered into between the Company and the Holders on March
5, 2007.

         The Notes bear an aggregate principal amount of $1,000,000 and are
convertible into an aggregate of 5,000,000 shares of the Company's Common Stock
and mature on February 15, 2009. The Notes provide for the payment of accrued
and default interest through December 31, 2007 in the aggregate amount of
$295,248 to be paid in units ("Units") at the rate of $0.20 per Unit, each Unit
consisting of one share of the Company's Common Stock and one Class A Common
Stock Purchase Warrant (the "Class A Warrant") to purchase one share of the
Company's Common Stock at an exercise price of $0.20 per share. If the Holders
exercise the Class A Warrants on or before February 15, 2010, the Company will
issue them one Class B Common Stock Purchase Warrant (the "Class B Warrant") for
every two Class A Warrants exercised. The Class B Warrants will have an exercise
price of $0.60 per share.

         The Notes also provide for the payment of liquidated damages through
November 29, 2007 in the aggregate amount $269,336 to be paid in units ("Damages
Units") at the rate of $0.40 per Damages Unit, each Damages Unit consisting of
one share of the Company's Common Stock and one Class A-1 Common Stock Purchase
Warrant (the "Class A-1 Warrant") to purchase on share of the Company's Common
Stock at an exercise price of $0.40 per share. If the Holders exercise the Class
A-1 Warrants on or before February 15, 2010, the Company will issue them one
Class B-1 Common Stock Purchase Warrant (the "Class B-1 Warrant") for every two
Class A-1 Warrants exercised. The Class B-1 Warrants will have an exercise price
of $0.40 per share.

                                       46

<PAGE>

         In addition, the Notes provide for the issuance of Class A Principal
Common Stock Purchase Warrants (the "Class A Principal Warrant") to purchase an
aggregate of 5,000,000 shares of the Company's Common Stock on the same terms as
the Class A Warrants. The shares underlying the Class A Warrants, the Class A-1
Warrants and the Class A Principal Warrants shall be registered with the SEC by
March 31, 2008, and the shares underlying the Class B Warrants and the Class B-1
Warrants shall be registered with the SEC by the 30th day following the issuance
date of such warrants. This transaction was exempt from registration pursuant to
Regulation D promulgated under the Securities Act of 1933.

COMMON STOCK

         On January 8, 2008 the Company completed a private placement of 250,000
Units, priced at $1.00 per unit, raising $250,000. Each Unit is comprised of two
shares of common stock and one warrant. The warrant has an exercise price of
$0.50 and is exercisable for three years from issuance. The Company is required
to file a registration statement with the SEC covering the shares underlying the
units within 60 calendar days of closing. In the event that, within 180 days of
closing such registration is not effective, or the underlying shares are not
saleable under SEC Rule 144, the Company is obligated to pay penalties, payable
in additional shares, of 2% per month. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

         On December 31, 2007 the Company completed a private placement of
1,000,000 Units, priced at $1.00 per unit, raising $980,000. Each Unit is
comprised of two shares of common stock and one warrant. The warrant has an
exercise price of $0.50 and is exercisable for three years from issuance. The
Company is required to file a registration statement with the SEC covering the
shares underlying the units within 60 calendar days of closing. In the event
that, within 180 days of closing such registration is not effective, or the
underlying shares are not saleable under SEC Rule 144, the Company is obligated
to pay penalties, payable in additional shares, of 2% per month. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

         In August 2007, the Company issued 21,020 shares of restricted common
stock at between $0.68 and $0.78 per share in payment for investor relations
services to the Company valued at $15,000 based on the value of the services.
This transaction was exempt from registration pursuant to section 4(2) of the
Securities Act of 1933.

         In August 2007, the Company issued 14,000 shares of restricted common
stock at $0.50 per share in payment of a finder's fee to the Company valued at
$7,000 based on the value of the services.

         In June 2007, the Company issued 41,999 shares of restricted common
stock at between $0.30 and $0.74 per share in payment for investor relations
services to the Company valued at $20,000 based on the value of the services.
This transaction was exempt from registration pursuant to section 4(2) of the
Securities Act of 1933.

         In April 2007, the Company issued 30,617 shares of restricted common
stock as a result of the exercise of a cashless warrant held by a former
noteholder. This transaction was exempt from registration pursuant to section
4(2) of the Securities Act of 1933.

         In April 2007, the Company issued 15,152 shares of restricted common
stock at $0.33 per share in payment of an option agreement valued at $5,000.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

FISCAL YEAR ENDED MARCH 31, 2007

CONVERTIBLE NOTES PAYABLE AND WARRANTS

         On December 15, 2006, the Company issued two 10% Convertible Notes
("December 10% Notes") totaling $50,000 to accredited investors. The December
10% Notes accrue interest at a rate of ten percent (10%) per annum and mature on
March 15, 2007. Such notes are convertible into shares of restricted common
stock at any time at the election of the holder at a fixed conversion price of
$0.17 per share for any conversion occurring on or before the maturity date. In
addition, upon issuance, the Company issued five-year Warrants ("December 10%
Note Warrants") to purchase a number of shares equal to the number of shares
into which the December 10% Notes can be converted at a fixed exercise price of
$0.17. Additionally, if the December 10% Note Warrants are exercised prior to
December 15, 2007, the holder will receive an additional warrant on the same
terms as the December 10% Note Warrants on a one to one basis. The warrants can
be settled in unregistered shares of common stock. The December 10% Note
Warrants have been valued using a Binomial Lattice option pricing model and an
associated discount of $15,627, the relative fair value measured at the
commitment date, was recorded and presented net against the face amount of the
December 10% Notes. The convertible feature of the December 10% Notes provides
for an effective conversion rate that is below market value. Pursuant to EITF
No. 98-5 and EITF No. 00-27, the Company estimated the fair value of such BCF to
be $34,373 and recorded such amount as a debt discount. The discounts associated
with the warrants and the BCF are being accreted to interest expense over the
term of the December 10% Notes. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.


                                       47

<PAGE>

         Effective March 22, 2007, the Company entered into four Allonges (the
"Allonges") to its 10% Series A Convertible Promissory Notes entered into in
December 2005 having an aggregate principal amount of $1,000,000 (the "Notes")
with the Estate of Allan S. Bird, the Ellen R. Weiner Family Revocable Trust,
Claypoole Capital, LLC and Christian J. Hoffmann III (the "Holders"). Each
Holder has qualified as an "accredited investor" as that term is defined in the
Securities Act of 1933, as amended (the "Act"). Pursuant to the Allonges, the
Company amended and restated the Notes to extend the maturity date of the Notes
from January 2, 2007 until January 3, 2008. The Company will also pay all
accrued interest, through February 15, 2007 and each calendar quarter
thereafter, in the form of units (the "Units")at the rate of $0.20 per Unit (the
"Interest Payment Rate"). The Notes are convertible into Units at any time prior
to the Maturity Date at the conversion price of $0.20 per Unit (the "Conversion
Price"). Each Unit is composed of one share of the Company's Common Stock and on
Class A Common Stock Purchase Warrant (the "Class A Warrant"). Each Class A
Warrant expires on January 2, 2001 and is exercisable to purchase one share of
Common Stock at a price of $0.20 per share (the "Exercise Price"). If the Holder
exercises Class A Warrants on or before July 3, 2008, the Company will issue the
Holder one Class B Common Stock Purchase Warrant (the "Class B Warrant" and with
the Class A Warrant, collectively, the "Warrants") for every two Class A
Warrants exercised. Each Class B Warrant has a three-year term and is
exercisable to purchase one share of Common Stock at a price equal to the
greater of $0.20 per share or 75% of the average of the closing bid prices of
the Common Stock for the five trading days immediately preceding the date of the
notice of conversion. This transaction was exempt from registration pursuant to
Regulation D promulgated under the Securities Act of 1933.

COMMON STOCK

         In April 2006, the Company issued 3,086 shares of restricted common
stock at $0.81 per share in payment for investor relations valued at $2,500
based on the value of the services. This transaction was exempt from
registration pursuant to section 4(2) of the Securities Act of 1933.

         In April 2006, the Company repaid a $25,000 15% promissory notes,
including accrued interest of $18,750, through the issuance of 107,759
restricted common shares at $0.406 per share to an accredited individual
investor. There was no gain or loss on the extinguishment. This transaction was
exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

         In May 2006, the Company issued 4,545 shares of restricted common stock
at $0.55 per share in payment for investor relations valued at $2,500 based on
the value of the services. This transaction was exempt from registration
pursuant to section 4(2) of the Securities Act of 1933.

         In July 2006, the Company issued 6,250 shares of restricted common
stock at $0.40 per share in payment for investor relations services to the
Company valued at $2,500 based on the value of the services. This transaction
was exempt from registration pursuant to section 4(2) of the Securities Act of
1933.

         In July 2006, the Company issued 7,813 shares of restricted common
stock at $0.32 per share in payment for investor relations services to the
Company valued at $2,500 based on the value of the services. This transaction
was exempt from registration pursuant to section 4(2) of the Securities Act of
1933.

         In August 2006, the Company issued 114,132 shares of restricted common
stock at $0.20 per share in payment for accrued accounting consulting services
provided to the Company by a third party valued at $23,111 based upon the value
of the services. This transaction was exempt from registration pursuant to
section 4(2) of the Securities Act of 1933.

         In October 2006, the Company issued 8,065 shares of restricted common
stock at $0.31 per share in payment for investor relations services to the
Company valued at $2,500 based on the value of the services. This transaction
was exempt from registration pursuant to section 4(2) of the Securities Act of
1933.

         In October 2006, the Company issued 8,929 shares of restricted common
stock at $0.28 per share in payment for investor relations services to the
Company valued at $2,500 based on the value of the services. This transaction
was exempt from registration pursuant to section 4(2) of the Securities Act of
1933.

         In November 2006, the Company issued 555,556 shares of restricted
common stock at $0.18 per share in exchange for an investment of $100,000. As an
inducement the Company also issued five-year warrants to purchase a number of
shares equal to the number of restricted shares issued converted at a fixed
exercise price of $0.18. Additionally, if the warrants are exercised prior to
November 14, 2007, the holder will receive an additional warrant on the same
terms as the warrants. This transaction was exempt from registration pursuant to
Regulation D promulgated under the Securities Act of 1933.

         In December 2006, the Company issued 40,000 shares of restricted common
stock at $0.25 per share in exchange for license and development rights related
to certain intellectual property valued at $10,000 based on the fair market
value of the intellectual property license. This transaction was exempt from
registration pursuant to section 4(2) of the Securities Act of 1933.

                                       48

<PAGE>

         On March 31, 2007, we entered into a common stock purchase agreement
(the "Purchase Agreement"), as amended on August 10, 2007, with Fusion Capital
Fund II, LLC, an Illinois limited liability company ("Fusion Capital") for the
purchase of up to $8.4 million. We agreed to sell to Fusion Capital 1,333,333
shares of our common stock for $400,000 on March 27, 2007. We agreed to issue to
Fusion Capital 1,050,000 shares of our common stock as a commitment fee for
entering into the Purchase Agreement. These issuances were exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

FISCAL YEAR ENDED MARCH 31, 2006

CONVERTIBLE DEBT AND WARRANTS

         On May 16, 2005 the Company issued Fusion Capital ("Fusion") a $30,000
Convertible Promissory Note (the "Note") with an interest rate of fifteen
percent (15%) per annum that matured on August 15, 2005. In addition, the
Company also issued a five-year, cashless warrant to purchase 300,000 shares of
the Company's common stock at an exercise price of $0.25. The Note was converted
into 174,716 restricted shares of common stock in March 2006. This transaction
was exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

         From July 11, 2005 through December 15, 2005 the Company received cash
investments of $760,000 from an accredited investor (Ellen R. Weiner Family
Revocable Trust) based on agreed-upon terms reached on the cash receipt dates.
Such investments were documented on November 2, 2005, November 4, 2005 and
December 15, 2005 in three 10% Series A Convertible Notes ("Weiner Series A
Notes"). The Weiner Series A Notes accrue interest at a rate of ten percent
(10%) per annum and mature on January 2, 2007. The Weiner Series A Notes are
convertible into shares of restricted common stock at any time at the election
of the holder at a conversion price equal to $0.20 per share for any conversion
occurring on or prior to the maturity date. In addition, upon conversion, the
Company is obligated to issue three-year Warrants (the "Weiner Series A
Warrants") to purchase a number of shares equal to the number of shares into
which the Weiner Series A Notes can be converted at an exercise price of $0.20.
The Weiner Series A Warrants have been valued using a Binomial Lattice option
pricing model and an associated discount of $531,875, measured at the commitment
dates, will be expensed as future conversions occur. The convertible feature of
the Weiner Series A Notes provides for a rate of conversion that is below market
value. Pursuant to EITF 98-5 and EITF 00-27, the Company has estimated the fair
value of such BCF to be $228,125 and records such amount as a debt discount.
Such discount is being accreted to interest expense over the term of the Weiner
Series A Notes. This transaction was exempt from registration pursuant to
Regulation D promulgated under the Securities Act of 1933.

         From August 8, 2005 through December 14, 2005 the Company received cash
investments of $225,000, from an accredited investor (Allan S. Bird) based on
agreed upon terms reached on the cash receipt dates. Such investments were
documented on November 2, 2005, November 7, 2005 and December 14, 2005 in three
10% Series A Convertible Notes ("Bird Series A Notes"). The Bird Series A Notes
accrue interest at a rate of ten percent (10%) per annum and mature on January
2, 2007. The Bird Series A Notes are convertible into shares of restricted
common stock at any time at the election of the holder at a conversion price
equal to $0.20 per share for any conversion occurring on or prior to the
maturity date. In addition, upon conversion, the Company is obligated to issue
three-year Warrants (the "Bird Series A Warrants") to purchase a number of
shares equal to the number of shares into which the Bird Series A Notes can be
converted at an exercise price of $0.20. The Bird Series A Warrants have been
valued using a Binomial Lattice option pricing model and an associated discount
of $183,000, measured at the commitment dates. The discount will be expensed
when the warrants are issued when future debt conversions occur. The convertible
feature of the Bird Series A Note provides for a rate of conversion that is
below market value. Pursuant to EITF 98-5 and EITF 00-27, the Company has
estimated the fair value of such BCF to be $42,000 and records such amount as a
debt discount. Such discount is being accreted to interest expense over the term
of the Bird Series A Note. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

         On December 15, 2005, the Company received total cash investments of
$15,000 from two related accredited investors (Christian Hoffmann III and
Claypoole Capital, LLC). Such investments were documented in two 10% Series A
Convertible Notes ("December Notes"). The December Notes accrue interest at a
rate of ten percent (10%) per annum and mature on January 2, 2007. The December
Notes are convertible into shares of restricted common stock at any time at the
election of the holder at a conversion price of $0.20 per share for any
conversion occurring on or before the maturity date. In addition, upon
conversion, the Company is obligated to issue three-year Warrants (the "December
Warrants") to purchase a number of shares equal to the number of shares into
which the December Notes were converted at an exercise p rice of $0.20. The
December Warrants have been valued using a Binomial Lattice option pricing model
and an associated discount of $15,000, measured at the commitment date and the
discount will be expensed when the warrants are issued upon the occurrence of
future debt conversion. This transaction was exempt from registration pursuant
to Regulation D promulgated under the Securities Act of 1933.


                                       49

<PAGE>

COMMON STOCK AND WARRANTS

         In May 2005 the Company issued 100,000 shares of common stock and a
warrant to purchase 400,000 shares of common stock at a purchase price of $0.176
per share to an accredited investor for $17,600. This transaction was exempt
from registration pursuant to Regulation D promulgated under the Securities Act
of 1933.

         In June 2005, the Company issued 836,730 shares of restricted common
stock and a three-year warrant to purchase 418,365 shares of the Company's
restricted common stock at an exercise price of $0.25 to legal counsel as an
inducement to settle accrued past due legal services payable in the amount of
$167,346 which had been expensed in the prior fiscal year. At the time of the
settlement, the shares of the Company's restricted common stock were valued at
$209,183 and, using a Black-Scholes option pricing model, the warrant was valued
at $100,408. Additional non-cash expense of $142,245 was recorded as
professional fees expense during the quarter ended June 30, 2005. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

COMMON STOCK

         In December 2005, the Company issued 73,964 shares of restricted common
stock at $0.246 per share in payment of legal fees related to capital raising
transactions valued at $18,202. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

         In January 2006, the Company issued 579,813 shares of restricted common
stock at $0.24 per share in payment for patent fees valued at $139,155. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

         In January 2006, the Company issued 66,017 shares of restricted common
stock at Prices ranging from $0.28 to $0.33 per share in payment for investor
relations. This transaction was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.

         During March 2006, the Company issued 568,181 shares of common stock,
at $0.76 per share, to Fusion Capital for total proceeds of $431,818 pursuant to
an outstanding warrant held by Fusion Capital. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

         In March 2006, the Company repaid a $30,000 10% promissory notes,
including accrued interest of $4,564, through the issuance of 140,000 restricted
common shares at $0.25 per share to an accredited individual investor. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

         In March 2006, a $30,000 15% convertible note was converted at $0.20
per share for 174,716 shares of common stock at a price of $0.20 per share. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

         In March 2006, the Company issued 150,000 shares of restricted common
stock at $0.326 per share in payment of profession services related to investor
relations valued at $49,000. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

         In March 2006, the Company issued 35,714 shares of restricted common
stock at $0.28 per share in payment of profession services related to investor
relations valued at $10,000. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

         In March 2006, the Company issued 15,152 shares of restricted common
stock at $0.33 per share in payment of profession services related to investor
relations valued at $5,000. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

         In March 2006, the Company issued 33,333 shares of restricted common
stock at $0.33 per share in payment of an option agreement valued at $10,000.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

OPTIONS

         On September 9, 2005, the Company granted 2,857,143 options to James A.
Joyce, its Chief Executive Officer, in exchange for $300,000 of accrued
related-party liabilities. The fair value of such options approximated the value
of the accrued related-party liability. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.


                                       50

<PAGE>

FISCAL YEAR ENDED MARCH 31, 2005

NOTES PAYABLE

         In October 2004, the Company issued two $40,000, 10% one year
promissory notes each with 80,000 three-year warrants to purchase common stock
at $0.50 per share and 44,444 three-year warrants to purchase common stock at
$0.90 per share for cash in a total amount of $80,000 to two accredited
individual investors. This transaction was exempt from registration pursuant to
Regulation D promulgated under the Securities Act of 1933.

         In October 2004, the Company issued a $50,000, 10% one-year promissory
note plus 100,000 three-year warrants to purchase common stock at $0.50 per
share and 55,555 three-year warrants to purchase common stock at $0.90 per share
for cash in the amount of $50,000 to an accredited individual investor. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

COMMON STOCK

         In April 2004, the Company issued 500,000 shares of restricted common
stock to an accredited individual investor in connection with the exercise of
warrants at $0.25 per share for cash totaling $125,000. This transaction was
exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

         In April 2004, the Company issued 17,143 shares at $1.75 per share to
an accredited individual investor for investor relations services in the amount
of $30,000. This transaction was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.

         In April 2004, the Company issued 50,000 shares of restricted common
stock to Fusion Capital Fund II, LLC, an accredited institutional investor, for
a financing commitment to provide $6,000,000 under a common stock purchase
agreement. In connection with this agreement the Company paid a fee to Fusion
Capital in the amount of 418,604 shares of common stock. These issuances were
exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

         In May 2004, the Company issued 225,000 shares of common stock at $0.44
per share and 225,000 warrants to purchase the Company's common stock at a price
of $0.76 per share to legal counsel for legal services in the amount of $99,000,
which was recorded as expense in the accompanying consolidated financial
statements. This transaction was exempt from registration pursuant to Section
4(2)of the Securities Act of 1933.

         In May 2004, a $50,000 10% convertible note was converted at $0.44 per
share for 113,636 shares of common stock and 113,636 warrants to purchase the
Company's common stock at a price of $0.76 per share. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

         In May 2004, we issued fourteen accredited investors a total of 847,727
shares of restricted stock at a price of $0.44 per share for cash totaling
$373,000. In connection with the issuance of these shares, we granted the
stockholders 1,529,545 warrants to purchase our common stock at a price of $0.76
per share. The warrants vested immediately and expire on fifth anniversary from
the date of a registration statement covering the common stock underlying such
warrants is declared effective. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

         In May 2004, the Company issued 568,181 shares of restricted common
stock to Fusion Capital at $0.44 per share for cash totaling $250,000. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

         In July 2004, the Company issued 10,715 shares of restricted common
stock at $0.70 per share to an accredited individual for employee placement
services in the amount of $7,500. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

         In July 2004, the Company issued 6,850 shares of restricted common
stock at $0.73 per share to an accredited individual for consulting services on
opportunities for the Company's Hemopurifier(TM) within the biodefense
marketplace in the amount of $5,000. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

         In August 2004, the Company issued 46,364 shares of restricted common
stock at $0.55 per share to an accredited individual for employee placement
services in the amount of $25,500. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

         In August 2004, the Company issued 165,492 and 28,377 shares of
restricted common stock at $0.25 and $0.45 per share, respectively. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.


                                       51

<PAGE>

         In September 2004, the Company issued 479,513 shares of restricted
common stock to an accredited investor, in conjunction with the conversion of
$125,000 in principal amount of notes, plus accrued interest, at $0.34 per
share, in accordance with their convertible note agreement (see Note 8). This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

         In November and December 2004, the Company issued 80,000 shares of
restricted common stock to an accredited individual investor in connection with
the exercise of 80,000 warrants at $0.25 per share for consideration of a
$20,000 reduction in the principal amount of a 10% one-year promissory note.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

         In December 2004, the Company issued 461,667 shares of restricted
common stock to two accredited individual investors in connection with the
exercise of 461,667 warrants at $0.25 per share for cash totaling $115,417. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

         In December 2004, the Company repaid two $25,000 12% promissory notes,
including accrued interest of $17,778 each, through the issuance of 87,303
restricted common shares at $0.49 per share to each of two separate accredited
individual investors. These transactions were exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933.

         In December 2004, the Company issued 60,000 shares of restricted common
stock at $0.50 per share under a consulting agreement with an accredited
individual investor, for investor relations consulting services to the Company.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

         In January 2005, the Company issued 55,556 shares of restricted common
stock at $0.36 per share and a warrant to purchase 55,556 shares of common stock
at $0.44 per share for cash in the amount of $20,000 to an accredited individual
investor. This transaction was exempt from registration pursuant to Section
4(2)of the Securities Act of 1933.

         In January 2005, the Company issued 66,666 shares of restricted common
stock at $0.45 per share to an accredited individual investor under a consulting
agreement for investor relations services to the Company. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

         In January 2005, the Company issued 25,834 shares of restricted common
stock to an accredited individual investor in connection with the exercise of a
warrant to purchase 25,834 shares of common stock at $0.25 per share for cash
totaling $6,459. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

         In February 2005, the Company issued 139,063 shares of restricted
common stock to an accredited individual investor in connection with the
exercise of a warrant to purchase 139,063 shares of common stock at $0.25 per
share for cash totaling $34,766. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

         In February 2005, the Company issued 90,000 shares of restricted common
stock at $0.27 per share and a three-year warrant to purchase 90,000 shares of
common stock at $0.34 per share for cash in the amount of $24,300 to an
accredited individual investor. This transaction was exempt from registration
pursuant to Section 4(2)of the Securities Act of 1933.

         During the year ended March 31, 2005, the Company issued an additional
total of 1,416,958 shares of restricted common stock at prices ranging from
$0.25 to $0.52 for total cash proceeds of approximately $541,000. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

         During the year ended March 31, 2005, the Company issued an additional
557,647 shares of restricted common stock at prices ranging from $0.25 to $0.55
under various consulting service agreements for total recorded value of
approximately $196,000. This transaction was exempt from registration pursuant
to Section 4(2)of the Securities Act of 1933.

WARRANTS

         In August 2004, the Company issued a one-year warrant, which vests
immediately, to purchase 7,000 shares of common stock at $0.55 per share to an
accredited corporate entity in conjunction with a $6,000 fee for investor and
public relations services. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.


                                       52

<PAGE>

         During the year ended March 31, 2005, the Company granted 568,181
warrants to an investor in connection with a commitment fee for the purchase of
common stock. The warrants have an exercise price of $0.76 per share, vest
immediately and are exercisable through May 2009. As the warrants were issued in
connection with equity financing, no expense has been recorded in the
accompanying consolidated financial statements. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

         During the year ended March 31, 2005, the Company granted 847,727
warrants to investors in connection with the purchase of common stock. The
warrants have an exercise price of $0.76 per share, vest immediately and are
exercisable through May 2009. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

         During the year ended March 31, 2005, the Company issued 113,636
warrants to purchase common stock for $0.76 per share, which are exercisable
through May 2009 and vested upon grant. The warrants were issued in connection
with the conversion of notes payable. This transaction was exempt from
registration pursuant to Section 4(2)of the Securities Act of 1933.

         During the year ended March 31, 2005, the Company issued 225,000
warrants to purchase common stock for $0.76 per share, which are exercisable
through May 2009 and vested upon grant. The warrants were issued in connection
with common stock issued for legal services expense totaling $99,000 (see
"Common Stock" above). This transaction was exempt from registration pursuant to
Section 4(2)of the Securities Act of 1933.

         During the year ended March 31, 2005, the Company issued 260,000
warrants to purchase common stock for $0.50 per share, which vested upon grant
and expire in October 2007. The warrants were issued in connection with the
issuance of notes payable. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

         During the year ended March 31, 2005, the Company issued 144,443
warrants to purchase common stock for $0.90 per share, which vested upon grant
and expire in October 2007. The warrants were issued in connection with the
issuance of notes payable. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

         During the year ended March 31, 2005, the Company granted 55,556
warrants to an investor in connection with the purchase of common stock. The
warrants have an exercise price of $0.44 per share, vest immediately and are
exercisable through January 2008. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

         During the year ended March 31, 2005, the Company granted 90,000
warrants to investors in connection with the purchase of common stock. The
warrants have an exercise price of $0.34 per share, vest immediately and are
exercisable through February 2008. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

         During the year ended March 31, 2005, 1,206,564 warrants with a
exercise price of $0.25 per share, which were granted to investors in connection
with the purchase of common stock, were exercised. This transaction was exempt
from registration pursuant to Regulation D promulgated under the Securities Act
of 1933.

OPTIONS

         In February 2005, the Board of Directors granted the Company's Chief
Executive Officer ("CEO")and Chief Scientific Officer ("CSO") non-qualified
stock options to purchase up to 2,231,100 and 1,734,350 shares of common stock,
respectively, at an exercise price of $0.38 per share and vest fifty percent
immediately, twenty-five percent in December 2005 and twenty-five percent in
December 2006. In addition Mr. Calvin Leung, a board member, was granted
non-qualified stock options to purchase up to 308,725 shares at $0.38 that vest
fifty percent immediately, twenty-five percent in December 2005 and twenty-five
percent in December 2006. Messrs. Franklyn S Barry and Edward G Broenniman,
board members, were each granted non-qualified stock options to purchase up to
514,550 shares at $0.38 that vest forty percent immediately, twenty-five percent
in December 2005 and twenty-five percent in December 2006. All of these options
granted expire in 2010 and 2011 and were granted at a price that was $0.08 below
the estimated fair value of the underlying common stock on the date of grant.
This transaction was exempt from registration pursuant to Section 4(2)of the
Securities Act of 1933.


                                       53


<PAGE>

EXHIBITS

3.1               Articles of Incorporation of Aethlon Medical, Inc. (1)
3.2               Bylaws of Aethlon Medical, Inc. (1)
3.3               Certificate of Amendment of Articles of Incorporation dated
                  March 28, 2000 (2)
3.4               Certificate of Amendment of Articles of Incorporation dated
                  June 13, 2005(16)
3.5               Certificate of Amendment of Articles of Incorporation dated
                  March 6, 2007 (17)
5.1*              Legal opinion by Richardson & Patel LLP
10.1              Employment Letter between Aethlon Medical, Inc. and James
                  Dorst dated July 29, 2005 (15)
10.2              Employment Agreement between Aethlon Medical, Inc. and James
                  A. Joyce dated April 1, 1999 (3)
10.3              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Aethlon, Inc. dated March 10, 1999 (4)
10.4              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Hemex, Inc. dated March 10, 1999 (4)
10.5              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Syngen Research, Inc. (5)
10.6              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Cell Activation, Inc. (6)
10.7              2003 Consultant Stock Plan, as amended August 2005 (7)
10.8              Lease by and between Aethlon Medical, Inc. and San Diego
                  Science Center (8)
10.9              Patent License Agreement by and amongst Aethlon Medical, Inc.,
                  Hemex, Inc., Dr. Julian L. Ambrus and Dr. David O. Scamurra
                  (8)
10.10             Employment Agreement by and between Aethlon Medical, Inc. and
                  Dr. Richard H. Tullis (8)
10.11*            Cooperative Agreement by and between Aethlon Medical, Inc. and
                  George Mason University
10.12             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and James A. Joyce (10)
10.13             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and Richard Tullis (10)
10.14             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and Franklyn S. Barry (10)
10.15             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and Ed Broenniman (10)
10.16             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and James A. Joyce (11)
10.17             10% Convertible Promissory Note by and between Aethlon Medical
                  and Allan S. Bird (12)
10.18             10% Convertible Promissory Note by and between Aethlon Medical
                  and Ellen R. Weiner Family Revocable Trust (12)
10.19             Form of Warrant for the benefit of Allan S. Bird and Ellen R.
                  Weiner Family Revocable Trust (12)
10.20             Form of Registration Rights Agreement by and between Aethlon
                  Medical and Allan S. Bird and Ellen R. Weiner Revocable Trust
                  (12)
10.21             10% Convertible Promissory Note by and between Aethlon
                  Medical, Inc. and Christian J. Hoffmann III (16)
10.22             10% Convertible Promissory Note by and between Aethlon
                  Medical, Inc. and Claypoole Capital, LLC (16)
10.23             Form of Warrant for the benefit of Christian J. Hoffmann III
                  and Claypoole Capital, LLC (16)
10.24             Form of Registration Rights Agreement by and between Aethlon
                  Medical, Inc. and Christian J. Hoffmann III and Claypoole
                  Capital, LLC (16)
10.25             Warrant for the benefit of Fusion Capital Fund II, LLC dated
                  March 31, 2006 (17)
10.26*            Common Stock Purchase Agreement by and between Aethlon
                  Medical, Inc. and Fusion Capital Fund II, LLC dated March 21,
                  2007
10.27*            Registration Rights Agreement by and between Aethlon Medical,
                  Inc. and Fusion Capital Fund II, LLC dated March 21, 2007
10.28*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and between Aethlon Medical, Inc. and Christian
                  Hoffman III
10.29*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and amongs Aethlon Medical, Inc., Joel S. Aaronson,
                  Patricia Green, Christina J. Bird, Co-Executor of the Estate
                  of Allan S. Bird
10.30*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and between Aethlon Medical, Inc. and Claypoole
                  Capital, LLC
10.31*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and between Aethlon Medical, Inc. and Ellen R.
                  Weiner Family Revocable Trust
10.32*            Form of Registration Rights Agreement for Amended and Restated
                  Notes and Warrants
10.33*            Form of Class A Warrant
10.34*            Form of Class A Principal Warrant
10.35*            Form of Class A-1 Warrant
10.36*            Form of 10% Convertible Note


                                       54

<PAGE>

10.37*            Form of Class B Warrant
10.38*            Form of Class B-1 Warrant
10.39*            Form of Amended and Restated 10% Convertible Notes
10.40             Form of Unit Securities including Promissory Note and Common
                  Stock Purchase Warrants (9)
10.41*            Form of Unit Offering Subscription Agreement
10.42*            Form of Common Stock Warrant
10.43*            Form of Unit Securities including Promissory Note and Common
                  Stock Purchase Warrant
10.44*            First Amendment to Common Stock Purchase Agreement by and
                  between Aethlon Medical, Inc. and Fusion Capital Fund II, LLC
                  dated March 21, 2007
14*               Code of Ethics
21                List of subsidiaries (10)
23.1              Consent of Squar, Milner, Peterson, Miranda & Williamson, LLP,
                  Independent Registered Public Accounting Firm
23.2              Consent of Richardson & Patel LLP (included in Exhibit 5.1)


      * FILED HEREWITH
(1)      Filed with the Company's Registration Statement on Form SB-2 dated
         December 18, 2000 and incorporated by reference.
(2)      Filed with the Company's Annual Report on Form 10-KSB for the year
         ended March 31, 2000 and incorporated by reference.
(3)      Filed with the Company's Annual Report on Form 10-KSB for the year
         ended March 31, 1999 and incorporated by reference.
(4)      Filed with the Company's Current Report on Form 8-K dated March 10,
         1999 and incorporated by reference.
(5)      Filed with the Company's Current Report on Form 8-K dated January 10,
         2000 and incorporated by reference.
(6)      Filed with the Company's Current Report on Form 8-K dated April 10,
         2000 and incorporated by reference.
(7)      Incorporated by reference from our Registration Statement on Form
         S-8(File No. 333-114017) filed on August 29, 2005.
(8)      Filed with the Company's Annual Report on Form 10-KSB/A for the year
         ended March 31, 2004 and incorporated by reference.
(9)      Filed with the Company's Current Report on Form 8-K dated December 11,
         2007 and incorporated by reference. (10) Filed with the Company's
         Annual Report on Form 10-KSB for the year ended
         March 31, 2005 and incorporated by reference.
(11)     Filed with the Company's Current Report on Form 8-K dated September 9,
         2005 and incorporated by reference.
(12)     Filed with the Company's Current Report on Form 8-K dated November 7,
         2005 and incorporated by reference.
(13)     Filed with the Company's Post-Effective Amendment No.1 to Registration
         Statement on Form SB-2 filed on December 8, 2005 and incorporated by
         reference.
(14)     Filed with the Company's Current Report on Form 8-K dated June 14, 2005
         and incorporated by reference.
(15)     Filed with the Company's Current Report on Form 8-K dated March 7, 2007
         and incorporated by reference.
(16)     Filed with the Company's Registration Statement on Form SB-2 filed on
         January 9, 2006 and incorporated by reference.
(17)     Filed with the Company's Current Report on Form 8-K dated April 4, 2006
         and incorporated by reference.


         UNDERTAKINGS.

         We hereby undertake to:

1.       File, during any period in which we offer or sell securities, a
         post-effective amendment to this registration statement to:

         (i)      Include any prospectus required by Section 10(a)(3) of the
                  Securities Act;

         (ii)     Reflect in the prospectus any facts or events which,
                  individually or together, represent a fundamental change in
                  the information in the registration statement; and
                  notwithstanding the foregoing, any increase or decrease in
                  volume of securities offered (if the total dollar value of
                  securities offered would not exceed that which was registered)
                  and any deviation from the low or high end of the estimated
                  maximum offering range may be reflected in the form of
                  prospectus filed with the SEC under Rule 424(b) if, in the
                  aggregate, the changes in the volume and price represent no
                  more than a 20% change in the maximum aggregate offering price
                  set forth in the "Calculation of Registration Fee" table on
                  the face page of the effective registration statement; or


                                       55

<PAGE>

         (iii)    Include any additional or changed material information on the
                  plan of distribution.

2.       For determining liability under the Securities Act, treat each
         post-effective amendment as a new registration statement of the
         securities offered, and the offering of the securities at that time to
         be the initial bona fide offering.

3.       For determining liability of the undersigned small business issuer
         under the Securities Act to any purchaser in the initial distribution
         of the securities, the undersigned small business issuer undertakes
         that in a primary offering of securities of the undersigned small
         business issuer pursuant to this registration statement, regardless of
         the underwriting method used to sell the securities to the purchaser,
         if the securities are offered or sold to such purchaser by means of any
         of the following communications, the undersigned small business issuer
         will be a seller to the purchaser and will be considered to offer or
         sell such securities to such purchaser: Any preliminary prospectus or
         prospectus of the undersigned small business issuer relating to the
         offering required to be filed pursuant to Rule 424; Any free writing
         prospectus relating to the offering prepared by or on behalf of the
         undersigned small business issuer or used or referred to by the
         undersigned small business issuer; The portion of any other free
         writing prospectus relating to the offering containing material
         information about the undersigned small business issuer or its
         securities provided by or on behalf of the undersigned small business
         issuer; and Any other communication that is an offer in the offering
         made by the undersigned small business issuer to the purchaser.

4.       File a post-effective amendment to remove from registration any of the
         securities that remain unsold at the end of the offering.

5.       Each prospectus filed by the undersigned small business issuer pursuant
         to Rule 424(b)(3) shall be deemed to be part of the registration
         statement as of the date the filed prospectus was deemed part of and
         included in the registration statement.

6.       Each prospectus filed pursuant to Rule 424(b) as part of a registration
         statement relating to an offering, other than registration statements
         relying on Rule 430B or other than prospectuses filed in reliance on
         Rule 430A, shall be deemed to be part of and included in the
         registration statement as of the date it is first used after
         effectiveness. Provided, however, that no statement made in a
         registration statement or prospectus that is part of the registration
         statement or made in a document incorporated or deemed incorporated by
         reference into the registration statement or prospectus that is part of
         the registration statement will, as to a purchaser with a time of
         contract of sale prior to such first use, supersede or modify any
         statement that was made in the registration statement or prospectus
         that was part of the registration statement or made in any such
         document immediately prior to such date of first use.

7.       Each prospectus required to be filed pursuant to Rule 424(b)(2),
         (b)(5), or (b)(7) as part of a registration statement in reliance on
         Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),
         (vii), or (x) for the purpose of providing the information required by
         section 10(a) of the Securities Act shall be deemed to be part of and
         included in the registration statement as of the earlier of the date
         such form of prospectus is first used after effectiveness or the date
         of the first contract of sale of securities in the offering described
         in the prospectus. As provided in Rule 430B, for liability purposes of
         the issuer and any person that is at that date an Underwriter, such
         date shall be deemed to be a new effective date of the registration
         statement Relating to the securities in the registration statement to
         which that prospectus relates, and the offering of such securities at
         that time shall be deemed to be the initial bona fide offering thereof.
         Provided, however, that no statement made in a registration statement
         or prospectus that is part of the registration statement will, as to a
         purchaser with a time of contract of sale prior to such effective date,
         supersede or modify any statement that was made in the registration
         statement or prospectus that was part of the registration statement or
         made in any such document immediately prior to such effective date.

5.       Insofar as indemnification for liabilities arising under the Securities
         Act may be permitted to our directors, officers and controlling persons
         under the foregoing provisions or otherwise, we have been advised that
         in the opinion of the SEC such indemnification is against public policy
         as expressed in the Securities Act and is, therefore, unenforceable. If
         a claim for indemnification against such liabilities (other than our
         payment of expenses incurred or paid by any of our directors, officers
         or controlling persons in the successful defense of any action, suit,
         or proceeding) is asserted by such director, officer or controlling
         person in connection with the securities being registered, we will,
         unless in the opinion of our counsel the matter has been settled by a
         controlling precedent, submit to a court of appropriate jurisdiction
         the question whether such indemnification by us is against public
         policy as expressed in the Securities Act and will be governed by the
         final adjudication of such issue.


                                       56


<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Form S-1 Registration Statement and
authorized this Form S-1 Registration Statement to be signed on its behalf by
the undersigned, in the City of San Diego, State of California on February 8,
2008.
                                        AETHLON MEDICAL, INC.

                                    By: /s/ James A. Joyce
                                        -------------------------------------
                                        James A. Joyce
                                        Chief Executive Officer, President and
                                        Chief Accounting Officer
                                        (principal executive officer)


         In accordance with the requirements of the Securities Act of 1933, this
Form S-1 Registration Statement was signed by the following persons in the
capacities and on the dates stated:


<TABLE>
<S>                                       <C>                                               <C>
By: /S/ James A. Joyce                    President, Chief Executive Officer,               February 8, 2008
   --------------------------------       Chief Accounting Officer and Chairman
    James A. Joyce                        (principal executive officer)

By: /S/ Richard H. Tullis                 Chief Science Officer and Director                February 8, 2008
    --------------------------------
    Richard H. Tullis

By: /S/ Franklyn S. Barry, Jr.            Director                                          February 8, 2008
    --------------------------------
    Franklyn S. Barry, Jr.

By: /S/ Edward Broenniman                 Director                                          February 8, 2008
    --------------------------------
    Edward Broenniman
</TABLE>


                                       57


<PAGE>

EXHIBIT INDEX

3.1               Articles of Incorporation of Aethlon Medical, Inc. (1)
3.2               Bylaws of Aethlon Medical, Inc. (1)
3.3               Certificate of Amendment of Articles of Incorporation dated
                  March 28, 2000 (2)
3.4               Certificate of Amendment of Articles of Incorporation dated
                  June 13, 2005(16)
3.5               Certificate of Amendment of Articles of Incorporation dated
                  March 6, 2007 (17)
5.1*              Legal opinion by Richardson & Patel LLP
10.1              Employment Letter between Aethlon Medical, Inc. and James
                  Dorst dated July 29, 2005 (15)
10.2              Employment Agreement between Aethlon Medical, Inc. and James
                  A. Joyce dated April 1, 1999 (3)
10.3              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Aethlon, Inc. dated March 10, 1999 (4)
10.4              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Hemex, Inc. dated March 10, 1999 (4)
10.5              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Syngen Research, Inc. (5)
10.6              Agreement and Plan of Reorganization Between Aethlon Medical,
                  Inc. and Cell Activation, Inc. (6)
10.7              2003 Consultant Stock Plan, as amended August 2005 (7)
10.8              Lease by and between Aethlon Medical, Inc. and San Diego
                  Science Center (8)
10.9              Patent License Agreement by and amongst Aethlon Medical, Inc.,
                  Hemex, Inc., Dr. Julian L. Ambrus and Dr. David O. Scamurra
                  (8)
10.10             Employment Agreement by and between Aethlon Medical, Inc. and
                  Dr. Richard H. Tullis (8)
10.11*            Cooperative Agreement by and between Aethlon Medical, Inc. and
                  George Mason University
10.12             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and James A. Joyce (10)
10.13             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and Richard Tullis (10)
10.14             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and Franklyn S. Barry (10)
10.15             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and Ed Broenniman (10)
10.16             Stock Option Agreement by and between Aethlon Medical, Inc.
                  and James A. Joyce (11)
10.17             10% Convertible Promissory Note by and between Aethlon Medical
                  and Allan S. Bird (12)
10.18             10% Convertible Promissory Note by and between Aethlon Medical
                  and Ellen R. Weiner Family Revocable Trust (12)
10.19             Form of Warrant for the benefit of Allan S. Bird and Ellen R.
                  Weiner Family Revocable Trust (12)
10.20             Form of Registration Rights Agreement by and between Aethlon
                  Medical and Allan S. Bird and Ellen R. Weiner Revocable Trust
                  (12)
10.21             10% Convertible Promissory Note by and between Aethlon
                  Medical, Inc. and Christian J. Hoffmann III (16)
10.22             10% Convertible Promissory Note by and between Aethlon
                  Medical, Inc. and Claypoole Capital, LLC (16)
10.23             Form of Warrant for the benefit of Christian J. Hoffmann III
                  and Claypoole Capital, LLC (16)
10.24             Form of Registration Rights Agreement by and between Aethlon
                  Medical, Inc. and Christian J. Hoffmann III and Claypoole
                  Capital, LLC (16)
10.25             Warrant for the benefit of Fusion Capital Fund II, LLC dated
                  March 31, 2006 (17)
10.26*            Common Stock Purchase Agreement by and between Aethlon
                  Medical, Inc. and Fusion Capital Fund II, LLC dated March 21,
                  2007
10.27*            Registration Rights Agreement by and between Aethlon Medical,
                  Inc. and Fusion Capital Fund II, LLC dated March 21, 2007
10.28*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and between Aethlon Medical, Inc. and Christian
                  Hoffman III
10.29*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and amongs Aethlon Medical, Inc., Joel S. Aaronson,
                  Patricia Green, Christina J. Bird, Co-Executor of the Estate
                  of Allan S. Bird
10.30*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and between Aethlon Medical, Inc. and Claypoole
                  Capital, LLC
10.31*            Form of Allonge to 10% Series A Convertible Notes dated March
                  5, 2007 by and between Aethlon Medical, Inc. and Ellen R.
                  Weiner Family Revocable Trust
10.32*            Form of Registration Rights Agreement for Amended and Restated
                  Notes and Warrants
10.33*            Form of Class A Warrant
10.34*            Form of Class A Principal Warrant
10.35*            Form of Class A-1 Warrant
10.36*            Form of 10% Convertible Note


                                       58

<PAGE>

10.37*            Form of Class B Warrant
10.38*            Form of Class B-1 Warrant
10.39*            Form of Amended and Restated 10% Convertible Notes
10.40             Form of Unit Securities including Promissory Note and Common
                  Stock Purchase Warrants (9)
10.41*            Form of Unit Offering Subscription Agreement
10.42*            Form of Common Stock Warrant
10.43*            Form of Unit Securities including Promissory Note and Common
                  Stock Purchase Warrant
10.44*            First Amendment to Common Stock Purchase Agreement by and
                  between Aethlon Medical, Inc. and Fusion Capital Fund II, LLC
                  dated March 21, 2007
14*               Code of Ethics
21                List of subsidiaries (10)
23.1              Consent of Squar, Milner, Peterson, Miranda & Williamson, LLP,
                  Independent Registered Public Accounting Firm
23.2              Consent of Richardson & Patel LLP (included in Exhibit 5.1)


      * FILED HEREWITH
(1)      Filed with the Company's Registration Statement on Form SB-2 dated
         December 18, 2000 and incorporated by reference.
(2)      Filed with the Company's Annual Report on Form 10-KSB for the year
         ended March 31, 2000 and incorporated by reference.
(3)      Filed with the Company's Annual Report on Form 10-KSB for the year
         ended March 31, 1999 and incorporated by reference.
(4)      Filed with the Company's Current Report on Form 8-K dated March 10,
         1999 and incorporated by reference.
(5)      Filed with the Company's Current Report on Form 8-K dated January 10,
         2000 and incorporated by reference.
(6)      Filed with the Company's Current Report on Form 8-K dated April 10,
         2000 and incorporated by reference.
(7)      Incorporated by reference from our Registration Statement on Form
         S-8(File No. 333-114017) filed on August 29, 2005.
(8)      Filed with the Company's Annual Report on Form 10-KSB/A for the year
         ended March 31, 2004 and incorporated by reference.
(9)      Filed with the Company's Current Report on Form 8-K dated December 11,
         2007 and incorporated by reference. (10) Filed with the Company's
         Annual Report on Form 10-KSB for the year ended
         March 31, 2005 and incorporated by reference.
(11)     Filed with the Company's Current Report on Form 8-K dated September 9,
         2005 and incorporated by reference.
(12)     Filed with the Company's Current Report on Form 8-K dated November 7,
         2005 and incorporated by reference.
(13)     Filed with the Company's Post-Effective Amendment No.1 to Registration
         Statement on Form SB-2 filed on December 8, 2005 and incorporated by
         reference.
(14)     Filed with the Company's Current Report on Form 8-K dated June 14, 2005
         and incorporated by reference.
(15)     Filed with the Company's Current Report on Form 8-K dated March 7, 2007
         and incorporated by reference.
(16)     Filed with the Company's Registration Statement on Form SB-2 filed on
         January 9, 2006 and incorporated by reference.
(17)     Filed with the Company's Current Report on Form 8-K dated April 4, 2006
         and incorporated by reference.


                                       59

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>2
<FILENAME>aethlon_sb2-ex0501.txt
<DESCRIPTION>OPINION
<TEXT>
<PAGE>

                                                                     EXHIBIT 5.1

                               RICHARDSON & PATEL
                              10900 WILSHIRE BLVD.
                                    SUITE 500
                          LOS ANGELES, CALIFORNIA 90024
                            TELEPHONE (310) 208-1183
                            FACSIMILE (310) 208-1154

                                February 11, 2008
Aethlon Medical, Inc.
3030 Bunker Hill Street
Suite 4000
San Diego, CA 92109


         Re:   REGISTRATION STATEMENT ON FORM S-1
               ----------------------------------

Ladies and Gentlemen:

We have acted as counsel to Aethlon Medical, Inc., a Nevada corporation (the
"Company"), in connection with the registration with the Securities and Exchange
Commission (the "Commission") on Form S-1 (the "Registration Statement") of
8,000,000 shares of the Company's common stock, par value $0.001 (the "Shares"),
to be issued to the selling stockholder under the terms of the Common Stock
Purchase Agreement, as amended, between the Company and Fusion Capital Fund II,
LLC (the "Purchase Agreement") as described in the Registration Statement. In
connection with the Registration Statement, we have reviewed the proceedings of
the Board of Directors of the Company relating to the registration and the
issuance (or proposed issuance) of the Shares, the Company's Certificate of
Incorporation and all amendments thereto, the Bylaws of the Company and all
amendments thereto, and such other documents and matters as we have deemed
necessary to render the following opinion.

Based upon that review, it is our opinion that the Shares that may be issued
under the terms of the Purchase Agreemnet, will be legally issued, fully paid,
and non-assessable under Nevada law, including the statutory provisions, all
applicable provisions of the Nevada Constitution and all reported judicial
decisions interpreting those laws.

We hereby consent to the use of this opinion in the registration statement filed
with the Commission in connection with the registration of the Shares and to
reference to our firm under the heading "Legal Matters" in the registration
statement and the prospectus included therein. In giving such consent, we do not
consider that we are "experts" within the meaning of such term as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Commission issued thereunder, with respect to any part of the registration
statement, including this opinion as an exhibit or otherwise.

                                        /s/ RICHARDSON & PATEL LLP


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14
<SEQUENCE>3
<FILENAME>aethlon_sb2-ex0014.txt
<DESCRIPTION>CODE OF CONDUCT
<TEXT>
<PAGE>

                                                                      EXHIBIT 14

                       CODE OF BUSINESS CONDUCT AND ETHICS
                     (AS APPROVED BY THE BOARD OF DIRECTORS

THIS CODE APPLIES TO EVERY DIRECTOR, OFFICER (INCLUDING THE CHIEF EXECUTIVE
OFFICER, PRESIDENT AND CHIEF FINANCIAL OFFICER), AND EMPLOYEE OF AETHLON
MEDICAL, INC., (THE "COMPANY").

To further the Company's fundamental principles of honesty, loyalty, fairness
and forthrightness, the Board of Directors of the Company (the "BOARD:") has
established and adopted this Code of Business Conduct and Ethics (this "CODE").

This Code strives to deter wrongdoing and promote the following six objectives:

o        honest and ethical conduct;

o        avoidance of conflicts of interest;

o        full, fair, accurate, timely and transparent disclosure;

o        compliance with applicable government and self-regulatory organization
         laws, rules and regulations;

o        prompt internal reporting of Code violations; and

o        accountability for compliance with the Code.

Below, we discuss situations that require application of our fundamental
principles and promotion of our objectives. If you believe there is a conflict
between this Code and a specific procedure, please consult the Company's Board
of Directors for guidance.

Each of our directors, officers and employees is expected to:

o        understand the requirements of your position, including Company
         expectations and governmental rules and regulations that apply to your
         position;

o        comply with this Code and all applicable laws, rules and regulations;

o        report any violation of this Code of which you become aware; and

o        be accountable for complying with this Code.


                                       -1-
<PAGE>

TABLE OF CONTENTS
================================================================================

ETHICS ADMINISTRATOR...........................................................3
ACCOUNTING POLICIES............................................................3
AMENDMENTS AND MODIFICATIONS OF THIS CODE......................................3
ANTI-BOYCOTT AND U.S. SANCTIONS LAWS...........................................3
ANTITRUST AND FAIR COMPETITION LAWS............................................4
BRIBERY........................................................................5
COMPLIANCE WITH LAWS, RULES AND REGULATIONS....................................5
COMPUTER AND INFORMATION SYSTEMS...............................................5
CONFIDENTIAL INFORMATION BELONGING TO OTHERS...................................5
CONFIDENTIAL AND PROPRIETARY INFORMATION.......................................6
CONFLICTS OF INTEREST..........................................................7
CORPORATE OPPORTUNITIES AND USE AND PROTECTION OF COMPANY ASSETS...............8
DISCIPLINE FOR NONCOMPLIANCE WITH THIS CODE....................................8
DISCLOSURE POLICIES AND CONTROLS...............................................8
ENVIRONMENT, HEALTH AND SAFETY.................................................9
FILING OF GOVERNMENT REPORTS...................................................9
FOREIGN CORRUPT PRACTICES ACT..................................................9
INSIDER TRADING OR TIPPING....................................................10
INTELLECTUAL PROPERTY: PATENTS, COPYRIGHTS AND TRADEMARKS.....................11
INVESTOR RELATIONS AND PUBLIC AFFAIRS.........................................11
POLITICAL CONTRIBUTIONS.......................................................11
PROHIBITED SUBSTANCES.........................................................12
RECORD RETENTION..............................................................12
REPORTING VIOLATIONS OF THIS CODE.............................................12
WAIVERS.......................................................................13
CONCLUSION....................................................................13


                                       -2-
<PAGE>

ETHICS ADMINISTRATOR
================================================================================

All matters concerning this Code shall be heard by the Board of Directors.

ACCOUNTING POLICIES
================================================================================

The Company will make and keep books, records and accounts, which in reasonable
detail accurately and fairly present the Company's transactions.

All directors, officers, employees and other persons are prohibited from
directly or indirectly falsifying or causing to be false or misleading any
financial or accounting book, record or account. You and others are expressly
prohibited from directly or indirectly manipulating an audit, and from
destroying or tampering with any record, document or tangible object with the
intent to obstruct a pending or contemplated audit, review or federal
investigation. The commission of, or participation in, one of these prohibited
activities or other illegal conduct will subject you to federal penalties, as
well as to punishment, up to and including termination of employment.

No director, officer or employee of the Company may directly or indirectly make
or cause to be made a materially false or misleading statement, or omit to
state, or cause another person to omit to state, any material fact necessary to
make statements made not misleading, in connection with the audit of financial
statements by independent accountants, the preparation of any required reports
whether by independent or internal accountants, or any other work which involves
or relates to the filing of a document with the Securities and Exchange
Commission ("SEC").

AMENDMENTS AND MODIFICATIONS OF THIS CODE
================================================================================

There shall be no amendment or modification to this Code except upon approval by
the Board of Directors.

In case of any amendment or modification of this Code that applies to an officer
or director of the Company, the amendment or modification shall be posted on the
Company's website within two days of the board vote or shall be otherwise
disclosed as required by applicable law or the rules of any stock exchange or
market on which the Company's securities are listed for trading. Notice posted
on the website shall remain there for a period of twelve months and shall be
retained in the Company's files as required by law.

ANTI-BOYCOTT AND U.S. SANCTIONS LAWS
================================================================================

The Company must comply with anti-boycott laws of the United States, which
prohibit it from participating in, and require us to report to the authorities
any request to participate in, a boycott of a country or businesses within a
country. If you receive such a request, report it to your immediate superior,
our CEO, or to the chairman of the Board of Directors. We will also not engage
in business with any government, entity, organization or individual where doing
so is prohibited by applicable laws.

                                       -3-
<PAGE>

ANTITRUST AND FAIR COMPETITION LAWS
================================================================================

The purpose of antitrust laws of the United States and most other countries is
to provide a level playing field to economic competitors and to promote fair
competition. No director, officer or employee, under any circumstances or in any
context, may enter into any understanding or agreement, whether express or
implied, formal or informal, written or oral, with an actual or potential
competitor, which would illegally limit or restrict in any way either party's
actions, including the offers of either party to any third party. This
prohibition includes any action relating to prices, costs, profits, products,
services, terms or conditions of sale, market share or customer or supplier
classification or selection.

It is our policy to comply with all U.S. antitrust laws. This policy is not to
be compromised or qualified by anyone acting for or on behalf of our Company.
You must understand and comply with the antitrust laws as they may bear upon
your activities and decisions. Anti-competitive behavior in violation of
antitrust laws can result in criminal penalties, both for you and for the
Company. Accordingly, any question regarding compliance with antitrust laws or
your responsibilities under this policy should be directed to our CEO or the
chairman of the Board of Directors, who may then direct you to our legal
counsel. Any director, officer or employee found to have knowingly participated
in violating the antitrust laws will be subject to disciplinary action, up to
and including termination of employment.

Below are some scenarios that are prohibited and scenarios that could be
prohibited for antitrust reasons. These scenarios are not an exhaustive list of
all prohibited and possibly prohibited antitrust conduct.

    o    Proposals or agreements or understanding, express or implied, formal or
         informal, written or oral, with any competitor regarding any aspect of
         competition between the Company and the competitor for sales to third
         parties;

    o    Proposals or agreements or understandings with customers which restrict
         the price or other terms at which the customer may resell or lease any
         product to a third party; or

    o    Proposals or agreements or understandings with suppliers which restrict
         the price or other terms at which the Company may resell or lease any
         product or service to a third party.

The following business arrangements could raise anti-competition or antitrust
law issues. Before entering into them, you must consult with our CEO or the
chairman of the Board of Directors, who may then direct you to our legal
counsel:

    o    Exclusive arrangements for the purchase or sale of products or
         services;

    o    Bundling of goods and services; or

    o    Agreements to add an employee of the Company to another entity's board
         of Directors.

                                       -4-
<PAGE>

BRIBERY
================================================================================

You are strictly forbidden from offering, promising or giving money, gifts,
loans, rewards, favors or anything of value to any governmental official,
employee, agent or other intermediary (either inside or outside the United
States) which is prohibited by law. Those paying a bribe may subject the Company
and themselves to civil and criminal penalties. When dealing with government
customers or officials, no improper payments will be tolerated. If you receive
any offer of money or gifts that is intended to influence a business decision,
it should be reported to your supervisor our CEO or the chairman of the Board of
Directors immediately.

The Company prohibits improper payments in all of its activities, whether these
activities are with governments or in the private sector.

COMPLIANCE WITH LAWS, RULES AND REGULATIONS
================================================================================

The Company's goal and intention is to comply with the laws, rules and
regulations by which we are governed. In fact, we strive to comply not only with
requirements of the law but also with recognized compliance practices. All
illegal activities or illegal conduct are prohibited whether or not they are
specifically set forth in this Code.

Where law does not govern a situation or where the law is unclear or
conflicting, you should discuss the situation with your supervisor, our CEO or
the chairman of the Board of Directors, who may then direct you to our legal
counsel. Business should always be conducted in a fair and forthright manner.
Directors, officers and employees are expected to act according to high ethical
standards.

COMPUTER AND INFORMATION SYSTEMS
================================================================================

For business purposes, officers and employees are provided telephones and
computer workstations and software, including network access to computing
systems such as the Internet and e-mail, to improve personal productivity and to
efficiently manage proprietary information in a secure and reliable manner. You
must obtain the permission from your supervisor or our CEO to install any
software on any Company computer or connect any personal laptop to the Company
network. As with other equipment and assets of the Company, we are each
responsible for the appropriate use of these assets. Except for limited personal
use of the Company's telephones and computer/e-mail, such equipment may be used
only for business purposes. Officers and employees should not expect a right to
privacy of their e-mail or Internet use. All e-mails or Internet use on Company
equipment is subject to monitoring by the Company.

CONFIDENTIAL INFORMATION BELONGING TO OTHERS
================================================================================

You must respect the confidentiality of information, including, but not limited
to, trade secrets and other information given in confidence by others, just as
we protect our own confidential information. This includes, but is not limited
to partners, suppliers, contractors, competitors or customers. However, certain
restrictions about the information of others may place an unfair burden on the
Company's future business. For that reason, directors, officers and employees
should coordinate with your supervisor or the CEO to ensure appropriate


                                       -5-
<PAGE>

agreements are in place prior to receiving any confidential third-party
information. In addition, any confidential information that you may possess from
an outside source, such as a previous employer, must not, so long as such
information remains confidential, be disclosed to or used by the Company.
Unsolicited confidential information submitted to the Company should be refused,
returned to the sender where possible and deleted, if received via the Internet.

CONFIDENTIAL AND PROPRIETARY INFORMATION
================================================================================

It is the Company's policy to ensure that all operations, activities and
business affairs of the Company and our business associates are kept
confidential to the greatest extent possible. Confidential information includes
all non-public information that might be of use to competitors, or that might be
harmful to the Company or its customers if disclosed. Confidential and
proprietary information about the Company or its business associates belongs to
the Company, must be treated with strictest confidence and is not to be
disclosed or discussed with others.

Unless otherwise agreed to in writing, confidential and proprietary information
includes any and all information from which the Company may derive an economic
benefit, including, but not limited to, methods, inventions, improvements or
discoveries, whether or not patentable or copyrightable, and any other
information of a similar nature disclosed to the directors, officers or
employees of the Company or otherwise made known to the Company as a consequence
of or through employment or association with the Company (including information
originated by the director, officer or employee). This can include, but is not
limited to, information regarding the Company's business, products, processes,
and services. It also can include information relating to research, development,
inventions, trade secrets, intellectual property of any type or description,
data, business plans, marketing strategies, engineering, contract negotiations,
contents of the Company intranet and business methods or practices.

The following are examples of information that is not considered confidential:

    o    information that is in the public domain to the extent it is readily
         available;

    o    information that becomes generally known to the public other than by
         disclosure by the Company or a director, officer or employee; or

    o    information you receive from a party that is under no legal obligation
         of confidentiality with the Company with respect to such information.

We have exclusive property rights to all confidential and proprietary
information regarding the Company or our business associates. The unauthorized
disclosure of this information could destroy its value to the Company and give
others an unfair advantage. You are responsible for safeguarding Company
information and complying with established security controls and procedures. All
documents, records, notebooks, notes, memoranda and similar repositories of
information containing information of a secret, proprietary, confidential or
generally undisclosed nature relating to the Company or our operations and
activities, including any copies thereof, unless otherwise agreed to in writing,
belong to the Company and shall be held by you in trust solely for the benefit
of the Company. Confidential or proprietary information must be delivered to the
Company by you on the termination of your association with us or at any other
time we request.


                                       -6-
<PAGE>

CONFLICTS OF INTEREST
================================================================================

Conflicts of interest can arise in virtually every area of our operations. A
"conflict of interest" exists whenever an individual's private interests
interfere or conflict in any way (or even appear to interfere or conflict) with
the interests of the Company. We must strive to avoid conflicts of interest. We
must each make decisions solely in the best interest of the Company. Any
business, financial or other relationship with suppliers, customers or
competitors that might impair or appear to impair the exercise of our judgment
solely for the benefit of the Company is prohibited.

Here are some examples of conflicts of interest:

    o    FAMILY MEMBERS--Actions of family members may create a conflict of
         interest. For example, gifts to family members by a supplier of the
         Company are considered gifts to you and must be reported. Doing
         business for the Company with organizations where your family members
         are employed or that are partially or fully owned by your family
         members or close friends may create a conflict or the appearance of a
         conflict of interest. For purposes of this Code "family members"
         includes any child, stepchild, grandchild, parent, stepparent,
         grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
         daughter-in-law, brother-in-law or sister-in-law, and adoptive
         relationships.

    o    GIFTS, ENTERTAINMENT, LOANS, OR OTHER FAVORS--Directors, officers and
         employees shall not seek or accept personal gain, directly or
         indirectly, from anyone soliciting business from, or doing business
         with, the Company, or from any person or entity in competition with us.
         Examples of such personal gains are gifts, non-business-related trips,
         gratuities, favors, loans, and guarantees of loans, excessive
         entertainment or rewards. However, you may accept gifts of a nominal
         value. Other than common business courtesies, directors, officers,
         employees and independent contractors must not offer or provide
         anything to any person or organization for the purpose of influencing
         the person or organization in their business relationship with us.

         Directors, officers and employees are expected to deal with advisors
         or suppliers who best serve the needs of the Company as to price,
         quality and service in making decisions concerning the use or purchase
         of materials, equipment, property or services. Directors, officers and
         employees who use the Company's advisors, suppliers or contractors in
         a personal capacity are expected to pay market value for materials and
         services provided.

    o    OUTSIDE EMPLOYMENT--Officers and employees may not participate in
         outside employment, self-employment, or serve as officers, directors,
         partners or consultants for outside organizations, if such activity:

         o    reduces work efficiency;

         o    interferes with your ability to act conscientiously in our best
              interest; or

                                       -7-
<PAGE>

         o    requires you to utilize our proprietary or confidential
              procedures, plans or techniques.

You must inform your supervisor or the CEO of any outside employment, including
the employer's name and expected work hours.

You should report any actual or potential conflict of interest involving
yourself or others of which you become aware to your supervisor or our CEO.
Officers and directors should report any actual or potential conflict of
interest involving yourself or others of which you become aware to the chairman
of the Board of Directors.

CORPORATE OPPORTUNITIES AND USE AND PROTECTION OF COMPANY ASSETS
================================================================================

You are prohibited from:

    o    taking for yourself, personally, opportunities that are discovered
         through the use of Company property, information or position;

    o    using Company property, information or position for personal gain; or

    o    competing with the Company.

You have a duty to the Company to advance its legitimate interests when the
opportunity to do so arises.

You are personally responsible and accountable for the proper expenditure of
Company funds, including money spent for travel expenses or for customer
entertainment. You are also responsible for the proper use of property over
which you have control, including both Company property and funds and property
that customers or others have entrusted to your custody. Company assets must be
used only for proper purposes.

Company property should not be misused. Company property may not be sold, loaned
or given away regardless of condition or value, without proper authorization.
Each director, officer and employee should protect our assets and ensure their
efficient use. Theft, carelessness and waste have a direct impact on the
Company's profitability. Company assets should be used only for legitimate
business purposes.

DISCIPLINE FOR NONCOMPLIANCE WITH THIS CODE
================================================================================

Disciplinary actions for violations of this Code can include oral or written
reprimands, suspension or termination of employment or a potential civil lawsuit
against you. The violation of laws, rules or regulations, which can subject the
Company to fines and other penalties, may result in your criminal prosecution.

DISCLOSURE POLICIES AND CONTROLS
================================================================================

The continuing excellence of the Company's reputation depends upon our full and
complete disclosure of important information about the Company that is used in
the securities marketplace. Our financial and non-financial disclosures and
filings with the SEC must be transparent, accurate and timely. We must all work
together to insure that reliable, truthful and accurate information is disclosed
to the public.

                                      -8-
<PAGE>

The Company must disclose to the SEC, current security holders and the investing
public information that is required, and any additional information that may be
necessary to ensure the required disclosures are not misleading or inaccurate.
The Company requires you to participate in the disclosure process, which is
overseen by our CEO and CFO. The disclosure process is designed to record,
process, summarize and report material information as required by all applicable
laws, rules and regulations. Participation in the disclosure process is a
requirement of a public company, and full cooperation and participation by our
CEO, CFO and, upon request, other employees in the disclosure process is a
requirement of this Code.

Officers and employees must fully comply with their disclosure responsibilities
in an accurate and timely manner or be subject to discipline of up to and
including termination of employment.

ENVIRONMENT, HEALTH AND SAFETY
================================================================================

The Company is committed to managing and operating our assets in a manner that
is protective of human health and safety and the environment. It is our policy
to comply, in all material respects, with applicable health, safety and
environmental laws and regulations. Each employee is also expected to comply
with our policies, programs, standards and procedures.

FILING OF GOVERNMENT REPORTS
================================================================================

Any reports or information provided, on our behalf, to federal, state, local or
foreign governments should be true, complete and accurate. Any omission,
misstatement or lack of attention to detail could result in a violation of the
reporting laws, rules and regulations.

FOREIGN CORRUPT PRACTICES ACT
================================================================================

The United States Foreign Corrupt Practices Act prohibits giving anything of
value, directly or indirectly, to foreign government officials or foreign
political candidates in order to obtain, retain or direct business. Accordingly,
corporate funds, property or anything of value may not be, directly or
indirectly, offered or given by you or an agent acting on our behalf, to a
foreign official, foreign political party or official thereof or any candidate
for a foreign political office for the purpose of influencing any act or
decision of such foreign person or inducing such person to use his influence or
in order to assist in obtaining or retaining business for, or directing business
to, any person.

You are also prohibited from offering or paying anything of value to any foreign
person if it is known or there is a reason to know that all or part of such
payment will be used for the above-described prohibited actions. This provision
includes situations when intermediaries, such as affiliates, or agents, are used
to channel payoffs to foreign officials.

                                      -9-
<PAGE>

INSIDER TRADING OR TIPPING
================================================================================

Directors, officers and employees who are aware of material, non-public
information from or about the Company (an "INSIDER"), are not permitted,
directly or through family members or other persons or entities, to:

    o    buy or sell securities (or derivatives relating to such securities) of
         the Company, or

    o    pass on, tip or disclose material, nonpublic information to others
         outside the Company including family and friends.

Such buying, selling or trading of securities may be punished by discipline, up
to and including termination of employment; civil actions, resulting in
penalties of up to three times the amount of profit gained or loss avoided by
the inside trade or stock tip, or criminal actions, resulting in fines and jail
time.

Examples of information that may be considered material, non-public information
in some circumstances are:

    o    undisclosed annual, quarterly or monthly financial results, a change in
         earnings or earnings projections, or unexpected or unusual gains or
         losses in major operations;

    o    undisclosed negotiations and agreements regarding mergers, concessions,
         joint ventures, acquisitions, divestitures, business combinations or
         tender offers;

    o    undisclosed major management changes;

    o    a substantial contract award or termination that has not been publicly
         disclosed;

    o    a major lawsuit or claim that has not been publicly disclosed;

    o    the gain or loss of a significant customer or supplier that has not
         been publicly disclosed;

    o    an undisclosed filing of a bankruptcy petition by the Company;

    o    information that is considered confidential; and

    o    any other undisclosed information that could affect our stock price.

The same policy also applies to securities issued by another company if you have
acquired material, nonpublic information relating to such company in the course
of your employment or affiliation with the Company.

When material information has been publicly disclosed, each insider must
continue to refrain from buying or selling the securities in question until the
third business day after the information has been publicly released to allow the
markets time to absorb the information.

                                      -10-
<PAGE>

INTELLECTUAL PROPERTY: PATENTS, COPYRIGHTS AND TRADEMARKS
================================================================================

Except as otherwise agreed to in writing between the Company and an officer or
employee, all intellectual property you conceive or develop during the course of
your employment shall be the sole property of the Company. The term intellectual
property includes any invention, discovery, concept, idea, or writing whether
protectable or not by any United States or foreign copyright, trademark, patent,
or common law including, but not limited to, designs, materials, compositions of
matter, machines, processes, improvements, data, computer software, writings,
formula, techniques, know-how, methods, as well as improvements thereof or
know-how related thereto concerning any past, present, or prospective activities
of the Company. Officers and employees must promptly disclose in writing to the
Company any intellectual property developed or conceived either solely or with
others during the course of your employment and must render any and all aid and
assistance, at our expense, to secure the appropriate patent, copyright, or
trademark protection for such intellectual property.

Copyright laws may protect items posted on a website. Unless a website grants
permission to download the Internet content you generally only have the legal
right to view the content. If you do not have permission to download and
distribute specific website content you should contact your supervisor or our
CEO, who may refer you to our legal counsel.

If you are unclear as to the application of this Intellectual Property Policy or
if questions arise, please consult with your supervisor or our CEO, who may
refer you to our legal counsel.

INVESTOR RELATIONS AND PUBLIC AFFAIRS
================================================================================

It is very important that the information disseminated about the Company be both
accurate and consistent. For this reason, all matters relating to the Company's
internal and external communications are handled by our CEO (or, if retained for
such purpose, a public relations consultant). Our CEO (or a public relations
consultant retained by the Company) is solely responsible for public
communications with stockholders, analysts and other interested members of the
financial community. Our CEO (or a public relations consultant retained by the
Company) is also solely responsible for our marketing and advertising activities
and communication with employees, the media, local communities and government
officials. Our CEO serves as the Company's spokesperson in both routine and
crisis situations.

POLITICAL CONTRIBUTIONS
================================================================================

You must refrain from making any use of Company, personal or other funds or
resources on behalf of the Company for political or other purposes which are
improper or prohibited by the applicable federal, state, local or foreign laws,
rules or regulations. Company contributions or expenditures in connection with
election campaigns will be permitted only to the extent allowed by federal,
state, local or foreign election laws, rules and regulations.

You are encouraged to participate actively in the political process. We believe
that individual participation is a continuing responsibility of those who live
in a free country.

                                      -11-
<PAGE>

PROHIBITED SUBSTANCES
================================================================================

The use of alcohol, illegal drugs or other prohibited items, including legal
drugs which affect the ability to perform one's work duties, are prohibited
while on Company premises. We also prohibit the possession or use of alcoholic
beverages, firearms, weapons or explosives on our property, unless authorized by
our CEO. You are also prohibited from reporting to work while under the
influence of alcohol or illegal drugs. We reserve the right to perform
pre-employment and random drug testing on employees, as permitted by law.

RECORD RETENTION
================================================================================

The alteration, destruction or falsification of corporate documents or records
may constitute a criminal act. Destroying or altering documents with the intent
to obstruct a pending or anticipated official government proceeding is a
criminal act and could result in large fines and a prison sentence of up to 20
years. Document destruction or falsification in other contexts can result in a
violation of the federal securities laws or the obstruction of justice laws.

REPORTING VIOLATIONS OF THIS CODE
================================================================================

You should be alert and sensitive to situations that could result in actions
that might violate federal, state, or local laws or the standards of conduct set
forth in this Code. If you believe your own conduct or that of a fellow employee
may have violated any such laws or this Code, you have an obligation to report
the matter.

Generally, you should raise such matters first with an immediate supervisor.
However, if you are not comfortable bringing the matter up with your immediate
supervisor, or do not believe the supervisor has dealt with the matter properly,
then you should raise the matter with our CEO who may, if a law, rule or
regulation is in question, then refer you to our legal counsel. The most
important point is that possible violations should be reported and we support
all means of reporting them.

Directors and officers should report any potential violations of this Code to
the chairman of the Board of Directors or to our legal counsel.

We will not allow retaliation against an employee for reporting a possible
violation of this Code in good faith. Retaliation for reporting a federal
offense is illegal under federal law and prohibited under this Code. Retaliation
for reporting any violation of a law, rule or regulation or a provision of this
Code is prohibited. Retaliation will result in discipline, up to and including
termination of employment, and may also result in criminal prosecution. However,
if a reporting individual was involved in improper activity the individual may
be appropriately disciplined even if he or she was the one who disclosed the
matter to the Company. In these circumstances, we may consider the conduct of
the reporting individual in reporting the information as a mitigating factor in
any disciplinary decision.

                                      -12-
<PAGE>

WAIVERS
================================================================================

There shall be no waiver of any part of this Code for any director or officer
except by a vote of the Board of Directors. In case a waiver of this Code is
granted to a director or officer, the notice of such waiver shall be posted on
our website within five days of the Board's vote or shall be otherwise disclosed
as required by applicable law or the rules of any stock exchange or market on
which the Company's securities are listed for trading. Notices posted on our
website shall remain there for a period of 12 months and shall be retained in
our files as required by law.

CONCLUSION
================================================================================

This Code is an attempt to point all of us at the Company in the right
direction, but no document can achieve the level of principled compliance that
we are seeking. In reality, each of us must strive every day to maintain our
awareness of these issues and to comply with the Code's principles to the best
of our abilities. Before we take an action, we must always ask ourselves:

    o    Does it feel right?

    o    Is this action ethical in every way?

    o    Is this action in compliance with the law?

    o    Could my action create an appearance of impropriety?

    o    Am I trying to fool anyone, including myself, about the propriety of
         this action?

If an action would elicit the wrong answer to any of these questions, do not
take it. We cannot expect perfection, but we do expect good faith. If you act in
bad faith or fail to report illegal or unethical behavior, then you will be
subject to disciplinary procedures. We hope that you agree that the best course
of action is to be honest, forthright and loyal at all times.


                                      -13-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>4
<FILENAME>aethlon_sb2ex1011.txt
<DESCRIPTION>COOPERATIVE AGREEMENT
<TEXT>

<PAGE>

EXHIBIT 10.11


                 GEORGE MASON UNIVERSITY - AETHLON MEDICAL, INC.

                              COOPERATIVE AGREEMENT


                                    PREAMBLE

This Cooperative Agreement (hereinafter "Agreement") is entered into by and
between The Rector and Visitors of George Mason University, for its National
Center for Biodefense hereinafter called "GMU", a located at 4400 University
Drive, MS 4C6, Fairfax, VA 22030-4444, phone number (703) 993-2988, and Aethlon
Medical Inc., hereinafter called "Aethlon", a Nevada Corporation, with an office
located at 7625 Fay Avenue, Suite 200, La Jolla, California, 92037 phone number
(858) 459-7800. GMU and Aethlon are hereinafter referred to as "the Parties".

                                   I. RECITALS

1.01 Funding sources including, but not limited to the "Government", may make
available funding opportunities to support research activities that explore
and/or demonstrate the feasibility of apheresis treatment to certain bioweapons,
including certain CDC Class A toxins. Certain funding opportunities may also be
made available to support joint projects to demonstrate the practical or
commercial value of apheresis treatments for certain biodefense applications as
outlined in Appendix B (Projects). These funding opportunities may become
available in the form of an RFP to support such activities.

1.02 The Parties have complementary skills and capabilities which, taken
together, would allow the Parties to perform the Project

I .03 The Parties wish to form a teaming arrangement and to define their
respective rights, duties, and obligations thereunder.


                            II.OBJECTIVE AND DURATION

2.01 The objective of the teaming hereunder shall be to cooperate in identifying
possible funding sources and in preparing and submitting proposals in an attempt
to obtain the award of contracts for Projects resulting from any RFPs to support
these activities.

2.02 In each instance, the Parties shall determine which party will be the
prime. Both parties agree to prepare data required for any proposals and to
cooperate in integrating the data. The party designated as prime shall submit
the proposal with the other party identified in the proposal as the
subcontractor to provide following services as outlined in the proposal.

2.03 The duration of this Agreement shall be from the effective date hereof
until the occurrence of the earliest of the following events (subject, however,
to the provisions of Paragraph A.3, Attachment A hereto);

         a)  The failure or inability of either party to provide the support for
             the preparation of identified proposal opportunities.
         b)  Mutual consent of the Parties to terminate this Agreement.
         c)  Lapse of 24 months from the effective date of this agreement
             without award of a contract to support one or more Projects unless
             a procurement is still open.
         d)  The indictment, suspension, or debarment by the Government of
             either party.


                                                                     Page 1 of 6
<PAGE>

         e)  A Receiver, trustee in Bankruptcy, or other Custodian of the
             property or assets of a party hereto is appointed, or if either
             party hereto commits an act of bankruptcy or is adjudicated
             bankrupt or insolvent.
         f)  During the term hereof it is determined that either party may be
             ineligible for award due to an Organizational Conflict of Interest.


                            III. PROPOSAL PREPARATION

3.01 The party designated as prime shall have primary responsibility for the
preparation of all technical and non-technical aspects of the proposal
including, but not limited to:

         a)  Marketing and promotional effort;
         b)  Proposal content assembly and production;
         c)  Liaison with Government customer personnel;
         d)  Oral discussions and negotiations, if held.

3.02 The party designated as the subcontractor shall contribute to the
preparation of the proposal to the extent necessary to assure the inclusion of a
thorough and accurate description of its responsibilities in the Project.

Each party shall cooperate with the other (i) to provide such assistance as may
he required during the pre-proposal, proposal and post-proposal stages, (ii) to
furnish proposal material including manuscripts, graphic material and cost and
pricing data backup as required by the RIP or as appropriate, (iii) to assure
availability of management and technical personnel and (iv) to submit
management, technical and cost proposal materials and proposal clarifications
within required time frames as requested by the party assuming the prime
position.

Notwithstanding the provisions of Paragraph 3.01 preceding, the subcontractor
party shall be entitled to participate in oral discussions concerning its
contributions to the proposal and shall at all times be entitled to receive,
upon reasonable request, documentation and information concerning oral
discussions and negotiations between the prime party and the Government.
Further, the prime party shall in no way modify the proposal during discussions
or negotiations so as to either increase the risk of performance to, or decrease
potential cost or fee recovery by the subcontracting party unless the
subcontracting party specifically approves.

3.03 The subcontracting party will provide direct proposal support to the other
party in the development of proposals. Detailed proposal writing assignments
will be determined at a separate meeting or via separate communication between
GMU and Aethlon. All bid and proposal costs are the responsibility of the party
which incurs them and will not be paid by the other party.

3.04 GMU's contractual point of contact is Ann McQuigan, Ph.D. and the GMU
technical point of contact is Jerry Coughter. Aethlon's contractual point of
contact is James A. Joyce and the Aethlon technical point of contact is Richard
Tullis, Ph.D.

3.05 The Parties shall carry out the preparation of proposals and the conduct of
all negotiations and pricing, in accordance with all applicable laws and
regulations governing the applicable RFP and the award of any contract
thereunder,

3.06 Except as may otherwise be agreed in writing by the Parties, each of the
Parties shall bear its own expenses for its own performance of proposal and
related work.


                                                                     Page 2 of 6
<PAGE>

3.07 Contractor past performance may be a significant evaluation factor for the
solicitation. Both parties understand and agree that they will be required to
provide timely reports of all past performance information reasonably requested
by the prime party. The prime party reserves the right to independently contact
the points of contact provided in the other party's past performance citations
to determine the adequacy/appropriateness of those citations. The prime party,
at its sole discretion, may utilize in its proposal any or all citations
provided by the other party.


                         IV. FORMATION QF A SUBCONTRACT

4.01 Should a contract be awarded as a result of this Agreement, the Parties
agree to enter into good faith negotiations intending to culminate in a
subcontract to be awarded to the subcontracting party for its area of interest
identified in the relevant proposal subject to necessary Government approvals,
required flowdown clauses, and negotiation of mutually acceptable price,
delivery, terms, and conditions.


                              V. GENERAL PROVISIONS

5.01 No announcement, release, or other disclosure of information relating to
this Agreement shall be made except by specific written agreement of the
Parties.

5.02 This Agreement shall not constitute, create, or in any way be interpreted
as a joint venture, partnership, or formal business organization of any kind.
Neither party may assign or transfer its interests under this Agreement without
the written consent of the other party hereto except that GMU shall have the
right to assign its responsibilities under this Agreement to any division,
subsidiary, or affiliate thereof.

5.03 The efforts of both parties relating to any RFP in the area of a Project
shall be exclusive to this Agreement, and both parties, except as defined in
section 5.03.a, agree not to pursue the RFP either independently or in concert
with any additional party. In the event that the Government directs any change
affecting this Agreement in any material respect this Agreement shall be
modified in accordance with such direction, and the exclusivity of effort
described above shall continue to exist, except as the Government may
specifically prescribe, provided, however, that in no event shall this provision
be construed as a contract for the benefit of third parties.

5.03.a Aethlon is developing and commercializing the civilian use (defined as
non-military) of its proprietary Hemopurifier technology in conjunction with
parties other than GMU.

5.04 Attachment A hereto, entitled "Proprietary Data Provisions", is
incorporated by reference.

5.05 This Agreement is the entire agreement among the Parties and supersedes any
prior oral or written agreement or understanding pertaining to this Project.
Changes to this Agreement, to be effective, must be in writing and executed by
the Parties.

5.06 Notices shall be deemed given hereunder when received or, if mailed by
prepaid certified or registered mad return receipt requested, five (5) days
after mailing. Notices shall be addressed to the contractual point of contact
specified in Paragraph 3.03 of this Agreement at the addresses specified in the
PREAMBLE above. Either Party may change its cognizant point of contact by
written notice to the other.


                                                                     Page 3 of 6
<PAGE>

5.07 Neither party shall be liable to the other for any indirect, incidental,
special, or consequential damages, however caused, whether as a consequence of
the negligence of the one party or otherwise.

5.08 If any provision of this Agreement or part of such provision is or becomes
invalid or unenforceable, then the remaining provisions hereof shall continue to
be effective.

5.09 No waiver by a party of any of its rights or remedies shall be construed as
a waiver by such party of any other rights or remedies that such party may have
under this Agreement.

5.10 Any controversy or claim arising between the Parties out of or in
connection with the provisions of the Agreement shall he resolved by amicable
discussions between appropriate executives of the respective companies who are a
party to this Agreement. If such discussions do not result in a resolution of
the controversy or claim, either party may file suit in any court of competent
jurisdiction.

5.11 Inventions conceived solely by employees of Aethlon shall belong
exclusively to Aethlon. Inventions conceived solely by employees of SMU shall
belong exclusively to GMU. Inventions conceived jointly by the Parties hereto in
the course of work called for by this Agreement shall be subject to further
agreement of the Parties. This understanding is subject to modification as may
be required by applicable Government regulations, or the terms of the prime
contract or resultant subcontract between the Parties. Except as stated in the
preceding paragraph, nothing contained in this Agreement shall be deemed, by
implications, estoppel, or otherwise, to grant any right or license in respect
of any patents, inventions, or technical information at any time owned by the
other party.

5.12 Irrespective of the place of performance, this Agreement will be construed
and interpreted according to the Federal common law of Government contracts as
enunciated aid applied by Federal judicial bodies, Boards of Contract Appeals,
and quasi-judicial agencies of the Federal Government. To the extent that the
Federal common law of Government contracts is not dispositive, the laws of the
Commonwealth of Virginia shall apply..


                          VI. EXECUTION AND EFFECTIVITY

6.01 The Parties have executed this Agreement on the dates entered below. The
Agreement may be executed in two or more counterparts.

6.02 This Agreement is effective as of the last date entered below.


For AETHLON MEDICAL, INC.           For: GEORGE MASON UNIVERSITY

Signature:        //s//             Signature:        //s//
Printed Name:  James A Joyce        Printed Name:  Ann T McGuigan Phd
Title:  Chairman and CEO            Title: Director, Office of Sponsored Program
Date:   2/25/04                     Date:  2/25/04


                                                                     Page 4 of 6
<PAGE>


                                  ATTACHMENT A

                           PROPRIETARY DATA PROVISIONS

A.1 No party to this Agreement shall use, for any purpose not connected with the
Projects, or this Agreement, any data, as hereafter defined ("Data") or divulge
such Data to any person or entity other than appropriate Government agencies to
which proposals or reports must be submitted in connection With GMU's
performance. The foregoing limitations shall not apply to the disclosure or use
of any portion of such Data which:

     a)  The receiving party can demonstrate by written evidence was already
         known to it, prior to receiving it from the other party; or

     b)  Prior to the time of its disclosure hereunder to any party, has been
         published or otherwise made freely available to the general public; or

     e)  Subsequent to its disclosure hereunder to any other party is
         independently thereafter rightfully made available on an unrestricted
         basis to the public or the receiving party by the disclosing party or
         by another authorized party; or

     d)  is independently developed by the receiving party

For purposes of this Agreement, the term Data is defined to mean any technical
information, program or systems concept, financial information, or any other
information disclosed to it by the other patty in connection with the
performance of this Agreement. Nothing here n shall restrict a party from
disclosing any portion of such Data on a restricted basis pursuant to a judicial
or other lawful Government order, bet only to the extent of such order.

A.l No license to the other party, under any trademark, patent, or copyright,
domestic or foreign, is either granted or implied by the conveying of Data to a
party. None of the information which may be submitted or exchanged by the
Parties shall constitute any representation, warranty, assurance, guarantee, or
inducement by a party to the other with respect to the infringement of
trademarks, patents, copyrights, or other rights of third persons.

A.2 Notwithstanding any other portions of this Agreement, the obligations of
this Attachment A shall continue for a period of five (5) years from the
effective date of this Agreement.


                                                                     Page 5 of 6
<PAGE>

                                  ATTACHMENT B

                                STATEMENT OF WORK

B.1      Purpose

This attachment to the teaming agreement between GMU and Aethlon is provided to
delineate anticipated work responsibilities under any contract awarded as a
result of the Government's RFP to GMU. This attachment also discusses proposal
responsibilities.

B.1.1    Work Responsibilities

It is intended that the following will be required of one party as a
subcontractor to the other party during the performance of the contract
anticipated to be awarded as a result of the RFP; Such performance shall be
determined by mutual agreement of both parties prior to proposal preparation and
submission.

    o    To work jointly with GMU to perform experiments to demonstrate the
         feasibility of apheresis treatments to specific bioweapons. Target
         diseases may include:
             o   Small pox -> rabbit pox in rabbits
             o   Anthrax -> model to be determine

    o    To work jointly with GMU to obtain government or private funding for
         joint projects to demonstrate the practical or commercial value of
         apheresis treatments for biodefense application. Examples of target
         diseases include
             o   Anthrax
             o   Small pox
             o   Plague
             o   Tularemia


                                                                     Page 6 of 6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>5
<FILENAME>aethlon_sb2-ex1026.txt
<DESCRIPTION>COMMON STOCK PURCHASE AGREEMENT
<TEXT>
<PAGE>

EXHIBIT 10.26

                         COMMON STOCK PURCHASE AGREEMENT

       COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of March 21,
2007, by and between AETHLON MEDICAL, INC., a Nevada corporation (the
"Company"), and FUSION CAPITAL FUND II, LLC, an Illinois limited liability
company (the "Buyer"). Capitalized terms used herein and not otherwise defined
herein are defined in Section 10 hereof.

                                    WHEREAS:

         Subject to the terms and conditions set forth in this Agreement, the
Company wishes to sell to the Buyer, and the Buyer wishes to buy from the
Company, up to Eight Million Four Hundred Thousand Dollars ($8,400,000.00) of
the Company's common stock, par value $0.001 per share (the "Common Stock"). The
shares of Common Stock to be purchased hereunder are referred to herein as the
"Purchase Shares."

       NOW THEREFORE, the Company and the Buyer hereby agree as follows:

       1.     PURCHASE OF COMMON STOCK.

       Subject to the terms and conditions set forth in this Agreement, the
Company has the right to sell to the Buyer, and the Buyer has the obligation to
purchase from the Company, Purchase Shares as follows:

       (a)    Initial Purchase; Commencement of Base and Block Purchases of
Common Stock. On the Filing Date (as defined in Section 4(a) hereof), the Buyer
shall buy from the Company as of such date Four Hundred Thousand Dollars
($400,000.00) of Purchase Shares (the "Initial Purchase" and such Purchase
Shares are referred to herein as the "Initial Purchase Shares") at the lesser of
(i) the Purchase Price as of the Business Day prior to the Filing Date, or (ii)
$0.30. The Initial Purchase Shares shall be issued in certificated form and
(subject to Section 5 hereof) shall bear only the restrictive legend set forth
in Section 4(e) hereof. Thereafter, the purchase and sale of Purchase Shares
hereunder shall occur from time to time upon written notices by the Company to
the Buyer on the terms and conditions as set forth herein following the
satisfaction of the conditions (the "Commencement") as set forth in Sections 6
and 7 below (the date of satisfaction of such conditions, the "Commencement
Date").

       (b)    The Company's Right to Require Purchases. Any time on or after the
Commencement Date, the Company shall have the right but not the obligation to
direct the Buyer by its delivery to the Buyer of Base Purchase Notices from time
to time to buy Purchase Shares (each such purchase a "Base Purchase") in any
amount up to Thirty Two Thousand Dollars ($32,000.00) per Base Purchase Notice
(the "Base Purchase Amount") at the Purchase Price on the Purchase Date. The
Company may deliver multiple Base Purchase Notices to the Buyer so long as at
least two (2) Business Days have passed since the most recent Base Purchase was
completed. Notwithstanding the forgoing, any time on or after the Commencement
Date, the Company shall also have the right but not the obligation by its
delivery to the Buyer of Block Purchase Notices from time to time to direct the
Buyer to buy Purchase Shares (each such purchase a "Block Purchase") in any
amount up to One Million Dollars ($1,000,000.00) per Block Purchase Notice at
the Block Purchase Price on the Purchase Date as provided herein. For a Block
Purchase Notice to be valid the following conditions must be met: (1) the Block
Purchase Amount shall not exceed Fifty Thousand Dollars ($50,000.00) per Block
Purchase Notice, (2) the Company must deliver the Purchase Shares before 11:00


                                       1
<PAGE>

a.m. eastern time on the Purchase Date and (3) the Sale Price of the Common
Stock must not be below $0.30 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) during the Purchase Date, the date of the delivery of the
Block Purchase Notice and during the Business Day prior to the delivery of the
Block Purchase Notice. The Block Purchase Amount may be increased to up to One
Hundred Thousand Dollars ($100,000.00) per Block Purchase Notice if the Sale
Price of the Common Stock is not below $0.40 (subject to equitable adjustment
for any reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction) during the Purchase Date, the date of the delivery of
the Block Purchase Notice and during the Business Day prior to the delivery of
the Block Purchase Notice. The Block Purchase Amount may be increased to up to
Two Hundred Thousand Dollars ($200,000.00) per Block Purchase Notice if the Sale
Price of the Common Stock is not below $0.55 (subject to equitable adjustment
for any reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction) during the Purchase Date, the date of the delivery of
the Block Purchase Notice and during the Business Day prior to the delivery of
the Block Purchase Notice. The Block Purchase Amount may be increased to up to
Four Hundred Thousand Dollars ($400,000.00) per Block Purchase Notice if the
Sale Price of the Common Stock is not below $0.70 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) during the Purchase Date, the date of the
delivery of the Block Purchase Notice and during the Business Day prior to the
delivery of the Block Purchase Notice. The Block Purchase Amount may be
increased to up to One Million Dollars ($1,000,000.00) per Block Purchase Notice
if the Sale Price of the Common Stock is not below $1.50 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) during the Purchase Date, the date of the
delivery of the Block Purchase Notice and during the Business Day prior to the
delivery of the Block Purchase Notice. As used herein, the term "Block Purchase
Price" shall mean the lesser of (i) the lowest Sale Price of the Common Stock on
the Purchase Date or (ii) the lowest Purchase Price during the previous seven
(7) Business Days prior to the date that the valid Block Purchase Notice was
received by the Buyer. However, if at any time during the Purchase Date, the
date of the delivery of the Block Purchase Notice or during the Business Day
prior to the delivery of the Block Purchase Notice, the Sale Price of the Common
Stock is below the applicable Block Purchase threshold price, such Block
Purchase shall be void and the Buyer's obligations to buy Purchase Shares in
respect of that Block Purchase Notice shall be terminated. Thereafter, the
Company shall again have the right to submit a Block Purchase Notice as set
forth herein by delivery of a new Block Purchase Notice only if the Sale Price
of the Common Stock is above the applicable Block Purchase threshold price
during the date of the delivery of the Block Purchase Notice and during the
Business Day prior to the delivery of the Block Purchase Notice. The Company may
deliver multiple Block Purchase Notices to the Buyer so long as at least two (2)
Business Days have passed since the most recent Block Purchase was completed.

       (c)    Payment for Purchase Shares. The Buyer shall pay to the Company an
amount equal to the Purchase Amount with respect to such Purchase Shares as full
payment for such Purchase Shares via wire transfer of immediately available
funds on the same Business Day that the Buyer receives such Purchase Shares if
they are received by the Buyer before 11:00 a.m. eastern time or if received by
the Buyer after 11:00 a.m. eastern time, the next Business Day. The Company
shall not issue any fraction of a share of Common Stock upon any purchase. If
the issuance would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common Stock up or
down to the nearest whole share. All payments made under this Agreement shall be
made in lawful money of the United States of America or wire transfer of
immediately available funds to such account as the Company may from time to time
designate by written notice in accordance with the provisions of this Agreement.
Whenever any amount expressed to be due by the terms of this Agreement is due on
any day that is not a Business Day, the same shall instead be due on the next
succeeding day that is a Business Day.


                                       2
<PAGE>


       (d)    Purchase Price Floor. The Company and the Buyer shall not effect
any sales under this Agreement on any Purchase Date where the Purchase Price for
any purchases of Purchase Shares would be less than the Floor Price. "Floor
Price" means $0.25, which shall be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction.

       (e)    Records of Purchases. The Buyer and the Company shall each
maintain records showing the remaining Available Amount at any give time and the
dates and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.

       (f)    Taxes. The Company shall pay any and all transfer, stamp or
similar taxes that may be payable with respect to the issuance and delivery of
any shares of Common Stock to the Buyer made under this Agreement.

       2.     BUYER'S REPRESENTATIONS AND WARRANTIES.

       The Buyer represents and warrants to the Company that as of the date
hereof and as of the Commencement Date:

       (a)    Investment Purpose. The Buyer is entering into this Agreement and
acquiring the Commitment Shares, (as defined in Section 4(e) hereof) (this
Agreement, the Purchase Shares and the Commitment Shares are collectively
referred to herein as the "Securities"), for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof; provided however, by making the representations herein,
the Buyer does not agree to hold any of the Securities for any minimum or other
specific term.

       (b)    Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D.

       (c)    Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.

       (d)    Information. The Buyer has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been reasonably
requested by the Buyer, including, without limitation, the SEC Documents (as
defined in Section 3(f) hereof). The Buyer understands that its investment in
the Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.


                                       3
<PAGE>

       (e)    No Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

       (f)    Transfer or Sale. The Buyer understands that except as provided in
the Registration Rights Agreement (as defined in Section 4(a) hereof): (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Securities to be sold, assigned or transferred without
such registration; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.

       (g)    Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

       (h)    Residency. The Buyer is a resident of the State of Illinois.

       (i)    No Prior Short Selling. The Buyer represents and warrants to the
Company that at no time prior to the date of this Agreement has any of the
Buyer, its agents, representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is
defined in Section 242.200 of Regulation SHO of the Securities Exchange Act of
1934, as amended (the "1934 Act")) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.

       3.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

       The Company represents and warrants to the Buyer that as of the date
hereof and as of the Commencement Date:

       (a)    Organization and Qualification. The Company and its "Subsidiaries"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns 50% or more of the voting stock or capital stock or
other similar equity interests) are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authority to own their
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification


                                       4
<PAGE>

necessary, except to the extent that the failure to be so qualified or be in
good standing could not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, "Material Adverse Effect" means any material
adverse effect on any of: (i) the business, properties, assets, operations,
results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
in Section 3(b) hereof). The Company has no Subsidiaries except as set forth on
Schedule 3(a).

       (b)    Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement and each of
the other agreements entered into by the parties on the Commencement Date and
attached hereto as exhibits to this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation, the issuance of the Commitment Shares and
the reservation for issuance and the issuance of the Purchase Shares issuable
under this Agreement, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its shareholders, (iii) this Agreement has been, and
each other Transaction Document shall be on the Commencement Date, duly executed
and delivered by the Company and (iv) this Agreement constitutes, and each other
Transaction Document upon its execution on behalf of the Company, shall
constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. The
Board of Directors of the Company has approved the resolutions (the "Signing
Resolutions") substantially in the form as set forth as Exhibit C-1 attached
hereto to authorize this Agreement and the transactions contemplated hereby. The
Signing Resolutions are valid, in full force and effect and have not been
modified or supplemented in any respect other than by the resolutions set forth
in Exhibit C-2 attached hereto regarding the registration statement referred to
in Section 4 hereof. The Company has delivered to the Buyer a true and correct
copy of a unanimous written consent adopting the Signing Resolutions executed by
all of the members of the Board of Directors of the Company. No other approvals
or consents of the Company's Board of Directors and/or shareholders is necessary
under applicable laws and the Company's Certificate of Incorporation and/or
Bylaws to authorize the execution and delivery of this Agreement or any of the
transactions contemplated hereby, including, but not limited to, the issuance of
the Commitment Shares and the issuance of the Purchase Shares.

       (c)    Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 100,000,000 shares of Common Stock, of
which as of the date hereof, 29,423,874 shares are issued and outstanding, none
are held as treasury shares, 500,000 shares are reserved for issuance pursuant
to the Company's stock option plans of which 467,500 shares remain available for
future grants and 20,021,809 shares are issuable and reserved for issuance
pursuant to securities (other than stock options issued pursuant to the
Company's stock option plans) exercisable or exchangeable for, or convertible
into, shares of Common Stock and (ii) no shares of Preferred Stock are issued
and outstanding. All of such outstanding shares have been, or upon issuance will
be, validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or


                                       5
<PAGE>

arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement),
(v) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and the Company's By-laws, as amended and as in effect on
the date hereof (the "By-laws"), and summaries of the terms of all securities
convertible into or exercisable for Common Stock, if any, and copies of any
documents containing the material rights of the holders thereof in respect
thereto.

       (d)    Issuance of Securities. The Commitment Shares and the Initial
Purchase Shares have been duly authorized and, upon issuance (and payment
therefor in the case of the Initial Purchase Shares) in accordance with the
terms hereof, the Commitment Shares and Initial Purchase Shares shall be (i)
validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. 6,000,000 shares of Common
Stock have been duly authorized and reserved for issuance as Purchase Shares
under this Agreement after the Commencement. Upon issuance and payment therefor
in accordance with the terms and conditions of this Agreement, the Purchase
Shares shall be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock.

       (e)    No Conflicts. Except as disclosed in Schedule 3(e), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Purchase Shares) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market applicable to the Company or any
of its Subsidiaries) or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected, except in the case of conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
under clause (ii), which could not reasonably be expected to result in a
Material Adverse Effect. Except as disclosed in Schedule 3(e), neither the
Company nor its Subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation, any Certificate of Designation, Preferences
and Rights of any outstanding series of preferred stock of the Company or
By-laws or their organizational charter or by-laws, respectively. Except as
disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is
in violation of any term of or is in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations or


                                       6
<PAGE>

amendments which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted, in violation of any law, ordinance, regulation of
any governmental entity, except for possible violations, the sanctions for which
either individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act or applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. Except as disclosed in
Schedule 3(e), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence shall
be obtained or effected on or prior to the Commencement Date. Except as listed
in Schedule 3(e), since January 1, 2006, the Company has not received nor
delivered any notices or correspondence from or to the Principal Market. The
Principal Market has not commenced any delisting proceedings against the
Company.

       (f)    SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(f), since January 1, 2006,, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). As of
their respective dates (except as they have been correctly amended), the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC (except as they may have been properly amended), contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of
their respective dates (except as they have been properly amended), the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as listed in Schedule 3(f), the Company has received no
notices or correspondence from the SEC since January 1, 2006. The SEC has not
commenced any enforcement proceedings against the Company or any of its
subsidiaries.

       (g)    Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since January 1, 2007, there has been no material adverse change in the
business, properties, operations, financial condition or results of operations
of the Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings. The Company is financially solvent and is
generally able to pay its debts as they become due.


                                       7
<PAGE>

       (h)    Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
which could reasonably be expected to have a Material Adverse Effect. A
description of each action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body which, as of the date of this Agreement, is pending or threatened in
writing against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, is set forth in Schedule
3(h).

       (i)    Acknowledgment Regarding Buyer's Status. The Company acknowledges
and agrees that the Buyer is acting solely in the capacity of arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the Buyer
is not acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the Buyer that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives and
advisors.

       (j)    No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.

       (k)    Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(k), none of the
Company's material trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 3(k), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement, which could reasonably be
expected to have a Material Adverse Effect.

       (l)    Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.


                                       8
<PAGE>

       (m)    Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(m) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

       (n)    Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.

       (o)    Regulatory Permits. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

       (p)    Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.

       (q)    Transactions With Affiliates. Except as set forth on Schedule 3(q)
and other than the grant or exercise of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has an interest or is an
officer, director, trustee or partner.


                                       9
<PAGE>

       (r)    Application of Takeover Protections. The Company and its board of
directors have taken or will take prior to the Commencement Date all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.

       (s)    Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

       4.     COVENANTS.

       (a)    Filing of Form 8-K and Registration Statement. The Company agrees
that it shall, within the time required under the 1934 Act file a Report on Form
8-K disclosing this Agreement and the transaction contemplated hereby. The
Company shall also file within ten (10) Business Days from the date hereof a new
registration statement covering only the sale of the Commitment Shares and
7,333,333 Purchase Shares (which includes the 1,333,333 Initial Purchase Shares)
in accordance with the terms of the Registration Rights Agreement between the
Company and the Buyer, dated as of the date hereof ("Registration Rights
Agreement"). After such registration statement is declared effective by the SEC,
the Company agrees and acknowledges that any sales by the Company to the Buyer
pursuant to this Agreement are sales of the Company's equity securities in a
transaction that is registered under the 1933 Act.

       (b)    Blue Sky. The Company shall take such action, if any, as is
reasonably necessary in order to obtain an exemption for or to qualify (i) the
initial sale of the Commitment Shares and any Purchase Shares to the Buyer under
this Agreement and (ii) any subsequent sale of the Commitment Shares and any
Purchase Shares by the Buyer, in each case, under applicable securities or "Blue
Sky" laws of the states of the United States in such states as is reasonably
requested by the Buyer from time to time, and shall provide evidence of any such
action so taken to the Buyer.

       (c)    Listing. The Company shall promptly secure the listing of all of
the Purchase Shares and Commitment Shares upon each national securities exchange
and automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all such
securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action that would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall promptly, and in no event later than the following Business Day,
provide to the Buyer copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section.


                                       10
<PAGE>

       (d)    Limitation on Short Sales and Hedging Transactions. The Buyer
agrees that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11(k), the Buyer and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) "short sale" (as such term is
defined in Section 242.200 of Regulation SHO of the 1934 Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.

       (e)    Issuance of Commitment Shares; Limitation on Sales of Commitment
Shares. Immediately upon the execution of this Agreement, the Company shall
issue to the Buyer as consideration for the Buyer entering into this Agreement
1,050,000 shares of Common Stock (the "Commitment Shares"). The Commitment
Shares shall be issued in certificated form and (subject to Section 5 hereof)
shall bear the following restrictive legend and no other restrictive legend:

       THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
       UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
       SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
       NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
       AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
       UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933,
       AS AMENDED, OR (2) AN OPINION OF HOLDER'S COUNSEL, IN A CUSTOMARY FORM,
       THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
       SECURITIES LAWS.

       The Buyer agrees that the Buyer shall not transfer or sell the Commitment
Shares until the earlier of 500 Business Days (25 Monthly Periods) from the date
hereof or the date on which this Agreement has been terminated, provided,
however, that such restrictions shall not apply: (i) in connection with any
transfers to or among affiliates (as defined in the 1934 Act), (ii) in
connection with any pledge in connection with a bona fide loan or margin
account, (iii) in the event that the Commencement does not occur on or before
July 1, 2007, due to the failure of the Company to satisfy the conditions set
forth in Section 7 or (iv) if an Event of Default has occurred, or any event
which, after notice and/or lapse of time, would become an Event of Default,
including any failure by the Company to timely issue Purchase Shares under this
Agreement. Notwithstanding the forgoing, the Buyer may transfer Commitment
Shares to a third party in order to settle a sale made by the Buyer where the
Buyer reasonably expects the Company to deliver Purchase Shares to the Buyer
under this Agreement so long as the Buyer maintains ownership of the same
overall number of shares of Common Stock by "replacing" the Commitment Shares so
transferred with Purchase Shares when the Purchase Shares are actually issued by
the Company to the Buyer.

       (g)    Due Diligence. The Buyer shall have the right, from time to time
as the Buyer may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours. The Company and its
officers and employees shall provide information and reasonably cooperate with
the Buyer in connection with any reasonable request by the Buyer related to the
Buyer's due diligence of the Company, including, but not limited to, any such
request made by the Buyer in connection with (i) the filing of the registration
statement described in Section 4(a) hereof and (ii) the Commencement. Each party
hereto agrees not to disclose any Confidential Information of the other party to
any third party and shall not use the Confidential Information for any purpose


                                       11
<PAGE>

other than in connection with, or in furtherance of, the transactions
contemplated hereby. Each party hereto acknowledges that the Confidential
Information shall remain the property of the disclosing party and agrees that it
shall take all reasonable measures to protect the secrecy of any Confidential
Information disclosed by the other party.

       5.     TRANSFER AGENT INSTRUCTIONS.

       Immediately upon the execution of this Agreement, the Company shall
deliver to the Transfer Agent a letter in the form as set forth as Exhibit E
attached hereto with respect to the issuance of the Commitment Shares. On the
Commencement Date, the Company shall cause any restrictive legend on the
Commitment Shares and the Initial Purchase Shares to be removed and all of the
remaining Purchase Shares to be issued under this Agreement shall be issued
without any restrictive legend unless the Buyer expressly consents otherwise.
The Company shall issue irrevocable instructions to the Transfer Agent, and any
subsequent transfer agent, to issue Purchase Shares in the name of the Buyer for
the Purchase Shares (the "Irrevocable Transfer Agent Instructions"). The Company
warrants to the Buyer that no instruction other than the Irrevocable Transfer
Agent Instructions expressly referred to in this Agreement, will be given by the
Company to the Transfer Agent with respect to the Purchase Shares and that the
Commitment Shares and the Purchase Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement subject to the provisions of
Section 4(e) in the case of the Commitment Shares.

       6.     CONDITIONS TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF
              COMMON STOCK UNDER THIS AGREEMENT.

       The right of the Company hereunder to commence sales of the Purchase
Shares is subject to the satisfaction of each of the following conditions on or
before the Commencement Date (the date that the Company may begin sales):

       (a)    The Buyer shall have executed each of the Transaction Documents
and delivered the same to the Company;

       (b)    A registration statement covering the sale of all of the
Commitment Shares and Purchase Shares shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect to the registration
statement shall be pending or threatened by the SEC.

       7.     CONDITIONS TO THE BUYER'S OBLIGATION TO MAKE PURCHASES OF SHARES
              OF COMMON STOCK.

       The obligation of the Buyer to buy Purchase Shares under this Agreement
is subject to the satisfaction of each of the following conditions on or before
the Commencement Date (the date that the Company may begin sales) and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement has occurred:

       (a)    The Company shall have executed each of the Transaction Documents
and delivered the same to the Buyer;


                                       12
<PAGE>

       (b)    The Company shall have issued to the Buyer the Commitment Shares
and the Initial Purchase Shares and shall have removed the restrictive transfer
legend from the certificate representing the Commitment Shares and the Initial
Purchase Shares;

       (c)    The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been within the
last 365 days suspended by the SEC or the Principal Market and the Purchase
Shares and the Commitment Shares shall be approved for listing upon the
Principal Market;

       (d)    The Buyer shall have received the opinions of the Company's legal
counsel dated as of the Commencement Date substantially in the form of EXHIBIT A
attached hereto;

       (e)    The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Commencement Date. The Buyer shall have
received a certificate, executed by the CEO, President or CFO of the Company,
dated as of the Commencement Date, to the foregoing effect in the form attached
hereto as EXHIBIT B;

       (f)    The Board of Directors of the Company shall have adopted
resolutions in the form attached hereto as EXHIBIT C which shall be in full
force and effect without any amendment or supplement thereto as of the
Commencement Date;

       (g)    As of the Commencement Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
purchases of Purchase Shares hereunder, 7,333,333 shares of Common Stock
including the Initial Purchase Shares;

       (h)    The Irrevocable Transfer Agent Instructions, in form acceptable to
the Buyer shall have been delivered to and acknowledged in writing by the
Company and the Company's Transfer Agent;

       (i)    The Company shall have delivered to the Buyer a certificate
evidencing the incorporation and good standing of the Company in the State of
Nevada issued by the Secretary of State of the State of Nevada as of a date
within ten (10) Business Days of the Commencement Date;

       (j)    The Company shall have delivered to the Buyer a certified copy of
the Certificate of Incorporation as certified by the Secretary of State of the
State of Nevada within ten (10) Business Days of the Commencement Date;

       (k)    The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as EXHIBIT D;

       (l)    A registration statement covering the sale of all of the
Commitment Shares and Purchase Shares shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect to the registration
statement shall be pending or threatened by the SEC. The Company shall have


                                       13
<PAGE>

prepared and delivered to the Buyer a final and complete form of prospectus,
dated and current as of the Commencement Date, to be used by the Buyer in
connection with any sales of any Commitment Shares or any Purchase Shares, and
to be filed by the Company one Business Day after the Commencement Date. The
Company shall have made all filings under all applicable federal and state
securities laws necessary to consummate the issuance of the Commitment Shares
and the Purchase Shares pursuant to this Agreement in compliance with such laws;

       (m)    No Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred;

       (n)    On or prior to the Commencement Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the Buyer,
in order to render inapplicable any control share acquisition, business
combination, shareholder rights plan or poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities; and

       (o)    The Company shall have provided the Buyer with the information
requested by the Buyer in connection with its due diligence requests made prior
to, or in connection with, the Commencement, in accordance with the terms of
Section 4(g) hereof.

       8.     INDEMNIFICATION.

       In consideration of the Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Buyer and all of its
affiliates, shareholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which directly and primarily result from the gross negligence or
willful misconduct of the Indemnitee. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.


                                       14
<PAGE>

       9.     EVENTS OF DEFAULT.

       An "Event of Default" shall be deemed to have occurred at any time as any
of the following events occurs:

       (a)    while any registration statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of such registration statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for sale of all of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of five (5)
consecutive Business Days or for more than an aggregate of twenty (20) Business
Days in any 365-day period;

       (b)    the suspension from trading or failure of the Common Stock to be
listed on the Principal Market for a period of three (3) consecutive Business
Days;

       (c)    the delisting of the Company's Common Stock from the Principal
Market, provided, however, that the Common Stock is not immediately thereafter
trading on the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq
Capital Market, or the American Stock Exchange;

       (d)    the failure for any reason by the Transfer Agent to issue Purchase
Shares to the Buyer within five (5) Business Days after the applicable Purchase
Date which the Buyer is entitled to receive;

       (e)    the Company breaches any representation, warranty, covenant or
other term or condition under any Transaction Document if such breach could have
a Material Adverse Effect and except, in the case of a breach of a covenant
which is reasonably curable, only if such breach continues for a period of at
least five (5) Business Days;

       (f)    if any Person commences a proceeding against the Company pursuant
to or within the meaning of any Bankruptcy Law ;

       (g)    if the Company pursuant to or within the meaning of any Bankruptcy
Law; (A) commences a voluntary case, (B) consents to the entry of an order for
relief against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors, (E) becomes insolvent, or
(F) is generally unable to pay its debts as the same become due; or

       (h)    a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary.

In addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, or so long as the Purchase Price is below the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of
Common Stock under this Agreement. If pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case or any Person commences a
proceeding against the Company, a Custodian is appointed for the Company or for
all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event of


                                       15
<PAGE>

Default as described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person. No such termination of this
Agreement under Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.

       10.    CERTAIN DEFINED TERMS.

       For purposes of this Agreement, the following terms shall have the
following meanings:

       (a)    "1933 Act" means the Securities Act of 1933, as amended.

       (b)    "Available Amount" means initially Eight Million Four Hundred
Thousand Dollars ($8,400,000.00) in the aggregate which amount shall be reduced
by the Purchase Amount each time the Buyer purchases shares of Common Stock
pursuant to Section 1 hereof.

       (c)    "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

       (d)    "Base Purchase Notice" shall mean an irrevocable written notice
from the Company to the Buyer directing the Buyer to buy up to the Base Purchase
Amount in Purchase Shares as specified by the Company therein at the applicable
Purchase Price on the Purchase Date.

       (e)    "Block Purchase Amount" shall mean such Block Purchase Amount as
specified by the Company in a Block Purchase Notice subject to Section 1(b)
hereof.

       (f)    "Block Purchase Notice" shall mean an irrevocable written notice
from the Company to the Buyer directing the Buyer to buy the Block Purchase
Amount in Purchase Shares as specified by the Company therein at the Block
Purchase Price as of the Purchase Date subject to Section 1 hereof.

       (d)    "Business Day" means any day on which the Principal Market is open
for trading including any day on which the Principal Market is open for trading
for a period of time less than the customary time.

       (e)    "Closing Sale Price" means, for any security as of any date, the
last closing trade price for such security on the Principal Market as reported
by the Principal Market, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing trade
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by the Principal Market.

       (f)    "Confidential Information" means any information disclosed by
either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally shall be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within ten
(10) business days after the initial disclosure. Confidential Information may
also include information disclosed to a disclosing party by third parties.


                                       16
<PAGE>

Confidential Information shall not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party's files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party's obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party's Confidential Information, as shown
by documents and other competent evidence in the receiving party's possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.

       (g)    "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

       (h)    "Maturity Date" means the date that is 500 Business Days (25
Monthly Periods) from the Commencement Date.

       (i)    "Monthly Period" means each successive 20 Business Day period
commencing with the Commencement Date.

       (j)    "Person" means an individual or entity including any limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

       (k)    "Principal Market" means the Nasdaq OTC Bulletin Board; provided
however, that in the event the Company's Common Stock is ever listed or traded
on the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock
Exchange or the American Stock Exchange, than the "Principal Market" shall mean
such other market or exchange on which the Company's Common Stock is then listed
or traded.

       (l)    "Purchase Amount" means, with respect to any particular purchase
made hereunder, the portion of the Available Amount to be purchased by the Buyer
pursuant to Section 1 hereof as set forth in a valid Base Purchase Notice or a
valid Block Purchase Notice which the Company delivers to the Buyer.

       (m)    "Purchase Date" means with respect to any particular purchase made
hereunder, the Business Day after receipt by the Buyer of a valid Base Purchase
Notice or a valid Block Purchase Notice that the Buyer is to buy Purchase Shares
pursuant to Section 1 hereof.

       (n)    "Purchase Price" means the lower of the (A) the lowest Sale Price
of the Common Stock on the Purchase Date and (B) the arithmetic average of the
three (3) lowest Closing Sale Prices for the Common Stock during the twelve (12)
consecutive Business Days ending on the Business Day immediately preceding such
Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).

       (o)    "Sale Price" means, any trade price for the shares of Common Stock
on the Principal Market as reported by the Principal Market.

       (q)    "SEC" means the United States Securities and Exchange Commission.


                                       17
<PAGE>

       (r)    "Transfer Agent" means the transfer agent of the Company as set
forth in Section 11(f) hereof or such other person who is then serving as the
transfer agent for the Company in respect of the Common Stock.

       11.    MISCELLANEOUS.

       (a)    Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Nevada shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

       (b)    Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

       (c)    Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

       (d)    Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

       (e)    Entire Agreement. With the exception of the Mutual Nondisclosure
Agreement between the parties dated as of March 13, 2007, this Agreement
supersedes all other prior oral or written agreements between the Buyer, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer


                                       18
<PAGE>

makes any representation, warranty, covenant or undertaking with respect to such
matters. The Company acknowledges and agrees that is has not relied on, in any
manner whatsoever, any representations or statements, written or oral, other
than as expressly set forth in this Agreement.

       (f)    Notices. Any notices, consents or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt when delivered
personally; (ii) upon receipt when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

       If to the Company:
              Aethlon Medical, Inc.
              3030 Bunker Hill Street
              Suite 4000
              San Diego, CA 92109
              Telephone:    858-459-7800
              Facsimile:    858-332-1739
              Attention:    Chief Executive Officer

       With a copy to:
              Richardson & Patel, LLP
              10900 Wilshire Blvd., Suite 500
              Los Angeles, CA 90404
              Telephone:    310-208-1182
              Facsimile:    310-208-1154
              Attention:    Nimish Patel, Esq.

       If to the Buyer:
              Fusion Capital Fund II, LLC
              222 Merchandise Mart Plaza, Suite 9-112
              Chicago, IL 60654
              Telephone:    312-644-6644
              Facsimile:    312-644-6244
              Attention:    Steven G. Martin

       If to the Transfer Agent:
              Computershare Trust Company
              350 Indiana Street, #800
              Golden, CO 80401
              Telephone:    (303) 262-0600 ext. 4761
              Facsimile:    (303) 262-0700
              Attention:    Sue Barron

or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight


                                       19
<PAGE>

delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

       (g)    Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Buyer, including by merger or
consolidation. The Buyer may not assign its rights or obligations under this
Agreement.

       (h)    No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

       (i)    Publicity. The Buyer shall have the right to approve before
issuance any press release, SEC filing or any other public disclosure made by or
on behalf of the Company whatsoever with respect to, in any manner, the Buyer,
its purchases hereunder or any aspect of this Agreement or the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer, to make any press release or other
public disclosure (including any filings with the SEC) with respect to such
transactions as is required by applicable law and regulations so long as the
Company and its counsel consult with the Buyer in connection with any such press
release or other public disclosure at least two (2) Business Days prior to its
release. The Buyer must be provided with a copy thereof at least two (2)
Business Days prior to any release or use by the Company thereof. The Company
agrees and acknowledges that its failure to fully comply with this provision
constitutes a material adverse effect on its ability to perform its obligations
under this Agreement.

       (j)    Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

       (k)    Termination. This Agreement may be terminated only as follows:

              (i)    By the Buyer any time an Event of Default exists without
       any liability or payment to the Company. However, if pursuant to or
       within the meaning of any Bankruptcy Law, the Company commences a
       voluntary case or any Person commences a proceeding against the Company,
       a Custodian is appointed for the Company or for all or substantially all
       of its property, or the Company makes a general assignment for the
       benefit of its creditors, (any of which would be an Event of Default as
       described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall
       automatically terminate without any liability or payment to the Company
       without further action or notice by any Person. No such termination of
       this Agreement under this Section 11(k)(i) shall affect the Company's or
       the Buyer's obligations under this Agreement with respect to pending
       purchases and the Company and the Buyer shall complete their respective
       obligations with respect to any pending purchases under this Agreement.

              (ii)   In the event that the Commencement shall not have occurred,
       the Company shall have the option to terminate this Agreement for any
       reason or for no reason without liability of any party to any other
       party.


                                       20
<PAGE>

              (iii)  In the event that the Commencement shall not have occurred
       on or before July 1, 2007, due to the failure to satisfy the conditions
       set forth in Sections 6 and 7 above with respect to the Commencement, the
       nonbreaching party shall have the option to terminate this Agreement at
       the close of business on such date or thereafter without liability of any
       party to any other party.

              (iv)   If by the Maturity Date for any reason or for no reason the
       full Available Amount under this Agreement has not been purchased as
       provided for in Section 1 of this Agreement, by the Buyer without any
       liability or payment to the Company.

              (v)    At any time after the Commencement Date, the Company shall
       have the option to terminate this Agreement for any reason or for no
       reason by delivering notice (a "Company Termination Notice") to the Buyer
       electing to terminate this Agreement without any liability or payment to
       the Buyer. The Company Termination Notice shall not be effective until
       one (1) Business Day after it has been received by the Buyer.

              (vi)   This Agreement shall automatically terminate on the date
       that the Company sells and the Buyer purchases the full Available Amount
       as provided herein, without any action or notice on the part of any
       party.

Except as set forth in Sections 11(k)(i) (in respect of an Event of Default
under Sections 9(f), 9(g) and 9(h)) and 11(k)(vi), any termination of this
Agreement pursuant to this Section 11(k) shall be effected by written notice
from the Company to the Buyer, or the Buyer to the Company, as the case may be,
setting forth the basis for the termination hereof. The representations and
warranties of the Company and the Buyer contained in Sections 2, 3 and 5 hereof,
the indemnification provisions set forth in Section 8 hereof and the agreements
and covenants set forth in Section 11, shall survive the Commencement and any
termination of this Agreement. No termination of this Agreement shall affect the
Company's or the Buyer's rights or obligations (i) under the Registration Rights
Agreement which shall survive any such termination or (ii) under this Agreement
with respect to pending purchases and the Company and the Buyer shall complete
their respective obligations with respect to any pending purchases under this
Agreement.

       (l)    No Financial Advisor, Placement Agent, Broker or Finder. The
Company represents and warrants to the Buyer that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Buyer represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. The Company
shall be responsible for the payment of any fees or commissions, if any, of any
financial advisor, placement agent, broker or finder relating to or arising out
of the transactions contemplated hereby. The Company shall pay, and hold the
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in connection
with any such claim.

       (m)    No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

       (n)    Remedies, Other Obligations, Breaches and Injunctive Relief. The
Buyer's remedies provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Buyer contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Buyer's right to pursue actual damages for any failure by the


                                       21
<PAGE>

Company to comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.

       (o)    Enforcement Costs. If: (i) this Agreement is placed by the Buyer
in the hands of an attorney for enforcement or is enforced by the Buyer through
any legal proceeding; or (ii) an attorney is retained to represent the Buyer in
any bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Buyer in any other proceedings whatsoever
in connection with this Agreement, then the Company shall pay to the Buyer, as
incurred by the Buyer, all reasonable costs and expenses including attorneys'
fees incurred in connection therewith, in addition to all other amounts due
hereunder.

       (p)    Failure or Indulgence Not Waiver. No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.



                                    * * * * *


                                       22
<PAGE>

       IN WITNESS WHEREOF, the Buyer and the Company have caused this Common
Stock Purchase Agreement to be duly executed as of the date first written above.


                                               THE COMPANY:
                                               -----------

                                               AETHLON MEDICAL, INC.


                                               By: /s/ James A. Joyce
                                                  ------------------------------
                                               Name: James A. Joyce
                                               Title: Chief Executive Officer


                                               BUYER:
                                               -----

                                               FUSION CAPITAL FUND II, LLC
                                               BY: FUSION CAPITAL PARTNERS, LLC
                                               BY: ROCKLEDGE CAPITAL CORPORATION


                                               By: /s/ Joshua B. Scheinfeld
                                                  ------------------------------
                                               Name: Joshua B. Scheinfeld
                                               Title: President


                                       23
<PAGE>

                                    SCHEDULES
                                    ---------


Schedule 3(a)           Subsidiaries
Schedule 3(c)           Capitalization
Schedule 3(e)           Conflicts
Schedule 3(f)           1934 Act Filings
Schedule 3(g)           Material Changes
Schedule 3(h)           Litigation
Schedule 3(k)           Intellectual Property
Schedule 3(m)           Liens
Schedule 3(q)           Certain Transactions



                                    EXHIBITS
                                    --------


Exhibit A               Form of Company Counsel Opinion
Exhibit B               Form of Officer's Certificate
Exhibit C               Form of Resolutions of Board of Directors of the Company
Exhibit D               Form of Secretary's Certificate
Exhibit E               Form of Letter to Transfer Agent


                                       24
<PAGE>

                              DISCLOSURE SCHEDULES
                              --------------------


Schedule 3(a) - Subsidiaries:
The company has four wholly-owned dormant subsidiaries; Aethlon, Inc.; Hemex,
Inc.; Syngen Research, Inc. and Cell Activation, Inc.

Schedule 3(c) - Capitalization:



Outstanding debt:




















                                       25
<PAGE>

Warrants:



























                                       26
<PAGE>

Stock Options:





















Agreements to register the sale of securities:

Under the terms of the Company's 10% Series A Convertible Notes, associated
Registration Rights Agreements and Allonges (dated March 5, 2007; signed by the
Company but, yet to be executed by the Noteholders) the Company is obligated to
amend/or file a new registration statement with the SEC for the shares
underlying the original SB-2 filing (January 2006) and Allonge shares by March
31, 2007.

Schedule 3(e) - No Conflicts:
None

Schedule 3(f) - 1934 Act Filings:
On August 1, 2006, the Company received a letter from the SEC questioning the
treatment of its accounting for warrants issued with our 10% Series A
Convertible Notes under EITF 00-19 within the Company's Form 10-KSB filed for
the fiscal year ending March 31, 2006. Management and our auditors immediately
responded and on August 29, 2006 we were notified by the Commission that their
review was complete, and that we apparently had properly valued and disclosed
the warrant obligation.

Schedule 3(g) - Absence of Certain Changes:
None

Schedule 3(h) - Litigation:
None


                                       27
<PAGE>

Schedule 3(k) - Intellectual Property Rights:
No material intellectual property rights have expired over the prior two years,
nor are any slated to run to term within the next two years.

Schedule 3(m) - Title:
None

Schedule 3(q) - Transactions with Affiliates:
None


                                       28
<PAGE>

                                    EXHIBIT A
                                    ---------

                         FORM OF COMPANY COUNSEL OPINION

       Capitalized terms used herein but not defined herein, have the meaning
set forth in the Common Stock Purchase Agreement. Based on the foregoing, and
subject to the assumptions and qualifications set forth herein, we are of the
opinion that:

       1.     The Company is a corporation existing and in good standing under
the laws of the State of Nevada. The Company is qualified to do business as a
foreign corporation and is in good standing in the States of California.

       2.     The Company has the corporate power to execute and deliver, and
perform its obligations under, each Transaction Document to which it is a party.
The Company has the corporate power to conduct its business as, to the best of
our knowledge, it is now conducted, and to own and use the properties owned and
used by it.

       3.     The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Company. The execution and
delivery of the Transaction Documents by the Company, the performance of the
obligations of the Company thereunder and the consummation by it of the
transactions contemplated therein have been duly authorized and approved by the
Company's Board of Directors and no further consent, approval or authorization
of the Company, its Board of Directors or its stockholders is required. The
Transaction Documents to which the Company is a party have been duly executed
and delivered by the Company and are the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, liquidation or similar laws relating to, or
affecting creditor's rights and remedies.

       4.     The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby including the offering, sale and issuance of the Commitment
Shares, and the Purchase Shares in accordance with the terms and conditions of
the Common Stock Purchase Agreement, and fulfillment and compliance with terms
of the Transaction Documents, does not and shall not: (i) conflict with,
constitute a breach of or default (or an event which, with the giving of notice
or lapse of time or both, constitutes or could constitute a breach or a
default), under (a) the Certificate of Incorporation or the Bylaws of the
Company, (b) any material agreement, note, lease, mortgage, deed or other
material instrument to which to our knowledge the Company is a party or by which
the Company or any of its assets are bound, (ii) result in any violation of any
statute, law, rule or regulation applicable to the Company, or (iii) to our
knowledge, violate any order, writ, injunction or decree applicable to the
Company or any of its subsidiaries.

       5.     The issuance of the Purchase Shares and Commitment Shares pursuant
to the terms and conditions of the Transaction Documents has been duly
authorized and the Commitment Shares and the Initial Purchase Shares have been
validly issued, fully paid and non-assessable, to our knowledge, free of all
taxes, liens, charges, restrictions, rights of first refusal and preemptive
rights. 6,000,000 shares of Common Stock have been properly reserved for
issuance under the Common Stock Purchase Agreement. When issued and paid for in
accordance with the Common Stock Purchase Agreement, the Purchase Shares shall
be validly issued, fully paid and non-assessable, to our knowledge, free of all
taxes, liens, charges, restrictions, rights of first refusal and preemptive
rights. To our knowledge, the execution and delivery of the Registration Rights
Agreement do not, and the performance by the Company of its obligations
thereunder shall not, give rise to any rights of any other person for the
registration under the 1933 Act of any shares of Common Stock or other
securities of the Company which have not been waived.


                                       29
<PAGE>

       6.     As of the date hereof, the authorized capital stock of the Company
consists of _______ shares of common stock, par value $______ per share, of
which to our knowledge __________ shares are issued and outstanding. Except as
set forth on Schedule 3(c) of the Common Stock Purchase Agreement, to our
knowledge, there are no outstanding shares of capital stock or other securities
convertible into or exchangeable or exercisable for shares of the capital stock
of the Company.

       7.     Assuming the accuracy of the representations and your compliance
with the covenants made by you in the Transaction Documents, the offering, sale
and issuance of the Commitment Shares and the Initial Purchase Shares to you
pursuant to the Transaction Documents is exempt from registration under the 1933
Act and the securities laws and regulations of the State of California.

       8.     Other than that which has been obtained and completed prior to the
date hereof, no authorization, approval, consent, filing or other order of any
federal or state governmental body, regulatory agency, or stock exchange or
market, or any court, or, to our knowledge, any third party is required to be
obtained by the Company to enter into and perform its obligations under the
Transaction Documents or for the Company to issue and sell the Purchase Shares
as contemplated by the Transaction Documents.

       9.     The Common Stock is registered pursuant to Section 12(g) of the
1934 Act. To our knowledge, since, January 1, 2006, the Company has been in
compliance with the reporting requirements of the 1934 Act applicable to it. To
our knowledge, since January 1, 2006, the Company has not received any written
notice from the Principal Market stating that the Company has not been in
compliance with any of the rules and regulations (including the requirements for
continued listing) of the Principal Market.

       We further advise you that to our knowledge, except as disclosed on
Schedule 3(h) in the Common Stock Purchase Agreement, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body, any governmental agency, any stock exchange or market, or self-regulatory
organization, which has been threatened in writing or which is currently pending
against the Company, any of its subsidiaries, any officers or directors of the
Company or any of its subsidiaries or any of the properties of the Company or
any of its subsidiaries.

       In addition, we have participated in the preparation of the Registration
Statement (SEC File #________) covering the sale of the Purchase Shares, the
Commitment Shares including the prospectus dated ____________, contained therein
and in conferences with officers and other representatives of the Company
(including the Company's independent auditors) during which the contents of the
Registration Statement and related matters were discussed and reviewed and,
although we are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement, on the basis of the information that was developed in
the course of the performance of the services referred to above, considered in
the light of our understanding of the applicable law, nothing came to our
attention that caused us to believe that the Registration Statement (other than
the financial statements and schedules and the other financial and statistical
data included therein, as to which we express no belief), as of their dates,
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.


                                       30
<PAGE>

                                    EXHIBIT B
                                    ---------

                          FORM OF OFFICER'S CERTIFICATE

       This Officer's Certificate ("CERTIFICATE") is being delivered pursuant to
Section 7(e) of that certain Common Stock Purchase Agreement dated as of March
21, 2007, ("COMMON STOCK PURCHASE AGREEMENT"), by and between AETHLON MEDICAL,
INC., a Nevada corporation (the "COMPANY"), and FUSION CAPITAL FUND II, LLC (the
"BUYER"). Terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Common Stock Purchase Agreement.

       The undersigned, James W. Dorst, Chief Financial Officer of the Company,
hereby certifies as follows:

              1.     I am the Chief financial Officer of the Company and make
       the statements contained in this Certificate;

              2.     The representations and warranties of the Company are true
       and correct in all material respects (except to the extent that any of
       such representations and warranties is already qualified as to
       materiality in Section 3 of the Common Stock Purchase Agreement, in which
       case, such representations and warranties are true and correct without
       further qualification) as of the date when made and as of the
       Commencement Date as though made at that time (except for representations
       and warranties that speak as of a specific date);

              3.     The Company has performed, satisfied and complied in all
       material respects with covenants, agreements and conditions required by
       the Transaction Documents to be performed, satisfied or complied with by
       the Company at or prior to the Commencement Date.

              4.     The Company has not taken any steps, and does not currently
       expect to take any steps, to seek protection pursuant to any Bankruptcy
       Law nor does the Company or any of its Subsidiaries have any knowledge or
       reason to believe that its creditors intend to initiate involuntary
       bankruptcy or insolvency proceedings. The Company is financially solvent
       and is generally able to pay its debts as they become due.

       IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
___________.


                                                  /s/ James W. Dorst
                                                  ------------------------------
                                                  James W. Dorst:
                                                  Chief Financial Officer

       The undersigned as Secretary of AETHLON MEDICAL, INC., a Nevada
corporation, hereby certifies that James A. Joyce is the duly elected,
appointed, qualified and acting Secretary of Aethlon Medical, Inc. and that the
signature appearing above is his genuine signature.


                                                  /s/ James A. Joyce
                                                  ------------------------------
                                                  James A. Joyce


                                       31
<PAGE>

                                   EXHIBIT C-1
                                   -----------

                           FORM OF COMPANY RESOLUTIONS
                         FOR SIGNING PURCHASE AGREEMENT

                          UNANIMOUS WRITTEN CONSENT OF
                              AETHLON MEDICAL, INC.

       The undersigned, being all of the members of the Board of Directors of
Aethlon Medical, Inc., a Nevada corporation (the "Corporation"), acting pursuant
to the autority Granted by Section 78.315 of the Nevada General Corporation Law,
do hereby adopt the following resolutions by written consent as of March 21,
2007:

       WHEREAS, there has been presented to the Board of Directors of the
Corporation a draft of the Common Stock Purchase Agreement (the "Purchase
Agreement") by and between the Corporation and Fusion Capital Fund II, LLC
("Fusion"), providing for the purchase by Fusion of up to Eight Million Four
Hundred Thousand Dollars ($8,400,000) of the Corporation's common stock, par
value $0.001 (the "Common Stock"); and

       WHEREAS, after careful consideration of the Purchase Agreement, the
documents incident thereto and other factors deemed relevant by the Board of
Directors, the Board of Directors has determined that it is advisable and in the
best interests of the Corporation to engage in the transactions contemplated by
the Purchase Agreement, including, but not limited to, the issuance of 1,050,000
shares of Common Stock to Fusion as a commitment fee (the "Commitment Shares")
and the sale of shares of Common Stock to Fusion up to the available amount
under the Purchase Agreement (the "Purchase Shares").

                              TRANSACTION DOCUMENTS

       NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the
Purchase Agreement are hereby approved and James A. Joyce and James W. Dorst
(the "Authorized Officers") are severally authorized to execute and deliver the
Purchase Agreement, and any other agreements or documents contemplated thereby
including, without limitation, a registration rights agreement (the
"Registration Rights Agreement") providing for the registration of the shares of
the Company's Common Stock issuable in respect of the Purchase Agreement on
behalf of the Corporation, with such amendments, changes, additions and
deletions as the Authorized Officers may deem to be appropriate and approve on
behalf of, the Corporation, such approval to be conclusively evidenced by the
signature of an Authorized Officer thereon; and

       FURTHER RESOLVED, that the terms and provisions of the Registration
Rights Agreement by and among the Corporation and Fusion are hereby approved and
the Authorized Officers are authorized to execute and deliver the Registration
Rights Agreement (pursuant to the terms of the Purchase Agreement), with such
amendments, changes, additions and deletions as the Authorized Officer may deem
appropriate and approve on behalf of, the Corporation, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon; and

       FURTHER RESOLVED, that the terms and provisions of the Form of Transfer
Agent Instructions (the "Instructions") are hereby approved and the Authorized
Officers are authorized to execute and deliver the Instructions (pursuant to the
terms of the Purchase Agreement), with such amendments, changes, additions and
deletions as the Authorized Officers may deem appropriate and approve on behalf
of, the Corporation, such approval to be conclusively evidenced by the signature
of an Authorized Officer thereon; and


                                       32
<PAGE>

                         EXECUTION OF PURCHASE AGREEMENT

       FURTHER RESOLVED, that the Corporation be and it hereby is authorized to
execute the Purchase Agreement providing for the purchase of common stock of the
Corporation having an aggregate value of up to $8,400,000.00; and

                            ISSUANCE OF COMMON STOCK

       FURTHER RESOLVED, that the Corporation is hereby authorized to issue
1,050,000 shares of Common Stock to Fusion Capital Fund II, LLC as Commitment
Shares and that upon issuance of the Commitment Shares pursuant to the Purchase
Agreement, the Commitment Shares shall be duly authorized, validly issued, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof; and

       FURTHER RESOLVED, that the Corporation is hereby authorized to issue
shares of Common Stock upon the purchase of Purchase Shares up to the available
amount under the Purchase Agreement in accordance with the terms of the Purchase
Agreement and that, upon issuance of the Purchase Shares pursuant to the
Purchase Agreement, the Purchase Shares will be duly authorized, validly issued,
fully paid and nonassessable with no personal liability attaching to the
ownership thereof; and

       FURTHER RESOLVED, THAT THE CORPORATION SHALL INITIALLY RESERVE 7,333,333
SHARES OF COMMON STOCK FOR ISSUANCE AS PURCHASE SHARES UNDER THE PURCHASE
AGREEMENT.

                               APPROVAL OF ACTIONS

       FURTHER RESOLVED, that, without limiting the foregoing, the Authorized
Officers are, and each of them hereby is, authorized and directed to proceed on
behalf of the Corporation and to take all such steps as deemed necessary or
appropriate, with the advice and assistance of counsel, to cause the Corporation
to consummate the agreements referred to herein and to perform its obligations
under such agreements; and

       FURTHER RESOLVED, that the Authorized Officers be, and each of them
hereby is, authorized, empowered and directed on behalf of and in the name of
the Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.


                                       33
<PAGE>

       IN WITNESS WHEREOF, the Board of Directors has executed and delivered
this Consent effective as of March 21, 2007. This Written Consent may be
executed in counterparts and with facsimile signatures with the effect as if all
parties hereto had executed the same document. All counterparts shall be
construed together and shall constitute a single Written Consent.


       Dated as of March 21, 2007


                        DIRECTORS:


                                                /s/ James A. Joyce
                                                --------------------------------
                                                James A. Joyce


                                                /s/ Franklyn S. Barry, Jr.
                                                --------------------------------
                                                Franklyn S. Barry, Jr.


                                                /s/ Edward G. Broenniman
                                                --------------------------------
                                                Edward G. Broenniman


                                                /s/ Richard H. Tullis
                                                --------------------------------
                                                Richard H. Tullis




being all of the directors of AETHLON MEDICAL, INC., a Nevada corporation.


                                       34
<PAGE>

                                   EXHIBIT C-2
                                   -----------

          FORM OF COMPANY RESOLUTIONS APPROVING REGISTRATION STATEMENT

                          UNANIMOUS WRITTEN CONSENT OF
                              AETHLON MEDICAL, INC.

       The undersigned, being all of the members of the Board of Directors of
Aethlon Medical, Inc., a Nevada corporation (the "Corporation"), acting pursuant
to the authority Granted by Section 78.315 of the Nevada General Corporation
Law, do hereby adopt the following resolutions by written consent as of March
21, 2007:

       WHEREAS, there has been presented to the Board of Directors of the
Corporation Common Stock Purchase Agreement (the "Purchase Agreement") by and
among the Corporation and Fusion Capital Fund II, LLC ("Fusion"), providing for
the purchase by Fusion of up to Eight Million Four Hundred Thousand Dollars
($8,400,000) of the Corporation's common stock, par value $0.001 (the "Common
Stock"); and

       WHEREAS, after careful consideration of the Purchase Agreement, the
documents incident thereto and other factors deemed relevant by the Board of
Directors, the Board of Directors has approved the Purchase Agreement and the
transactions contemplated thereby and the Company has executed and delivered the
Purchase Agreement to Fusion; and

       WHEREAS, the management of the Corporation has prepared an initial draft
of a Registration Statement on Form SB-2 (the "Registration Statement") in order
to register the sale of the Purchase Shares and the Commitment Shares
(collectively, the "Shares"); and

       WHEREAS, the Board of Directors has determined to approve the
Registration Statement and to authorize the appropriate officers of the
Corporation to take all such actions as they may deem appropriate to effect the
offering.

       NOW, THEREFORE, BE IT RESOLVED, that the officers and directors of the
Corporation be, and each of them hereby is, authorized and directed, with the
assistance of counsel and accountants for the Corporation, to prepare, execute
and file with the Commission the Registration Statement, which Registration
Statement shall be filed substantially in the form presented to the Board of
Directors, with such changes therein as the Chief Executive Officer of the
Corporation or any Vice President of the Corporation shall deem desirable and in
the best interest of the Corporation and its shareholders (such officer's
execution thereof including such changes shall be deemed to evidence
conclusively such determination); and

       FURTHER RESOLVED, that the officers of the Corporation be, and each of
them hereby is, authorized and directed, with the assistance of counsel and
accountants for the Corporation, to prepare, execute and file with the
Commission all amendments, including post-effective amendments, and supplements
to the Registration Statement, and all certificates, exhibits, schedules,
documents and other instruments relating to the Registration Statement, as such
officers shall deem necessary or appropriate (such officer's execution and
filing thereof shall be deemed to evidence conclusively such determination); and


                                       35
<PAGE>

       FURTHER RESOLVED, that the execution of the Registration Statement and of
any amendments and supplements thereto by the officers and directors of the
Corporation be, and the same hereby is, specifically authorized either
personally or by the Authorized Officers as such officer's or director's true
and lawful attorneys-in-fact and agents; and

       FURTHER RESOLVED, that the Authorized Officers are hereby designated as
"Agent for Service" of the Corporation in connection with the Registration
Statement and the filing thereof with the Commission, and the Authorized
Officers hereby are authorized to receive communications and notices from the
Commission with respect to the Registration Statement; and

       FURTHER RESOLVED, that the officers of the Corporation be, and each of
them hereby is, authorized and directed to pay all fees, costs and expenses that
may be incurred by the Corporation in connection with the Registration
Statement; and

       FURTHER RESOLVED, that it is desirable and in the best interest of the
Corporation that the Shares be qualified or registered for sale in various
states; that the officers of the Corporation be, and each of them hereby is,
authorized to determine the states in which appropriate action shall be taken to
qualify or register for sale all or such part of the Shares as they may deem
advisable; that said officers be, and each of them hereby is, authorized to
perform on behalf of the Corporation any and all such acts as they may deem
necessary or advisable in order to comply with the applicable laws of any such
states, and in connection therewith to execute and file all requisite papers and
documents, including, but not limited to, applications, reports, surety bonds,
irrevocable consents, appointments of attorneys for service of process and
resolutions; and the execution by such officers of any such paper or document or
the doing by them of any act in connection with the foregoing matters shall
conclusively establish their authority therefor from the Corporation and the
approval and ratification by the Corporation of the papers and documents so
executed and the actions so taken; and

       FURTHER RESOLVED, that if, in any state where the securities to be
registered or qualified for sale to the public, or where the Corporation is to
be registered in connection with the public offering of the Shares, a prescribed
form of resolution or resolutions is required to be adopted by the Board of
Directors, each such resolution shall be deemed to have been and hereby is
adopted, and the Secretary is hereby authorized to certify the adoption of all
such resolutions as though such resolutions were now presented to and adopted by
the Board of Directors; and

       FURTHER RESOLVED, that the officers of the Corporation with the
assistance of counsel be, and each of them hereby is, authorized and directed to
take all necessary steps and do all other things necessary and appropriate to
effect the listing of the Shares on the OTC Bulletin Board.

                               APPROVAL OF ACTIONS

       FURTHER RESOLVED, that, without limiting the foregoing, the Authorized
Officers are, and each of them hereby is, authorized and directed to proceed on
behalf of the Corporation and to take all such steps as are deemed necessary or
appropriate, with the advice and assistance of counsel, to cause the Corporation
to take all such action referred to herein and to perform its obligations
incident to the registration, listing and sale of the Shares; and

       FURTHER RESOLVED, that the Authorized Officers be, and each of them
hereby is, authorized, empowered and directed on behalf of and in the name of
the Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such


                                       36
<PAGE>

fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.

       IN WITNESS WHEREOF, the Board of Directors has executed and delivered
this Consent effective as of March 21, 2007. This Written Consent may be
executed in counterparts and with facsimile signatures with the effect as if all
parties hereto had executed the same document. All counterparts shall be
construed together and shall constitute a single Written Consent.

       Dated as of March 21, 2007

                DIRECTORS:


                                                /s/ James A. Joyce
                                                --------------------------------
                                                James A. Joyce


                                                /s/ Franklyn S. Barry, Jr.
                                                --------------------------------
                                                Franklyn S. Barry, Jr.


                                                /s/ Edward G. Broenniman
                                                --------------------------------
                                                Edward G. Broenniman


                                                /s/ Richard H. Tullis
                                                --------------------------------
                                                Richard H. Tullis




being all of the directors of AETHLON MEDICAL, INC., a Nevada corporation.


                                       37
<PAGE>

                                    EXHIBIT D
                                    ---------

                         FORM OF SECRETARY'S CERTIFICATE

       This Secretary's Certificate ("Certificate") is being delivered pursuant
to Section 7(k) of that certain Common Stock Purchase Agreement dated as of
March 21, 2007, ("Common Stock Purchase Agreement"), by and between AETHLON
MEDICAL, INC., a Nevada corporation (the "Company") and FUSION CAPITAL FUND II,
LLC (the "Buyer"), pursuant to which the Company may sell to the Buyer up to
Eight Million Four Hundred Thousand Dollars ($8,400,000) of the Company's Common
Stock, par value $0.001 per share (the "Common Stock"). Terms used herein and
not otherwise defined shall have the meanings ascribed to them in the Common
Stock Purchase Agreement.

       The undersigned, James A. Joyce, Secretary of the Company, hereby
certifies as follows:

              1.     I am the Secretary of the Company and make the statements
       contained in this Secretary's Certificate.

              2.     Attached hereto as Exhibit A and Exhibit B are true,
       correct and complete copies of the Company's bylaws ("Bylaws") and
       Certificate of Incorporation ("Articles"), in each case, as amended
       through the date hereof, and no action has been taken by the Company, its
       directors, officers or shareholders, in contemplation of the filing of
       any further amendment relating to or affecting the Bylaws or Articles.

              3.     Attached hereto as Exhibit C are true, correct and complete
       copies of the resolutions duly adopted by the Board of Directors of the
       Company on March 21, 2007, at which a quorum was present and acting
       throughout. Such resolutions have not been amended, modified or rescinded
       and remain in full force and effect and such resolutions are the only
       resolutions adopted by the Company's Board of Directors, or any committee
       thereof, or the shareholders of the Company relating to or affecting (i)
       the entering into and performance of the Common Stock Purchase Agreement,
       or the issuance, offering and sale of the Purchase Shares and the
       Commitment Shares and (ii) and the performance of the Company of its
       obligation under the Transaction Documents as contemplated therein.

              4.     As of the date hereof, the authorized, issued and reserved
       capital stock of the Company is as set forth on Exhibit D hereto.

       IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
____________.

                                        _________________________
                                                Secretary


       The undersigned as ___________ of __________, a ________ corporation,
       hereby certifies that ____________ is the duly elected, appointed,
       qualified and acting Secretary of _________, and that the signature
       appearing above is his genuine signature.

                                        _________________________


                                       38
<PAGE>

                                    EXHIBIT E
                                    ---------

          FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE
            COMMITMENTS SHARES AT SIGNING OF THE PURCHASE AGREEMENT




                              [COMPANY LETTERHEAD]



[DATE]

[TRANSFER AGENT]
__________________
__________________
__________________

Re: Issuance of Common Shares to Fusion Capital Fund II, LLC

Dear ________,

On behalf of AETHLON MEDICAL, INC., a Nevada corporation (the "Company"), you
are hereby instructed to issue AS SOON AS POSSIBLE 1,050,000 shares of our
common stock in the name of FUSION CAPITAL FUND II, LLC. The share certificate
should be dated [DATE OF THE COMMON STOCK PURCHASE AGREEMENT]. I have included a
true and correct copy of a unanimous written consent executed by all of the
members of the Board of Directors of the Company adopting resolutions approving
the issuance of these shares. The shares should be issued subject to the
following restrictive legend and NO OTHER LEGEND WHATSOEVER:

       THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
       UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
       SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
       NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
       AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
       UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933,
       AS AMENDED, OR (2) AN OPINION OF HOLDER'S COUNSEL, IN A CUSTOMARY FORM,
       THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
       SECURITIES LAWS.

The share certificate should be sent AS SOON AS POSSIBLE VIA OVERNIGHT MAIL to
the following address:

                                Fusion Capital Fund II, LLC
                                222 Merchandise Mart Plaza, Suite 9-112
                                Chicago, IL 60654
                                Attention: Steven Martin

Thank you very much for your help. Please call me at ______________ if you have
any questions or need anything further.

AETHLON MEDICAL, INC., a Nevada corporation


BY:_____________________________
         [name]
         [title]


                                       39
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>6
<FILENAME>aethlon_sb2-ex1027.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREMENT
<TEXT>
<PAGE>

EXHIBIT 10.27

                          REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March 21,
2007, by and between AETHLON MEDICAL, INC., a Nevada corporation, (the
"COMPANY"), and FUSION CAPITAL FUND II, LLC (together with it permitted assigns,
the "BUYER"). Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Common Stock Purchase
Agreement by and between the parties hereto, dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
"PURCHASE AGREEMENT").

                                    WHEREAS:

      A.    The Company has agreed, upon the terms and subject to the conditions
of the Purchase Agreement, to issue to the Buyer (i) up to Eight Million Four
Hundred Thousand Dollars ($8,400,000) of the Company's common stock, par value
$0.001 per share (the "COMMON STOCK") (the "PURCHASE SHARES"), and (ii) such
number of shares of Common Stock as is required pursuant to Section 4(e) of the
Purchase Agreement (the "COMMITMENT SHARES"); and

      B.    To induce the Buyer to enter into the Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "1933 ACT"), and applicable state
securities laws.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:

      1.    DEFINITIONS.

            As used in this Agreement, the following terms shall have the
following meanings:

            a.    "INVESTOR" means the Buyer, any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.

            b.    "PERSON" means any person or entity including any corporation,
a limited liability company, an association, a partnership, an organization, a
business, an individual, a governmental or political subdivision thereof or a
governmental agency.

            c.    "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more registration
statements of the Company in compliance with the 1933 Act and pursuant to Rule
415 under the 1933 Act or any successor rule providing for offering securities
on a continuous basis ("RULE 415"), and the declaration or ordering of
effectiveness of such registration statement(s) by the United States Securities
and Exchange Commission (the "SEC").

<PAGE>

            d.    "REGISTRABLE SECURITIES" means the Purchase Shares which have
been, or which may from time to time be, issued or issuable upon purchases of
the Available Amount under the Purchase Agreement (without regard to any
limitation or restriction on purchases) and the Commitment Shares issued or
issuable to the Investor and any shares of capital stock issued or issuable with
respect to the Purchase Shares, the Commitment Shares or the Purchase Agreement
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitation on purchases under
the Purchase Agreement.

            e.    "REGISTRATION STATEMENT" means the registration statement of
the Company covering only the sale of the Registrable Securities.

      2.    REGISTRATION.

            a.    Mandatory Registration. The Company shall within ten (10)
Business Days from the date hereof file with the SEC the Registration Statement.
The Registration Statement shall register only the Registrable Securities and no
other securities of the Company. The Investor and its counsel shall have a
reasonable opportunity to review and comment upon such registration statement or
amendment to such registration statement and any related prospectus prior to its
filing with the SEC. Investor shall furnish all information reasonably requested
by the Company for inclusion therein. The Company shall use its best efforts to
have the Registration Statement or amendment declared effective by the SEC at
the earliest possible date. The Company shall use reasonable best efforts to
keep the Registration Statement effective pursuant to Rule 415 promulgated under
the 1933 Act and available for sales of all of the Registrable Securities at all
times until the earlier of (i) the date as of which the Investor may sell all of
the Registrable Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) or (ii) the date on which
(A) the Investor shall have sold all the Registrable Securities and no Available
Amount remains under the Purchase Agreement (the "REGISTRATION PERIOD"). The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.

            b.    Rule 424 Prospectus. The Company shall, as required by
applicable securities regulations, from time to time file with the SEC, pursuant
to Rule 424 promulgated under the 1933 Act, the prospectus and prospectus
supplements, if any, to be used in connection with sales of the Registrable
Securities under the Registration Statement. The Investor and its counsel shall
have a reasonable opportunity to review and comment upon such prospectus prior
to its filing with the SEC. The Investor shall use its reasonable best efforts
to comment upon such prospectus within one (1) Business Day from the date the
Investor receives the final version of such prospectus.

            c.    Sufficient Number of Shares Registered. In the event the
number of shares available under the Registration Statement is insufficient to
cover all of the Registrable Securities, the Company shall amend the
Registration Statement or file a new registration statement (a "NEW REGISTRATION
STATEMENT"), so as to cover all of such Registrable Securities as soon as
practicable, but in any event not later than ten (10) Business Days after the
necessity therefor arises. The Company shall use it reasonable best efforts to
cause such amendment and/or New Registration Statement to become effective as
soon as practicable following the filing thereof.


                                       2
<PAGE>

      3.    RELATED OBLIGATIONS.

            With respect to the Registration Statement and whenever any
Registrable Securities are to be registered pursuant to Section 2(b) including
on any New Registration Statement, the Company shall use its reasonable best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:

            a.    The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to any
registration statement and the prospectus used in connection with such
registration statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement or any New Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement or any New Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such registration statement.

            b.    The Company shall permit the Investor to review and comment
upon the Registration Statement or any New Registration Statement and all
amendments and supplements thereto at least two (2) Business Days prior to their
filing with the SEC, and not file any document in a form to which Investor
reasonably objects. The Investor shall use its reasonable best efforts to
comment upon the Registration Statement or any New Registration Statement and
any amendments or supplements thereto within two (2) Business Days from the date
the Investor receives the final version thereof. The Company shall furnish to
the Investor, without charge any correspondence from the SEC or the staff of the
SEC to the Company or its representatives relating to the Registration Statement
or any New Registration Statement.

            c.    Upon request of the Investor, the Company shall furnish to the
Investor, (i) promptly after the same is prepared and filed with the SEC, at
least one copy of such registration statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, (ii) upon the effectiveness of any registration
statement, a copy of the prospectus included in such registration statement and
all amendments and supplements thereto (or such other number of copies as the
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as the Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by the Investor.

            d.    The Company shall use reasonable best efforts to (i) register
and qualify the Registrable Securities covered by a registration statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investor reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify


                                       3
<PAGE>

the Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.

            e.    As promptly as practicable after becoming aware of such event
or facts, the Company shall notify the Investor in writing of the happening of
any event or existence of such facts as a result of which the prospectus
included in any registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and promptly prepare a
supplement or amendment to such registration statement to correct such untrue
statement or omission, and deliver a copy of such supplement or amendment to the
Investor (or such other number of copies as the Investor may reasonably
request). The Company shall also promptly notify the Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a registration statement or any post-effective amendment
has become effective (notification of such effectiveness shall be delivered to
the Investor by facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to any
registration statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
registration statement would be appropriate.

            f.    The Company shall use its reasonable best efforts to prevent
the issuance of any stop order or other suspension of effectiveness of any
registration statement, or the suspension of the qualification of any
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Investor of the issuance of such
order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.

            g.    The Company shall (i) cause all the Registrable Securities to
be listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities on the
Principal Market. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section.

            h.    The Company shall cooperate with the Investor to facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to any
registration statement and enable such certificates to be in such denominations
or amounts as the Investor may reasonably request and registered in such names
as the Investor may request.

            i.    The Company shall at all times provide a transfer agent and
registrar with respect to its Common Stock.

            j.    If reasonably requested by the Investor, the Company shall (i)
immediately incorporate in a prospectus supplement or post-effective amendment
such information as the Investor believes should be included therein relating to
the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any registration
statement.


                                       4
<PAGE>

            k.    The Company shall use its reasonable best efforts to cause the
Registrable Securities covered by the any registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

            l.    Within one (1) Business Day after any registration statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investor) confirmation that such registration statement has been declared
effective by the SEC in the form attached hereto as Exhibit A. Thereafter, if
requested by the Buyer at any time, the Company shall require its counsel to
deliver to the Buyer a written confirmation whether or not the effectiveness of
such registration statement has lapsed at any time for any reason (including,
without limitation, the issuance of a stop order) and whether or not the
registration statement is current and available to the Buyer for sale of all of
the Registrable Securities.

            m.    The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to any registration statement.

      4.    OBLIGATIONS OF THE INVESTOR.

            a.    The Company shall notify the Investor in writing of the
information the Company reasonably requires from the Investor in connection with
any registration statement hereunder. The Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.

            b.    The Investor agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any registration statement hereunder.

            c.    The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event or existence of facts of the kind
described in Section 3(f) or the first sentence of 3(e), the Investor will
immediately discontinue disposition of Registrable Securities pursuant to any
registration statement(s) covering such Registrable Securities until the
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to promptly
deliver shares of Common Stock without any restrictive legend in accordance with
the terms of the Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale prior to the Investor's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Investor has not yet settled.


                                       5
<PAGE>

      5.    EXPENSES OF REGISTRATION.

            All reasonable expenses, other than sales or brokerage commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, shall be paid by the Company.

      6.    INDEMNIFICATION.

            a.    To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend the Investor, each Person, if
any, who controls the Investor, the members, the directors, officers, partners,
employees, agents, representatives of the Investor and each Person, if any, who
controls the Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT") (each, an "INDEMNIFIED
PERSON"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "CLAIMS") incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may be
a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement, any New Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to the Registration Statement or
any New Registration Statement or (iv) any material violation by the Company of
this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "VIOLATIONS"). The Company shall reimburse each Indemnified Person
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, any New Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superceded
prospectus, shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the superceded
prospectus was corrected in the revised prospectus, as then amended or
supplemented, if such revised prospectus was timely made available by the
Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was


                                       6
<PAGE>

promptly advised in writing not to use the incorrect prospectus prior to the use
giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim is based
on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(c) or Section 3(e); and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investor pursuant to Section 9.

            b.    In connection with the Registration Statement or any New
Registration Statement, the Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement or any New Registration Statement,
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
about the Investor set forth on Exhibit B attached hereto and furnished to the
Company by the Investor expressly for use in connection with such registration
statement; and, subject to Section 6(d), the Investor will reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
the Investor as a result of the sale of Registrable Securities pursuant to such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9.

            c.    Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information


                                       7
<PAGE>

reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.

            d.    The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.

            e.    The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

      7.    CONTRIBUTION.

            To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.

      8.    REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.

            With a view to making available to the Investor the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investor to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees, at
the Company's sole expense, to:

            a.    make and keep public information available, as those terms are
understood and defined in Rule 144;

            b.    file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and


                                       8
<PAGE>

            c.    furnish to the Investor so long as the Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting and or disclosure provisions of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Investor to sell such securities pursuant to Rule 144 without
registration.

            d.    take such additional action as is requested by the Investor to
enable the Investor to sell the Registrable Securities pursuant to Rule 144,
including, without limitation, delivering all such legal opinions, consents,
certificates, resolutions and instructions to the Company's Transfer Agent as
may be requested from time to time by the Investor and otherwise fully cooperate
with Investor and Investor's broker to effect such sale of securities pursuant
to Rule 144.

            The Company agrees that damages may be an inadequate remedy for any
breach of the terms and provisions of this Section 8 and that Investor shall,
whether or not it is pursuing any remedies at law, be entitled to equitable
relief in the form of a preliminary or permanent injunctions, without having to
post any bond or other security, upon any breach or threatened breach of any
such terms or provisions.

      9.    ASSIGNMENT OF REGISTRATION RIGHTS.

            The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation. The Investor may not assign its rights
under this Agreement without the written consent of the Company, other than to
an affiliate of the Investor controlled by Steven G. Martin or Joshua B.
Scheinfeld.

      10.   AMENDMENT OF REGISTRATION RIGHTS.

            Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investor.

      11.   MISCELLANEOUS.

            a.    A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.

            b.    Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:


                                       9
<PAGE>

      If to the Company:
            Aethlon Medical, Inc.
            3030 Bunker Hill Street
            Suite 4000
            San Diego, CA 92109
            Telephone:    858-459-7800
            Facsimile:    858-332-1739
            Attention:    Chief Executive Officer

      With a copy to:
            Richardson & Patel, LLP
            10900 Wilshire Blvd., Suite 500
            Los Angeles, CA 90404
            Telephone:    310-208-1182
            Facsimile:    310-208-1154
            Attention:    Nimish Patel, Esq.

      If to the Investor:
            Fusion Capital Fund II, LLC
            222 Merchandise Mart Plaza, Suite 9-112
            Chicago, IL 60654
            Telephone:    312-644-6644
            Facsimile:    312-644-6244
            Attention:    Steven G. Martin

or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

            c.    Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

            d.    The corporate laws of the State of Nevada shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting the City of Chicago, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the


                                       10
<PAGE>

venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

            e.    This Agreement, and the Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.

            f.    Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

            g.    The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

            h.    This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

            i.    Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

            j.    The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.

            k.    This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.



                                   * * * * * *


                                       11
<PAGE>

      IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.


                                               THE COMPANY:
                                               -----------

                                               AETHLON MEDICAL, INC.


                                               By: /s/ James A. Joyce
                                                  ------------------------------
                                               Name: James A. Joyce
                                               Title: Chief Executive Officer


                                               BUYER:
                                               -----

                                               FUSION CAPITAL FUND II, LLC
                                               BY: FUSION CAPITAL PARTNERS, LLC
                                               BY: ROCKLEDGE CAPITAL CORPORATION


                                               By: /s/ Joshua B. Scheinfeld
                                                  ------------------------------
                                               Name: Joshua B. Scheinfeld
                                               Title: President


                                       12
<PAGE>

                                    EXHIBIT A
                                    ---------

                        TO REGISTRATION RIGHTS AGREEMENT
                        --------------------------------

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[Date]

[TRANSFER AGENT]
___________________
___________________

Re: AETHLON MEDICAL:, INC.

Ladies and Gentlemen:

      We are counsel to AETHLON MEDICAL, INC., a Nevada corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Common Stock Purchase Agreement, dated as of _________, 2007 (the "PURCHASE
AGREEMENT"), entered into by and between the Company and Fusion Capital Fund II,
LLC (the "BUYER") pursuant to which the Company has agreed to issue to the Buyer
shares of the Company's Common Stock, par value $0.001 per share (the "COMMON
STOCK"), in an amount up to Eight Million Four Hundred Dollars ($8,400,000) (the
"PURCHASE SHARES"), in accordance with the terms of the Purchase Agreement. In
connection with the transactions contemplated by the Purchase Agreement, the
Company has registered with the U.S. Securities & Exchange Commission the
following shares of Common Stock:

      (1)   6,000,000 shares of Common Stock to be issued upon purchase from the
            Company by the Buyer from time to time (the "PURCHASE SHARES.").

      (2)   1,050,000 shares of Common Stock which have been issued to the Buyer
            as a commitment fee (the "COMMITMENT SHARES").

      (3)   1,333,333 Purchase Shares of Common Stock previously issued to the
            Buyer (the "INITIAL PURCHASE Shares.").


Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement, dated as of ______, with the Buyer (the
"Registration Rights Agreement") pursuant to which the Company agreed, among
other things, to register the Purchase Shares, the Initial Purchase Shares and
the Commitment Shares under the Securities Act of 1933, as amended (the "1933
Act"). In connection with the Company's obligations under the Purchase Agreement
and the Registration Rights Agreement, on _______, the Company filed a
Registration Statement (File No. 333-_________) (the "Registration Statement")
with the Securities and Exchange Commission (the "SEC") relating to the sale of
the Purchase Shares, the Initial Purchase Shares and the Commitment Shares.

In connection with the foregoing, we advise you that: (1) a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at _____ P.M. on
__________, 2007, (2) we have no knowledge, after telephonic inquiry of a member
of the SEC's staff, that any stop order suspending its effectiveness has been
issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC, (3) the Commitment Shares and the Initial Purchase
Shares are available for sale under the 1933 Act pursuant to the Registration
Statement and the restrictive legend on the Commitment Shares and the Initial
Purchase Shares may be removed and (4) the Purchase Shares are available for
sale under the 1933 Act pursuant to the Registration Statement and may be issued
without any restrictive legend.


                                                Very truly yours,

                                                [Company Counsel]


                                                By:____________________




CC:       Fusion Capital Fund II, LLC


                                       13
<PAGE>

                                    EXHIBIT B
                                    ---------

                        TO REGISTRATION RIGHTS AGREEMENT
                        --------------------------------

     Information About The Investor Furnished To The Company By The Investor
         Expressly For Use In Connection With The Registration Statement


As of the date of the Purchase Agreement, Fusion Capital beneficially owned
767,191 shares of common stock of the Company. Steven G. Martin and Joshua B.
Scheinfeld, the principals of Fusion Capital, are deemed to be beneficial owners
of all of the shares of common stock owned by Fusion Capital. Messrs. Martin and
Scheinfeld have shared voting and investment power over the shares being offered
under the prospectus filed with the SEC in connection with the transactions
contemplated under the Purchase Agreement. Fusion Capital is not a licensed
broker dealer or an affiliate of a licensed broker dealer.


                                       14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28
<SEQUENCE>7
<FILENAME>aethlon_sb2-ex1028.txt
<DESCRIPTION>FORM OF ALLONGE
<TEXT>
<PAGE>

EXHIBIT 10.28

                                     FORM OF
                                   ALLONGE TO
                         10% SERIES A CONVERTIBLE NOTES


         This Allonge (the "Allonge"), dated as of March 5, 2007, attached to
and forming a part of certain 10% Series A Convertible Promissory Notes, dated
in November and December, 2005 (collectively, the "Note"), made by AETHLON
MEDICAL, INC., a Nevada corporation (the "Company"), payable to the order of
Christian J. Hoffman III (the "Holder"), in the total principal amount of
$10,000.

         1. Paragraph 1, "Interest," is hereby amended and restated in its
entirety as follows:

         1.       INTEREST

                  1.1 This Note shall bear interest ("Interest") equal to ten
                  percent (10%) per annum on the unpaid principal balance,
                  computed on a three hundred sixty (360)-day year, during the
                  term of the Note. Interest will accrue on each Advance
                  commencing on the date of the Advance, as set forth on Exhibit
                  A to this Note. The Company shall pay all accrued Interest
                  after the date of the Allonge on a quarterly basis on the
                  first day of April, July, October and on the Maturity Date. In
                  no event shall the rate of Interest payable on this Note
                  exceed the maximum rate of Interest permitted to be charged
                  under applicable law.

                  1.2 Within five (5) business days of the execution date of
                  this Allonge, the Company will pay accrued Interest through
                  February 15, 2007. The Company will pay the Interest in units
                  (the "Units") at the rate of $.20 per Unit (the "Interest
                  Payment Rate"). Each Unit is composed of one share of the
                  Company's Common Stock and one Class A Common Stock Purchase
                  Warrant (the "Class A Warrant"). The Company will pay the
                  accrued Interest through February 15, 2007 by issuing 5,861
                  Units and will pay all accrued Interest thereafter in Units at
                  the Interest Payment Rate. Each Class A Warrant will be
                  exercisable to purchase one share of Common Stock at a price
                  of $.20 per share (the Exercise Price"). If the Holder
                  exercises Class A Warrants on or before July 3, 2008, the
                  Company will issue the Holder one Class B Common Stock
                  Purchase Warrant (the "Class B Warrant") for every two Class A
                  Warrants exercised. Each Class B Warrant will be exercisable
                  to purchase one share of Common Stock at a price equal to the
                  greater of $.20 per share or seventy-five percent (75%) of the
                  average of the closing bid prices of the Common Stock for the
                  five (5) trading days immediately preceding the date of the
                  notice of conversion. The forms of the Class A Warrant and
                  Class B Warrant are set forth as Exhibits B and C,
                  respectively. The Class A Warrants and Class B Warrants are
                  referred to as the "Warrants."

<PAGE>

                  1.3 All Interest payable under the Note after the date of the
                  Allonge will, at the option of the Holder, be payable in cash
                  or Units, valued at the Interest Payment Rate, as such term is
                  defined in this Note. The Company will pay any Interest that
                  cannot be paid in full Units in cash.

                  1.4 Paragraph 3 of the Note is hereby amended and restated in
                  its entirety as follows:

                  3. PRE-PAYMENTS AND MATURITY DATE. This Note shall be due and
                  payable in full, including all accrued Interest thereon, on
                  January 3, 2008 (the "Maturity Date"). At any time prior to
                  the Maturity Date, the Company shall have the right to prepay
                  this Note, in whole or in part, without penalty, on ten (10)
                  days' advance written notice to the Holder, subject to the
                  right of the Holder to convert in advance of such prepayment
                  date and provided that on such prepayment date the Company
                  will pay in respect of the redeemed Note cash equal to the
                  face amount plus accrued Interest on the Note (or portion)
                  redeemed. If the Company plans to pay the Note in full on or
                  after the Maturity Date, it will give the Holder the
                  opportunity to convert at the Conversion Price for a period of
                  ten (10) days after delivery of written notice of the payment
                  to the Holder. The Company may prepay this Note at anytime
                  after issuance without penalty.

                  1.5 Paragraph 5.1 of the Note is hereby amended and restated
                  in its entirety as follows:

                  5.1 CONVERSION OF NOTE/CONVERSION PRICE. This Note is
                  convertible, at the option of the Holder, into Units at any
                  time after the Issue Date prior to the close of business on
                  the Business Day preceding the Maturity Date at the rate of
                  $.20 per Unit (the "Conversion Price"), subject to adjustment
                  as hereinafter provided. Each Unit is composed of one share of
                  Common Stock and one Class A Warrant. Each Class A Warrant is
                  exercisable to purchase one share of Common Stock at the
                  Exercise Price. If the Holder exercises Class A Warrants on or
                  before July 3, 2008, the Company will issue the Holder one
                  Class B Warrant for every two Class A Warrants exercised. The
                  Common Stock comprising the Units shall be deemed to have a
                  value of $0.199 per share and the Class A Warrant and Class B
                  Warrant shall each be deemed to have a value of $0.001. No
                  fractional shares will be issued. In lieu thereof, the Company
                  will pay cash for fractional share amounts equal to the fair
                  market value of the Common Stock as quoted as the closing bid
                  price of the Common Stock on the date of conversion.

                  1.6 Paragraphs 11.1.2 and 11.1.3 are amended and restated in
                  their entirety as follows:


                                       -2-

<PAGE>

                  11.1.2 Failure of the Company to pay Interest when due
                  hereunder; or

                  11.1.3 Except for Events of Default set forth in Paragraphs
                  11.1.1 and 11.1.2, failure of the Company to perform any of
                  the covenants, conditions, provisions or agreements contained
                  herein, or in any other agreement between the Company and
                  Holder, which failure continues for a period of thirty (30)
                  days after notice of default has been given to the Company by
                  the Holders of not less than twenty-five percent (25%) of the
                  principal amount of the Notes then outstanding; provided,
                  however, that if the nature of the Company's obligation is
                  such that more than thirty (30) days are required for
                  performance, then an Event of Default shall not occur if the
                  Company commences performance within such thirty (30) day
                  period and thereafter diligently prosecutes the same to
                  completion; or

         2.       Paragraph 26, "Covenants of the Company," is hereby added as
                  follows:

                  26. COVENANTS OF THE COMPANY. The Company covenants to perform
                  the following:

                  26.1 The Company does not have a sufficient number of
                  authorized shares of its Common Stock to make all of the share
                  issuances pursuant to the Note, the Warrants and this Allonge.
                  The Company will use its best efforts to obtain shareholder
                  approval to increase the number of authorized shares by an
                  amount sufficient to satisfy the requirements of the Note, the
                  Warrants and this Allonge, but not less than five (5) million
                  shares, at its annual meeting of shareholders, which meeting
                  will be held no later than March 31, 2007. The Company will
                  reserve such number of shares of Common Stock as are required
                  for issuance under the Notes, the Warrants and this Allonge;

                  26.2 The Class A Warrants will have a term expiring on January
                  2, 2011 and the Class B Warrants will have a term of three
                  years from their respective dates of issuance. All Warrants
                  will be assignable by their holders;

                  26.3 The Company will amend its Registration Statement No.
                  333-130915 and/or file a new registration statement with the
                  SEC on or before March 31, 2007 to cover the shares of Common
                  Stock that may be issued under the Notes, the Warrants and
                  this Allonge, but not fewer than 20,000,000 shares. The
                  Company will use its best efforts to have such amendment or
                  new Registration Statement declared effective promptly and
                  will cause such registration statement to remain effective
                  while the Notes and Warrants are outstanding;

                  26.4 The Company will collaborate with the Holder to expand
                  its Board of Directors by appointing or electing one
                  additional director who has background in life sciences that
                  the Holder may designate after the date of this Allonge. Such
                  additional director will remain on the Board while the


                                       -3-
<PAGE>

                  Notes are outstanding. If the Holder elects not to designate
                  such a person for appointment or election to the Board, the
                  Holder will be entitled to an observer at the Board meetings,
                  which observer shall be included in all meetings of the Board;

                  26.5 The Company will hold Board of Directors meetings,
                  whether formal or informal, at least once per month; and

                  26.6 The Company will give written notice to the Holder within
                  three (3) Business Days of the Company's receipt of any
                  proposed financing and disclose its terms and conditions. The
                  Company will consult with Holder respecting the proposed
                  financing before it concludes such financing.

                  26.7 The Company grants the Holder the right, for a period of
                  seven (7) Business Days after the Company gives written notice
                  to the Holder, to purchase any of the Company's securities at
                  the same price and on the same terms and conditions at any
                  time that the Company proposes to sell to a third party in A
                  BONA FIDE transaction or a series of transactions in an amount
                  up to

                           (i) all of the securities proposed to be sold if the
                  Company proposes to sell its Common Stock at a price of $0.20
                  per share or less; and

                           (ii) the principal amount of the Note converted and
                  total purchase price of the Common Stock for the Warrants
                  exercised if the Company proposes to sell its Common Stock at
                  a price above $0.20 per share.

                  This right of first refusal in favor of the Holder will apply
                  to all securities of the Company convertible into Common Stock
                  and will expire upon the later of the payment of the Notes in
                  full or exercise of all of the Warrants. This right of first
                  refusal shall not apply to securities issuable under the
                  Fusion funding facility; and

                  26.8 The Company will execute such other documents as may be
                  necessary or appropriate to carry out the provisions of the
                  Notes, the Warrants and this Allonge. The Company will bear
                  all reasonable costs associated with the preparation and
                  implementation of this Allonge.

                  2.1 The following definitions in Paragraph 24, "Definitions,"
                  are hereby amended and restated as follows:

                  "Maturity Date" means January 3, 2008.

                  "Senior Indebtedness" means any Indebtedness of the Company,
                  outstanding prior to the date of this Allonge, unless such
                  Indebtedness is PARI PASSU with or contractually subordinate
                  or junior in right of payment to the Notes, except
                  Indebtedness to any Affiliate of the Company, which shall be
                  junior and subordinate to the Notes.


                                       -4-
<PAGE>

                  "Subordinated Indebtedness of the Company" means any
                  Indebtedness of the Company incurred after the date of this
                  Allonge.

                  2.2 Paragraph 27, "Senior Subordinated Indebtedness" is hereby
                  added as follows:

                  27. SENIOR SUBORDINATED INDEBTEDNESS.

                  27.1 This Note constitutes Senior Subordinated Indebtedness of
                  the Company and is unsecured.

                  27.2 The Indebtedness evidenced by this Note and all of the
                  Notes will be subordinated to the prior payment when due of
                  the principal of, and premium, if any, and accrued and unpaid
                  interest on, all existing Senior Indebtedness. The Notes will
                  be senior to, in right of payment of principal of, premium, if
                  any, and accrued and unpaid interest on, any Subordinated
                  Indebtedness of the Company.

                  27.3 Upon any distribution of assets of the Company in any
                  dissolution, winding up, liquidation or reorganization of the
                  Company, all holders of Senior Indebtedness of the Company
                  must be paid in full before any payment or distribution is
                  made with respect to the Notes. The Company shall pay all
                  principal and accrued and unpaid Interest on the Notes before
                  it makes any payment or distribution to the holders of
                  Subordinated Indebtedness.

                  2.3 In all other respects, the Note is confirmed, ratified,
                  and approved and, as amended by this Allonge, shall continue
                  in full force and effect.

         IN WITNESS WHEREOF, the Company and Holder have caused this Allonge to
be executed and delivered by their respective duly authorized officer and
trustee on March 5, 2007, to be effective as of the date and year first above
written.

                                          AETHLON MEDICAL, INC.


                                                /s/ James A. Joyce

                                                James A. Joyce
                                          Its:  Chairman and CEO

                                          Accepted and agreed to:



                                          By:   /s/ Christian J. Hoffman
                                             -----------------------------------
                                                Christian J. Hoffman III


                                       -5-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>8
<FILENAME>aethlon_sb2-ex1029.txt
<DESCRIPTION>FORM OF ALLONGE
<TEXT>
<PAGE>

EXHIBIT 10.29

                                     FORM OF
                                   ALLONGE TO
                         10% SERIES A CONVERTIBLE NOTES


         This Allonge (the "Allonge"), dated as of March 5, 2007, attached to
and forming a part of certain 10% Series A Convertible Promissory Notes, dated
in November and December, 2005 (collectively, the "Note"), made by AETHLON
MEDICAL, INC., a Nevada corporation (the "Company"), payable to the order of
Joel S. Aaronson, Patricia Green, Christina J. Bird, Co-Executors of the Estate
of Allan S. Bird (the "Holder"), in the total principal amount of $225,000.

         1. Paragraph 1, "Interest," is hereby amended and restated in its
entirety as follows:

         1.       INTEREST

                  1.1 This Note shall bear interest ("Interest") equal to ten
                  percent (10%) per annum on the unpaid principal balance,
                  computed on a three hundred sixty (360)-day year, during the
                  term of the Note. Interest will accrue on each Advance
                  commencing on the date of the Advance, as set forth on Exhibit
                  A to this Note. The Company shall pay all accrued Interest
                  after the date of the Allonge on a quarterly basis on the
                  first day of April, July, October and on the Maturity Date. In
                  no event shall the rate of Interest payable on this Note
                  exceed the maximum rate of Interest permitted to be charged
                  under applicable law.

                  1.2 Within five (5) business days of the execution date of
                  this Allonge, the Company will pay accrued Interest through
                  February 15, 2007. The Company will pay the Interest in units
                  (the "Units") at the rate of $.20 per Unit (the "Interest
                  Payment Rate"). Each Unit is composed of one share of the
                  Company's Common Stock and one Class A Common Stock Purchase
                  Warrant (the "Class A Warrant"). The Company will pay the
                  accrued Interest through February 15, 2007 by issuing 148,959
                  Units and will pay all accrued Interest thereafter in Units at
                  the Interest Payment Rate. Each Class A Warrant will be
                  exercisable to purchase one share of Common Stock at a price
                  of $.20 per share (the Exercise Price"). If the Holder
                  exercises Class A Warrants on or before July 3, 2008, the
                  Company will issue the Holder one Class B Common Stock
                  Purchase Warrant (the "Class B Warrant") for every two Class A
                  Warrants exercised. Each Class B Warrant will be exercisable
                  to purchase one share of Common Stock at a price equal to the
                  greater of $.20 per share or seventy-five percent (75%) of the
                  average of the closing bid prices of the Common Stock for the
                  five (5) trading days immediately preceding the date of the
                  notice of conversion. The forms of the Class A Warrant and
                  Class B Warrant are set forth as Exhibits B and C,
                  respectively. The Class A Warrants and Class B Warrants are
                  referred to as the "Warrants."

<PAGE>

                  1.3 All Interest payable under the Note after the date of the
                  Allonge will, at the option of the Holder, be payable in cash
                  or Units, valued at the Interest Payment Rate, as such term is
                  defined in this Note. The Company will pay any Interest that
                  cannot be paid in full Units in cash.

                  1.4 Paragraph 3 of the Note is hereby amended and restated in
                  its entirety as follows:

                  3. PRE-PAYMENTS AND MATURITY DATE. This Note shall be due and
                  payable in full, including all accrued Interest thereon, on
                  January 3, 2008 (the "Maturity Date"). At any time prior to
                  the Maturity Date, the Company shall have the right to prepay
                  this Note, in whole or in part, without penalty, on ten (10)
                  days' advance written notice to the Holder, subject to the
                  right of the Holder to convert in advance of such prepayment
                  date and provided that on such prepayment date the Company
                  will pay in respect of the redeemed Note cash equal to the
                  face amount plus accrued Interest on the Note (or portion)
                  redeemed. If the Company plans to pay the Note in full on or
                  after the Maturity Date, it will give the Holder the
                  opportunity to convert at the Conversion Price for a period of
                  ten (10) days after delivery of written notice of the payment
                  to the Holder. The Company may prepay this Note at anytime
                  after issuance without penalty.

                  1.5 Paragraph 5.1 of the Note is hereby amended and restated
                  in its entirety as follows:

                  5.1 CONVERSION OF NOTE/CONVERSION PRICE. This Note is
                  convertible, at the option of the Holder, into Units at any
                  time after the Issue Date prior to the close of business on
                  the Business Day preceding the Maturity Date at the rate of
                  $.20 per Unit (the "Conversion Price"), subject to adjustment
                  as hereinafter provided. Each Unit is composed of one share of
                  Common Stock and one Class A Warrant. Each Class A Warrant is
                  exercisable to purchase one share of Common Stock at the
                  Exercise Price. If the Holder exercises Class A Warrants on or
                  before July 3, 2008, the Company will issue the Holder one
                  Class B Warrant for every two Class A Warrants exercised. The
                  Common Stock comprising the Units shall be deemed to have a
                  value of $0.199 per share and the Class A Warrant and Class B
                  Warrant shall each be deemed to have a value of $0.001. No
                  fractional shares will be issued. In lieu thereof, the Company
                  will pay cash for fractional share amounts equal to the fair
                  market value of the Common Stock as quoted as the closing bid
                  price of the Common Stock on the date of conversion.

                  1.6 Paragraphs 11.1.2 and 11.1.3 are amended and restated in
                  their entirety as follows:


                                       -2-

<PAGE>

                  11.1.2 Failure of the Company to pay Interest when due
                  hereunder; or

                  11.1.3 Except for Events of Default set forth in Paragraphs
                  11.1.1 and 11.1.2, failure of the Company to perform any of
                  the covenants, conditions, provisions or agreements contained
                  herein, or in any other agreement between the Company and
                  Holder, which failure continues for a period of thirty (30)
                  days after notice of default has been given to the Company by
                  the Holders of not less than twenty-five percent (25%) of the
                  principal amount of the Notes then outstanding; provided,
                  however, that if the nature of the Company's obligation is
                  such that more than thirty (30) days are required for
                  performance, then an Event of Default shall not occur if the
                  Company commences performance within such thirty (30) day
                  period and thereafter diligently prosecutes the same to
                  completion; or

         2.       Paragraph 26, "Covenants of the Company," is hereby added as
                  follows:

                  26. COVENANTS OF THE COMPANY. The Company covenants to perform
                  the following:

                  26.1 The Company does not have a sufficient number of
                  authorized shares of its Common Stock to make all of the share
                  issuances pursuant to the Note, the Warrants and this Allonge.
                  The Company will use its best efforts to obtain shareholder
                  approval to increase the number of authorized shares by an
                  amount sufficient to satisfy the requirements of the Note, the
                  Warrants and this Allonge, but not less than five (5) million
                  shares, at its annual meeting of shareholders, which meeting
                  will be held no later than March 31, 2007. The Company will
                  reserve such number of shares of Common Stock as are required
                  for issuance under the Notes, the Warrants and this Allonge;

                  26.2 The Class A Warrants will have a term expiring on January
                  2, 2011 and the Class B Warrants will have a term of three
                  years from their respective dates of issuance. All Warrants
                  will be assignable by their holders;

                  26.3 The Company will amend its Registration Statement No.
                  333-130915 and/or file a new registration statement with the
                  SEC on or before March 31, 2007 to cover the shares of Common
                  Stock that may be issued under the Notes, the Warrants and
                  this Allonge, but not fewer than 20,000,000 shares. The
                  Company will use its best efforts to have such amendment or
                  new Registration Statement declared effective promptly and
                  will cause such registration statement to remain effective
                  while the Notes and Warrants are outstanding;

                  26.4 The Company will collaborate with the Holder to expand
                  its Board of Directors by appointing or electing one
                  additional director who has background in life sciences that
                  the Holder may designate after the date of this Allonge. Such
                  additional director will remain on the Board while the


                                       -3-
<PAGE>

                  Notes are outstanding. If the Holder elects not to designate
                  such a person for appointment or election to the Board, the
                  Holder will be entitled to an observer at the Board meetings,
                  which observer shall be included in all meetings of the Board;

                  26.5 The Company will hold Board of Directors meetings,
                  whether formal or informal, at least once per month; and

                  26.6 The Company will give written notice to the Holder within
                  three (3) Business Days of the Company's receipt of any
                  proposed financing and disclose its terms and conditions. The
                  Company will consult with Holder respecting the proposed
                  financing before it concludes such financing.

                  26.7 The Company grants the Holder the right, for a period of
                  seven (7) Business Days after the Company gives written notice
                  to the Holder, to purchase any of the Company's securities at
                  the same price and on the same terms and conditions at any
                  time that the Company proposes to sell to a third party in A
                  BONA FIDE transaction or a series of transactions in an amount
                  up to

                           (i) all of the securities proposed to be sold if the
                  Company proposes to sell its Common Stock at a price of $0.20
                  per share or less; and

                           (ii) the principal amount of the Note converted and
                  total purchase price of the Common Stock for the Warrants
                  exercised if the Company proposes to sell its Common Stock at
                  a price above $0.20 per share.

                  This right of first refusal in favor of the Holder will apply
                  to all securities of the Company convertible into Common Stock
                  and will expire upon the later of the payment of the Notes in
                  full or exercise of all of the Warrants. This right of first
                  refusal shall not apply to securities issuable under the
                  Fusion funding facility; and

                  26.8 The Company will execute such other documents as may be
                  necessary or appropriate to carry out the provisions of the
                  Notes, the Warrants and this Allonge. The Company will bear
                  all reasonable costs associated with the preparation and
                  implementation of this Allonge.

                  2.1 The following definitions in Paragraph 24, "Definitions,"
                  are hereby amended and restated as follows:

                  "Maturity Date" means January 3, 2008.

                  "Senior Indebtedness" means any Indebtedness of the Company,
                  outstanding prior to the date of this Allonge, unless such
                  Indebtedness is PARI PASSU with or contractually subordinate
                  or junior in right of payment to the Notes, except
                  Indebtedness to any Affiliate of the Company, which shall be
                  junior and subordinate to the Notes.


                                       -4-
<PAGE>

                  "Subordinated Indebtedness of the Company" means any
                  Indebtedness of the Company incurred after the date of this
                  Allonge.

                  2.2 Paragraph 27, "Senior Subordinated Indebtedness" is hereby
                  added as follows:

                  27. SENIOR SUBORDINATED INDEBTEDNESS.

                  27.1 This Note constitutes Senior Subordinated Indebtedness of
                  the Company and is unsecured.

                  27.2 The Indebtedness evidenced by this Note and all of the
                  Notes will be subordinated to the prior payment when due of
                  the principal of, and premium, if any, and accrued and unpaid
                  interest on, all existing Senior Indebtedness. The Notes will
                  be senior to, in right of payment of principal of, premium, if
                  any, and accrued and unpaid interest on, any Subordinated
                  Indebtedness of the Company.

                  27.3 Upon any distribution of assets of the Company in any
                  dissolution, winding up, liquidation or reorganization of the
                  Company, all holders of Senior Indebtedness of the Company
                  must be paid in full before any payment or distribution is
                  made with respect to the Notes. The Company shall pay all
                  principal and accrued and unpaid Interest on the Notes before
                  it makes any payment or distribution to the holders of
                  Subordinated Indebtedness.

                  2.3 In all other respects, the Note is confirmed, ratified,
                  and approved and, as amended by this Allonge, shall continue
                  in full force and effect.

         IN WITNESS WHEREOF, the Company and Holder have caused this Allonge to
be executed and delivered by their respective duly authorized officer and
trustee on March 5, 2007, to be effective as of the date and year first above
written.

                                          AETHLON MEDICAL, INC.


                                                /s/ James A. Joyce

                                                James A. Joyce
                                          Its:  Chairman and CEO

                                          Accepted and agreed to:



                                          By:
                                             -----------------------------------
                                                Holder


                                       -5-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.30
<SEQUENCE>9
<FILENAME>aethlon_sb2-ex1030.txt
<DESCRIPTION>FORM OF ALLONGE
<TEXT>
<PAGE>

EXHIBIT 10.30

                                     FORM OF
                                   ALLONGE TO
                         10% SERIES A CONVERTIBLE NOTES


         This Allonge (the "Allonge"), dated as of March 5, 2007, attached to
and forming a part of certain 10% Series A Convertible Promissory Notes, dated
in November and December, 2005 (collectively, the "Note"), made by AETHLON
MEDICAL, INC., a Nevada corporation (the "Company"), payable to the order of
Claypoole Capital, LLC (the "Holder"), in the total principal amount of $5,000.

         1. Paragraph 1, "Interest," is hereby amended and restated in its
entirety as follows:

         1.       INTEREST

                  1.1 This Note shall bear interest ("Interest") equal to ten
                  percent (10%) per annum on the unpaid principal balance,
                  computed on a three hundred sixty (360)-day year, during the
                  term of the Note. Interest will accrue on each Advance
                  commencing on the date of the Advance, as set forth on Exhibit
                  A to this Note. The Company shall pay all accrued Interest
                  after the date of the Allonge on a quarterly basis on the
                  first day of April, July, October and on the Maturity Date. In
                  no event shall the rate of Interest payable on this Note
                  exceed the maximum rate of Interest permitted to be charged
                  under applicable law.

                  1.2 Within five (5) business days of the execution date of
                  this Allonge, the Company will pay accrued Interest through
                  February 15, 2007. The Company will pay the Interest in units
                  (the "Units") at the rate of $.20 per Unit (the "Interest
                  Payment Rate"). Each Unit is composed of one share of the
                  Company's Common Stock and one Class A Common Stock Purchase
                  Warrant (the "Class A Warrant"). The Company will pay the
                  accrued Interest through February 15, 2007 by issuing 2,938
                  Units and will pay all accrued Interest thereafter in Units at
                  the Interest Payment Rate. Each Class A Warrant will be
                  exercisable to purchase one share of Common Stock at a price
                  of $.20 per share (the Exercise Price"). If the Holder
                  exercises Class A Warrants on or before July 3, 2008, the
                  Company will issue the Holder one Class B Common Stock
                  Purchase Warrant (the "Class B Warrant") for every two Class A
                  Warrants exercised. Each Class B Warrant will be exercisable
                  to purchase one share of Common Stock at a price equal to the
                  greater of $.20 per share or seventy-five percent (75%) of the
                  average of the closing bid prices of the Common Stock for the
                  five (5) trading days immediately preceding the date of the
                  notice of conversion. The forms of the Class A Warrant and
                  Class B Warrant are set forth as Exhibits B and C,
                  respectively. The Class A Warrants and Class B Warrants are
                  referred to as the "Warrants."

<PAGE>

                  1.3 All Interest payable under the Note after the date of the
                  Allonge will, at the option of the Holder, be payable in cash
                  or Units, valued at the Interest Payment Rate, as such term is
                  defined in this Note. The Company will pay any Interest that
                  cannot be paid in full Units in cash.

                  1.4 Paragraph 3 of the Note is hereby amended and restated in
                  its entirety as follows:

                  3. PRE-PAYMENTS AND MATURITY DATE. This Note shall be due and
                  payable in full, including all accrued Interest thereon, on
                  January 3, 2008 (the "Maturity Date"). At any time prior to
                  the Maturity Date, the Company shall have the right to prepay
                  this Note, in whole or in part, without penalty, on ten (10)
                  days' advance written notice to the Holder, subject to the
                  right of the Holder to convert in advance of such prepayment
                  date and provided that on such prepayment date the Company
                  will pay in respect of the redeemed Note cash equal to the
                  face amount plus accrued Interest on the Note (or portion)
                  redeemed. If the Company plans to pay the Note in full on or
                  after the Maturity Date, it will give the Holder the
                  opportunity to convert at the Conversion Price for a period of
                  ten (10) days after delivery of written notice of the payment
                  to the Holder. The Company may prepay this Note at anytime
                  after issuance without penalty.

                  1.5 Paragraph 5.1 of the Note is hereby amended and restated
                  in its entirety as follows:

                  5.1 CONVERSION OF NOTE/CONVERSION PRICE. This Note is
                  convertible, at the option of the Holder, into Units at any
                  time after the Issue Date prior to the close of business on
                  the Business Day preceding the Maturity Date at the rate of
                  $.20 per Unit (the "Conversion Price"), subject to adjustment
                  as hereinafter provided. Each Unit is composed of one share of
                  Common Stock and one Class A Warrant. Each Class A Warrant is
                  exercisable to purchase one share of Common Stock at the
                  Exercise Price. If the Holder exercises Class A Warrants on or
                  before July 3, 2008, the Company will issue the Holder one
                  Class B Warrant for every two Class A Warrants exercised. The
                  Common Stock comprising the Units shall be deemed to have a
                  value of $0.199 per share and the Class A Warrant and Class B
                  Warrant shall each be deemed to have a value of $0.001. No
                  fractional shares will be issued. In lieu thereof, the Company
                  will pay cash for fractional share amounts equal to the fair
                  market value of the Common Stock as quoted as the closing bid
                  price of the Common Stock on the date of conversion.

                  1.6 Paragraphs 11.1.2 and 11.1.3 are amended and restated in
                  their entirety as follows:


                                       -2-

<PAGE>

                  11.1.2 Failure of the Company to pay Interest when due
                  hereunder; or

                  11.1.3 Except for Events of Default set forth in Paragraphs
                  11.1.1 and 11.1.2, failure of the Company to perform any of
                  the covenants, conditions, provisions or agreements contained
                  herein, or in any other agreement between the Company and
                  Holder, which failure continues for a period of thirty (30)
                  days after notice of default has been given to the Company by
                  the Holders of not less than twenty-five percent (25%) of the
                  principal amount of the Notes then outstanding; provided,
                  however, that if the nature of the Company's obligation is
                  such that more than thirty (30) days are required for
                  performance, then an Event of Default shall not occur if the
                  Company commences performance within such thirty (30) day
                  period and thereafter diligently prosecutes the same to
                  completion; or

         2.       Paragraph 26, "Covenants of the Company," is hereby added as
                  follows:

                  26. COVENANTS OF THE COMPANY. The Company covenants to perform
                  the following:

                  26.1 The Company does not have a sufficient number of
                  authorized shares of its Common Stock to make all of the share
                  issuances pursuant to the Note, the Warrants and this Allonge.
                  The Company will use its best efforts to obtain shareholder
                  approval to increase the number of authorized shares by an
                  amount sufficient to satisfy the requirements of the Note, the
                  Warrants and this Allonge, but not less than five (5) million
                  shares, at its annual meeting of shareholders, which meeting
                  will be held no later than March 31, 2007. The Company will
                  reserve such number of shares of Common Stock as are required
                  for issuance under the Notes, the Warrants and this Allonge;

                  26.2 The Class A Warrants will have a term expiring on January
                  2, 2011 and the Class B Warrants will have a term of three
                  years from their respective dates of issuance. All Warrants
                  will be assignable by their holders;

                  26.3 The Company will amend its Registration Statement No.
                  333-130915 and/or file a new registration statement with the
                  SEC on or before March 31, 2007 to cover the shares of Common
                  Stock that may be issued under the Notes, the Warrants and
                  this Allonge, but not fewer than 20,000,000 shares. The
                  Company will use its best efforts to have such amendment or
                  new Registration Statement declared effective promptly and
                  will cause such registration statement to remain effective
                  while the Notes and Warrants are outstanding;

                  26.4 The Company will collaborate with the Holder to expand
                  its Board of Directors by appointing or electing one
                  additional director who has background in life sciences that
                  the Holder may designate after the date of this Allonge. Such
                  additional director will remain on the Board while the


                                       -3-
<PAGE>

                  Notes are outstanding. If the Holder elects not to designate
                  such a person for appointment or election to the Board, the
                  Holder will be entitled to an observer at the Board meetings,
                  which observer shall be included in all meetings of the Board;

                  26.5 The Company will hold Board of Directors meetings,
                  whether formal or informal, at least once per month; and

                  26.6 The Company will give written notice to the Holder within
                  three (3) Business Days of the Company's receipt of any
                  proposed financing and disclose its terms and conditions. The
                  Company will consult with Holder respecting the proposed
                  financing before it concludes such financing.

                  26.7 The Company grants the Holder the right, for a period of
                  seven (7) Business Days after the Company gives written notice
                  to the Holder, to purchase any of the Company's securities at
                  the same price and on the same terms and conditions at any
                  time that the Company proposes to sell to a third party in A
                  BONA FIDE transaction or a series of transactions in an amount
                  up to

                           (i) all of the securities proposed to be sold if the
                  Company proposes to sell its Common Stock at a price of $0.20
                  per share or less; and

                           (ii) the principal amount of the Note converted and
                  total purchase price of the Common Stock for the Warrants
                  exercised if the Company proposes to sell its Common Stock at
                  a price above $0.20 per share.

                  This right of first refusal in favor of the Holder will apply
                  to all securities of the Company convertible into Common Stock
                  and will expire upon the later of the payment of the Notes in
                  full or exercise of all of the Warrants. This right of first
                  refusal shall not apply to securities issuable under the
                  Fusion funding facility; and

                  26.8 The Company will execute such other documents as may be
                  necessary or appropriate to carry out the provisions of the
                  Notes, the Warrants and this Allonge. The Company will bear
                  all reasonable costs associated with the preparation and
                  implementation of this Allonge.

                  2.1 The following definitions in Paragraph 24, "Definitions,"
                  are hereby amended and restated as follows:

                  "Maturity Date" means January 3, 2008.

                  "Senior Indebtedness" means any Indebtedness of the Company,
                  outstanding prior to the date of this Allonge, unless such
                  Indebtedness is PARI PASSU with or contractually subordinate
                  or junior in right of payment to the Notes, except
                  Indebtedness to any Affiliate of the Company, which shall be
                  junior and subordinate to the Notes.


                                       -4-
<PAGE>

                  "Subordinated Indebtedness of the Company" means any
                  Indebtedness of the Company incurred after the date of this
                  Allonge.

                  2.2 Paragraph 27, "Senior Subordinated Indebtedness" is hereby
                  added as follows:

                  27. SENIOR SUBORDINATED INDEBTEDNESS.

                  27.1 This Note constitutes Senior Subordinated Indebtedness of
                  the Company and is unsecured.

                  27.2 The Indebtedness evidenced by this Note and all of the
                  Notes will be subordinated to the prior payment when due of
                  the principal of, and premium, if any, and accrued and unpaid
                  interest on, all existing Senior Indebtedness. The Notes will
                  be senior to, in right of payment of principal of, premium, if
                  any, and accrued and unpaid interest on, any Subordinated
                  Indebtedness of the Company.

                  27.3 Upon any distribution of assets of the Company in any
                  dissolution, winding up, liquidation or reorganization of the
                  Company, all holders of Senior Indebtedness of the Company
                  must be paid in full before any payment or distribution is
                  made with respect to the Notes. The Company shall pay all
                  principal and accrued and unpaid Interest on the Notes before
                  it makes any payment or distribution to the holders of
                  Subordinated Indebtedness.

                  2.3 In all other respects, the Note is confirmed, ratified,
                  and approved and, as amended by this Allonge, shall continue
                  in full force and effect.

         IN WITNESS WHEREOF, the Company and Holder have caused this Allonge to
be executed and delivered by their respective duly authorized officer and
trustee on March 5, 2007, to be effective as of the date and year first above
written.

                                          AETHLON MEDICAL, INC.


                                                /s/ James A. Joyce

                                                James A. Joyce
                                          Its:  Chairman and CEO

                                          Accepted and agreed to:
                                          Claypoole Capital, LLC.


                                          By:   /s/ Christian J. Hoffmann III
                                             -----------------------------------
                                                Christian J. Hoffmann III


                                       -5-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.31
<SEQUENCE>10
<FILENAME>aethlon_sb2-ex1031.txt
<DESCRIPTION>FORM OF ALLONGE
<TEXT>
<PAGE>

EXHIBIT 10.31

                                     FORM OF
                                   ALLONGE TO
                         10% SERIES A CONVERTIBLE NOTES


         This Allonge (the "Allonge"), dated as of March 5, 2007, attached to
and forming a part of certain 10% Series A Convertible Promissory Notes, dated
in November and December, 2005 (collectively, the "Note"), made by AETHLON
MEDICAL, INC., a Nevada corporation (the "Company"), payable to the order of the
Ellen R. Weiner Family Revocable Trust (the "Holder"), in the total principal
amount of $760,000.

         1. Paragraph 1, "Interest," is hereby amended and restated in its
entirety as follows:

         1.       INTEREST

                  1.1 This Note shall bear interest ("Interest") equal to ten
                  percent (10%) per annum on the unpaid principal balance,
                  computed on a three hundred sixty (360)-day year, during the
                  term of the Note. Interest will accrue on each Advance
                  commencing on the date of the Advance, as set forth on Exhibit
                  A to this Note. The Company shall pay all accrued Interest
                  after the date of the Allonge on a quarterly basis on the
                  first day of April, July, October and on the Maturity Date. In
                  no event shall the rate of Interest payable on this Note
                  exceed the maximum rate of Interest permitted to be charged
                  under applicable law.

                  1.2 Within five (5) business days of the execution date of
                  this Allonge, the Company will pay accrued Interest through
                  February 15, 2007. The Company will pay the Interest in units
                  (the "Units") at the rate of $.20 per Unit (the "Interest
                  Payment Rate"). Each Unit is composed of one share of the
                  Company's Common Stock and one Class A Common Stock Purchase
                  Warrant (the "Class A Warrant"). The Company will pay the
                  accrued Interest through February 15, 2007 by issuing 527,577
                  Units and will pay all accrued Interest thereafter in Units at
                  the Interest Payment Rate. Each Class A Warrant will be
                  exercisable to purchase one share of Common Stock at a price
                  of $.20 per share (the Exercise Price"). If the Holder
                  exercises Class A Warrants on or before July 3, 2008, the
                  Company will issue the Holder one Class B Common Stock
                  Purchase Warrant (the "Class B Warrant") for every two Class A
                  Warrants exercised. Each Class B Warrant will be exercisable
                  to purchase one share of Common Stock at a price equal to the
                  greater of $.20 per share or seventy-five percent (75%) of the
                  average of the closing bid prices of the Common Stock for the
                  five (5) trading days immediately preceding the date of the
                  notice of conversion. The forms of the Class A Warrant and
                  Class B Warrant are set forth as Exhibits B and C,
                  respectively. The Class A Warrants and Class B Warrants are
                  referred to as the "Warrants."

<PAGE>

                  1.3 All Interest payable under the Note after the date of the
                  Allonge will, at the option of the Holder, be payable in cash
                  or Units, valued at the Interest Payment Rate, as such term is
                  defined in this Note. The Company will pay any Interest that
                  cannot be paid in full Units in cash.

                  1.4 Paragraph 3 of the Note is hereby amended and restated in
                  its entirety as follows:

                  3. PRE-PAYMENTS AND MATURITY DATE. This Note shall be due and
                  payable in full, including all accrued Interest thereon, on
                  January 3, 2008 (the "Maturity Date"). At any time prior to
                  the Maturity Date, the Company shall have the right to prepay
                  this Note, in whole or in part, without penalty, on ten (10)
                  days' advance written notice to the Holder, subject to the
                  right of the Holder to convert in advance of such prepayment
                  date and provided that on such prepayment date the Company
                  will pay in respect of the redeemed Note cash equal to the
                  face amount plus accrued Interest on the Note (or portion)
                  redeemed. If the Company plans to pay the Note in full on or
                  after the Maturity Date, it will give the Holder the
                  opportunity to convert at the Conversion Price for a period of
                  ten (10) days after delivery of written notice of the payment
                  to the Holder. The Company may prepay this Note at anytime
                  after issuance without penalty.

                  1.5 Paragraph 5.1 of the Note is hereby amended and restated
                  in its entirety as follows:

                  5.1 CONVERSION OF NOTE/CONVERSION PRICE. This Note is
                  convertible, at the option of the Holder, into Units at any
                  time after the Issue Date prior to the close of business on
                  the Business Day preceding the Maturity Date at the rate of
                  $.20 per Unit (the "Conversion Price"), subject to adjustment
                  as hereinafter provided. Each Unit is composed of one share of
                  Common Stock and one Class A Warrant. Each Class A Warrant is
                  exercisable to purchase one share of Common Stock at the
                  Exercise Price. If the Holder exercises Class A Warrants on or
                  before July 3, 2008, the Company will issue the Holder one
                  Class B Warrant for every two Class A Warrants exercised. The
                  Common Stock comprising the Units shall be deemed to have a
                  value of $0.199 per share and the Class A Warrant and Class B
                  Warrant shall each be deemed to have a value of $0.001. No
                  fractional shares will be issued. In lieu thereof, the Company
                  will pay cash for fractional share amounts equal to the fair
                  market value of the Common Stock as quoted as the closing bid
                  price of the Common Stock on the date of conversion.

                  1.6 Paragraphs 11.1.2 and 11.1.3 are amended and restated in
                  their entirety as follows:


                                       -2-

<PAGE>

                  11.1.2 Failure of the Company to pay Interest when due
                  hereunder; or

                  11.1.3 Except for Events of Default set forth in Paragraphs
                  11.1.1 and 11.1.2, failure of the Company to perform any of
                  the covenants, conditions, provisions or agreements contained
                  herein, or in any other agreement between the Company and
                  Holder, which failure continues for a period of thirty (30)
                  days after notice of default has been given to the Company by
                  the Holders of not less than twenty-five percent (25%) of the
                  principal amount of the Notes then outstanding; provided,
                  however, that if the nature of the Company's obligation is
                  such that more than thirty (30) days are required for
                  performance, then an Event of Default shall not occur if the
                  Company commences performance within such thirty (30) day
                  period and thereafter diligently prosecutes the same to
                  completion; or

         2.       Paragraph 26, "Covenants of the Company," is hereby added as
                  follows:

                  26. COVENANTS OF THE COMPANY. The Company covenants to perform
                  the following:

                  26.1 The Company does not have a sufficient number of
                  authorized shares of its Common Stock to make all of the share
                  issuances pursuant to the Note, the Warrants and this Allonge.
                  The Company will use its best efforts to obtain shareholder
                  approval to increase the number of authorized shares by an
                  amount sufficient to satisfy the requirements of the Note, the
                  Warrants and this Allonge, but not less than five (5) million
                  shares, at its annual meeting of shareholders, which meeting
                  will be held no later than March 31, 2007. The Company will
                  reserve such number of shares of Common Stock as are required
                  for issuance under the Notes, the Warrants and this Allonge;

                  26.2 The Class A Warrants will have a term expiring on January
                  2, 2011 and the Class B Warrants will have a term of three
                  years from their respective dates of issuance. All Warrants
                  will be assignable by their holders;

                  26.3 The Company will amend its Registration Statement No.
                  333-130915 and/or file a new registration statement with the
                  SEC on or before March 31, 2007 to cover the shares of Common
                  Stock that may be issued under the Notes, the Warrants and
                  this Allonge, but not fewer than 20,000,000 shares. The
                  Company will use its best efforts to have such amendment or
                  new Registration Statement declared effective promptly and
                  will cause such registration statement to remain effective
                  while the Notes and Warrants are outstanding;

                  26.4 The Company will collaborate with the Holder to expand
                  its Board of Directors by appointing or electing one
                  additional director who has background in life sciences that
                  the Holder may designate after the date of this Allonge. Such
                  additional director will remain on the Board while the


                                       -3-
<PAGE>

                  Notes are outstanding. If the Holder elects not to designate
                  such a person for appointment or election to the Board, the
                  Holder will be entitled to an observer at the Board meetings,
                  which observer shall be included in all meetings of the Board;

                  26.5 The Company will hold Board of Directors meetings,
                  whether formal or informal, at least once per month; and

                  26.6 The Company will give written notice to the Holder within
                  three (3) Business Days of the Company's receipt of any
                  proposed financing and disclose its terms and conditions. The
                  Company will consult with Holder respecting the proposed
                  financing before it concludes such financing.

                  26.7 The Company grants the Holder the right, for a period of
                  seven (7) Business Days after the Company gives written notice
                  to the Holder, to purchase any of the Company's securities at
                  the same price and on the same terms and conditions at any
                  time that the Company proposes to sell to a third party in A
                  BONA FIDE transaction or a series of transactions in an amount
                  up to

                           (i) all of the securities proposed to be sold if the
                  Company proposes to sell its Common Stock at a price of $0.20
                  per share or less; and

                           (ii) the principal amount of the Note converted and
                  total purchase price of the Common Stock for the Warrants
                  exercised if the Company proposes to sell its Common Stock at
                  a price above $0.20 per share.

                  This right of first refusal in favor of the Holder will apply
                  to all securities of the Company convertible into Common Stock
                  and will expire upon the later of the payment of the Notes in
                  full or exercise of all of the Warrants. This right of first
                  refusal shall not apply to securities issuable under the
                  Fusion funding facility; and

                  26.8 The Company will execute such other documents as may be
                  necessary or appropriate to carry out the provisions of the
                  Notes, the Warrants and this Allonge. The Company will bear
                  all reasonable costs associated with the preparation and
                  implementation of this Allonge.

                  2.1 The following definitions in Paragraph 24, "Definitions,"
                  are hereby amended and restated as follows:

                  "Maturity Date" means January 3, 2008.

                  "Senior Indebtedness" means any Indebtedness of the Company,
                  outstanding prior to the date of this Allonge, unless such
                  Indebtedness is PARI PASSU with or contractually subordinate
                  or junior in right of payment to the Notes, except
                  Indebtedness to any Affiliate of the Company, which shall be
                  junior and subordinate to the Notes.


                                       -4-
<PAGE>


                  "Subordinated Indebtedness of the Company" means any
                  Indebtedness of the Company incurred after the date of this
                  Allonge.

                  2.2 Paragraph 27, "Senior Subordinated Indebtedness" is hereby
                  added as follows:

                  27. SENIOR SUBORDINATED INDEBTEDNESS.

                  27.1 This Note constitutes Senior Subordinated Indebtedness of
                  the Company and is unsecured.

                  27.2 The Indebtedness evidenced by this Note and all of the
                  Notes will be subordinated to the prior payment when due of
                  the principal of, and premium, if any, and accrued and unpaid
                  interest on, all existing Senior Indebtedness. The Notes will
                  be senior to, in right of payment of principal of, premium, if
                  any, and accrued and unpaid interest on, any Subordinated
                  Indebtedness of the Company.

                  27.3 Upon any distribution of assets of the Company in any
                  dissolution, winding up, liquidation or reorganization of the
                  Company, all holders of Senior Indebtedness of the Company
                  must be paid in full before any payment or distribution is
                  made with respect to the Notes. The Company shall pay all
                  principal and accrued and unpaid Interest on the Notes before
                  it makes any payment or distribution to the holders of
                  Subordinated Indebtedness.

                  2.3 In all other respects, the Note is confirmed, ratified,
                  and approved and, as amended by this Allonge, shall continue
                  in full force and effect.

         IN WITNESS WHEREOF, the Company and Holder have caused this Allonge to
be executed and delivered by their respective duly authorized officer and
trustee on March 5, 2007, to be effective as of the date and year first above
written.

                                          AETHLON MEDICAL, INC.


                                                /s/ James A. Joyce

                                                James A. Joyce
                                          Its:  Chairman and CEO

                                          Accepted and agreed to:
                                          Ellen R. Weiner Family Revocable Trust


                                          By:   /s/ Ellen R. Weiner
                                             -----------------------------------
                                                Ellen R. Weiner


                                       -5-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.32
<SEQUENCE>11
<FILENAME>aethlon_sb2-ex1032.txt
<DESCRIPTION>REGISTRATION RIGHTS AGR
<TEXT>
<PAGE>

EXHIBIT 10.32

                          REGISTRATION RIGHTS AGREEMENT

      This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
November 29, 2007, by and among AETHLON MEDICAL, INC., a Nevada corporation (the
"Company"), and the parties who are signatories to this Agreement (collectively
referred to as the "Holders").

      WHEREAS, the Company and the Holders entered into a certain Amended and
Restated 10% Series A Convertible Promissory Note (the "Note") in exchange for
cancelling certain prior promissory notes ("Prior Notes") and allonges
("Allonges");

      WHEREAS, in order to induce the Holders to amend the Prior Notes, the
Company has entered into this Agreement to register the shares of Common Stock
issuable upon upon exercise of the Class A Principal Warrants ("Class A
Principal Warrants"), Class A Common Stock Purchase Warrants (the "Class A
Warrants"), Class A-1 Common Stock Purchase Warrants (the "Class A-1 Warrants"),
the Class B Common Stock Purchase Warrants (the "Class B Warrants") and the
Class B-1 Common Stock Purchase Warrants (the "Class B-1 Warrants") under the
Securities Act of 1933, as amended (the "Act") in accordance with the provisions
of this Agreement.

      NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:

      1.    DEFINITIONS.

      As used in this Agreement, the following terms shall have the following
meanings. Other capitalized terms in this Agreement will have the meanings set
forth in the Notes and the Warrants, as the case may be.

            1.1   "BUSINESS DAY" means any day except Saturday, Sunday and any
      day which shall be a legal holiday or a day on which banking institutions
      in the State of New York or the State of California are authorized or
      required by law or other government actions to close.

            1.2   "EFFECTIVENESS DATE" means, with respect to the initial
      Registration Statement required to be filed hereunder as to shares of
      Common Stock underlying the Class A Principal Warrants, the Class A
      Warrants and the Class A-1 Warrants, the ninetieth (90th) calendar day
      following the Filing Date and, with respect to any additional Registration
      Statements which may be required pursuant to Section 3.3, the ninetieth
      (90th) calendar day following the date on which the Company first knows,
      or reasonably should have known, that such additional Registration
      Statement is required hereunder; PROVIDED, HOWEVER, if the Company is
      notified by the Commission that one of the above Registration Statements
      will not be reviewed or is no longer subject to further review and
      comments, the Effectiveness Date as to such Registration Statement shall
      be the tenth (10th) Trading Day following the date on which the Company is
      so notified if such date precedes the dates required above.

                                       1
<PAGE>

            1.3   "EFFECTIVENESS PERIOD" shall have the meaning set forth in
      Section 2.1.

            1.4   "FILING DATE" means, with respect to the initial Registration
      Statement required to be filed hereunder as to shares of Common Stock
      underlying the Class A Principal Warrants, Class A Warrants and Class A-1
      Warrants, March 31, 2008 and, with respect to any additional Registration
      Statements which may be required pursuant to Section 3.3, the thirtieth
      (30th) day following the issuance date of any of the other Warrants or
      such other date on which the Company first knows, or reasonably should
      have known that such additional Registration Statement is required
      hereunder.

            1.5   "HOLDER" or "HOLDERS" means the holder or holders, as the case
      may be, from time to time of Registrable Securities.

            1.6   "INDEMNIFIED PARTY" shall have the meaning set forth in
      Section 5.3.

            1.7   "INDEMNIFYING PARTY" shall have the meaning set forth in
      Section 5.3.

            1.8   "PROSPECTUS" means the prospectus included in a Registration
      Statement (including, without limitation, a prospectus that includes any
      information previously omitted from a prospectus filed as part of an
      effective registration statement in reliance upon Rule 430A promulgated
      under the Securities Act), as amended or supplemented by any prospectus
      supplement, with respect to the terms of the offering of any portion of
      the Registrable Securities covered by a Registration Statement, and all
      other amendments and supplements to the Prospectus, including
      post-effective amendments, and all material incorporated by reference or
      deemed to be incorporated by reference in such Prospectus.

            1.9   "REGISTRABLE SECURITIES" means all of the shares of Common
      Stock issuable upon the exercise of the Warrants together with any
      securities issued or issuable upon any stock split, dividend or other
      distribution recapitalization or similar event with respect to the
      foregoing.

            1.10  "REGISTRATION STATEMENT" means the registration statements
      required to be filed hereunder and any additional registration statements
      contemplated by Section 3.3, including (in each case) the Prospectus,
      amendments and supplements to such registration statement or Prospectus,
      including pre- and post-effective amendments, all exhibits thereto, and
      all material incorporated by reference or deemed to be incorporated by
      reference in such registration statement.

            1.11  "RULE 415" means Rule 415 promulgated by the Commission
      pursuant to the Securities Act, as such Rule may be amended from time to
      time, or any similar rule or regulation hereafter adopted by the
      Commission having substantially the same effect as such Rule.

                                       2
<PAGE>

            1.12  "RULE 424" means Rule 424 promulgated by the Commission
      pursuant to the Securities Act, as such Rule may be amended from time to
      time, or any similar rule or regulation hereafter adopted by the
      Commission having substantially the same effect as such Rule.

            1.13  "SPECIAL COUNSEL" means one special counsel for the Holders,
      the cost of whose services will be reimbursed by the Company pursuant to
      Section 4.

            1.14  "WARRANTS" shall mean the Class A Principal Warrants, Class A
      Warrants, Class A-1 Warrants, Class B Warrants and Class B-1 Warrants
      issued to the Holders.

      2.    SHELF REGISTRATION.

            2.1   On or prior to each Filing Date, the Company shall prepare and
      file with the Commission a "Shelf" Registration Statement covering the
      resale of all Registrable Securities applicable to such Filing Date for an
      offering to be made on a continuous basis pursuant to Rule 415. The
      Registration Statement shall be on Form S-3 (except if the Company is not
      then eligible to register for resale the Registrable Securities on Form
      S-3, in which case such registration shall be on Form SB-2 or another
      appropriate form in accordance herewith) and shall contain (except if
      otherwise directed by the Holders) the "Plan of Distribution" in
      substantially the form attached hereto as EXHIBIT A. The Company shall use
      its best efforts to cause the Registration Statement to be declared
      effective under the Securities Act as promptly as possible after the
      filing thereof, but in any event prior to the applicable Effectiveness
      Date, and shall use its best efforts to keep such Registration Statement
      continuously effective under the Securities Act until the date which is
      two years after the expiration date of the Warrants or such earlier date
      when all Registrable Securities covered by such Registration Statement
      have been sold or may be sold without volume restrictions pursuant to Rule
      144(k), as determined by the counsel to the Company pursuant to a written
      opinion letter to such effect, addressed and acceptable to the Company's
      transfer agent and the affected Holders (the "EFFECTIVENESS PERIOD").

            2.2   The Registration Statements to be filed hereunder shall
      include a number of shares of Common Stock equal to no less than the sum
      of 150% of the number of shares of Common Stock issuable upon exercise in
      full of the Registrable Securities subject to such Registration Statement.

            2.3   The Company shall be subject to the provisions of Sections 2.4
      if

                  2.3.1   a Registration Statement is not filed on or prior to
            its respective Filing Date (if the Company files such Registration
            Statement without affording the Holder the opportunity to review and
            comment on the same as required by Section 3.1 hereof, the Company
            shall not be deemed to have satisfied this Subsection 2.3.1); or

                  2.3.2   a Registration Statement filed hereunder is not
            declared effective by the Commission on or prior to its
            Effectiveness Date; or

                                       3
<PAGE>

                  2.3.3   after a Registration Statement is filed with and
            declared effective by the Commission, such Registration Statement
            ceases to be effective as to all Registrable Securities to which it
            is required to relate at any time prior to the expiration of the
            Effectiveness Period without being succeeded within ten (10)
            Business Days by an amendment to such Registration Statement or by a
            subsequent Registration Statement filed with and declared effective
            by the Commission; or

                  2.3.4   the Common Stock shall be delisted or suspended from
            trading on the New York Stock Exchange, American Stock Exchange, the
            Nasdaq Stock Market or the Nasdaq OTC Bulletin Board (each, a
            "SUBSEQUENT MARKET") for more than twenty (20) Business Days (which
            need not be consecutive Business Days); or

                  Any failure or breach set forth in this Section 2.3 is
            referred to as an "EVENT." The following are referred to as "Event
            Date": for purposes of Subsections 2.3.1 and 2.3.2, the date on
            which such Event occurs, or for purposes of Subsections 2.3.3 and
            2.3.4, the date on which such ten (10) and twenty (20) Business Day
            periods are exceeded.

            2.4   On an Event Date, the Company shall pay to each Holder, as
      liquidated damages and not as a penalty, an amount in cash equal to one
      percent (1.0%) of the original principal amount of the Notes of such
      Holder. On every month after the Event Date until the applicable Event is
      cured, the Company shall pay to each Holder, as liquidated damages and not
      as a penalty, an amount in cash equal to one and one-half percent (1.5%)
      of the original principal amount of the Notes. If the Warrants have been
      issued and are "in the money," the penalties shall be computed based on
      the value of any outstanding Warrants on an Event Date and on each month
      following an Event Date until the Event is cured. The value of the
      Warrants for such purposes shall be the difference between the closing
      price of the Common Stock on the Event Date (and after the Event Date, the
      average of the closing sales prices during the applicable month) and the
      exercise price multiplied by the number of shares of Common Stock issuable
      upon exercise of the Warrants. If the Company fails to pay any liquidated
      damages pursuant to this Section in full within seven (7) days after the
      date payable, the Company will pay interest thereon at a rate of twelve
      (12%) per annum (or such lesser maximum amount that is permitted to be
      paid by applicable law) to the Holder, accruing daily from the date such
      liquidated damages are due until such amounts, plus all such interest
      thereon, are paid in full. At the option of the Company, shares of Common
      Stock may be issued to the Holder in lieu of a cash payment for such
      liquidated damages based upon the Conversion Price then in effect,
      provided that such shares have been registered for resale by such Holder
      and the Company provides the Holder with at least five (5) Business Days'
      irrevocable notice prior to the date such payment is due. The liquidated
      damages pursuant to the terms hereof shall apply on a pro-rata basis for
      any portion of a month prior to the cure of an Event.

                                       4
<PAGE>

      3.    REGISTRATION PROCEDURES. In connection with the Company's
registration obligations hereunder, the Company shall:

            3.1   Not less than five (5) Business Days prior to the filing of
      each Registration Statement or any related Prospectus or any amendment or
      supplement thereto (including any document that would be incorporated or
      deemed to be incorporated therein by reference), the Company shall (i)
      furnish to the Holders and their Special Counsel copies of all such
      documents proposed to be filed, which documents (other than those
      incorporated or deemed to be incorporated by reference) will be subject to
      the review of such Holders and their Special Counsel, and (ii) cause its
      officers and directors, counsel and independent certified public
      accountants to respond to such inquiries as shall be necessary, in the
      reasonable opinion of respective counsel to conduct a reasonable
      investigation within the meaning of the Securities Act. The Company shall
      not file the Registration Statement or any such Prospectus or any
      amendments or supplements thereto to which the Holders of a majority of
      the Registrable Securities and their Special Counsel shall reasonably
      object, provided the Company is notified of such objection no later than
      five (5) Business Days after the Holders have been so furnished copies of
      such documents and provided, further, that such objections relate to the
      selling shareholder information, the plan of distribution, any information
      relating to the Holders, either directly or indirectly, or the compliance
      under the Securities Act of such Registration Statement or Prospectus as
      to form.

            3.2   (i) Prepare and file with the Commission such amendments,
      including post-effective amendments, to a Registration Statement and the
      Prospectus used in connection therewith as may be necessary to keep a
      Registration Statement continuously effective as to the applicable
      Registrable Securities for the Effectiveness Period and prepare and file
      with the Commission such additional Registration Statements in order to
      register for resale under the Securities Act all of the Registrable
      Securities; (ii) cause the related Prospectus to be amended or
      supplemented by any required Prospectus supplement, and as so supplemented
      or amended to be filed pursuant to Rule 424; (iii) respond as promptly as
      reasonably possible, and in any event within ten (10) days, to any
      comments received from the Commission with respect to a Registration
      Statement or any amendment thereto and as promptly as reasonably possible
      provide the Holders true and complete copies of all correspondence from
      and to the Commission relating to a Registration Statement; and (iv)
      comply in all material respects with the provisions of the Securities Act
      and the Exchange Act with respect to the disposition of all Registrable
      Securities covered by a Registration Statement during the applicable
      period in accordance with the intended methods of disposition by the
      Holders thereof set forth in such Registration Statement as so amended or
      in such Prospectus as so supplemented.

            3.3   File additional Registration Statements (i) upon the issuance
      of the Class B Warrants or Class B-1 Warrants or (ii) if the number of
      Registrable Securities at any time exceeds seventy-five percent (75%) of
      the number of shares of Common Stock then registered for the account of
      the Holders in all existing Registration Statements hereunder.

                                       5
<PAGE>

            3.4   Notify the Holders of Registrable Securities to be sold and
      their Special Counsel as promptly as reasonably possible (and, in the case
      of (i)(A) below, not less than five (5) Business Days prior to such
      filing) and (if requested by any such Person) confirm such notice in
      writing no later than one Business Day following the day (i)(A) when a
      Prospectus or any Prospectus supplement or post-effective amendment to a
      Registration Statement is proposed to be filed; and (B) with respect to a
      Registration Statement or any post-effective amendment, when the same has
      become effective; (ii) of the issuance by the Commission of any stop order
      suspending the effectiveness of a Registration Statement covering any or
      all of the Registrable Securities or the initiation of any Proceedings for
      that purpose; (iii) of the receipt by the Company of any notification with
      respect to the suspension of the qualification or exemption from
      qualification of any of the Registrable Securities for sale in any
      jurisdiction, or the initiation or threatening of any Proceeding for such
      purpose; and (iv) of the occurrence of any event or passage of time that
      makes the financial statements included in a Registration Statement
      ineligible for inclusion therein or any statement made in a Registration
      Statement or Prospectus or any document incorporated or deemed to be
      incorporated therein by reference untrue in any material respect or that
      requires any revisions to a Registration Statement, Prospectus or other
      documents so that, in the case of a Registration Statement or the
      Prospectus, as the case may be, it will not contain any untrue statement
      of a material fact or omit to state any material fact required to be
      stated therein or necessary to make the statements therein, in light of
      the circumstances under which they were made, not misleading.

            3.5   Promptly deliver to each Holder and their Special Counsel,
      without charge, as many copies of the Prospectus or Prospectuses,
      including each form of Prospectus, and each amendment or supplement
      thereto as such Persons may reasonably request. The Company hereby
      consents to the use of such Prospectus and each amendment or supplement
      thereto by each of the selling Holders in connection with the offering and
      sale of the Registrable Securities covered by such Prospectus and any
      amendment or supplement thereto.

            3.6   Prior to any public offering of Registrable Securities, use
      its best efforts to register or qualify or cooperate with the selling
      Holders and their Special Counsel in connection with the registration or
      qualification (or exemption from such registration or qualification) of
      such Registrable Securities for offer and sale under the securities or
      Blue Sky laws of such jurisdictions within the United States as any Holder
      requests in writing, to keep each such registration or qualification (or
      exemption therefrom) effective during the Effectiveness Period and to do
      any and all other acts or things necessary or advisable to enable the
      disposition in such jurisdictions of the Registrable Securities covered by
      a Registration Statement; provided, that the Company shall not be required
      to qualify generally to do business in any jurisdiction where it is not
      then so qualified or subject the Company to any material tax in any such
      jurisdiction where it is not then so subject.

                                       6
<PAGE>

            3.7   Cooperate with the Holders to facilitate the timely
      preparation and delivery of certificates representing Registrable
      Securities to be delivered to a transferee pursuant to a Registration
      Statement, which certificates shall be free, to the extent permitted by
      law, of all restrictive legends, and to enable such Registrable Securities
      to be in such denominations and registered in such names as any such
      Holders may request.

            3.8   Upon the occurrence of any event contemplated this Section 3,
      as promptly as reasonably possible, prepare a supplement or amendment,
      including a post-effective amendment, to a Registration Statement or a
      supplement to the related Prospectus or any document incorporated or
      deemed to be incorporated therein by reference, and file any other
      required document so that, as thereafter delivered, neither a Registration
      Statement nor such Prospectus will contain an untrue statement of a
      material fact or omit to state a material fact required to be stated
      therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading.

            3.9   Comply with all applicable rules and regulations of the
      Commission.

            3.10  Use its best efforts to avoid the issuance of, or, if issued,
      obtain the withdrawal of (i) any order suspending the effectiveness of a
      Registration Statement, or (ii) any suspension of the qualification (or
      exemption from qualification) of any of the Registrable Securities for
      sale in any jurisdiction, at the earliest practicable moment.

            3.11  Furnish to each Holder and their Special Counsel, without
      charge, at least one conformed copy of each Registration Statement and
      each amendment thereto, including financial statements and schedules, all
      documents incorporated or deemed to be incorporated therein by reference,
      and all exhibits to the extent requested by such Person (including those
      previously furnished or incorporated by reference) promptly after the
      filing of such documents with the Commission.

            3.12  Notwithstanding anything herein to the contrary, if at any
      time or from time to time during the Effectiveness Period, the Company
      notifies the Holders in writing of the existence of a Potential Material
      Event (as defined below), the Holders shall not offer or sell any
      Securities from the time of the giving of notice with respect to a
      Potential Material Event until the Holders receive written notice from the
      Company that such Potential Material Event either has been disclosed to
      the public or no longer constitutes a Potential Material Event; PROVIDED,
      HOWEVER, that, subject to Subsections 3.12.1 and 3.12.2, the Company may
      not so suspend the right to such holders of Securities for more than sixty
      (60) calendar days in the aggregate during any twelve-month period, and if
      such period is exceeded, such period shall be deemed an "Event" and the
      Company shall be liable to the Holder for liquidated damages pursuant to
      Section 2(c); PROVIDED, FURTHER, subject to Subsections 3.12.1 and 3.12.2,
      the failure to maintain a Registration Statement for not more than sixty
      (60) calendar days in the aggregate during any twelve (12) month period as
      a result of a Potential Material Event shall not be deemed a breach of
      this Agreement, provided the Company timely pays the Holder such
      liquidated damages. The Company must give the Holders at least thirty (30)
      calendar days' prior written notice that such a blackout period (without
      indicating the nature of such blackout period) will occur and such notice
      must be acknowledged in writing by the Holders. Failure to provide the
      Holders with such notice shall constitute an Event during the entire
      applicable period that the Registration Statement is suspended. "Potential
      Material Event" means any of the following:

                                       7
<PAGE>

                  3.12.1   The Board of Directors of the Company determines, in
            its good faith judgment, that the use of any Prospectus would
            require the disclosure of important information which the Company
            has a bona fide business purpose for preserving as confidential or
            the disclosure of which would impede the Company's ability to
            consummate a significant transaction, in which event such period may
            be extended for up to thirty (30) additional days in any twelve (12)
            month period;

                  3.12.2   Company consummates any business combination for
            purposes of Rule 3-05 or Article 11 of Regulation S-X under the
            Securities Act, in which event such restricted period may be
            extended until the date on which the Company has filed such reports
            or obtained the financial information required by Rule 3-05 or
            Article 11 of Regulation S-X to be included in the Registration
            Statement, but in no event more sixty (60) additional days in any
            twelve (12) month period;

                  3.12.3   After one year from the Closing Date, the Company
            files or proposes to file a registration statement in an
            underwritten primary equity offering initiated by the Company (other
            than any registration by the Company on Form S-8), which
            underwriters are reasonably acceptable to a majority in interest of
            the Holders, or a successor or substantially similar form, of (i) an
            employee stock option, stock purchase or compensation plan or of
            securities issued or issuable pursuant to any such plan, or (ii) a
            dividend reinvestment plan), in which event such restricted period
            may be extended for thirty (30) days prior to the effective date of
            the registration statement covering such underwritten primary equity
            offering and ending on the date specified by such managing
            underwriter in such written request to each Holder, which date shall
            be no more than thirty (30) days after such effective date, during
            which the Holder agrees, if requested in writing by the managing
            underwriter or underwriters administering such offering, not to
            effect any offer, sale or distribution of Company securities (or any
            option or right to acquire Company securities;

      4.    REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Nasdaq OTC Bulletin Board and any Subsequent Market
on which the Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws (including, without limitation,
fees and disbursements of counsel for the Company in connection with Blue Sky

                                       8
<PAGE>

qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders)); (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders);
(iii) messenger, telephone and delivery expenses; (iv) fees and disbursements of
counsel for the Company; and (v) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement; and (vi) and fees and expenses of the Special
Counsel up to $20,000. In addition, the Company shall be responsible for all of
its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.

      5.    INDEMNIFICATION.

            5.1   INDEMNIFICATION BY THE COMPANY. The Company shall,
      notwithstanding any termination of this Agreement, indemnify and hold
      harmless each Holder, the officers, directors, agents, brokers (including
      brokers who offer and sell Registrable Securities as principal as a result
      of a pledge or any failure to perform under a margin call of Common
      Stock), investment advisors and employees of each of them, each Person who
      controls any such Holder (within the meaning of Section 15 of the
      Securities Act or Section 20 of the Exchange Act) and the officers,
      directors, agents and employees of each such controlling Person, to the
      fullest extent permitted by applicable law, from and against any and all
      losses, claims, damages, liabilities, costs (including, without
      limitation, costs of preparation and attorneys' fees) and expenses
      (collectively, "Losses"), as incurred, arising out of or relating to any
      untrue or alleged untrue statement of a material fact contained in a
      Registration Statement, any Prospectus or any form of prospectus or in any
      amendment or supplement thereto or in any preliminary prospectus, or
      arising out of or relating to any omission or alleged omission of a
      material fact required to be stated therein or necessary to make the
      statements therein (in the case of any Prospectus or form of prospectus or
      supplement thereto, in light of the circumstances under which they were
      made) not misleading, except to the extent, but only to the extent, that
      (i) such untrue statements or omissions are based solely upon information
      regarding such Holder furnished in writing to the Company by such Holder
      expressly for use therein, or to the extent that such information relates
      to such Holder or such Holder's proposed method of distribution of
      Registrable Securities and was reviewed and expressly approved in writing
      by such Holder expressly for use in a Registration Statement, such
      Prospectus or such form of Prospectus or in any amendment or supplement
      thereto or (ii) in the case of an occurrence of an event of the type
      specified in Section 3.4(ii)-(vi), the use by such Holder of an outdated
      or defective Prospectus after the Company has notified such Holder in
      writing that the Prospectus is outdated or defective and prior to the
      receipt by such Holder of the Advice contemplated in Section 6.5. The
      Company shall notify the Holders promptly of the institution, threat or
      assertion of any Proceeding of which the Company is aware in connection
      with the transactions contemplated by this Agreement.

                                       9
<PAGE>

            5.2   INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
      not jointly, indemnify and hold harmless the Company, its directors,
      officers, agents and employees, each Person who controls the Company
      (within the meaning of Section 15 of the Securities Act and Section 20 of
      the Exchange Act), and the directors, officers, agents or employees of
      such controlling Persons, to the fullest extent permitted by applicable
      law, from and against all Losses (as determined by a court of competent
      jurisdiction in a final judgment not subject to appeal or review) arising
      out of or based upon any untrue statement of a material fact contained in
      any Registration Statement, any Prospectus, or any form of prospectus, or
      in any amendment or supplement thereto, or arising solely out of or based
      solely upon any omission of a material fact required to be stated therein
      or necessary to make the statements therein not misleading to the extent,
      but only to the extent, that such untrue statement or omission is
      contained in any information so furnished in writing by such Holder to the
      Company specifically for inclusion in such Registration Statement or such
      Prospectus or to the extent that (i) such untrue statements or omissions
      are based solely upon information regarding such Holder furnished in
      writing to the Company by such Holder expressly for use therein, or to the
      extent that such information relates to such Holder or such Holder's
      proposed method of distribution of Registrable Securities and was reviewed
      and expressly approved in writing by such Holder expressly for use in the
      Registration Statement, such Prospectus or such form of Prospectus or in
      any amendment or supplement thereto or (ii) in the case of an occurrence
      of an event of the type specified in Section 3(d)(ii)-(vi), the use by
      such Holder of an outdated or defective Prospectus after the Company has
      notified such Holder in writing that the Prospectus is outdated or
      defective and prior to the receipt by such Holder of the Advice
      contemplated in Section 6(e). In no event shall the liability of any
      selling Holder hereunder be greater in amount than the dollar amount of
      the net proceeds received by such Holder upon the sale of the Registrable
      Securities giving rise to such indemnification obligation.

            5.3   CONDUCT OF INDEMNIFICATION PROCEEDINGS.

                  5.3.1   If any Proceeding shall be brought or asserted against
            any Person entitled to indemnity hereunder (an "INDEMNIFIED PArty"),
            such Indemnified Party shall promptly notify the Person from whom
            indemnity is sought (the "Indemnifying Party") in writing, and the
            Indemnifying Party shall assume the defense thereof, including the
            employment of counsel reasonably satisfactory to the Indemnified
            Party and the payment of all fees and expenses incurred in
            connection with defense thereof; provided, that the failure of any
            Indemnified Party to give such notice shall not relieve the
            Indemnifying Party of its obligations or liabilities pursuant to
            this Agreement, except (and only) to the extent that it shall be
            finally determined by a court of competent jurisdiction (which
            determination is not subject to appeal or further review) that such
            failure shall have proximately and materially adversely prejudiced
            the Indemnifying Party.

                                       10
<PAGE>

                  5.3.2   An Indemnified Party shall have the right to employ
            separate counsel in any such Proceeding and to participate in the
            defense thereof, but the fees and expenses of such counsel shall be
            at the expense of such Indemnified Party or Parties unless: (i) the
            Indemnifying Party has agreed in writing to pay such fees and
            expenses; or (ii) the Indemnifying Party shall have failed promptly
            to assume the defense of such Proceeding and to employ counsel
            reasonably satisfactory to such Indemnified Party in any such
            Proceeding; or (iii) the named parties to any such Proceeding
            (including any impleaded parties) include both such Indemnified
            Party and the Indemnifying Party, and such Indemnified Party shall
            have been advised by counsel that a conflict of interest is likely
            to exist if the same counsel were to represent such Indemnified
            Party and the Indemnifying Party (in which case, if such Indemnified
            Party notifies the Indemnifying Party in writing that it elects to
            employ separate counsel at the expense of the Indemnifying Party,
            the Indemnifying Party shall not have the right to assume the
            defense thereof and such counsel shall be at the expense of the
            Indemnifying Party). The Indemnifying Party shall not be liable for
            any settlement of any such Proceeding effected without its written
            consent, which consent shall not be unreasonably withheld. No
            Indemnifying Party shall, without the prior written consent of the
            Indemnified Party, effect any settlement of any pending Proceeding
            in respect of which any Indemnified Party is a party, unless such
            settlement includes an unconditional release of such Indemnified
            Party from all liability on claims that are the subject matter of
            such Proceeding.

                  5.3.3   All fees and expenses of the Indemnified Party
            (including reasonable fees and expenses to the extent incurred in
            connection with investigating or preparing to defend such Proceeding
            in a manner not inconsistent with this Section) shall be paid to the
            Indemnified Party, as incurred, within ten (10) Business Days of
            written notice thereof to the Indemnifying Party (regardless of
            whether it is ultimately determined that an Indemnified Party is not
            entitled to indemnification hereunder; provided, that the
            Indemnifying Party may require such Indemnified Party to undertake
            to reimburse all such fees and expenses to the extent it is finally
            judicially determined that such Indemnified Party is not entitled to
            indemnification hereunder).

            5.4   CONTRIBUTION.

                  5.4.1   If a claim for indemnification under Section 5.1 or
            5.2 is unavailable to an Indemnified Party (by reason of public
            policy or otherwise), then each Indemnifying Party, in lieu of
            indemnifying such Indemnified Party, shall contribute to the amount
            paid or payable by such Indemnified Party as a result of such
            Losses, in such proportion as is appropriate to reflect the relative
            fault of the Indemnifying Party and Indemnified Party in connection
            with the actions, statements or omissions that resulted in such
            Losses as well as any other relevant equitable considerations. The
            relative fault of such Indemnifying Party and Indemnified Party
            shall be determined by reference to, among other things, whether any

                                       11
<PAGE>

            action in question, including any untrue or alleged untrue statement
            of a material fact or omission or alleged omission of a material
            fact, has been taken or made by, or relates to information supplied
            by, such Indemnifying Party or Indemnified Party, and the parties'
            relative intent, knowledge, access to information and opportunity to
            correct or prevent such action, statement or omission. The amount
            paid or payable by a party as a result of any Losses shall be deemed
            to include, subject to the limitations set forth in Section 5.3, any
            reasonable attorneys' or other reasonable fees or expenses incurred
            by such party in connection with any Proceeding to the extent such
            party would have been indemnified for such fees or expenses if the
            indemnification provided for in this Section was available to such
            party in accordance with its terms.

                  5.4.2   The parties hereto agree that it would not be just and
            equitable if contribution pursuant to this Section 5.4 were
            determined by pro rata allocation or by any other method of
            allocation that does not take into account the equitable
            considerations referred to in the immediately preceding paragraph.
            Notwithstanding the provisions of this Section 5.4, no Holder shall
            be required to contribute, in the aggregate, any amount in excess of
            the amount by which the proceeds actually received by such Holder
            from the sale of the Registrable Securities subject to the
            Proceeding exceeds the amount of any damages that such Holder has
            otherwise been required to pay by reason of such untrue or alleged
            untrue statement or omission or alleged omission.

                  5.4.3   The indemnity and contribution agreements contained in
            this Section are in addition to any liability that the Indemnifying
            Parties may have to the Indemnified Parties.

      6.    MISCELLANEOUS.

            6.1   AMENDMENTS AND WAIVERS. The provisions of this Agreement,
      including the provisions of this sentence, may not be amended, modified or
      supplemented, and waivers or consents to departures from the provisions
      hereof may not be given, unless the same shall be in writing and signed by
      the Company and the Holders of at least two-thirds of the then outstanding
      Registrable Securities. Notwithstanding the foregoing, a waiver or consent
      to depart from the provisions hereof with respect to a matter that relates
      exclusively to the rights of Holders and that does not directly or
      indirectly affect the rights of other Holders may be given by Holders of
      at least a majority of the Registrable Securities to which such waiver or
      consent relates; PROVIDED, HOWEVER, that the provisions of this sentence
      may not be amended, modified, or supplemented except in accordance with
      the provisions of the immediately preceding sentence.

            6.2   NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
      subsidiaries has entered, as of the date hereof, nor shall the Company or
      any of its subsidiaries, on or after the date of this Agreement, enter
      into any agreement with respect to its securities, that would have the
      effect of impairing the rights granted to the Holders in this Agreement or
      otherwise conflicts with the provisions hereof. Except as and to the
      extent specified in Schedule 6.2 hereto, neither the Company nor any of
      its subsidiaries has previously entered into any agreement granting any
      registration rights with respect to any of its securities to any Person
      that have not been satisfied in full.

                                       12
<PAGE>

            6.3   NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
      specified in Schedule 6.3 hereto, neither the Company nor any of its
      security holders (other than the Holders in such capacity pursuant hereto)
      may include securities of the Company in the Registration Statement other
      than the Registrable Securities, and the Company shall not after the date
      hereof enter into any agreement providing any such right to any of its
      security holders.

            6.4   COMPLIANCE. Each Holder covenants and agrees that it will
      comply with the prospectus delivery requirements of the Securities Act as
      applicable to it in connection with sales of Registrable Securities
      pursuant to the Registration Statement.

            6.5   DISCONTINUED DISPOSITION. Each Holder agrees by its
      acquisition of such Registrable Securities that, upon receipt of a notice
      from the Company of the occurrence of any event of the kind described in
      Sections 3.4, such Holder will forthwith discontinue disposition of such
      Registrable Securities under a Registration Statement until such Holder's
      receipt of the copies of the supplemented Prospectus and/or amended
      Registration Statement contemplated by Section 3.8, or until it is advised
      in writing (the "Advice") by the Company that the use of the applicable
      Prospectus may be resumed, and, in either case, has received copies of any
      additional or supplemental filings that are incorporated or deemed to be
      incorporated by reference in such Prospectus or Registration Statement.
      The Company may provide appropriate stop orders to enforce the provisions
      of this paragraph.

            6.6   PIGGY-BACK REGISTRATIONS. If at any time during the
      Effectiveness Period there is not an effective Registration Statement
      covering all of the Registrable Securities and the Company shall determine
      to prepare and file with the Commission a registration statement relating
      to an offering for its own account or the account of others under the
      Securities Act of any of its equity securities, other than on Form S-4 or
      Form S-8 (each as promulgated under the Securities Act) or their then
      equivalents relating to equity securities to be issued solely in
      connection with any acquisition of any entity or business or equity
      securities issuable in connection with stock option or other employee
      benefit plans, then the Company shall send to each Holder written notice
      of such determination and, if within fifteen (15) days after receipt of
      such notice, any such Holder shall so request in writing, the Company
      shall include in such registration statement all or any part of such
      Registrable Securities such holder requests to be registered, subject to
      customary underwriter cutbacks applicable to all Holders of registration
      rights; provided, that, the Company shall not be required to register any
      Registrable Securities pursuant to this Section 6.6 that are eligible for
      resale pursuant to Rule 144(k) promulgated under the Securities Act.

                                       13
<PAGE>

            6.7   NOTICES. Any and all notices or other communications or
      deliveries required or permitted to be provided hereunder shall be
      delivered as set forth in the Purchase Agreement.

            6.8   SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
      benefit of and be binding upon the successors and permitted assigns of
      each of the parties and shall inure to the benefit of each Holder. The
      Company may not assign its rights or obligations hereunder without the
      prior written consent of each Holder. Each Holder may assign their
      respective rights hereunder in the manner and to the Persons as permitted
      under the Purchase Agreement.

            6.9   COUNTERPARTS. This Agreement may be executed in any number of
      counterparts, each of which when so executed shall be deemed to be an
      original and, all of which taken together shall constitute one and the
      same Agreement. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid binding obligation of
      the party executing (or on whose behalf such signature is executed) the
      same with the same force and effect as if such facsimile signature were
      the original thereof.

            6.10  GOVERNING LAW. All questions concerning the construction,
      validity, enforcement and interpretation of this Agreement shall be
      governed by and construed and enforced in accordance with the internal
      laws of the State of California, without regard to the principles of
      conflicts of law thereof. Each party hereby irrevocably submits to the
      exclusive jurisdiction of the state and federal courts sitting in the City
      of San Diego, for the adjudication of any dispute hereunder or in
      connection herewith or with any transaction contemplated hereby or
      discussed herein, and hereby irrevocably waives, and agrees not to assert
      in any suit, action or proceeding, any claim that it is not personally
      subject to the jurisdiction of any such court, that such suit, action or
      proceeding is improper. Each party hereby irrevocably waives personal
      service of process and consents to process being served in any such suit,
      action or proceeding by mailing a copy thereof to such party at the
      address in effect for notices to it under this Agreement and agrees that
      such service shall constitute good and sufficient service of process and
      notice thereof. Nothing contained herein shall be deemed to limit in any
      way any right to serve process in any manner permitted by law. Each party
      hereto hereby irrevocably waives, to the fullest extent permitted by
      applicable law, any and all right to trial by jury in any legal proceeding
      arising out of or relating to this Agreement or the transactions
      contemplated hereby. If either party shall commence a Proceeding to
      enforce any provisions of this Agreement, then the prevailing party in
      such Proceeding shall be reimbursed by the other party for its attorney's
      fees and other costs and expenses incurred with the investigation,
      preparation and prosecution of such Proceeding.

            6.11  CUMULATIVE REMEDIES. The remedies provided herein are
      cumulative and not exclusive of any remedies provided by law.

                                       14
<PAGE>

            6.12  SEVERABILITY. If any term, provision, covenant or restriction
      of this Agreement is held by a court of competent jurisdiction to be
      invalid, illegal, void or unenforceable, the remainder of the terms,
      provisions, covenants and restrictions set forth herein shall remain in
      full force and effect and shall in no way be affected, impaired or
      invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially
      the same result as that contemplated by such term, provision, covenant or
      restriction. It is hereby stipulated and declared to be the intention of
      the parties that they would have executed the remaining terms, provisions,
      covenants and restrictions without including any of such that may be
      hereafter declared invalid, illegal, void or unenforceable.

            6.13  HEADINGS. The headings in this Agreement are for convenience
      of reference only and shall not limit or otherwise affect the meaning
      hereof.

            6.14  INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
      obligations of each Purchaser hereunder is several and not joint with the
      obligations of any other Purchaser hereunder, and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser hereunder. Nothing contained herein or in any other agreement or
      document delivered at any closing, and no action taken by any Purchaser
      pursuant hereto or thereto, shall be deemed to constitute the Purchasers
      as a partnership, an association, a joint venture or any other kind of
      entity, or create a presumption that the Purchasers are in any way acting
      in concert with respect to such obligations or the transactions
      contemplated by this Agreement. Each Purchaser shall be entitled to
      protect and enforce its rights, including without limitation the rights
      arising out of this Agreement, and it shall not be necessary for any other
      Purchaser to be joined as an additional party in any proceeding for such
      purpose.

      IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                          AETHLON MEDICAL, INC.


                                          By: /s/ James Joyce
                                             -----------------------------------
                                          Name:  James Joyce
                                          Title: President and Chief Executive
                                                 Officer



                                       15
<PAGE>

             HOLDER SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT




________________________________
Signature of Holder

                                                     $_________________
                                           Outstanding Principal Amount of Notes


________________________________
Name of Holder





                                       16
<PAGE>

                                    EXHIBIT A

                              PLAN OF DISTRIBUTION

      The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:

      o     ordinary brokerage transactions and transactions in which the
            broker-dealer solicits purchasers;

      o     block trades in which the broker-dealer will attempt to sell the
            shares as agent but may position and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases by a broker-dealer as principal and resale by the
            broker-dealer for its account;

      o     an exchange distribution in accordance with the rules of the
            applicable exchange;

      o     privately negotiated transactions;

      o     short sales;

      o     broker-dealers may agree with the Selling Stockholders to sell a
            specified number of such shares at a stipulated price per share;

      o     a combination of any such methods of sale; and

      o     any other method permitted pursuant to applicable law.

      The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

      The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the Shares or Common Stock or Warrant owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of Selling Stockholders to include the pledgee, transferee or
other successors in interest as Selling Stockholders under this prospectus.

                                       17
<PAGE>

      The Selling Stockholders also may transfer the shares of Common Stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.

      The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholders have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.

      The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.






                                       18
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.33
<SEQUENCE>12
<FILENAME>aethlon_sb2-ex1033.txt
<DESCRIPTION>COMMON STOCK PURCH WARRANT
<TEXT>
<PAGE>

EXHIBIT 10.33

THESE SECURITIES MAY NOT BE OFFERED OR SOLD UNLESS AT THE TIME OF SUCH OFFER OR
SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS MEETING THE
REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT THERETO,
WHICH IS EFFECTIVE UNDER SAID ACT, UNLESS IN THE OPINION OF COUNSEL TO THE
CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SAID ACT.

WARRANT NO: ______

                                     CLASS A
                          COMMON STOCK PURCHASE WARRANT
                               ("CLASS A WARRANT")
                                       OF

                              AETHLON MEDICAL, INC.

      Aethlon Medical, Inc. (the "Company"), a Nevada corporation, hereby
certifies that, for value received of $.001 per Warrant, _____________________
(the "Holder"), whose address is ___________________________________, is
entitled, subject to the terms set forth below at any time or from time to time
after the date hereof and before the Expiration Date (as defined below), to
purchase from the Company ________________ shares (the "Shares") of Common
Stock, $ .001 par value, at a price of $0.20 per Share (the purchase price per
Share, as adjusted from time to time pursuant to the provisions hereunder set
forth, is referred to in this Warrant as the "Purchase Price"). The Warrant is
being issued as a part of a Unit consisting of this Warrant and one share of
Common Stock in consideration for accrued interest due under that certain
Amended and Restated 10% Series A Convertible Note entered into between the
Company and the Holder (the "Note").

1.    TERMS OF THE WARRANT.

      1.1   TIME OF EXERCISE. Subject to the provisions of Sections 1.5,
"Transfer and Assignment," and 3.1, "Registration and Legends," this Warrant may
be exercised at any time and from time to time after 9:00 a.m., P.S.T., on
January 3, 2008 (the "Exercise Commencement Date"), but no later than 5:00 p.m.,
P.S.T., January 3, 2013 (the "Expiration Date"), at which point it shall become
void and all rights under this Warrant shall cease. If this Warrant is exercised
in whole or in part on or before February 15, 2010, the Company will issue to
the Holder one Class B Common Stock Purchase Warrant ("Class B Warrant") for
every two Shares purchased under this Warrant.

      1.2   MANNER OF EXERCISE.

            1.2.1   Upon compliance with and subject to the conditions set forth
in this Warrant, the Holder may exercise this Warrant, in whole or in part, upon
surrender of this Warrant with the form of subscription attached hereto duly
executed to the Company at its corporate office at the address indicated in this
Warrant, together with the full Purchase Price for each Share to be purchased
(i) in lawful money of the United States, or by certified check, bank draft or
postal or express money order payable in United States dollars to the order of
the Company or (ii) a manner acceptable to the Company.

<PAGE>

            1.2.2   Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates or other evidence of ownership, for the total number
of whole Shares for which this Warrant is being exercised in such denominations
as are required for delivery to the Holder, and the Company shall thereupon
deliver such documents to the Holder or its nominee.

            1.2.3   If the Holder exercises this Warrant with respect to fewer
than all of the Shares that may be purchased under this Warrant, the Company
shall execute a new Warrant for the balance of the Shares that may be purchased
upon exercise of this Warrant and deliver such new Warrant to the Holder.

            1.2.4   The Company covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect of the issue of
this Warrant, or the issue of any Shares upon the exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of the Shares in a name other than that of the Holder at the time of surrender,
and until the payment of such tax, the Company shall not be required to issue
such Shares.

            1.2.5   The Company shall, at the time of any exercise of all or
part of this Warrant, upon the request of the Holder hereof, acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holders shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant, provided that if the Holder of this Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligations of the Company to afford to such Holder any such rights.

      1.3   EXCHANGE OF WARRANT. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, it shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.

      1.4   HOLDER AS OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Company may deem and treat the Holder as the
absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Irrespective of the date of issue and delivery of certificates for any Shares
issuable upon the exercise of the Warrant, each person in whose name any such
certificate is issued shall be deemed to have become the holder of record of the
Shares represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and

                                      -2-
<PAGE>

payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of Warrant shall be entitled to receive only dividends or
distributions payable to holders of record on or after the date on which such
person shall be deemed to have become the holder of record of such Shares.

      1.5   TRANSFER AND ASSIGNMENT. This Warrant may not be sold, hypothecated,
exercised, assigned or transferred except in accordance with and subject to the
provisions of the Securities Act of 1933, as amended (the "Act"), including
limiting such transfers to Accredited Investors as that term is defined under
Regulation D of the Act.

      1.6   METHOD FOR ASSIGNMENT. Any assignment permitted under this Warrant
shall be made by surrender of this Warrant to the Company at its principal
office with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee designated
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation thereof at the corporate office of the Company together
with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.

      1.7   RIGHTS OF HOLDER. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or consent or receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:

            1.7.1   The Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or

            1.7.2   The Company shall offer to the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or

            1.7.3   There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or

                                      -3-
<PAGE>

            1.7.4   There shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of said cases, the Company shall cause to be mailed to the Holder, at the
earliest practicable time (and, in any event, not less than thirty (30) days
before any record date or other date set for definitive action), written notice
of the date on which the books of the Company shall close or a record shall be
taken to determine the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Purchase
Price and the kind and amount of the Common Stock and other securities and
property deliverable upon exercise of this Warrant. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in said distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to exercise this Warrant shall terminate). Without limiting the
obligation of the Company to provide notice to the holder of actions hereunder,
it is agreed that failure of the Company to give notice shall not invalidate
such action of the Company.

      1.8   LOST WARRANT CERTIFICATE(S). Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required by the
Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will cause to be executed and delivered a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.

      1.9   COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:

            1.9.1   At all times it shall reserve and keep available for the
exercise of this Warrant into Common Stock such number of authorized shares of
Common Stock as are sufficient to permit the exercise in full of this Warrant
into Common Stock; and

            1.9.2   All Shares issued upon exercise of the Warrant shall be duly
authorized, validly issued and outstanding, fully-paid and non-assessable.

      1.10  LIMITATION ON EXERCISE RIGHTS. Notwithstanding any other provision
of Section 1 to the contrary, the Holder shall not be entitled to exercise this
Warrant and any other Warrant (the "Related Warrants") issued by the Company to
the Holder or convert any of the Notes issued by the Company to the Holder into
Common Stock in excess of that number of shares of Common Stock which, upon
giving effect to such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the Holder and its Affiliates to exceed 9.9%
of the outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing provision, the aggregate number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the

                                      -4-
<PAGE>

number of shares of Common Stock beneficially owned and those shares issuable
upon conversion of all Notes and Related Warrants with respect to which the
determination of such provision is being made, but shall exclude the number of
shares of Common Stock that would be issuable upon (i) conversion of the
remaining principal amount(s) of all Notes and the Related Warrants beneficially
owned by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note. For purposes of this Section, in determining the number
of outstanding shares of Common Stock the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (a) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, or (b) more recent public
announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). For purposes of this Warrant, an "Affiliate" of any
specified Person means any other Person directly or indirectly controlling or
controlled by or under common control with such specified Person. A "Person"
means any individual, corporation, partnership, joint venture, trust, estate or
unincorporated organization.

2.    ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
      EXERCISE.

      2.1   RECAPITALIZATION. The number of Shares purchasable on exercise of
this Warrant and the Purchase Price therefor shall be subject to adjustment from
time to time in the event that the Company shall: (i) pay a dividend in, or make
a distribution of, shares of Common Stock; (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares; (iii) combine its outstanding
shares of Common Stock into a smaller number of shares; or (iv) spin-off a
subsidiary by distributing, as a dividend or otherwise, shares of the subsidiary
to its stockholders. In any such case, the total number of shares purchasable on
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive, at the same aggregate purchase price, the
number of shares of Common Stock that the Holder would have owned or would have
been entitled to receive immediately following the occurrence of any of the
events described above had this Warrant been exercised in full immediately prior
to the occurrence (or applicable record date) of such event. An adjustment made
pursuant to this Paragraph 2 shall, in the case of a stock dividend or
distribution, be made as of the record date and, in the case of a subdivision or
combination, be made as of the effective date thereof. If, as a result of any
adjustment pursuant to this Paragraph 2, the Holder shall become entitled to
receive shares of two or more classes of series of securities of the Company,
the Board of Directors of the Company shall equitably determine the allocation
of the adjusted purchase price between or among shares or other units of such
classes or series and shall notify the Holder of such allocation.

                                      -5-
<PAGE>

      2.2   MERGER OR CONSOLIDATION. In the event of any reorganization or
recapitalization of the Company or in the event the Company consolidates with or
merges into another entity or transfers all or substantially all of its assets
to another entity, then and in each such event, the Holder, on exercise of this
Warrant as provided herein, at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or transfer, shall be
entitled, and the documents executed to effectuate such event shall so provide,
to receive the stock or other securities or property to which the Holder would
have been entitled upon such consummation if the Holder had exercised this
Warrant immediately prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization, recapitalization,
consolidation, merger or transfer and shall be applicable to the shares of stock
or other securities or property receivable on the exercise of this Warrant after
such consummation. and as an exchange for a larger or smaller number of shares,
as the case may be.

      2.3   NOTICE OF DISSOLUTION OR LIQUIDATION. Except as otherwise provided
in Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance
of all or substantially all of the assets of the Company in connection with a
plan of complete liquidation of the Company, or in the case of the dissolution,
liquidation or winding-up of the Company, all rights under this Warrant shall
terminate on a date fixed by the Company, such date so fixed to be not earlier
than the date of the commencement of the proceedings for such dissolution,
liquidation or winding-up and not later than thirty (30) days after such
commencement date. Notice of such termination of purchase rights shall be given
to the Holder at least thirty (30) days prior to such termination date.

      2.4   STATEMENT OF ADJUSTMENT. Any adjustment pursuant to the provisions
of this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.

      2.5   NO FRACTIONAL SHARES. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.5, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives his right to receive
a certificate for any fraction of a Share upon exercise hereof.

      2.6   NO CHANGE IN FORM REQUIRED. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.

                                      -6-
<PAGE>

3.    REGISTRATION UNDER THE SECURITIES ACT OF 1933.

      3.1   REGISTRATION AND LEGENDS. The Holder understands that (i) the
Company has not registered the Warrant or the Shares under the Act, or the
applicable securities laws of any state in reliance on exemptions from
registration and (ii) such exemptions depend upon the Holder's investment intent
at the time the Holder acquires the Warrant or the Shares. The Holder therefore
represents and warrants that it is acquiring the Warrant, and will acquire the
Shares, for the Holder's own account for investment and not with a view to
distribution, assignment, resale or other transfer of the Warrant or the Shares.
Because the Warrant and the Shares are not registered, the Holder is aware that
the Holder must hold them indefinitely unless they are registered under the Act
and any applicable securities laws or the Holder must obtain exemptions from
such registration. Upon exercise, in part or in whole, of this Warrant, the
Shares shall bear the following legend:

            The shares of Common Stock represented by this certificate
      have not been registered under the Securities Act of 1933, as
      amended ("Act") or any applicable state securities laws, and
      they may not be offered for sale, sold, transferred, pledged
      or hypothecated without an effective registration statement
      under the Securities Act and under any applicable state
      securities laws, or an opinion of counsel, satisfactory to the
      company, that an exemption from such registration is
      available.

      3.2   NO-ACTION LETTER. The Company agrees that it will be satisfied that
no post-effective amendment or new registration is required for the public sale
of the Shares if it shall be presented with a letter from the Staff of the
Securities and Exchange Commission (the "Commission"), stating in effect that,
based upon stated facts which the Company shall have no reason to believe are
not true in any material respect, the Staff will not recommend any action to the
Commission if such Shares are offered and sold without delivery of a prospectus,
and that, therefore, no Registration Statement under which such shares are to be
registered is required to be filed.

      3.3   REGISTRATION RIGHTS. The Holder shall have the right, under the
terms of a Registration Rights Agreement dated November 29, 2007 between the
Holder and the Company, to cause the Company to register the Common Stock
underlying this Warrant (the "Underlying Common Stock") in a Registration
Statement under the Securities Act of 1933, as amended (the "Act"), filed by the
Company with the Securities and Exchange Commission (the "SEC").

      3.4   RULE 144. If the Company (a) has or registers a class of securities
under Section 12 of the Exchange Act or (b) has or commences to file reports
under Section 13 or 15(d) of the Exchange Act, then, at the request of any
Holder who proposes to sell securities in compliance with Rule 144 of the SEC,
the Company will (i) forthwith furnish to such holder a written statement of
compliance with the filing requirements of the SEC as set forth in Rule 144, as
such rules may be amended from time to time and (ii) make available to the
public and such Holder such information and take such other action as it
requested by the Holder as will enable the Holder to make sales pursuant to Rule
144.

                                      -7-
<PAGE>

      3.5   AGREEMENTS. The agreements in this Section shall continue in effect
regardless of the exercise and surrender of this Warrant.

4.    RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued Common Stock or such other
class or classes of capital stock or other securities to such number as shall be
sufficient for that purpose.

5.    SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.

6.    REMEDIES. The Company agrees that the remedies at law of the Holder, in
the event of any default or threatened default by the Company in the performance
or compliance with any of the terms of this Warrant, may not be adequate and
such terms may, in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

7.    OTHER MATTERS.

      7.1   BINDING EFFECT. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.

      7.2   NOTICES. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:

                            Aethlon Medical, Inc.
                            3030 Bunker Hill Street
                            Suite 4000
                            San Diego, CA 92109
                            Attn: President

Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.

                                      -8-
<PAGE>

      7.3   GOVERNING LAW. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of California.

      7.4   PARTIES BOUND AND BENEFITTED. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.

      7.5   HEADINGS. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.

      IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 29th day of November, 2007.


                                         AETHLON MEDICAL, INC.


                                         By: /s/ James A. Joyce
                                            --------------------------------
                                            James A. Joyce
                                            Chairman and Chief Executive Officer


                                      -9-
<PAGE>

                              AETHLON MEDICAL, INC.

                                   ASSIGNMENT


      FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers unto ____________________________________________________
the within Warrant and the rights represented thereby, and does hereby
irrevocably constitute and appoint ______________________________________
Attorney, to transfer said Warrant on the books of the Company, with full power
of substitution.

Dated:________________________


                                      Signed:___________________________________

                                      Print Name:_______________________________

<PAGE>

                                SUBSCRIPTION FORM

                              AETHLON MEDICAL, INC.
                             3030 BUNKER HILL STREET
                            SUITE 4000, SAN DIEGO, CA

      The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock (the "Shares"), pursuant to and in accordance with the
terms and conditions of this Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.

      The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such Shares, unless either (a) a
registration statement, or post-effective amendment thereto, covering such
Shares have been filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Act"), and such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering the
Shares to be so sold, transferred or otherwise disposed of, or (b) counsel to
Aethlon Medical, Inc. (the "Company") satisfactory to the undersigned has
rendered an opinion in writing and addressed to the Company that such proposed
offer, sale, transfer or other disposition of the Shares is exempt from the
provisions of Section 5 of the Act in view of the circumstances of such proposed
offer, sale, transfer or other disposition; (2) the Company may notify the
transfer agent for its Common Stock that the certificates for the Common Stock
acquired by the undersigned are not to be transferred unless the transfer agent
receives advice from the Company that one or both of the conditions referred to
in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix
the legend set forth in Section 3.1 of this Warrant to the certificates for
Shares hereby subscribed for, if such legend is applicable.

Dated:___________________              Signed:_________________________________

                                       Address:________________________________

                                       ________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>13
<FILENAME>aethlon_sb2-ex1034.txt
<DESCRIPTION>COMMON STOCK PURCH WARRANT
<TEXT>
<PAGE>

EXHIBIT 10.34

THESE SECURITIES MAY NOT BE OFFERED OR SOLD UNLESS AT THE TIME OF SUCH OFFER OR
SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS MEETING THE
REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT THERETO,
WHICH IS EFFECTIVE UNDER SAID ACT, UNLESS IN THE OPINION OF COUNSEL TO THE
CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SAID ACT.

WARRANT NO: ______

                                CLASS A PRINCIPAL
                          COMMON STOCK PURCHASE WARRANT
                          ("CLASS A PRINCIPAL WARRANT")
                                       OF

                              AETHLON MEDICAL, INC.

      Aethlon Medical, Inc. (the "Company"), a Nevada corporation, hereby
certifies that, for value received of $.001 per Warrant, ___________________
(the "Holder"), whose address is ________________________________, is entitled,
subject to the terms set forth below at any time or from time to time after the
date hereof and before the Expiration Date (as defined below), to purchase from
the Company ____________ shares (the "Shares") of Common Stock, $ .001 par
value, at a price of $0.20 per Share (the purchase price per Share, as adjusted
from time to time pursuant to the provisions hereunder set forth, is referred to
in this Warrant as the "Purchase Price"). The Warrant is being issued in
conjunction with that certain Amended and Restated 10% Series A Convertible Note
entered into between the Company and the Holder (the "Note").

1.    TERMS OF THE WARRANT.

      1.1   TIME OF EXERCISE. Subject to the provisions of Sections 1.5,
"Transfer and Assignment," and 3.1, "Registration and Legends," this Warrant may
be exercised at any time and from time to time after 9:00 a.m., P.S.T., on
November 29, 2007 (the "Exercise Commencement Date"), but no later than 5:00
p.m., P.S.T., November 29, 2012 (the "Expiration Date"), at which point it shall
become void and all rights under this Warrant shall cease. If this Warrant is
exercised in whole or in part on or before February 15, 2010, the Company will
issue to the Holder one Class B Common Stock Purchase Warrant ("Class B
Warrant") for every two Shares purchased under this Warrant.

      1.2   MANNER OF EXERCISE.

            1.2.1   Upon compliance with and subject to the conditions set forth
in this Warrant, the Holder may exercise this Warrant, in whole or in part, upon
surrender of this Warrant with the form of subscription attached hereto duly
executed to the Company at its corporate office at the address indicated in this
Warrant, together with the full Purchase Price for each Share to be purchased
(i) in lawful money of the United States, or by certified check, bank draft or
postal or express money order payable in United States dollars to the order of
the Company or (ii) a manner acceptable to the Company.

<PAGE>

            1.2.2   Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates or other evidence of ownership, for the total number
of whole Shares for which this Warrant is being exercised in such denominations
as are required for delivery to the Holder, and the Company shall thereupon
deliver such documents to the Holder or its nominee.

            1.2.3 If the Holder exercises this Warrant with respect to fewer
than all of the Shares that may be purchased under this Warrant, the Company
shall execute a new Warrant for the balance of the Shares that may be purchased
upon exercise of this Warrant and deliver such new Warrant to the Holder.

            1.2.4 The Company covenants and agrees that it will pay when due and
payable any and all taxes which may be payable in respect of the issue of this
Warrant, or the issue of any Shares upon the exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of the Shares in a name other than that of the Holder at the time of surrender,
and until the payment of such tax, the Company shall not be required to issue
such Shares.

            1.2.5 The Company shall, at the time of any exercise of all or part
of this Warrant, upon the request of the Holder hereof, acknowledge in writing
its continuing obligation to afford to such Holder any rights to which such
Holders shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant, provided that if the Holder of this Warrant shall
fail to make any such request, such failure shall not affect the continuing
obligations of the Company to afford to such Holder any such rights.

      1.3   EXCHANGE OF WARRANT. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, it shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.

      1.4   HOLDER AS OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Company may deem and treat the Holder as the
absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Irrespective of the date of issue and delivery of certificates for any Shares
issuable upon the exercise of the Warrant, each person in whose name any such
certificate is issued shall be deemed to have become the holder of record of the
Shares represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and

                                      -2-
<PAGE>

payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of Warrant shall be entitled to receive only dividends or
distributions payable to holders of record on or after the date on which such
person shall be deemed to have become the holder of record of such Shares.

      1.5   TRANSFER AND ASSIGNMENT. This Warrant may not be sold, hypothecated,
exercised, assigned or transferred except in accordance with and subject to the
provisions of the Securities Act of 1933, as amended (the "Act"), including
limiting such transfers to Accredited Investors as that term is defined under
Regulation D of the Act.

      1.6   METHOD FOR ASSIGNMENT. Any assignment permitted under this Warrant
shall be made by surrender of this Warrant to the Company at its principal
office with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee designated
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation thereof at the corporate office of the Company together
with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.

      1.7   RIGHTS OF HOLDER. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or consent or receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:

            1.7.1   The Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or

            1.7.2   The Company shall offer to the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or

            1.7.3   There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or

                                      -3-
<PAGE>

            1.7.4   There shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of said cases, the Company shall cause to be mailed to the Holder, at the
earliest practicable time (and, in any event, not less than thirty (30) days
before any record date or other date set for definitive action), written notice
of the date on which the books of the Company shall close or a record shall be
taken to determine the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Purchase
Price and the kind and amount of the Common Stock and other securities and
property deliverable upon exercise of this Warrant. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in said distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to exercise this Warrant shall terminate). Without limiting the
obligation of the Company to provide notice to the holder of actions hereunder,
it is agreed that failure of the Company to give notice shall not invalidate
such action of the Company.

      1.8   LOST WARRANT CERTIFICATE(S). Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required by the
Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will cause to be executed and delivered a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.

      1.9   COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:

            1.9.1   At all times it shall reserve and keep available for the
exercise of this Warrant into Common Stock such number of authorized shares of
Common Stock as are sufficient to permit the exercise in full of this Warrant
into Common Stock; and

            1.9.2   All Shares issued upon exercise of the Warrant shall be duly
authorized, validly issued and outstanding, fully-paid and non-assessable.

      1.10  LIMITATION ON EXERCISE RIGHTS. Notwithstanding any other provision
of Section 1 to the contrary, the Holder shall not be entitled to exercise this
Warrant and any other Warrant (the "Related Warrants") issued by the Company to
the Holder or convert any of the Notes issued by the Company to the Holder into
Common Stock in excess of that number of shares of Common Stock which, upon
giving effect to such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the Holder and its Affiliates to exceed 9.9%
of the outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing provision, the aggregate number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the

                                      -4-
<PAGE>

number of shares of Common Stock beneficially owned and those shares issuable
upon conversion of all Notes and Related Warrants with respect to which the
determination of such provision is being made, but shall exclude the number of
shares of Common Stock that would be issuable upon (i) conversion of the
remaining principal amount(s) of all Notes and the Related Warrants beneficially
owned by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note. For purposes of this Section, in determining the number
of outstanding shares of Common Stock the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (a) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, or (b) more recent public
announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). For purposes of this Warrant, an "Affiliate" of any
specified Person means any other Person directly or indirectly controlling or
controlled by or under common control with such specified Person. A "Person"
means any individual, corporation, partnership, joint venture, trust, estate or
unincorporated organization.

2.    ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
      EXERCISE.

      2.1   RECAPITALIZATION. The number of Shares purchasable on exercise of
this Warrant and the Purchase Price therefor shall be subject to adjustment from
time to time in the event that the Company shall: (i) pay a dividend in, or make
a distribution of, shares of Common Stock; (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares; (iii) combine its outstanding
shares of Common Stock into a smaller number of shares; or (iv) spin-off a
subsidiary by distributing, as a dividend or otherwise, shares of the subsidiary
to its stockholders. In any such case, the total number of shares purchasable on
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive, at the same aggregate purchase price, the
number of shares of Common Stock that the Holder would have owned or would have
been entitled to receive immediately following the occurrence of any of the
events described above had this Warrant been exercised in full immediately prior
to the occurrence (or applicable record date) of such event. An adjustment made
pursuant to this Paragraph 2 shall, in the case of a stock dividend or
distribution, be made as of the record date and, in the case of a subdivision or
combination, be made as of the effective date thereof. If, as a result of any
adjustment pursuant to this Paragraph 2, the Holder shall become entitled to
receive shares of two or more classes of series of securities of the Company,
the Board of Directors of the Company shall equitably determine the allocation
of the adjusted purchase price between or among shares or other units of such
classes or series and shall notify the Holder of such allocation.

                                      -5-
<PAGE>

      2.2   MERGER OR CONSOLIDATION. In the event of any reorganization or
recapitalization of the Company or in the event the Company consolidates with or
merges into another entity or transfers all or substantially all of its assets
to another entity, then and in each such event, the Holder, on exercise of this
Warrant as provided herein, at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or transfer, shall be
entitled, and the documents executed to effectuate such event shall so provide,
to receive the stock or other securities or property to which the Holder would
have been entitled upon such consummation if the Holder had exercised this
Warrant immediately prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization, recapitalization,
consolidation, merger or transfer and shall be applicable to the shares of stock
or other securities or property receivable on the exercise of this Warrant after
such consummation. and as an exchange for a larger or smaller number of shares,
as the case may be.

      2.3   NOTICE OF DISSOLUTION OR LIQUIDATION. Except as otherwise provided
in Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance
of all or substantially all of the assets of the Company in connection with a
plan of complete liquidation of the Company, or in the case of the dissolution,
liquidation or winding-up of the Company, all rights under this Warrant shall
terminate on a date fixed by the Company, such date so fixed to be not earlier
than the date of the commencement of the proceedings for such dissolution,
liquidation or winding-up and not later than thirty (30) days after such
commencement date. Notice of such termination of purchase rights shall be given
to the Holder at least thirty (30) days prior to such termination date.

      2.4   STATEMENT OF ADJUSTMENT. Any adjustment pursuant to the provisions
of this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.

      2.5   NO FRACTIONAL SHARES. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.5, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives his right to receive
a certificate for any fraction of a Share upon exercise hereof.

      2.6   NO CHANGE IN FORM REQUIRED. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.

                                      -6-
<PAGE>

3.    REGISTRATION UNDER THE SECURITIES ACT OF 1933.

      3.1   REGISTRATION AND LEGENDS. The Holder understands that (i) the
Company has not registered the Warrant or the Shares under the Act, or the
applicable securities laws of any state in reliance on exemptions from
registration and (ii) such exemptions depend upon the Holder's investment intent
at the time the Holder acquires the Warrant or the Shares. The Holder therefore
represents and warrants that it is acquiring the Warrant, and will acquire the
Shares, for the Holder's own account for investment and not with a view to
distribution, assignment, resale or other transfer of the Warrant or the Shares.
Because the Warrant and the Shares are not registered, the Holder is aware that
the Holder must hold them indefinitely unless they are registered under the Act
and any applicable securities laws or the Holder must obtain exemptions from
such registration. Upon exercise, in part or in whole, of this Warrant, the
Shares shall bear the following legend:

            The shares of Common Stock represented by this certificate
      have not been registered under the Securities Act of 1933, as
      amended ("Act") or any applicable state securities laws, and
      they may not be offered for sale, sold, transferred, pledged
      or hypothecated without an effective registration statement
      under the Securities Act and under any applicable state
      securities laws, or an opinion of counsel, satisfactory to the
      company, that an exemption from such registration is
      available.

      3.2   NO-ACTION LETTER. The Company agrees that it will be satisfied that
no post-effective amendment or new registration is required for the public sale
of the Shares if it shall be presented with a letter from the Staff of the
Securities and Exchange Commission (the "Commission"), stating in effect that,
based upon stated facts which the Company shall have no reason to believe are
not true in any material respect, the Staff will not recommend any action to the
Commission if such Shares are offered and sold without delivery of a prospectus,
and that, therefore, no Registration Statement under which such shares are to be
registered is required to be filed.

      3.3   REGISTRATION RIGHTS. The Holder shall have the right, under the
terms of a Registration Rights Agreement dated November 29, 2007 between the
Holder and the Company, to cause the Company to register the Common Stock
underlying this Warrant (the "Underlying Common Stock") in a Registration
Statement under the Securities Act of 1933, as amended (the "Act"), filed by the
Company with the Securities and Exchange Commission (the "SEC").

      3.4   RULE 144. If the Company (a) has or registers a class of securities
under Section 12 of the Exchange Act or (b) has or commences to file reports
under Section 13 or 15(d) of the Exchange Act, then, at the request of any
Holder who proposes to sell securities in compliance with Rule 144 of the SEC,
the Company will (i) forthwith furnish to such holder a written statement of
compliance with the filing requirements of the SEC as set forth in Rule 144, as
such rules may be amended from time to time and (ii) make available to the
public and such Holder such information and take such other action as it
requested by the Holder as will enable the Holder to make sales pursuant to Rule
144.

                                      -7-
<PAGE>

      3.5   AGREEMENTS. The agreements in this Section shall continue in effect
regardless of the exercise and surrender of this Warrant.

4.    RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued Common Stock or such other
class or classes of capital stock or other securities to such number as shall be
sufficient for that purpose.

5.    SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.

6.    REMEDIES. The Company agrees that the remedies at law of the Holder, in
the event of any default or threatened default by the Company in the performance
or compliance with any of the terms of this Warrant, may not be adequate and
such terms may, in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

7.    OTHER MATTERS.

      7.1   BINDING EFFECT. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.

      7.2   NOTICES. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:

                            Aethlon Medical, Inc.
                            3030 Bunker Hill Street
                            Suite 4000
                            San Diego, CA 92109
                            Attn: President

Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.

                                      -8-
<PAGE>

      7.3   GOVERNING LAW. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of California.

      7.4   PARTIES BOUND AND BENEFITTED. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.

      7.5   HEADINGS. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.

      IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 29th day of November, 2007.


                                         AETHLON MEDICAL, INC.


                                         By: /s/ James A. Joyce
                                            --------------------------------
                                            James A. Joyce
                                            Chairman and Chief Executive Officer


                                      -9-
<PAGE>

                              AETHLON MEDICAL, INC.

                                   ASSIGNMENT

      FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers unto ____________________________________________________
the within Warrant and the rights represented thereby, and does hereby
irrevocably constitute and appoint ______________________________________
Attorney, to transfer said Warrant on the books of the Company, with full power
of substitution.

Dated:________________________


                                      Signed:___________________________________

                                      Print Name:_______________________________

<PAGE>

                                SUBSCRIPTION FORM

                              AETHLON MEDICAL, INC.
                             3030 BUNKER HILL STREET
                            SUITE 4000, SAN DIEGO, CA

      The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock (the "Shares"), pursuant to and in accordance with the
terms and conditions of this Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.

      The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such Shares, unless either (a) a
registration statement, or post-effective amendment thereto, covering such
Shares have been filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Act"), and such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering the
Shares to be so sold, transferred or otherwise disposed of, or (b) counsel to
Aethlon Medical, Inc. (the "Company") satisfactory to the undersigned has
rendered an opinion in writing and addressed to the Company that such proposed
offer, sale, transfer or other disposition of the Shares is exempt from the
provisions of Section 5 of the Act in view of the circumstances of such proposed
offer, sale, transfer or other disposition; (2) the Company may notify the
transfer agent for its Common Stock that the certificates for the Common Stock
acquired by the undersigned are not to be transferred unless the transfer agent
receives advice from the Company that one or both of the conditions referred to
in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix
the legend set forth in Section 3.1 of this Warrant to the certificates for
Shares hereby subscribed for, if such legend is applicable.

Dated:___________________              Signed:_________________________________

                                       Address:________________________________

                                       ________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>14
<FILENAME>aethlon_sb2-ex1035.txt
<DESCRIPTION>COMMON STOCK PURCH WARRANT
<TEXT>
<PAGE>

EXHIBIT 10.35

THESE SECURITIES MAY NOT BE OFFERED OR SOLD UNLESS AT THE TIME OF SUCH OFFER OR
SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS MEETING THE
REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT THERETO,
WHICH IS EFFECTIVE UNDER SAID ACT, UNLESS IN THE OPINION OF COUNSEL TO THE
CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SAID ACT.

WARRANT NO: _____

                                    CLASS A-1
                          COMMON STOCK PURCHASE WARRANT
                              ("CLASS A-1 WARRANT")
                                       OF

                              AETHLON MEDICAL, INC.

      Aethlon Medical, Inc. (the "Company"), a Nevada corporation, hereby
certifies that, for value received of $.001 per Warrant,
_________________________ (the "Holder"), whose address is
_______________________________, is entitled, subject to the terms set forth
below at any time or from time to time after the date hereof and before the
Expiration Date (as defined below), to purchase from the Company ____________
shares (the "Shares") of Common Stock, $ .001 par value, at a price of $0.40 per
Share (the purchase price per Share, as adjusted from time to time pursuant to
the provisions hereunder set forth, is referred to in this Warrant as the
"Purchase Price"). This Warrant is issued as part of a Unit consisting of this
Warrant and one share of Common Stock. The Unit is being issued in consideration
for liquidated damages and associated accrued interest due under that certain
Amended and Restated 10% Series A Convertible Note entered into between the
Company and the Holder (the "Note").

1.    TERMS OF THE WARRANT.

      1.1   TIME OF EXERCISE. Subject to the provisions of Sections 1.5,
"Transfer and Assignment," and 3.1, "Registration and Legends," this Warrant may
be exercised at any time and from time to time after 9:00 a.m., P.S.T., on
January 3, 2008 (the "Exercise Commencement Date"), but no later than 5:00 p.m.,
P.S.T., January 3, 2013 (the "Expiration Date"), at which point it shall become
void and all rights under this Warrant shall cease. If this Warrant is exercised
in whole or in part on or before February 15, 2010, the Company will issue to
the Holder one Class B-1 Common Stock Purchase Warrant ("Class B-1 Warrant") for
every two Shares purchased under this Warrant.

      1.2   MANNER OF EXERCISE.

            1.2.1   Upon compliance with and subject to the conditions set forth
in this Warrant, the Holder may exercise this Warrant, in whole or in part, upon
surrender of this Warrant with the form of subscription attached hereto duly
executed to the Company at its corporate office at the address indicated in this
Warrant, together with the full Purchase Price for each Share to be purchased
(i) in lawful money of the United States, or by certified check, bank draft or
postal or express money order payable in United States dollars to the order of
the Company or (ii) a manner acceptable to the Company.

<PAGE>

            1.2.2   Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates or other evidence of ownership, for the total number
of whole Shares for which this Warrant is being exercised in such denominations
as are required for delivery to the Holder, and the Company shall thereupon
deliver such documents to the Holder or its nominee.

            1.2.3   If the Holder exercises this Warrant with respect to fewer
than all of the Shares that may be purchased under this Warrant, the Company
shall execute a new Warrant for the balance of the Shares that may be purchased
upon exercise of this Warrant and deliver such new Warrant to the Holder.

            1.2.4   The Company covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect of the issue of
this Warrant, or the issue of any Shares upon the exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of the Shares in a name other than that of the Holder at the time of surrender,
and until the payment of such tax, the Company shall not be required to issue
such Shares.

            1.2.5   The Company shall, at the time of any exercise of all or
part of this Warrant, upon the request of the Holder hereof, acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holders shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant, provided that if the Holder of this Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligations of the Company to afford to such Holder any such rights.

      1.3   EXCHANGE OF WARRANT. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, it shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.

      1.4   HOLDER AS OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Company may deem and treat the Holder as the
absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Irrespective of the date of issue and delivery of certificates for any Shares
issuable upon the exercise of the Warrant, each person in whose name any such
certificate is issued shall be deemed to have become the holder of record of the
Shares represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and

                                       -2-
<PAGE>

payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of Warrant shall be entitled to receive only dividends or
distributions payable to holders of record on or after the date on which such
person shall be deemed to have become the holder of record of such Shares.

      1.5   TRANSFER AND ASSIGNMENT. This Warrant may not be sold, hypothecated,
exercised, assigned or transferred except in accordance with and subject to the
provisions of the Securities Act of 1933, as amended (the "Act"), including
limiting such transfers to Accredited Investors as that term is defined under
Regulation D of the Act.

      1.6   METHOD FOR ASSIGNMENT. Any assignment permitted under this Warrant
shall be made by surrender of this Warrant to the Company at its principal
office with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee designated
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation thereof at the corporate office of the Company together
with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.

      1.7   RIGHTS OF HOLDER. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or consent or receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:

            1.7.1   The Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or

            1.7.2   The Company shall offer to the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or

            1.7.3   There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or

                                      -3-
<PAGE>

            1.7.4   There shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of said cases, the Company shall cause to be mailed to the Holder, at the
earliest practicable time (and, in any event, not less than thirty (30) days
before any record date or other date set for definitive action), written notice
of the date on which the books of the Company shall close or a record shall be
taken to determine the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Purchase
Price and the kind and amount of the Common Stock and other securities and
property deliverable upon exercise of this Warrant. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in said distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to exercise this Warrant shall terminate). Without limiting the
obligation of the Company to provide notice to the holder of actions hereunder,
it is agreed that failure of the Company to give notice shall not invalidate
such action of the Company.

      1.8   LOST WARRANT CERTIFICATE(S). Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required by the
Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will cause to be executed and delivered a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.

      1.9   COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:

            1.9.1   At all times it shall reserve and keep available for the
exercise of this Warrant into Common Stock such number of authorized shares of
Common Stock as are sufficient to permit the exercise in full of this Warrant
into Common Stock; and

            1.9.2   All Shares issued upon exercise of the Warrant shall be duly
authorized, validly issued and outstanding, fully-paid and non-assessable.

      1.10  LIMITATION ON EXERCISE RIGHTS. Notwithstanding any other provision
of Section 1 to the contrary, the Holder shall not be entitled to exercise this
Warrant and any other Warrant (the "Related Warrants") issued by the Company to
the Holder or convert any of the Notes issued by the Company to the Holder into
Common Stock in excess of that number of shares of Common Stock which, upon
giving effect to such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the Holder and its Affiliates to exceed 9.9%
of the outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing provision, the aggregate number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the

                                      -4-
<PAGE>

number of shares of Common Stock beneficially owned and those shares issuable
upon conversion of all Notes and Related Warrants with respect to which the
determination of such provision is being made, but shall exclude the number of
shares of Common Stock that would be issuable upon (i) conversion of the
remaining principal amount(s) of all Notes and the Related Warrants beneficially
owned by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note. For purposes of this Section, in determining the number
of outstanding shares of Common Stock the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (a) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, or (b) more recent public
announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). For purposes of this Warrant, an "Affiliate" of any
specified Person means any other Person directly or indirectly controlling or
controlled by or under common control with such specified Person. A "Person"
means any individual, corporation, partnership, joint venture, trust, estate or
unincorporated organization.

2.    ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
      EXERCISE.

      2.1   RECAPITALIZATION. The number of Shares purchasable on exercise of
this Warrant and the Purchase Price therefor shall be subject to adjustment from
time to time in the event that the Company shall: (i) pay a dividend in, or make
a distribution of, shares of Common Stock; (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares; (iii) combine its outstanding
shares of Common Stock into a smaller number of shares; or (iv) spin-off a
subsidiary by distributing, as a dividend or otherwise, shares of the subsidiary
to its stockholders. In any such case, the total number of shares purchasable on
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive, at the same aggregate purchase price, the
number of shares of Common Stock that the Holder would have owned or would have
been entitled to receive immediately following the occurrence of any of the
events described above had this Warrant been exercised in full immediately prior
to the occurrence (or applicable record date) of such event. An adjustment made
pursuant to this Paragraph 2 shall, in the case of a stock dividend or
distribution, be made as of the record date and, in the case of a subdivision or
combination, be made as of the effective date thereof. If, as a result of any
adjustment pursuant to this Paragraph 2, the Holder shall become entitled to
receive shares of two or more classes of series of securities of the Company,
the Board of Directors of the Company shall equitably determine the allocation
of the adjusted purchase price between or among shares or other units of such
classes or series and shall notify the Holder of such allocation.

                                      -5-
<PAGE>

      2.2   MERGER OR CONSOLIDATION. In the event of any reorganization or
recapitalization of the Company or in the event the Company consolidates with or
merges into another entity or transfers all or substantially all of its assets
to another entity, then and in each such event, the Holder, on exercise of this
Warrant as provided herein, at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or transfer, shall be
entitled, and the documents executed to effectuate such event shall so provide,
to receive the stock or other securities or property to which the Holder would
have been entitled upon such consummation if the Holder had exercised this
Warrant immediately prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization, recapitalization,
consolidation, merger or transfer and shall be applicable to the shares of stock
or other securities or property receivable on the exercise of this Warrant after
such consummation. and as an exchange for a larger or smaller number of shares,
as the case may be.

      2.3   NOTICE OF DISSOLUTION OR LIQUIDATION. Except as otherwise provided
in Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance
of all or substantially all of the assets of the Company in connection with a
plan of complete liquidation of the Company, or in the case of the dissolution,
liquidation or winding-up of the Company, all rights under this Warrant shall
terminate on a date fixed by the Company, such date so fixed to be not earlier
than the date of the commencement of the proceedings for such dissolution,
liquidation or winding-up and not later than thirty (30) days after such
commencement date. Notice of such termination of purchase rights shall be given
to the Holder at least thirty (30) days prior to such termination date.

      2.4   STATEMENT OF ADJUSTMENT. Any adjustment pursuant to the provisions
of this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.

      2.5   NO FRACTIONAL SHARES. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.5, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives his right to receive
a certificate for any fraction of a Share upon exercise hereof.

      2.6   NO CHANGE IN FORM REQUIRED. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.

                                      -6-
<PAGE>

3.    REGISTRATION UNDER THE SECURITIES ACT OF 1933.

      3.1   REGISTRATION AND LEGENDS. The Holder understands that (i) the
Company has not registered the Warrant or the Shares under the Act, or the
applicable securities laws of any state in reliance on exemptions from
registration and (ii) such exemptions depend upon the Holder's investment intent
at the time the Holder acquires the Warrant or the Shares. The Holder therefore
represents and warrants that it is acquiring the Warrant, and will acquire the
Shares, for the Holder's own account for investment and not with a view to
distribution, assignment, resale or other transfer of the Warrant or the Shares.
Because the Warrant and the Shares are not registered, the Holder is aware that
the Holder must hold them indefinitely unless they are registered under the Act
and any applicable securities laws or the Holder must obtain exemptions from
such registration. Upon exercise, in part or in whole, of this Warrant, the
Shares shall bear the following legend:

            The shares of Common Stock represented by this certificate
      have not been registered under the Securities Act of 1933, as
      amended ("Act") or any applicable state securities laws, and
      they may not be offered for sale, sold, transferred, pledged
      or hypothecated without an effective registration statement
      under the Securities Act and under any applicable state
      securities laws, or an opinion of counsel, satisfactory to the
      company, that an exemption from such registration is
      available.

      3.2   NO-ACTION LETTER. The Company agrees that it will be satisfied that
no post-effective amendment or new registration is required for the public sale
of the Shares if it shall be presented with a letter from the Staff of the
Securities and Exchange Commission (the "Commission"), stating in effect that,
based upon stated facts which the Company shall have no reason to believe are
not true in any material respect, the Staff will not recommend any action to the
Commission if such Shares are offered and sold without delivery of a prospectus,
and that, therefore, no Registration Statement under which such shares are to be
registered is required to be filed.

      3.3   REGISTRATION RIGHTS. The Holder shall have the right, under the
terms of a Registration Rights Agreement dated November 29, 2007 between the
Holder and the Company, to cause the Company to register the Common Stock
underlying this Warrant (the "Underlying Common Stock") in a Registration
Statement under the Securities Act of 1933, as amended (the "Act"), filed by the
Company with the Securities and Exchange Commission (the "SEC").

      3.4   RULE 144. If the Company (a) has or registers a class of securities
under Section 12 of the Exchange Act or (b) has or commences to file reports
under Section 13 or 15(d) of the Exchange Act, then, at the request of any
Holder who proposes to sell securities in compliance with Rule 144 of the SEC,
the Company will (i) forthwith furnish to such holder a written statement of
compliance with the filing requirements of the SEC as set forth in Rule 144, as
such rules may be amended from time to time and (ii) make available to the
public and such Holder such information and take such other action as it
requested by the Holder as will enable the Holder to make sales pursuant to Rule
144.

                                      -7-
<PAGE>

      3.5   AGREEMENTS. The agreements in this Section shall continue in effect
regardless of the exercise and surrender of this Warrant.

4.    RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued Common Stock or such other
class or classes of capital stock or other securities to such number as shall be
sufficient for that purpose.

5.    SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.

6.    REMEDIES. The Company agrees that the remedies at law of the Holder, in
the event of any default or threatened default by the Company in the performance
or compliance with any of the terms of this Warrant, may not be adequate and
such terms may, in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

7.    OTHER MATTERS.

      7.1   BINDING EFFECT. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.

      7.2   NOTICES. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:

                           Aethlon Medical, Inc.
                           3030 Bunker Hill Street
                           Suite 4000
                           San Diego, CA 92109
                           Attn: President

Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.

                                      -8-
<PAGE>

      7.3   GOVERNING LAW. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of California.

      7.4   PARTIES BOUND AND BENEFITTED. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.

      7.5   HEADINGS. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.

      IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 29th day of November, 2007.


                                         AETHLON MEDICAL, INC.


                                         By: /s/ James A. Joyce
                                            --------------------------------
                                            James A. Joyce
                                            Chairman and Chief Executive Officer


                                      -9-
<PAGE>

                              AETHLON MEDICAL, INC.

                                   ASSIGNMENT

      FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers unto ____________________________________________________
the within Warrant and the rights represented thereby, and does hereby
irrevocably constitute and appoint ______________________________________
Attorney, to transfer said Warrant on the books of the Company, with full power
of substitution.

Dated:________________________


                                      Signed:___________________________________

                                      Print Name:_______________________________

<PAGE>

                                SUBSCRIPTION FORM

                              AETHLON MEDICAL, INC.
                             3030 BUNKER HILL STREET
                            SUITE 4000, SAN DIEGO, CA

      The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock (the "Shares"), pursuant to and in accordance with the
terms and conditions of this Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.

      The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such Shares, unless either (a) a
registration statement, or post-effective amendment thereto, covering such
Shares have been filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Act"), and such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering the
Shares to be so sold, transferred or otherwise disposed of, or (b) counsel to
Aethlon Medical, Inc. (the "Company") satisfactory to the undersigned has
rendered an opinion in writing and addressed to the Company that such proposed
offer, sale, transfer or other disposition of the Shares is exempt from the
provisions of Section 5 of the Act in view of the circumstances of such proposed
offer, sale, transfer or other disposition; (2) the Company may notify the
transfer agent for its Common Stock that the certificates for the Common Stock
acquired by the undersigned are not to be transferred unless the transfer agent
receives advice from the Company that one or both of the conditions referred to
in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix
the legend set forth in Section 3.1 of this Warrant to the certificates for
Shares hereby subscribed for, if such legend is applicable.

Dated:___________________              Signed:_________________________________

                                       Address:________________________________

                                       ________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>15
<FILENAME>aethlon_sb2-ex1036.txt
<DESCRIPTION>AMENDED CONVERTIBLE NOTE
<TEXT>
<PAGE>

EXHIBIT 10.36


      THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
     THE NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
     AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. NEITHER THE NOTE NOR
           SUCH SHARES OF COMMON STOCK MAY BE OFFERED FOR SALE, SOLD,
     TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT AN EFFECTIVE REGISTRATION
        STATEMENT UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE
         SECURITIES LAWS, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
         COMPANY, THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.


                              AETHLON MEDICAL, INC.

                          10% SERIES A CONVERTIBLE NOTE


No. ___                                                                $________

     FOR VALUE RECEIVED, Aethlon Medical, Inc., a Nevada corporation (the
"Company"), promises to pay to ______________________, whose address is
____________________________, or registered assigns (the "Holder"), the sum of
_______________________ Dollars ($_____________) in lawful money of the United
States of America on or before the Maturity Date as defined herein, with all
Interest thereon as defined and specified herein. This Note includes various
advances (the "Advances") that the Holder has made to the Company since July
2005. This Note replaces promissory notes previously issued by the Company to
the Holder prior to the Issue Date respecting certain of those Advances and
provides documentation for other Advances for which no notes have yet been
issued.

     1. INTEREST. This Note shall bear interest ("Interest") equal to ten
percent (10%) per annum on the unpaid principal balance, computed on a three
hundred sixty (360)-day year, during the term of the Note. Interest will accrue
on each Advance commencing on the date of the Advance, as set forth on Exhibit A
to this Note. The Company shall pay all Interest on or before the Maturity Date.
In no event shall the rate of Interest payable on this Note exceed the maximum
rate of Interest permitted to be charged under applicable law.

     2. PAYMENTS. All payments under this Note shall first be credited against
costs and expenses provided for in this Note, second to the payment of any
penalties, third to the payment of accrued and unpaid Interest, if any, and the
remainder shall be credited against principal. All payments due hereunder shall
be payable in legal tender of the United States of America, and in same day
funds delivered to Holder by cashier's check, certified check, bank wire
transfer or any other means of guaranteed funds to the mailing address provided
below, or at such other place as the Holder shall designate in writing for such
purpose from time to time. If a payment under this Note otherwise would become
due and payable on a Saturday, Sunday or legal holiday (any other day being a
"Business Day"), the due date of the payment shall be extended to the next
succeeding Business Day, and Interest, if any, shall be payable thereon during
such extension.

<PAGE>

     3. PRE-PAYMENTS AND MATURITY DATE. This Note shall be due and payable in
full, including all accrued Interest thereon, on January 2, 2007 (the "Maturity
Date"). At any time on or prior to the Maturity Date, the Company shall have the
right to prepay this Note, in whole or in part, on ten (10) days' advance notice
to the Holder and subject to the right of the Holder to convert in advance of
such prepayment date and provided that on such prepayment date, the Company will
pay in respect of the redeemed Note cash equal to the face amount plus accrued
Interest on the Note (or portion thereof) redeemed. At any time after the
Maturity Date, the Company shall have the right to repay this Note, in whole or
in part, on ten (10) days' advance notice to the Holder and subject to the right
of the Holder to convert in advance of such repayment date. The Company may
prepay this Note at any time after issuance without penalty.

     4. EQUAL RANK. This Note represents one of a series of up to One Million
Dollars ($1,000,000) principal amount of 10% Series A Convertible Notes (the
"Notes") issued or to be issued by the Company. All Notes rank equally and
ratably without priority over one another.

     5. Conversion of Note and Issuance of Warrants.

          5.1 CONVERSION OF NOTE/CONVERSION PRICE. This Note is convertible, at
the option of the Holder, into shares of the Company's Common Stock (the "Common
Stock") at any time after the Issue Date prior to the close of business on the
Business Day prior to the Maturity Date at the rate of $.20 per share (the
"Conversion Price"), subject to adjustment as hereinafter provided. No
fractional shares will be issued. In lieu thereof, the Company will pay cash for
fractional share amounts equal to the fair market value of the Common Stock as
quoted as the closing bid price of the Common Stock on the date of conversion.

          5.2 ISSUANCE OF WARRANTS. Upon the conversion of this Note, the
Company will issue to the Holder a Common Stock Purchase Warrant (the "Warrant")
exercisable to purchase the same number of shares of Common Stock into which
this Note would be convertible on the Issue Date. The Warrant is exercisable to
purchase shares of Common Stock at the price of $.20 per share and as otherwise
specified in the Warrant.

          5.3 LIMITATION ON CONVERSION RIGHTS. Notwithstanding any other
provision of Paragraph 5 to the contrary, the Holder shall not be entitled to
convert this Note, and any other outstanding Notes of this Series A issued to
the Holder that is convertible into Common Stock (the "Related Notes") in excess
of that number of shares of Common Stock which, upon giving effect to such
conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the Holder and its Affiliates to exceed 9.9% of the
outstanding shares of the Common Stock following such conversion. For purposes
of the foregoing provision, the aggregate number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock beneficially owned and those shares issuable upon
conversion of this Note and all Related Notes with respect to which the
determination of such proviso is being made, but shall exclude the number of
shares of Common Stock that would be issuable upon (i) conversion of the
remaining principal amount of this Note and the Related Notes beneficially owned
by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note. For purposes of this Paragraph, in determining the
number of outstanding shares of Common Stock the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (a) the Company's most


                                      -2-
<PAGE>

recent Form 10-Q or Form 10-K, as the case may be, or (b) more recent public
announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. If the foregoing 9.9% limitation is ever reached and the Holder desires
to convert this Note or part thereof into equity, the Company will acknowledge
the conversion in writing, but not issue the Holder any additional shares of
Common Stock at that point. Under such circumstances the Holder will have the
right to receive additional shares of Common Stock as a result of the conversion
only at such point and to the extent that its beneficial ownership subsequently
becomes less than 9.9% and such issuance will not cause the Holder's beneficial
ownership to exceed 9.9%. Upon written notice to this effect given by the
Holder, the Company will issue such additional shares in accordance with
Paragraph 5.8, "Issuance of Certificate."

          5.4 ADJUSTMENT BASED UPON STOCK DIVIDENDS, COMBINATION OF SHARES OR
RECAPITALIZATION. The Conversion Price shall be adjusted in the event that the
Company shall at any time (i) pay a stock dividend on the Common Stock; (ii)
subdivide its outstanding Common Stock into a greater number of shares; (iii)
combine its outstanding Common Stock into a smaller number of shares; (iv) issue
by reclassification of its Common Stock any other special capital stock of the
Company; or (v) distribute to all holders of Common Stock evidences of
indebtedness or assets (excluding cash dividends) or rights or warrants to
subscribe for Common Stock (other than those mentioned above). No adjustment of
the Conversion Price will be required until cumulative adjustments amount to One
Dollar ($1.00) per Note or more. Upon the occurrence of an event requiring
adjustment of the Conversion Price, and thereafter, the Holder, upon surrender
of this Note for conversion, shall be entitled to receive the number of shares
of Common Stock or other capital stock of the Company that the Holder would have
owned or have been entitled to receive after the happening of any of the events
described above had this Note been converted immediately prior to the happening
of such event.

          5.5 ADJUSTMENT BASED UPON MERGER OR CONSOLIDATION. In case of any
consolidation or merger to which the Company is a party (other than a merger in
which the Company is the surviving entity and which does not result in any
reclassification of or change in the outstanding Common Stock of the Company),
or in case of any sale or conveyance to another person, firm, or corporation of
the property of the Company as an entirety or substantially as an entirety, the
Holder shall have the right to convert this Note into the kind and amount of
securities and property (including cash) receivable upon such consolidation,
merger, sale or conveyance by the Holder of the number of shares of Common Stock
into which such Note might have been converted immediately prior thereto.

          5.6 Exercise of Conversion Privilege.


                                      -3-
<PAGE>

               5.6.1 The Conversion Privilege provided for in this Note shall be
exercisable by the Holder by written notice to the Company or its successor and
the surrender of this Note in exchange for the number of shares (or other
securities and property, including cash, in the event of an adjustment of the
Conversion Price) into which this Note is convertible based upon the Conversion
Price.

               5.6.2 The Holder's conversion right set forth in this Paragraph
5.5 may be exercised at any time and from time to time but prior to payment in
full of the principal amount of the accrued interest on this Note. Conversion
rights will expire at the close of business on the Business Day prior to the
Maturity Date or redemption date of this Note.

               5.6.3 The Holder may exercise the right to convert all or any
portion of the principal amount and accrued Interest on this Note by delivery of
(i) this Note and (ii) a completed Conversion Notice in the form attached as
Exhibit B on a Business Day to the Company's principal executive offices. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the Business Day of such delivery a conversion notice (the
"Conversion Date"), and the Holder shall be treated for all purposes as the
record holder of the shares of Common Stock into which this Note is converted as
of such date.

               5.6.4 Upon conversion of the entire principal amount and accrued
Interest of this Note and the delivery of shares of Common Stock upon conversion
of this Note, except as otherwise provided in Paragraph 22, "Representations and
Warranties to Survive Closing," the Company shall be forever released from all
of its obligations and liabilities under this Note.

          5.7 CORPORATE STATUS OF COMMON STOCK TO BE ISSUED. All Common Stock
(or other securities in the event of an adjustment of the Conversion Price)
which may be issued upon the conversion of this Note shall, upon issuance, be
fully paid and nonassessable.

          5.8 ISSUANCE OF CERTIFICATE. Upon the conversion of this Note, the
Company shall, within five (5) Business Days of such conversion, issue to the
Holder a certificate or certificates representing the number of shares of the
Common Stock (or other securities in the event of an adjustment of the
Conversion Price) to which the conversion relates.

     6. STATUS OF HOLDER OF NOTE. This Note shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company or to any rights
whatsoever except the rights herein expressed, and no dividends shall be payable
or accrue in respect of this Note or the securities issuable upon the conversion
hereof unless and until this Note shall be converted. Upon the conversion of
this Note, the Holder shall, to the extent permitted by law, be deemed to be the
holder of record of the shares of Common Stock and Warrants issuable upon such
conversion, notwithstanding that the stock transfer books of the Company shall
then be closed or that the certificates representing such shares of Common Stock
and Warrants shall not then be actually delivered.

     7. RESERVE OF SHARES OF COMMON STOCK. The Company shall reserve out of its
authorized shares of Common Stock, and other securities in the event of an
adjustment of the Conversion Price, a number of shares sufficient to enable it
to comply with its obligation to issue shares of Common Stock, and other
securities in the event of an adjustment of the Conversion Price, upon the
conversion of this Note.


                                      -4-
<PAGE>

     8. Transfer Restrictions; Exemption from Registration.

          8.1 The Holder agrees that (i) this Note and the shares of Common
Stock issuable upon conversion have not been registered under the Act and may
not be sold or transferred without registration under the Act or unless an
exemption from such registration is available; (ii) the Holder has acquired this
Note and will acquire the Common Stock for its own account for investment
purposes only and not with a view toward resale or distribution; and (iii) if a
registration statement that includes the Common Stock is not effective at the
time Common Stock is issued to Holder upon conversion under this Note, and the
Common Stock is not exempt from registration under Rule 144, then the Common
Stock shall be inscribed with the following legend:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF HOLDER'S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.

          8.2 If an opinion of counsel of Holder provides that registration is
not required for the proposed conversion or transfer of this Note or the
proposed transfer of the shares of Common Stock issuable upon conversion and
that the proposed conversion or transfer in the absence of registration would
require the Company to take any action including executing and filing forms or
other documents with the Securities and Exchange Commission (the "SEC") or any
state securities agency, or delivering to the Holder any form or document in
order to establish the right of the Holder to effectuate the proposed conversion
or transfer, the Company agrees promptly, at its expense, to take any such
action; and provided, further, that the Company will reimburse the Holder in
full for any expenses (including but not limited to the fees and disbursements
of such counsel, but excluding brokers' commissions) incurred by the Holder or
owner of shares of Common Stock on his, her or its behalf in connection with
such conversion or transfer of the Note or transfer of the shares of Common
Stock.

     9. Registration Rights.

          The Holders of the Notes and Warrants or Common Stock issued to the
Holder without an effective Registration Statement under the Act (the
"Restricted Shares") shall have the right, under the terms of a Registration
Rights Agreement between the Holder and the Company, to cause the Company
register the Common Stock underlying the Notes and Warrants (the "Underlying
Common Stock") or Restricted Shares in a Registration Statement under the
Securities Act 1993, as amended ("Act"), filed by the Company with the SEC.


                                      -5-
<PAGE>

     10. Rule 144

          If the Company (a) has or registers a class of securities under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or (b) has or commences to file reports under Section 13 or 15(d) of the
Exchange Act, then, at the request of any Holder who proposes to sell securities
in compliance with Rule 144 of the SEC, the Company will (i) forthwith furnish
to such holder a written statement of compliance with the filing requirements of
the SEC as set forth in Rule 144, as such rules may be amended from time to time
and (ii) make available to the public and such Holder such information and take
such other action as is requested by the Holder to enable the Holder to make
sales pursuant to Rule 144.

     11. DEFAULT. The Company shall perform its obligations and covenants
hereunder and in each and every other agreement between the Company and Holder
pertaining to the Indebtedness evidenced hereby. The following provisions shall
apply upon failure of the Company so to perform.

          11.1 EVENT OF DEFAULT. Any of the following events shall constitute an
"Event of Default" hereunder:

               11.1.1 Failure by the Company to pay principal of any of the
Notes when due and payable on the Maturity Date;

               11.1.2 Failure of the Company to pay Interest when due hereunder,
which failure continues for a period of thirty (30) days after the due date of
the amount involved; or

               11.1.3 Failure of the Company to perform any of the covenants,
conditions, provisions or agreements contained herein, or in any other agreement
between the Company and Holder, which failure continues for a period of thirty
(30) days after notice of default has been given to the Company by the Holders
of not less than twenty-five percent (25%) of the principal amount of the Notes
then outstanding; provided, however, that if the nature of the Company's
obligation is such that more than thirty (30) days are required for performance,
then an Event of Default shall not occur if the Company commences performance
within such thirty (30) day period and thereafter diligently prosecutes the same
to completion; or

               11.1.4 The entry of an order for relief under Federal Bankruptcy
Code as to the Company or entry of any order appointing a receiver or trustee
for the Company or approving a petition in reorganization or other similar
relief under bankruptcy or similar laws in the United States of America or any
other competent jurisdiction, and if such order, if involuntary, is not
satisfied or withdrawn within sixty (60) days after entry thereof; or the filing
of a petition by the Company seeking any of the foregoing, or consenting
thereto; or the filing of a petition to take advantage of any debtor's act; or
making a general assignment for the benefit of creditors; or admitting in
writing inability to pay debts as they mature.

          11.2 ACCELERATION. Upon any Event of Default (in addition to any other
rights or remedies provided for under this Note), at the option of the Holders
of not less than twenty-five percent (25%) of the principal amount of the Notes
then outstanding, all sums evidenced hereby, including all principal, Interest,
fees and all other amounts due hereunder, shall become immediately due and
payable. If an Event of Default in the payment of principal or Interest should


                                      -6-
<PAGE>

occur and be continuing with respect to the Note, any one or more holders of the
Notes then outstanding may declare the principal of the Notes to be immediately
due and payable. In the Event of a Default due to a breach of any other covenant
or term, Holders representing twenty-five percent (25%) of the principal amount
of the Notes may take action to accelerate the Notes.

          11.3 NOTICE BY COMPANY. Upon the happening of any Event of Default
specified in this paragraph that is not cured within the respective periods
prescribed above, the Company will give prompt written notice thereof to the
Holder of this Note.

          11.4 NO WAIVER. Failure of the Holder to exercise any option hereunder
shall not constitute a waiver of the right to exercise the same in the event of
any subsequent Event of Default, or in the event of continuance of any existing
Event of Default after demand or performance thereof.

          11.5 DEFAULT INTEREST. Default Interest will accrue on an unpaid
principal or Interest due hereunder at the rate of fifteen percent (15%) per
annum upon the occurrence of any Event of Default until the Event of Default is
cured.

          11.6 PURSUIT OF ANY REMEDY. No Holder of a Note may pursue any remedy
under the Notes unless (i) the Company shall have received written notice of a
continuing Event of Default from the Holder and (ii) the Company shall have
received a request from Holders of at least twenty-five percent (25%) of
principal amount of the Notes to pursue such remedy. The Holders of fifty-one
percent (51%) of principal amount of the Notes then outstanding have the right
to direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Noteholders under the Notes.

     12. Assignment, Transfer or Loss of the Note.

          12.1 No Holder of this Note may assign, transfer, hypothecate or sell
all or any part of this Note or in any way alienate or encumber the Note without
the express written consent of the Company, the granting or denial of which
shall be within the absolute discretion of the Company. Any attempt to effect
such transfer without the consent of the Company shall be null and void. The
Company has not registered this Note under the Act or the applicable securities
laws of any state in reliance on exemptions from registration. Such exemptions
depend upon the investment intent of the Holder at the time he acquires his
Note. The Holder is acquiring this Note for his own account for investment
purposes only and not with a view toward distribution or resale of such Note
within the meaning of the Act and the applicable securities laws of any state.
The Company shall be under no duty to register the Note or to comply with an
exemption in connection with the sale, transfer or other disposition under the
applicable laws and regulations of the Act or the applicable securities laws of
any state. The Company may require the Holder to provide, at his expense, an
opinion of counsel satisfactory to the Company to the effect that any proposed
transfer or other assignment of the Note will not result in a violation of the
applicable federal or state securities laws or any other applicable federal or
state laws or regulations.


                                      -7-
<PAGE>

          12.2 All expenses, including reasonable legal fees incurred by the
Company in connection with any permitted transfer, assignment or pledge of this
Note will be paid by the Holder requesting such transfer, assignment or pledge.

          12.3 Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of any Note and, in the case of
any such loss, theft or destruction of any Note, upon delivery of an indemnity
bond in such reasonable amount as the Company may determine (or, in the case of
any Note held by the original Noteholder, of an indemnity agreement reasonably
satisfactory to the Company), or, in the case of any such mutilation, upon the
surrender of such Note to the Company at is principal office for cancellation,
the Company at its expense will execute and deliver, in lieu thereof, a new Note
of like tenor, dated the date to which interest hereunder shall have been paid
on such lost, stolen, destroyed or mutilated Note.

          12.4 Subject to Subparagraph 12.1 above, the Holder may, at his
option, either in person or by duly authorized attorney, surrender this Note for
registration of transfer at the principal office of the Company and, upon
payment of any expenses associated with the transfer, receive in exchange
therefor a Note or Notes, dated as of the date to which interest has been paid
on the Note so surrendered, each in the principal amount of $1,000 or any
multiple thereof, for the same aggregate unpaid principal amount as the Note so
surrendered and registered as payable to such person or persons as may be
designated by the Holder. Every Note surrendered for registration of transfer
shall be duly endorsed or shall be accompanied by a written instrument of
transfer duly executed by the Holder or his attorney duly authorized in writing.
Every Note, so made and delivered by the Company in exchange for any Note
surrendered, shall in all other respects be in the same form and have the same
terms as the Note surrendered. No transfer of any Note shall be valid unless
made in such manner at the principal office of the Company.

          12.5 The Company may treat the person in whose name this Note is
registered as the owner and Holder of this Note for the purpose of receiving
payment of all principal of and all Interest on this Note, and for all other
purposes whatsoever, whether or not such Note shall be overdue and, except for
transfers effected in accordance with this subparagraph, the Company shall not
be affected by notice to the contrary.

     13. MODIFICATIONS AND AMENDMENTS. After notice given by the Company to the
Holders of all Notes at the time outstanding, the Company may from time to time
and at any time enter into an agreement or agreements supplemental to the
provisions of this Note for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Notes or of modifying
in any manner the rights of the Holders of the Notes; PROVIDED, HOWEVER, that no
such supplemental agreement, modification or amendment may, without the consent
of the holder of each Note then outstanding affected thereby, (i) reduce the
percentage of principal amount of Notes whose Holders may consent to an
amendment, supplement or waiver; (ii) reduce the rate or change the time for
payment of interest, including Default Interest, on any Note; (iii) reduce the
principal amount of any Note or change the Maturity Date of the Notes; (iv) make
any Note payable in money other than that stated in the Note; (v) impair the
right to institute suit for the enforcement of any payment of principal of, or
premium, if any, or interest on, any Note; (vi) make any change in the
percentage of principal amount of Notes necessary to waive compliance with
certain provisions of the Note; or (vii) waive a continuing default or Event of


                                      -8-
<PAGE>

Default in the payment of principal of, premium, if any, or Interest on the
Notes. The modifications and amendments of the Notes may be made by the Company
without the consent of any Holders of Notes in certain limited circumstances,
including (a) to cure any ambiguity, omission, defect or inconsistency, (b) to
provide for the assumption of the obligations of the Company under the Notes
upon the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company, or (c) to make any change that
does not adversely affect the rights of any holder of Notes. The Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
any past default under the Notes, except a default in the payment of principal,
premium, if any, or Interest. Promptly after execution by the Company and
Holders of the Notes of a supplemental agreement pursuant to the provisions of
this paragraph, the Company shall deliver a copy of such supplemental agreement
to all Holders of the Notes at the time outstanding.

     14. NOTICES. All notices provided for herein shall be validly given if in
writing and delivered personally or sent by certified mail, postage prepaid, to
the office of the Company or such other address as the Company may from time to
time designate in writing sent by certified mail, postage prepaid, to the Holder
at his address set forth below or such other address as the Holder may from time
to time designate in writing to the Company by certified mail, postage prepaid.

     15. USURY. All Interest, Default Interest, fees, charges, goods, things in
action or any other sums or things of value, or other contractual obligations
(collectively, the "Additional Sums") paid by the Company hereunder, whether
pursuant to this Note or otherwise, with respect to the Indebtedness evidenced
hereby, or any other document or instrument in any way pertaining to the
Indebtedness, which, under the laws of the State of California may be deemed to
be Interest with respect to such loan or Indebtedness, shall, for the purpose of
any laws of the State of California, which may limit the maximum amount of
Interest to be charged with respect to such loan or Indebtedness, be payable by
the Company as, and shall be deemed to be, Interest and for such purposes only,
the agreed upon and contracted rate of Interest shall be deemed to be increased
by the Additional Sums. Notwithstanding any provision of this Note to the
contrary, the total liability for payments in the nature of Interest under this
Note shall not exceed the limits imposed by applicable law. The Company shall
not assert a claim, and shall actively resist any attempts to compel it to
assert a claim, respecting a benefit under any present or future usury laws
against any Holder of this Note.

     16. BINDING EFFECT. This Note shall be binding upon the parties hereto and
their respective heirs, executors, administrators, representatives, successors
and permitted assigns.

     17. COLLECTION FEES. Except as otherwise provided herein, the Company shall
pay all costs of collection, including reasonable attorneys' fees and all costs
of suit and preparation for such suit (and whether at trial or appellate level),
in the event the unpaid principal amount of this Note, or any payment of
Interest is not paid when due, or in the event Holder is made party to any
litigation because of the existence of the Indebtedness evidenced by this Note,
or if at any time Holder should incur any attorneys' fees in any proceeding
under the Federal Bankruptcy Code (or other similar laws for the protection of
debtors generally) in order to collect any Indebtedness hereunder or to
preserve, protect or realize upon any security for, or guarantee or surety of,
such Indebtedness whether suit be brought or not, and whether through courts of
original jurisdiction, as well as in courts of appellate jurisdiction, or
through a bankruptcy court or other legal proceedings.


                                      -9-
<PAGE>

     18. CONSTRUCTION. This Note shall be governed as to its validity,
interpretation, construction, effect and in all other respects by and in
accordance with the laws and interpretations thereof of the State of California.
Unless the context otherwise requires, the use of terms in singular and
masculine form shall include in all instances singular and plural number and
masculine, feminine and neuter gender.

     19. SEVERABILITY. In the event any one or more of the provisions contained
in this Note or any future amendment hereto shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note or such other
agreement, and in lieu of each such invalid, illegal or unenforceable provision
there shall be added automatically as a part of this Note a provision as similar
in terms to such invalid, illegal or unenforceable provision as may be possible
and be valid, legal and enforceable.

     20. ENTIRE AGREEMENT. This Note Agreement represents the entire agreement
and understanding between the parties concerning the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings,
representations and warranties with respect thereto.

     21. GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws of the
State of Nevada shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by the
internal laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of California. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of San Diego for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby or
discussed herein, or in any manner arising in connection with or related to the
transactions contemplated hereby or involving the parties hereto whether at law
or equity and under any contract, tort or any other claim whatsoever and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing or faxing a copy
thereof to such party at the address for such notices as listed in this Note and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.


                                      -10-
<PAGE>

     22. REPRESENTATIONS AND WARRANTIES TO SURVIVE CLOSING. All representations,
warranties and covenants contained herein shall survive the execution and
delivery of this Note and the issuance of any Conversion Shares upon the
conversion hereof.

     23. HEADINGS. The headings used in this Note are used for convenience only
and are not to be considered in construing or interpreting this Note.

     24. Definitions.

     "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

     "BOARD OF DIRECTORS" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.

     "CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, equity participations or other equivalents (however designated) of
corporate stock or partnership interests and any and all warrants, options and
rights with respect thereto (whether or not currently exercisable), including
each class of common stock and preferred stock of such Person.

     "GAAP" means generally accepted accounting principles as in effect in the
United States of America as of the Issue Date.

     "HOLDER" means a Person in whose name a Note is registered on the Company's
books.

     "INDEBTEDNESS" means, without duplication, with respect to any Person, (a)
all obligations of such Person (i) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person or only
to a portion thereof); (ii) evidenced by bonds, notes, debentures or similar
instruments; (iii) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business); (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v) for
the payment of money relating to a capitalized lease obligation under GAAP; or
(vi) evidenced by a letter of credit or a reimbursement obligation of such
Person with respect to any letter of credit; (b) all net obligations of such
Person under interest rate swap obligations and foreign currency hedges; (c) all
liabilities of others of the kind described in the preceding clauses (a) or (b)
that such Person has guaranteed or that are otherwise its legal liability; (d)
Indebtedness (as otherwise defined in this definition) of another Person secured
by lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, the amount of such obligations being deemed to be the lesser of
(1) the full amount of such obligations so secured, and (2) the fair market
value of such asset, as determined in good faith by the Board of Directors of
such Person, which determination shall be evidenced by a board resolution; and
(e) any and all deferrals, renewals, extensions, refinancings and refundings
(whether direct or indirect) of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a), (b),
(c), (d) or this clause (e), whether or not between or among the same parties.


                                      -11-
<PAGE>

     "ISSUE DATE" means the date on which the Note is originally issued.

     "MATURITY DATE" means January 2, 2007.

     "PERSON" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.

     A "SUBSIDIARY" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more subsidiaries of such Person or by such Person and one or more
subsidiaries of such Person, (ii) a partnership in which such Person or a
subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if such Person or its subsidiary is
entitled to receive more than fifty percent (50%) of the assets of such
partnership upon its dissolution, or (iii) any other Person (other than a
corporation or partnership) in which such Person, directly or indirectly, at the
date of determination thereof, has (x) at least a majority ownership interest or
(y) the power to elect or direct the election of a majority of directors or
other governing body of such Person.

     "SUBSIDIARY" means any subsidiary of the Company.

     "VOTING STOCK" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof,
whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency to vote in the election of members of the
Board of Directors or other governing body of such Person.

     25. MISCELLANEOUS. Except as otherwise provided herein, the Company waives
demand, diligence, presentment for payment and protest, notice of extension,
dishonor, maturity and protest. Time is of the essence with respect to the
performance of each and every covenant, condition, term and provision hereof.

     IN WITNESS WHEREOF, this Note has been issued on the 2nd day of November,
2005.

                                          AETHLON MEDICAL, INC.


                                          By  /s/ James A. Joyce
                                             --------------------------------
                                             James A. Joyce
                                             Its Chairman and CEO


                                      -12-
<PAGE>

Mailing Address of Holder:
___________________________________
___________________________________
___________________________________

Mailing Address of Company:
3030 Bunker Hill Street
Suite 4000
San Diego, CA 92109




                                      -13-
<PAGE>

                                    EXHIBIT A

                              SCHEDULE OF ADVANCES


                      DATE                           AMOUNT
                      ----                           ------




                                      -14-
<PAGE>

                                    EXHIBIT B

                                CONVERSION NOTICE


                (To be signed only upon conversion of this Note)


TO:   AETHLON MEDICAL, INC.

The undersigned, the registered holder of the 10 % Series A Convertible Note
(the "Note") of AETHLON MEDICAL, INC. (the "Company"), hereby surrenders the
Note for conversion into shares of Common Stock of the Company (the "Common
Stock") to the extent of $_______ unpaid principal amount of the Note and
$_______ unpaid accrued Interest due under the Note, all in accordance with the
provisions of such Note. The undersigned requests (i) that a certificate
representing shares of Common Stock, bearing the appropriate legends, be issued
to the undersigned, and (ii) if the unpaid principal amount so converted is less
than the entire unpaid principal amount of the Note, that a new substitute note
representing the portion of said unpaid principal amount that is not so
converted be issued in accordance with the provisions of the Note.



______________________________________________
(Signature and name of the registered holder)

______________________________________________
Print Name

Dated:___________________________________

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.37
<SEQUENCE>16
<FILENAME>aethlon_sb2-ex1037.txt
<DESCRIPTION>COMMON STOCK PURCH WARRANT
<TEXT>
<PAGE>

EXHIBIT 10.37

THESE SECURITIES MAY NOT BE OFFERED OR SOLD UNLESS AT THE TIME OF SUCH OFFER OR
SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS MEETING THE
REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT THERETO,
WHICH IS EFFECTIVE UNDER SAID ACT, UNLESS IN THE OPINION OF COUNSEL TO THE
CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SAID ACT.

WARRANT NO: ____

                                     CLASS B
                          COMMON STOCK PURCHASE WARRANT
                               ("CLASS B WARRANT")
                                       OF

                              AETHLON MEDICAL, INC.

      Aethlon Medical, Inc. (the "Company"), a Nevada corporation, hereby
certifies that, for value received of $.001 per Warrant,
_____________________________________________ (the "Holder"), whose address is
______________________________________________, is entitled, subject to the
terms set forth below at any time or from time to time after the date hereof and
before the Expiration Date (as defined below), to purchase from the Company
_________ shares (the "Shares") of Common Stock, $ .001 par value, at a price of
$0.60 per Share (the purchase price per Share, as adjusted from time to time
pursuant to the provisions hereunder set forth, is referred to in this Warrant
as the "Purchase Price"). This Warrant is issued pursuant to the exercise of
that certain Class A Warrant issued to the Holder (the "Class A Warrant"). The
exercise of the Class A Warrant in whole or in part on or before February 15,
2010 entitles the Holder to one Class B Warrant for every two shares of Common
Stock purchased under the Class A Warrant.

1.    TERMS OF THE WARRANT.

      1.1   TIME OF EXERCISE. Subject to the provisions of Sections 1.5,
"Transfer and Assignment," and 3.1, "Registration and Legends," this Warrant may
be exercised at any time and from time to time after 9:00 a.m., P.S.T., on
_____________, 20__ (the "Exercise Commencement Date"), but no later than 5:00
p.m., P.S.T., ___________, 20__ (five years from the date of issuance, the
"Expiration Date"), at which point it shall become void and all rights under
this Warrant shall cease.

      1.2   MANNER OF EXERCISE.

            1.2.1   Upon compliance with and subject to the conditions set forth
in this Warrant, the Holder may exercise this Warrant, in whole or in part, upon
surrender of this Warrant with the form of subscription attached hereto duly
executed to the Company at its corporate office at the address indicated in this
Warrant, together with the full Purchase Price for each Share to be purchased
(i) in lawful money of the United States, or by certified check, bank draft or
postal or express money order payable in United States dollars to the order of
the Company or (ii) a manner acceptable to the Company.

<PAGE>

            1.2.2   Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates or other evidence of ownership, for the total number
of whole Shares for which this Warrant is being exercised in such denominations
as are required for delivery to the Holder, and the Company shall thereupon
deliver such documents to the Holder or its nominee.

            1.2.3   If the Holder exercises this Warrant with respect to fewer
than all of the Shares that may be purchased under this Warrant, the Company
shall execute a new Warrant for the balance of the Shares that may be purchased
upon exercise of this Warrant and deliver such new Warrant to the Holder.

            1.2.4   The Company covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect of the issue of
this Warrant, or the issue of any Shares upon the exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of the Shares in a name other than that of the Holder at the time of surrender,
and until the payment of such tax, the Company shall not be required to issue
such Shares.

            1.2.5   The Company shall, at the time of any exercise of all or
part of this Warrant, upon the request of the Holder hereof, acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holders shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant, provided that if the Holder of this Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligations of the Company to afford to such Holder any such rights.

      1.3   EXCHANGE OF WARRANT. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, it shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.

      1.4   HOLDER AS OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Company may deem and treat the Holder as the
absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Irrespective of the date of issue and delivery of certificates for any Shares
issuable upon the exercise of the Warrant, each person in whose name any such
certificate is issued shall be deemed to have become the holder of record of the
Shares represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and

                                       -2-
<PAGE>

payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of Warrant shall be entitled to receive only dividends or
distributions payable to holders of record on or after the date on which such
person shall be deemed to have become the holder of record of such Shares.

      1.5   TRANSFER AND ASSIGNMENT. This Warrant may not be sold, hypothecated,
exercised, assigned or transferred except in accordance with and subject to the
provisions of the Securities Act of 1933, as amended (the "Act"), including
limiting such transfers to Accredited Investors as that term is defined under
Regulation D of the Act.

      1.6   METHOD FOR ASSIGNMENT. Any assignment permitted under this Warrant
shall be made by surrender of this Warrant to the Company at its principal
office with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee designated
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation thereof at the corporate office of the Company together
with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.

      1.7   RIGHTS OF HOLDER. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or consent or receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:

            1.7.1   The Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or

            1.7.2   The Company shall offer to the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or

            1.7.3   There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or

                                      -3-
<PAGE>

            1.7.4   There shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of said cases, the Company shall cause to be mailed to the Holder, at the
earliest practicable time (and, in any event, not less than thirty (30) days
before any record date or other date set for definitive action), written notice
of the date on which the books of the Company shall close or a record shall be
taken to determine the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Purchase
Price and the kind and amount of the Common Stock and other securities and
property deliverable upon exercise of this Warrant. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in said distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to exercise this Warrant shall terminate). Without limiting the
obligation of the Company to provide notice to the holder of actions hereunder,
it is agreed that failure of the Company to give notice shall not invalidate
such action of the Company.

      1.8   LOST WARRANT CERTIFICATE(S). Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required by the
Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will cause to be executed and delivered a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.

      1.9   COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:

            1.9.1   At all times it shall reserve and keep available for the
exercise of this Warrant into Common Stock such number of authorized shares of
Common Stock as are sufficient to permit the exercise in full of this Warrant
into Common Stock; and

            1.9.2   All Shares issued upon exercise of the Warrant shall be duly
authorized, validly issued and outstanding, fully-paid and non-assessable.

      1.10  LIMITATION ON EXERCISE RIGHTS. Notwithstanding any other provision
of Section 1 to the contrary, the Holder shall not be entitled to exercise this
Warrant and any other Warrant (the "Related Warrants") issued by the Company to
the Holder or convert any of the Notes issued by the Company to the Holder into
Common Stock in excess of that number of shares of Common Stock which, upon
giving effect to such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the Holder and its Affiliates to exceed 9.9%
of the outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing provision, the aggregate number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the
number of shares of Common Stock beneficially owned and those shares issuable

                                      -4-
<PAGE>

upon conversion of all Notes and Related Warrants with respect to which the
determination of such provision is being made, but shall exclude the number of
shares of Common Stock that would be issuable upon (i) conversion of the
remaining principal amount(s) of all Notes and the Related Warrants beneficially
owned by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note. For purposes of this Section, in determining the number
of outstanding shares of Common Stock the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (a) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, or (b) more recent public
announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). For purposes of this Warrant, an "Affiliate" of any
specified Person means any other Person directly or indirectly controlling or
controlled by or under common control with such specified Person. A "Person"
means any individual, corporation, partnership, joint venture, trust, estate or
unincorporated organization.

2.    ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
      EXERCISE.

      2.1   RECAPITALIZATION. The number of Shares purchasable on exercise of
this Warrant and the Purchase Price therefor shall be subject to adjustment from
time to time in the event that the Company shall: (i) pay a dividend in, or make
a distribution of, shares of Common Stock; (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares; (iii) combine its outstanding
shares of Common Stock into a smaller number of shares; or (iv) spin-off a
subsidiary by distributing, as a dividend or otherwise, shares of the subsidiary
to its stockholders. In any such case, the total number of shares purchasable on
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive, at the same aggregate purchase price, the
number of shares of Common Stock that the Holder would have owned or would have
been entitled to receive immediately following the occurrence of any of the
events described above had this Warrant been exercised in full immediately prior
to the occurrence (or applicable record date) of such event. An adjustment made
pursuant to this Paragraph 2 shall, in the case of a stock dividend or
distribution, be made as of the record date and, in the case of a subdivision or
combination, be made as of the effective date thereof. If, as a result of any
adjustment pursuant to this Paragraph 2, the Holder shall become entitled to
receive shares of two or more classes of series of securities of the Company,
the Board of Directors of the Company shall equitably determine the allocation
of the adjusted purchase price between or among shares or other units of such
classes or series and shall notify the Holder of such allocation.

                                      -5-
<PAGE>

      2.2   MERGER OR CONSOLIDATION. In the event of any reorganization or
recapitalization of the Company or in the event the Company consolidates with or
merges into another entity or transfers all or substantially all of its assets
to another entity, then and in each such event, the Holder, on exercise of this
Warrant as provided herein, at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or transfer, shall be
entitled, and the documents executed to effectuate such event shall so provide,
to receive the stock or other securities or property to which the Holder would
have been entitled upon such consummation if the Holder had exercised this
Warrant immediately prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization, recapitalization,
consolidation, merger or transfer and shall be applicable to the shares of stock
or other securities or property receivable on the exercise of this Warrant after
such consummation. and as an exchange for a larger or smaller number of shares,
as the case may be.

      2.3   NOTICE OF DISSOLUTION OR LIQUIDATION. Except as otherwise provided
in Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance
of all or substantially all of the assets of the Company in connection with a
plan of complete liquidation of the Company, or in the case of the dissolution,
liquidation or winding-up of the Company, all rights under this Warrant shall
terminate on a date fixed by the Company, such date so fixed to be not earlier
than the date of the commencement of the proceedings for such dissolution,
liquidation or winding-up and not later than thirty (30) days after such
commencement date. Notice of such termination of purchase rights shall be given
to the Holder at least thirty (30) days prior to such termination date.

      2.4   STATEMENT OF ADJUSTMENT. Any adjustment pursuant to the provisions
of this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.

      2.5   NO FRACTIONAL SHARES. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.5, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives his right to receive
a certificate for any fraction of a Share upon exercise hereof.

      2.6   NO CHANGE IN FORM REQUIRED. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.

                                      -6-
<PAGE>

3.    REGISTRATION UNDER THE SECURITIES ACT OF 1933.

      3.1   REGISTRATION AND LEGENDS. The Holder understands that (i) the
Company has not registered the Warrant or the Shares under the Act, or the
applicable securities laws of any state in reliance on exemptions from
registration and (ii) such exemptions depend upon the Holder's investment intent
at the time the Holder acquires the Warrant or the Shares. The Holder therefore
represents and warrants that it is acquiring the Warrant, and will acquire the
Shares, for the Holder's own account for investment and not with a view to
distribution, assignment, resale or other transfer of the Warrant or the Shares.
Because the Warrant and the Shares are not registered, the Holder is aware that
the Holder must hold them indefinitely unless they are registered under the Act
and any applicable securities laws or the Holder must obtain exemptions from
such registration. Upon exercise, in part or in whole, of this Warrant, the
Shares shall bear the following legend:

            The shares of Common Stock represented by this certificate
      have not been registered under the Securities Act of 1933, as
      amended ("Act") or any applicable state securities laws, and
      they may not be offered for sale, sold, transferred, pledged
      or hypothecated without an effective registration statement
      under the Securities Act and under any applicable state
      securities laws, or an opinion of counsel, satisfactory to the
      company, that an exemption from such registration is
      available.

      3.2   NO-ACTION LETTER. The Company agrees that it will be satisfied that
no post-effective amendment or new registration is required for the public sale
of the Shares if it shall be presented with a letter from the Staff of the
Securities and Exchange Commission (the "Commission"), stating in effect that,
based upon stated facts which the Company shall have no reason to believe are
not true in any material respect, the Staff will not recommend any action to the
Commission if such Shares are offered and sold without delivery of a prospectus,
and that, therefore, no Registration Statement under which such shares are to be
registered is required to be filed.

      3.3   REGISTRATION RIGHTS. The Holder shall have the right, under the
terms of a Registration Rights Agreement dated November 29, 2007 between the
Holder and the Company, to cause the Company to register the Common Stock
underlying this Warrant (the "Underlying Common Stock") in a Registration
Statement under the Securities Act of 1933, as amended (the "Act"), filed by the
Company with the Securities and Exchange Commission (the "SEC").

      3.4   RULE 144. If the Company (a) has or registers a class of securities
under Section 12 of the Exchange Act or (b) has or commences to file reports
under Section 13 or 15(d) of the Exchange Act, then, at the request of any
Holder who proposes to sell securities in compliance with Rule 144 of the SEC,
the Company will (i) forthwith furnish to such holder a written statement of
compliance with the filing requirements of the SEC as set forth in Rule 144, as
such rules may be amended from time to time and (ii) make available to the
public and such Holder such information and take such other action as it
requested by the Holder as will enable the Holder to make sales pursuant to Rule
144.

                                      -7-
<PAGE>

      3.5   AGREEMENTS. The agreements in this Section shall continue in effect
regardless of the exercise and surrender of this Warrant.

4.    RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued Common Stock or such other
class or classes of capital stock or other securities to such number as shall be
sufficient for that purpose.

5.    SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.

6.    REMEDIES. The Company agrees that the remedies at law of the Holder, in
the event of any default or threatened default by the Company in the performance
or compliance with any of the terms of this Warrant, may not be adequate and
such terms may, in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

7.    OTHER MATTERS.

      7.1   BINDING EFFECT. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.

      7.2   NOTICES. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:

                              Aethlon Medical, Inc.
                              3030 Bunker Hill Street
                              Suite 4000
                              San Diego, CA 92109
                              Attn: President

Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.

      7.3   GOVERNING LAW. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of California.

                                      -8-
<PAGE>

      7.4   PARTIES BOUND AND BENEFITTED. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.

      7.5   HEADINGS. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.

      IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the ____ day of ____________, 20__.


                                         AETHLON MEDICAL, INC.


                                         By: /s/ James A. Joyce
                                            --------------------------------
                                            James A. Joyce
                                            Chairman and Chief Executive Officer


                                      -9-
<PAGE>

                              AETHLON MEDICAL, INC.

                                   ASSIGNMENT

      FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers unto ____________________________________________________
the within Warrant and the rights represented thereby, and does hereby
irrevocably constitute and appoint ______________________________________
Attorney, to transfer said Warrant on the books of the Company, with full power
of substitution.

Dated:________________________


                                      Signed:___________________________________

                                      Print Name:_______________________________

<PAGE>

                                SUBSCRIPTION FORM

                              AETHLON MEDICAL, INC.
                             3030 BUNKER HILL STREET
                            SUITE 4000, SAN DIEGO, CA

      The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock (the "Shares"), pursuant to and in accordance with the
terms and conditions of this Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.

      The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such Shares, unless either (a) a
registration statement, or post-effective amendment thereto, covering such
Shares have been filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Act"), and such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering the
Shares to be so sold, transferred or otherwise disposed of, or (b) counsel to
Aethlon Medical, Inc. (the "Company") satisfactory to the undersigned has
rendered an opinion in writing and addressed to the Company that such proposed
offer, sale, transfer or other disposition of the Shares is exempt from the
provisions of Section 5 of the Act in view of the circumstances of such proposed
offer, sale, transfer or other disposition; (2) the Company may notify the
transfer agent for its Common Stock that the certificates for the Common Stock
acquired by the undersigned are not to be transferred unless the transfer agent
receives advice from the Company that one or both of the conditions referred to
in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix
the legend set forth in Section 3.1 of this Warrant to the certificates for
Shares hereby subscribed for, if such legend is applicable.

Dated:___________________              Signed:_________________________________

                                       Address:________________________________

                                       ________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>17
<FILENAME>aethlon_sb2-ex1038.txt
<DESCRIPTION>COMMON STOCK PURCH WARRANT
<TEXT>
<PAGE>

EXHIBIT 10.38

THESE SECURITIES MAY NOT BE OFFERED OR SOLD UNLESS AT THE TIME OF SUCH OFFER OR
SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS MEETING THE
REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT THERETO,
WHICH IS EFFECTIVE UNDER SAID ACT, UNLESS IN THE OPINION OF COUNSEL TO THE
CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SAID ACT.

WARRANT NO: ____

                                    CLASS B-1
                          COMMON STOCK PURCHASE WARRANT
                              ("CLASS B-1 WARRANT")
                                       OF

                              AETHLON MEDICAL, INC.

      Aethlon Medical, Inc. (the "Company"), a Nevada corporation, hereby
certifies that, for value received of $.001 per Warrant,
_____________________________________________ (the "Holder"), whose address is
______________________________________________, is entitled, subject to the
terms set forth below at any time or from time to time after the date hereof and
before the Expiration Date (as defined below), to purchase from the Company
_________ shares (the "Shares") of Common Stock, $ .001 par value, at a price of
$0.40 per Share (the purchase price per Share, as adjusted from time to time
pursuant to the provisions hereunder set forth, is referred to in this Warrant
as the "Purchase Price"). This Warrant is issued pursuant to the exercise of
that certain Class A-1 Warrant issued to the Holder on ________________ (the
"Class A-1 Warrant"). The exercise of the Class A-1 Warrant, in whole or in
part, on or before February 15, 2010 entitles the Holder to one Class B-1
Warrant for every two shares of Common Stock purchased under the Class A-1
Warrant.

1.    TERMS OF THE WARRANT.

      1.1   TIME OF EXERCISE. Subject to the provisions of Sections 1.5,
"Transfer and Assignment," and 3.1, "Registration and Legends," this Warrant may
be exercised at any time and from time to time after 9:00 a.m., P.S.T., on
_____________, 20__ (the "Exercise Commencement Date"), but no later than 5:00
p.m., P.S.T., ___________, 20__ (five years from the date of issuance, the
"Expiration Date"), at which point it shall become void and all rights under
this Warrant shall cease.

      1.2   MANNER OF EXERCISE.

            1.2.1   Upon compliance with and subject to the conditions set forth
in this Warrant, the Holder may exercise this Warrant, in whole or in part, upon
surrender of this Warrant with the form of subscription attached hereto duly
executed to the Company at its corporate office at the address indicated in this
Warrant, together with the full Purchase Price for each Share to be purchased
(i) in lawful money of the United States, or by certified check, bank draft or
postal or express money order payable in United States dollars to the order of
the Company or (ii) a manner acceptable to the Company.

<PAGE>

            1.2.2   Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates or other evidence of ownership, for the total number
of whole Shares for which this Warrant is being exercised in such denominations
as are required for delivery to the Holder, and the Company shall thereupon
deliver such documents to the Holder or its nominee.

            1.2.3   If the Holder exercises this Warrant with respect to fewer
than all of the Shares that may be purchased under this Warrant, the Company
shall execute a new Warrant for the balance of the Shares that may be purchased
upon exercise of this Warrant and deliver such new Warrant to the Holder.

            1.2.4   The Company covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect of the issue of
this Warrant, or the issue of any Shares upon the exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of the Shares in a name other than that of the Holder at the time of surrender,
and until the payment of such tax, the Company shall not be required to issue
such Shares.

            1.2.5   The Company shall, at the time of any exercise of all or
part of this Warrant, upon the request of the Holder hereof, acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holders shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant, provided that if the Holder of this Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligations of the Company to afford to such Holder any such rights.

      1.3   EXCHANGE OF WARRANT. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, it shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.

      1.4   HOLDER AS OWNER. Prior to due presentment for registration of
transfer of this Warrant, the Company may deem and treat the Holder as the
absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Irrespective of the date of issue and delivery of certificates for any Shares
issuable upon the exercise of the Warrant, each person in whose name any such
certificate is issued shall be deemed to have become the holder of record of the
Shares represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and

                                      -2-
<PAGE>

payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of Warrant shall be entitled to receive only dividends or
distributions payable to holders of record on or after the date on which such
person shall be deemed to have become the holder of record of such Shares.

      1.5   TRANSFER AND ASSIGNMENT. This Warrant may not be sold, hypothecated,
exercised, assigned or transferred except in accordance with and subject to the
provisions of the Securities Act of 1933, as amended (the "Act"), including
limiting such transfers to Accredited Investors as that term is defined under
Regulation D of the Act.

      1.6   METHOD FOR ASSIGNMENT. Any assignment permitted under this Warrant
shall be made by surrender of this Warrant to the Company at its principal
office with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee designated
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation thereof at the corporate office of the Company together
with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.

      1.7   RIGHTS OF HOLDER. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or consent or receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:

            1.7.1   The Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or

            1.7.2   The Company shall offer to the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or

            1.7.3   There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or

                                      -3-
<PAGE>

            1.7.4   There shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of said cases, the Company shall cause to be mailed to the Holder, at the
earliest practicable time (and, in any event, not less than thirty (30) days
before any record date or other date set for definitive action), written notice
of the date on which the books of the Company shall close or a record shall be
taken to determine the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Purchase
Price and the kind and amount of the Common Stock and other securities and
property deliverable upon exercise of this Warrant. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in said distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to exercise this Warrant shall terminate). Without limiting the
obligation of the Company to provide notice to the holder of actions hereunder,
it is agreed that failure of the Company to give notice shall not invalidate
such action of the Company.

      1.8   LOST WARRANT CERTIFICATE(S). Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required by the
Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will cause to be executed and delivered a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.

      1.9   COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:

            1.9.1   At all times it shall reserve and keep available for the
exercise of this Warrant into Common Stock such number of authorized shares of
Common Stock as are sufficient to permit the exercise in full of this Warrant
into Common Stock; and

            1.9.2   All Shares issued upon exercise of the Warrant shall be duly
authorized, validly issued and outstanding, fully-paid and non-assessable.

      1.10  LIMITATION ON EXERCISE RIGHTS. Notwithstanding any other provision
of Section 1 to the contrary, the Holder shall not be entitled to exercise this
Warrant and any other Warrant (the "Related Warrants") issued by the Company to
the Holder or convert any of the Notes issued by the Company to the Holder into
Common Stock in excess of that number of shares of Common Stock which, upon
giving effect to such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the Holder and its Affiliates to exceed 9.9%
of the outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing provision, the aggregate number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the
number of shares of Common Stock beneficially owned and those shares issuable

                                      -4-
<PAGE>

upon conversion of all Notes and Related Warrants with respect to which the
determination of such provision is being made, but shall exclude the number of
shares of Common Stock that would be issuable upon (i) conversion of the
remaining principal amount(s) of all Notes and the Related Warrants beneficially
owned by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note. For purposes of this Section, in determining the number
of outstanding shares of Common Stock the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (a) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, or (b) more recent public
announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). For purposes of this Warrant, an "Affiliate" of any
specified Person means any other Person directly or indirectly controlling or
controlled by or under common control with such specified Person. A "Person"
means any individual, corporation, partnership, joint venture, trust, estate or
unincorporated organization.

2.    ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
      EXERCISE.

      2.1   RECAPITALIZATION. The number of Shares purchasable on exercise of
this Warrant and the Purchase Price therefor shall be subject to adjustment from
time to time in the event that the Company shall: (i) pay a dividend in, or make
a distribution of, shares of Common Stock; (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares; (iii) combine its outstanding
shares of Common Stock into a smaller number of shares; or (iv) spin-off a
subsidiary by distributing, as a dividend or otherwise, shares of the subsidiary
to its stockholders. In any such case, the total number of shares purchasable on
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive, at the same aggregate purchase price, the
number of shares of Common Stock that the Holder would have owned or would have
been entitled to receive immediately following the occurrence of any of the
events described above had this Warrant been exercised in full immediately prior
to the occurrence (or applicable record date) of such event. An adjustment made
pursuant to this Paragraph 2 shall, in the case of a stock dividend or
distribution, be made as of the record date and, in the case of a subdivision or
combination, be made as of the effective date thereof. If, as a result of any
adjustment pursuant to this Paragraph 2, the Holder shall become entitled to
receive shares of two or more classes of series of securities of the Company,
the Board of Directors of the Company shall equitably determine the allocation
of the adjusted purchase price between or among shares or other units of such
classes or series and shall notify the Holder of such allocation.

                                      -5-
<PAGE>

      2.2   MERGER OR CONSOLIDATION. In the event of any reorganization or
recapitalization of the Company or in the event the Company consolidates with or
merges into another entity or transfers all or substantially all of its assets
to another entity, then and in each such event, the Holder, on exercise of this
Warrant as provided herein, at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or transfer, shall be
entitled, and the documents executed to effectuate such event shall so provide,
to receive the stock or other securities or property to which the Holder would
have been entitled upon such consummation if the Holder had exercised this
Warrant immediately prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization, recapitalization,
consolidation, merger or transfer and shall be applicable to the shares of stock
or other securities or property receivable on the exercise of this Warrant after
such consummation. and as an exchange for a larger or smaller number of shares,
as the case may be.

      2.3   NOTICE OF DISSOLUTION OR LIQUIDATION. Except as otherwise provided
in Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance
of all or substantially all of the assets of the Company in connection with a
plan of complete liquidation of the Company, or in the case of the dissolution,
liquidation or winding-up of the Company, all rights under this Warrant shall
terminate on a date fixed by the Company, such date so fixed to be not earlier
than the date of the commencement of the proceedings for such dissolution,
liquidation or winding-up and not later than thirty (30) days after such
commencement date. Notice of such termination of purchase rights shall be given
to the Holder at least thirty (30) days prior to such termination date.

      2.4   STATEMENT OF ADJUSTMENT. Any adjustment pursuant to the provisions
of this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.

      2.5   NO FRACTIONAL SHARES. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.5, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives his right to receive
a certificate for any fraction of a Share upon exercise hereof.

      2.6   NO CHANGE IN FORM REQUIRED. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.

                                      -6-
<PAGE>

3.    REGISTRATION UNDER THE SECURITIES ACT OF 1933.

      3.1   REGISTRATION AND LEGENDS. The Holder understands that (i) the
Company has not registered the Warrant or the Shares under the Act, or the
applicable securities laws of any state in reliance on exemptions from
registration and (ii) such exemptions depend upon the Holder's investment intent
at the time the Holder acquires the Warrant or the Shares. The Holder therefore
represents and warrants that it is acquiring the Warrant, and will acquire the
Shares, for the Holder's own account for investment and not with a view to
distribution, assignment, resale or other transfer of the Warrant or the Shares.
Because the Warrant and the Shares are not registered, the Holder is aware that
the Holder must hold them indefinitely unless they are registered under the Act
and any applicable securities laws or the Holder must obtain exemptions from
such registration. Upon exercise, in part or in whole, of this Warrant, the
Shares shall bear the following legend:

            The shares of Common Stock represented by this certificate
      have not been registered under the Securities Act of 1933, as
      amended ("Act") or any applicable state securities laws, and
      they may not be offered for sale, sold, transferred, pledged
      or hypothecated without an effective registration statement
      under the Securities Act and under any applicable state
      securities laws, or an opinion of counsel, satisfactory to the
      company, that an exemption from such registration is
      available.

      3.2   NO-ACTION LETTER. The Company agrees that it will be satisfied that
no post-effective amendment or new registration is required for the public sale
of the Shares if it shall be presented with a letter from the Staff of the
Securities and Exchange Commission (the "Commission"), stating in effect that,
based upon stated facts which the Company shall have no reason to believe are
not true in any material respect, the Staff will not recommend any action to the
Commission if such Shares are offered and sold without delivery of a prospectus,
and that, therefore, no Registration Statement under which such shares are to be
registered is required to be filed.

      3.3   REGISTRATION RIGHTS. The Holder shall have the right, under the
terms of a Registration Rights Agreement dated November 29, 2007 between the
Holder and the Company, to cause the Company to register the Common Stock
underlying this Warrant (the "Underlying Common Stock") in a Registration
Statement under the Securities Act of 1933, as amended (the "Act"), filed by the
Company with the Securities and Exchange Commission (the "SEC").

      3.4   RULE 144. If the Company (a) has or registers a class of securities
under Section 12 of the Exchange Act or (b) has or commences to file reports
under Section 13 or 15(d) of the Exchange Act, then, at the request of any
Holder who proposes to sell securities in compliance with Rule 144 of the SEC,
the Company will (i) forthwith furnish to such holder a written statement of
compliance with the filing requirements of the SEC as set forth in Rule 144, as
such rules may be amended from time to time and (ii) make available to the
public and such Holder such information and take such other action as it
requested by the Holder as will enable the Holder to make sales pursuant to Rule
144.

                                      -7-
<PAGE>

      3.5   AGREEMENTS. The agreements in this Section shall continue in effect
regardless of the exercise and surrender of this Warrant.

4.    RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued Common Stock or such other
class or classes of capital stock or other securities to such number as shall be
sufficient for that purpose.

5.    SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.

6.    REMEDIES. The Company agrees that the remedies at law of the Holder, in
the event of any default or threatened default by the Company in the performance
or compliance with any of the terms of this Warrant, may not be adequate and
such terms may, in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

7.    OTHER MATTERS.

      7.1   BINDING EFFECT. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.

      7.2   NOTICES. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:

                              Aethlon Medical, Inc.
                              3030 Bunker Hill Street
                              Suite 4000
                              San Diego, CA 92109
                              Attn: President

Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.

      7.3   GOVERNING LAW. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of California.

                                      -8-
<PAGE>

      7.4   PARTIES BOUND AND BENEFITTED. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.

      7.5   HEADINGS. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.

      IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the ____ day of ____________, 20__.


                                         AETHLON MEDICAL, INC.


                                         By: /s/ James A. Joyce
                                            --------------------------------
                                            James A. Joyce
                                            Chairman and Chief Executive Officer


                                      -9-
<PAGE>

                              AETHLON MEDICAL, INC.

                                   ASSIGNMENT

      FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers unto ____________________________________________________
the within Warrant and the rights represented thereby, and does hereby
irrevocably constitute and appoint ______________________________________
Attorney, to transfer said Warrant on the books of the Company, with full power
of substitution.

Dated:________________________


                                      Signed:___________________________________

                                      Print Name:_______________________________

<PAGE>

                                SUBSCRIPTION FORM

                              AETHLON MEDICAL, INC.
                             3030 BUNKER HILL STREET
                            SUITE 4000, SAN DIEGO, CA

      The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock (the "Shares"), pursuant to and in accordance with the
terms and conditions of this Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.

      The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such Shares, unless either (a) a
registration statement, or post-effective amendment thereto, covering such
Shares have been filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Act"), and such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering the
Shares to be so sold, transferred or otherwise disposed of, or (b) counsel to
Aethlon Medical, Inc. (the "Company") satisfactory to the undersigned has
rendered an opinion in writing and addressed to the Company that such proposed
offer, sale, transfer or other disposition of the Shares is exempt from the
provisions of Section 5 of the Act in view of the circumstances of such proposed
offer, sale, transfer or other disposition; (2) the Company may notify the
transfer agent for its Common Stock that the certificates for the Common Stock
acquired by the undersigned are not to be transferred unless the transfer agent
receives advice from the Company that one or both of the conditions referred to
in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix
the legend set forth in Section 3.1 of this Warrant to the certificates for
Shares hereby subscribed for, if such legend is applicable.

Dated:___________________              Signed:_________________________________

                                       Address:________________________________

                                       ________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.39
<SEQUENCE>18
<FILENAME>aethlon_sb2-ex1039.txt
<DESCRIPTION>AMENDED AND RESTATED 10% CONVERTIBLE NOTE
<TEXT>
<PAGE>

EXHIBIT 10.39

THIS NOTE AND THE UNITS ISSUABLE UPON CONVERSION OF THE NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. NEITHER THE NOTE NOR SUCH UNITS MAY BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.


                              AETHLON MEDICAL, INC.

                              AMENDED AND RESTATED
                          10% SERIES A CONVERTIBLE NOTE

No. ____                                                           $____________

       FOR VALUE RECEIVED, Aethlon Medical, Inc., a Nevada corporation (the
"Company"), promises to pay to ________________________________________, or
registered assigns (the "Holder"), the sum ________________________ in lawful
money of the United States of America on or before the Maturity Date as defined
herein, with all Interest thereon as defined and specified herein. This Note
includes various advances (the "Advances") that the Holder has made to the
Company since July 2005. This Note is issued in exchange for those certain
promissory notes previously issued by the Company to the Holder prior to the
Issue Date (the "Prior Notes"), and all amendments to the Prior Notes, including
that certain allonge entered into between the Company and the Holder on March 5,
2007 (the "Allonge").

       1.     INTEREST AND LIQUIDATED DAMAGES.

              1.1    This Note shall bear interest ("Interest") equal to ten
percent (10%) per annum on the unpaid principal balance, computed on a three
hundred sixty (360)-day year, during the term of the Note. Interest accrues on
each Advance commencing on the date of the Advance, as set forth on Exhibit A to
this Note. The Company shall pay all accrued Interest on a quarterly basis on
the fifteenth day of January, April, July and October of each year until the
Maturity Date, when all accrued but unpaid Interest will be due and payable. In
no event shall the rate of Interest payable on this Note exceed the maximum rate
of Interest permitted to be charged under applicable law.

              1.2    On January 3, 2008, the Company will pay accrued Interest
and Default Interest through December 31, 2007. The Company will pay the
Interest in units ("Units") at the rate of $0.20 per Unit (the "Interest Payment
Rate"). Each Unit shall be composed of one share of the Company's Common Stock
and one Class A Common Stock Purchase Warrant (the "Class A Warrant"). The
Company shall pay the accrued Interest and Default Interest by issuing
________________ Units and shall pay all accrued Interest thereafter in Units at
the Interest Payment Rate. Each Class A Warrant will be exercisable to purchase
one share of Common Stock at a price of $0.20 per share (the "Exercise Price").
If the Holder exercises Class A Warrants on or before February 15, 2010, the
Company will issue the Holder one Class B Common Stock Purchase Warrant (the
"Class B Warrant"), for every two Class A Warrants exercised. No half Class B
Warrants will be issued. Each Class B Warrant will be exercisable to purchase
one share of Common Stock at an exercise price of $0.60 per share. The Class A
Warrant and Class B Warrant are set forth as Exhibit C and Exhibit D,
respectively.


                                       1
<PAGE>

              1.3    All Interest accrued under this Note after December 31,
2007 will, at the option of the Company, be payable in cash or in Units, valued
at the Interest Payment Rate, as such term is defined in this Note. No
fractional shares will be issued. In lieu thereof, the Company will pay cash for
fractional share amounts equal to the fair market value of the Common Stock as
quoted as the closing bid price of the Common Stock on the date of conversion.

              1.4    On January 3, 2008, the Company will pay the liquidated
damages ("Liquidated Damages") due under the Registration Rights Agreement
through November 29, 2007. The Company will pay the Liquidated Damages in units
("Damages Units") at the rate of $0.40 per Damages Unit (the "Damages Interest
Payment Rate"). Each Damages Unit shall be composed of one share of the
Company's Common Stock and one Class A-1 Common Stock Purchase Warrant (the
"Class A-1 Warrant"). The Company shall pay the Liquidated Damages and all
interest accrued on the Liquidated Damages by issuing ____________ Units. Each
Class A-1 Warrant will be exercisable to purchase one share of Common Stock at a
price of $0.40 per share (the "Damages Exercise Price"). If the Holder exercises
Class A-1 Warrants on or before February 15, 2010, the Company will issue the
Holder one Class B-1 Common Stock Purchase Warrant (the "Class B-1 Warrant"),
for every two Class A-1 Warrants exercised. No half Class B-1 Warrants will be
issued. Each Class B-1 Warrant will be exercisable to purchase one share of
Common Stock at an exercise price of $0.40 per share. The forms of Class A-1
Warrant and Class B-1 Warrant are set forth as Exhibit E and Exhibit F,
respectively. The Class A-1 Warrants together with the Class A Principal
Warrants, Class A Warrants, the Class B Warrants and the Class B-1 Warrants are
referred to collectively as the "Warrants."

              1.5    Concurrent herewith, the Company will issue to the Holder
one Class A Warrant (the "Class A Principal Warrant"). The Class A Principal
Warrant will be exercisable to purchase a total of ________________ shares of
Common Stock on the same terms and conditions as set forth in 1.2 above
regarding the Class A Warrant. The Class A Principal Warrant is set forth as
Exhibit G.

              1.6    SERIES OF NOTES. This Note has been issued in exchange for
certain Prior Notes issued to the Holder as follows: ______________________.
This Note is one of a Series of Notes issued by the Company as of the date
hereof in exchange for the surrender of prior notes outstanding by Holder.

       2.     PAYMENTS. All payments under this Note shall first be credited
against costs and expenses provided for in this Note, second to the payment of
any penalties, third to the payment of accrued and unpaid Interest, if any, and
the remainder shall be credited against principal. All cash payments due
hereunder shall be payable in legal tender of the United States of America, and
in same day funds delivered to Holder by cashier's check, certified check, bank
wire transfer or any other means of guaranteed funds to the mailing address
provided below, or at such other place as the Holder shall designate in writing
for such purpose from time to time. If a payment under this Note otherwise would
become due and payable on a Saturday, Sunday or legal holiday (any other day
being a "Business Day"), the due date of the payment shall be extended to the
next succeeding Business Day, and Interest, if any, shall be payable thereon
during such extension.


                                       2
<PAGE>

       3.     PRE-PAYMENTS AND MATURITY DATE. This Note shall be due and payable
in full, including all accrued Interest thereon, on February 15, 2009 (the
"Maturity Date"). At any time on or prior to the Maturity Date, the Company
shall have the right to prepay this Note, in whole or in part, on ten (10) days'
advance notice to the Holder and subject to the right of the Holder to convert
in advance of such prepayment date and provided that on such prepayment date,
the Company will pay in respect of the redeemed Note cash equal to the face
amount plus accrued Interest on the Note (or portion thereof) redeemed. At any
time after the Maturity Date, the Company shall have the right to repay this
Note, in whole or in part, on ten (10) days' advance notice to the Holder and
subject to the right of the Holder to convert in advance of such repayment date.
The Company may prepay this Note at any time after issuance without penalty.

       4.     EQUAL RANK. This Note represents one of a series of One Million
Dollars ($1,000,000) principal amount of 10% Series A Convertible Notes (the
"Notes") issued or to be issued by the Company. All Notes rank equally and
ratably without priority over one another.

       5.     CONVERSION OF NOTE AND ISSUANCE OF WARRANTS.

              5.1    The principal amount of this Note is convertible, at the
option of the Holder, into shares of the Company's Common Stock (the "Common
Stock") at any time after the Issue Date prior to the close of business on the
Business Day prior to the Maturity Date at the rate of $0.20 per share (the
"Conversion Price"), subject to adjustment as hereinafter provided. No
fractional shares will be issued. In lieu thereof, the Company will pay cash for
fractional share amounts equal to the Fair Market Value of the Common Stock on
the date of conversion.

              5.2    INTENTIONALLY OMITTED.

              5.3    LIMITATION ON CONVERSION RIGHTS. Notwithstanding any other
provision of Paragraph 5 to the contrary, the Holder shall not be entitled to
convert this Note, in excess of that number of shares of Common Stock which,
upon giving effect to such conversion, would cause the aggregate number of
shares of Common Stock beneficially owned by the Holder and its Affiliates to
exceed 9.9% of the outstanding shares of the Common Stock following such
conversion. For purposes of the foregoing provision, the aggregate number of
shares of Common Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock beneficially owned and those shares
issuable upon conversion of this Note and all Related Notes with respect to
which the determination of such proviso is being made, but shall exclude the
number of shares of Common Stock that would be issuable upon (i) conversion of
the remaining principal amount of this Note and the Related Notes beneficially
owned by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note. For purposes of this Paragraph, in determining the
number of outstanding shares of Common Stock the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (a) the Company's most
recent Form 10-Q or Form 10-K, as the case may be, or (b) more recent public


                                       3
<PAGE>

announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. If the foregoing 9.9% limitation is ever reached and the Holder desires
to convert this Note or part thereof into equity, the Company will acknowledge
the conversion in writing, but not issue the Holder any additional shares of
Common Stock at that point. Under such circumstances the Holder will have the
right to receive additional shares of Common Stock as a result of the conversion
only at such point and to the extent that its beneficial ownership subsequently
becomes less than 9.9% and such issuance will not cause the Holder's beneficial
ownership to exceed 9.9%. Upon written notice to this effect given by the
Holder, the Company will issue such additional shares in accordance with
Paragraph 5.8, "Issuance of Certificate."

              5.4    ADJUSTMENT BASED UPON STOCK DIVIDENDS, COMBINATION OF
SHARES OR RECAPITALIZATION. The Conversion Price shall be adjusted in the event
that the Company shall at any time (i) pay a stock dividend on the Common Stock;
(ii) subdivide its outstanding Common Stock into a greater number of shares;
(iii) combine its outstanding Common Stock into a smaller number of shares; (iv)
issue by reclassification of its Common Stock any other special capital stock of
the Company; or (v) distribute to all holders of Common Stock evidences of
indebtedness or assets (excluding cash dividends) or rights or warrants to
subscribe for Common Stock (other than those mentioned above). No adjustment of
the Conversion Price will be required until cumulative adjustments amount to One
Dollar ($1.00) per Note or more. Upon the occurrence of an event requiring
adjustment of the Conversion Price, and thereafter, the Holder, upon surrender
of this Note for conversion, shall be entitled to receive the number of shares
of Common Stock or other capital stock of the Company that the Holder would have
owned or have been entitled to receive after the happening of any of the events
described above had this Note been converted immediately prior to the happening
of such event.

              5.5    ADJUSTMENT BASED UPON MERGER OR CONSOLIDATION. In case of
any consolidation or merger to which the Company is a party (other than a merger
in which the Company is the surviving entity and which does not result in any
reclassification of or change in the outstanding Common Stock of the Company),
or in case of any sale or conveyance to another person, firm, or corporation of
the property of the Company as an entirety or substantially as an entirety, the
Holder shall have the right to convert this Note into the kind and amount of
securities and property (including cash) receivable upon such consolidation,
merger, sale or conveyance by the Holder of the number of Units into which such
Note might have been converted immediately prior thereto.

              5.6    Exercise of Conversion Privilege.

                     5.6.1  The Conversion Privilege provided for in this Note
shall be exercisable by the Holder by written notice to the Company or its
successor and the surrender of this Note in exchange for the number of shares
(or other securities and property, including cash, in the event of an adjustment
of the Conversion Price) into which this Note is convertible based upon the
Conversion Price.


                                       4
<PAGE>

                     5.6.2  The Holder's conversion right set forth in this
Paragraph 5 may be exercised at any time and from time to time but prior to
payment in full of the principal amount and the accrued interest on this Note.
Conversion rights will expire at the close of business on the Business Day prior
to the Maturity Date or redemption date of this Note.

                     5.6.3  The Holder may exercise the right to convert all or
any portion of the principal amount and accrued Interest on this Note by
delivery of (i) this Note and (ii) a completed Conversion Notice in the form
attached as Exhibit B on a Business Day to the Company's principal executive
offices. Such conversion shall be deemed to have been made immediately prior to
the close of business on the Business Day of such delivery a conversion notice
(the "Conversion Date"), and the Holder shall be treated for all purposes as the
record holder of the Units into which this Note is converted as of such date.

                     5.6.4  Upon conversion of the entire principal amount and
accrued Interest of this Note and the delivery of Units upon conversion of this
Note, except as otherwise provided in Paragraph 22, "Representations and
Warranties to Survive Closing," the Company shall be forever released from all
of its obligations and liabilities under this Note.

              5.7    CORPORATE STATUS OF COMMON STOCK TO BE ISSUED. All Units
(or other securities in the event of an adjustment of the Conversion Price)
which may be issued upon the conversion of this Note shall, upon issuance, be
fully paid and nonassessable.

              5.8    ISSUANCE OF CERTIFICATE. Upon the conversion of this Note,
the Company shall, within five (5) Business Days of such conversion, issue to
the Holder a certificate or certificates representing the number of Units (or
other securities in the event of an adjustment of the Conversion Price) to which
the conversion relates.

       6.     STATUS OF HOLDER OF NOTE. This Note shall not entitle the Holder
to any voting rights or other rights as a shareholder of the Company or to any
rights whatsoever except the rights herein expressed, and no dividends shall be
payable or accrue in respect of this Note or the securities issuable upon the
conversion hereof unless and until this Note shall be converted. Upon the
conversion of this Note, the Holder shall, to the extent permitted by law, be
deemed to be the holder of record of the shares of Common Stock and Warrants
issuable upon such conversion, notwithstanding that the stock transfer books of
the Company shall then be closed or that the certificates representing such
shares of Common Stock and Warrants shall not then be actually delivered.

       7.     RESERVE OF SHARES OF COMMON STOCK. The Company shall reserve out
of its authorized shares of Common Stock, and other securities in the event of
an adjustment of the Conversion Price, a number of shares sufficient to enable
it to comply with its obligation to issue shares of Common Stock, and other
securities in the event of an adjustment of the Conversion Price, upon the
conversion of this Note.

       8.     TRANSFER RESTRICTIONS; EXEMPTION FROM REGISTRATION.


                                       5
<PAGE>

              8.1    The Holder agrees that (i) this Note and the Units issuable
upon conversion have not been registered under the Act and may not be sold or
transferred without registration under the Act or unless an exemption from such
registration is available; (ii) the Holder has acquired this Note and will
acquire the Common Stock for its own account for investment purposes only and
not with a view toward resale or distribution; and (iii) if a registration
statement that includes the Common Stock is not effective at the time Common
Stock is issued to Holder upon conversion under this Note, and the Common Stock
is not exempt from registration under Rule 144, then the Common Stock shall be
inscribed with the following legend:

       THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF HOLDER'S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.

              8.2    If an opinion of counsel of Holder provides that
registration is not required for the proposed conversion or transfer of this
Note or the proposed transfer of the shares of Units issuable upon conversion
and that the proposed conversion or transfer in the absence of registration
would require the Company to take any action including executing and filing
forms or other documents with the Securities and Exchange Commission (the "SEC")
or any state securities agency, or delivering to the Holder any form or document
in order to establish the right of the Holder to effectuate the proposed
conversion or transfer, the Company agrees promptly, at its expense, to take any
such action; and provided, further, that the Company will reimburse the Holder
in full for any expenses (including but not limited to the fees and
disbursements of such counsel, but excluding brokers' commissions) incurred by
the Holder or owner of Units on his, her or its behalf in connection with such
conversion or transfer of the Note or transfer of the Units.

       9.     Registration Rights.

       The Holder shall have the right, under the terms of a Registration Rights
Agreement dated November 29, 2007, the "New Registration Rights Agreement"
between the Holder and the Company, to cause the Company to register the Common
Stock underlying the Warrants (the "Underlying Common Stock") in a Registration
Statement under the Securities Act of 1993, as amended (the "Act"), filed by the
Company with the Securities and Exchange Commission (the "SEC").

       10.    Rule 144

       If the Company (a) has or registers a class of securities under Section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
(b) has or commences to file reports under Section 13 or 15(d) of the Exchange
Act, then, at the request of any Holder who proposes to sell securities in
compliance with Rule 144 of the SEC, the Company will (i) forthwith furnish to
such holder a written statement of compliance with the filing requirements of
the SEC as set forth in Rule 144, as such rules may be amended from time to time
and (ii) make available to the public and such Holder such information and take
such other action as is requested by the Holder to enable the Holder to make
sales pursuant to Rule 144.


                                       6
<PAGE>

       11.    DEFAULT. The Company shall perform its obligations and covenants
hereunder and in each and every other agreement between the Company and Holder
pertaining to the Indebtedness evidenced hereby. The following provisions shall
apply upon failure of the Company so to perform.

              11.1   EVENT OF DEFAULT. Any of the following events shall
constitute an "Event of Default" hereunder:

                     11.1.1 Failure by the Company to pay principal of any of
this Note when due and payable on the Maturity Date;

                     11.1.2 Failure of the Company to pay Interest when due
hereunder; or

                     11.1.3 Except as set forth in Paragraphs 11.1.1 and 11.1.2,
failure of the Company to perform any of the covenants, conditions, provisions
or agreements contained herein, or in any other agreement between the Company
and Holder, which failure continues for a period of thirty (30) days after
notice of default has been given to the Company by the Holders of not less than
twenty-five percent (25%) of the principal amount of the Notes then outstanding;
provided, however, that if the nature of the Company's obligation is such that
more than thirty (30) days are required for performance, then an Event of
Default shall not occur if the Company commences performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion; or

                     11.1.4 The entry of an order for relief under Federal
Bankruptcy Code as to the Company or entry of any order appointing a receiver or
trustee for the Company or approving a petition in reorganization or other
similar relief under bankruptcy or similar laws in the United States of America
or any other competent jurisdiction, and if such order, if involuntary, is not
satisfied or withdrawn within sixty (60) days after entry thereof; or the filing
of a petition by the Company seeking any of the foregoing, or consenting
thereto; or the filing of a petition to take advantage of any debtor's act; or
making a general assignment for the benefit of creditors; or admitting in
writing inability to pay debts as they mature.

              11.2   ACCELERATION. Upon any Event of Default (in addition to any
other rights or remedies provided for under this Note), at the option of the
Holders of not less than twenty-five percent (25%) of the principal amount of
the Notes then outstanding, all sums evidenced hereby, including all principal,
Interest, fees and all other amounts due hereunder, shall become immediately due
and payable. If an Event of Default in the payment of principal or Interest
should occur and be continuing with respect to the Note, any one or more holders
of the Notes then outstanding may declare the principal of the Notes to be
immediately due and payable. In the Event of a Default due to a breach of any
other covenant or term, Holders representing twenty-five percent (25%) of the
principal amount of the Notes may take action to accelerate the Notes.


                                       7
<PAGE>

              11.3   NOTICE BY COMPANY. Upon the happening of any Event of
Default specified in this paragraph that is not cured within the respective
periods prescribed above, the Company will give prompt written notice thereof to
the Holder of this Note.

              11.4   NO WAIVER. Failure of the Holder to exercise any option
hereunder shall not constitute a waiver of the right to exercise the same in the
event of any subsequent Event of Default, or in the event of continuance of any
existing Event of Default after demand or performance thereof.

              11.5   DEFAULT INTEREST. Default Interest will accrue on an unpaid
principal or Interest due hereunder at the rate of fifteen percent (15%) per
annum upon the occurrence of any Event of Default until the Event of Default is
cured.

              11.6   PURSUIT OF ANY REMEDY. No Holder of a Note may pursue any
remedy under the Notes unless (i) the Company shall have received written notice
of a continuing Event of Default from the Holder and (ii) the Company shall have
received a request from Holders of at least twenty-five percent (25%) of
principal amount of the Notes to pursue such remedy. The Holders of fifty-one
percent (51%) of principal amount of the Notes then outstanding have the right
to direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Noteholders under the Notes.

       12.    Assignment, Transfer or Loss of the Note.

              12.1   No Holder of this Note may assign, transfer, hypothecate or
sell all or any part of this Note or in any way alienate or encumber the Note
without the express written consent of the Company, the granting or denial of
which shall be within the absolute discretion of the Company. Any attempt to
effect such transfer without the consent of the Company shall be null and void.
The Company has not registered this Note under the Act or the applicable
securities laws of any state in reliance on exemptions from registration. Such
exemptions depend upon the investment intent of the Holder at the time he
acquires his Note. The Holder is acquiring this Note for his own account for
investment purposes only and not with a view toward distribution or resale of
such Note within the meaning of the Act and the applicable securities laws of
any state. The Company shall be under no duty to register the Note or to comply
with an exemption in connection with the sale, transfer or other disposition
under the applicable laws and regulations of the Act or the applicable
securities laws of any state. The Company may require the Holder to provide, at
his expense, an opinion of counsel satisfactory to the Company to the effect
that any proposed transfer or other assignment of the Note will not result in a
violation of the applicable federal or state securities laws or any other
applicable federal or state laws or regulations.

              12.2   All expenses, including reasonable legal fees incurred by
the Company in connection with any permitted transfer, assignment or pledge of
this Note will be paid by the Holder requesting such transfer, assignment or
pledge.


                                       8
<PAGE>

              12.3   Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Note and, in the
case of any such loss, theft or destruction of any Note, upon delivery of an
indemnity bond in such reasonable amount as the Company may determine (or, in
the case of any Note held by the original Noteholder, of an indemnity agreement
reasonably satisfactory to the Company), or, in the case of any such mutilation,
upon the surrender of such Note to the Company at is principal office for
cancellation, the Company at its expense will execute and deliver, in lieu
thereof, a new Note of like tenor, dated the date to which interest hereunder
shall have been paid on such lost, stolen, destroyed or mutilated Note.

              12.4   Subject to Subparagraph 12.1 above, the Holder may, at his
option, either in person or by duly authorized attorney, surrender this Note for
registration of transfer at the principal office of the Company and, upon
payment of any expenses associated with the transfer, receive in exchange
therefor a Note or Notes, dated as of the date to which interest has been paid
on the Note so surrendered, each in the principal amount of $1,000 or any
multiple thereof, for the same aggregate unpaid principal amount as the Note so
surrendered and registered as payable to such person or persons as may be
designated by the Holder. Every Note surrendered for registration of transfer
shall be duly endorsed or shall be accompanied by a written instrument of
transfer duly executed by the Holder or his attorney duly authorized in writing.
Every Note, so made and delivered by the Company in exchange for any Note
surrendered, shall in all other respects be in the same form and have the same
terms as the Note surrendered. No transfer of any Note shall be valid unless
made in such manner at the principal office of the Company.

              12.5   The Company may treat the person in whose name this Note is
registered as the owner and Holder of this Note for the purpose of receiving
payment of all principal of and all Interest on this Note, and for all other
purposes whatsoever, whether or not such Note shall be overdue and, except for
transfers effected in accordance with this subparagraph, the Company shall not
be affected by notice to the contrary.

       13.    MODIFICATIONS AND AMENDMENTS. After notice given by the Company to
the Holders of all Notes at the time outstanding, the Company may from time to
time and at any time enter into an agreement or agreements supplemental to the
provisions of this Note for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Notes or of modifying
in any manner the rights of the Holders of the Notes; PROVIDED, HOWEVER, that no
such supplemental agreement, modification or amendment may, without the consent
of the holder of each Note then outstanding affected thereby, (i) reduce the
percentage of principal amount of Notes whose Holders may consent to an
amendment, supplement or waiver; (ii) reduce the rate or change the time for
payment of interest, including Default Interest, on any Note; (iii) reduce the
principal amount of any Note or change the Maturity Date of the Notes; (iv) make
any Note payable in money other than that stated in the Note; (v) impair the
right to institute suit for the enforcement of any payment of principal of, or
premium, if any, or interest on, any Note; (vi) make any change in the
percentage of principal amount of Notes necessary to waive compliance with
certain provisions of the Note; or (vii) waive a continuing default or Event of
Default in the payment of principal of, premium, if any, or Interest on the
Notes. The modifications and amendments of the Notes may be made by the Company
without the consent of any Holders of Notes in certain limited circumstances,
including (a) to cure any ambiguity, omission, defect or inconsistency, (b) to


                                       9
<PAGE>

provide for the assumption of the obligations of the Company under the Notes
upon the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company, or (c) to make any change that
does not adversely affect the rights of any holder of Notes. The Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
any past default under the Notes, except a default in the payment of principal,
premium, if any, or Interest. Promptly after execution by the Company and
Holders of the Notes of a supplemental agreement pursuant to the provisions of
this paragraph, the Company shall deliver a copy of such supplemental agreement
to all Holders of the Notes at the time outstanding.

       14.    NOTICES. All notices provided for herein shall be validly given if
in writing and delivered personally or sent by certified mail, postage prepaid,
to the office of the Company or such other address as the Company may from time
to time designate in writing sent by certified mail, postage prepaid, to the
Holder at his address set forth below or such other address as the Holder may
from time to time designate in writing to the Company by certified mail, postage
prepaid.

       15.    USURY. All Interest, Default Interest, fees, charges, goods,
things in action or any other sums or things of value, or other contractual
obligations (collectively, the "Additional Sums") paid by the Company hereunder,
whether pursuant to this Note or otherwise, with respect to the Indebtedness
evidenced hereby, or any other document or instrument in any way pertaining to
the Indebtedness, which, under the laws of the State of California may be deemed
to be Interest with respect to such loan or Indebtedness, shall, for the purpose
of any laws of the State of California, which may limit the maximum amount of
Interest to be charged with respect to such loan or Indebtedness, be payable by
the Company as, and shall be deemed to be, Interest and for such purposes only,
the agreed upon and contracted rate of Interest shall be deemed to be increased
by the Additional Sums. Notwithstanding any provision of this Note to the
contrary, the total liability for payments in the nature of Interest under this
Note shall not exceed the limits imposed by applicable law. The Company shall
not assert a claim, and shall actively resist any attempts to compel it to
assert a claim, respecting a benefit under any present or future usury laws
against any Holder of this Note.

       16.    BINDING EFFECT. This Note shall be binding upon the parties hereto
and their respective heirs, executors, administrators, representatives,
successors and permitted assigns.

       17.    COLLECTION FEES. Except as otherwise provided herein, the Company
shall pay all costs of collection, including reasonable attorneys' fees and all
costs of suit and preparation for such suit (and whether at trial or appellate
level), in the event the unpaid principal amount of this Note, or any payment of
Interest is not paid when due, or in the event Holder is made party to any
litigation because of the existence of the Indebtedness evidenced by this Note,
or if at any time Holder should incur any attorneys' fees in any proceeding
under the Federal Bankruptcy Code (or other similar laws for the protection of
debtors generally) in order to collect any Indebtedness hereunder or to
preserve, protect or realize upon any security for, or guarantee or surety of,
such Indebtedness whether suit be brought or not, and whether through courts of
original jurisdiction, as well as in courts of appellate jurisdiction, or
through a bankruptcy court or other legal proceedings.


                                       10
<PAGE>

       18.    CONSTRUCTION. This Note shall be governed as to its validity,
interpretation, construction, effect and in all other respects by and in
accordance with the laws and interpretations thereof of the State of California.
Unless the context otherwise requires, the use of terms in singular and
masculine form shall include in all instances singular and plural number and
masculine, feminine and neuter gender.

       19.    SEVERABILITY. In the event any one or more of the provisions
contained in this Note or any future amendment hereto shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this Note
or such other agreement, and in lieu of each such invalid, illegal or
unenforceable provision there shall be added automatically as a part of this
Note a provision as similar in terms to such invalid, illegal or unenforceable
provision as may be possible and be valid, legal and enforceable.

       20.    ENTIRE AGREEMENT. This Note Agreement represents the entire
agreement and understanding between the parties concerning the subject matter
hereof and supersede all prior and contemporaneous agreements, understandings,
representations and warranties with respect thereto.

       21.    GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws of the
State of Nevada shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by the
internal laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of California. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of San Diego for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby or
discussed herein, or in any manner arising in connection with or related to the
transactions contemplated hereby or involving the parties hereto whether at law
or equity and under any contract, tort or any other claim whatsoever and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing or faxing a copy
thereof to such party at the address for such notices as listed in this Note and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

       22.    REPRESENTATIONS AND WARRANTIES TO SURVIVE CLOSING. All
representations, warranties and covenants contained herein shall survive the
execution and delivery of this Note and the issuance of any Conversion Shares
upon the conversion hereof.


                                       11
<PAGE>

       23.    HEADINGS. The headings used in this Note are used for convenience
only and are not to be considered in construing or interpreting this Note.

       24.    DEFINITIONS.

       "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

       "BOARD OF DIRECTORS" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.

       "CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, equity participations or other equivalents (however designated) of
corporate stock or partnership interests and any and all warrants, options and
rights with respect thereto (whether or not currently exercisable), including
each class of common stock and preferred stock of such Person.

       "FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:

              (a)    if such Common Stock is publicly traded and is then listed
       on a national securities exchange, its closing price on the date of
       determination on the principal national securities exchange on which the
       Common Stock is listed or admitted to trading;

              (b)    if such Common Stock is quoted on the NASDAQ National
       Market or the NASDAQ Capital Market, its closing price on the NASDAQ
       National Market or the NASDAQ Capital Market, respectively, on the date
       of determination;

              (c)    if such Common Stock is not listed on a national securities
       exchange or quoted on the NASADQ National Market or the NASDAQ Capital
       Market, but is traded in the over-the-counter market, the average of the
       bid and ask prices for a share of Common Stock on the most recent date on
       which the Common Stock was publicly traded;

              (d)    if none of the foregoing is applicable, by the Committee in
       good faith.

       "GAAP" means generally accepted accounting principles as in effect in the
United States of America as of the Issue Date.

       "HOLDER" means a Person in whose name a Note is registered on the
Company's books.


                                       12
<PAGE>

       "INDEBTEDNESS" means, without duplication, with respect to any Person,
(a) all obligations of such Person (i) in respect of borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such person or
only to a portion thereof); (ii) evidenced by bonds, notes, debentures or
similar instruments; (iii) representing the balance deferred and unpaid of the
purchase price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business); (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v) for
the payment of money relating to a capitalized lease obligation under GAAP; or
(vi) evidenced by a letter of credit or a reimbursement obligation of such
Person with respect to any letter of credit; (b) all net obligations of such
Person under interest rate swap obligations and foreign currency hedges; (c) all
liabilities of others of the kind described in the preceding clauses (a) or (b)
that such Person has guaranteed or that are otherwise its legal liability; (d)
Indebtedness (as otherwise defined in this definition) of another Person secured
by lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, the amount of such obligations being deemed to be the lesser of
(1) the full amount of such obligations so secured, and (2) the fair market
value of such asset, as determined in good faith by the Board of Directors of
such Person, which determination shall be evidenced by a board resolution; and
(e) any and all deferrals, renewals, extensions, refinancings and refundings
(whether direct or indirect) of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a), (b),
(c), (d) or this clause (e), whether or not between or among the same parties.

       "ISSUE DATE" means the date on which the Note is originally issued.

       "MATURITY DATE" means February 15, 2009.

       "PERSON" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.

       "SENIOR INDEBTEDNESS" means any Indebtedness of the Company, outstanding
prior to the date of this Note, unless such Indebtedness is PARI PASSU with or
contractually subordinate or junior in right to payment of this Note, except
Indebtedness to any Affiliate of the Company, which shall be junior and
subordinate to this Note.

       "SUBORDINATED INDEBTEDNESS OF THE COMPANY" means any Indebtedness of the
Company incurred after the date of this Note.

       A "SUBSIDIARY" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more subsidiaries of such Person or by such Person and one or more
subsidiaries of such Person, (ii) a partnership in which such Person or a
subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if such Person or its subsidiary is
entitled to receive more than fifty percent (50%) of the assets of such
partnership upon its dissolution, or (iii) any other Person (other than a
corporation or partnership) in which such Person, directly or indirectly, at the
date of determination thereof, has (x) at least a majority ownership interest or
(y) the power to elect or direct the election of a majority of directors or
other governing body of such Person.

       "SUBSIDIARY" means any subsidiary of the Company.


                                       13
<PAGE>

       "VOTING STOCK" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof,
whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency to vote in the election of members of the
Board of Directors or other governing body of such Person.

       25.    MISCELLANEOUS. Except as otherwise provided herein, the Company
waives demand, diligence, presentment for payment and protest, notice of
extension, dishonor, maturity and protest. Time is of the essence with respect
to the performance of each and every covenant, condition, term and provision
hereof.

       26.    COVENANTS OF THE COMPANY. The Company covenants to perform the
following:

              26.1   The Warrants will have a term expiring five years from
their respective date of issuance. Each Warrant will have a term of five years
from its respective date of issuance. All Warrants will be assignable by their
holders.

              26.2   The Company will collaborate with the Holder to expand its
Board of Directors (the "Board") by appointing or electing one additional
director who has background in life sciences that the Holder may designate after
the date of this Note. Such additional director will remain on the Board while
the Notes are outstanding. If the Holder elects not to designate such a person
for appointment or election to the Board, the Holder will be entitled to be an
observer at the Board meetings, which observer shall be included in all meetings
of the Board.

              26.3   The Company will hold Board meetings, whether formal or
informal, at least once per month.

              26.4   The Company will give written notice to the Holder within
three (3) Business Days of the Company's receipt of any proposed financing and
disclose its terms and conditions. The Company will consult with Holder
respecting the proposed financing before it concludes such financing.

              26.5   The Company grants the Holder the right, for a period of
seven (7) Business Days after the Company gives written notice to the Holder, to
purchase any of the Company's securities at the same price and on the same terms
and conditions at any time that the Company proposes to sell to a third party in
a BONA FIDE transaction or a series of transactions in an amount up to

                     (i)    all of the securities proposed to be sold if the
Company proposes to sell its Common Stock at a price of $0.20 per share or less;
and

                     (ii)   the principal amount of the Note converted and total
purchase price of the Common Stock for the Warrants exercised if the Company
proposes to sell its Common Stock at a price above $0.20 per share.

              26.6   The Company will pay all of the fees and related costs of
legal counsel of the Holder before January 3, 2008.

              26.7   The Company will execute such other documents as may be
necessary or appropriate to carry out the provisions of this Note and the
Warrants. The Company will bear all reasonable costs associated with the
preparation and implementation of this Note and the Warrants.


                                       14
<PAGE>

       27.    SENIOR SUBORDINATED INDEBTEDNESS.

              27.1   This Note constitutes Senior Subordinated Indebtedness of
the Company and is unsecured.

              27.2   The Indebtedness evidenced by this Note and all of the
Notes will be subordinated to the prior payment when due of the principal of,
and premium, if any, and accrued and unpaid interest on, all existing Senior
Indebtedness. This Note will be senior to, in right of payment of principal of,
premium, if any, and accrued and unpaid interest on, any Subordinated
Indebtedness of the Company.

              27.3   Upon any distribution of assets of the Company in any
dissolution, winding up, liquidation or reorganization of the Company, all
holders of Senior Indebtedness of the Company must be paid in full before any
payment or distribution is made with respect to this Note. The Company shall pay
all principal or distribution to the holders of Subordinated Indebtedness.


                                       15
<PAGE>

       IN WITNESS WHEREOF, this Note has been issued on the 29 day of November,
2007.

                                                AETHLON MEDICAL, INC.


                                                By: /s/ James A. Joyce
                                                    ----------------------------
                                                    James A. Joyce
                                                    Its Chairman and CEO


                                                Accepted and agreed to:


                                                By: ____________________________



Mailing Address of Holder:
__________________________
__________________________
__________________________


Mailing Address of Company:
3030 Bunker Hill Street
Suite 4000
San Diego, CA 92109


                                       16
<PAGE>

                                    EXHIBIT A

                              SCHEDULE OF ADVANCES





                                       17
<PAGE>

                                    EXHIBIT B

                                CONVERSION NOTICE


                (To be signed only upon conversion of this Note)


TO: AETHLON MEDICAL, INC.

The undersigned, the registered holder of the 10 % Series A Convertible Note
(the "Note") of AETHLON MEDICAL, INC. (the "Company"), hereby surrenders the
Note for conversion into shares of Common Stock of the Company (the "Common
Stock") to the extent of $____________ unpaid principal amount of the Note and
$__________ unpaid accrued Interest due under the Note, all in accordance with
the provisions of such Note. The undersigned requests (i) that a certificate
representing the shares, bearing the appropriate legends, be issued to the
undersigned, and (ii) if the unpaid principal amount so converted is less than
the entire unpaid principal amount of the Note, that a new substitute note
representing the portion of said unpaid principal amount that is not so
converted be issued in accordance with the provisions of the Note.



______________________________________________
(Signature and name of the registered holder)

______________________________________________
Print Name

Dated:________________________________________



                                       18
<PAGE>

                                    EXHIBIT C

                                 CLASS A WARRANT

                                [Attached hereto]





                                       19
<PAGE>

                                    EXHIBIT D

                             FORM OF CLASS B WARRANT

                                [Attached hereto]





                                       20
<PAGE>

                                    EXHIBIT E

                                CLASS A-1 WARRANT

                                [Attached hereto]





                                       21
<PAGE>

                                    EXHIBIT F

                            FORM OF CLASS B-1 WARRANT

                                [Attached hereto]





                                       22
<PAGE>

                                    EXHIBIT G

                        FORM OF CLASS A PRICIPAL WARRANT

                                [Attached hereto]





                                       23
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.41
<SEQUENCE>19
<FILENAME>aethlon_sb2-ex1041.txt
<DESCRIPTION>FORM OF UNIT OFFERING SUBSCRIPTION AGREEMENT
<TEXT>
<PAGE>

EXHIBIT 10.41

- --------------------------------------------------------------------------------


                              AETHLON MEDICAL, INC.


                             SUBSCRIPTION AGREEMENT

- --------------------------------------------------------------------------------

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE PERSON OR ENTITY ISSUING THE UNITS AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THE UNITS BEING OFFERED HEREBY HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY
OR DETERMINED THE ADEQUACY OF THIS DOCUMENT.

THESE UNITS AND THE UNDERLYING SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

<PAGE>

                             SUBSCRIPTION AGREEMENT

     The undersigned (hereinafter "SUBSCRIBER") hereby confirms its subscription
for the purchase of Units comprised of shares of Common Stock, par value $.001
per share ("Common Stock"), of AETHLON MEDICAL, INC., a Nevada corporation (the
"COMPANY"), and warrants exercisable for Common Stock ("Warrants"), on the terms
described below.

     The Units, the Common Stock, the Warrants and the shares issuable upon
exercise of the Warrants ("Warrant Shares") are sometimes referred to
collectively herein as the "SECURITIES."

     In connection with this subscription, Subscriber and the Company agree as
follows:

A.   Subscription of the Subscriber.

     1. Purchase of Units. The undersigned (the "Subscriber") hereby irrevocably
agrees, represents and warrants with, to and for the benefit of the Company,
that such Subscriber is executing this Agreement in connection with the
subscription by the Subscriber for _______ units of the Company ("Units"), with
each Unit consisting of (i) two shares of Common Stock of the Company and (ii)
one Warrant to purchase one share of Common Stock of the Company for an exercise
price of $0.50 per share, at a price per Unit of $1.00, resulting in the
aggregate purchase price set forth on the Subscriber's signature page hereto
(the "Offering Price"). The Common Stock and the Warrants (and the Warrant
Shares) are sometimes referred to hereinafter collectively as the "Underlying
Stock". The Subscriber understands that the Company is relying upon the accuracy
and completeness of the information contained herein in complying with its
obligations under federal and state securities and other applicable laws.
Subject to the terms and conditions of this Agreement, upon execution and
delivery hereof by the Subscriber, the Subscriber hereby agrees to purchase the
Units of the Company pursuant to the transaction hereof, and against concurrent
delivery of the purchase price for such Units. The date upon which the final
subscription is accepted by the Company and the full Offering Price has been
tendered to the Company, shall be known as the "Closing Date."

     2. Offering. This offering of the Units (the "Offering") is being made to a
limited group of investors, all of whom shall represent to the Company pursuant
to this Agreement that they are "accredited investors," as that term is defined
in Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act") or who have otherwise been qualified as investors by the
Company. All of the Units offered hereby are being sold by the Company. The
Company is offering Units for the consideration set forth herein. The Company
may sell less than all of the Units, and shall be entitled to accept
subscriptions and receive the Offering Price for each subscription prior to the
entire Offering being subscribed for. The Offering is being made on a "best
efforts" basis. The minimum subscription amount is $25,000.

B.   Representations and Warranties of the Subscriber. The Subscriber hereby
represents and warrants to the Company as of the date hereof:

     1. Place of Business. The principal place of business address set forth
below is such Subscriber's true and correct principal place of business and is
the only jurisdiction in which an offer to sell the Units was made to such
Subscriber and such Subscriber has no present intention of moving its principal
place of business to or of becoming a resident of any other state or
jurisdiction.


                                      -1-
<PAGE>

     2. Sale or Transfer of the Units and Underlying Stock. The Subscriber
understands that neither the Units nor any of the Underlying Stock has been
registered under the Securities Act, or under the laws of any other
jurisdiction. The Subscriber understands and agrees that transfer or sale of the
Units and the Underlying Stock may be restricted or prohibited unless they are
subsequently registered under the Securities Act and, where required, under the
laws of other jurisdictions or an exemption from registration is available. The
Subscriber will not offer, sell, transfer or assign its Units or Underlying
Stock or any interest therein in contravention of this Agreement, the Securities
Act or any state or federal law. The Subscriber understands and acknowledges
that, because of the substantial restrictions on the transferability of the
Units and Underlying Stock, it may not be possible for the Subscriber to
liquidate the Subscriber's investment in the Company readily, even in the case
of an emergency.

     3. Representation of Accredited Investor Status, Investment Experience and
Ability to Bear Risk. Subscriber acknowledges that the Offering has not been
registered with the Securities and Exchange Commission because the Company is
relying on an exemption from registration under Section 4(2) of the Securities
Act and Regulation D promulgated thereunder. SUBSCRIBER BELIEVES THAT AT THE
TIME OF THE SALE OF THE UNITS TO SUBSCRIBER, SUBSCRIBER (OR, IF SUBSCRIBER IS A
CORPORATION, LIMITED LIABILITY COMPANY OR TRUST, EACH OF ITS EQUITY OWNERS)
QUALIFIES AS AN "ACCREDITED INVESTOR" (AS DEFINED UNDER RULE 501 OF REGULATION D
PROMULGATED UNDER THE SECURITIES ACT) USING THE FOLLOWING QUALIFICATION FACTORS
(CHECK ALL APPROPRIATE ITEMS):

(__) $1,000,000 NET WORTH TEST:

     I, Subscriber, am a natural person and my individual net worth, or joint
     net worth with my spouse (if any), INCLUSIVE of home, furnishings and
     automobiles, at the time of this purchase is in excess of $1,000,000.

(__) $200,000 INDIVIDUAL/$300,000 JOINT ANNUAL INCOME TEST:

     I, Subscriber, am a natural person and my individual annual gross income
     (exclusive of my spouse's income) has been in excess of $200,000 in each of
     the two most recent tax years, and I reasonably expect individual annual
     gross income (exclusive of my spouse's income) to be in excess of $200,000
     for the current tax year; or I am a natural person and my joint annual
     gross income (including my spouse's annual gross income) has been in excess
     of $300,000 in each of the two most recent tax years, and I reasonably
     expect our joint annual gross incomes to be in excess of $300,000 for the
     current tax year.

     ("INCOME" under this test is defined as adjusted gross income for federal
     income tax purposes PLUS (i) deductions for long-term capital gains under
     the Internal Revenue Code; (ii) deductions for depletion under section 611
     et seq. of the Code; (iii) any exclusion for interest received on
     tax-exempt securities; and (iv) any losses of a Company allocated to the
     individual limited partners of the Company as reported on Form 1040).


                                      -2-
<PAGE>

(__) BANK OR INVESTMENT COMPANY TEST:

     Subscriber is a bank as defined in section 3(a)(2) of the Securities Act,
     or any savings and loan association or other institution as defined in
     section 3(a)(5)(A) of the Securities Act, whether acting in its individual
     or fiduciary capacity; or is a broker or dealer registered pursuant to
     section 15 of the Securities Exchange Act of 1934; or is an insurance
     company as defined in section 2(13) of the Securities Act; or is any
     investment company registered under the Investment Corporation Act of 1940,
     or a business development company as defined in section 2(a)(48) of that
     Act; or is a Small Business Investment Corporation licensed by the U.S.
     Small Business Administration under section 301(c) or (d) of the Small
     Business Investment Act of 1958; is a plan established and maintained by a
     state, its political subdivision, or any agency or instrumentality of a
     state or its political subdivisions, for the benefit of its employees, if
     such plan has total assets in excess of $5,000,000; or is an employee
     benefit plan within the meaning of the employee Retirement Income Security
     Act of 1974, if the investment decision is made by a plan fiduciary, as
     defined in section 3(21) of such Act, which is either a bank, savings and
     loan association, insurance company, or registered investment adviser, or
     if the employee benefit plan has total assets in excess of $5,000,000, or,
     if a self-directed plan, with investment decisions made solely by persons
     that are accredited investors.

(__) PRIVATE BUSINESS DEVELOPMENT CORPORATION TEST:

     Subscriber is a private business development company as defined in section
     202(a)(22) of the Investment Advisors Act of 1940.

(__) IRC SECTION 501(C)(3) ORGANIZATION TEST:

     Subscriber is an organization described in Section 501(c)(3) of the
     Internal Revenue Code, corporation, Massachusetts or similar business
     trust, or Company, not formed for the specific purpose of acquiring the
     securities being offered, with total assets in excess of $5,000,000.

(__) DIRECT RELATIONSHIP TO ISSUER TEST:

     Subscriber is a director, executive officer, partner or manager of the
     Company of the securities being offered or sold, or any director, executive
     officer or manager of a partner or partner of that issuer.

(__) $5,000,000 NONINVESTMENT TRUST TEST:

     Subscriber is a trust with total assets in excess of $5,000,000 not formed
     for the specific purpose of acquiring the securities being offered, whose
     purchase is directed by a "sophisticated person" as described in section
     230.506(b)(2)(ii).


                                      -3-
<PAGE>

(__) EQUITY ENTITY COMPRISED OF ACCREDITED INVESTORS TEST:

     Subscriber is any equity entity in which all of the equity owners are
     accredited investors as defined above. Subscriber has had one of the
     persons responsible for overseeing and/or managing one or more of
     Subscriber's financial accounts complete the attestation in Section D
     hereof in order to verify the information in this Section B:

     Yes _________   No _________

In addition, Subscriber is knowledgeable and experienced with respect to the
financial and business activities contemplated by the Company and is capable of
evaluating the risks and merits of investing in the Units and, in making a
decision to proceed with this investment, has not relied upon any
representations, warranties or agreements, other than those set forth in this
Agreement and can bear the economic risk of an investment in the Company for an
indefinite period of time, and can afford to suffer the complete loss thereof.

     4. Own Advice. In connection with the Subscriber's investment in the
Company, the Subscriber has carefully considered and has, to the extent the
Subscriber believes such discussion necessary, discussed with the Subscriber's
professional legal, tax and financial advisers (the "Investment Advisors") the
suitability of an investment in the Units for the Subscriber's particular tax
and financial situation and the Subscriber has determined that the Units are a
suitable investment for the Subscriber.

     5. Company History; Risks. The Subscriber represents and warrants that the
Subscriber is aware (i) that the Company has limited operating history; (ii)
that the Units involve a substantial degree of risk of loss of the Subscriber's
entire investment and that there is no assurance of any income from the
Subscriber's investment; and (iii) that any federal and/or state income tax
benefits which may be available to the Subscriber, if any, may be lost through
the adoption of new laws or regulations, to changes to existing laws and
regulations and to changes in the interpretation of existing laws and
regulations. The Subscriber further represents that the Subscriber is relying
solely on the Subscriber's own conclusions or the advice of the Subscriber's
Investment Advisors with respect to tax aspects of any investment in the Units.

     6. Inquiries. The Subscriber and its Investment Advisors have been given
access to, and prior to the execution of this Agreement, have been provided with
an opportunity to ask questions of, and receive answers from, the Company
officers concerning the Company and the terms and conditions of the Offering and
the Units, and to obtain any other information which the Subscriber and the
Subscriber's Investment Advisors required with respect to the Company and an
investment in the Company in order to evaluate such investment and verify the
accuracy of all information furnished to the Subscriber and its Investment
Advisors regarding the Company. All such questions, if asked, were answered
satisfactorily and all information or documents provided were found to be
satisfactory. Neither the Subscriber nor its Investment Advisors have been
furnished any offering literature on which they have relied on other this
Agreement and the Subscriber and its Investment Advisors have relied only on
this Agreement. At no time was the Subscriber presented with or solicited by any
leaflet, public promotion meeting, newspaper or magazine article, radio or
television advertisement or any other form of general advertising or general
solicitation.


                                      -4-
<PAGE>

     7. Authority. The Subscriber is authorized and has full right and power to
subscribe for the Units and to perform the Subscriber's obligations pursuant to
the provisions of this Agreement; the person signing this Agreement and any
other instrument executed and delivered herewith on behalf of such Subscriber
has been duly authorized by such entity and has full power and authority to do
so. If the Subscriber is a corporation, partnership, unincorporated association
or other entity, the person signing this agreement has the legal capacity to
authorize, deliver and be bound by this Subscription Agreement and to take all
actions required pursuant hereto and further certifies that all necessary
approvals of directors, shareholders or otherwise have been given and obtained;
and if the Subscriber is an individual, it is of the full age of majority in the
jurisdiction in which the Subscriber is resident and is legally competent to
execute, deliver and be bound by this Subscription Agreement and take all action
pursuant hereto.

     8. No Default. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby will not
conflict with, or result in any violation of or default pursuant to, any
provision of any governing instrument applicable to the Subscriber, or any
agreement or other instrument to which the Subscriber is a party or by which the
Subscriber or any of the Subscriber's properties are bound or any permit,
franchise, judgment, decree, statute, rule or regulation applicable to the
Subscriber or any of the Subscriber's business or properties.

     9. ERISA. If the Subscriber is an employee benefit plan subject to ERISA,
then such Subscriber acknowledges that such Subscriber has been informed of and
understands the operations and business of the Company, and represents that such
Subscriber's investment in the Company (i) is permissible under the documents
and instruments governing such plan; (ii) satisfies the diversification
requirements of ERISA; (iii) is prudent considering all the facts and
circumstances, including the fact that there is no trading market for the Units
or the Underlying Stock; and (iv) is not a "prohibited transaction" within the
meaning of Section 406 of ERISA.

     10. Purchase Entirely For Own Account. This Agreement is made with the
Subscriber in reliance upon the Subscriber's representations to the Company,
which by the Subscriber's execution of this Agreement, the Subscriber hereby
confirms, that the Units issuable to the Subscriber will be acquired for
investment for the Subscriber's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Subscriber has no present intention of selling, granting any participation in,
or otherwise distributing the same. The Subscriber represents and warrants that
the Subscriber has no contract, understanding, agreement or arrangement with any
person to sell or transfer or pledge to such person or anyone else any of the
Units for which the Subscriber hereby subscribes (in whole or in part) or any
interest therein; and the Subscriber represents and warrants that the Subscriber
has no present plans to enter into any such contract, undertaking, agreement or
arrangement.

     The Subscriber represents and warrants that the funds representing the
Aggregate Subscription Price which will be advanced by the Subscriber hereunder
will not represent proceeds of crime and the Subscriber acknowledges that the
Company or the Placement Agents may in the future be required by law to disclose
the Subscriber's name and other information relating to this Subscription
Agreement and the Subscriber's subscription hereunder, on a confidential basis,
and to the best of the Subscriber's knowledge (i) none of the subscription funds
to be provided by the Subscriber (a) have been or will be derived from or
related to any activity that is deemed criminal under the laws of the United
States of America, or any other jurisdiction, or (b) are being tendered on
behalf of a person or entity who has not been identified to the Subscriber, and
(ii) it shall promptly notify the Company and the Placement Agents if the
Subscriber discovers that any of such representations ceases to be true, and to
provide the Company and the Placement Agents with appropriate information in
connection therewith.


                                      -5-
<PAGE>

The Subscriber represents and warrants that the current structure of this
transaction and all transactions and activities contemplated hereunder is not a
plan or scheme to evade the registration provisions of the Securities Act.

The Subscriber acknowledges that:

     (i)  no securities commission or similar regulatory authority has reviewed
          or passed on the merits of the Units or the Underlying Stock; and

     (ii) there is no government or other insurance covering the Units or
          Underlying Stock; and

     (iii) there are risks associated with the purchase of the Units; and

     (iv) there are restrictions on the Subscriber's ability to resell the Units
          and the Underlying Stock and it is the responsibility of the
          Subscriber to find out what those restrictions are and to comply with
          them before selling the Units and the Underlying Stock; and

     (v)  the Company has advised the Subscriber that the Company is relying on
          an exemption from the requirements to provide the Subscriber with a
          prospectus and to sell securities through a person or company
          registered to sell securities under applicable securities laws and, as
          a consequence of acquiring the Units pursuant to this exemption,
          certain protections, rights and remedies provided by applicable
          securities laws, including statutory rights of rescission or damages,
          will not be available to the Subscriber.

The Subscriber represents and warrants that it has not received nor does it
expect to receive any financial assistance from the Company, directly or
indirectly, in respect of the Subscriber's purchase of the Units.

The Subscriber represents and warrants that neither the Company nor the
Placement Agents, nor any of their respective directors, officers, employees or
representatives, have made any representations (oral or written) to the
Subscriber regarding the future value of the Units or the Underlying Stock.

The Subscriber acknowledges that (i) the Company may complete secured or
unsecured debt financings or equity financings in the future in order to develop
the Company's business and to fund its ongoing development, (ii) there is no
assurance that such financings will be available and, if available, on
reasonable terms, (iii) any such future financings may have a dilutive effect on
current security holders, including the Subscriber, and (iv) if such future
financings are not available, the Company may be unable to fund its ongoing
development and the lack of capital resources may result in the failure of its
business.


                                      -6-
<PAGE>

The Subscriber acknowledges that the Placement Agents, their respective
affiliates and their respective directors, officers, employees and companies
with which they are associated may, from time to time, have a long or short
position or deal as principal in the securities of the Company.

C.   Representations and Warranties of the Company.

     1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, in good standing under the laws of
the State of Nevada and has all requisite corporate power and corporate
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in the State of Nevada. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to be so qualified would not
have a material adverse effect on the Company.

     2. Finders Fees. A finder's fee of up to 7% of the amounts subscribed for
may be paid to anyone acting as a finder in this Offering. Such fee, if any,
shall be payable one-half in cash and one-half in Units.

     3. Capitalization. As of consummation of the transactions contemplated
hereby and immediately thereafter, the authorized capital stock of the Company
shall consist of 100,000,000 shares of common stock, par value $0.001 per share
(the "Common Stock"), of which (i)__________ shares shall be issued and
outstanding, (ii) shares are reserved for issuance upon exercise of outstanding
warrants, options and other convertible securities, and (iii) _____ shares shall
be reserved for issuance upon the exercise of the Warrants . All such issued and
outstanding shares have been duly authorized and validly issued and have been
offered, issued, sold, and delivered by the Company in compliance with
applicable federal and state securities laws.

     4. Authorization. The Company has all requisite corporate power to execute,
deliver and perform its obligations under this Agreement and all other
agreements contemplated hereby and thereby and to issue the Units and the
Underlying Stock in accordance with the terms hereof. All corporate action on
the part of the Company, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement and all other
agreements and obligations contemplated hereby and thereby, the performance of
all obligations of the Company hereunder and thereunder, and the authorization,
issuance (or reservation for issuance), sale and delivery of the Common Stock to
be issued hereunder has been taken. This Agreement constitutes valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by general
principles of equity, including concepts of materiality, reasonableness, good
faith and fair dealing and by the possible unavailability of specific
performance, injunctive relief or other equitable remedies.


                                      -7-
<PAGE>

     5. No Violation. The Company's execution, delivery and performance of this
Agreement and all other agreements contemplated hereby and thereby and the
consummation of the transactions contemplated hereby and thereby will not with
or without the giving of notice or the lapse of time or both (A) violate any
provision of law, statute, rule or regulation to which the Company is subject,
(B) violate any order, judgment or decree applicable to it, or (C) conflict with
or result in a breach or default under any term or condition of its applicable
governing instruments or any agreement or other instrument to which it is a
party or by which it is bound.

     6. Valid Issuance of Common Stock. The Common Stock being issued hereunder,
when issued, sold and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable and will be free of preemptive rights and restrictions on
transfer other than restrictions on transfer under this Agreement and applicable
state and federal securities laws. Assuming the truth and accuracy of the
representations and warranties of each of the Subscribers for the Company's
capital stock under agreements similar to this Agreement, the issuance of the
Units hereunder shall be exempt from registration under the Securities Act and
any applicable state securities laws.

     7. Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the valid execution of this Agreement and the
consummation of the transactions contemplated by this Agreement except for
filings pursuant to applicable state and federal securities laws which allow
filings to be made following the Closing but in no event later than 15 days
after the consummation of the transactions contemplated hereby. The Company (a)
is not a Person described or designated in the Specially Designated Nationals
and Blocked Persons List of the Office of Foreign Assets Control or in Section 1
of the Anti-Terrorism Order or (b) does not engage in any dealings or
transactions with any such Person. The Company is in compliance, in all material
respects, with the USA Patriot Act.

     8. Use of Proceeds. The proceeds from the sale of Units will be available
for the Company's general corporate purposes. Up to 7% of the proceeds may be
paid for finders fees which will be paid one-half in cash and one-half in Units
at the Offering Price.

     9. No Subsidiaries. The Company has four dormant wholly-owned subsidiaries,
Aethlon, Inc, Cell Activation, Inc., Syngen Research, Inc. and Hemex, Inc.

     10. Registration Rights

  (a) Subject to the terms and limitations hereof, the Company shall file a
registration statement on Form SB-2 or other appropriate registration document
under the Securities Act (the "Registration Statement") for resale of the Common
Stock and Warrant Shares underlying the Warrants (the "Registrable Securities")
and shall use its reasonable best efforts to maintain the Registration Statement
effective so long as any of the Warrants are outstanding (the "Effectiveness
Period"). The Company shall file such Registration Statement no later than sixty
(60) days after the completion of the Offering (the "Closing Date"); provided,
however, the Company will not be obligated to register more than 33% of its
issued and outstanding shares of Common Stock on such registration statement. If
the number of shares of Common Stock and the Warrant Shares exceeds such 33%
limitation, the Company will cut back the number of shares being registered in
order for it to adhere to such 33% limitation, and such cut back will be applied


                                      -8-
<PAGE>

to the holders of the Units on a pro rata basis. The Company shall also use its
best efforts to ensure that such Registration Statement is declared effective
within one hundred and eighty (180) calendar days from the Closing Date. If the
event the Registration Statement is not declared effective within one hundred
and eighty (180) calendar days from the Closing Date (the "Effective Date"), the
Subscriber will be entitled to receive from the Company, without additional
consideration, additional shares of Common Stock equal to two percent (2%) of
the shares of Common Stock sold in the Offering for each 30-day period (or
portion thereof) after which the Effective Date has passed and the Registration
Statement remains without effectiveness. No "penalty shares" shall accrue or be
issuable if at such time the Registrable Securities may be resold pursuant to
Rule 144 under the Act.

  (b) Notwithstanding the foregoing, the Company shall not be obligated to
effect any registration of the Registrable Securities or take any other action
pursuant to this Section 10: (i) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act, or (ii) during any period in which the Company suspends the
rights of a Subscriber after giving the Subscriber written notification of a
Potential Material Event (defined below) pursuant to subsection (i) below.

  (c) Except as otherwise expressly set forth, the Company shall bear all
expenses incurred by the Company in compliance with the registration obligation
of the Company, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company incurred in
connection with any registration, qualification or compliance pursuant to this
Subscription Agreement and all underwriting discounts, selling commissions and
expense allowances applicable to the sale of any securities by the Company for
its own account in any registration. All underwriting discounts, selling
commissions and expense allowances applicable to the sale by Subscriber of
Registrable Securities and all fees and disbursements of counsel for the
Subscriber shall be borne by the Subscriber.

  (d) To the extent permitted by law the Company will indemnify each Subscriber,
each of its officers, directors, agents, employees and partners, and each person
controlling such Subscriber, with respect to each registration, qualification or
compliance effected pursuant to this Agreement, and each underwriter, if any,
and each person who controls any underwriter, and their respective counsel
against all claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document prepared by the Company
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or (ii) any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and subject to the provisions of subsection (g) below, will
reimburse each such Subscriber, each of its officers, directors, agents,
employees and partners, and each person controlling such Subscriber, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses as they are reasonably incurred in connection with


                                      -9-
<PAGE>

investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement (or alleged untrue statement) or omission (or alleged
omissions) based upon written information furnished to the Company by (or on
behalf of) such Subscriber or underwriter, or if the person asserting any such
loss, claim, damage or liability (or action or proceeding in respect thereof)
did not receive a copy of an amended preliminary prospectus or the final
prospectus (or the final prospectus as amended and supplemented) at or before
the written confirmation of the sale of such Registrable Securities to such
person because of the failure of the Subscriber or underwriter to so provide
such amended preliminary or final prospectus (or the final prospectus as amended
and supplemented); provided, however, that the indemnity agreement contained in
this subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
the Subscriber, any such partner, officer, director, employee, agent or
controlling person of such Subscriber, or any such underwriter or any person who
controls any such underwriter; provided, however, that the obligations of the
Company hereunder shall be limited to an amount equal to the portion of net
proceeds represented by the Registrable Securities pursuant to this Agreement.

  (e) To the extent permitted by law, each Subscriber whose Registrable
Securities are included in any registration, qualification or compliance
effected pursuant to this Subscription Agreement will indemnify the Company, and
its directors, officers, agents, employees and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such Subscriber and
each of their officers, directors, partners, agents and employees, and each
person controlling such Subscriber, and their respective counsel against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Subscribers, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses as they are reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Subscriber; provided, however, that the
obligations of any Subscriber hereunder shall be limited to an amount equal to
the net proceeds to such Subscriber from Registrable Securities sold under such
registration statement, prospectus, offering circular or other document as
contemplated herein; provided, further, that the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Subscriber, which consent shall not be unreasonably withheld
or delayed.


                                      -10-
<PAGE>

  (f) Each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided further that if any Indemnified
Party reasonably concludes that there may be one or more legal defenses
available to it that are not available to the Indemnifying Party, or that such
claim or litigation involves or could have an effect on matters beyond the scope
of this Agreement, then the Indemnified Party may retain its own counsel at the
expense of the Indemnifying Party; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless and only to
the extent that such failure to give notice results in material prejudice to the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.

  (g) If the indemnification provided for in this Section is held by a court of
competent jurisdiction to be unavailable to an Indemnified Party with respect to
any loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

  (h) The Registrable Securities, and any related benefits to the Subscriber
hereunder may be transferred or assigned by the Subscriber to a permitted
transferee or assignee, provided that the Company is given written notice of
such transfer or assignment, stating the name and address of said transferee or
assignee and identifying the Registrable Securities with respect to which such
registration rights are being transferred or assigned; provided further that the
transferee or assignee of such Registrable Securities shall be deemed to have
assumed the obligations of the Subscriber under this Agreement by the acceptance
of such assignment and shall, upon request from the Company, evidence such
assumption by delivery to the Company of a written agreement assuming such
obligations of the Subscriber.


                                      -11-
<PAGE>

  (i) Subscriber covenants and agrees that such Subscriber will comply with the
prospectus delivery requirements of the Securities Act as applicable to such
Subscriber in connection with sales of Registrable Securities pursuant to the
registration statement required hereunder.

     11. No Stock Agreements. There is not in effect on the date hereof any
agreement to which the Company or (to its knowledge) any holders of equity
securities of the Company is a party relating to the voting, transfer or sale of
such securities.

D.   Legend. The certificate representing the Underlying Stock and the Warrants
issued by the Company shall bear the following (or similar) legends:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
     SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
     EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
     SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS
     PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION THEREFROM.

E.   Indemnification. The Subscriber agrees to indemnify and hold harmless the
Company and its officers, managers, members, employees, agents and affiliates
against any and all loss, liability, claim, damage and expense whatsoever
(including without limitation any and all expenses reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by the Subscriber to comply with
any covenant agreement made by the Subscriber herein. The Company agrees to
indemnify and hold harmless the Subscriber and its officers, managers, members,
employees, agents and affiliates against any and all loss, liability, claim,
damage and expense whatsoever (including without limitation any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representation or warranty or breach or failure to comply
with any covenant agreement made by the Company herein.

F.   Modification. Neither this Agreement nor any provision hereof shall be
waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any such waiver, modification, discharge or
termination is sought.

G.   Assignability. This Agreement and the rights and obligations hereunder are
not transferable or assignable by the Subscriber.

H.   Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without regard to principles of
conflicts of law.


                                      -12-
<PAGE>

I.   Survival of Representations and Warranties. All representations and
warranties made by the Subscriber in this Agreement shall survive the execution
and delivery of this Agreement, as well as any investigation at any time made by
or on behalf of the Company and the issue and sale of the Units and Underlying
Stock.

J.   Reliance. The Subscriber understands and acknowledges that the Subscriber's
representations, warranties, acknowledgements and agreements in this Agreement
will be relied upon by the Company in determining the Subscriber's suitability
as a purchaser of Units.

K.   Further Assurances. The Subscriber agrees to provide, if requested, any
additional information that may be requested or required to determine the
Subscriber's eligibility to purchase the Units.

L.   Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.

M.   Severability. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.


                                      -13-
<PAGE>

     IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date set forth on this signature page.

     Class and number of Units Subscribed for:   ________________________

     Aggregate Purchase Price:                   ________________________

     _______________________________             ____________________________
     Print Name of Company, Limited              Print Name of Authorized
     Liability Company, Corporation              Representative
     or Trust

     By:____________________________             ____________________________
     Signature of Authorized                     Capacity of Authorized
     Representative                              Representative

     Date: _____________

     Address: _______________________



SUBSCRIPTION ACCEPTED:

AETHLON MEDICAL, INC., a Nevada corporation

By: /s/ James A. Joyce
    ---------------------------------
    Name: James A. Joyce                         Date: ____________, 2007
    Title: CEO


                                      -14-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.42
<SEQUENCE>20
<FILENAME>aethlon_sb2-ex1042.txt
<DESCRIPTION>FORM OF COMMON STOCK WARRANT
<TEXT>
<PAGE>

EXHIBIT 10.42


THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO AETHLON MEDICAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

                                  Right to Purchase  __________  of shares of
                                  Common Stock of Aethlon Medical, Inc. (subject
                                  to adjustment as provided herein)


                          COMMON STOCK PURCHASE WARRANT

No. __________                                      Issue Date:_________________

     AETHLON MEDICAL, INC., a corporation organized under the laws of the State
of Nevada (the "Company"), hereby certifies that, for value received, or its
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time after the Issue Date until 5:00 p.m.,
P.S.T. on the thridanniversary of the Issue Date (the "Expiration Date"), up to
fully paid and nonassessable shares of the common stock of the Company (the
"Common Stock"), at a per share purchase price of $0.50. The aforedescribed
purchase price per share, as adjusted from time to time as herein provided, is
referred to herein as the "Purchase Price." The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein. The Company may reduce the Purchase Price without the consent
of the Holder.

     As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

     (a) The term "Company" shall include Aethlon Medical, Inc. and any
corporation which shall succeed or assume the obligations of Aethlon Medical,
Inc. hereunder.

     (b) The term "Common Stock" includes (a) the Company's Common Stock and (b)
any other securities into which or for which any of the securities described in
(a) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

     (c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

     1.   Exercise of Warrant.

          1.1. Number of Shares Issuable upon Exercise. From and after the Issue
Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

                                       1
<PAGE>

          1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within seven (7)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect or by cashless exercise in the manner set forth in Section 2.

          1.3. Partial Exercise. This Warrant may be exercised in part (but not
for a fractional share) by surrender of this Warrant in the manner and at the
place provided in subsection 1.2 except that the amount payable by the Holder on
such partial exercise shall be the amount obtained by multiplying (a) the number
of whole shares of Common Stock designated by the Holder in the Subscription
Form by (b) the Purchase Price then in effect. On any such partial exercise, the
Company, at its expense, will forthwith issue and deliver to or upon the order
of the Holder hereof a new Warrant of like tenor, in the name of the Holder
hereof or as such Holder (upon payment by such Holder of any applicable transfer
taxes) may request, the whole number of shares of Common Stock for which such
Warrant may still be exercised.

          1.4. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.

          1.5. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

          1.6 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction.

     2.   Registration Rights. The Company shall file a registration statement
on Form SB-2 or other appropriate registration form under the Securities Act
(the "Registration Statement") for the registration of the shares of Common
Stock underlying this Warrant (the "Warrant Shares") and shall use its
reasonable best efforts to maintain the Registration Statement effective so long
as this Warrant is outstanding (the "Effectiveness Period"). The Company shall
file such Registration Statement no later than sixty (60) days after August 13,
2007; provided, however, the Company will not be obligated to register more than
33% of its issued and outstanding shares of Common Stock on such registration
statement. If the number of shares of Common Stock and the Warrant Shares
proposed to be registered thereunder exceeds such 33% limitation, the Company


                                       2
<PAGE>

will cut back the number of shares being registered in order for it to adhere to
such 33% limitation, and such cut back will be applied to the holders of the
shares being registered (including the Holder hereof) on a pro rata basis. The
Company shall also use its best efforts to ensure that such Registration
Statement is declared effective within one hundred and eighty (180) calendar
days from August 13, 2007. Except as otherwise expressly set forth, the Company
shall bear all expenses incurred by the Company in compliance with this
registration obligation of the Company, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company incurred in connection with any registration,
qualification or compliance concerning the Warrant Shares.

     3.   Adjustment for Reorganization, Consolidation, Merger, etc.

          3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

          3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in Los Angeles, California, as trustee
for the Holder of the Warrants.

          3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

     4.   Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The


                                       3
<PAGE>

Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

     5.   Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

     6.   Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrants, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.

     7.   Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor"). On the surrender
for exchange of this Warrant, with the Transferor's endorsement in the form of
Exhibit B attached hereto (the "Transferor Endorsement Form") and together with
an opinion of counsel reasonably satisfactory to the Company that the transfer
of this Warrant will be in compliance with applicable securities laws, the
Company at its expense, but with payment by the Transferor of any applicable
transfer taxes, will issue and deliver to or on the order of the Transferor
thereof a new Warrant or Warrants of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor. No such transfers shall result in a public
distribution of the Warrant.

     8.   Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense, twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

     9.   Warrant Agent. The Company may, by written notice to the Holder of the
Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to Section
1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.


                                       4
<PAGE>

     10.   Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

     11.   Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: Aethlon Medical, Inc.,
3030 Bunker Hill Street, Suite 4000, San Diego, California 92109, FAX (858)
332-1739, with a copy by facsimile only to: Richardson & Patel LLP, 10900
Wilshire Boulevard, Suite 500, Los Angeles, CA 90024, Attn: Nimish Patel, Esq.,
telecopier: (310) 208-1154, (ii) if to the Holder, to the address and facsimile
number listed on the first paragraph of this Warrant.

     12.   Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of California. Any dispute relating to this Warrant shall
be adjudicated in City of Los Angeles in the State of California. The headings
in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or enforceability of
any other provision.

     IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.

                              AETHLON MEDICAL, INC.



                              By: /s/ James A. Joyce
                                  ----------------------------------------------
                                  Name: James A. Joyce
                                  Title: Chairman and Chief Executive Officer


Witness:


_______________________


                                       5
<PAGE>

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO:  AETHLON MEDICAL, INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___    ________ shares of the Common Stock covered by such Warrant.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

___    $__________ in lawful money of the United States

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________________________
whose address is _______________________________________________________________
_______________________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.

Dated:___________________


Signature:_____________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)

Address: __________________________
         __________________________
         __________________________


                                        6
<PAGE>

                                    EXHIBIT B


                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

     For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of AETHLON MEDICAL, INC. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
AETHLON MEDICAL, INC. with full power of substitution in the premises.


- --------------------------------------------------------------------------------
Transferees             Percentage Transferred           Number Transferred
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------


Dated:  ______________, ___________       _____________________________________
                                          (Signature must conform to name of
                                          holder as specified on the face of
                                          the warrant)

Signed in the presence of:

__________________________________        _____________________________________
         (Name)                           _____________________________________
                                                        (address)

ACCEPTED AND AGREED:                      _____________________________________
[TRANSFEREE]                              _____________________________________
                                                        (address)
__________________________________
         (Name)


                                        7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.43
<SEQUENCE>21
<FILENAME>aethlon_sb2-ex1043.txt
<DESCRIPTION>FORM OF UNIT SECURITIES
<TEXT>
<PAGE>

EXHIBIT 10.43


                             SUBSCRIPTION AGREEMENT
                             ----------------------


      THIS SUBSCRIPTION AGREEMENT (this "AGREEMENT"), is dated as of January __,
2008, by and among Aethlon Medical, Inc., a Nevada corporation (the "COMPANY"),
and the subscribers identified on the signature page hereto (each a "SUBSCRIBER"
and collectively "SUBSCRIBERS").

      WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D ("REGULATION
D") as promulgated by the United States Securities and Exchange Commission (the
"COMMISSION") under the Securities Act of 1933, as amended (the "1933 ACT").

      WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase for up to $200,000 (the "PURCHASE PRICE") up to $220,000 (the
"PRINCIPAL AMOUNT") of principal amount of promissory notes of the Company
("NOTE" or "NOTES"), a form of which is annexed hereto as EXHIBIT A; and share
purchase warrants (the "WARRANTS"), in the form annexed hereto as EXHIBIT B, to
purchase shares of the Company's $.001 par value Common Stock (the "COMMON
STOCK" and the "WARRANT SHARES") during the period and at the per share purchase
price set forth in the Warrants (the "EXERCISE PRICE"). The Notes, the Warrants
and the Warrant Shares are collectively referred to herein as the "SECURITIES."

      NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:

      1.    Closing Date. The "CLOSING DATE" shall be the date that the Purchase
Price is transmitted by wire transfer or otherwise credited to or for the
benefit of the Company. The consummation of the transactions contemplated herein
("CLOSING") shall take place at the offices of Richardson & Patel LLP, 10900
Wilshire Blvd., Suite 500, Los Angeles, California 90024, upon the satisfaction
or waiver of all conditions to closing set forth in this Agreement.

      2.    Closing. Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase and the Company shall sell the Notes and Warrants to each Subscriber.
The Principal Amount for each Subscriber's Note will be determined by dividing
such Subscriber's portion of the Purchase Price by .9090.

      3.    Class C Warrants. On the Closing Date, the Company will issue and
deliver Class C Warrants to the Subscribers. 660,000 Class C Warrants will be
issued for $220,000 of Note Principal Amount issued on the Closing Date. The
Exercise Price to acquire a Warrant Share upon exercise of a Class C Warrant
shall be $0.50, subject to reduction as described in the Class C Warrant. The
Class C Warrants shall be exercisable until three years after the issue date of
the Class C Warrants.

      4.    Subscriber Representations and Warranties. Each Subscriber hereby
represents and warrants to and agrees with the Company only as to such
Subscriber that:

            (a)   Organization and Standing of the Subscribers. If such
Subscriber is an entity, such Subscriber is a corporation, partnership or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization.

            (b)   Authorization and Power. Such Subscriber has the requisite
power and authority to enter into and perform this Agreement and the other
Transaction Documents and to purchase the Notes and Warrants being sold to it
hereunder. The execution, delivery and performance of this Agreement and the
other Transaction Documents by such Subscriber and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Subscriber or its Board of Directors, stockholders,
partners, members, as the case may be, is required. This Agreement and the other
Transaction Documents have been duly authorized, executed and delivered by such
Subscriber and constitutes, or shall constitute when executed and delivered, a
valid and binding obligation of such Subscriber enforceable against such
Subscriber in accordance with the terms thereof.


                                       1
<PAGE>

            (c)   No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by such
Subscriber of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Subscriber's
charter documents or bylaws or other organizational documents or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Subscriber). Such Subscriber is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the other
Transaction Documents or to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
such Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

            (d)   Information on Company. Such Subscriber has been furnished
with or has had access at the EDGAR Website of the Commission to the Company's
Form 10-KSB filed on July 13, 2007 for the fiscal year ended March 31, 2007, and
the financial statements included therein, together with all subsequent filings
made with the Commission available at the EDGAR website (hereinafter referred to
collectively as the "REPORTS"). In addition, such Subscriber may have received
in writing from the Company such other information concerning its operations,
financial condition and other matters as such Subscriber has requested in
writing, identified thereon as OTHER WRITTEN INFORMATION (such other information
is collectively, the "OTHER WRITTEN INFORMATION"), and considered all factors
such Subscriber deems material in deciding on the advisability of investing in
the Securities.

            (e)   Information on Subscriber. Such Subscriber is, and will be at
the time of the exercise of the Warrants, an "ACCREDITED INVESTOR", as such term
is defined in Regulation D promulgated by the Commission under the 1933 Act, is
experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its representatives, has
such knowledge and experience in financial, tax and other business matters as to
enable such Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. Such Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities. Such Subscriber is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
The information set forth on the signature page hereto regarding such Subscriber
is accurate.

            (f)   Purchase of Notes and Warrants. On the Closing Date, such
Subscriber will purchase the Notes and Warrants as principal for its own account
for investment only and not with a view toward, or for resale in connection
with, the public sale or any distribution thereof.

            (g)   Compliance with Securities Laws. Such Subscriber understands
and agrees that the Securities have not been registered under the 1933 Act or
any applicable state securities laws, by reason of their issuance in a
transaction that does not require registration under the 1933 Act (based in part
on the accuracy of the representations and warranties of such Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration. Such Subscriber will comply
with all applicable rules and regulations in connection with the sales of the
Securities.


                                       2
<PAGE>

            (h)   Restricted Securities. Such Subscriber understands that the
Securities have not been registered under the 1933 Act and such Subscriber will
not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of the Securities unless pursuant to an effective registration statement under
the 1933 Act, or unless an exemption from registration is available.
Notwithstanding anything to the contrary contained in this Agreement, such
Subscriber may transfer (without restriction and without the need for an opinion
of counsel) the Securities to its Affiliates (as defined below) provided that
each such Affiliate is an "accredited investor" under Regulation D and such
Affiliate agrees to be bound by the terms and conditions of this Agreement. For
the purposes of this Agreement, an "AFFILIATE" of any person or entity means any
other person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such person or entity. Affiliate
includes each Subsidiary of the Company. For purposes of this definition,
"CONTROL" means the power to direct the management and policies of such person
or firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

            (i)   Warrants Legend. The Warrants shall bear the following or
similar legend:

                  "NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
                  BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
                  SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
                  SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
                  SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
                  EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
                  COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
                  GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
                  UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
                  RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
                  SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
                  MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
                  BY THE SECURITIES."

            (j)   Note Legend. The Note shall bear the following legend:

                  "THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
                  CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
                  SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
                  ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
                  STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
                  AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL
                  BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM,
                  THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
                  UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
                  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
                  IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
                  FINANCING ARRANGEMENT SECURED BY THE SECURITIES. "


                                       3
<PAGE>

            (k)   Communication of Offer. The offer to sell the Securities was
directly communicated to such Subscriber by the Company. At no time was such
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.

            (l)   Authority; Enforceability. This Agreement and other agreements
delivered together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by such Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and such Subscriber has full power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by such Subscriber relating hereto.

            (m)   No Governmental Review. Such Subscriber understands that no
United States federal or state agency or any other governmental or state agency
has passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

            (n)   Correctness of Representations. Such Subscriber represents as
to such Subscriber that the foregoing representations and warranties are true
and correct as of the date hereof and, unless such Subscriber otherwise notifies
the Company prior to the Closing Date shall be true and correct as of the
Closing Date.

            (o)   Survival. The foregoing representations and warranties shall
survive the Closing Date.

      5.    Company Representations and Warranties. The Company represents and
warrants to and agrees with each Subscriber that:

            (a)   Due Incorporation. The Company is a corporation or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
the requisite corporate power to own its properties and to carry on its business
as presently conducted. The Company is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a Material Adverse Effect. For purposes of the Transaction
Documents, a "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the financial condition, results of operations, prospects, properties or
business of the Company and its Subsidiaries taken as a whole. For purposes of
this Agreement, "SUBSIDIARY" means, with respect to any entity at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity of which more than
30% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity. The Subsidiaries as of the Closing Date are
set forth on SCHEDULE 5(A).


                                       4
<PAGE>

            (b)   Outstanding Stock. All issued and outstanding shares of
capital stock of the Company and Subsidiary have been duly authorized and
validly issued and are fully paid and non-assessable.

            (c)   Authority; Enforceability. This Agreement, the Note, the
Warrants, and Escrow Agreement, and all other agreements delivered together with
this Agreement or in connection herewith (collectively "TRANSACTION DOCUMENTS")
have been duly authorized, executed and delivered by the Company and are valid
and binding agreements of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity. The Company has
full corporate power and authority necessary to enter into and deliver the
Transaction Documents and to perform its obligations thereunder.

            (d)   Capitalization and Additional Issuances. The authorized and
outstanding capital stock of the Company and Subsidiaries as of the date of this
Agreement and the Closing Date (not including the Securities) are set forth on
SCHEDULE 5(D). There are no outstanding agreements or preemptive or similar
rights affecting the Company's Common Stock or equity and no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with respect to the sale or issuance of any
shares of Common Stock or equity of the Company or Subsidiaries or other equity
interest in the Company or Subsidiaries except as described on SCHEDULE 5(D).
The Common Stock, options, warrants, agreements and other rights to acquire
equity of the Company and any Subsidiary outstanding as of the last Business Day
preceding the Closing Date is set forth on SCHEDULE 5(D). The only officer,
director, employee and consultant stock option or stock incentive plan in effect
or contemplated by the Company as of the Closing Date is described on SCHEDULE
5(D).

            (e)   Consents. No consent, approval, authorization or order of any
court, governmental agency, or body or arbitrator having jurisdiction over the
Company, Subsidiaries or any of their Affiliates, the OTC Bulletin Board
("BULLETIN BOARD") or the Company's shareholders is required for the execution
by the Company of the Transaction Documents and compliance and performance by
the Company of its obligations under the Transaction Documents, including,
without limitation, the issuance and sale of the Securities. The Transaction
Documents and the Company's performance of its obligations thereunder has been
unanimously approved by the Company's Board of Directors.

            (f)   No Violation or Conflict. Assuming the representations and
warranties of the Subscribers in Section 4 are true and correct, neither the
issuance and sale of the Securities nor the performance of the Company's
obligations under the Transaction Documents by the Company will:

                  (i)   violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles or certificate of incorporation, charter or bylaws of the Company,
(B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company of any court, governmental
agency or body, or arbitrator having jurisdiction over the Company or over the
properties or assets of the Company or any of its Affiliates, (C) the terms of
any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company or any of its Affiliates is a
party, by which the Company or any of its Affiliates is bound, or to which any
of the properties of the Company or any of its Affiliates is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its Affiliates is a party except the
violation, conflict, breach, or default of which would not have a Material
Adverse Effect; or


                                       5
<PAGE>

                  (ii)  result in the creation or imposition of any lien, charge
or encumbrance upon the Securities or any of the assets of the Company or any of
its Affiliates except as described herein; or

                  (iii) result in the activation of any anti-dilution rights or
a reset or repricing of any debt or security instrument of any other creditor,
equity holder, or potential equity holder of the Company, nor result in the
acceleration of the due date of any obligation of the Company; or

                  (iv)  will result in the triggering of any piggy-back
registration rights of any person or entity holding securities of the Company or
having the right to receive securities of the Company.

            (g)   The Securities. The Securities upon issuance:

                  (i)   are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and any applicable state securities laws;

                  (ii)  have been, or will be, duly and validly authorized and
on the date of issuance of the Securities, the Securities will be duly and
validly issued, fully paid and non-assessable and if registered pursuant to the
1933 Act and resold pursuant to an effective registration statement will be free
trading and unrestricted;

                  (iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company;

                  (iv)  will not subject the holders thereof to personal
liability by reason of being such holders; and

                  (v)   assuming the representations and warranties of the
Subscribers as set forth in Section 4 hereof are true and correct, will not
result in a violation of Section 5 under the 1933 Act.

            (h)   Litigation. There is no pending or, to the best knowledge of
the Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company, or any of its Affiliates that would affect the execution by the Company
or the performance by the Company of its obligations under the Transaction
Documents. There is no pending or, to the best knowledge of the Company, basis
for or threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates which litigation if adversely determined would have a
Material Adverse Effect.

            (i)   No Market Manipulation. The Company and its Affiliates have
not taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities or affect the price at which the Securities may be issued or
resold.

            (j)   Information Concerning Company. The Reports including the
exhibits and financial statements included therewith, and Other Written
Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the dates of the most
recent financial statements included in the Reports, and except as modified in
the Other Written Information or in the Schedules hereto, there has been no
Material Adverse Event relating to the Company's business, financial condition
or affairs not disclosed in the Reports. The Reports including the exhibits and
financial statements included therewith, and Other Written Information do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, taken
as a whole, not misleading in light of the circumstances when made.


                                       6
<PAGE>

            (k)   Stop Transfer. The Company will not issue any stop transfer
order or other order impeding the sale, resale or delivery of any of the
Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscriber.

            (l)   Defaults. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
would have a Material Adverse Effect, (ii) not in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect.

            (m)   No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board which would impair the exemptions relied upon in this
Offering or the Company's ability to timely comply with its obligations
hereunder. Neither the Company nor any of its Affiliates will take any action or
steps that would cause the offer or issuance of the Securities to be integrated
with other offerings which would impair the exemptions relied upon in this
Offering or the Company's ability to timely comply with its obligations
hereunder. The Company will not conduct any offering that will be integrated
with the offer or issuance of the Securities that would impair the exemptions
relied upon in connection with the offer and sale of the Securities or the
Company's ability to timely comply with its obligations pursuant to the
Transaction Documents.

            (n)   No General Solicitation. Neither the Company, nor any of its
Affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities.

            (o)   Liabilities. The Company has no liabilities or obligations
which are material, individually or in the aggregate, other than those incurred
in the ordinary course of the Company businesses since the date of the most
recent audited financial statements of the Company contained in the Reports, and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

            (p)   No Undisclosed Events or Circumstances. Since the date of the
most recent audited financial statements of the Company contained in the
Reports, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company prior to the date hereof and/or prior to the Closing
Date which has not been so publicly announced or disclosed in the Reports.

            (q)   Dilution. The Company's executive officers and directors
understand the nature of the Securities being sold hereby and recognize that the
issuance of the Securities will have a potential dilutive effect on the equity
holdings of other holders of the Company's equity or rights to receive equity of
the Company. The board of directors of the Company has concluded, in its good
faith business judgment that the issuance of the Securities is in the best
interests of the Company. The Company specifically acknowledges that its
obligation to issue the Warrant Shares upon exercise of the Warrants, is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company or parties
entitled to receive equity of the Company.


                                       7
<PAGE>

            (r)   No Disagreements with Accountants and Lawyers. There are no
material disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise between the Company and the accountants and lawyers
presently employed by the Company, including but not limited to disputes or
conflicts over payment owed to such accountants and lawyers, nor have there been
any such disagreements during the two years prior to the Closing Date.

            (s)   Investment Company. Neither the Company nor any Affiliate of
the Company is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

            (t)   Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.

            (u)   Reporting Company. The Company is a publicly-held company
subject to reporting obligations pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 ACT") and has a class of Common
Stock registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the twelve
months preceding the date of this Agreement and the Closing Date.

            (v)   Listing. The Company's Common Stock is quoted on the Bulletin
Board under the symbol AEMD.OB. The Company has not received any oral or written
notice that its Common Stock is not eligible nor will become ineligible for
quotation on the Bulletin Board nor that its Common Stock does not meet all
requirements for the continuation of such quotation. The Company satisfies all
the requirements for the continued quotation of its Common Stock on the Bulletin
Board.

            (w)   DTC Status. The Company's transfer agent is a participant in,
and the Common Stock is eligible for transfer pursuant to, the Depository Trust
Company Automated Securities Transfer Program. The name, address, telephone
number, fax number, contact person and email address of the Company transfer
agent is set forth on SCHEDULE 5(W) hereto.

            (x)   Solvency. Based on the financial condition of the Company as
of the Closing Date after giving effect to the receipt by the Company of the
proceeds from the sale of the Notes, (i) the Company's fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).

            (y)   Company Predecessor and Subsidiaries. The Company makes each
of the representations contained in Sections 5(a), (b), (c), (d), (e), (f), (h),
(j), (l), (o), (p), (r), (s), (u), and (x) of this Agreement, as same relate to
the Subsidiary of the Company. All representations made by or relating to the
Company of a historical or prospective nature and all undertakings described in
Sections 9(g) through 9(l) shall relate, apply and refer to the Company and its
predecessors. The Company represents that it owns 100% of the outstanding equity
of the Subsidiaries and rights to receive equity of the Subsidiaries free and
clear of all liens, encumbrances and claims, except as set forth on Schedule
5(d). No person or entity other than the Company has the right to own and
receive any equity interest in the Subsidiaries.


                                       8
<PAGE>

            (z)   Correctness of Representations. The Company represents that
the foregoing representations and warranties are true and correct as of the date
hereof in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date; provided, that, if such representation or
warranty is made as of a different date in which case such representation or
warranty shall be true as of such date.

            (AA)  Survival. The foregoing representations and warranties shall
survive the Closing Date.

      6.    Regulation D Offering/Legal Opinion. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6)
of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. The
Company will provide, at the Company's expense, such legal opinions, if any, as
are reasonably necessary for the issuance and resale of the Common Stock
issuable upon exercise of the Warrants pursuant to an effective registration
statement, Rule 144 under the 1933 Act or an exemption from registration.

      7.1.  Mandatory Redemption at Subscriber's Election. Upon the occurrence
of an Event of Default (as defined in the Note or in this Agreement), that
continues for more than twenty (20) business days, (iii) a Change in Control (as
defined below), or (iv) of the liquidation, dissolution or winding up of the
Company, then at the Subscriber's election, the Company must pay to each
Subscriber ten (30) business days after request by each Subscriber ("CALCULATION
PERIOD"), a sum of money determined by multiplying up to the outstanding
principal amount of the Note designated by each such Subscriber by 120%, plus
accrued but unpaid interest ("MANDATORY REDEMPTION PAYMENT"). The Mandatory
Redemption Payment must be received by each Subscriber not later than thirty
(30) business days after request ("MANDATORY REDEMPTION PAYMENT DATE"). Upon
receipt of the Mandatory Redemption Payment, the corresponding Note principal
and interest will be deemed paid and no longer outstanding. For purposes of this
Section 7.1, "CHANGE IN CONTROL" shall mean (i) the Company no longer having a
class of shares publicly traded or listed on a Principal Market (as defined in
Section 9(b)), (ii) the Company becoming a Subsidiary of another entity (other
than a corporation formed by the Company for purposes of reincorporation in
another U.S. jurisdiction), (iii) a majority of the board of directors of the
Company as of the Closing Date no longer serving as directors of the Company
except due to natural causes, and (iv) the sale, lease or transfer of
substantially all the assets of the Company or Subsidiaries.

      7.2.  Redemption. The Notes shall not be redeemable or callable by the
Company except as described in the Note.

      8.    Commission. The Company on the one hand, and each Subscriber (for
himself only) on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any persons claiming
brokerage commissions or finder's fees on account of services purported to have
been rendered on behalf of the indemnifying party in connection with this
Agreement or the transactions contemplated hereby or in connection with any
investment in the Company at any time, whether or not such investment was
consummated and arising out of such party's actions. The Company represents that
there are no parties entitled to receive fees, commissions, or similar payments
in connection with the Offering.

      9.    Covenants of the Company. The Company covenants and agrees with the
Subscribers as follows:

            (a)   Stop Orders. The Company will advise the Subscribers, within
twenty-four hours after it receives notice of issuance by the Commission, any
state securities commission or any other regulatory authority of any stop order
or of any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.


                                       9
<PAGE>

            (b)   Listing/Quotation. The Company shall promptly secure the
quotation or listing of the Common Stock and Warrant Shares upon each national
securities exchange, or automated quotation system upon which they are or become
eligible for quotation or listing (subject to official notice of issuance) and
shall maintain same so long as any Warrants are outstanding. The Company will
maintain the quotation or listing of its Common Stock on the American Stock
Exchange, National Capital Market, Nasdaq Global Market, Nasdaq Global Select
Market, New York Stock Exchange or Bulletin Board (whichever of the foregoing is
at the time the principal trading exchange or market for the Common Stock (the
"PRINCIPAL MARKET"), and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market, as applicable. The Company will provide the Subscribers copies
of all notices it receives notifying the Company of the threatened and actual
delisting of the Common Stock from any Principal Market. As of the date of this
Agreement and the Closing Date, the Bulletin Board is and will be the Principal
Market.

            (c)   Market Regulations. The Company shall notify the Commission,
the Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscribers and promptly provide copies thereof to the
Subscribers.

            (d)   Filing Requirements. From the date of this Agreement and until
the last to occur of (i) one (1) year after the Closing Date, (ii) until all the
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, or (iii) the Notes are not outstanding (the date of occurrence of
the last such event being the "END DATE"), the Company will (A) cause its Common
Stock to be registered under Section 12(b) or 12(g) of the 1934 Act, (B) comply
in all respects with its reporting and filing obligations under the 1934 Act,
(C) voluntarily comply with all reporting requirements that are applicable to an
issuer with a class of shares registered pursuant to Section 12(b) or Section
12(g) of the 1934 Act, if the Company is not subject to such reporting
requirements, and (D) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will not take any action
or file any document (whether or not permitted by the 1933 Act or the 1934 Act
or the rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said acts until
the End Date. Until the End Date, the Company will continue the listing or
quotation of the Common Stock on a Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market. The Company agrees to timely file a
Form D with respect to the Securities if required under Regulation D and to
provide a copy thereof to each Subscriber promptly after such filing.

            (e)   Use of Proceeds. The proceeds of the Offering will be employed
by the Company for general working capital. The Purchase Price may not and will
not be used for accrued and unpaid officer and director salaries, payment of
financing related debt, redemption of outstanding notes or equity instruments of
the Company nor non-trade obligations outstanding on a Closing Date. For so long
as any Notes are outstanding, the Company will not prepay any financing related
debt obligations nor redeem any equity instruments of the Company.

            (f)   Reservation. Prior to the Closing Date, and at all times
thereafter, the Company shall have reserved, pro rata, on behalf of each holder
of a Warrant, from its authorized but unissued Common Stock, the amount of
Warrant Shares issuable upon exercise of the Warrants.

            (g)   DTC Program. At all times that Notes or Warrants are
outstanding, the Company will employ as the transfer agent for the Common Stock
and Warrant Shares a participant in the Depository Trust Company Automated
Securities Transfer Program.


                                       10
<PAGE>

            (h)   Taxes. From the date of this Agreement and until the End Date,
the Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore. The Company undertakes to satisfy within sixty (60) days
after the Closing Date, out of the proceeds of the Offering, all outstanding tax
related charges payable by the Company which the Company represents do not
exceed $25,000.

            (i)   Insurance. From the date of this Agreement and until the End
Date, the Company will keep its assets which are of an insurable character
insured by financially sound and reputable insurers against loss or damage by
fire, explosion and other risks customarily insured against by companies in the
Company's line of business, in amounts sufficient to prevent the Company from
becoming a co-insurer and not in any event less than one hundred percent (100%)
of the insurable value of the property insured less reasonable deductible
amounts; and the Company will maintain, with financially sound and reputable
insurers, insurance against other hazards and risks and liability to persons and
property to the extent and in the manner customary for companies in similar
businesses similarly situated and to the extent available on commercially
reasonable terms.

            (j)   Books and Records. From the date of this Agreement and until
the End Date, the Company will keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.

            (k)   Governmental Authorities. From the date of this Agreement and
until the End Date, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.

            (l)   Intellectual Property. From the date of this Agreement and
until the End Date, the Company shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other rights to
use intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for value.

            (m)   Properties. From the date of this Agreement and until the End
Date, the Company will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could reasonably be expected to have a Material Adverse
Effect.

            (n)   Confidentiality/Public Announcement. From the date of this
Agreement and until the End Date, the Company agrees that except in connection
with a Form 8-K and the registration statement or statements regarding the
Securities or in correspondence with the SEC regarding same, it will not
disclose publicly or privately the identity of the Subscribers unless expressly
agreed to in writing by each Subscriber to be identified but only to the extent
required by law and then only upon five days prior notice to Subscriber. In any
event and subject to the foregoing, the Company undertakes to file a Form 8-K or
make a public announcement describing the Offering not later than the first
business day after the Closing Date. Prior to filing or announcement, such Form
8-K or public announcement will be provided to Subscribers for their review and
approval. In the Form 8-K or public announcement, the Company will specifically
disclose the amount of Common Stock outstanding immediately after the Closing.
Upon delivery by the Company to the Subscribers after the Closing Date of any
notice or information, in writing, electronically or otherwise, and while a


                                       11
<PAGE>

Note, Warrants, or Warrant Shares are held by such Subscribers, unless the
Company has in good faith determined that the matters relating to such notice do
not constitute material, nonpublic information relating to the Company or
Subsidiaries, the Company shall within one business day after any such delivery
publicly disclose such material, nonpublic information on a Report on Form 8-K
or otherwise. IN THE EVENT THAT THE COMPANY BELIEVES THAT A NOTICE OR
COMMUNICATION TO A SUBSCRIBER CONTAINS MATERIAL, NONPUBLIC INFORMATION, RELATING
TO THE COMPANY OR SUBSIDIARIES, THE COMPANY SHALL SO INDICATE TO SUCH SUBSCRIBER
CONTEMPORANEOUSLY WITH DELIVERY OF SUCH NOTICE OR INFORMATION. IN THE ABSENCE OF
ANY SUCH INDICATION, SUCH SUBSCRIBER SHALL BE ALLOWED TO PRESUME THAT ALL
MATTERS RELATING TO SUCH NOTICE AND INFORMATION DO NOT CONSTITUTE MATERIAL,
NONPUBLIC INFORMATION RELATING TO THE COMPANY OR ITS SUBSIDIARIES.

            (o)   Non-Public Information. The Company covenants and agrees that
except for the Reports, Other Written Information and schedules and exhibits to
this Agreement, which information the Company undertakes to publicly disclose
not later than the sooner of the required or actual filing date of the Form 8-K
described in Section 9(n) above, neither it nor any other person acting on its
behalf will at any time provide any Subscriber or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Subscriber shall have agreed in writing
to receive such information. The Company understands and confirms that each
Subscriber shall be relying on the foregoing representations in effecting
transactions in securities of the Company.

            (p)   Negative Covenants. So long as a Note is outstanding, without
the consent of the Subscribers, the Company will not and will not permit any of
its Subsidiaries to directly or indirectly:

                  (i)   amend its certificate of incorporation, bylaws or its
charter documents so as to materially and adversely affect any rights of the
Subscriber;

                  (ii)  repay, redeem, repurchase or offer to repay, redeem,
repurchase or otherwise acquire or make any dividend or distribution in respect
of any of its Common Stock, preferred stock, warrants, options or other equity
securities other than to the extent permitted or required under the Transaction
Documents; or

                  (iii) prepay or redeem any financing related debt or past due
obligations outstanding as of the Closing Date.

            (q)   Seniority. Except as otherwise provided for herein, until the
Notes are fully satisfied or converted, the Company shall not grant nor allow
any security interest to be taken in the assets of the Company or any
Subsidiary; nor issue any debt, equity or other instrument which would give the
holder thereof directly or indirectly, a right in any assets of the Company or
any Subsidiary, equal or superior to any right or potential of the holder of a
Note in or to such assets.

            (r)   Notices. For so long as the Subscribers hold any Securities,
the Company will maintain as United States address and United States fax number
for notices purposes under the Transaction Documents.

      10.   Covenants of the Company Regarding Indemnification. The Company
agrees to indemnify, hold harmless, reimburse and defend the Subscribers, the
Subscribers' officers, directors, agents, Affiliates, members, managers, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
Company or breach of any representation or warranty by Company in this Agreement
or in any Exhibits or Schedules attached hereto, or other agreement delivered
pursuant hereto; or (ii) after any applicable notice and/or cure periods, any
breach or default in performance by the Company of any covenant or undertaking
to be performed by the Company hereunder, or any other agreement entered into by
the Company and Subscriber relating hereto. The procedures set forth in Section
11.6 shall apply to the indemnification set forth in Section 10(a).


                                       12
<PAGE>

      11.   Registration Rights.

      11.1. Registration Statement. The Company shall file with the Commission a
Form SB-2 registration statement (the "REGISTRATION STATEMENT") (or such other
form that it is eligible to use) in order to register on behalf of the holder of
Warrants and Warrant Shares ("SELLER" or "SELLERS") all of the Warrant Shares
("REGISTRABLE SECURITIES") for resale and distribution under the 1933 Act within
sixty (60) calendar days after the Closing Date (the "FILING DATE"), and cause
the Registration Statement to be declared effective not later than one hundred
and eighty (180) calendar days after the Closing Date (the "EFFECTIVE DATE").
The Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber, pro rata, and not issued, employed or reserved for
anyone other than each such person. The Registration Statement will immediately
be amended or additional registration statements will be immediately filed by
the Company as necessary to register additional shares of Common Stock to allow
the public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities. It shall be deemed a Non-Registration Event if at any
time after the date the Registration Statement is declared effective by the
Commission ("ACTUAL EFFECTIVE DATE") the Company has registered for unrestricted
resale on behalf of the Subscribers less than all of the Registrable Securities
required to be registered as described in this Agreement (such amount of
unregistered Common stock being the "SHORTFALL"). The Company shall cause to be
registered a sufficient amount of shares of Common stock in order to eliminate
the Shortfall within 60 days after the date the Shortfall occurs.

      11.2. Registration Procedures. If and whenever the Company is required by
the provisions of Section 11.1(i) to effect the registration of any Registrable
Securities under the 1933 Act, the Company will, as expeditiously as possible:

            (a)   subject to the timelines provided in this Agreement, prepare
and file with the Commission a registration statement required by Section 11,
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), promptly
provide to the holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify the Subscribers (by telecopier and by
e-mail addresses provided by the Subscribers) on or before the second business
day thereafter that the Company receives notice that (i) the Commission has no
comments or no further comments on the Registration Statement, and (ii) the
registration statement has been declared effective (failure to timely provide
notice as required by this Section 11.2(a) shall be a material breach of the
Company's obligation and an Event of Default as defined in the Notes and a
Non-Registration Event as defined in Section 11.4 of this Agreement);

            (b)   prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
so long as Warrants are outstanding, and comply with the provisions of the 1933
Act with respect to the disposition of all of the Registrable Securities covered
by such registration statement in accordance with the Sellers' intended method
of disposition set forth in such registration statement for such period;

            (c)   furnish to the Sellers, at the Company's expense, such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement or make them electronically available;

            (d)   use its reasonable best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Sellers shall request
in writing, provided, however, that the Company shall not for any such purpose
be required to qualify generally to transact business as a foreign corporation
in any jurisdiction where it is not so qualified or to consent to general
service of process in any such jurisdiction;


                                       13
<PAGE>

            (e)   if applicable, list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;

            (f)   notify the Subscribers within twenty-four hours of the
Company's becoming aware that a prospectus relating thereto is required to be
delivered under the 1933 Act, of the happening of any event of which the Company
has knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing or which becomes subject to a Commission, state or other governmental
order suspending the effectiveness of the registration statement covering any of
the Registrable Securities;

            (g)   provided same would not be in violation of the provision of
Regulation FD under the 1934 Act, make available for inspection by the Sellers
during reasonable business hours, and any attorney, accountant or other agent
retained by the Seller or underwriter, all publicly available, non-confidential
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
publicly available, non-confidential information reasonably requested by the
seller, attorney, accountant or agent in connection with such registration
statement at such requesting Seller's expense; and

            (h)   provide to the Sellers copies of the registration statement
and amendments thereto five business days prior to the filing thereof with the
Commission. Any Subscriber's failure to comment on any Registration Statement or
other document provided to a Subscriber or its counsel shall not be construed to
constitute approval thereof nor the accuracy thereof.

      11.3. Provision of Documents. In connection with each registration
statement described in this Section 11, each Seller will furnish to the Company
in writing such information and representation letters with respect to itself
and the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws.

      11.4. Non-Registration Events. The Company agrees that the Sellers will
suffer damages if the Registration Statement is not filed by the Filing Date and
not declared effective by the Commission by the Effective Date, and maintained
in the manner and time periods contemplated by Section 11 hereof, and it would
not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or before the
Filing Date, (B) the Registration Statement is not declared effective on or
before the required Effective Date, (C) due to the action or inaction of the
Company the Registration Statement is not declared effective within three (3)
business days after receipt by the Company or its attorneys of a written or oral
communication from the Commission that the Registration Statement will not be
reviewed or that the Commission has no further comments, (D) the Registration
Statement is filed and declared effective but shall thereafter cease to be
effective without being succeeded within 20 business days by an effective
replacement or amended registration statement or for a period of time which
shall exceed 20 days in the aggregate per year (defined as every rolling period
of 365 consecutive days commencing on the Actual Effective Date (each such event
referred to in clauses A through D of this Section 11.4 is referred to herein as
a "NON-REGISTRATION EVENT"), then the Company shall deliver to the holder of
Registrable Securities, as "LIQUIDATED DAMAGES", an amount equal to two percent
(2%) for each 30 days (or such lesser pro-rata amount for any period of less
than 30 days) of the Principal Amount of the Notes issued on the Closing Date to
Subscriber multiplied by a fraction, the numerator of which is the amount of
Warrants and Warrant Shares held by the Subscriber during the pendency of the
Non-Registration Event and the denominator of which is the amount of Warrants
issued to such Subscriber on the Closing Date. The Company must pay the
Liquidated Damages in cash. The Liquidated Damages must be paid within 10 days
after the end of each 30 day period or shorter part thereof for which Liquidated
Damages are payable. In the event a Registration Statement is filed by the


                                       14
<PAGE>

Filing Date but is withdrawn prior to being declared effective by the
Commission, then such Registration Statement will be deemed to have not been
filed and Liquidated Damages will be calculated accordingly. All oral or written
comments received from the Commission relating to the Registration Statement
must be satisfactorily responded to within ten business days after receipt of
comments from the Commission. Failure to timely respond to Commission comments
is a Non-Registration Event for which Liquidated Damages shall accrue and be
payable by the Company to the holders of Registrable Securities at the same rate
and amounts set forth above calculated from the eleventh day after the comments
were received through the date responses to the comments are given to the
Commission. The amount of Liquidated Damages payable in the aggregate for all
Non-Registration Events may not exceed $75,000.

      11.5. Expenses. All expenses incurred by the Company in complying with
Section 11, including, without limitation, all registration and filing fees,
printing expenses (if required), fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, and fees of
transfer agents and registrars, are called "REGISTRATION EXPENSES." All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities are called "SELLING EXPENSES." The Company will pay all
Registration Expenses in connection with the registration statement under
Section 11. Selling Expenses in connection with each registration statement
under Section 11 shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of shares sold by the Seller relative to the
number of shares sold under such registration statement or as all Sellers
thereunder may agree.

      11.6. Indemnification and Contribution.

            (a)   In the event of a registration of any Registrable Securities
under the 1933 Act pursuant to Section 11, the Company will, to the extent
permitted by law, indemnify and hold harmless the Seller, each officers,
directors, agents, Affiliates, members, managers, control persons, and principal
shareholders of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller in
writing specifically for use in such registration statement or prospectus.

            (b)   In the event of a registration of any of the Registrable
Securities under the 1933 Act pursuant to Section 11, each Seller severally but
not jointly will, to the extent permitted by law, indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the 1933 Act, each officer of the Company who signs the registration


                                       15
<PAGE>

statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the 1933 Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 11, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities pursuant to such registration statement.

            (c)   Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 11.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 11.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 11.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnifying party shall have reasonably concluded that there may be reasonable
defenses available to indemnified party which are different from or additional
to those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified parties, as a group, shall have the right to
select one separate counsel, reasonably satisfactory to the indemnified and
indemnifying party, and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.

            (d)   In order to provide for just and equitable contribution in the
event of joint liability under the 1933 Act in any case in which either (i) a
Seller, or any controlling person of a Seller, makes a claim for indemnification
pursuant to this Section 11.6 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 11.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities


                                       16
<PAGE>

offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities sold by it pursuant
to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation and provided, further, however, that the liability
of the Seller hereunder shall be limited to the net proceeds actually received
by the Seller from the sale of Registrable Securities pursuant to such
Registration Statement.

      11.7. Delivery of Unlegended Shares.

            (a)   Within seven (7) business days (such seventh business day
being the "UNLEGENDED SHARES DELIVERY DATE") after the business day on which the
Company has received (i) a notice that Warrant Shares have been sold pursuant to
the Registration Statement or Rule 144 under the 1933 Act, (ii) a representation
that the prospectus delivery requirements, or the requirements of Rule 144, as
applicable and if required, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters of
the Subscriber and/or a Subscriber's broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver, and
shall cause legal counsel selected by the Company to deliver to its transfer
agent (with copies to Subscriber) an appropriate instruction and opinion of such
counsel, directing the delivery of shares of Common Stock without any legends
including the legend set forth in Section 4(i) above (the "UNLEGENDED SHARES");
and (z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
submitted certificate, if any, to the Subscriber at the address specified in the
notice of sale, via express courier, by electronic transfer or otherwise on or
before the Unlegended Shares Delivery Date.

            (b)   In lieu of delivering physical certificates representing the
Unlegended Shares, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company will cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account of Subscriber's prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission system, if such transfer agent
participates in such DWAC system. Such delivery must be made on or before the
Unlegended Shares Delivery Date.

            (c)   The Company understands that a delay in the delivery of the
Unlegended Shares pursuant to Section 11 hereof later than the Unlegended Shares
Delivery Date could result in economic loss to a Subscriber. As compensation to
a Subscriber for such loss, the Company agrees to pay late payment fees (as
liquidated damages and not as a penalty) to the Subscriber for late delivery of
Unlegended Shares in the amount of $100 per business day after the Delivery Date
for each $10,000 of purchase price of the Unlegended Shares subject to the
delivery default. If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11.7 for an aggregate of thirty
(30) days, then each Subscriber or assignee holding Warrant Shares subject to
such default may, at its option, require the Company to redeem all or any
portion of the Warrant Shares subject to such default at a price per share equal
to the greater of (i) 120% of the purchase price of such shares, or (ii) the
highest closing price of the Common Stock during the aforedescribed thirty day
period as reported by Bloomberg L.P. for the Principal Market, multiplied by the
aggregate Exercise Price of the Warrant Shares subject to such default
("UNLEGENDED REDEMPTION AMOUNT"). The Company shall pay any payments incurred
under this Section in immediately available funds not later than thirty (30)
business days after demand.

            (d)   In addition to any other rights available to a Subscriber, if
the Company fails to deliver to a Subscriber Unlegended Shares as required
pursuant to this Agreement, within three (3) business days after the Unlegended
Shares Delivery Date and the Subscriber or a broker on the Subscriber's behalf,
purchases (in an open market transaction or otherwise) shares of common stock to
deliver in satisfaction of a sale by such Subscriber of the shares of Common
Stock which the Subscriber was entitled to receive from the Company (a


                                       17
<PAGE>

"BUY-IN"), then the Company shall pay in cash to the Subscriber (in addition to
any remedies available to or elected by the Subscriber) on demand the amount by
which (A) the Subscriber's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (B) the
aggregate purchase price of the shares of Common Stock delivered to the Company
for reissuance as Unlegended Shares together with interest thereon at a rate of
15% per annum accruing until such amount and any accrued interest thereon is
paid in full (which amount shall be paid as liquidated damages and not as a
penalty). For example, if a Subscriber purchases shares of Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of
purchase price of shares of Common Stock delivered to the Company for reissuance
as Unlegended Shares, the Company shall be required to pay the Subscriber
$1,000, plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In.

            (e)   In the event a Subscriber shall request delivery of Unlegended
Shares as described in Section 11.7 and the Company is required to deliver such
Unlegended Shares pursuant to Section 11.7 or the Warrant Shares pursuant to the
Warrants, the Company may not refuse to deliver Unlegended Shares based on any
claim that such Subscriber or any one associated or affiliated with such
Subscriber has been engaged in any violation of law, or for any other reason,
unless, an injunction or temporary restraining order from a court, on notice,
restraining and or enjoining delivery of such Unlegended Shares shall have been
sought and obtained by the Company or at the Company's request or with the
Company's assistance, and the Company has posted a surety bond for the benefit
of such Subscriber in the amount of 120% of the amount of the aggregate purchase
price of the Warrant Shares which are subject to the injunction or temporary
restraining order, which bond shall remain in effect until the final
unappealable disposition of the litigation of the dispute and the proceeds of
which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber's favor.

      12.   (a)   Right of Participation. For so long as Notes are outstanding,
the Subscribers shall be given not less than ten (10) business days prior
written notice of any proposed sale by the Company of its Common Stock or other
securities or equity linked debt obligations, except in connection with (i) full
or partial consideration in connection with a strategic merger, acquisition,
consolidation or purchase of substantially all of the securities or assets of
corporation or other entity which holders of such securities or debt are not at
any time granted registration or registration rights, (ii) the Company's
issuance of securities in connection with strategic license agreements and other
partnering arrangements so long as such issuances are not for the purpose of
raising capital and which holders of such securities or debt are not at any time
granted registration or registration rights, (iii) the Company's issuance of
Common Stock or the issuances or grants of options to purchase Common Stock to
employees, directors, and consultants pursuant to plans described on SCHEDULE
5(D), (iv) as a result of the exercise of Warrants which are granted or issued
pursuant to this Agreement on the terms described in the Transaction Documents
as of the Closing Date (collectively the foregoing are "EXCEPTED ISSUANCES") and
(v) as set forth on SCHEDULE 12(A). The Subscribers who exercise their rights
pursuant to this Section 12(a) shall have the right during the ten business days
following receipt of the notice to purchase by application of the outstanding
balance of the Notes including principal, interest, liquidated damages and any
other amount then owing to such Subscriber by the Company, such Common Stock,
debt or other securities in accordance with the terms and conditions set forth
in the notice of sale. In the event such terms and conditions are modified
during the notice period, the Subscribers shall be given prompt notice of such
modification and shall have the right during the ten business days following the
notice of modification to exercise such right. In the event the exercise of the
rights described in this Section 12(a) would or could result in the issuance of
an amount of Common Stock of the Company that would exceed the maximum amount
that may be issued to a Subscriber calculated in the manner described in Section
10 of the Warrant, then the issuance of such additional shares of Common Stock
of the Company to such Subscriber will be deferred in whole or in part until
such time as such Subscriber is able to beneficially own such Common Stock
without exceeding the applicable maximum amount set forth calculated in the
manner described in Section 10 of the Warrant. The determination of when such
Common Stock may be issued shall be made by each Subscriber as to only such
Subscriber.


                                       18
<PAGE>

            (b)   Favored Nations Provision. Other than in connection with the
Excepted Issuances, if at any time the Warrants are outstanding, the Company
shall agree to or issue (the "LOWER PRICE ISSUANCE") any Common Stock or
securities convertible into or exercisable for shares of Common Stock (or modify
any of the foregoing which may be outstanding) to any person or entity at a
price per share or exercise price per share which shall be less than the Warrant
exercise price, without the consent of each Subscriber, then the Company shall
issue, for each such occasion, additional shares of Common Stock to each
Subscriber respecting those Warrants and Warrant Shares that remain outstanding
at the time of the Lower Price Issuance so that the average per share purchase
price of the shares of Common Stock issued to each Subscriber (of the Warrant
Shares still owned by a Subscriber) is equal to such other lower price per share
and the Warrant Exercise Price shall automatically be reduced to such other
lower price. The delivery to a Subscriber of the additional shares of Common
Stock shall be not later than the closing date of the transaction giving rise to
the requirement to issue additional shares of Common Stock. Each Subscriber is
granted the registration rights described in Section 11 hereof in relation to
such additional shares of Common Stock. For purposes of the issuance and
adjustment described in this paragraph, the issuance of any security of the
Company carrying the right to convert such security into shares of Common Stock
or of any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security, warrant, right or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such purchase rights if such issuance is at a price lower
than the Warrant Exercise Price in effect upon such issuance. The rights of each
Subscriber set forth in this Section 12 are in addition to any other rights the
Subscriber has pursuant to this Agreement and the Warrant. Each Subscriber is
also given the right to elect to substitute any term or terms of any other
offering in connection with which such Subscriber has rights as described in
Section 12(a), for any term or terms of the Offering in connection with Warrants
owned by such Subscriber as of the date the notice described in Section 12(a) is
required to be given to such Subscriber.

      13.   Miscellaneous.

            (a)   Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: Aethlon Medical, Inc.,
3030 Bunker Hill Street, Suite 4000, San Diego, CA 92109, Attn: James A. Joyce,
CEO, telecopier: (858) 272-2738, with a copy by telecopier only to: Richardson &
Patel LLP, 10900 Wilshire Boulevard, Suite 500, Los Angeles, CA 90024, Attn:
Jennifer Post, Esq., telecopier: (310) 208-1154, and (ii) if to the Subscriber,
to: the one or more addresses and telecopier numbers indicated on the signature
pages hereto.

            (b)   Entire Agreement; Assignment. This Agreement and other
documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by the Company and the affected Subscriber
and as described in Section 13(h). Neither the Company nor the Subscribers have
relied on any representations not contained or referred to in this Agreement and
the documents delivered herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the Subscribers.


                                       19
<PAGE>

            (c)   Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.

            (d)   Law Governing this Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of California without
regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of California or in the federal courts
located in the state and county of California. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. THE PARTIES EXECUTING
THIS AGREEMENT AND OTHER AGREEMENTS REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE IN PERSONAM
JURISDICTION OF SUCH COURTS AND HEREBY IRREVOCABLY WAIVE TRIAL BY JURY. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law.

            (e)   Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 13(d) hereof, the Company hereby irrevocably waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction in California of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.

            (f)   Independent Nature of Subscribers. The Company acknowledges
that the obligations of each Subscriber under the Transaction Documents are
several and not joint with the obligations of any other Subscriber, and no
Subscriber shall be responsible in any way for the performance of the
obligations of any other Subscriber under the Transaction Documents. The Company
acknowledges that each Subscriber has represented that the decision of each
Subscriber to purchase Securities has been made by such Subscriber independently
of any other Subscriber and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in the Registration Statement and (ii) review by, and
consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or


                                       20
<PAGE>

any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Subscriber shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of the Transaction
Documents, and it shall not be necessary for any other Subscriber to be joined
as an additional party in any proceeding for such purpose. The Company
acknowledges that it has elected to provide all Subscribers with the same terms
and Transaction Documents for the convenience of the Company and not because
Company was required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Subscribers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.

            (g)   Damages. In the event the Subscriber is entitled to receive
any liquidated damages pursuant to the Transactions, the Subscriber may elect to
receive the greater of actual damages or such liquidated damages.

            (h)   Consent. As used in the Agreement, "consent of the
Subscribers" or similar language means the consent of holders (the "REQUIRED
HOLDERS") of not less than 75% of the total of the Warrants and Warrant Shares
issued and issuable upon exercise of outstanding Warrants held by Subscribers on
the date consent is requested.

            (i)   Equal Treatment. No consideration shall be offered or paid to
any person to amend or consent to a waiver or modification of any provision of
the Transaction Documents unless the same consideration is also offered and paid
to all the Subscribers and their permitted successors and assigns.

            (j)   Maximum Payments. Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest or dividends required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Subscriber and thus refunded
to the Company.

            (k)   Calendar Days. All references to "days" in the Transaction
Documents shall mean calendar days unless otherwise stated. The terms "business
days" and "trading days" shall mean days that the New York Stock Exchange is
open for trading for three or more hours. Time periods shall be determined as if
the relevant action, calculation or time period were occurring in New York City.
Any deadline that falls on a non-business day in any of the Transaction
Documents shall be automatically extended to the next business day and interest,
if any, shall be calculated and payable through such extended period.

            (l)   Captions: Certain Definitions. The captions of the various
sections and paragraphs of this Agreement have been inserted only for the
purposes of convenience; such captions are not a part of this Agreement and
shall not be deemed in any manner to modify, explain, enlarge or restrict any of
the provisions of this Agreement. As used in this Agreement the term "person"
shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.

            (m)   Severability. In the event that any term or provision of this
Agreement shall be finally determined to be superseded, invalid, illegal or
otherwise unenforceable pursuant to applicable law by an authority having
jurisdiction and venue, that determination shall not impair or otherwise affect
the validity, legality or enforceability: (i) by or before that authority of the
remaining terms and provisions of this Agreement, which shall be enforced as if
the unenforceable term or provision were deleted, or (ii) by or before any other
authority of any of the terms and provisions of this Agreement.


                                       21
<PAGE>

            (n)   Successor Laws. References in the Transaction Documents to
laws, rules, regulations and forms shall also include successors to and
functionally equivalent replacements of such laws, rules, regulations and forms.




                      [THIS SPACE INTENTIONALLY LEFT BLANK]




                                       22
<PAGE>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
                  --------------------------------------------


      Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                        AETHLON MEDICAL, INC.
                                        a Nevada corporation


                                        By: /s/  James A. Joyce
                                           -------------------------------
                                           Name: James A. Joyce
                                           Title: CEO

                                        Dated: January __, 2008


- ------------------------- ----------------- ------------------ -----------------
SUBSCRIBER                PURCHASE PRICE    PRINCIPAL AMOUNT   CLASS C
                          (CASH)            OF NOTE            WARRANTS
- ------------------------- ----------------- ------------------ -----------------




_______________________
(Signature)
By: ___________________
Name: _________________
Title: ________________

- ------------------------- ----------------- ------------------ -----------------


                                       23
<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES
                         ------------------------------



Exhibit A                  Form of Note

Exhibit B                  Form of Class C Warrant

Schedule 5(a)              Subsidiaries

Schedule 5(d)              Additional Issuances / Capitalization

Schedule 5(w)              Transfer Agent

Schedule 12(a)             Excepted Issuances




                                       24
<PAGE>

                                    EXHIBIT A
                                    ---------

                                  FORM OF NOTE


NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

PRINCIPAL AMOUNT: $220,000.00                       ISSUE DATE: JANUARY __, 2008
PURCHASE PRICE:   $200,000.00


                                 PROMISSORY NOTE
                                 ---------------

      FOR VALUE RECEIVED, AETHLON MEDICAL, INC., a Nevada corporation
(hereinafter called "Borrower"), hereby promises to pay to , (the "Holder") or
its registered assigns or successors in interest or order, without demand, the
sum of Two Hundred and Twenty Thousand Dollars ($220,000.00) ("Principal
Amount"), with interest compounded monthly at the annual rate of nine percent
(9%) on October __, 2008 (the "Maturity Date"), if not sooner paid.

      This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder dated of even date herewith (the
"Subscription Agreement"), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:

                                    ARTICLE I

                               GENERAL PROVISIONS

      1.1.  Application of Principal Interest. All amounts payable to the Holder
on this Note, whether or not due may be applied, at the discretion of the
Holder, towards the purchase price of equity or debt of the Borrower pursuant to
Section 12 of the Subscription Agreement.

      1.2.  Discount for Cash Payment. Provided an Event of Default (as defined
in Article II) nor an event which with the passage of time or the giving of
notice could become an Event of Default, has not occurred, and further provided
the Holder has not exercised the Holder's rights set forth in Section 1.1, then
upon the timely payment of this Note in cash, the principal portion payable upon
this Note shall be equal to the outstanding Principal Amount multiplied by
..9091. Interest and other sums payable on or in connection with this Note shall
be paid in full without deduction.

      1.3.  Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, which, if susceptible to cure is not cured
within the cure periods (if any) set forth in Article II, otherwise then from
the first date of such occurrence, the annual interest rate on this Note shall
(subject to Section 3.7) be twelve percent (12%), and be due on demand.


                                       25
<PAGE>

                                   ARTICLE II

                                EVENTS OF DEFAULT

      The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth on
Schedule 2.1 hereto and below:

      2.1   Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of Principal Amount, interest or other sum due under this Note or
any Transaction Document when due.

      2.2   Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of the Subscription Agreement, this Note or Transaction
Document in any material respect and such breach, if subject to cure, continues
for a period of ten (10) business days after written notice to the Borrower from
the Holder.

      2.3   Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement, Transaction Document or in any agreement, statement or certificate
given in writing pursuant hereto or in connection herewith or therewith shall be
false or misleading in any material respect as of the date made and the Closing
Date.

      2.4   Receiver or Trustee. The Borrower or any Subsidiary of Borrower
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for them or for a substantial part
of their property or business; or such a receiver or trustee shall otherwise be
appointed.

      2.5   Judgments. Any money judgment, writ or similar final process shall
be entered or filed against Borrower or any subsidiary of Borrower or any of
their property or other assets for more than $100,000, and shall remain
unvacated, unbonded, unappealed, unsatisfied, or unstayed for a period of
forty-five (45) days.

      2.6   Non-Payment. A default by the Borrower under any one or more
obligations in an aggregate monetary amount in excess of $100,000 for more than
twenty (20) days after the due date, unless the Borrower is contesting the
validity of such obligation in good faith and has segregated cash funds equal to
not less than one-half of the contested amount.

      2.7   Bankruptcy. Bankruptcy, insolvency, reorganization, or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Borrower or any Subsidiary of
Borrower and if instituted against them are not dismissed within forty-five (45)
days of initiation.

      2.8   Delisting. Delisting of the Common Stock from any Principal Market
for a period of ten consecutive trading days.

      2.9   Stop Trade. An SEC or judicial stop trade order or Principal Market
trading suspension with respect to Borrower's Common Stock that lasts for five
or more consecutive trading days.

      2.10  Non-Registration Event. The occurrence of a Non-Registration Event
as described in Section 11.4 of the Subscription Agreement.

      2.11  Cross Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any Transaction Document or other agreement
to which the Borrower and Holder are parties, or the occurrence of a material
event of default under any such other agreement to which Borrower and Holder are
parties, which is not cured after any required notice and/or cure period.


                                       26
<PAGE>

      2.12  Financial Statement Restatement. The restatement of any financial
statements filed by the Borrower with the Securities and Exchange Commission for
any date or period from two years prior to the Issue Date of this Note and until
this Note is no longer outstanding, if the result of such restatement would, by
comparison to the unrestated financial statements, have constituted a Material
Adverse Effect.

      2.13  Other Note Default. The occurrence of any Event of Default under any
Other Note between Borrower and Holder.

                                   ARTICLE III

                                  MISCELLANEOUS

      3.1   Failure or Indulgence Not Waiver. No failure or delay on the part of
Holder hereof in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

      3.2   Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: Aethlon Medical, Inc.,
3030 Bunker Hill Street, Suite 4000, San Diego, CA 92109, Attn: James A. Joyce,
CEO, telecopier: (858) 272-2738, with a copy by telecopier only to: Richardson &
Patel LLP, 10900 Wilshire Boulevard, Suite 500, Los Angeles, CA 90024, Attn:
Jennifer Post, Esq., telecopier: (310) 208-1154, and (ii) if to the Holder, to
the name, address and telecopy number set forth on the front page of this Note.

      3.3   Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.

      3.4   Assignees. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns.

      3.5   Cost of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.

      3.6   Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California, INCLUDING, BUT NOT LIMITED
TO, CALIFORNIA STATUTES OF LIMITATIONS. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the civil or state courts of California or in the
federal courts located in the State and county of California. Both parties and
the individual signing this Agreement on behalf of the Borrower agree to submit
to the jurisdiction of such courts. The prevailing party shall be entitled to


                                       27
<PAGE>

recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or unenforceability of any other provision of this Note. Nothing contained
herein shall be deemed or operate to preclude the Holder from bringing suit or
taking other legal action against the Borrower in any other jurisdiction to
collect on the Borrower's obligations to Holder, to realize on any collateral or
any other security for such obligations, or to enforce a judgment or other
decision in favor of the Holder.

      3.7   Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

      3.8.  Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.

      3.9   Redemption. This Note may not be redeemed, called or prepaid without
the consent of the Holder.

      3.10  Non-Business Days. Whenever any payment or any action to be made
shall be due on a Saturday, Sunday or a public holiday under the laws of the
State of California, such payment may be due or action shall be required on the
next succeeding business day and, for such payment, such next succeeding day
shall be included in the calculation of the amount of accrued interest payable
on such date.


                                       28
<PAGE>

      IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by an authorized officer as of the ____ day of January, 2008.


                                                AETHLON MEDICAL, INC.




                                                By:_____________________________
                                                   Name:
                                                   Title: President & CEO

WITNESS:



_______________________________
[Print Name]
Chief Financial Officer



                                       29
<PAGE>

                                    EXHIBIT B
                                    ---------

                                 FORM OF WARRANT


NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


                     Right to Purchase 660,000 shares of Common Stock of Aethlon
                        Medical, Inc. (subject to adjustment as provided herein)


                      CLASS C COMMON STOCK PURCHASE WARRANT

No. 2008-C-                                         Issue Date: January __, 2008

      AETHLON MEDICAL, INC., a corporation organized under the laws of the State
of Nevada (the "Company"), hereby certifies that, for value received,
___________________________________, or its assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company at any time
commencing after the Issue Date until 5:00 p.m., E.S.T on the third anniversary
of the Issue Date (the "Expiration Date"), up to 660,000 fully paid and
nonassessable shares of Common Stock at a per share purchase price of $0.50. The
aforedescribed purchase price per share, as adjusted from time to time as herein
provided, is referred to herein as the "Purchase Price." The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein. The Company may reduce the Purchase Price for
some or all of the Warrants, temporarily or permanently. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the "SUBSCRIPTION AGREEMENT"), dated as of
January __, 2008, entered into by the Company and the Holder.

      As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

      (a)   The term "Company" shall include Aethlon Medical, Inc. and any
corporation which shall succeed or assume the obligations of Aethlon Medical,
Inc. hereunder.

      (b)   The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Subscription
Agreement, and (b) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.


                                       30
<PAGE>

      (c)   The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

      (d)   The term "Warrant Shares" shall mean the Common Stock issuable upon
exercise of this Warrant.

      1.    Exercise of Warrant.

            1.1.  Number of Shares Issuable upon Exercise. From and after the
Issue Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

            1.2.  Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and delivery within two days thereafter of payment, in
cash, wire transfer or by certified or official bank check payable to the order
of the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Purchase Price
then in effect. The original Warrant is not required to be surrendered to the
Company until it has been fully exercised.

            1.3.  Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by delivery of a Subscription Form in the manner and
at the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise provided the Holder has surrendered the original Warrant, the Company,
at its expense, will forthwith issue and deliver to or upon the order of the
Holder hereof a new Warrant of like tenor, in the name of the Holder hereof or
as such Holder (upon payment by such Holder of any applicable transfer taxes)
may request, the whole number of shares of Common Stock for which such Warrant
may still be exercised.

            1.4.  Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean:

                  (a)   If the Company's Common Stock is traded on an exchange
or is quoted on the NASDAQ Global Market, Nasdaq Global Select Market, the
NASDAQ Capital Market, the California Stock Exchange, the American Stock
Exchange, LLC, or OTC Bulletin Board, then the average of the closing or last
sale prices, respectively, reported for the ten trading days immediately
preceding the Determination Date;

                  (b)   If the Company's Common Stock is not traded on an
exchange or on the NASDAQ Global Market, Nasdaq Global Select Market, the NASDAQ
Capital Market, the California Stock Exchange, the American Stock Exchange, LLC,
or OTC Bulletin Board, but is traded in the over-the-counter market, then the
average of the closing bid and ask prices reported for the ten trading days
immediately preceding the Determination Date;

                  (c)   Except as provided in clause (d) below and Section 3.1,
if the Company's Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided with such arbitration
to be conducted in California City, California; or


                                       31
<PAGE>

                  (d)   If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.

            1.5.  Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.

            1.6.  Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

            1.7   Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which delivery of a
Subscription Form shall have occurred and payment made for such shares as
aforesaid. As soon as practicable after the exercise of this Warrant in full or
in part, and in any event within seven (7) business days thereafter ("Warrant
Share Delivery Date"), the Company at its expense (including the payment by it
of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder hereof, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and non-assessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which such Holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market Value of one full
share of Common Stock, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise pursuant to Section 1 or otherwise. The Company understands
that a delay in the delivery of the Warrant Shares after the Warrant Share
Delivery Date could result in economic loss to the Holder. As compensation to
the Holder for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to the Holder for late issuance of Warrant Shares upon
exercise of this Warrant the proportionate amount of $100 per business day after
the Warrant Share Delivery Date for each $10,000 of Purchase Price of Warrant
Shares for which this Warrant is exercised which are not timely delivered. The
Company shall pay any payments incurred under this Section in immediately
available funds within thirty (30) business days after demand. Furthermore, in
addition to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of the Warrant
Shares by the Warrant Share Delivery Date, the Holder may revoke all or part of
the relevant Warrant exercise by delivery of a notice to such effect to the
Company, whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to the exercise of the relevant portion
of this Warrant, except that the liquidated damages described above shall be
payable through the date notice of revocation or rescission is given to the
Company.


                                       32
<PAGE>

            1.8   Buy-In. In addition to any other rights available to the
Holder, if the Company fails to deliver to a Holder the Warrant Shares as
required pursuant to this Warrant, within seven (7) business days after the
Warrant Share Delivery Date and the Holder or a broker on the Holder's behalf,
purchases (in an open market transaction or otherwise) shares of common stock to
deliver in satisfaction of a sale by such Holder of the Warrant Shares which the
Holder was entitled to receive from the Company (a "BUY-IN"), then the Company
shall pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) on demand, the amount by which (A) the Holder's total
purchase price (including brokerage commissions, if any) for the shares of
common stock so purchased exceeds (B) the aggregate Purchase Price of the
Warrant Shares required to have been delivered together with interest thereon at
a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if a Holder purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to
$10,000 of Purchase Price of Warrant Shares to have been received upon exercise
of this Warrant, the Company shall be required to pay the Holder $1,000, plus
interest. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In.

            1.9   The Company agrees and acknowledges that despite the pendency
of a not yet effective Registration Statement which includes for registration
the Registrable Securities (as defined in Section 11.1(iv) of the Subscription
Agreement), a Holder is permitted to and the Company will issue to such Holder
Warrant Shares upon exercise of the Warrants.

      2.    Cashless Exercise.

            (a)   If a registration statement (as described in Section 11 of the
Subscription Agreement) ("Registration Statement") is effective and the Holder
may sell all of its shares of Common Stock upon exercise of all of the Warrants
issued to the Holder on the Issue Date pursuant to such Registration Statement,
this Warrant may be exercised in whole or in part for cash only as set forth in
Section 1 above. If such Registration Statement is not available, the payment
upon exercise may be made at the option of the Holder either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by delivery of
Common Stock issuable upon exercise of the Warrants in accordance with Section
(b) below or (iii) by a combination of any of the foregoing methods, for the
number of Common Stock specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable to the holder per the terms of this Warrant) and the holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.

            (b)   Subject to the provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Purchase Price (at
the date of calculation as set forth below), in lieu of exercising this Warrant
for cash, the holder may elect to receive shares equal to the value (as
determined below) of this Warrant (or the portion thereof being cancelled) by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Form in which event the Company shall issue
to the holder a number of shares of Common Stock computed using the following
formula:

                    X= Y (A-B)
                       -------
                          A

            Where   X=  the number of shares of Common Stock to be issued to the
                        holder

                    Y=  the number of shares of Common Stock purchasable under
                        the Warrant or, if only a portion of the Warrant is
                        being exercised, the portion of the Warrant being
                        exercised (at the date of such calculation)

                    A=  the average of the closing sale prices of the Common
                        Stock for the five (5) Trading Days immediately prior to
                        (but not including) the Exercise Date, or Fair Market
                        Value, whichever is less

                    B=  Purchase Price (as adjusted to the date of such
                        calculation)


                                       33
<PAGE>

      For purposes of Rule 144 promulgated under the 1933 Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued pursuant to the Subscription
Agreement.

      3.    Adjustment for Reorganization, Consolidation, Merger, etc.

            3.1.  Fundamental Transaction. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another entity, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another entity) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, (D) the Company
consummates a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with one or more persons or entities whereby such other persons or
entities acquire more than the 50% of the outstanding shares of Common Stock
(not including any shares of Common Stock held by such other persons or entities
making or party to, or associated or affiliated with the other persons or
entities making or party to, such stock purchase agreement or other business
combination), (E) any "person" or "group" (as these terms are used for purposes
of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the "beneficial
owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
50% of the aggregate Common Stock of the Company, or (F) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a "Fundamental Transaction"),
then, upon any subsequent exercise of this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction, at
the option of the Holder, (a) upon exercise of this Warrant, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the "Alternate Consideration") receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event or (b) if the Company is acquired in
(1) a transaction where the consideration paid to the holders of the Common
Stock consists solely of cash, (2) a "Rule 13e-3 transaction" as defined in Rule
13e-3 under the 1934 Act, or (3) a transaction involving a person or entity not
traded on a national securities exchange, the Nasdaq Global Select Market, the
Nasdaq Global Market or the Nasdaq Capital Market, cash equal to the
Black-Scholes Value. For purposes of any such exercise, the determination of the
Purchase Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Purchase Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder's right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3.1 and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.


                                       34
<PAGE>

"Black-Scholes Value" shall be determined in accordance with the Black-Scholes
Option Pricing Model obtained from the "OV" function on Bloomberg L.P. using (i)
a price per share of Common Stock equal to the VWAP of the Common Stock for the
Trading Day immediately preceding the date of consummation of the applicable
Fundamental Transaction, (ii) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant as
of the date of such request and (iii) an expected volatility equal to the 100
day volatility obtained from the HVT function on Bloomberg L.P. determined as of
the Trading Day immediately following the public announcement of the applicable
Fundamental Transaction.

            3.2.  Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in California, NY, as trustee for the
Holder of the Warrants. Such property shall be delivered only upon payment of
the Warrant exercise price.

            3.3.  Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

            3.4   Share Issuance. Until the Expiration Date, if the Company
shall issue any Common Stock except for the Excepted Issuances (as defined in
the Subscription Agreement), prior to the complete exercise of this Warrant for
a consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower price for then outstanding
Warrants. For purposes of this adjustment, the issuance of any security or debt
instrument of the Company carrying the right to convert such security or debt
instrument into Common Stock or of any warrant, right or option to purchase
Common Stock shall result in an adjustment to the Purchase Price upon the
issuance of the above-described security, debt instrument, warrant, right, or
option if such issuance is at a price lower than the Purchase Price in effect
upon such issuance and again at any time upon any subsequent issuances of shares
of Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the Purchase Price in effect upon such
issuance. Common Stock issued or issuable by the Company for no consideration
will be deemed issuable or to have been issued for $0.0001 per share of Common
Stock. The reduction of the Purchase Price described in this Section 3.4 is
subject to the provisions of, and in addition to the other rights of the Holder
described in, the Subscription Agreement.

      4.    Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such


                                       35
<PAGE>

event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof, be entitled to receive shall be adjusted to
a number determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 4 be issuable on such
exercise by a fraction of which (a) the numerator is the Purchase Price that
would otherwise (but for the provisions of this Section 4 be in effect, and (b)
the denominator is the Purchase Price in effect on the date of such exercise.

      5.    Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

      6.    Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.

      7.    Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company will issue and deliver to or on the order of the Transferor
thereof a new Warrant or Warrants of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.

      8.    Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.


                                       36
<PAGE>

      9.    Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.

      10.   Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
on such date. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
1934 Act , and Rule 13d-3 thereunder. Subject to the foregoing, the Holder shall
not be limited to aggregate exercises which would result in the issuance of more
than 4.99%. The restriction described in this paragraph may be waived, in whole
or in part, upon sixty-one (61) days prior notice from the Holder to the Company
to increase such percentage to up to 9.99%, but not in excess of 9.99%. The
Holder may decide whether to convert a Convertible Note or exercise this Warrant
to achieve an actual 4.99% or up to 9.99% ownership position as described above,
but not in excess of 9.99%.

      11.   Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

      12.   Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

      13.   Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: if to the Company, to: Aethlon Medical, Inc., 3030
Bunker Hill Street, Suite 4000, San Diego, CA 92109, Attn: James A. Joyce, CEO,
telecopier: (858) 272-2738, with a copy by telecopier only to: Richardson &
Patel LLP, 10900 Wilshire Boulevard, Suite 500, Los Angeles, CA 90024, Attn:
Jennifer Post, Esq., telecopier: (310) 208-1154, and (ii) if to the Holder, to
the address and telecopier number listed on the first paragraph of this Warrant.


                                       37
<PAGE>

      14.   Law Governing This Warrant. This Warrant shall be governed by and
construed in accordance with the laws of the State of California without regard
to principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of California or in the federal courts located
in the state and county of California. The parties to this Warrant hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The Company and Holder
waive trial by jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event that any
provision of this Warrant or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement. Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.

      IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.

                                                AETHLON MEDICAL, INC.



                                                By: ____________________________
                                                    Name:


                                       38
<PAGE>

                                    EXHIBIT A
                                    ---------

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO:  AETHLON MEDICAL, INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___   ________ shares of the Common Stock covered by such Warrant; or

___   the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

___   $__________ in lawful money of the United States; and/or

___   the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or

___   the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________________________
whose address is ______________________________________________________________
_______________________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.

Dated:___________________                       ________________________________
                                                (Signature must conform to name
                                                of holder as specified on the
                                                face of the Warrant)


                                                ________________________________
                                                ________________________________
                                                (Address)


                                       39
<PAGE>

                                    EXHIBIT B
                                    ---------

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

      For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of AETHLON MEDICAL, INC. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
AETHLON MEDICAL, INC. with full power of substitution in the premises.


- ------------------------ -------------------------- ---------------------------
Transferees             Percentage Transferred     Number Transferred
- ------------------------ -------------------------- ---------------------------

- ------------------------ -------------------------- ---------------------------

- ------------------------ -------------------------- ---------------------------

- ------------------------ -------------------------- ---------------------------


Dated:  ______________, ______                  ________________________________
                                                (Signature must conform to name
                                                of holder as specified on the
                                                face of the warrant)

Signed in the presence of:

______________________________                  ________________________________
         (Name)                                 ________________________________
                                                        (address)

ACCEPTED AND AGREED:
[TRANSFEREE]                                    ________________________________
                                                ________________________________
                                                        (address)

______________________________
         (Name)


                                       40
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.44
<SEQUENCE>22
<FILENAME>aethlon_sb2-ex1044.txt
<DESCRIPTION>FIRST AMENDMENT
<TEXT>
<PAGE>
EXHIBIT 10.44

               FIRST AMENDMENT TO COMMON STOCK PURCHASE AGREEMENT

       THIS FIRST AMENDMENT TO COMMON STOCK PURCHASE AGREEMENT (the
"Amendment"), dated as of August 10, 2007, by and between AETHLON MEDICAL, INC.,
a Nevada corporation (the "Company"), and FUSION CAPITAL FUND H, LLC (together
with its permitted assigns, the "Buyer"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings given them in the Common Stock
Purchase Agreement.

       WHEREAS, THE parties hereto are parties to a Common Stock Purchase
Agreement dated as of March 21, 2007 (the "Common Stock Purchase Agreement")
pursuant to which the Buyer has agreed to purchase, and the Company has agreed
to sell up to $8,400,000 of the Common Stock;

       WHEREAS, the parties desire to amend and restate certain provisions of
the Common Stock Purchase Agreement;

       NOW, THEREFORE, in consideration of the agreements, covenants and
considerations contained herein, the parties hereto agree as follows:


1.     AMENDMENTS. The following Sections of the Common Stock Purchase Agreement
       are hereby amended as follow:

       a.     Section 4(a) of the Common Stock Purchase Agreement is hereby
              amended and restated in its entirety as follows:

              "(a) FILING OF FORM 8-K AND REGISTRATION STATEMENT. The Company
              agrees that it shall, within the time required under the 1934 Act
              file a Report on Form 8-K disclosing this Agreement and the
              transaction contemplated hereby. The Company shall also file
              within ten (10) Business Days from the date hereof a new
              registration statement covering only the sale of the Commitment
              Shares and 7,333,333 Purchase Shares (which includes the 1,333,333
              Initial Purchase Shares) in accordance with the terms of the
              Registration Rights Agreement between the Company and the Buyer,
              dated as of the date hereof ("Registration Rights Agreement")."

       b.     Section 11(k)(iv) of the Common Stock Purchase Agreement is hereby
              amended and restated in its entirety as follows:

              "(iv) If by the Maturity Date for any reason or for no reason the
              full Available Amount under this Agreement has not been purchased
              as provided for in Section I of this Agreement. this Agreement
              shall automatically terminate on the Maturity Date, without any
              action or notice on the part of any party and without any
              liability whatsoever of any party TO any other party under this
              Agreement."

2.     EFFECT OF AMENDMENT/INCORPORATION OF CERTAIN PROVISIONS. Except as
       amended as set forth above, the Common Stock Purchase Agreement shall
       continue in full force and effect. The provisions set forth IN Section 11
       of the Common Stock Purchase Agreement are hereby incorporated by
       reference into this Amendment.


                                   * * * * *

<PAGE>

       IN WITNESS WHEREOF, the Buyer and the Company have caused this First
Amendment to Common Stock Purchase Agreement to be duly executed as of the date
first written above.



                                        THE COMPANY:
                                        ------------

                                        AETHLON MEDICAL, INC.

                                        By: /s/ Peter M. Kuhn
                                            ----------------------------
                                        Name:
                                        Title:


                                        BUYER:
                                        ------

                                        FUSION CAPITAL FUND II, LLC
                                        BY: FUSION CAPITAL PARTNERS, LLC
                                        BY: SGM HOLDINGS CORP.


                                        By: /s/ Steven G. Martin
                                            ----------------------------
                                        Name: Steven G. Martin
                                        Title: President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>23
<FILENAME>aethlon_sb2-ex2301.txt
<DESCRIPTION>CONSENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 23.1




          CONSENT OF SQUAR, MILNER, PETERSON, MIRANDA & WILLIAMSON, LLP
                  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



We hereby consent to the incorporation by reference into this Registration
Statement on Form S-1 of Aethlon Medical, Inc. of our report dated July 12,
2007, relating to the consolidated balance sheet of Aethlon Medical, Inc. as of
March 31, 2007 and the related consolidated statements of operations,
stockholders' deficit, and cash flows for each of the years in the two-year
period then ended and for the period from January 31, 1984 (Inception) to March
31, 2007. We also consent to the reference to our Firm under the caption
"Experts".



/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP
February 11, 2008
Newport Beach, California
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
